UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 40-F
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x
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Registration statement pursuant to Section 12 of the Securities Exchange Act of 1934
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or
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¨
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Annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
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For the fiscal year ended
Commission File Number
FIELD TRIP HEALTH LTD.
(Exact name of registrant as specified in its
charter)
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Canada
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8000, 2834, 2833
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N/A
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(Province or Other Jurisdiction of
Incorporation or Organization)
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(Primary Standard Industrial
Classification Code)
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(I.R.S. Employer
Identification No.)
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30 Duncan Street, Suite 401
Toronto, ON, Canada M5V 2C3
1-833-222-0084
(Address and telephone number of registrant’s
principal executive offices)
Bennett Jones LLP
135 East 57th Street, Suite 14
New York City, NY
10022
1-646.992.4322
(Name, address (including
zip code) and telephone number (including area code)
of agent for service in the United States)
Securities to be registered pursuant to Section 12(b) of
the Act:
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Title of Each
Class:
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Trading Symbol
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Name of Each
Exchange On Which Registered:
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Common Shares, no par value
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FTRP
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The Nasdaq Stock Market LLC
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Securities registered pursuant to Section 12(g) of
the Act: None
Securities for which there is a reporting obligation
pursuant to Section 15(d) of the Act: None
For annual reports, indicate by check mark the
information filed with this form:
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¨ Annual Information Form
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¨ Audited Annual Financial Statements
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Indicate the number of outstanding shares of each of the registrant’s
classes of capital or common stock as of the close of the period covered by the annual report: N/A
Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports); and (2) has been subject to such filing requirements for the past
90 days.
¨ Yes x No
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
¨ Yes ¨ No
Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 12b-2 of the Exchange Act.
Emerging
growth company x
If an emerging growth company that prepares its financial statements
in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.
¨
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
¨
FORWARD LOOKING STATEMENTS
The information provided in this Registration
Statement on Form 40-F, including the exhibits hereto and information incorporated by reference herein (collectively, the “Form 40-F”),
may contain "forward-looking statements" about the Registrant. All statements, other than statements of historical fact, made
by the Registrant that address activities, events or developments that the Registrant expects or anticipates will or may occur in the
future are forward-looking statements, including statements preceded by, followed by or that include words such as "may", "will",
"would", "could", "should", "believes", "estimates", "projects", "potential",
"expects", "plans", "intends", "anticipates", "targeted", "continues", "forecasts",
"designed", "goal", or the negative of those words or other similar or comparable words. Forward-looking statements
may relate to future financial conditions, results of operations, plans, objectives, performance or business developments. These statements
speak only as at the date they are made and are based on information currently available and on management’s current expectations
and assumptions concerning the Registrant’s future events, financial conditions, results of operations, plans, objectives, performance,
business developments, objectives or milestones. Actual results and developments may differ materially from those contemplated by these
statements. Forward-looking statements in this Form 40-F include statements related to, the business and future activities of the
Registrant, and developments related to, the Registrant after the date of this Form 40-F, including but not limited to, statements
relating as future business strategy, competitive strengths, goals, expansion and growth of the Registrant 's business, operations and
plans, including new revenue streams, the completion of contemplated expansion by the Registrant, changes in laws or regulatory requirements,
the market for the Registrant 's services, the impact of the COVID-19 pandemic, the business objectives of the Registrant and its research
and development activities, the acceptance in the medical community of ketamine and other psychedelic substances as effective treatment
for depression, post-traumatic stress disorder, addiction and other mental health conditions, the funds available to the Registrant and
the use of such funds, the healthcare industry in Canada and the United States, the ability of the Registrant to operate its clinics and
additional clinics, the development, patentability and viability of molecule FT-104 (“FT-104”), the ability of the Registrant
to complete an investigational new drug application and obtain regulatory approvals, as required, prior to initiating any additional clinical
trials for FT-104, the ability of the Registrant to meet eligibility requirements for clinical testing and through to more complex clinical
trials, the ability of the Registrant to obtain regulatory approvals prior to each clinical trial and the ability of the Registrant to
generate patient member growth.
The forward-looking statements contained herein
are based on certain key management expectations and assumptions, including with respect to expectations and assumptions concerning: (i) receipt
of required shareholder and regulatory approvals in a timely manner or at all; (ii) receipt and/or maintenance of required licenses
and third-party consents in a timely manner or at all; and (iii) the success of the operations of the Registrant.
Forward-looking statements are subject to a number
of known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially
different from that which are expressed or implied by such forward-looking statements. These risks and uncertainties include those related
to: the ability of the Registrant to secure additional financing for current and future operations and capital projects, as needed; forward-looking
statements may prove to be inaccurate; future issuances or actual or potential sales of securities; negative operating cash flow and going
concern; discretion over the use of proceeds; unpredictability and volatility of the listed securities of the Registrant; speculative
nature of an investment in the securities of the Registrant; limited operating history as a public company; a significant number of common
shares of the Registrant (the "Common Shares") are owned by a limited number of existing shareholders; the expected future losses
of the Registrant and profitability; significant risks inherent in the nature of the health clinic industry; risks associated with failure
to achieve its publicly announced milestones according to schedule, or at all; risks related to potential operations in Oregon and jurisdictions
that have passed or are considering measures to legalize psychedelics; risks associated with the regulation of psilocybin containing truffles
and mushrooms in The Netherlands, Jamaica and elsewhere; reliance on drug developers; reliance on contract manufacturers; violations of
laws and regulations; reliance on the capabilities and experience of its key executives and scientists; the possible engagement in misconduct
or other improper activities by employees; the expansion of the Registrant 's business through acquisitions or collaborations; risk of
product liability claims; risks related to third-party licenses; changes in patent law; litigation regarding patents, patent applications,
and other proprietary rights; reliance on third parties; no assurance of an active or liquid market; public markets and share prices;
additional issuances and dilution; the ability of the Registrant to secure additional financing for current and future operations and
capital projects, as needed, which may not be available on acceptable terms, or at all; the Registrant’s dependence on management
and key personnel; general economic, market and business conditions, early-stage industry growth rates, the risks associated with competition
from other companies directly or indirectly engaged in the Registrant’s industry; negative results from clinical trials; foreign
currency exchange rate fluctuations and its effects on the Registrant’s operations; the risks and costs associated with being a
publicly traded company, the market demand for the Common Shares; the impact of the COVID-19 pandemic; non-compliance with laws; medical
personnel operating out of the Registrant 's clinics; unfavourable publicity or consumer perception; patient acquisitions; drug development
risks; substantial risks of regulatory or political change; the ability to obtain necessary government permits and licences; ketamine
as a pharmaceutical; non-referral of patients; negative cash flow from operating activities; management of growth; intellectual property;
litigation; insurance coverage; the Registrant being a holding company; the industry being difficult to forecast; conflicts of interest;
enforcement of legal rights; emerging market risks; enforcement of legal rights in foreign jurisdictions; inadequate internal controls
over financial reporting; agriculture risks; violations of laws and regulations related to drug development; reliance on third parties
for drug development; ability to produce commercial grade pharmaceuticals; clinical testing; regulatory approval process; cyber-attacks;
reliance upon insurers and governments; difficulty in enforcing judgments and effecting service of process on directors and officers;
any other risks described in this Form 40-F and the documents filed by the Registrant with Canadian securities regulatory authorities;
other factors beyond the Registrant’s control; and other risks and uncertainties not presently known to the Registrant or that the
Registrant presently believe are not material could also cause actual results or events to differ materially from those expressed in
There can be no assurance that such forward-looking
information and statements will prove to be accurate as actual results and future events could differ materially from those anticipated
in such information and statements. Accordingly, readers should not place undue reliance on forward-looking information and statements.
The forward-looking information and statements contained herein are presented for the purposes of assisting readers in understanding the
Registrant 's expected financial and operating performance and the Registrant 's plans and objectives and may not be appropriate for other
purposes.
The forward-looking information and statements
contained in this Form 40-F represent the Registrant 's views as of the date of this Form 40-F and forward-looking information
and statements contained in the documents incorporated by reference herein represent the Registrant 's views as of the date of such documents,
unless otherwise indicated in such documents. The Registrant anticipates that subsequent events and developments may cause its views to
change. However, while the Registrant may elect to update such forward-looking information and statements at a future time, it has no
current intention of doing so except to the extent required by applicable law.
DOCUMENTS FILED PURSUANT TO GENERAL INSTRUCTIONS
In accordance with General Instruction B.(l) of
Form 40-F, the Registrant hereby incorporates by reference Exhibit 99.1 through Exhibit 99.54, as set forth in the Exhibit Index
attached hereto.
DESCRIPTION OF THE SECURITIES
The authorized capital of the Registrant consists
of an unlimited number of Common Shares, without par value, and an unlimited number of preferred shares (the “Preferred Shares”).
As at the date of this Form 40-F no Preferred Shares are issued and outstanding.
Holders of Common Shares are entitled to one vote
for each Common Share held at all meetings of shareholders of the Registrant, to receive dividends if, as and when declared by the Board,
and to participate ratably in any distribution of property or assets upon the liquidation, winding-up or other dissolution of the Registrant.
The Common Shares carry no pre-emptive rights, conversion or exchange rights, or redemption, retraction, repurchase, sinking fund or purchase
fund provisions. There are no provisions requiring a holder of Common Shares to contribute additional capital, and no restrictions on
the issuance of additional securities by the Registrant. There are no restrictions on the repurchase or redemption of Common Shares by
the Registrant except to the extent that any such repurchase or redemption would render the Registrant insolvent. The Preferred Shares
may, if issued, be made convertible into Common Shares at such rate and upon such basis as the Board, in its discretion, may determine.
UNDERTAKINGS
The Registrant undertakes to make available, in
person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested
to do so by the Commission staff, information relating to: the securities registered pursuant to this Form 40-F; the securities in
relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities.
CORPORATE GOVERNANCE PRACTICES
There are certain differences
between the corporate governance practices applicable to the Registrant and those applicable to U.S. companies under the Nasdaq Corporate
Governance Requirements. A summary of the significant differences will be posted on the Registrant's website at www.fieldtriphealth.com.
CONSENT TO SERVICE OF PROCESS
Concurrently with the filing of this Form 40-F,
the Registrant will file with the Commission a written irrevocable consent and power of attorney on Form F-X. Any change to the name
or address of the Registrant’s agent for service shall be communicated promptly to the Commission by amendment to the Form F-X
referencing the file number of the Registrant.
SIGNATURES
Pursuant to the requirements of the Exchange Act,
the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly authorized.
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FIELD TRIP HEALTH LTD.
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/s/ Joseph del Moral
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Name:
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Joseph del Moral
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Title:
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Chief Executive Officer
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Date:
July 19, 2021
EXHIBIT INDEX
The following documents are being filed with the
Commission as exhibits to this Form 40-F.
Exhibit 99.1
FIELD TRIP HEALTH LTD.
Annual Information Form (Amended)
For the Fiscal Year Ended March 31, 2021
Date: July 16, 2021
This Annual Information Form has been amended to correct minor errors found on pages 15, 21, 34, 37 and 39.
TABLE OF CONTENTS
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GENERAL
In this Annual Information Form (this “AIF”), unless otherwise noted or the context indicates otherwise, references to “Field Trip”, the “Company”, “we”, “us” and “our” refer to Field Trip Health Ltd. and its direct and indirect subsidiaries.
All financial information in this AIF is prepared in Canadian dollars and using International Financial Reporting Standards as issued by the International Accounting Standards Board. Unless otherwise noted herein, this AIF applies to the business activities and operations of the Company for the fiscal year ended March 31, 2021, as updated to June 24, 2021, unless otherwise indicated.
All dollar amounts in this AIF are expressed in Canadian dollars, except as otherwise indicated. References to US$ or “U.S. dollars” are to United States dollars.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This document includes “forward-looking information” and “forward-looking statements” within the meaning of Canadian securities laws. All statements, other than statements of historical fact, made by Field Trip that address activities, events or developments that Field Trip expects or anticipates will or may occur in the future are forward-looking statements, including statements preceded by, followed by or that include words such as “may”, “will”, “would”, “could”, “should”, “believes”, “estimates”, “projects”, “potential”, “expects”, “plans”, “intends”, “anticipates”, “targeted”, “continues”, “forecasts”, “designed”, “goal”, or the negative of those words or other similar or comparable words. Forward-looking statements may relate to future financial conditions, results of operations, plans, objectives, performance or business developments. These statements speak only as at the date they are made and are based on information currently available and on management’s current expectations and assumptions concerning Field Trip’s future events, financial conditions, results of operations, plans, objectives, performance, business developments, objectives or milestones. Actual results and developments may differ materially from those contemplated by these statements. Forward-looking statements in this document include statements related to, the business and future activities of Field Trip, and developments related to, Field Trip after the date of this document, including but not limited to, statements relating to future business strategy, competitive strengths, goals, expansion and growth of Field Trip’s business, operations and plans, including potential new revenue streams, the completion of contemplated expansion by Field Trip, changes in laws or regulatory requirements, the market for Field Trip’s services, the impact of the COVID-19 pandemic, the business objectives of Field Trip and its research and development activities, the acceptance in the medical community of ketamine and other psychedelic substances as effective treatment for depression, post-traumatic stress disorder, addiction and other mental health conditions, the funds available to Field Trip and the use of such funds, the healthcare industry in Canada and the United States, the ability of Field Trip to operate the clinics, the development, patentability and viability of FT Discovery molecule FT-104, the ability of Field Trip to complete an investigational new drug application and obtain regulatory approvals, as required, prior to initiating any additional clinical trials for FT-104, the ability of Field Trip to meet eligibility requirements for clinical testing and through to more complex clinical trials, the ability of Field Trip to obtain regulatory approvals prior to each clinical trial and the ability of Field Trip to generate patient member growth. Forward-looking statements are subject to a number of known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from that which are expressed or implied by such forward-looking statements. These risks and uncertainties include those related to: the ability of Field Trip to secure additional financing for current and future operations and capital projects, as needed; risks associated with the application to list its securities, if at all, on the NASDAQ; future issuances or actual or potential sales of securities; negative operating cash flow and going concern; discretion over the use of proceeds; unpredictability and volatility of the listed securities of Field Trip; speculative nature of an investment in the securities of Field Trip; limited operating history as a public company; a significant number of common shares of Field Trip (the “Common Shares”) are owned by a limited number of existing shareholders; the expected future losses of Field Trip and profitability; significant risks inherent in the nature of the health clinic industry; risks associated with failure to achieve its publicly announced milestones according to schedule, or at all; risks related to potential operations in Oregon and other jurisdictions that have passed or are considering measures to legalize psychedelics; risks associated with the regulation of psilocybin containing truffles and mushrooms in The Netherlands, Jamaica and elsewhere; reliance on drug developers; reliance on contract manufacturers; violations of laws and regulations; reliance on the capabilities and experience of its key executives and scientists; the possible engagement in misconduct or other improper activities by employees; the expansion of Field Trip’s business through acquisitions or collaborations; risk of product liability claims; risks related to third-party licenses; changes in patent law; litigation regarding patents, patent applications, and other proprietary rights; reliance on third parties; no assurance of an active or liquid market; public markets and share prices; additional issuances and dilution; the ability of Field Trip to secure additional financing for current and future operations and capital projects, as needed, which may not be available on acceptable terms, or at all; Field Trip’s dependence on management and key personnel; general economic, market and business conditions, early-stage industry growth rates, the risks associated with competition from other companies directly or indirectly engaged in Field Trip’s industry; negative results from clinical trials; foreign currency exchange rate fluctuations and its effects on Field Trip’s operations; the risks and costs associated with being a publicly traded company, the market demand for the Common Shares; the impact of the COVID-19 pandemic; non-compliance with laws; medical personnel operating out of Field Trip’s clinics; unfavourable publicity or consumer perception; patient acquisitions;
drug development risks; substantial risks of regulatory or political change; the ability to obtain necessary government permits and licences; ketamine as a pharmaceutical; non-referral of patients; negative cash flow from operating activities; management of growth; intellectual property; litigation; insurance coverage; Field Trip being a holding company; the industry being difficult to forecast; conflicts of interest; enforcement of legal rights; emerging market risks; enforcement of legal rights in foreign jurisdictions; inadequate internal controls over financial reporting; agriculture risks; violations of laws and regulations related to drug development; reliance on third parties for drug development; ability to produce commercial grade pharmaceuticals; clinical testing; regulatory approval process; cyber-attacks; reliance upon insurers and governments; and difficulty in enforcing judgments and effecting service of process on directors and officers. . Other risks and uncertainties not presently known to the Company or that the Company presently believe are not material could also cause actual results or events to differ materially from those expressed in the forward-looking statements contained herein.
There can be no assurance that such forward-looking information and statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such information and statements. Accordingly, readers should not place undue reliance on forward-looking information and statements. The forward-looking information and statements contained herein are presented for the purposes of assisting readers in understanding Field Trip’s expected financial and operating performance and Field Trip’s plans and objectives and may not be appropriate for other purposes.
The forward-looking information and statements contained in this document represent Field Trip’s views as of the date of this document and forward-looking information and statements contained in the documents incorporated by reference herein represent Field Trip’s views as of the date of such documents, unless otherwise indicated in such documents. Field Trip anticipates that subsequent events and developments may cause its views to change. However, while Field Trip may elect to update such forward-looking information and statements at a future time, it has no current intention of doing so except to the extent required by applicable law.
For a more detailed discussion of risks and other factors, see Field Trip’s annual information form dated June 24, 2021 under the heading “Risk Factors”, or otherwise disclosed in the public filings made with applicable securities regulatory authorities and available under Field Trip’s SEDAR and EDGAR profiles.
Foreign Currency Information
The Company’s expenses are denominated in Canadian dollars and some of its operations are in the U.S., the Netherlands and Jamaica. The Company may be adversely affected by foreign currency fluctuations. A significant portion of its expenditures are in other currencies, and the Company is therefore subject to foreign currency fluctuations which may, from time to time, impact its financial position and results of operations.
MARKET AND INDUSTRY DATA
Unless otherwise indicated, the market and industry data contained or incorporated by reference in this AIF is based upon information from independent industry publications, market research, analyst reports and surveys and other publicly available sources. Although the Company believes these sources to be generally reliable, market and industry data is subject to interpretation and cannot be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in any survey. The Company has not independently verified any of the data from third party sources referred to or incorporated by reference herein, and accordingly the accuracy and completeness of such data is not guaranteed.
GLOSSARY OF TERMS
In addition to terms defined elsewhere in this AIF, the following terms, when used in this AIF, will have the following meanings (unless otherwise indicated):
“ABCA” means the Business Corporations Act (Alberta), as from time to time amended or re-enacted, and includes any regulations made pursuant thereto.
“Agency Agreement” has the meaning set out in General Development of the Business — History of the Company.
“Agents” has the meaning set out in General Development of the Business — History of the Company.
“Agents’ Shares” has the meaning set out in General Development of the Business — History of the Company.
“Amalgamation Agreement” means the amalgamation agreement dated August 21, 2020 between Newton, Field Trip and Subco.
“Associate” has the meaning set out in Section 1(1) of the Securities Act (Ontario), RSO 1990, c. S.5.
“Atlanta Health Centre” has the meaning set out in General Development of the Business — History of the Company.
“Aurora” has the meaning set out in Directors and Executive Officers.
“Board” means the board of directors of Newton prior to the Transaction and the board of directors of the Company following the Transaction.
“CA Medical Board” has the meaning set out in Description of the Business — Principal Products and Services — Psychedelic Therapy Market.
“CBCA” means the Canada Business Corporations Act, as from time to time amended or re-enacted, and includes any regulations made pursuant thereto.
“CDSA” means the Controlled Drugs and Substances Act (Canada), as from time to time amended or re-enacted, and includes any regulations made pursuant thereto.
“cGMP” has the meaning set out in Risk Factors — Reliance on Third-Parties — Drug Development.
“Chicago Health Centre” has the meaning set out in General Development of the Business — History of the Company.
“CIPO” means Canadian Intellectual Property Office.
“CMC” has the meaning set out inDescription of the Business — Regulatory Oversight — Research and Development Operations.
“CMO” has the meaning set out in Risk Factors — Reliance on Third-Parties — Drug Development.
“CMO Agreement” has the meaning set out in Description of the Business — Regulatory Oversight — Research and Development Operations.
“Common Shares” means common shares in the capital of the Company.
“Company” or “Field Trip” means Field Trip Health Ltd., a company existing under the CBCA, being Newton after the completion of the Transaction, on a consolidated basis which carries on the business and operations of Field Trip, following the Transaction.
“Company Option” means the option to purchase Common Shares granted pursuant to the Company Option Plan.
“Company Option Plan” means Field Trip’s stock option plan, as adopted by the Company.
“Company Warrants” means warrants to purchase Common Shares.
“Compensation Warrants” has the meaning set out in General Development of the Business — History of the Company.
“Consultant Compensation Warrants” has the meaning set out in General Development of the Business — History of the Company.
“Continuance” has the meaning set out in Corporate Structure — Name, Address and Incorporation.
“CPOM” has the meaning set out inDescription of the Business — Regulatory Oversight — Operation of Field Trip Health Centres.
“CPSO” has the meaning set out in Risk Factors — Ketamine as a Pharmaceutical.
“CRO” has the meaning set out inDescription of the Business — Regulatory Oversight — Research and Development Operations.
“CRO Engagement” has the meaning set out in Description of the Business — Regulatory Oversight — Research and Development Operations.
“CSA” means the Controlled Substances Act (21 U.S.C. § 811), as from time to time amended or re-enacted, and includes any regulations made pursuant thereto.
“CSE” means the Canadian Securities Exchange.
“DEA” means US Drug Enforcement Agency.
“DEA License” has the meaning set out in Description of the Business — Regulatory Oversight — Operation of Field Trip Health Centres.
“DTC” has the meaning set out in General Development Of The Business — Events Subsequent to the Year-Ended March 31, 2021.
“Dutch Controlled Substances” has the meaning set out in Description of the Business — Regulatory Oversight — Operation of Field Trip Health Centres.
“EPO” means the European Patent Office.
“Escrow Agreement” has the meaning set out in Escrowed Securities and Securities Subject to Contractual Restriction on Transfer.
“Escrowed Securities” has the meaning set out in Escrowed Securities and Securities Subject to Contractual Restriction on Transfer.
“FDA” has the meaning set out in Description of the Business — Field Trip Health Centres.
“Field Trip” or “Company” means Field Trip Health Ltd., a company existing under the CBCA, being Newton after the completion of the Transaction, on a consolidated basis which carries on the business and operations of Field Trip, following the Transaction.
“Field Trip Health Centres” means collectively, the Toronto Health Centre, the New York Health Centre, the Chicago Health Centre, the Santa Monica Health Centre, the Atlanta Health Centre, the Houston Health Centre and, as the context requires, any other Field Trip Health Centres established in the future.
“Field Trip Options” means the issued and outstanding options of Field Trip exercisable for Field Trip Common Shares.
“Field Trip USA” means Field Trip Health USA Inc., a company existing under the laws of Delaware, incorporated via articles of incorporation on July 22, 2019 as amended on August 19, 2020, a wholly owned subsidiary of Field Trip prior to the Transaction and an indirect wholly-owned subsidiary of the Company following the Transaction.
“Founders” has the meaning set out in Escrowed Securities and Securities Subject to Contractual Restriction on Transfer.
“FT Discovery” has the meaning set out in General Development of the Business — History of the Company.
“FTP” means Field Trip Psychedelics Inc., prior to giving effect to the Transaction, a company existing under the CBCA via articles of incorporation dated April 2, 2019 as amended on October 10, 2019, January 17, 2020 and January 28, 2020, and, where applicable, each subsidiary thereof.
“FTP Class B Shares” means Class B shares in the capital of Field Trip.
“FTP Common Shares” means Class A shares in the capital of Field Trip.
“FT Private Placement” has the meaning set out in General Development of the Business — History of the Company.
“FT-104” has the meaning set out in General Development of the Business — History of the Company.
“FT-104 Agreements” has the meaning set out in General Development of the Business — Regulatory Oversight — Research and Development Operations.
“GLP” has the meaning set out in Risk Factors — Reliance on Third-Parties — Drug Development.
“HC” means Health Canada.
“HHP” means the Heroic Hearts Project, an international non-profit organization that connects military veterans struggling with mental trauma to psychedelic therapies.
“HPFB” has the meaning set out in Description of the Business — Regulatory Oversight — Pharmaceutical Development and Approval Requirements — Canada.
“Houston Health Centre” has the meaning set out in General Development Of The Business — Events Subsequent to the Year-Ended March 31, 2021.
“IAPP” has the meaning set out in Directors and Executive Officers.
“IDFPR” has the meaning set out in Description of the Business — Principal Products and Services — Psychedelic Therapy Market.
“IND” has the meaning set out in Risk Factors — Clinical Testing.
“Insider” when used in relation to an Company, means: (a) a directors or senior officer of the Company, (b) a director or senior officer of a company that is an Insider or subsidiary of the Company, (c) a person that beneficially owns or controls, directly or indirectly, voting shares carrying more than 10% of the voting rights attached to all outstanding voting securities of the Company, and (d) the Company itself if it holds any of its own securities.
“ISO” has the meaning set out in General Development of the Business — History of the Company.
“Jamaica Drug Act” means Jamaica’s Dangerous Drugs Act, 1948, as from time to time amended or re-enacted, and includes any regulations made pursuant thereto.
“Jamaica Facility” has the meaning set out in General Development of the Business — History of the Company.
“Jamaica SPA” has the meaning set out in General Development of the Business — History of the Company.
“January BD Offering” has the meaning set out in General Development of the Business — History of the Company.
“January Compensation Warrants” has the meaning set out in General Development of the Business — History of the Company.
“January Underwriters” has the meaning set out in General Development of the Business — History of the Company.
“January Underwriting Agreement” has the meaning set out in General Development of the Business — History of the Company.
“JMH” means the Jamaica Ministry of Health.
“Ketamine-Enhanced Psychotherapy” or “KEP” means a clinic-based treatment that combines the administration of ketamine with psychotherapy sessions. These sessions are conducted with medical and psychological support and may include therapy-enhancing tools such as music.
“Listing Date” means the date of listing of the Common Shares on the CSE, being October 6, 2020.
“Listing Statement” means the CSE Form 2A Listing Statement dated October 1, 2020, as filed on SEDAR October 5, 2020, which has been filed as required in accordance with the policies of the CSE.
“March BD Offering” has the meaning set out in General Development of the Business — History of the Company.
“March Compensation Warrants” has the meaning set out in General Development of the Business — History of the Company.
“March Underwriters” has the meaning set out in General Development of the Business — History of the Company.
“March Underwriting Agreement” has the meaning set out in General Development of the Business — History of the Company.
“Milestone Shares” has the meaning set out in General Development of the Business — History of the Company.
“mg/kg” A milligram per kilogram of the body weight of the subject person.
“MMCC” has the meaning set out in Directors and Executive Officers.
“MSA” has the meaning set out in Description of the Business — Field Trip Health Centres.
“NCA” has the meaning set out inDescription of the Business — Regulatory Oversight — Research and Development Operations.
“NDA” has the meaning set out in Description of the Business — Regulatory Oversight — Pharmaceutical Development and Approval Requirements — United States.
“NDS” has the meaning set out in Description of the Business — Regulatory Oversight — Pharmaceutical Development and Approval Requirements — Canada.
“New York Health Centre” has the meaning set out in General Development of the Business — History of the Company.
“Newton” means Newton Energy Corporation, as a company existing, prior to the Transaction, under the ABCA via articles of amalgamation dated September 30, 2008, as amended on September 30, 2020 in connection with the Transaction.
“Newton Common Shares” means common shares in the capital of Newton prior to the Transaction.
“NY Medical Board” has the meaning set out in Description of the Business — Psychedelic Therapy Market.
“NYCRR” has the meaning set out in Description of the Business — Psychedelic Therapy Market.
“NYEL” has the meaning set out in Description of the Business — Psychedelic Therapy Market.
“NYOP” has the meaning set out in Description of the Business — Psychedelic Therapy Market.
“Odyssey” means Odyssey Trust Company.
“Odyssey Escrowed Securities” has the meaning set out in Escrowed Securities and Securities Subject to Contractual Restriction on Transfer.
“OHIP” has the meaning set out in Description of the Business.
“OHPIP” has the meaning set out in Risk Factors — Ketamine as a Pharmaceutical.
“Opium Act” has the meaning set out in Description of the Business — Regulatory Oversight — Operation of Field Trip Health Centres.
“OTCQX” has the meaning set out in General Development of the Business — History of the Company.
“Patient Portal” has the meaning set out in Description of the Business — Principal Products and Services.
“PC” has the meaning set out in Description of the Business — Compliance Program.
“PC Centres” has the meaning set out in General Development of the Business — History of the Company.
“PC Committee” has the meaning set out in General Development of the Business — History of the Company.
“PC Health Centres” has the meaning set out in General Development of the Business — History of the Company.
“PCT” has the meaning set out in Description of the Business — Research and Development — Patent Cooperation Treaty.
“person” means a company, a partnership, a trust or individual.
“Preferred Shares” means preferred shares in the capital of the Company.
“Psilocybin Research” has the meaning set out in General Development of the Business — History of the Company.
“PTSD” means post-traumatic stress disorder, as defined in Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition.
“Research Agreement” has the meaning set out in General Development of the Business — History of the Company.
“Reverse Takeover” has the meaning set out in National Instrument 51-102 — Continuous Disclosure Obligations of the Canadian Securities Administrators.
“Santa Monica Health Centre” has the meaning set out in General Development of the Business — History of the Company.
“SAP” has the meaning set out inDescription of the Business — Regulatory Oversight — Operation of Field Trip Health Centres.
“September Offering” has the meaning set out in General Development of the Business — History of the Company.
“Subco” means Newton Energy Subco Limited, a company existing under the CBCA, as incorporated on July 24, 2020 solely for the purpose of completing the Transaction, and is a wholly-owned subsidiary of Newton prior to the Transaction.
“Toronto Health Centre” has the meaning set out in General Development of the Business — History of the Company.
“Transaction” has the meaning set out in Corporate Structure — Name, Address and Incorporation.
“Trip App” has the meaning set out in General Development of the Business — History of the Company.
“TPD” has the meaning set out in Description of the Business — Regulatory Oversight — Pharmaceutical Development and Approval Requirements — Canada.
“TSX” has the Toronto Stock Exchange.
“TSXV” means the TSX Venture Exchange Inc.
“Units” has the meaning set out in General Development of the Business — History of the Company.
“USPTO” means the United States Patent and Trademark Office.
“UWI” has the meaning set out in General Development of the Business — History of the Company.
“Warrant Indenture” means the warrant indenture, dated January 5, 2021, between the Company and Computershare Trust Company of Canada governing the terms and conditions of the Warrants issued under the January BD Offering.
“Warrant Share” has the meaning set out in General Development of the Business — History of the Company.
“Warrants” has the meaning set out in General Development of the Business — History of the Company.
“WIPO” means the World Intellectual Property Organization.
CORPORATE STRUCTURE
Name, Address and Incorporation
The Company was formed on September 30, 2008, pursuant to an amalgamation under the ABCA and adopted the name “Newton Energy Corporation”. On September 30, 2020, in connection with the Transaction, the Company filed articles of amendment to: (i) consolidate its outstanding Common Shares on an eight (8) old for one (1) new basis; and (ii) change its name from Newton Energy Corporation to “Field Trip Health Ltd.”
On October 1, 2020: (i) the Company and FTP completed a series of transactions resulting in a reorganization of FTP and the Company and pursuant to which the Company became the direct parent and sole shareholder of FTP; (ii) the Company changed its year end from December 31 to March 31; and (iii) the Company was continued under the CBCA by Certificate and Articles of Continuance (the “Continuance”) ((i) — (iii) collectively referred to as the “Transaction”).
In connection with the Continuance, the Company adopted new by-laws which included an advance notice provision, which stipulates the requirement to provide advance notice to the Company in circumstances where nominations of persons for election to the Board are made by the Company shareholders other than pursuant to: (i) a requisition of a meeting made pursuant to the provisions of the CBCA; or (ii) a shareholder proposal made pursuant to the provisions of the CBCA. Company shareholders approved and ratified the advance notice provision on September 23, 2020.
The Transaction constituted a reverse takeover of the Company by FTP under applicable securities laws. FTP became a wholly-owned subsidiary of the Company and the business of FTP became the business of the Company.
The Common Shares were listed on the NEX board of the TSXV until September 30, 2020, when they were delisted from the TSXV in connection with the completion of the Transaction. The Common Shares commenced trading on the CSE on October 6, 2020, under the symbol “FTRP”. The Warrants commenced trading on the CSE on January 5, 2021, under the symbol “FTRP.WT”. On June 7, 2021, the Common Shares and the Warrants were delisted from the CSE and commenced trading on the TSX.
The Company’s registered office and head office is located at 30 Duncan Street, Suite 401, Toronto, ON M5V 2C3.
Intercorporate Relationships
The following table describes the subsidiaries of the Company, their place of incorporation, continuance or formation, and the percentage of the outstanding voting securities of each subsidiary that are beneficially owned, controlled or directed by the Company:
GENERAL DEVELOPMENT OF THE BUSINESS
History of the Company
On August 20, 2019, Field Trip entered into a letter of intent with the University of West Indies at Mona, Jamaica (“UWI”), to establish and operate a clinical laboratory and research facility (the “Jamaica Facility”) within the UWI premises in order to conduct research and development related to the cultivation of, as well as the identification and isolation of new substances contained in, psilocybin mushrooms, botanicals and other related fungi (the “Psilocybin Research”). The Psilocybin Research is not in contravention of local laws in Jamaica and the Company has received a legal opinion from local counsel confirming the same with respect to the Psilocybin Research. In addition, the Minister of Health & Wellness of Jamaica has delivered a letter to the Company stating his support for the Company’s operations in Jamaica. We reiterate that the Company’s activity in relation to the research and cultivation of psilocybin mushrooms, botanicals and other related fungi is limited to the jurisdiction of Jamaica and the Company does not deal with psychedelic substances except within laboratory and clinical trial settings conducted within approved regulatory frameworks in order to identify and develop treatments for medical conditions and does not have any direct or indirect involvement with illegal selling, production or distribution of any substances in jurisdictions in which it operates. Psilocybin is currently a Schedule III drug under the CDSA and it is a criminal offence to possess substances under the CDSA without a prescription. Health Canada has not approved psilocybin as a drug for any indication.
On October 3, 2019, Field Trip filed a provisional patent with the USPTO (Appl 62,909,931; October 3, 2019) relating to certain hallucinogenic compositions. No further scientific data has been generated to support the invention. Field Trip has decided that the examples and content are likely insufficient to gain patent approval, but the nature of the invention warrants further investigation. Field Trip has decided to allow the current filing to lapse and may choose to refile at some time in the future when additional information and data support is available.
On November 28, 2019, Field Trip entered into a lease agreement for its first Ketamine-Enhanced Psychotherapy, psychedelic-enhanced psychotherapy, and psychedelic-integration psychotherapy health centre in Toronto, Ontario (the “Toronto Health Centre”). On March 4, 2020, Field Trip opened the Toronto Health Centre and began conducting initial consultations with patients who were interested in ketamine as a treatment for depression symptoms.
On February 14, 2020, Field Trip entered into a lease agreement for its Ketamine-Enhanced Psychotherapy, psychedelic-enhanced psychotherapy, and psychedelic-integration psychotherapy health centre in New York, New York (the “New York Health Centre”). In August 2020, Field Trip opened the New York Health Centre and began conducting initial consultations with patients who were interested in ketamine as a treatment for depression symptoms.
On April 6, 2020, Field Trip entered into the definitive research agreement with UWI (the “Research Agreement”), whereby Field Trip agreed to lease property from UWI on which to construct the Jamaica Facility, where it will carry out the Psilocybin Research, and engaged UWI to assist Field Trip in the Psilocybin Research. Under the Research Agreement, Field Trip agreed to contribute up to US$1,000,000 for initial capital for the Jamaica Facility and Psilocybin Research and a total of US$100,000 to fund student development initiatives at UWI over a 36-month period. UWI has agreed to provide personnel selected by Field Trip to assist it in the Psilocybin Research and Field Trip shall be responsible for the costs of labour, laboratory supplies, technical assistance and other charges directly related to the Psilocybin Research provided by UWI, plus 15%. All equipment, machinery, data and other property purchased by Field Trip, and all intellectual property and discoveries developed through the Psilocybin Research, remain the sole and exclusive property of Field Trip. In the event that Field Trip develops and commercializes the intellectual property developed at the Jamaica Facility, UWI shall receive a royalty of 2% of the net sales from any products developed utilizing such intellectual property. In connection with entering into the Research Agreement, Field Trip launched a new research and drug development business segment, entitled Field Trip Discovery (“FT Discovery”). FT Discovery is an umbrella term used by the Company to divide its personnel between those involved with the clinical operations of the Company’s business and those involved in the research and development operations of the Company’s business. The term “Field Trip Discovery” will also be used as a marketing and branding tool to support the Company’s research and development operations. The Company has applied for a trademark in Canada for the term “Field Trip Discovery”.
FT Discovery is also developing a molecule called FT-104 (“FT-104”). Field Trip believes that FT-104 is unique and patentable in Canada and the United States and has received advice from counsel in Canada confirming such belief. Field Trip filed a provisional patent with the USPTO (Appl 63,045,901; June 30, 2020) with claims that include FT-104 structures and uses. Experimental evidence has been achieved and continues to be a focus of efforts in order to further support the concepts within the invention.
On June 2, 2020, Field Trip entered into a share purchase agreement with Darwin, Inc. (the “Jamaica SPA”), whereby Field Trip agreed to acquire the remaining 22.22% interest in its subsidiary Field Trip Natural Products Limited that it did not already own in exchange for the issuance of 1,200,000 Common Shares, issuable on the achievement of certain milestones (the “Milestone Shares”). Upon execution of the Jamaica SPA, Field Trip acquired 100% ownership of FTNP. The Milestone Shares are issuable as follows: (i) 600,000 Milestone Shares upon commencing research under the Research Agreement at the Jamaica Facility, which occurred on September 21, 2020; (ii) 150,000 Milestone Shares on June 3, 2021; and (iii) 450,000 Milestone Shares issuable on a prorated quarterly basis over 36 months, commencing on the first calendar quarter following June 3, 2021; provided in each case that the lease for the Jamaica Facility and the Research Agreement have not been terminated.
On June 5, 2020 Field Trip entered into a lease agreement for its Ketamine-Enhanced Psychotherapy, psychedelic-enhanced psychotherapy, and psychedelic-integration psychotherapy health centre in Santa Monica, California (the “Santa Monica Health Centre”). In September 2020, Field Trip opened the Santa Monic Health Centre and began conducting initial consultations with patients who were interested in ketamine as a treatment for depression symptoms.
On July 21, 2020 Field Trip entered into lease agreement for an additional health centre to be developed in Chicago, Illinois (the “Chicago Health Centre”). Construction of the Chicago Health Centre was completed in October 2020 and the Chicago Health Centre became operational in December 2020.
On August 14, 2020, Field Trip completed a brokered private placement offering of 5,516,724 FTP Common Shares at a price per FTP Common Share of $2.00, for aggregate gross proceeds of $11,033,448 (the “FT Private Placement”). The FT Private Placement was completed pursuant to an agency agreement (the “Agency Agreement”) among Field Trip and the agents in the FT Private Placement (the “Agents”). The net proceeds of the FT Private Placement will be used for funding of the FT Discovery drug discovery & development program, to develop the Field Trip Health Centres, marketing, to fund research & development at the Jamaica Facility, for technology and innovation, and for general working capital purposes. In connection with the closing of the FT Private Placement, the compensation payable to the Agents included the issuance of: (i) an aggregate of 299,753 warrants (the “Compensation Warrants”), each of which is exercisable into one FTP Common Share at an exercise price of $2.00 per FTP Common Share until August 14, 2022; and (ii) an aggregate of 55,167 FTP Common Shares (the “Agents’ Shares”) at a deemed price of $2.00 per FTP Common Share.
On September 2, 2020, Field Trip released its custom designed mobile software application on both iOS and Android devices (the “Trip App”). The Trip App is designed to provide users with a framework and tools for self-directed consciousness-expanding activities. The Trip App features mood tracking, personalized music, trip record keeping, guided journaling, voice recording, and mindfulness content.
On September 21, 2020, Field Trip completed a follow on financing on the same terms as the FT Private Placement (the “September Offering”). In connection with the September Offering, Field Trip issued an aggregate of 816,932 FTP Common Shares a price per FTP Common Share of $2.00 for aggregate gross proceeds of $1,633,864.
In October 2020, the Company substantially completed construction of the Jamaica Facility and the Jamaica Facility was fully operational by February 9, 2021. The Jamaica Facility is also used to train local personnel who are anticipated to become full time employees at Field Trip upon completion of their doctoral degrees.
On October 6, 2020 and in conjunction with the closing of the Transaction, the Company amended the Company Option Plan. See “Description of Capital Structure”.
On October 8, 2020, the Company announced the addition of Andrew Weil, M.D., a leader and pioneer in the field of integrative medicine, to its medical advisory board. In this role, Dr. Weil will provide the Company with medical advice and expertise on healing-oriented approaches to healthcare, as well as guidance on extending the influence and reach of psychedelic therapies. Dr. Weil is a Harvard-educated physician with expertise in practicing natural and preventive medicine. Dr. Weil is the founder and director of the Andrew Weil Center for Integrative Medicine at the University of Arizona, where he also holds the Lovell-Jones Endowed Chair in Integrative Rheumatology, and is Clinical Professor of Medicine and Professor of Public Health.
On October 14, 2020, the Company announced its entry into a strategic relationship with Heroic Hearts Project (“HHP”), an international non-profit organization that connects military veterans struggling with mental trauma to psychedelic therapies, to increase access to, and awareness of, psychedelic therapies for veterans suffering from mental health disorders such as Post-Traumatic Stress Disorder (“PTSD”). Under the terms of the relationship, and in accordance with the foundation’s mission, HHP will be conducting active outreach and education programs for military veterans about the therapeutic potential of KEP. The Company has developed a unique “KEP+” trauma-focused treatment pathway tailored to veterans and frontline workers, and intends to assist military veterans in applying for insurance and reimbursement options to make the treatment available at little to no cost.
On October 15, 2020, the Company established a Professional Corporation Advisory Committee (the “PC Committee”). The primary mandate of the PC Committee is to (a) provide strategic advice with respect to the structure of certain Field Trip Health Centres as professional corporations (“PC Health Centres”) and the protocols for operations of the PC Health Centres established by the Company, (b) initiate, monitor and report on implementation of the Company’s policies within the PC Health Centres, and (c) periodic review and advice concerning performance of the respective PC Health Centre. The PC Committee must be comprised of a minimum of three physicians, psychologists or psychotherapists of who own a professional corporation or other corporate vehicle which operates a Field Trip Health Centre. The current members of the PC Committee include Dr. Ben Medrano, Dr. Randy Scharlach, Dr. Kiran Chekka and Dr. Michael Muench, who operate PC Health Centres and Dr. Ryan Yermus, the Chief Clinical Officer of the Company.
On October 29, 2020, the Company announced further results of the development of FT-104. The experiments indicated that: (i) FT-104 is a near equipotent 5HT2A receptor agonist to psilocybin that can be delivered with high bioavailability; and (ii) FT-104 will likely produce a reliably short-duration of psychedelic experience in the range of two to four hours, which is approximately half the duration of psilocybin. While these results are encouraging, there is no guarantee or assurances that such results will be replicated at the clinical stage of development or that FT-104 will be developed into a viable pharmaceutical.
In October 2020, the Company launched its proprietary digital “Portal”, along with an updated version of the Trip App. The user base of the Trip App grew by 144% from the second fiscal quarter.
On November 3, 2020, an additional provisional patent (Appl 63,109,095) was filed with the USPTO, wherein certain provisional examples were updated with real examples and new information relating to pharmacology and pharmacokinetics of FT-104.
On November 5, 2020, in response to the passage of Measure 109 in Oregon on November 3, 2020, the Company announced that it is in advanced stages of identifying potential sites to establish a clinic to treat patients in the State of Oregon with psilocybin therapies. The Company intends to seek licenses for cultivation of psilocybin-producing mushrooms in the State of Oregon when the regulations created under Measure 109 are established.
On November 18, 2020, the Company announced that it had entered into a lease and plans to open a Field Trip Health Centre in Amsterdam, Netherlands, located at Piet Heinkade 55, overlooking the IJhaven River. The 665 sq. m. (7,158 sq. ft.) location will be the first health centre focused on therapeutic use of psychedelics using legal psilocybin truffles. The Company has started accepting people interested in participating in its programs, with the Netherlands location expected to treat first patients in July 2021.
On November 19, 2020, the Company announced a partnership whereby the Company will be using WHOOP Strap 3.0, a wearable fitness tracker made by WHOOP Inc., to measure the biometric effects of the Company’s psychedelic therapies. The Company plans to conduct an observational study to assess whether
the Company’s ketamine assisted therapies translate into improvements in physical health through a variety of biometric measures collected via WHOOP Strap 3.0, including heart rate variability (HRV), resting heart rate, and overall sleep quality. The Company procured WHOOP products and access to additional data insights via a research partnership and enterprise program. The initial focus of the study will be on military veterans who seek ketamine-assisted therapies through the Company’s “Basecamp” program, a treatment program designed specifically for military veterans and people in high-intensity professions, such as front-line medical workers, police and firefighters.
On January 5, 2021, the Company announced that it closed its previously announced bought deal short form prospectus offering, including the exercise in full of the underwriters’ over-allotment option (the “January BD Offering”). The January BD Offering was completed pursuant to an underwriting agreement (the “January Underwriting Agreement”) among Field Trip and the underwriters in the January BD Offering (the “January Underwriters”). In connection with the January BD Offering, the Company issued 4,448,200 units (the “Units”), with each Unit being comprised of one Common Share and one-half of one Common Share purchase warrant (the “Warrants”) at a price of $4.50 per Unit, for aggregate gross proceeds of $20,016,900. In connection with the January BD Offering, the Company issued to the January Underwriters an aggregate of 169,565 warrants (the “January Compensation Warrants”). Each January Compensation Warrant is exercisable to purchase one Common Share (a “Warrant Share”) at a price of $4.50 per Warrant Share, subject to customary adjustment, for a period of twenty-four (24) months following the closing of the January BD Offering. Each Warrant entitles the holder thereof to acquire (subject to adjustment and acceleration in certain circumstances) one Common Share at an exercise price of $5.60 per Common Share until the date that is eighteen (18) months following the closing date of the the January BD Offering. The Warrants are governed by the terms and conditions of the Warrant Indenture. See “Description of Capital Structure” for additional information on the Warrants and the Warrant Indenture.
On January 7, 2021, the Company announced that, subject to the completion of a final site inspection, it had been selected as a trial location for a study sponsored by MAPS Public Benefit Corporation on the safety, feasibility and preliminary outcomes of MDMA-assisted therapy to treat eating disorders, including anorexia nervosa.
On January 26, 2021, the Company announced the opening of its fifth location in the city of Atlanta, Georgia and located in the Glenwood Park neighborhood (the “Atlanta Health Centre”). The Atlanta Health Centre utilizes Field Trip’s step-by-step, integrated treatment programs, in which patients are medically supervised and utilize ketamine (a legal, dissociative psychedelic molecule) in conjunction with psychotherapy, mindfulness, and self-care in a comfortable, spa-like environment to support those struggling with depression and other mental health challenges.
On January 28, 2021, the Company announced that the Common Shares had been approved for and commenced trading on the OTCQX® Best Market (“OTCQX”) under the symbol FTRPF. The OTCQX Best Market is for established, investor-focused, U.S. and international companies. To qualify for the OTCQX market, companies must meet high financial standards, follow best practice corporate governance, demonstrate compliance with U.S. securities laws, be current in their disclosure and have a professional third-party sponsor.
On February 9, 2021, the Company announced the official opening of the Jamaica Facility. The Jamaica Facility is the world’s first legal research and cultivation facility dedicated exclusively to psilocybin-producing mushrooms and other plant-based psychedelics. The work at the Jamaica Facility will leverage the research and development efforts that have been conducted by Field Trip at a temporary facility at UWI since January 2020, and will include genetics, breeding and cultivation studies on many of the more than 180 recorded species of psilocybin-producing mushrooms; and developing analytical methods for quality control, identification of novel molecules, as well as extractions and formulations for drug development purposes. Research at the Jamaica Facility will be led by Dr. Rupika Delgoda, Professor of Biochemical Pharmacology & Pharmacognosy and Director of the Natural Products Institute at UWI, who holds a Doctor of Philosophy from Oxford University (UK) in Pharmacology.
On March 17, 2021, the Company announced that it closed its previously announced bought deal short form prospectus offering, including the exercise in full of the underwriters’ over-allotment option (the “March BD Offering”). The March BD Offering was completed pursuant to an underwriting agreement (the “March
Underwriting Agreement”) among Field Trip and the underwriters in the March BD Offering (the “March Underwriters”). In connection with the March BD Offering, the Company issued 14,661,499 Common Shares in the capital of the Company at a price of $6.50 per Common Share, for aggregate gross proceeds of approximately $95 Million. In connection with the March BD Offering, the Company issued the underwriters an aggregate of 763,303 warrants (the “March Compensation Warrants”). Each March Compensation Warrant is exercisable to purchase one Common Share at a price of $6.50 per Common Share, subject to customary adjustment, until March 17, 2023. An additional 104,000 warrants to purchase Common Shares were issued to a consultant on the same terms as the March Compensation Warrants (the “Consultant Compensation Warrants”).
Events Subsequent to the Year-Ended March 31, 2021
On May 4, 2021, the Company announced the opening of its sixth location in the city of Houston, Texas and located in the River Oaks District (the “Houston Health Centre”). and that it has entered into leases and has commenced, or will soon commence construction to build, additional Field Trip Health Centres in San Diego, California, San Carlos, California, Seattle, Washington, Washington, DC and Fredericton, New Brunswick.
On May 6, 2021, the Company announced that it had received eligibility for the electronic clearing and settlement of its Common Shares through The Depositary Trust Company in the United States (“DTC”). This electronic method of clearing securities speeds up the receipt of stock and cash and thus accelerates the settlement process for investors and brokers, enabling the stock to be traded over a wider selection of brokerage firms.
On May 20, 2021, the Company announced the appointment of former U.S. Senate Majority Leader Tom Daschle as a Special Adviser to the Company. Senator Daschle is one of the longest serving Senate Democratic leaders in history and one of only two to serve twice as both Majority and Minority Leader. Senator Daschle is also the Founder and CEO of the Daschle Group, a Public Policy Advisory of Baker Donelson and a legal and government affairs firm that advises clients on a broad array of economic, policy and political issues.
On May 27, 2021, the Company announced that it had received conditional approval to list its common shares and warrants on the TSX.
On June 7, 2021, the Common Shares and Warrants were delisted from the CSE and commenced trading on the TSX under the trading symbol “FTRP” and “FTRP-WT”, respectively. The Common Shares continue to trade on the OTCQX market under the symbol “FTRPF”. In conjunction with its TSX listing, the Company announced that it has appointed Barry Fishman and Ellen Lubman to the Board. Mr. Fishman is an accomplished business leader and board director with proven success in strategy development, performance enhancement and public company governance, with an expansive global network and deep pharmaceutical knowledge. Ms. Lubman brings nearly 20 years of experience in corporate and business development, portfolio strategic planning, financial strategy and investor relations through leadership roles in small biotech and large pharma, starting her career as a Wall Street equity research analyst.
On June 8, 2021 Field Trip announced that it has applied to list the Common Shares on the NASDAQ Stock Market (“NASDAQ”). On their listing on NASDAQ, the Common Shares will cease to be quoted on the OTCQX.
On June 22, 2021, Field Trip issued 125,000 Milestone Shares to Darwin, Inc. Under the Jamaica SPA in accordance with its previously disclosed obligations thereunder,
DESCRIPTION OF THE BUSINESS
Field Trip Health Centres
The Company’s business is premised on a growing body of research that psychedelics can be a new way to treat a myriad of mental health conditions, including depression and addiction. Through the Company’s currently operational Field Trip Health Centres and its contemplated expansion of Field Trip Health Centre locations in other jurisdictions, including San Diego, California, San Carlos, California, Seattle, Washington, Washington, DC, Austin, Texas, Arizona, Vancouver, British Columbia, Fredericton, New Brunswick, and Amsterdam, Netherlands, the Company seeks to create a global brand of trusted health centres for Ketamine-Enhanced Psychotherapy, psychedelic-enhanced psychotherapy and psychedelic-integration psychotherapy, utilizing the Company’s custom protocol while under the supervision of medical professionals and enabling patients to more effectively and affordably address depression, anxiety, addiction and other conditions.
Currently, and in accordance with applicable laws, ketamine is the only substance used by patients of the Field Trip Health Centres who have a valid prescription for such medication prescribed by the appropriate medical professional in the jurisdiction where the Field Trip Health Centres operate. Ketamine-Enhanced Psychotherapy is conducted at lower doses of ketamine than what is used in anaesthesia and in a safe setting alongside psychotherapy.
The Company believes that some corporations may reduce their space requirements as a consequence of permitting employees to work-from-home and, as such, the Company may be able to lease and build clinical space at favourable rates. Further, as an alternative to building new Field Trip Health Centres, the Company may acquire or enter into service relationships with existing clinics that deliver mental health services. The establishment of additional Field Trip Health Centres or the establishment of service relationships will be funded by either available funds or debt or equity financings, based on the capital needs and requirements of the Company at the time of the acquisition. Details regarding the current expansion plans of the Company are discussed in Significant Events or Milestones below.
The Company notes that the Field Trip Health Centres continue to experience direct and indirect consequences of the COVID-19 pandemic on operations, including construction delays that may impact the timing of our clinic openings and potential reluctance of people to attend in-person ketamine dosing sessions and group therapy sessions at our clinics. See Significant Events or Milestones below, for additional details on the Company’s expansion strategy.
At the Toronto Health Centre medical professionals work on contract and receive remuneration via their billings for patient visits from the Ontario Health Insurance Plan (“OHIP”). Field Trip receives 100% of the private pay services offered at the Toronto Health Centre, which include exploratory therapy, Ketamine-Enhanced Psychotherapy and integration therapy.
The Field Trip Health Centres located in the United States are PC Health Centres which have entered into a master services agreement (“MSA”) with the Company. When these PC Health Centres provide professional services to patients, the Company, as administrator, perform billing and collection services on behalf of the PC Health Centres, and the PC Health Centres receive the fees for the services provided. In return for these professional clinical, management, operational and administrative services, the Company receives fees from the PC Health Centres that represent fair value. Each PC Health Centre is owned and operated by a licensed medical professional in the applicable jurisdiction.
At the Toronto Health Centre, when a patient receives a prescription for ketamine, the patient sources and obtains the medicine from a pharmacy that can prepare the prescription in lozenge form. The medication is then used under the supervision of medical staff. At Field Trip Health Centres in the United States, where medically appropriate, ketamine is prescribed to patients and administered via intramuscular injection under the supervision of medical staff. The ketamine is sourced from a licensed medical supplier.
The Company also intends to seek merger and acquisition opportunities where possible, in order to accelerate its business expansion plans and drive value.
Details of the open Field Trip Health Centres are as follows:
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Toronto, Ontario
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|
|
4,000
|
|
|
|
|
|
6
|
|
|
|
New York, NY
|
|
|
|
|
4,500
|
|
|
|
|
|
7
|
|
|
|
Santa Monica, CA
|
|
|
|
|
5,200
|
|
|
|
|
|
6
|
|
|
|
Chicago, IL
|
|
|
|
|
4,145
|
|
|
|
|
|
6
|
|
|
|
Atlanta, GA
|
|
|
|
|
4,456
|
|
|
|
|
|
7
|
|
|
|
Houston, TX
|
|
|
|
|
4,600
|
|
|
|
|
|
6
|
|
|
|
Amsterdam, NL
|
|
|
|
|
7,158
|
|
|
|
|
|
6
|
|
|
Depression is the leading cause of disability worldwide.(1) According to Statistics Canada’s 2012 Canadian Community Health Survey on Mental Health, 4.7% of the Canadian population aged 15 years and over reported experiencing major depression over the previous 12 months. In the United States, recent estimates show 16 million adults had an episode of major depression in the course of a year.(2) The COVID-19 pandemic has resulted in an estimated three-fold increase in the incidence of depression in the US.
Ketamine is a dissociative psychedelic that has unique effects on the body and mind. It has a high safety profile and has been legally used as an anesthetic since the 1970s. A series of studies in the early 2000s showed ketamine’s effectiveness as an antidepressant, and it is now used in Canada as a doctor-prescribed, off-label treatment for mental health conditions. While the use of sublingual lozenges of ketamine to treat depression and other mental health concerns is considered “off-label”, the use of ketamine is legal under medical supervision. In March 2020, the United States Food and Drug Administration (the “FDA”) approved a ketamine-based treatment for depression.(3) Ketamine-based treatment is a new approach for treating depression, a condition the World Health Organization has labeled the leading cause of disability worldwide(4), and represents the first approval for a genuinely new type of psychiatric drug for any condition to be brought to market in more than 30 years.(5)
In 2000, researchers found that ketamine had strong, fast-acting and lasting effects on depression. In a randomized, placebo-controlled, crossover design study, patients with depression received 0.5 mg/kg of ketamine or saline on the first day of testing. Treatments were switched one week later. Researchers found that the antidepressant effects of ketamine began within 4 hours, peaked at 72 hours, and lasted for 1 to 2 weeks thereafter. In a 2006 study, this finding was replicated in an independent group of 18 patients with major depressive disorder who were resistant to other treatments. Compared with participants who received a placebo, those who received ketamine showed significant improvement in symptoms within 110 minutes, with 35% maintaining significant response for at least 1 week.(6) In subsequent years, results from a number of placebo-controlled studies revealed that ketamine is largely effective in treatment of bipolar disorder and treatment-resistant major depressive disorder, and produces antisuicidal and anti-anhedonic effects in mood disorders.(7) See also, Research and Development below.
(1)
World Health Organization, Depression — Fact Sheet, January 30, 2020 (available at https://www.who.int/news-room/fact-sheets/detail/depression).
(2)
National Institute of Mental Health, Mental Health Information > Statistics >Major Depression Last Updated: February 2019 (available at https://www.nimh.nih.gov/health/statistics/major-depression.shtml).
(3)
FDA News Release: FDA approves new nasal spray medication for treatment-resistant depression; available only at a certified doctor’s office or clinic, March 5, 2019 (available at https://www.fda.gov/news-events/press-announcements/fda-approves-new-nasal-spray-medication-treatment-resistant-depression-available-only-certified).
(4)
Depression — Fact Sheet, supra note 1.
(5)
Makin, Simon. Behind the Buzz: How Ketamine Changes the Depressed Patient’s Brain. Scientific American, April 12, 2019, (available at www.scientificamerican.com/article/behind-the-buzz-how-ketamine-changes-the-depressed-patients-brain/.
(6)
Zarate CA Jr, Singh JB, Carlson PJ, et al. A randomized trial of an N-methyl-D-aspartate antagonist in treatment-resistant major depression. Arch Gen Psychiatry.2006;63(8):856-64
(7)
Ketamine and Future Depression Treatments. Psychiatry Advisor, October 16, 2019, (available at www.psychiatryadvisor.com/home/depression-advisor/ketamine-and-future-depression-treatments/.
Efforts to legalize psychedelic substances for medical use are underway in both Canada and the United States. Clinical trials are underway evaluating psilocybin, MDMA and other psychedelic substances for the treatment of a myriad of conditions such as obsessive-compulsive disorder, post-traumatic stress disorder, opioid addiction, alcoholism, eating disorders, depression, anxiety and obesity. Once completed, it is anticipated that federal regulatory bodies such as Health Canada and the FDA in the United States will be asked to approve these substances. In August 2020, Canada’s Minister of Health granted four individuals the right to use psilocybin therapy to treat end-of-life distress pursuant to a compassionate ruling.(8)
Additionally, grassroots efforts in the US are underway seeking to either decriminalize the possession of psychedelic molecules, or to create legal, regulated market for psychedelics and related therapies. On November 3, 2020, the State of Oregon, via Measure 109, became the first state to legalize psychedelic mushrooms for therapeutic use in supervised environments. The cities of Denver, Colorado, Oakland, California, Santa Cruz, California and the District of Columbia have decriminalized possession of psilocybin, and other cities are currently considering similar measures. See also, Regulatory Overview below.
As additional psychedelic medicines are legalized or approved for use in Canada and the United States, the Company will evaluate them for use in the Field Trip Health Centres and, where appropriate, develop protocols to incorporate them into the therapeutic offering at Field Trip Health Centres. Furthermore, research into novel molecules like FT-104 and into the cultivation, extraction, and composition of psychedelic fungi at the Jamaica Facility may result in novel drugs or analogues that, if legalized or approved, would be used in the Field Trip Health Centres in jurisdictions where such approval is obtained or otherwise permitted.
Advanced Research and Drug Development
The Company is also focused on research and development, through its FT Discovery business segment, of psychedelic-inspired regulated medicines. FT Discovery has two independent activities: (i) developing custom synthetic molecules targeting serotonin 5HT2A receptors, which are, in part, implicated in mood disorders; and (ii) the Psilocybin Research, in collaboration with UWI, pursuant to the Research Agreement. To facilitate the Psilocybin Research, the Company has established the Jamaica Facility. The aim of the Jamaica Facility is to seek to optimize cultivation techniques and operating procedures for psilocybin-producing fungi and develop analytical tools and techniques to support the safe use of domesticated species in psychedelic therapy in legal jurisdictions (states or countries), as markets for psilocybin producing fungi continue to emerge.
FT Discovery anticipates that insights and experience relating to the administration of psychedelics and psychedelic-assisted psychotherapy within the Field Trip Health Centres may be applied in the development strategies of novel drug products innovated within FT Discovery. FT Discovery is developing FT-104 for which a provisional patent has been filed with the USPTO (Appl 63,045,901; June 30, 2020), with claims that include FT-104 structures and uses. Experimental evidence has been achieved and continues to be a focus of efforts in order to further support the concepts within the invention. The Company intends to file a utility patent with the USPTO and under the Patent Cooperation Treaty, which facilitates filing for patent recognition in multiple jurisdictions simultaneously using a single uniform patent application. FT-104 is currently in the pre-clinical development stage. No assurances can be given that Field Trip will be able to meet its development timelines disclosed in the Significant Events or Milestones of the Company section, or that FT-104 will be a viable therapeutic product.
Psilocybin, along with other synthetic and natural serotoninergic psychedelics, act to stimulate 5HT2A receptors in the brain resulting in a profound alteration of normal brain signaling and processing, creating what is generally referred to as a “psychedelic experience” or an “altered state of consciousness.” Under psychedelics, the brain “escapes” from its usual tightly constrained and predictable patterns of operation, with a global increase in connectivity of brain regions and brain networks. Often, this can allow patients new introspective insights about their past behaviour, memories, actions, feelings and beliefs. Psychedelic therapy
(8)
See https://mcmillan.ca/mobile/Exemption-for-Four-Patients-Opens-Door-Further-for-Therapeutic-Use-of-Psilocybin
combined with psychotherapy can lead to improvements in conditions relating to depression, PTSD and addiction, which are often a result of dysfunctional brain processing.(9)
FT Discovery is led by Dr. Nathan Bryson, the Company’s Chief Science Officer. Dr. Bryson, who holds a PhD in Chemistry and a Postdoctoral Associate Degree from the Massachusetts Institute of Technology, has three decades of hands-on research and development experience in the biotechnology and pharmaceutical industries, where he has overseen innovation, clinical development, regulatory, quality, global supply chain and medical affairs.
In addition to the clinical work with FT-104 and other drug development efforts, in partnership with UWI, FT Discovery will be conducting research, development and cultivation of psilocybin mushrooms and other related fungi at the Jamaica Facility. The Company’s activity in relation to the research and cultivation of psilocybin mushrooms, botanicals and other related fungi is limited to the jurisdiction of Jamaica and the Company does not deal with psychedelic substances except within laboratory and clinical trial settings conducted within approved regulatory frameworks in order to identify and develop treatments for medical conditions and does not have any direct or indirect involvement with illegal selling, production or distribution of any substances in jurisdictions in which it operates. The Company’s Jamaica team is comprised of a senior researcher and professor at the University of West Indies, Dr. Rupi Delgoda, as well as business consultants, legal counsel and local post-doctoral research students. As well, the Company has employees who are expected to travel to the Jamaica Facility frequently (which has since been restricted due to COVID-19).
In order to develop regulated medicines, FT Discovery’s process must be conducted in strict compliance with the regulations of federal, state, local and regulatory agencies in Canada and the United States, and the equivalent regulatory agencies in the other jurisdictions in which Field Trip operates, including Jamaica. These regulatory authorities regulate, among other things, the research, manufacture, promotion and distribution of drugs in specific jurisdictions under applicable laws and regulations. It is important to note, that unlike in Canada and the United States, psilocybin mushrooms are not an illegal drug under Jamaica’s Dangerous Drugs Act, 1948, therefore research on psilocybin mushrooms is not in contravention of the laws of Jamaica and does not require any permit or authorization from the regulatory authorities in Jamaica.
The Company notes that the COVID-19 pandemic has resulted in delayed drug development deliverables due to temporary quarantining of critical personnel at contract organizations, delayed arrival of reagents to the contract drug manufacturer (CMO) from chemical warehouses, possibly due to shortages, and reduced availability of animal services due to increased activity in preclinical activities at the Company’s selected CRO. See Significant Events or Milestones below, for additional details on Field Trip’s drug development strategy.
Regulatory Oversight
Controlled Substances
The Canadian and United States federal governments regulate drugs through the Controlled Drugs and Substances Act (Canada) (the “CDSA”) and the Controlled Substances Act (21 U.S.C. § 811) (the “CSA”), respectively, which place controlled substances in a schedule. Under the CDSA, ketamine is currently a Schedule I drug and psilocybin is currently a Schedule III drug. Under the CSA, ketamine is currently a Schedule III drug as well as being listed under the associated Narcotic Control Regulations, and psilocybin is currently a Schedule I drug.
Most US States have enacted Controlled Substances Acts (“State CSAs”), which regulate the possession, use, sale, distribution, and manufacture of specified drugs or categories of drugs and establish penalties for State CSA violations, form the basis for much state and local drug laws enforcement activity. State CSAs have either adopted drug schedules identical or similar to the federal CSA schedules or, in some instances, have incorporated the federal scheduling mechanism. Among other requirements, some States have established a prescription drug monitoring or review programs collect information about prescription and dispensing of controlled substances for the purposes of monitoring, analysis and education. Field Trip complies with all State CSAs in jurisdictions where it operates.
(9)
Nutt D, Erritzoe D, Carhart-Harris R. Psychedelic Psychiatry’s Brave New World. Cell. 2020;181:24-8 (available at https://www.cell.com/cell/pdf/S0092-8674(20)30282-8.pdf)
In the United States, facilities holding or administering controlled substances must be registered with the US Drug Enforcement Agency (“DEA”) to perform this activity. As such, medical professionals or the clinics in which they operate, as applicable, are also required to have a DEA license to obtain and administer ketamine (a “DEA License”). To the Company’s knowledge, the Clinics in the United States and the required medical professionals hold all required DEA Licenses. Furthermore, the Clinics have in place security, control, recordkeeping, reporting and inventory mechanisms required by the DEA to prevent drug loss and diversion. Staff at Clinics in the United States, including the medical doctors and/or the nurse practitioner(s), advanced practice registered nurse(s) or other medical professionals who report to them, hold the required DEA Licenses and the Company has put in place policies designed to adhere to DEA requirements.
The Opium Act (Opiumwe) (the “Opium Act”) is the primary drug legislation in the Netherlands which place controlled substances on a list. The controlled substances on those lists and any preparations thereof are prohibited, including psilocybin. However, the Dutch Supreme Court (the highest court in the Netherlands) stated that the plants/fungi in which those substances occur naturally are not prohibited unless specifically listed. Psilocybin-containing truffles or sclerotia are not listed under the Opium Act and, therefore, do not qualify as a controlled substance restricted under the Opium Act. Furthermore, the Dutch Minister of Healthcare confirmed in Parliament that psilocybin-containing truffles are not illegal and can legally be sold, bought and used as a natural product in The Netherlands. Therefore, subject to certain requirements, the Opium Act does not prohibit the cultivation, production and sale of fresh, unprocessed truffles.
Unlike in Canada and the United States, psilocybin mushrooms are not an illegal drug under Jamaica’s Dangerous Drugs Act, 1948 (“Jamaica Drug Act”). Therefore, the psilocybin research is not in contravention of the laws of Jamaica and does not require any permit or authorization from the regulatory authorities in Jamaica. In addition, the Minister of Health & Wellness of Jamaica has delivered a letter to the Company stating his support for the Company’s operations in Jamaica.
Field Trip does not deal with controlled substances except in jurisdictions where such activity is legal and then only within (a) laboratory or clinical trial settings, (b) in the case of the Netherlands, within a clinical setting, and (c) in the case of ketamine, as prescribed by a licensed medical practitioner. Field Trip does not have any direct or indirect involvement with illegal selling, production or distribution of any substances in jurisdictions in which it operates.
On September 30, 2020, Canada’s House of Commons heard an official proposal to decriminalize psychedelics. The Canadian Government response to that proposal included statements from each from the Ministers of Justice, Health, and Public Safety and Emergency Preparedness, who reiterated that these substances remain illegal in Canada and, in the case of the Minister of Health, that any approval for medical purposes would need to pass Canada’s drug review process and receive authorization from Health Canada. Subsequent to this response, Health Canada announced its intention to remove the current prohibition on access to controlled substances through Health Canada’s Special Access Program (“SAP”). See Regulation of Prescription Medications.
On November 3, 2020, the State of Oregon, via Measure 109, became the first state to legalize psychedelic mushrooms for therapeutic use in supervised environments. Measure 109 is expected to allow people in the state who are age 21 or older to access psychedelic mushrooms for personal development upon passing a screening conducted by a qualified therapist. People who use the drug are expected to be able to do so at a psilocybin service centre, with the supervision of a designated service facilitator. Oregon expects to have a two-year planning period in which lawmakers will determine how the drug will be regulated, including qualifications for therapists intending to prescribe psychedelic mushrooms and for psilocybin facilitators. The program is expected to be regulated by the Oregon Health Authority.
In addition, since the passage of Measure 109, legislation in respect of psilocybin or psychedelics has been proposed in each of Florida, California, Hawaii and Connecticut drawing on elements of the Oregon ballot measure. In Florida, The Florida Psilocybin Mental Health Care Act, if approved, will create state-sponsored clinics where patients suffering from mental-health disorders could be administered doses of psilocybin by a licensed medical professional. The patient would go through the experience, or “trip,” with the professional present and then be offered a post-treatment counseling session. In Hawaii, Senate Bill 738, if approved, will establish treatment centers designated by the Hawaii Department of Health for the monitored, therapeutic administration of psilocybin and psilocin to treat mental illness. In California, Senate Bill 519, if
approved, would decriminalize the personal use of psychedelic drugs including psilocybin mushrooms, MDMA(10), LSD(11), ketamine, DMT(12), mescaline and ibogaine for all Californians over the age of 21. In Connecticut, House Bill 6296, if approved, will establish a task force to study the health benefits of psilocybin.
The Company expects that legislation of similar natures may be introduced in other jurisdictions in the coming years, as well as additional ballot measures similar to Measure 109. The Company cannot comment on the regulatory framework in any such jurisdiction as it has not been created. The Company will assess its options to conduct legal business in such jurisdictions when State or Provincial, as applicable, and Federal regulations are established and may seek any required licenses or approvals at that time. See “Risk Factors”.
Regulation of Prescription Medications
In Canada, oversight of healthcare is divided between the federal and provincial governments. The federal government is responsible for regulating, among other things, the approval, import, sale, and marketing of drugs such as ketamine. Please see “Regulatory Oversight — Research and Development”.
While Ketamine is a controlled substance in Canada and the United States, it is approved as an anesthetic under the Food and Drugs Act (Canada) and the US Food, Drug, and Cosmetic Act. Once a drug is approved for use, physicians may prescribe that drug for uses that are not described in the product’s labelling or that differ from those tested by the manufacturer and approved by Health Canada or the Food and Drug Administration (the “FDA”), as applicable. This is known as “off-label” use and is a common practice among physicians. Additionally, as mentioned above, Ketamine-based treatment is gaining acceptance for treating depression. Furthermore, a Ketamine nasal spray for the treatment of major depression was approved by the FDA in March 2020 and Health Canada in July 2020.
Health Canada and the FDA have not approved psilocybin as a drug for any indication. However, there are legal routes through which psilocybin may be accessed for medical purposes.
In Canada, Section 56(1) of the CDSA permits the Health Minister to exempt any person or class of persons or any controlled substance or precursor or class thereof from the application of all or any provisions of the Canadian Controlled Substances Act if, in his or her opinion, the exemption is necessary for a medical or scientific purpose or is otherwise in the public interest. In August 2020, Health Minister Patty Hajdu approved such an exemption to allow four (4) Canadians with incurable cancer and experiencing end of life distress or other intractable mental health conditions to receive psilocybin therapy to treat their end-of-life anxiety. Having the exemption in question permits such individuals to legally obtain and use psilocybin.
Furthermore, on December 12, 2020, Health Canada announced its intention to remove the current prohibition on access to controlled substances through Health Canada’s SAP. Under the SAP, medical practitioners treating patients with serious or life-threatening conditions can request access to drugs that have not yet been approved for sale in Canada when conventional therapies have failed, are unsuitable, or unavailable. Such amendments would create another means of legally accessing psilocybin through the SAP.(13)
In the United States, the FDA has granted psilocybin therapy a breakthrough therapy designation to facilitate drug trials testing its efficacy for treatment resistant depression and major depressive disorder. Similar trials are ongoing in Canada. If approved, these medications would provide a legal route to prescribe psilocybin in the United States.
Although psilocybin-containing truffles or sclerotia are not prohibited by the Opium Act, they are not approved under the Medicines Act. In light of the above and based on advice of counsel in the Netherlands, the Opium Act does not prohibit the presence and/or use of fresh, unprocessed truffles with psilocybin. The truffles with psilocybin may not be subject in any way or form to any further processing (that results in the truffles becoming a preparation prohibited under the Opium Act).
(10)
Being, the chemical compound 3,4-Methylenedioxymethamphetamine.
(11)
Being, lysergic acid diethylamide.
(12)
Being, the chemical compound N,N-Dimethyltryptamine.
(13)
See gazette.gc.ca/rp-pr/p1/2020/2020-12-12/html/notice-avis-eng.html
Operation of the Field Trip Health Centres
Each province and territory of Canada and each state in the United States mandates the requirements for the Field Trip Health Centers (the “Clinics”) and the conduct of the medical professionals who work in the Clinics. Please refer to the table below for details concerning these regulations.
Although it is the Company’s intention to administer psilocybin-containing truffles as a food product in The Netherlands, the Company also intends to employ medical professionals in its Amsterdam Centre and has applied for an “alternative care” license under the Dutch Healthcare Quality, Complaints and Disputes Act (WKKGZ). The table below also includes a summary of the laws applicable to the Company’s business that it proposes to operate in Amsterdam.
|
Province / State
|
|
|
Medical Professional
|
|
|
Governing Law
|
|
|
Regulatory Bodies
|
|
|
Ontario
|
|
|
Medical Doctors
|
|
|
Regulated Health Professions Act, 1991 (Ontario) (“RPHA”), Medicine Act, 1991 (Ontario)
|
|
|
College of Physicians and Surgeons of Ontario (“CPSO”)
|
|
|
|
|
|
Psychologists
|
|
|
RPHA, Psychology Act, 1991 (Ontario)
|
|
|
College of Psychologists of Ontario (“CPO”)
|
|
|
|
|
|
Nurses; Nurse Practitioners
|
|
|
RPHA, Nursing Act, 1991 (Ontario)
|
|
|
College of Nurses of Ontario (“CNO”)
|
|
|
|
|
|
Psychotherapists
|
|
|
RPHA, Psychotherapy Act, 2007 (Ontario)
|
|
|
College of Registered Psychotherapists of Ontario, CPSO, CPO, CNO, College of Occupational Therapists of Ontario, or Ontario College of Social Workers and Social Service Workers
|
|
|
|
|
|
Respiratory therapist
|
|
|
Respiratory Therapy Act, 1991 (Ontario)
|
|
|
College of Respiratory Therapists of Ontario
|
|
|
New Brunswick
|
|
|
Medical Doctors
|
|
|
Medical Act
|
|
|
College of Physicians and Surgeons of New Brunswick
|
|
|
|
|
|
Psychologists
|
|
|
Psychologists Act
|
|
|
College of Psychologists of New Brunswick
|
|
|
|
|
|
Counselling Therapists
|
|
|
Licensed Counselling Therapy Act
|
|
|
College of Counselling Therapists of New Brunswick
|
|
|
|
|
|
Nurses; Nurse Practitioners
|
|
|
Nurses Act
|
|
|
Nurses Association of New Brunswick
|
|
|
|
|
|
Licensed Practical Nurses
|
|
|
Licensed Practical Nurses Act
|
|
|
Association of New Brunswick Licensed Practical Nurses
|
|
|
New York
|
|
|
Medical Doctors
|
|
|
State of New York are New York Education Law §§ 6500 — 6516 and 6520 — 6532 and 8 New York Codes, Rules and Regulations (“NYCRR”)
|
|
|
New York State Education Department, Office of the Professions, State Board for Medicine (“NY Medical Board”)
|
|
|
|
|
|
Psychologists
|
|
|
New York Education Law (“NYEL”) §§ 7600 and 8 NY CRR §§ 72.1
|
|
|
New York State Education Department, Office of the Professions (“NYOP”), State Board for Psychology
|
|
|
|
|
|
Psychotherapists
|
|
|
NYEL §§ 8400, 8 NY CRR § 52.35 and 8 NY CRR §§ 79.12.
|
|
|
NYOP, State Board for Mental Health Practitioners
|
|
|
|
|
|
Nurses; Nurse Practitioners
|
|
|
NYEL §§ 6900 and additional regulations that apply only to nurses at NYCRR §§ 64.1.
|
|
|
NYOP, State Board for Nursing
|
|
|
Province / State
|
|
|
Medical Professional
|
|
|
Governing Law
|
|
|
Regulatory Bodies
|
|
|
California
|
|
|
Medical Doctors
|
|
|
Business and Professions Code, §2190.5 (“CA BPC”)
|
|
|
Medical Board of California (“CA Medical Board”)
|
|
|
|
|
|
Naturopathic Doctors
|
|
|
CA BPC
|
|
|
Naturopathic Medicine Committee
|
|
|
|
|
|
Psychologists
|
|
|
CA BPC
|
|
|
California Board of Psychology
|
|
|
|
|
|
Clinical Social Workers and Licensed Professional Clinical Counselors
|
|
|
CA BPC
|
|
|
California Board of Behavioral Sciences
|
|
|
|
|
|
Nurses; Nurse Practitioners
|
|
|
CA BPC
|
|
|
Board of Registered Nursing
|
|
|
Illinois
|
|
|
Medical Doctors
|
|
|
Medical Practice Act (225 ILCS 60/2)
|
|
|
Illinois Department of Financial and Professional Regulation (“IDFPR”)
|
|
|
|
|
|
Psychologists
|
|
|
Clinical Psychologist Licensing Act (225 ILCS 15/)
|
|
|
IDFPR
|
|
|
|
|
|
Professional Counselors and Clinical Professional Counselors
|
|
|
Professional Counselor and Clinical Professional Counselor Licensing and Practice Act (225 ILCS 107/1)
|
|
|
IDFPR
|
|
|
|
|
|
Nurses; Nurse Practitioners
|
|
|
Nurse Practice Act (225 ILCS 65/)
|
|
|
IDFPR
|
|
|
Georgia
|
|
|
Medical Doctors
|
|
|
Medical Practice Act, Official Code of Georgia (“OCGA”) §§43-34 and 34A
|
|
|
Georgia Composite Medical Board
|
|
|
|
|
|
Psychologists
|
|
|
OCGA Title 43, Chapter 39
|
|
|
Georgia State Board of Examiners of Psychologists
|
|
|
|
|
|
Professional Counselors
|
|
|
OCGA Title 43, Chapters 7A and 10A
|
|
|
Georgia Composite Board of Professional Counselors, Social Workers and Marriage and Family Therapists
|
|
|
|
|
|
Nurses; Nurse Practitioners
|
|
|
Nurse Practice Act, OCGA § 43-26
|
|
|
Georgia State Board of Nursing
|
|
|
Texas
|
|
|
Professional Counselor
|
|
|
Texas Occupations Code Chapter 503
|
|
|
TBHEC
|
|
|
|
|
|
Medical Doctors
|
|
|
Texas Occupations Code Chapter 155 and 22 TAC Chapter 163
|
|
|
Texas Medical Board
|
|
|
|
|
|
Psychologists
|
|
|
Texas Occupations Code Chapter 501
|
|
|
Texas Behavioral Health Executive Council (“TBHEC”)
|
|
|
|
|
|
Nurses; Nurse Practitioners
|
|
|
Texas Occupations Code Chapter 301
|
|
|
Texas Board of Nursing
|
|
|
Province / State
|
|
|
Medical Professional
|
|
|
Governing Law
|
|
|
Regulatory Bodies
|
|
|
Netherlands
|
|
|
Medical Doctors
|
|
|
Individual Healthcare Act (Wet op de Beroepen in de Individuele Gezondheidszor, “BIG”), and if other care is provided, the Healthcare Quality, Complaints and Disputes Act (Wet kwaliteit, klachten en geschillen zorg, “WKKGZ”)
|
|
|
Ministry of Health, Welfare and Sport (Ministerie van Volksgezondheid, Welzijn en Sport, “VWS”), the Inspectorate for Heath and Youth Care (Inspectie gezondheidszorg en jeugd (“IGJ”) and the Royal Dutch Medical Association (Koninklijke Nederlandsche Maatschappij tot bevordering der Geneeskunst)
|
|
|
|
|
|
Health Psychologists
|
|
|
BIG, and if other care is provided, WKKGZ
|
|
|
VWS, IGJ and the Federation of Healthcare psychologists (Federatie van Gezondheidzorgpsychologen en Psychotherapeuten, “FGZPT”)
|
|
|
|
|
|
Psychotherapists
|
|
|
BIG, and if other care is provided, WKKGZ
|
|
|
VWS, IGJ and FGZPT
|
|
|
|
|
|
Certified Nurse Specialist
|
|
|
BIG, and if other care is provided, WKKGZ
|
|
|
VWS, Registration Commission for Nurse Specialists (Registratiecommissie Specialismen Verpleegkunde)
|
|
|
Washington
|
|
|
Medical Doctors
|
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|
Wash. Rev. Code Ann. §§ 18.71.002, et seq.; 18.71B.010, et seq.; Wash. Admin. Code §§ 246-919-421, et seq.
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Medical Quality Assurance Commission
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Naturopathic Doctors
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Wash. Rev. Code Ann. §§18.36A, et seq.; Wash. Admin. Code §§246-836-210, et seq
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Board of Naturopathy
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Psychologists
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Wash. Rev. Code Ann. §§ 18.83.005, et seq.; Wash. Admin. Code §§ 246-924-000, et seq.
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Washington Department of Health, Examining Board of Psychology (EBOP)
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Mental Health Counselors
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Wash. Rev. Code Ann. §§ 18.225.005, et seq; Wash. Admin. Code §§ 246-809-000, et seq.
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Washington Department of Health; Mental Health Counselors, Marriage and Family Therapist and Social Worker Advisory Committee
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Nurses; Nurse Practitioners
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Wash. Rev. Code Ann. §§ 18.79.010, et seq.; Wash. Admin. Code §§ 246-840-000, et seq.
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Washington Department of Health, Nursing Care Quality Assurance Commission
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Province / State
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Medical Professional
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Governing Law
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Regulatory Bodies
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District of Columbia
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Medical Doctors
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District of Columbia Official Code Title 3 Chapter 12 subchapters 1-5; Code of D.C. Municipal Regulations Title 17 Chapter 46
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The DC Board of Medicine
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Psychologists
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District of Columbia Official Code Title 3 Chapter 12 subchapters 1-5; Code of D.C. Municipal Regulations Title 17 Chapter 69
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The DC Board of Psychology
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Professional Counselors
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District of Columbia Official Code Title 3 Chapter 12 subchapter 7A; Code of D.C. Municipal Regulations Title 17 Chapter 66
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The DC Board of Professional Counseling
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Nurses; Nurse Practitioners
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The Nurse Practice Act District of Columbia Official Code Title 3 Chapter 12; Code of D.C. Municipal Regulations Title 17 Chapters 54-60
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The DC Board of Nursing
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Connecticut
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Medical Doctors
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Conn. Gen. Stat. §20-8 through 20-14r; Conn. Agencies Regs. § 20-10-1 through 20-10-6
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Connecticut Medical Examining Board
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Psychologists
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Conn. Gen. Stat. §20-186; Conn. Agencies Regs. § 20-188-1 through 20-188-3
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Board of Examiners for Psychologists
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Licensed Professional Counselors
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Conn. Gen. Stat. §20-195aa through 20-195ff; Conn. Agencies Regs. § 20-195cc-1 through 20-195cc-7
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Commissioner of Public Health
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Nurses; Nurse Practitioners
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Conn. Gen. Stat. §20-87 through 20-102a; Conn. Agencies Regs. § 20-90-45 through 20-90-59
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Connecticut State Board of Examiners for Nursing
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|
While the treatments that occur at the Clinics are novel in some respects, the prescription of ketamine and the dispensing of ketamine are not novel and are subject to the same restrictions as would apply to any medical professional who prescribes other controlled substances to his or her patients. There are no special licenses, permits, authorizations or approvals required that are different from any other ordinary course approvals required by applicable governmental authorities for any medical clinic. As such, licensed medical practitioners may prescribe ketamine legally in Canada or the United States where they believe it will be an effective treatment in their professional judgment. It is Field Trip’s policy never to dictate or influence the professional judgement of our physicians, nurses or other clinical staff.
Administration of ketamine as part of the Ketamine Assisted Psychotherapy (“KAP”) program is performed only following prescription by a licensed physician or by a licensed nurse practitioner or other medical professional, under the supervision of a licensed physician. The Clinics may utilize, in addition to physicians, mid-level practitioners such as physician assistants and nurse practitioners and mental health practitioners such as psychologists and psychotherapists. The exact make-up of staff for each Clinic varies by location and additional professionals and/or administrative staff may also be employed.
In Canada, the provincial/territorial level of government has authority over the delivery of health care services, including regulating health facilities, administering health insurance plans such as OHIP, distributing prescription drugs within the province, and regulating health professionals such as doctors, psychologists, psychotherapists and nurse practitioners. Regulation is generally overseen by various colleges formed for that purpose, such as the College of Physicians and Surgeons of Ontario.
In the United States, the laws applicable to the Clinics and the conduct of medical professionals therein are at the State level and vary by jurisdiction. Additionally, in the United States, the Clinics or doctors, as applicable, are also required to have a DEA License to prescribe ketamine. In each State, the Company plans to offer KAP, psychotherapy and ancillary mental health services.
As of the date hereof, to the best of Field Trip’s knowledge, each of the medical professionals working at the Clinics are in good standing with the applicable regulatory body that governs such medical professional.
Under the Company’s business model, there are no state-specific licenses required to (a) operate a mental health clinic prescribing and/or administering ketamine, (b) that apply to the storage and/or administration of ketamine, other than those which mirror the CDSA requirements, and (c) operate or provide management services to the Clinics, other than standard filings with the applicable Secretary of State for out-of-state companies, which Field Trip Health USA Inc. (“Field Trip USA”) has obtained in connection with the setup of these locations.
Some states have legislation or policies relating to the “Corporate Practice of Medicine” doctrine (“CPOM”) that govern business relationships between licensed medical professionals and unlicensed individuals or companies. The following states have CPOM legislation: New York, California, Illinois, and Texas. The States of Georgia, Washington and Connecticut do not have specific CPOM legislation, but case law or statetments by the Attorney General may have established or invoked CPOM doctrine in those states. In order to comply with CPOM, Clinics in these states are owned solely by State-licensed physicians and are organized as physician practices. In such states, Field Trip USA will provide management services to the physician practices that own such clinics. The relationship between Field Trip USA and the physician practices that it manages are subject to various standards of CPOM, anti-kickback and fee-splitting rules. The District of Columbia does not have a CPOM statutes nor is there clear judicial consideration of CPOM within this jurisdiction. However, Field Trip proposes to organize the Clinics in those jurisdictions as a physician-owned Professional Corporations.
Individuals and entities that conduct business in the US health care industry must comply with applicable state and federal anti-kickback laws that limit activities that may be viewed as incentivization or inducement methods. To the best of the Company’s knowledge, no medical professionals at the Clinics receive commissions, incentives or other fees, directly or indirectly.
In The Netherlands, Field Trip’s wellness centre will make psilocybin-containing truffles available to clients in connection with wellness programs. As noted above, psilocybin-containing truffles are neither prohibited under the Opium Act nor are they approved as a medicine. As such, Field Trip is making the psilocybin-containing truffles available to clients as a whole, natural food product. As Field Trip employs medical professionals in its business, we have elected to register as an alternative care provider. In the event that the Dutch authorities take the position that therapy with truffles qualifies as “regular care”, or that truffles containing psilocybin qualify as medicinal product, the Company would then need to take steps to comply with local laws applicable to a regular care provider. Should this event occur, the Company will evaluate its options in the Netherlands to ensure full compliance with all applicable legislation and regulations. See “Risk Factors”.
The Company’s business is also governed by laws in Canada, the United States and the Netherlands pertaining to handling, use and protection of personal health information, including the Personal Health Information Protection Act (Ontario), The Health Insurance Portability and Accountability Act of 1996, the Netherlands Personal Data Protection Act (Wet Bescherming persoonsgegevens) and similar provincial or state laws. These laws and related regulations grant a number of rights to individuals as to their personal health information and restrict the use and disclosure of such information. The Company has in place privacy practices designed to comply with these requirements and ensures that service providers having access to personal health information have entered into agreements that include appropriate protective clauses, including business associate agreements where applicable.
Natural Products Operations
Through consultation with local resources and personnel with relevant knowledge and experience, as necessary, in Jamaica, the Company is satisfied that all necessary licenses, permits and regulatory approvals
have been obtained in order to carry on the business as currently conducted and that such licenses, permits and regulatory approvals that have been obtained are in good standing.
As psilocybin is not included in the Jamaica Drug Act, it is not a controlled or restricted substance in Jamaica and therefore no other specific controls, permits, licenses or authorizations are required to conduct research on psilocybin. The Psilocybin Research conducted at the Jamaica Facility is governed by the JMH, Ethics and Medico-Legal Affairs Panel and by the JMH Standards and Regulation Division, as would any other research conducted in a clinical setting. In addition to Good Laboratory Practices (“GLP”) and cGMP, research involving human subjects is governed by the JMH Guidelines for the Conduct of Research on Human Subjects. Furthermore, medicines, including natural products, require registration with the JMH prior to importation, distribution and sale in Jamaica, as outlined in the Food and Drugs Act, 1964.
The Company has received legal opinions or advice in each jurisdiction where it currently operates or proposes to operate (other than Oregon, where the applicable legislation has not yet been created), confirming the permissibility of the Company’s operations in such jurisdictions.
Research and Development Operations
In Canada and the United States, the regulation of drug development, including novel molecules such as FT-104 and natural substances such as psilocybin-containing mushrooms and truffles, are regulated by the Federal governments.
As the Company’s business spans different operational models, the Company relies on a variety of researchers, medical professionals, suppliers, manufacturers and other service providers for the conduct of its operations. The Company’s research and development activities rely on the following relationships with three third parties: (1) the Research Agreement in respect of the Psilocybin Research; (2) engagement by the Company of a contract research organization (“CRO”) regarding FT-104 (the “CRO Engagement”) and (3) the service agreement with the Company’s contract manufacturing organization (“CMO”) in respect of FT-104 (the “CMO Agreement” and together with the CRO Engagement, the “FT-104 Agreements”).
UWI is a globally recognized academic institution. The Research Agreement was negotiated at arm’s length, with legal counsel acting on behalf of the Company both in Canada and Jamaica, and includes appropriate intellectual property and confidentiality provisions. Psilocybin research is legal in Jamaica.
With respect to the FT-104 Agreements, Health Canada and the FDA have indicated that FT-104 is not a controlled substance and therefore does not require licenses, permits or specific approvals. Notwithstanding, the CMO is Health Canada approved, FDA registered and compliant with cGMP (a standard applied in the pharmaceutical industry) in the synthesis, process optimization and production of drug substances and has been successfully audited by Health Canada and the FDA.
The CRO is GLP compliant and holds all licenses required for its activities as they relate to the Company. Both the CMO and CRO have controlled substance licenses for other known controlled substances and are qualified for handling FT-104, which, for certainty, is not a controlled substance. In addition, the Company has entered into appropriately negotiated services agreements or statements of work with the CMO and CRO that contemplate appropriate intellectual property and confidentiality provisions. In order to develop regulated medicines, including FT-104, the Company’s process must be conducted in strict compliance with the regulations of Health Canada, the FDA and other applicable federal, state, local and regulatory agencies. Details regarding the process required in Canada and the United States before prescription drug product candidates may be marketed in such jurisdictions is included in the AIF under the headings “Description of the Business — Research and Development — Canada” and “Description of the Business — Research and Development — United States”, respectively, which are incorporated herein by reference.
FT-104 is currently in the pre-clinical stage of development, in which the primary activities are: (1) optimization and standardization of Chemistry-Manufacturing and Controls (“CMC”), including additional chemical characterization, synthesis, process optimization, stability, and development of analytical methodology to ensure drug substance quality, (2) excipient compatibility, formulation, stability and analytical methodology to ensure drug product quality and (3) non-clinical (same as preclinical) activities (“NCA”) that measure performance (pharmacokinetics) and safety (toxicology; pharmacology) using a variety of in-vitro and in-vivo assays. These studies will help to define the expected pharmacologic characteristics of the drug
substance contained with the drug product, including determining adequate safety margins to allow for safe testing of the substance in Phase I clinical trials. CMC activities are carried out by the CMO. NCA activities are carried out by the CRO.
The CMO is reliant on third-party suppliers for starting materials to produce FT-104. The Company, along with the CMO, only source starting materials, reagents, solvents and supplies required from reputable and approved suppliers who hold the proper authorizations and approvals. Weekly or bi-weekly meetings occur to monitor the activities and advancements of CMO and CRO. It is expected that, at the appropriate time, a third party regulatory group will be engaged to assist with the development of the regulatory strategy and the regulatory documentation that will be required for approval at each stage of the clinical development.
Pharmaceutical Development and Approval Requirements — Canada
Before a prescription drug product candidate may be marketed in Canada, the process required generally involves:
•
Chemical and Biological Research — Laboratory tests are carried out on cell and/or tissue cultures and animal models to determine the properties of the drug. If the results are promising, the manufacturer will proceed to the next step of development.
•
Pre-Clinical Development — Laboratory animals are given the drug in varying amounts over differing periods of time. If it can be shown that the drug causes no serious or unexpected harm at the doses required to have an effect, the manufacturer will proceed to clinical trials.
•
Clinical Trials — Phase 1 — The first administration in humans is to test if people can safely tolerate the drug. If this testing is to take place in Canada, the manufacturer must prepare a clinical trial application for the Therapeutic Products Directorate of Health Canada (the “TPD”). This includes the results of the first two steps and a proposal for testing in humans. If the information is sufficient, the Health Products and Food Branch of Health Canada (the “HPFB”) grants permission to start testing the drug, generally first on healthy volunteers.
•
Clinical Trials — Phase 2 — Phase 2 trials are conducted in patients with the target condition, who are usually otherwise healthy, with no other medical condition. Trials carried out in Canada must be approved by the TPD. In Phase 2, the objectives of the trials are to continue to gather information on the safety of the drug and begin to determine its potential effectiveness.
•
Clinical Trials — Phase 3 — If the results from Phase 2 show promising proof of concept for the drug candidate, the manufacturer provides an updated clinical trial application to the TPD for Phase 3 trials. The objectives of Phase 3 include determining whether the drug can be shown to be safe and effective, and have an acceptable side effect profile, in people who better represent the general population. Further information will also be obtained on how the drug should be used, the optimal dosage regimen and the possible significant side effects.
•
New Drug Submission — If the results from Phase 3 continue to be favourable, the drug manufacturer can submit a new drug submission (“NDS”) to the TPD. A drug manufacturer can submit an NDS regardless of whether the clinical trials were carried out in Canada. The TPD reviews all the information gathered during the development of the drug and assesses the risks and benefits of the drug. If it is judged that, for a specific patient population and specific conditions of use, the benefits of the drug outweigh the known risks, the HPFB will approve the drug by issuing a notice of compliance.
•
Scheduling — FT-104 is a psychoactive substance with the potential for abuse. If FT-104 is approved as a drug, we will need to hold discussions with Health Canada to determine a risk management plan to protect FT-104 from potential diversion and misuse by patients, as well as to schedule its removal from category III (no known medical utility) to another category based on data acquired during development and based on the drug’s adverse properties, if any, related to potential abuse and addiction.
Pharmaceutical Development and Approval Requirements — United States
Before a prescription drug product candidate may be marketed in the United States, the process required generally involves:
•
Completion of extensive nonclinical laboratory tests, animal studies and formulation studies, all performed in accordance with the FDA’s Good Laboratory and Manufacturing Practice regulations.
•
Submission to the FDA of an investigational new drug application, which must become effective before human clinical trials may begin.
•
For some products, performance of adequate and well-controlled human clinical trials in accordance with the FDA’s regulations, including good clinical practices, to establish the safety and efficacy of the product candidate for each proposed indication.
•
Submission to the FDA of a new drug application (“NDA”).
•
Scheduling in collaboration with the DEA based on the drugs adverse properties, if any, related to potential abuse and addiction.
•
FDA review and approval of the NDA prior to any commercial marketing, sale or shipment of the drug.
The operations of the Company, as currently conducted, do not require and are not dependent on, any licenses to conduct such operations.
Compliance Program
The Company oversees and monitors compliance with applicable laws in each jurisdiction in which it operates. In addition to the Company’s senior executives and the employees responsible for overseeing compliance, the Company has local regulatory/compliance counsel engaged in every jurisdiction (provincial, state and local) in which it operates. The principal medical professional at each Field Trip Health Centre serves as the liaison to provincial, state and/or local governmental authorities. The Company has developed protocols for use in all of its Field Trip Health Centres with the goal of ensuring that each of the Field Trip Health Centres’ operations and employees strictly comply with applicable laws and regulations and that operations do not endanger the health, safety or welfare of the community. Additionally, the Company has established a Medical Advisory Board with cross-functional expertise in business, neuroscience, pharmaceuticals, mental health and psychedelics to advise management.
In conjunction with the Company’s human resources and operations departments, the Company oversees and implements training on the Company’s protocols. The Company will continue to work closely with external counsel and other compliance experts, and is evaluating the engagement of one or more independent third party providers to further develop, enhance and improve its compliance and risk management and mitigation processes and procedures in furtherance of continued compliance with the laws of the jurisdictions in which the Company operates. The programs currently in place include continued monitoring by executives of the Company to ensure that all operations conform to and comply with required laws, regulations and operating procedures. The Company further requires that each Field Trip Health Centre and all third parties in which it is engaged with report and disclose all instances of non-compliance, regulatory, administrative, or legal proceedings that may be initiated against them. The Company is currently in compliance with the laws and regulations in all jurisdictions and the related licencing framework applicable to its business activities. Additionally, the PC Committee is mandated to provide strategic advice with respect to the structure of PC Health Centres and the protocols for operations of the PC Health Centres.
The Company has developed and continues to refine a compliance program designed to ensure operational and regulatory requirements continue to be satisfied. Field Trip has also put in place an AML Policy designed to ensure proactive, ongoing steps are taken to create and maintain operations that are conducted in compliance with all applicable AML laws, including in Canada, the United States and other jurisdictions. Through its human resources and operations departments, the Company oversees and implements training for all employees with respect to the Company’s protocols.
The Company has received legal opinions or advice in each jurisdiction where it currently operates or proposes to operate (other than jurisdictions, where the applicable legislation has not yet been created or has not yet been passed into law), confirming the permissibility of the Company’s operations in such jurisdictions.
The Company’s operations are conducted in compliance with local laws where such activities are permissible and either (a) do not require any specific legal or regulatory approvals, or (b) the Company has all necessary legal and/or regulatory approvals. See Risk Factors.
Selected Financial Information
The Company currently only derives revenues from the operations of the Field Trip Health Centres. The following table provides a brief summary of the Company’s financial information for its fiscal year ended March 31, 2021 as compared to FTP’s financial information for the period from incorporation (April 2, 2019) to March 31, 2020. The selected financial information has been derived from, and should be read in conjunction with, the Company’s and FTP’s audited financial statements and management discussion & analysis for the years ended March 31, 2021 and 2020, respectively.
|
|
|
|
As at and for the year ended
March 31, 2021
|
|
|
As at and for the year ended
March 31, 2020
|
|
|
|
|
|
(audited)
($)
|
|
|
(audited)
($)
|
|
|
Statement of operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
|
|
|
960,895
|
|
|
|
|
|
1,000
|
|
|
|
Net and comprehensive loss from operations
|
|
|
|
|
22,740,266
|
|
|
|
|
|
2,678,365
|
|
|
|
Net loss per share (basic and diluted)
|
|
|
|
|
(0.70)
|
|
|
|
|
|
(0.26)
|
|
|
|
Statement of financial position
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
126,450,005
|
|
|
|
|
|
12,541,095
|
|
|
|
Total liabilities
|
|
|
|
|
12,887,347
|
|
|
|
|
|
2,121,083
|
|
|
|
Cash dividends declared per share
|
|
|
|
|
Nil
|
|
|
|
|
|
Nil
|
|
|
Business Objectives of the Company
Key elements of the Company’s growth strategy include: (i) the development of additional Field Trip Health Centres; (ii) expanding its network and consumer database via partnerships and strategic arrangements with other existing health clinics that do not currently offer psychedelic therapy services, which will require educating physicians on the benefits and medical developments of psychedelic therapy; (iii) adding additional health care practitioners to increase growth at Field Trip Health Centres; and (iv) supplementary educational programs to help other health care practitioners book more appointments.
The Company’s short-term objectives for the next 12 months (April 2021 through March 2022) are:
1.
Completion of US utility and PCT patient filings with respect to FT-104.
2.
Completion of CMC development and pre-clinical studies of FT-104.
3.
Commence Phase I clinical trials of FT-104.
4.
Expand our Field Trip Health Centres network to 20 locations, (open or under construction), by December 2021.
5.
Launch a premium version of our Trip App for purchase on the App Store and Google Play.
The Company’s medium & long-term objectives for the following 12 months (April 2022 through March 2023) are:
1.
Completion of Phase I clinical trials of FT-104.
2.
Commencement of Phase II clinical trials of FT-104.
3.
Continue to expand our Field Trip Health Centres network to 30 locations by Q4 2022.
Significant Events or Milestones of the Company
To achieve the broad business objectives set out above, the Company has established the following milestones:
|
Objective
|
|
|
Milestone Description
|
|
|
Timeframe for
Completion (based on
calendar year)
|
|
|
75 Operational Clinics(1)
|
|
|
10th Field Trip Health Centre operational (i.e. 4 additional Field Trip Health Centres)
|
|
|
Q2 2021
|
|
|
|
|
|
15th Field Trip Health Centre operational
|
|
|
Q3 2021
|
|
|
|
|
|
20th Field Trip Health Centre operational
|
|
|
Q4 2021
|
|
|
|
|
|
30th Field Trip Health Centre operational
|
|
|
Q4 2022
|
|
|
|
|
|
75th Field Trip Health Centre operational
|
|
|
Q4 2024
|
|
|
FT-104 Development Patenting, Phase 1 completed and Phase 2 completed
|
|
|
US utility and PCT patent filings
|
|
|
Q2 2021
|
|
|
|
|
|
CMC development and pre-clinical studies completed
|
|
|
Q2 2021
|
|
|
|
|
|
Phase 1 studies completed
|
|
|
Q1 2022
|
|
|
|
|
|
Phase 2 studies completed
|
|
|
Q2 2023
|
|
|
Issuer Technology Platforms
|
|
|
Trip App premium version launched
|
|
|
Q4 2021
|
|
|
|
|
|
Patient Portal enhancements launched
|
|
|
Q4 2021
|
|
(1)
Operational clinics is defined to include clinics under construction and in preparation for opening.
Other than as described in this AIF, to the knowledge of management, there are no other particular significant events or milestones that must occur for the Company’s initial business objectives to be accomplished. However, there is no guarantee that the Company will meet its business objectives or milestones described above within the specific time periods, within the estimated costs or at all. The Company may, for sound business reasons, reallocate its time or capital resources, or both, differently than as described above. See “Risk Factors”.
Additional details on the Company’s business objectives and milestones, are described in the Company’s management discussion & analysis for the fiscal year ended March 31, 2021 under the heading “Milestones and Available Funds” which is available on the Company’s SEDAR profile at www.sedar.com.
Principal Products and Services
The Company plans to capitalize on psychedelic therapy opportunities through the Field Trip Health Centres and by providing education services for patients and medical professionals.
Generally, a patient’s primary physician or psychiatrist will refer a patient to the Company for possible treatment. When a referral is received, the Company’s medical team will review the patient’s medical history to ensure there are no immediate contraindications. A patient will then consult with one of the psychiatrists operating out of the Field Trip Health Centres to assess whether Ketamine-Enhanced Psychotherapy might be a suitable treatment option. Once approved, the patient will undergo a second screening to ensure their physical health is suitable for Ketamine-Enhanced Psychotherapy and a treatment plan will be developed. Treatment will vary by individual; however, a standard Ketamine-Enhanced Psychotherapy program involves three sequential blocks, each consisting of two ketamine exploratory therapy sessions followed by one integration session. During and after the exploratory sessions, licensed psychotherapists guide the patient through the experience, and provide exploratory therapy to help the patient reintegrate into their body and understand their experience. During the integration sessions, psychotherapists help the patient integrate their experiences using clinical psychology techniques to help drive habit change as well as outlook and mindset improvements.
After the completion of these sessions, the Company also provides a digital patient portal (the “Patient Portal”) for on-going support and education to help sustain the effects of Ketamine-Enhanced Psychotherapy. The Patient Portal provides patients with mood monitoring and mindfulness tools, patient-therapist communication, and personalized protocols and content. In October 2020, the Company launched the Patient Portal along with its Trip mobile software application. The Trip app premium version will be released in the second half of calendar 2021, along with further enhancements to the Patient Portal.
Psychedelic Therapy Market
The Canadian psychedelic therapy industry is an emerging market and serves a medical market only. In Ontario, physicians working in medical clinics are regulated by the College of Physicians and Surgeons of Ontario, via the Regulated Health Professions Act, 1991 (Ontario) and the Medicine Act, 1991 (Ontario).
Ketamine clinics in the State of New York that are owned solely by New York-licensed physicians are organized as physician practices. Physician practices in the State of New York are overseen by the New York State Education Department, Office of the Professions, State Board for Medicine (the “NY Medical Board”). Laws that apply specifically to physician practices in the State of New York are New York Education Law §§ 6500 — 6516 and 6520 — 6532 and 8 New York Codes, Rules and Regulations (“NYCRR”) §§ 59.1 et. seq. and 8 NYCRR §§ 60.1 et. seq. The New York Health Centre is likely to utilize, in addition to physicians, mid-level practitioners such as physician assistants and nurse practitioners and mental health practitioners such as psychologists and psychotherapists. Physician assistants are also subject to oversight of the NY Medical Board (and subject to laws codified at New York Education Law (“NYEL”) §§ 6540 et. seq.) and nurse practitioners are subject to oversight of the New York State Education Department, Office of the Professions (“NYOP”), State Board for Nursing (and subject to laws codified at NYEL §§ 6900 et. seq. and additional regulation that apply only to nurses at NYCRR §§ 64.1 et. seq.). Psychologists are licensed by the NYOP, State Board for Psychology (and subject to additional laws and regulations codified at NYEL §§ 7600 et. seq. and 8 NY CRR §§ 72.1 et. seq.), and psychotherapists are licensed by the NYOP, State Board for Mental Health Practitioners (and subject to additional laws and regulations codified at NYEL §§ 8400 et. seq. and 8 NY CRR § 52.35 and 8 NY CRR §§ 79.12 et. seq.).
Similarly, ketamine clinics in the State of California that are owned solely by California-licensed physicians are organized as California professional medical corporations while unlicensed persons are able to participate in a medical practice via a management service company. The Medical Board of California (the “CA Medical Board”) regulates physicians and surgeons under the Business and Professions Code, §2190.5. The CA Medical Board also regulates medical assistants, while nurses, nurse practitioners and certain psychotherapists are regulated by the Board of Registered Nursing. Psychologists are licensed by the California Board of Psychology.
In the State of Illinois, the Illinois Department of Financial and Professional Regulation (“IDFPR”) regulates physicians and surgeons under the Medical Practice Act (225 ILCS 60/2) and Medical Corporations under the Medical Corporation Act (805 ILCS 15/1). The IDFPR also regulates nurses under the Nurse Practice Act (225 ILCS 65/), psychologists under the Clinical Psychologist Licensing Act (225 ILCS 15/), and both licensed professional counselors and licensed clinical professional counselors under the Illinois Professional Counselor and Clinical Professional Counselor Licensing and Practice Act (225 ILCS 107/1).
In the United States where ketamine clinics are physician-owned, Field Trip USA will provide management services to the physician practice that will own the clinics located in the United States. The relationship between Field Trip USA and the physician practice that it manages is subject to various standards of corporate practice and fee-splitting rules.
In Jamaica, psilocybin is not prohibited by the Jamaica Dangerous Drugs Act, 1948. Research conducted by Field Trip at the Jamaica Facility is governed by the JMH, Ethics and Medico-Legal Affairs Panel and by the JMH Standards and Regulation Division. In addition to GLP and cGMP, research involving human subject is governed by the JMH Guidelines for the Conduct of Research on Human Subjects. Furthermore, medicines, including natural products, require registration with the JMH prior to importation, distribution and sale in Jamaica as outlined in the Food and Drugs Act, 1964.
Marketing Plans and Strategies
Patient Acquisition
The Company’s planned expansion is contingent upon its patient member growth. Thus, its patient acquisition strategy is a critical component of its future success.
The Company plans to focus on a push-pull marketing strategy to generate patient leads. The marketing strategy will blend different marketing strategies to reach prospective patients (including through public relations campaigns, social media, digital marketing efforts through paid search and social media advertising, as well as potentially more traditional advertising channels such as television, radio and billboard advertising) as well as strategies to reach and educate the medical and therapy communities in jurisdictions that it plans to enter, including through medical education events.
The Company also markets and promotes itself to community physicians, as they are the individuals who most frequently provide the patient referrals. It focuses on the education of physicians via its website, podcast and through marketing materials.
Building Brand and Community
The Trip App extends the reach and awareness of the Company’s brand to a broader audience of users, and opens potential revenue and marketing channels for the Company by providing tools to interested people through digital media tools.
In addition to traditional public relations activities, the Company has a number of marketing plans and strategies designed to build brand awareness and community around psychedelic therapy opportunities, including education and outreach programs such as the Field Tripping Podcast and webinars, and a comprehensive social media strategy which comprises both paid and organic components.
Regulatory Restrictions on Branding
Colleges in Canada and Medical Boards in the United States impose certain restrictions on their members’ ability to conduct marketing and advertising activities.
Regulation of Advertising
Regulated professions in Canada and the United States, including physicians, psychotherapists, psychologists, and nurses, are subject to certain restrictions and requirements concerning advertising or soliciting patients. The restrictions vary by jurisdiction and profession. The Company will develop a compliance program to ensure adherence to these requirements.
Intellectual Property
The Company has developed proprietary processes, including its clinical techniques. While exploring the patentability of these techniques and processes, the Company relies on non-disclosure and confidentiality arrangements and trade secret protection.
The Company has invested significant resources towards developing a recognizable and unique brand and is in the process of seeking registration of trademarks with the Canadian Intellectual Property Office. The Company owns the website domains www.fieldtriphealth.com, www.meetfieldtrip.com and www.fieldtripping.fm and maintains a variety of social media accounts. The Company also has a podcast available located at www.fieldtripping.fm and is also available through other channels including Spotify, Apple Podcasts, iHeart Radio, Google Podcasts, and Simplecast.
The Company maintains strict standards and operating procedures regarding its intellectual property, including the standard use of non-disclosure, confidentiality, and intellectual property assignment agreements.
Trademarks
The Company has registered or filed to register, the following name and design for trademark protection in Canada and the United States. For additional details on the risks associated with the lack of trademark protection, please see Risk Factors — Intellectual Property:
The text and stylized logo for “field trip”, produced here:
The Company has applied for the following names for trademark protection in Canada and intends to do so in the United States. For additional details on the risks associated with the lack of trademark protection, please see Risk Factors — Intellectual Property:
The text “Field Trip Health”, “Field Trip Psychedelics”, “Field Tripping”, “Field Trip Discovery”, “Field Trip Basecamp” and “Field Trip Natural Products”.
In addition, the Company has a provisional patent relating to FT-104 composition and use that has been filed with the USPTO (63,045,901; June 30, 2020). See Description of the Business — Research and Development.
Cyclical or Seasonal Impacts
The business of psychedelic therapy and patient services is neither cyclical nor seasonal. Patient demand is based on medical need and this need is not a factor of season or markets. However, the business is subject to physician availability and the acceptance in the medical community of ketamine and other psychedelic substances as effective treatments for depression, PTSD, addiction, and other mental health conditions.
Environmental Protections
The Company’s business does not materially impact environmental conditions. The Company does not expect that there will be any financial or operational effects as a result of environmental protection requirements on its capital expenditures, profit or loss, or its competitive position in the current fiscal year or in future years.
Number of Employees
As of March 31, 2021, the Company has 104 employees, including contractors and part-time employees of affiliates (the Field Trip Health Centres), distributed among the following departments:
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Department
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|
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Number of Employees
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|
|
Clinical
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|
|
|
|
30
|
|
|
|
Operations
|
|
|
|
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14
|
|
|
|
HR, Finance, Legal
|
|
|
|
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9
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|
|
|
Executive
|
|
|
|
|
8
|
|
|
|
Sales and marketing
|
|
|
|
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5
|
|
|
|
Technology
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|
|
|
|
6
|
|
|
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Research and development
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|
|
|
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4
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|
|
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Professional Corporations
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|
|
|
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28
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Total
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|
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|
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104
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Reorganizations
Other than the Transaction, described in “General Development of the Business” above, there are no other applicable material reorganizations of your company or any of its subsidiaries. Additional details regarding the Transaction can be found in the Company’s Listing Statement as filed on SEDAR on October 5, 2020.
RISK FACTORS
There are various risk factors that could cause the Company’s future results to differ materially from those described in this AIF. The risks and uncertainties described below are those we currently believe to be material, but they are not the only ones we face. If any of the following risks, or any other risks and uncertainties that we have not yet identified or that we currently consider not to be material, actually occur or become material risks, our business, financial condition, results of operations and cash flows, and consequently the price of the Shares, could be materially and adversely affected. The risks discussed below also include forward-looking statements and our actual results may differ substantially from those discussed in these forward-looking statements. See “Note Regarding Forward-Looking Statements” in this AIF.
Future Losses and Profitability
The Company has historically incurred losses and expects to incur an operating loss for the year ending March 31, 2022. The Company believes that operating losses will continue as it is planning to incur significant costs associated with the expansion of Field Trip Health Centres, its research and development initiatives with UWI and the clinical development of FT-104 and other projects. The Company’s net losses have had and will continue to have an adverse effect on, among other things, shareholders’ equity, total assets and working capital. The Company expects that losses will fluctuate from quarter to quarter and year to year, and that such fluctuations may be substantial. The Company cannot predict when it will become profitable, if at all.
Reliance on Additional Capital
As a health centre operator and service provider and a research and development company, the Company expects to spend substantial funds to continue these initiatives. The Company will also require significant additional funds if it expands its current clinical plans for FT-104. Therefore, for the foreseeable future, the Company will have to fund all of its operations and development expenditures from cash on hand, equity financings, through collaborations with other companies or through financings from other sources. If it does not succeed in raising additional funds on acceptable terms, the Company might not be able to complete its planned expansion of Field Trip Health Centres, its research and development initiatives with UWI and the clinical development of FT-104 and other projects. It is possible that future financing will not be available or, if available, may not be on favorable terms. The availability of financing will be affected by the achievement of the Company’s corporate goals, the results of operations, the ability to obtain regulatory approvals (where applicable) and the state of the capital markets generally and with particular reference to psychedelics companies. If adequate funding is not available, the Company may be required to delay, reduce or eliminate certain operations, or obtain funds on less favourable terms than the Company would otherwise accept. To the extent that external sources of capital become limited or unavailable or available on onerous terms, the Company’s intangible assets and its ability to continue its plans may become impaired, and the Company’s assets, liabilities, business, financial condition and results of operations may be materially or adversely affected.
Impact of the COVID-19 Pandemic
The novel coronavirus commonly referred to as “COVID-19” was identified in December 2019 in Wuhan, China. On January 30, 2020, the World Health Organization declared the outbreak a global health emergency, and on March 11, 2020, the spread of COVID-19 was declared a pandemic by the World Health Organization. The outbreak has spread throughout Europe, the Middle East and North America, causing companies and various international jurisdictions to impose restrictions such as quarantines, business closures and travel restrictions. While these effects are expected to be temporary, the duration of the business disruptions internationally and related financial impact cannot be reasonably estimated at this time. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 outbreak is unknown at this time, as is the efficacy of the government and central bank interventions. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Company and its operating subsidiaries in future periods. However, depending on the length and severity of the pandemic, COVID-19 could impact the Company’s operations, could cause delays relating to approval from the FDA and equivalent organizations in other countries, could postpone research activities, and could impair the Company’s ability to raise funds depending on COVID-19’s effect on capital markets.
The rapid development of the COVID-19 pandemic and the measures being taken by governments and private parties to respond to it are extremely fluid. While the Company has continuously sought to assess the potential impact of the pandemic on its operations, any assessment is subject to extreme uncertainty as to probability, severity and duration. The Company has attempted to assess the impact of the pandemic by identifying risks in the following principal areas:
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Mandatory Closure. In response to the pandemic, many provinces, states and localities have implemented mandatory shut-downs of business to prevent the spread of COVID-19. In the locations where the Company operates or conducts research activity, these activities have been deemed an “essential service”, and thus not subject to the mandatory closures applicable to non-essential businesses. It is uncertain what impact COVID-19 will have on the construction of the Company’s newly leased locations. If required, the Company will work with governmental authorities to seek temporary measures that allow it to remain operational, however, there is no guarantee that the Company will be permitted to remain operational. The Company’s ability to generate revenue and meet its milestones could be materially impacted by any shut down of operations or services.
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Patient Impact. If its patients or potential patients become ill with COVID-19, they may be forced to quarantine, decide to self-quarantine or not to visit Field Trip Health Centres to observe “social distancing”, it may have a material negative impact patient acquisition and retention as well as revenues while the pandemic continues.
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Research and Development Disruptions. The Company relies on a third party CMO, CRO and other personnel for its activities related to FT-104 and the Psilocybin Research, respectively. If these third parties are unable to continue operating due to mandatory closures or other effects of the pandemic, it may negatively impact the Company’s ability to meet its milestones and may significantly delay development. At this time, the Company has not experienced any significant disruptions.
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Staffing Disruption. The Company is, for the time being, implementing among its staff where feasible “social distancing” measures recommended by local authorities. The Company has cancelled nonessential travel by employees, implemented remote meetings where possible, and permitted all staff who can work remotely to do so. For those whose duties require them to work on-site, measures have been implemented to reduce infection risk, such as reducing contact with patients, mandating additional cleaning and hand disinfection and providing masks and gloves to certain personnel. Nevertheless, despite such measures, the Company may find it difficult to ensure that its operations remain staffed due to employees falling ill with COVID-19, becoming subject to quarantine, or deciding not to come to work on their own volition to avoid infection.
The Company is actively addressing the risk to business continuity represented by each of the above factors through the implementation of a broad range of measures throughout its structure and is re-assessing its response to the COVID-19 pandemic on an ongoing basis. The above risks individually or collectively may have a material impact on the Company’s ability to generate revenue.
The Company has sufficient cash on hand raised via equity financings to fund its operations for the next 18-months and meet its working capital requirements. To date, Field Trip Health Centres have not been subject to any “lock-down” restrictions as they are medical clinics and deemed an “essential service”. It is anticipated that the long-term goals of the Company will require additional capital contributions via debt or equity financings. In the event that the impact of COVID-19 worsens and negatively affects capital markets generally, there is a risk that the Company may not be able to secure funding for these long-term objectives. See “Risk Factors”.
Limited Operating History — General
The Company has not yet generated material revenue. Field Trip was incorporated in April 2019 and thus has a limited operating history. The Company is therefore subject to many of the risks common to early-stage enterprises, including under-capitalization, cash shortages, limitations with respect to personnel, financial, and other resources and lack of revenues. There is no assurance that the Company will be successful in achieving a return on shareholders’ investment and the likelihood of success must be considered in light of the early stage of operations.
Limited Operating History — Public Company
The Company has a limited operating history as a public company. The Common Shares and Warrants commenced trading on the CSE on October 6, 2020 and January 5, 2021, respectively. The Common Shares and Warrants were delisted from the CSE and listed on the TSX on June 7, 2021. As a reporting issuer, the Company is subject to reporting requirements under applicable securities law and, as of June 7, 2021, the policies of the TSX. Compliance with these requirements result in legal and financial compliance costs, make some activities more difficult, time consuming or costly and increase demand on existing systems and resources. Among other things, the Company is required to file annual, quarterly and current reports with respect to its business and results of operations and maintain effective disclosure controls and procedures and internal controls over financial reporting. In order to maintain and, if required, improve disclosure controls and procedures and internal controls over financial reporting to meet this standard, significant resources and management oversight is required. As a result, management’s attention may be diverted from other business concerns, which could harm the Company’s business and results of operations. The Company may need to hire additional employees to comply with these requirements in the future, which would increase its costs and expenses. Management of the Company believes that being a reporting issuer makes it more expensive to maintain director and officer liability insurance. This factor could also make it more difficult for the Company to retain qualified directors and executive officers. Failure or delay in compliance with reporting requirements under applicable securities law and the policies of the TSX could adversely affect the business, financial condition, liquidity and results of operations of the Company and, more specifically, could result in regulatory penalties, market criticism or the imposition of cease trade orders in respect of the Common Shares and Warrants.
Reliance on Forward-Looking Statements
Potential investors should not place undue reliance on forward-looking statements. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, of both general and specific nature, that could cause actual results to differ materially from those suggested by the forward-looking statements or contribute to the possibility that predictions, forecasts or projections will prove to be materially inaccurate.
Failure to Achieve Milestones
From time to time, the Company may announce the timing of certain events it expects to occur, such as the anticipated timing of future Field Trip Health Centres becoming operational, research and development updates and results from its trials on FT-104. These statements are forward-looking and are based on the best estimates of management at the time relating to the occurrence of such events. However, the actual timing of such events may differ from what has been publicly disclosed. These variations in timing may occur as a result of different events, beyond the Company’s control having the effect of delaying the publicly announced timeline. The Company undertakes no obligation to update or revise any forward-looking information or statements, whether as a result of new information, future events or otherwise, except as otherwise required by law. Any variation in the timing of previously announced milestones could have a material adverse effect on its business plan, financial condition or operating results and the trading price of the Common Shares and Warrants.
Risks Associated with Drug Development
Drug development is subject to various laws, regulations and guidelines by governmental authorities. Laws and regulations, applied generally, grant government agencies and self-regulatory bodies broad administrative discretion over the drug development activities of the Company, including the power to limit or restrict business activities as well as impose additional disclosure requirements on the Company’s products and services.
Given the early stage of FT Discovery’s product development, the Company can make no assurance that its research and development programs will result in regulatory approval or commercially viable products. To achieve profitable operations, the Company, alone or with others, must successfully develop, gain regulatory approval for, and market its future products. The Company currently has no products that have been approved by the FDA, Health Canada or any similar regulatory authority. To obtain regulatory approvals for its product
candidates being developed and to achieve commercial success, clinical trials must demonstrate that the product candidates are safe for human use and that they demonstrate efficacy. The Company has not yet completed later stage clinical trials for any of its product candidates.
Many product candidates never reach the stage of clinical testing and even those that do have only a small chance of successfully completing clinical development and gaining regulatory approval. Product candidates may fail for a number of reasons, including being unsafe for human use or due to the failure to provide therapeutic benefits equal to or better than the standard of treatment at the time of testing. Unsatisfactory results obtained from a particular study relating to a research and development program may cause the Company or its collaborators to abandon commitments to that program. Positive results of early pre-clinical research may not be indicative of the results that will be obtained in later stages of pre-clinical or clinical research. Similarly, positive results from early-stage clinical trials may not be indicative of favourable outcomes in later-stage clinical trials, and the Company can make no assurance that any future studies, if undertaken, will yield favourable results.
The early stage of FT Discovery’s product development makes it particularly uncertain whether any of its product development efforts will prove to be successful and meet applicable regulatory requirements, and whether any of its product candidates will receive the requisite regulatory approvals, be capable of being manufactured at a reasonable cost or be successfully marketed. If the Company is successful in developing its current and future product candidates into approved products, the Company will still experience many potential obstacles, which would affect the Company’s ability to successfully market and commercialize such approved products, such as the need to develop or obtain manufacturing, marketing and distribution capabilities, price pressures from third-party payors, or proposed changes in health care systems. If the Company is unable to successfully market and commercialize any of its products, its financial condition and results of operations may be materially and adversely affected.
The Company can make no assurance that any future studies, if undertaken, will yield favorable results. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in later-stage clinical trials after achieving positive results in early-stage development, and the Company cannot be certain that it will not face similar setbacks. These setbacks have been caused by, among other things, pre-clinical findings made while clinical trials were underway or safety or efficacy observations made in clinical trials, including previously unreported adverse events. Moreover, pre-clinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in pre-clinical studies and clinical trials nonetheless failed to obtain FDA approval. If the Company fails to produce positive results in its future clinical trials of FT-104, the development timeline and regulatory approval and commercialization prospects for FT-104, would be materially adversely affected which may have materially adversely impact on the Company’s business.
Regulation of Healthcare Services Generally
Healthcare service providers in Canada are subject to various governmental regulation and licensing requirements and, as a result, government regulations and funding are critical to the Company’s business. Any change in governmental regulation, delisting of services, and licensing requirements relating to healthcare services, or their interpretation and application, could adversely affect the business, financial condition and results of operations of the Company. In addition, the Company could incur significant costs in the course of complying with any changes in the regulatory regime. Non-compliance with any existing or proposed laws or regulations could result in audits, civil or regulatory proceedings, fines, penalties, injunctions, recalls or seizures, any of which could adversely affect the reputation, operations or financial performance of the Company.
Risks Inherent in the Nature of the Health Clinic Industry
Changes in operating costs (including costs for maintenance, insurance), inability to obtain permits required to conduct the Company’s business, changes in health care laws and governmental regulations, and various other factors may significantly impact the ability of the Company to generate revenues. Certain significant expenditures, including legal fees, borrowing costs, maintenance costs, insurance costs and related charges, must be made to operate the Field Trip Health Centres, regardless of whether the Company is generating revenue.
Potential Regulation of Truffles Containing Psilocybin under the Opium Act
As noted above, Field Trip Health B.V. is seeking licensing in the category of “other care” or alternative care. In the event that the Dutch authorities take the position that therapy with truffles qualifies as “regular care”, the Company would then need to take steps to comply with local laws applicable to a healthcare provider, including but not limited to: (i) having a quality program in place which has been registered at the Netherlands Healthcare Institute and made public; (ii) verifying that care providers have not functioned in a way that impedes the provision of care; (iii) reporting emergencies in the provision of care and the dismissal of care providers due to underperformance to local regulatory bodies and (iv) in certain circumstances, installing a client council. In the event that the Dutch authorities take the position that truffles containing psilocybin qualify as medicinal product, either through actions by the Company or by third parties (such as registering truffles containing psilocybin as medicinal product) the Company would need to ensure that storing, selling and providing the truffles complies with local laws applicable to placing medicinal products on the market. Any changes in applicable laws and regulations could have an adverse effect on the Company’s business prospects in the Netherlands. The Company cannot predict the impact, cost or time required to comply with any change to the Dutch legal regime, which may significantly delay or impact the development of its business in the Netherlands. There is no assurance that activities of the Company in the Netherlands will continue to be legally permissible or viable in such an event.
Uncertainty Related to Potential Oregon Operations and Other States
As a result of Measure 109, there is a possibility that the Company may choose to expand its operations to the State of Oregon. While any activity in Oregon will be in compliance with laws applicable to Oregon, the decision to pursue operations in Oregon will depend on the regulatory framework established by the state government. The Company does not, and will not knowingly, engage in activities that are illegal in any jurisdiction where it operates. There is a possibility that operations of the Company that are in compliance with the laws of Oregon (or other states where similar initiatives have been announced such as Florida, California, Hawaii and Connecticut) could conflict or be in contravention of the federal laws of the United States. In such a circumstance, the Company’s existing operations in the United States, and any future operations or investments, may become the subject of heightened scrutiny or enforcement by regulators, stock exchanges and other authorities in Canada and the United States. There can be no assurance that this heightened scrutiny will not in turn lead to the imposition of certain restrictions on the Company’s ability to operate or invest in the United States or any other jurisdiction. While currently the Company operates in compliance with applicable laws and as such is not prohibited from sourcing any access public or private capital, in the event that the Company’s activities in such states are in violation of applicable United States federal laws, it may have difficulty accessing the service of banks or sourcing financing on commercially reasonable terms or at all.
Risks Related to Regulatory Changes
In Canada, psilocybin is classified as a Schedule III drug and ketamine as a Schedule I drug under the CDSA. In the United States, psilocybin is classified as a Schedule I drug and ketamine is classified as a Schedule III drug under the CSA. All activities involving such substances by or on behalf of the Company are conducted in accordance with applicable federal, provincial, state and local laws. While the Company is focused on programs using ketamine and psychedelic inspired compounds, the Company does not have any direct or indirect involvement with the illegal selling, production or distribution of any substances in the jurisdictions in which it operates and does not intend to have any such involvement. However, a violation of any applicable laws the jurisdictions in which the Company operates could result in significant fines, penalties, administrative sanctions, convictions or settlements arising from civil proceedings initiated by either government entities in the jurisdictions in which the Company operates, or private citizens or criminal charges.
Any changes in applicable laws and regulations could have an adverse effect on the Company’s operations. The psychedelic drug industry is a fairly new industry and the Company cannot predict the impact of the ever-evolving compliance regime in respect of this industry. Similarly, the Company cannot predict the time required to secure all appropriate regulatory approvals for future products, or the extent of testing and documentation that may, from time to time, be required by governmental authorities. The impact of compliance regimes, any delays in obtaining, or failure to obtain regulatory approvals may significantly delay
or impact the development of markets, its business and products, and sales initiatives and could have a material adverse effect on the business, financial condition and operating results of the Company. The Company will incur ongoing costs and obligations related to regulatory compliance. Failure to comply with regulations may result in additional costs for corrective measures, penalties or result in restrictions on the Company’s operations. In addition, changes in regulations, more vigorous enforcement thereof or other unanticipated events could require extensive changes to the Company’s operations, increased compliance costs or give rise to material liabilities, which could have a material adverse effect on the business, financial condition and operating results of the Company.
The success of the Company’s business is dependent on its activities being permissible under applicable laws and any reform of controlled substances laws or other laws may have a material impact on the Company’s business and success. There is no assurance that activities of the Company will continue to be legally permissible.
The potential reclassification of psilocybin and other psychedelic drugs in the United States could create additional regulatory burdens on the Company’s operations and negatively affect the Company’s results of operations.
If psilocybin and/or other psychedelic drugs are rescheduled under the CSA as a Schedule II or lower controlled substance (i.e., Schedule III, IV or V), it may materially alter enforcement policies across many federal agencies, primarily the FDA and DEA. The FDA is responsible for ensuring public health and safety through regulation of food, drugs, supplements, and cosmetics, among other products, through its enforcement authority pursuant to the Federal Food, Drug, and Cosmetic Act. The FDA’s responsibilities include regulating the ingredients as well as the marketing and labeling of drugs sold in interstate commerce. Since it is currently illegal under federal law to produce and sell psilocybin and psychedelic drugs other than Ketamine and as there are no federally recognized medical uses, the FDA has historically deferred enforcement related to these products to the DEA. If psilocybin and/or other psychedelic drugs were to be rescheduled to a federally controlled, yet legal, substance, the FDA would likely play a more active regulatory role. The DEA would continue to be active in regulating manufacturing, distribution and dispensing of such substances. Multi-agency regulation and enforcement could materially affect the Company’s costs associated with research and/or therapeutic uses of these substances in its business.
Speculative Nature of Investment Risk
An investment in the securities of the Company carries a high degree of risk and should be considered as a speculative investment. The Company has no history of earnings, limited cash reserves, limited operating history, has not paid dividends, and is unlikely to pay dividends in the immediate or near future.
Non-Compliance with Laws
Under the CDSA, ketamine is currently a Schedule I drug and psilocybin is currently a Schedule III drug. Under the CSA, ketamine is currently a Schedule III drug and psilocybin is currently a Schedule I drug. The Company’s operations are conducted in strict compliance with the laws and regulations regarding its activities with such substances. As such, all facilities engaged with such substances by or on behalf of the Company do so under current licenses, permits and approvals, as applicable, issued by appropriate federal, provincial, state and local governmental agencies. While the Company is focused on programs using ketamine and psychedelic inspired compounds, the Company does not have any direct or indirect involvement with the illegal selling, production or distribution of any substances in the jurisdictions in which it operates and does not intend to have any such involvement. However, a violation of any applicable laws and regulations, such as the CDSA and CSA, or of similar legislation in the jurisdictions in which it operates, including the Netherlands, could result in significant fines, penalties, administrative sanctions, convictions or settlements arising from civil proceedings initiated by the government entities in the jurisdictions in which the Company operates, private citizens or criminal charges. Any such violations could have an adverse effect on the Company’s operations. Further, there is no guarantee that psychedelic drugs or psychedelic inspired drugs will ever be approved as medicines in any jurisdiction in which the Company operates.
The activities of the Field Trip Health Centres and the medical personnel operating the Field Trip Health Centres are subject to regulation by governmental authorities, and the Company’s business objectives are
contingent, in part, upon its and its personnel’s compliance with regulatory requirements enacted by these governmental authorities, and obtaining all regulatory approvals, where necessary, for the carrying on of business at the Field Trip Health Centres. Any delays in obtaining, failure to obtain, or violations of regulatory approvals and requirements would significantly delay the development of markets and products and could have a material adverse effect on the business, results of operations and financial condition of the Company.
Risks Related to Prescribing Medication
Provincial and state medical boards or other regulatory bodies could take disciplinary action against the Company’s physicians for excessive psychedelic prescriptions. Physician prescription patterns may be tracked and may be used to impose disciplinary action on physicians who prescribe psychedelics at a high rate. If any of the Company’s physicians are deemed to be prescribing psychedelics excessively, such physicians could face disciplinary action, including, revocation of the physician’s license. Any disciplinary action or license revocation of physicians who work at a Field Trip Health Centres could result in such Field Trip Health Centre not having sufficient physicians to address patient needs and could adversely affect the Company’s business.
Unfavourable Publicity or Consumer Perception
The success of the psychedelic therapy industry may be significantly influenced by the public’s perception of psychedelic medicinal applications. Psychedelic therapy is a controversial topic, and there is no guarantee that future scientific research, publicity, regulations, medical opinion, and public opinion relating to psychedelic therapy will be favourable. The psychedelic therapy industry is an early-stage business that is constantly evolving, with no guarantee of viability. The market for psychedelic therapy is uncertain, and any adverse or negative publicity, scientific research, limiting regulations, medical opinion and public opinion relating to the consumption of psychedelic therapy may have a material adverse effect on the Company’s operational results, consumer base and financial results.
Social Media
There has been a recent marked increase in the use of social media platforms and similar channels that provide individuals with access to a broad audience of consumers and other interested persons. The availability and impact of information on social media platforms is virtually immediate and many social media platforms publish user-generated content without filters or independent verification as to the accuracy of the content posted. Information posted about the Company may be averse to the Company’s interests or may be inaccurate, each of which may harm the Company’s business, financial condition and results of operations.
Patient Acquisitions
The Company’s success will depend, in part, on its ability to attract and retain patients. There are many factors which could impact the Company’s ability to attract and retain patients, including the successful implementation of the Company’s patient-acquisition plans and the continued growth in the aggregate number of patients selecting psychedelic therapy as a treatment option. The Company’s failure to acquire and retain patients as clients would have a material adverse effect on the Company’s business, operating results and financial condition.
Development Risks
Future development of the Company’s business may not yield expected returns and may strain management resources. Development of the Company’s revenue streams is subject to a number of risks, including construction delays, cost overruns, financing risks, cancellation of key service contracts, and changes in government regulations. Overall costs may significantly exceed the costs that were estimated when the project was originally undertaken, which could result in reduced returns, or even losses, from such investments.
Acquisitions and Strategic Collaborations
The Company has in the past and may in the future seek to expand its pipeline and capabilities by acquiring one or more companies or businesses or entering into collaborations. Acquisitions and
collaborations involve numerous risks, including, but not limited to: substantial cash expenditures; technology development risks; potentially dilutive issuances of equity securities; incurrence of debt and contingent liabilities, some of which may be difficult or impossible to identify at the time of acquisition; difficulties in assimilating the operations of the acquired companies; potential disputes regarding contingent consideration; diverting management’s attention away from other business concerns; entering markets in which we have limited or no direct experience; and potential loss of our key employees or key employees of the acquired companies or businesses.
Management has experience in making acquisitions and entering collaborations; however, we cannot provide assurance that any acquisition or collaboration will result in short-term or long-term benefits to it. We may incorrectly judge the value or worth of an acquired company or business. In addition, our future success depends in part on our ability to manage the rapid growth associated with some of these acquisitions and collaborations. We cannot provide assurance that we would be able to successfully combine our business with that of acquired businesses or manage a collaboration. Furthermore, the development or expansion of our business may require a substantial capital investment by the Company.
Substantial Risk of Regulatory or Political Change.
The success of the business strategy of the Company depends on the legality of the use of psychedelics for the treatment of mental health conditions and the acceptance of such use in the medical community. The political environment surrounding the psychedelics industry in general can be volatile. As of the date of this AIF, Canada and the United States permit the use of ketamine or a derivative thereof as a treatment for certain mental health conditions; however, the risk remains that a shift in the regulatory or political realm could occur and have a drastic impact on the use of psychedelics as a whole, adversely impacting the Company’s ability to successfully operate or grow its business.
Government Regulations, Permits and Licenses
The Company’s operations may be subject to governmental laws or regulations promulgated by various legislatures or governmental agencies from time to time. A breach of such legislation may result in the imposition of fines and penalties. The cost of compliance with changes in governmental regulations has the potential to reduce the profitability of operations. The Company intends to fully comply with all governmental laws and regulations. The physicians that recommend psychedelic therapy to the Company’s patients will be subject to various federal, provincial and municipal laws in Canada. While there are currently no indications that the Company will require approval by a governmental or regulatory authority in Canada, the United States or Jamaica, such approvals may ultimately be required. If any permits are required for the Company’s operations and activities in the future, there can be no assurance that such permits will be obtainable on reasonable terms or on a timely basis, or that applicable laws and regulations will not have an adverse effect on the Company’s business.
The results of pre-clinical testing of FT-104 are uncertain and it may fail as a product candidate in the pre-clinical phase or at any other stage of clinical development. For instance, psilocybin is currently a controlled substance with no approved use in Canada or the United States, and the Company selected Jamaica for Psilocybin Research and development because Jamaica is one of the few jurisdictions in the world with a legal environment that would permit such activities with no regulatory requirements. If a medical use for psilocybin is not developed or, if developed, is not approved for use in Canada, the United States and other jurisdictions, the commercial opportunity that the Company is pursuing may be highly limited.
The current and future operations of the Company are and will be governed by laws and regulations governing the healthcare industry, labour standards, occupational health and safety, land use, environmental protection, and other matters. Amendments to current laws, regulations and permits governing operations and activities of health clinics, or more stringent implementation thereof, could have a material adverse impact on the Company and cause increases in capital expenditures or costs, or reduction in levels of its medical services.
Reliance on Third-Party Licenses
A substantial number of patents have already been issued to other biotechnology and pharmaceutical companies. To the extent that valid third-party patent rights cover any future products or services, the
Company would be required to seek licenses from the holders of these patents in order to manufacture, use or sell these products and services, and payments under them would reduce the Company’s profits from these products and services. The Company is currently unable to predict the extent to which it may wish or be required to acquire rights under such patents, the availability and cost of acquiring such rights, and whether a license to such patents will be available on acceptable terms or at all. There may be patents in Canada, the United States or in foreign countries or patents issued in the future that are unavailable to license on acceptable terms. The Company’s inability to obtain such licenses may hinder or eliminate its ability to manufacture and market its products.
Changes to Patent Law
The Company is dependent on intellectual property rights, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involves technological and legal complexity, and obtaining and enforcing biopharmaceutical patents is costly, time consuming and inherently uncertain. The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to the Company’s ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the USPTO the laws and regulations governing patents could change in unpredictable ways that would weaken the Company’s ability to obtain new patents or to enforce existing patents and patents.
Ketamine as a Pharmaceutical
The Company is currently administering oral ketamine lozenges to patients at the Toronto Health Centre, which is not subject to OHPIP (as such term is defined below) oversight. The Company has received correspondence from the College of Physicians and Surgeons of Ontario (“CPSO”) advising that, while the administration of lozenges does not currently fall within the scope of the Out-of-Hospital Inspection Program (“OHPIP”), the OHPIP may be expanded in the future to include lozenges. To the extent that ketamine is administered by a member of the CPSO, the Company may have to cease administration of ketamine by physicians. In such an event and if required to continue operations, the Company intends to seek OHPIP certification for the Toronto Health Centre, but as there is no guarantee that such certificate will be obtained or obtained in a timely manner, the Company has developed plans that it believes will enable it to continue operating the Toronto Health Centre without seeking OHPIP certification such as using medical professionals not subject to CPSO oversight. For instance, the Company has received a legal opinion that OHPIP does not apply to the prescribing or administration of oral ketamine lozenges by nurse practitioners. In either case, such result could have a material impact on the Company’s business and results of operations.
US law does not regulate the mode of administration of ketamine. Provided the physician is licensed, the method of administration is left to the discretion of the physician.
Non-Referrals
Physicians may not refer patients to Field Trip Health Centres. In addition, as the market grows, and general practitioners become more comfortable and knowledgeable about the psychedelic therapy industry and products available, they may choose to write prescriptions directly for their own patients rather than refer them to an outside clinic.
Negative Cash Flow from Operating Activities
The Company has had negative cash flow from operating activities since inception and may never be profitable. Significant capital investment will be required to achieve the Company’s existing plans. There is no assurance that the Company’s business will generate earnings, operate profitably, or provide a return on investment in the near future. Accordingly, the Company may be required to obtain additional financing in order to meet its future cash commitments
Management of Growth
The Company may be subject to growth-related risks, including pressure on its internal systems and controls. The Company’s ability to manage its growth effectively will require it to continue to implement and
improve its operational and financial systems and to expand, train and manage its employee base. The inability of the Company to deal with this growth could have a material adverse impact on its business, operations and prospects. While management believes that it will have made the necessary investments in infrastructure to process anticipated volume increases in the short term, the Company may experience growth in the number of its employees and the scope of its operating and financial systems, resulting in increased responsibilities for the Company’s personnel, the hiring of additional personnel and, in general, higher levels of operating expenses. In order to manage its current operations and any future growth effectively, the Company will also need to continue to implement and improve its operational, financial and management information systems and to hire, train, motivate, manage and retain its employees. There can be no assurance that the Company will be able to manage such growth effectively, that its management, personnel or systems will be adequate to support the Company’s operations or that the Company will be able to achieve the increased levels of revenue commensurate with the increased levels of operating expenses associated with this growth.
Reliance on Management Team, Key Executives and Scientists
The Company will depend on certain key senior managers who have developed strong relationships in the industry to oversee the Company’s core marketing, business development, operational and fund-raising activities. Their loss or departure in the short-term would have an adverse effect on the Company’s future performance.
The loss of the Company’s executive officers or other key members of the Company’s staff, could harm the Company. The Company also depends on its scientific and clinical collaborators and advisors, all of whom have outside commitments that may limit their availability to the Company. In addition, the Company believes that its future success will depend in large part upon its ability to attract and retain highly skilled scientific, managerial, medical, manufacturing, clinical and regulatory personnel, particularly as the Company expands its operations. The Company enters into agreements with its scientific and clinical collaborators and advisors, key opinion leaders and academic partners in the ordinary course of its business. The Company also enters into agreements with physicians in the ordinary course of its business. Notwithstanding these arrangements, the Company faces significant competition for these types of personnel from other companies, research and academic institutions, government entities and other organizations. The Company cannot predict its success in hiring or retaining the personnel it requires for continued growth. The loss of the services of any of the Company’s executive officers or other key personnel could potentially harm its business, operating results or financial condition.
Employee Misconduct and Non-Compliance with Regulatory Standards and Requirements
The Company is exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include failures to comply with applicable regulations, provide accurate information to the governmental authorities, comply with protocol and standards the Company has established, comply with federal, provincial, state and local laws, healthcare, fraud and abuse laws and regulations, report financial information or data accurately or disclose unauthorized activities to the Company. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing, and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to the Company’s reputation. If any such actions are instituted against the Company, and the Company is not successful in defending itself or asserting its rights, those actions could have a substantial impact on the Company’s business and results of operations, including the imposition of substantial fines or other sanctions.
Risks Related to Acquisitions or Collaborations
The Company has in the past and may in the future seek to expand its pipeline and capabilities by acquiring one or more companies or businesses or entering into collaborations. Acquisitions and collaborations involve numerous risks, including, but not limited to: substantial cash expenditures; technology development risks; potentially dilutive issuances of equity securities; incurrence of debt and contingent liabilities, some of which may be difficult or impossible to identify at the time of acquisition; difficulties in
assimilating the operations of the acquired companies; potential disputes regarding contingent consideration; diverting the Company’s management’s attention away from other business concerns; entering markets in which the Company has limited or no direct experience; and potential loss of the Company’s key employees or key employees of the acquired companies or businesses.
The Company’s management has experience in making acquisitions and entering collaborations; however, the Company cannot provide assurance that any acquisition or collaboration will result in short-term or long-term benefits to it. The Company may incorrectly judge the value or worth of an acquired company or business. In addition, the Company’s future success would depend in part on its ability to manage the rapid growth associated with some of these acquisitions and collaborations. The Company cannot provide assurance that it would be able to successfully combine its business with that of acquired businesses or manage a collaboration. Furthermore, the development or expansion of the Company’s business may require a substantial capital investment by the Company.
Competitive Conditions
The psychedelic therapy business in Canada is an emerging industry with high levels of competition. The Company’s current business plan is the establishment of a North American chain of Ketamine-Enhanced Psychotherapy, psychedelic-enhanced psychotherapy and psychedelic-integration psychotherapy health centres. The Company expects that, due to the urgent need for new and innovative treatments for mental health conditions and the evidence-based studies showing the impact of psychedelics as a treatment for mental health conditions, psychedelics as a treatment for these conditions will become more accepted in the medical community. As such, the Company expects to compete with numerous other similar businesses as well as with individual medical professionals who undertake the prescribing and supervising of psychedelics to their patients. While the Company was an early entrant to the psychedelic-enhanced psychotherapy market in Canada, other market participants have emerged, as there are no significant barriers to entry. The Company expects to face intense competition from new or existing market participants, some of which may have greater financial resources and technical facilities. Increased competition by larger and better financed competitors could materially and adversely affect the business, financial condition and results of operations of the Company. This increases the risk that the Company will not be able to access financing when needed, or at all.
In relation to FT Discovery, the biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. The Company’s competitors include large, well-established pharmaceutical companies, biotechnology companies, and academic and research institutions developing therapeutics for the same indications the Company is targeting and competitors with existing marketed therapies. Many other companies are developing or commercializing therapies to treat the same diseases or indications for which FT-104 or the Company’s other product candidates may be useful. Many of the Company’s competitors have substantially greater financial, technical and human resources than the Company does and have significantly greater experience than the Company in conducting preclinical testing and human clinical trials of product candidates, scaling up manufacturing operations and obtaining regulatory approvals of products. Accordingly, the Company’s competitors may succeed in obtaining regulatory approval for products more rapidly than the Company.
Risks Regarding Foreign Operations
The Toronto Health Centre and the Company’s current principal business operations are located in Canada. The Company also has Field Trip Health Centres in the States of New York, California, Illinois Georgia and Texas and has entered into lease agreements for additional Field Trip Health Centres in the State of Washington and the District of Columbia. The Company has plans in the near-term to expand its operations to other states in the United States and Europe. Currently, the Company is conducting research and development at the Jamaica Facility. As a result, there is a risk that regulatory changes as well as economic or political uncertainty could require that the Company re-evaluate its business prospects and could negatively impact upon its ability to conduct its research initiatives. The Company is not dependent on any current or future foreign operations, as they are not core to the business of the Company. The Company does not have any other risks and/or dependencies on foreign operations.
Intellectual Property
Failure to obtain or register trademarks used or proposed to be used in our business could require the Company to rebrand, resulting in a material adverse impact on its business. If the Company is unable to register or, if registered, maintain effective patent rights for its product candidates, the Company may not be able to effectively compete in the market. If the Company is not able to protect its proprietary information and know-how, such proprietary information may be used by others to compete against the Company. The Company may not be able to identify infringements of its patents (if and when granted), and, accordingly, the enforcement of its intellectual property rights may be difficult. Once such infringements are identified, enforcement could be costly and time consuming. Third party claims of intellectual property infringement, whether or not reasonable, may prevent or delay the Company’s development and commercialization efforts.
The Company’s success will depend in part upon its ability to protect its intellectual property and proprietary technologies and upon the nature and scope of the intellectual property protection the Company receives. The ability to compete effectively and to achieve partnerships will depend on its ability to develop and maintain proprietary aspects of the Company’s technology and to operate without infringing on the proprietary rights of others. The presence of such proprietary rights of others could severely limit its ability to develop and commercialize its products and to conduct its existing research, and could require financial resources to defend litigation, which may be in excess of the Company’s ability to raise such funds. There is no assurance that the Company’s patent applications submitted or those that it intends to acquire will be approved in a form that will be sufficient to protect its proprietary technology and gain or keep any competitive advantage that the Company may have or, once approved, will be upheld in any post-grant proceedings brought by any third parties.
The patent positions of pharmaceutical companies can be highly uncertain and involve complex legal, scientific and factual questions for which important legal principles remain unresolved. Patents issued to the Company may be challenged, invalidated or circumvented. To the extent the Company’s intellectual property offers inadequate protection, or is found to be invalid or unenforceable, the Company will be exposed to a greater risk of direct competition. If its intellectual property does not provide adequate protection against the Company’s competitors, its competitive position could be adversely affected, as could the Company’s business, financial condition and results of operations. Both the patent application process and the process of managing patent disputes can be time consuming and expensive, and the laws of some foreign countries may not protect the Company’s intellectual property rights to the same extent as do the laws of Canada and the United States. The Company will be able to protect its intellectual property from unauthorized use by third parties only to the extent that its proprietary technologies, key products, and any future products are covered by valid and enforceable intellectual property rights, including patents, or are effectively maintained as trade secrets, and provided the Company has the funds to enforce its rights, if necessary.
Litigation — General
The Company may become party to litigation from time to time in the ordinary course of business, including a medical malpractice claim, or a claim based in related legal theories of negligence or vicarious liability among others if a physician at a Field Trip Health Centre causes injury, which could adversely affect the Company’s business. Should any litigation in which the Company becomes involved be determined against the Company, such a decision could adversely affect the Company’s ability to continue operating and the market price for the Common Shares. Even if the Company is involved in litigation and wins, litigation can redirect significant resources. Litigation may also create a negative perception of the Company’s business.
Litigation — Intellectual Property
The pharmaceutical industry is characterized by extensive patent litigation. Other parties may have patents that allege that the Company’s patent application infringes upon existing patents. Such proceedings could result in adverse decisions regarding: the patentability of FT-104; and the enforceability, validity, or scope of protection offered to FT-104. If the Company is unable to avoid infringing the patent rights of others, the Company may be required to seek a license, defend an infringement action, or challenge the validity of the patents in court. Regardless of the outcome, patent litigation is costly and time consuming. In some cases, the Company may not have sufficient resources to bring these actions to a successful conclusion. In addition, if the Company does not obtain a license, develop or obtain non-infringing technology, fail to defend
an infringement action successfully or have infringed patents declared invalid, the Company may incur substantial monetary damages, encounter significant delays in bringing its key products to market and be precluded from the manufacture, use or sale of FT-104. Even if the Company is successful in these proceedings, it may incur substantial costs and divert management time and attention in pursuing these proceedings, which could have a material adverse effect on the Company.
Insurance Coverage
The Company believes its insurance coverage addresses all material risks to which it is exposed and is adequate and customary in its current state of operations, however such insurance is subject to coverage limits and exclusions and may not be available for the risks and hazards to which the Company is exposed. Moreover, there can be no guarantee that the Company will be able to obtain adequate insurance coverage in the future or obtain or maintain liability insurance on acceptable terms or with adequate coverage against all potential liabilities.
Product Liability
If and when the Company develops any product, including FT-104, if ever developed, it would be exposed to the risk of product liability claims alleging that use of its product caused an injury or harm. These claims can arise at any point in the development, testing, manufacture, marketing or sale of a product and may be made directly by patients involved in clinical trials of its product candidates, by consumers or healthcare providers or by individuals, organizations or companies selling its products. Product liability claims can be expensive to defend, even if the product or product candidate did not actually cause the alleged injury or harm.
Insurance covering product liability claims becomes increasingly expensive as a product moves through the development pipeline to commercialization. The Company currently maintains what it views as sufficient liability insurance coverage for its current operations; however, there can be no assurance that such insurance coverage is or will continue to be adequate or available to the Company at a cost acceptable to it or at all. The Company may choose or find it necessary to increase its insurance coverage in the future. The Company may not be able to secure greater or broader product liability insurance coverage on acceptable terms or at reasonable costs when needed. Any liability for damages resulting from a product liability claim could exceed the amount of its coverage, require the Company to pay a substantial monetary award from its own cash resources and have a material adverse effect on its business, financial condition and results of operations. Moreover, a product recall, if required, could generate substantial negative publicity about its products and business, inhibit or prevent commercialization of other products and product candidates or negatively impact existing or future collaborations.
Holding Company
The Company is a holding company and essentially all of its assets are the shares of its material subsidiary, Field Trip Psychedelics Inc., and, in turn, all of this subsidiary’s material assets are the shares of its material subsidiaries. As a result, investors in the Company are subject to the risks attributable to its subsidiaries. As a holding company, the Company will conduct substantially all of its business through its subsidiaries, which generate substantially all of its revenues. Consequently, the Company’s cash flows and ability to complete current or desirable future enhancement opportunities are dependent on the earnings of its subsidiaries and the distribution of those earnings to the Company. The ability of these entities to pay dividends and other distributions will depend on their operating results and will be subject to applicable laws and regulations which require that solvency and capital standards be maintained by such companies and contractual restrictions contained in the instruments governing their debt, as applicable. In the event of a bankruptcy, liquidation or reorganization of any of the Company’s material subsidiaries, holders of any indebtedness and trade creditors may be entitled to payment of their claims from the assets of those subsidiaries before the Company.
Early Stage Companies
Market perception of early stage companies may change, potentially affecting the value of investors’ holdings and the ability of the Company to raise further funds through the issue of further Common Shares
or otherwise. The share price of publicly traded early stage companies can be highly volatile. The value of the Common Shares may rise or fall and, in particular, the share price may be subject to sudden and large falls in value given the restricted marketability of the Common Shares.
A Significant Number of Common Shares are Owned by a Limited Number of Existing Shareholders
The Company’s management, directors and employees own a substantial number of the outstanding Common Shares (on a non-diluted and partially-diluted basis). As such, the Company’s management, directors and employees, as a group, are in a position to exercise influence over matters requiring shareholder approval, including the election of directors and the determination of corporate actions. As well, these shareholders could delay or prevent a change in control of the Company that could otherwise be beneficial to the Company’s shareholders.
The Company must rely largely on its own market research to forecast the utilization of its services, as detailed forecasts are not generally obtainable from other sources at this early stage of the psychedelics industry in Canada and the U.S. A failure in the demand for its services to materialize as a result of competition, technological change, market acceptance or other factors could have a material adverse effect on the business, results of operations and financial condition of the Company.
From time to time, studies or clinical trials on various aspects of biopharmaceutical products are conducted by academic researchers, competitors or others. The results of these studies or trials, when published, may have a significant effect on the market for the biopharmaceutical product that is the subject of the study. The publication of negative results of studies or clinical trials or adverse safety events related to the FT Discovery, or the Field Trip Health Centres, could adversely affect the Company’s ability to finance future developments or the price of the Common Shares, and the Company’s business and financial results could be materially and adversely affected.
Unpredictability and Volatility of the Common Shares
Publicly-traded securities, such as those of the Company, will not necessarily trade at values determined by reference to the underlying value of its business. The prices at which the Common Shares will trade cannot be predicted. The market price of the Common Shares could be subject to significant fluctuations in response to a variety of factors, including the following: actual or anticipated fluctuations in our quarterly results of operations; recommendations by securities research analysts; changes in the economic performance or market valuations of companies in the industry in which we operate; additions or departures by our executive officers and other key personnel; significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving the Company or our competitors; operating and share price performance of other companies that investors deem comparable to the Company; and news reports relating to trends, concerns, technological or competitive developments, regulatory changes and other related issues in the Company’s industry or target markets.
In addition, the securities markets have experienced significant price and volume fluctuations from time to time in recent years that often have been unrelated or disproportionate to the operating performance of particular issuers. These broad fluctuations may adversely affect the market price of the Common Shares. Accordingly, investors may not be able to sell their Common Shares at their initial purchase price.
Milestones and Use of Funds
This AIF incorporates by reference details on the Company’s business objectives and milestones, as described in the Company’s management discussion & analysis for the fiscal year ended March 31, 2021 under the heading “Milestones and Available Funds”. This includes the Company’s estimate of its use of available funds over the period described therein. As the Company further expands its business, it is possible that results and circumstances may dictate a departure from the current expected uses. Further, the Company may, from time to time, as opportunities arise, utilise its financial resources to participate in additional opportunities that arise and fit within the Company’s broader objectives, as a means of advancing shareholder value.
Conflicts of Interest
Some of the Company’s directors and officers may act as directors and/or officers of other health and wellness companies. As such, such directors and officers may be faced with conflicts of interests when
evaluating alternative health and wellness opportunities. In addition, the Company’s directors and officers may prioritize the business affairs of another company over the affairs of the Company.
Personnel
The Company has a small management team and the loss of any key individual could affect the Company’s business. Any inability to secure and/or retain appropriate personnel may have a materially adverse impact on the business and operations of the Company.
Tax Issues
Income tax consequences in relation to the purchase and sale of Common Shares will vary according to the circumstances of each purchaser. Prospective purchasers should seek independent advice from their own tax and legal advisers prior to purchasing any Common Shares.
Liquidity of the Common Shares
The listing of the Common Shares on the TSX should not be taken as implying that there will be a liquid market for the Common Shares. Investors should be aware that the value of the Common Shares may be volatile. Investors may, on disposing of their Common Shares, realise less than their original investment, or may lose their entire investment. The Common Shares, therefore, may not be suitable as an investment.
The market price of the Common Shares may not reflect the underlying value of the Company’s net assets. The price at which the Common Shares will be traded, and the price at which investors may purchase and sell their Common Shares, will be influenced by a large number of factors, some specific to the Company and its proposed operations, and some which may affect the sectors in which the Company operates. Such factors could include the performance of the Company’s operations, large purchases or sales of the Common Shares, liquidity or the absence of liquidity in the Common Shares, legislative or regulatory changes relating to the business of the Company, and general market and economic conditions.
Substantial Number of Authorized but Unissued Shares
The Company has an unlimited number of Common Shares that may be issued by the Board without further action or approval of the Company’s shareholders. While the Board is required to fulfill its fiduciary obligations in connection with the issuance of such shares, the shares may be issued in transactions with which not all shareholders agree, and the issuance of such shares will cause dilution to the ownership interests of the Company’s shareholders.
Foreign Currency Fluctuations
The Company may be adversely affected by foreign currency fluctuations. The Company has operations in Canada, the United States, Jamaica and the Netherlands. Also, a significant portion of its expenditures are in other currencies, and the Company is therefore subject to foreign currency fluctuations which may, from time to time, impact its financial position and results of operations.
Emerging Market Risks
The Company has operations in Jamaica, an emerging market country, and may have operations in additional emerging markets in the future. Such operations expose the Company to the socio-economic conditions as well as the laws governing the activities of the Company in Jamaica and any other jurisdiction where the Company may have operations in the future. Inherent risks with conducting foreign operations include, but are not limited to: high rates of inflation; extreme fluctuations in currency exchange rates, military repression; war or civil war; social and labour unrest; organized crime; hostage taking; terrorism; violent crime; expropriation and nationalization; renegotiation or nullification of existing licenses, approvals, permits and contracts; changes in taxation policies; restrictions on foreign exchange and repatriation; and changing political norms, banking and currency controls and governmental regulations that favour or require the Company to award contracts in, employ citizens of, or purchase supplies from, the jurisdiction.
The Jamaican government, or other governments in emerging markets where the Company may have operations in the future, may intervene in its economies, sometimes frequently, and occasionally make significant changes in policies and regulations. Changes, if any, in the research, cultivation and development of psilocybin mushroom and other botanicals policies or shifts in political attitude in Jamaica or other countries where the Company may have operations in the future may adversely affect its operations or profitability. Operations may be affected in varying degrees by government regulations with respect to, but not limited to, restrictions on production, price controls, export controls, currency remittance, importation of product and supplies, income and other taxes, royalties, the repatriation of profits, expropriation of property, foreign investment, maintenance of licenses, approvals and permits, environmental matters, land use, land claims of local people, water use and workplace safety. Failure to comply strictly with applicable laws, regulations and local practices could materially impact the Company’s operations in Jamaica or other countries where the Company may have operations in the future. The Company continues to monitor developments and policies in Jamaica to assess the impact thereof to its operations or future operations; however, such developments cannot be predicted and could have an adverse effect on the Company’s operations in Jamaica.
Jamaica has a history of economic instability (such as inflation or recession). In 2013, Jamaica launched an ambitious reform program to stabilize the economy, reduce debt, and fuel growth, gaining national and international support. While there is no current political instability, and historically there has been no change in laws and regulations, this is subject to change in the future and could adversely affect the Company’s business, financial condition and results of operations. Jamaica is vulnerable to natural disasters such as hurricanes and flooding and the effects of climate change. It is an upper middle-income economy that is nevertheless struggling due to low growth, high public debt, and exposure to external shocks.
Global economic crises could negatively affect investor confidence in emerging markets or the economies of emerging markets, including Jamaica. Such events could materially and adversely affect the Company’s business, financial condition and results of operations.
Financial and securities markets in Jamaica are influenced by the economic and market conditions in other countries, including other emerging market countries and other global markets. Although economic conditions in these countries may differ significantly from economic conditions in Jamaica, investors’ reactions to developments in these other countries, such as the recent developments in the global financial markets, may substantially affect the capital flows into Jamaica and the market value of the securities of the Company.
The legal and regulatory requirements and local business culture and practices in Jamaica and the foreign countries in which the Company may expand are different from those in which it currently operates. The officers and directors of the Company will rely, to a great extent, on the Company’s local legal counsel and local consultants and advisors in respect of legal, banking, labour, financing and tax matters in order to ensure compliance with material legal, regulatory and governmental developments as they pertain to and affect the Company’s operations, particularly with respect to psilocybin or related operations. Increased compliance costs may be incurred by the Company. Further, there can be no assurance that the Company will develop a marketable product or service in Jamaica or any other foreign country. These factors may have a material adverse effect on the Company’s research and development business and the results of its research and development operations.
In the event of a dispute arising in connection with the Company’s operations in Jamaica or another foreign jurisdiction where the Company may conduct business, the Company may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons to the jurisdictions of the courts of Canada or enforcing Canadian judgments in such other jurisdictions. The Company may also be hindered or prevented from enforcing its rights with respect to a governmental instrumentality because of the doctrine of sovereign immunity. Accordingly, the Company’s activities in foreign jurisdictions could be substantially affected by factors beyond the Company’s control.
Other risks include the potential for fraud and corruption by suppliers or personnel or government officials which may implicate the Company, compliance with applicable anti-corruption laws, including the Corruption of Foreign Public Officials Act (Canada) by virtue of the Company’s operating in jurisdictions that may be vulnerable to the possibility of bribery, collusion, kickbacks, theft, improper commissions, facilitation payments, conflicts of interest and related party transactions and the Company’s possible failure to identify, manage and mitigate instances of fraud, corruption, or violations applicable regulatory requirements.
Agriculture
FT Discovery’s business involves the growing of an agricultural product and is subject to the risks inherent in the agricultural business, such as insects, plant diseases, and invasive species. Although the Company expects that any such growing will be completed indoors under climate-controlled conditions, there can be no assurance that natural elements will not have a material adverse effect on any future production.
Risks Relating to CPOM Laws — General
Many states prohibit or otherwise regulate under the CPOM doctrine the extent to which non-licensed personnel may be involved in the practice of medicine or otherwise employ licensed personnel. Related state rules further limit the extent to which fees for professional services may be shared or “split” between parties. In connection with the Field Trip Health Centres, such rules in some states my impact the Company’s relationship with the medical doctors who own the PC Health Centres through which therapy is delivered. The Company is structuring its financial and billing relationships with such Professional Corporations to be in compliance with applicable state rules. Failure to comply with state CPOM and fee splitting rules, however, may result in fines and other liabilities, which may adversely affect the Professional Corporation’s business, financial condition and results of operations.
Where CPOM Doctrine is established by case law, it is subject to judicial interpretation and case law may distinguish, elaborate, or amend those laws. Further in states where the CPOM doctrine established by statute, the State may amend those statutes. The California Legislature considered a bill SB-642 that would have strengthened the state’s restrictions on CPOM. After the bill passed the state’s Senate Committee on Health, the state’s Senate Appropriations Committee placed the bill in its “suspense file” while that committee considers the bill’s fiscal impact. The Company cannot predict the impact, cost or time required to comply with any change to California CPOM that bill SB-62, or an amended version thereof, would cause if passed. It may significantly delay or impact the development of its business in California or necessitate a renegotiation of the terms of its relationship with any PC in California.
Corporate Practice of Medicine and Fee Splitting in the United States
The Field Trip Health Centres in the United States are subject to corporate practice of medicine and fee-splitting prohibitions which vary widely from state to state. The corporate practice of medicine prohibition exists in some form, by statute, regulation, board of medicine or attorney general guidance, or case law, in various states that we operate. These laws generally prohibit the practice of medicine by lay persons or entities and are intended to prevent unlicensed persons or entities from interfering with or inappropriately influencing providers’ professional judgment. Due to the prevalence of the corporate practice of medicine doctrine, we contract with PC Health Centres, who in turn employ or retain physicians and other medical providers to deliver professional clinical services in Field Trip Health Centres located in the United States. The PC Health Centres are wholly owned by providers licensed in their respective states.
Under our MSA’s, when our PC Health Centres provide professional clinical services to patients, we, as administrator, perform billing and collection services on behalf of the PC Health Centres, and the PC Health Centres receive the fees for the services provided. In return for these professional clinical, management, operational and administrative services, we receive fees from the PC Health Centres that represent fair value. As a result, our ability to receive cash fees from the PC Health Centres is limited to the fair market value of the services provided under the MSA’s. To the extent our ability to receive cash fees from the PC Health Centres is limited, our ability to use that cash for growth, debt service or other uses at PC Health Centres may be impaired and, as a result, our results of operations and financial condition may be adversely affected.
Our ability to perform medical and digital health services in a particular U.S. state is directly dependent upon the applicable laws governing the practice of medicine, healthcare delivery and fee splitting in such locations, which are subject to changing political, regulatory and other influences. The extent to which a U.S. state considers particular actions or relationships to constitute the practice of medicine is subject to change and to evolving interpretations by medical boards and state attorneys general, among others, each of which has broad discretion. There is a risk that U.S. state authorities in some jurisdictions may find that our contractual relationships with the PC Health Centres, which govern the provision of medical and digital health services and the payment of administrative and operations support fees, violate laws prohibiting the corporate
practice of medicine and fee splitting. The extent to which each state may consider particular actions or contractual relationships to constitute improper influence of professional judgment varies across the states and is subject to change and to evolving interpretations by state boards of medicine and state attorneys general, among others. Accordingly, we must monitor our compliance with laws in every jurisdiction in which we operate on an ongoing basis, and we cannot provide assurance that our activities and arrangements, if challenged, will be found to be in compliance with the law. Additionally, it is possible that the laws and rules governing the practice of medicine, including the provision of digital health services, and fee splitting in one or more jurisdictions may change in a manner adverse to our business. While the MSA’s prohibit us from controlling, influencing or otherwise interfering with the practice of medicine at each PC Health Centre, and provide that physicians retain exclusive control and responsibility for all aspects of the practice of medicine and the delivery of medical services, there can be no assurance that our contractual arrangements and activities with the PC Health Centres will be free from scrutiny from U.S. state authorities, and we cannot guarantee that subsequent interpretation of the corporate practice of medicine and fee splitting laws will not circumscribe our business operations. State corporate practice of medicine doctrines also often impose penalties on physicians themselves for aiding the corporate practice of medicine, which could discourage providers from participating in our network of physicians. If a successful legal challenge or an adverse change in relevant laws were to occur, and we were unable to adapt our business model accordingly, our operations in affected jurisdictions would be disrupted, which could harm our business.
While we expect that our relationships with the PC Field Trip Health Centres will continue, a material change in our relationship with these entities, or among the PC Clinics, whether resulting from a dispute among the entities, a challenge from a governmental regulator, a change in government regulation, or the loss of these relationships or contracts with the PC Field Trip Health Centres, could impair our ability to provide services to our patients and could harm our business.
Failure to Comply with Applicable Federal and State Anti-Kickback Laws
The anti-kickback statute (“AKS”) applies to Medicare and other state and federal programs. AKS prohibits the solicitation, offer, payment or receipt of remuneration in return for referrals or the purchase, or in return for recommending or arranging for the referral or purchase, of goods covered by the federal healthcare programs. The AKS is a criminal statute with criminal penalties, as well as potential civil and administrative penalties. The AKS, however, provides a number of statutory exceptions and regulatory “safe harbors” for particular types of transactions. At present, neither the Company nor the Field Trip Health Centres participate in any federal programs as their services are not reimbursed by Medicare, Medicaid or any other state or federal program. Many states have similar fraud and abuse laws and their own anti-kickback laws, some of which can apply to all payors, and not just governmental payors. While the Company believes that it is in material compliance with both federal and state AKS laws, if it were determined that the Company was not in compliance with the AKS, it could be subject to liability, and its operations could be curtailed, which could have a material adverse effect on its business, financial condition and results of operations. Moreover, if the activities of Professional Corporations with which the Company has a business relationship were found to constitute a violation of the AKS and the Company, as a result of the provision of products or services to such Professional Corporations, were found to have knowingly participated in such activities, the Company could be subject to sanctions or liability under such laws, including civil and/or criminal penalties, as well as exclusion from government health programs. As a result of exclusion from government health programs, neither products nor services could be provided to any beneficiaries of any federal healthcare program.
Reclassification of Psilocybin and other Psychedelic Drugs
If psilocybin and/or other psychedelic drugs are rescheduled under the CSA as a Schedule II or lower controlled substance (i.e., Schedule III, IV or V), it may materially alter enforcement policies across many federal agencies, primarily the FDA and DEA. The FDA is responsible for ensuring public health and safety through regulation of food, drugs, supplements, and cosmetics, among other products, through its enforcement authority pursuant to the Federal Food, Drug, and Cosmetic Act. The FDA’s responsibilities include regulating the ingredients as well as the marketing and labeling of drugs sold in interstate commerce. Since it is currently illegal under federal law to produce and sell psilocybin and psychedelic drugs other than Ketamine and as there are no federally recognized medical uses, the FDA has historically deferred enforcement related to
these products to the DEA. If psilocybin and/or other psychedelic drugs were to be rescheduled to a federally controlled, yet legal, substance, the FDA would likely play a more active regulatory role. The DEA would continue to be active in regulating manufacturing, distribution and dispensing of such substances. Multi-agency regulation and enforcement could materially effect the Company’s costs associated with research and/or therapeutic uses of these substances in its business.
Reliance on Third Parties — General
The Company has entered into agreements with third parties with respect to our operations. Such relationships could present unforeseen obstacles or costs and may involve risks that could adversely affect us, including significant amounts of management time that may be diverted from operations in order to pursue and maintain such relationships. There can be no assurance that such third parties will achieve the expected benefits to our business or that we will be able to consummate any future relationships on satisfactory terms, or at all. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations. Any violation of any applicable laws and regulations, such as the CDSA and CSA, or of similar legislation in the jurisdictions in which we operate, could result in such third parties suspending or withdrawing their services to us. The termination or cancellation of any such agreements or our failure and/or the failure of other parties to these arrangements to fulfill their obligations could have a material adverse effect on our business, financial condition and results of operations. In addition, disagreements between the Company and any third parties we contract with could lead to delays or time consuming and expensive legal proceedings, which could have a material adverse effect on our business, financial condition and results of operations.
Reliance on Third-Parties — Drug Development
The Company relies and will continue to rely on third parties to conduct a significant portion of its pre-clinical and clinical development activities. Pre-clinical activities include in vivo studies providing access to specific disease models, pharmacology and toxicology studies, and assay development. Clinical development activities include trial design, regulatory submissions, clinical patient recruitment, clinical trial monitoring, clinical data management and analysis, safety monitoring and project management. If there is any dispute or disruption in its relationship with third parties, or if it is unable to provide quality services in a timely manner and at a feasible cost, the Company’s active development programs will face delays. Further, if any of these third parties fails to perform as the Company expects or if their work fails to meet regulatory requirements, the Company’s testing could be delayed, cancelled or rendered ineffective.
Pre-clinical and clinical development activities must be carried out in accordance with GLP. GLP was originally established by the Organisation for Economic Co-operation and Development to promote the quality and validity of test data and to establish a basis for mutual acceptance of data among member states at the international level. GLP was adopted by both Health Canada and the Standards Council of Canada, which has monitoring authority for GLP compliance of test facilities within Canada, and by the FDA as (Good Laboratory Practice regulations, 21 CFR 58). Labs must adopt these GLP practices to ensure they are producing valuable test results, and each lab has its own set of approaches to staying compliant. If any of these third partner or service provider fails to GLP requirements, the Company’s pre-clinical and clinical development activities could be delayed, cancelled or rendered ineffective.
The Company has no manufacturing experience and will rely on CMOs to manufacture its product candidates for pre-clinical studies and clinical trials. The Company will rely on CMOs for manufacturing, filling, packaging, storing and shipping of drug product in compliance with current Good Manufacturing Practices (“cGMP”) regulations applicable to its products. The FDA and Health Canada ensure the quality of drug products by carefully monitoring drug manufacturers’ compliance with cGMP regulations. The cGMP regulations for drugs contain minimum requirements for the methods, facilities and controls used in manufacturing, processing and packing of a drug product.
There can be no assurances that CMOs will be able to meet the Company’s timetable and requirements. The Company has not contracted with suppliers for FT-104 drug substance production but in the event that the selected provider is unable to scale up production, or if it otherwise experiences any other significant problems and the Company is unable to arrange for alternative third-party manufacturing sources on commercially reasonable terms or in a timely manner, the Company may be delayed in the development of
FT-104, or other product candidates. Further, CMOs must operate in compliance with cGMP and failure to do so could result in, among other things, the disruption of product supplies. The Company’s dependence upon third parties for the manufacture of its products may adversely affect its profit margins and its ability to develop and deliver products on a timely and competitive basis.
Reliance on Contract Manufacturers
The Company has limited manufacturing experience and relies on the CMO to manufacture FT-104 for preclinical studies and clinical trials. The Company relies on the CMO for manufacturing, filling, packaging, storing and shipping of FT-104 in compliance with cGMP regulations. There can be no assurances that the CMO will be able to meet the Company’s timetable and requirements. The Company has not contracted with alternate third parties for FT-104 production in the event that the current CMO is unable to scale up production, or if it otherwise experiences any other significant problems. If the Company is unable to arrange for alternative third-party manufacturing sources on commercially reasonable terms or in a timely manner, the Company may be delayed in the development of FT-104. Further, the CMO must operate in compliance with cGMP and ensure that their appropriate permits and licences remain in good standing and failure to do so could have a material detrimental impact on the Company and may adversely affect its profit margins. The CMO is in turn reliant on suppliers for starting materials, some of which have been somewhat difficult to procure, possibly due to heightened activities in psilocybin synthesis/manufacture. The CMO has been partially delayed in obtaining portions of the starting material, however, it has planned to source sufficient amounts to sustain through Phase 1 and possibly Phase 2 clinical trials.
Disclosure of Intellectual Property by Third Parties
Because the Company relies on third parties at its Field Trip Health Centres, including patients and employees, and in relation to FT-104, it must share trade secrets with them. The Company seeks to protect its proprietary technology in part by entering into confidentiality agreements and other similar agreements prior to disclosing proprietary information. These agreements typically restrict the ability to publish data potentially relating to its trade secrets. The Company’s academic and clinical collaborators typically have rights to publish data, provided that the Company is notified in advance and may delay publication for a specified time in order to secure is intellectual property rights arising from the collaboration. In other cases, publication rights are controlled exclusively by the Company, although in some cases the Company may share these rights with other parties. The Company may also conduct joint research and development programs which may require the Company to share trade secrets under the terms of research and development collaborations or similar agreements. Despite its efforts to protect its trade secrets, the Company’s competitors may discover its trade secrets, either through breach of these agreements, independent development or publication of information including its trade secrets in cases where the Company does not have proprietary or otherwise protected rights at the time of publication. A competitor’s discovery of the Company’s trade secrets may impair its competitive position and could have a material adverse effect on its business and financial condition.
Commercial Grade Development
To date, FT-104 has been manufactured in small quantities for pre-clinical studies. In order to commercialize its product, the Company needs to manufacture commercial quality drug supply for use in registration clinical trials. Most, if not all, of the clinical material used in phase 3/pivotal/registration studies must be derived from the defined commercial process, including scale, manufacturing site, process controls and batch size. If the Company has not scaled up and validated the commercial production of its product prior to the commencement of pivotal clinical trials, it may have to employ a bridging strategy during the trial to demonstrate equivalency of early stage material to commercial drug product, or potentially delay the initiation or completion of the trial until drug supply is available. The manufacturing of commercial quality drug product has long lead times, is very expensive and requires significant efforts, including scale-up of production to anticipated commercial scale, process characterization and validation, analytical method validation, identification of critical process parameters and product quality attributes, and multiple process performance and validation runs. If the Company does not have commercial drug supply available when needed for pivotal clinical trials, the Company’s regulatory and commercial progress may be delayed, and it may incur increased product development costs. This may have a material adverse effect on the Company’s business, financial condition and prospects, and may delay marketing of its product.
Clinical Testing
Before obtaining marketing approval from regulatory authorities for the sale of the Company’s product candidates, it must conduct pre-clinical studies in animals and extensive clinical trials in humans to demonstrate the safety and efficacy of the product candidates. Clinical testing is expensive and difficult to design and implement, can take many years to complete and has uncertain outcomes. The outcome of pre-clinical studies and early clinical trials may not predict the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials due to lack of efficacy or unacceptable safety profiles, notwithstanding promising results in earlier trials. The Company does not know whether the clinical trials it may conduct will demonstrate adequate efficacy and safety to result in regulatory approval to market any of its product candidates in any jurisdiction. A product candidate may fail for safety or efficacy reasons at any stage of the testing process. A major risk the Company faces is the possibility that none of its product candidates under development will successfully gain market approval from the FDA or other regulatory authorities, resulting in the Company being unable to derive any commercial revenue from this business segment after investing significant amounts of capital in its development.
The Company cannot predict whether any clinical trials will begin as planned, will need to be restructured, or will be completed on schedule, or at all. The Company’s product development costs will increase if it experiences delays in clinical testing. Significant clinical trial delays could shorten any periods during which the Company may have the exclusive right to commercialize its product candidates or allow its competitors to bring products to market before the Company, which would impair the Company’s ability to successfully commercialize its product candidates and may harm its financial condition, results of operations and prospects. The Company’s product development costs will increase if it experiences delays in testing or approval or if the Company needs to perform more or larger clinical trials than planned. Additionally, changes in regulatory requirements and policies may occur, and the Company may need to amend study protocols to reflect these changes. Amendments may require the Company to resubmit its study protocols for re-examination, which may impact the cost, timing or successful completion of that trial. Delays or increased product development costs may have a material adverse effect on the Company’s business, financial condition and prospects. Clinical trials could be delayed by the following non-exhaustive factors:
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failure by regulatory authorities to grant permission to proceed or placing the clinical trial on hold;
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patients failing to enroll or remain in the clinical trials at the rate the Company expects;
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suspension or termination of clinical trials by regulators for many reasons, including concerns about patient safety or failure to comply with cGMP requirements;
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any changes to the manufacturing process that may be necessary or desired;
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delays or failure to obtain clinical supply from CMOs of products necessary to conduct clinical trials;
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a lack of safety or efficacy during clinical trials;
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patients choosing an alternative treatment or participating in competing clinical trials;
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patients failing to complete clinical trials due to dissatisfaction with the treatment, side effects or other reasons;
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reports of clinical testing on similar technologies and products raising safety or efficacy concerns;
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competing clinical trials and scheduling conflicts with participating clinicians;
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clinical investigators not performing the clinical trials on their anticipated schedule, dropping out of a trial, or employing methods not consistent with the clinical trial protocol, regulatory requirements or other third parties not performing data collection and analysis in a timely or accurate manner;
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failure of the Company’s CROs to satisfy their contractual duties or meet expected deadlines;
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inspections of clinical trial sites by regulatory authorities or ethics committees finding regulatory violations that require corrective action, resulting in suspension or termination of one or more sites or the imposition of a clinical hold on the entire study;
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one or more regulatory authorities or ethics committees rejecting, suspending or terminating the study at an investigational site, precluding enrollment of additional subjects, or withdrawing its approval of the trial; or
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failure to reach agreement on acceptable terms with prospective clinical trial sites.
Prior to commencing clinical trials in Canada, the United States or other jurisdictions, including Jamaica, for FT-104 or any other product candidates if developed by the Company, it may be required to have an allowed investigational new drug application (“IND”) (or equivalent) for each product candidate and to file additional INDs prior to initiating any additional clinical trials for FT-104. The Company believes that the data from its studies will support the filing of additional INDs to enable the Company to undertake additional clinical studies as it has planned. However, submission of an IND (or equivalent) may not result in the FDA (or equivalent authorities) allowing further clinical trials to begin and, once begun, issues may arise that will require the Company to suspend or terminate such clinical trials.
Additionally, even if relevant regulatory authorities agree with the design and implementation of the clinical trials set forth in an IND, these regulatory authorities may change their requirements in the future. Failure to submit or have effective INDs (or equivalent) and commence or continue clinical programs will significantly limit its opportunity to generate revenue.
Patients for Clinical Trials
If the FT-104 advances from pre-clinical testing to clinical testing, and then through progressively larger and more complex clinical trials, the Company will need to enroll an increasing number of patients that meet its eligibility criteria. There is significant competition for recruiting patients in clinical trials, and the Company may be unable to enroll the patients it needs to complete clinical trials on a timely basis or at all.
Negative Results from Clinical Trials or Studies
From time to time, studies or clinical trials on various aspects of psychedelics may be conducted by academic researchers, competitors or others. The results of these studies or trials, when published, may have a significant effect on the marketability of the substance that is the subject of the study. The publication of negative results of studies or clinical trials, or the occurrence of adverse safety events related to psychedelics could adversely affect the Company’s clinical operations, research, share price and ability to finance future operations. Consumer perception of psychedelics may be also significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention and other publicity.
Privacy and Data Regulation
The Company may be subject to federal, state and provincial data protection laws and regulations in the jurisdictions in which it operates, such as laws and regulations that address privacy and data security. The Company may obtain health information from third parties, which are subject to privacy and security requirements under applicable laws. Depending on the facts and circumstances, the Company could be subject to significant civil, criminal, and administrative penalties if it obtains, uses, or discloses individually identifiable health information maintained by entities covered by applicable health and data protection laws in a manner that is not authorized or permitted by such laws.
Compliance with privacy and data protection laws and regulations could require the Company to contractually restrict its ability to collect, use and disclose data, or in some cases, impact its ability to operate in certain jurisdictions. Failure to comply with these laws and regulations could result in civil, criminal and administrative penalties, private litigation, or adverse publicity and could negatively affect the Company’s operating results and business. Moreover, clinical trial subjects, employees and other individuals may limit our ability to collect, use and disclose information collected. Claims that the Company has violated privacy rights, failed to comply with data protection laws, or otherwise breached obligations, could be expensive and time-consuming to defend and could result in adverse publicity that could harm the Company’s business.
Regulatory Approval Process
The Company’s development and commercialization activities related to FT-104 or other product candidates are significantly regulated by a number of governmental entities, including the FDA, HC, and
comparable authorities in other countries, including Jamaica. Regulatory approvals are required prior to each clinical trial and the Company may fail to obtain the necessary approvals to commence or continue clinical testing. The Company must comply with regulations concerning the manufacture, testing, safety, effectiveness, labeling, documentation, advertising, and sale of products and product candidates and ultimately must obtain regulatory approval before it can commercialize a product candidate. The time required to obtain approval by such regulatory authorities is unpredictable but typically takes many years following the commencement of preclinical studies and clinical trials. Any analysis of data from clinical activities the Company performs is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. Even if the Company believes results from its clinical trials are favorable to support the marketing of its product candidates, the FDA or other regulatory authorities may disagree. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. The Company has not obtained regulatory approval for any product candidate and it is possible that none of its existing product candidates or any future product candidates will ever obtain regulatory approval.
A regulatory authority may require more information, including additional preclinical or clinical data to support approval, which may delay or prevent approval and the Company’s commercialization plans, or we may decide to abandon the development program. If the Company were to obtain approval, regulatory authorities may approve any of its product candidates for fewer or more limited indications than the Company requests, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Moreover, depending on any safety issues associated with the Company’s product candidates that garner approval, the FDA may impose a risk evaluation and mitigation strategy, thereby imposing certain restrictions on the sale and marketability of such products.
Cyber-Attacks
The Company’s operations depend, in part, on how well it protects its information technology systems, networks, equipment and software from damages from a number of threats. Events such as cable cuts, power loss, hacking, computer viruses and theft could result in information system failures, delays and/or increase in capital expenses for the Company. While the Company implements protective measures to reduce the risk of and detect cyber incidents, cyber-attacks are becoming more sophisticated and frequent, and the techniques used in such attacks change rapidly; the development of the Company’s business and operating results may be hindered by applicable restrictions on sales and marketing activities imposed by regulatory bodies.
Reliance upon Insurers and Governments
Even if the Company is able to commercialize pharmaceutical product candidates, the products may not receive adequate reimbursement from government or private pay insurers. Additionally, fluctuations in drug prices caused by governments and insurers could affect the Company’s business.
Difficulty in Enforcing Judgments and Effecting Service of Process on Directors and Officers
Certain directors and officers of the Company reside outside of Canada. Some or all of the assets of such persons may be located outside of Canada. Therefore, it may not be possible for investors to collect or to enforce judgments obtained in Canadian courts predicated upon the civil liability provisions of applicable Canadian securities laws against such persons. Moreover, it may not be possible for investors to effect service of process within Canada upon such persons.
Inadequate Internal Controls
If the Company fails to maintain an effective system of internal controls, the Company might not be able to report its financial results accurately or prevent misstatement; and in that case, the Company’s shareholders could lose confidence in its financial reporting, which would harm its business and could negatively impact the value of its shares. While the Company believes that it has sufficient personnel and review procedures to allow it to maintain an effective system of internal controls, there can be no assurance that the Company will always successfully detect misstatements or implement necessary improvements in a timely fashion.
No assurance of an Active or Liquid Market
No assurance can be given that an active or liquid trading market for the Common Shares and Warrants will be sustained. If an active or liquid market for the Common Shares and Warrants fails to be sustained, the prices at which such securities trade may be adversely affected. Whether or not the Common Shares and Warrants will trade at lower prices depends on many factors, including the liquidity of the Common Shares and Warrants, prevailing interest rates, the markets for similar securities, general economic conditions and the Company’s financial condition, historic financial performance and future prospects.
Public Markets and Share Prices
The market price of the Common Shares and Warrants on the TSX could be subject to significant fluctuations in response to variations in the Company’s operating results or other factors. In addition, fluctuations in the stock market may adversely affect the market price of the Common Shares and Warrants that may become listed and posted for trading on the TSX or any other stock exchange regardless of the operating performance of the Company. Securities markets have also experienced significant price and volume fluctuations from time to time. In some instances, these fluctuations have been unrelated or disproportionate to the operating performance of issuers. Market fluctuations may adversely impact the market price of the Common Shares and Warrants.
Future Issuances, Actual or Potential Sales of Securities
The issuance by the Company of Common Shares or other securities convertible into Common Shares could result in significant dilution in the equity interest of existing shareholders and adversely affect the market price of the Common Shares. In addition, in the future, we may issue additional Common Shares or securities convertible into Common Shares, which may dilute existing shareholders. The Company’s articles permit the issuance of an unlimited number of Common Shares and an unlimited number of Preferred Shares, and shareholders will have no pre-emptive rights in connection with such further issuances. Also, additional Common Shares may be issued by the Company upon the exercise of stock options and upon the exercise or conversion of other securities convertible into Common Shares. The issuance of these additional equity securities may have a similar dilutive effect on then existing holders of Common Shares.
The market price of the Common Shares could decline as a result of future issuances by the Company, including issuance of shares issued in connection with strategic alliances, or sales by its existing holders of Common Shares, or the perception that these sales could occur. Sales by shareholders might also make it more difficult for the Company to sell equity securities at a time and price that it deems appropriate, which could reduce its ability to raise capital and have an adverse effect on its business.
General
Although management believes that the above risks fairly and comprehensibly illustrate all material risks facing the Company, the risks noted above do not necessarily comprise all those potentially faced by the Company as it is impossible to foresee all possible risks.
Although the Board will seek to minimise the impact of the risk factors, an investment in the Company should only be made by investors able to sustain a total loss of their investment. Investors are strongly recommended to consult a person who specialises in investments of this nature before making any decision to invest.
DIVIDENDS AND DISTRIBUTIONS
The Company does not currently intend to declare any dividends payable to the holders of the Common Shares. The Company has no restrictions on paying dividends, but if the Company generates earnings in the foreseeable future, it expects that they will be retained to finance growth. The Board will determine if and when dividends should be declared and paid in the future based upon the Company’s financial position at the relevant time.
DESCRIPTION OF CAPITAL STRUCTURE
Share Capital
The authorized capital of the Company consists of an unlimited number of Common Shares and an unlimited number of Preferred Shares. As at the date of this AIF, 57,625,826 Common Shares are issued and outstanding and no Preferred Shares are issued and outstanding.
Holders of Common Shares are entitled to one vote for each Common Share held at all meetings of shareholders of the Company, to receive dividends if, as and when declared by the Board, and to participate rateably in any distribution of property or assets upon the liquidation, winding-up or other dissolution of the Company. The Shares carry no pre-emptive rights, conversion or exchange rights, or redemption, retraction, repurchase, sinking fund or purchase fund provisions. There are no provisions requiring a holder of Shares to contribute additional capital, and no restrictions on the issuance of additional securities by the Company. There are no restrictions on the repurchase or redemption of Shares by the Company except to the extent that any such repurchase or redemption would render the Company insolvent. The Company Preferred Shares may, if issued, be made convertible into Common Shares at such rate and upon such basis as the Board, in its discretion, may determine.
Company Option Plan
The Company Option Plan is to attract and retain employees, directors and consultants, and to ensure that interests of key persons are aligned with the success of the Company and its affiliates. The maximum number of options to purchase Common Shares reserved for issuance under the Company Option Plan is the greater of: (i) 3,100,000 Common Shares; or (ii) 15% of the issued and outstanding Common Shares (subject to adjustment in accordance with the Company Option Plan) from time to time, on a non-diluted basis. Company Options that have been exercised, cancelled, surrendered or terminated, or that expire without being exercised, shall again be available for issuance under the Company Option Plan. Notwithstanding the foregoing, the maximum number of Common Shares that may be issued under the Company Option Plan pursuant to the exercise or surrender of Company Options is 7,500,000, but in all events subject to the limitations in (i) and (ii).
Warrants
As of March 31, 2021, the Company had 2,071,090 Warrants outstanding. As of June 24, 2021, the Company has 2,071,090 Warrants outstanding, exercisable to purchase up to 2,071,090 Warrant Shares at an exercise price of $5.60 per Warrant Share.
The following is a summary of certain of the rights, privileges, restrictions and conditions attaching to the Warrants. For a complete description of the Warrants, please refer to the Warrant Indenture, which has been filed on the Company’s SEDAR profile, accessible at www.sedar.com.
The Warrants were issued under and are governed by the Warrant Indenture. The Company has appointed the principal transfer office of Computershare Trust Company of Canada in Toronto, Ontario as the location at which the Warrants may be surrendered for exercise, transfer or exchange. A register of holders is maintained at the primary offices of the warrant agent in Toronto, Ontario.
Each Warrant is transferrable, and entitles the holder thereof to acquire one Warrant Share at an exercise price of $5.60 per Warrant Share, until 4:30 p.m. (Eastern Time) on June 5, 2022, subject to adjustment in certain customary events, after which time the Warrants will expire and become null and void. The Warrant Indenture provides that, if, following the closing of the January Public Offering, the volume weighted average
price of the Common Shares on the CSE (or such other stock exchange on which the Common Shares are then principally traded) exceeds $9.00 for any ten (10) consecutive trading days, the Company shall have the right to accelerate the expiry date of the Warrants upon not less than fifteen (15) trading days’ notice, to be disseminated by the Company by way of a news release. No fractional Warrant Shares will be issuable upon the exercise of any Warrants and no cash or other consideration will be paid in lieu of fractional Warrant Shares. Holders of Warrants will not have any voting or pre-emptive rights or any other rights which a holder of Common Shares would have.
Pursuant to the Warrant Indenture, and subject to applicable securities legislation and approval of applicable regulatory authorities, the Company is entitled to purchase in the market, by private contract or otherwise, any of the Warrants then outstanding and any Warrants so purchased will be cancelled.
The Warrant Indenture provides for adjustment in the number of Warrant Shares issuable upon the exercise of the Warrants and/or the exercise price per Warrant Share upon the occurrence of certain events, including: (i) the issuance of Common Shares or securities exchangeable for or convertible into Common Shares to all or substantially all of the holders of the Common Shares by way of a stock dividend or other distribution (other than a dividend in the ordinary course or a distribution of Common Shares upon the exercise of any Warrants or options outstanding as of the date of the Warrant Indenture); (ii) the subdivision, re-division or change of the Common Shares into a greater number of Common Shares; (iii) the consolidation, reduction or combination of the Common Shares into a lesser number of Common Shares; (iv) the issuance to all or substantially all of the holders of the Common Shares of rights, options or warrants under which such holders are entitled, during a period expiring not more than 45 days after the record date for such issuance, to subscribe for or purchase Common Shares, or securities exchangeable for or convertible into Common Shares, at a price per share to the holder (or at an exchange or conversion price per share) of less than 95% of the Current Market Price (as defined in the Warrant Indenture); and (v) the issuance or distribution to all or substantially all of the holders of the Common Shares of securities of any class, rights, options or warrants to subscribe for or purchase Common Shares or securities exchangeable or convertible into any Common Shares (other than a “rights offering” pursuant to (iv)), evidences of indebtedness or any property or other assets.
The Warrant Indenture also provides for adjustment in the class and/or number of securities issuable upon the exercise of the Warrants and/or exercise price per security in the event of the following additional events: (i) reclassifications of the Common Shares or a capital reorganization of the Company (other than as described above); (ii) consolidations, amalgamations, arrangements or mergers of the Company with or into any other corporation or other entity (other than consolidations, amalgamations, arrangements or mergers which do not result in any reclassification of the outstanding Common Shares or a change of the Common Shares into other shares); or (iii) the sale, conveyance or transfer of the undertaking or assets of the Company as an entirety or substantially as an entirety to another corporation or other entity.
No adjustment in the exercise price or the number of Warrant Shares issuable upon the exercise of the Warrants will be required to be made unless the cumulative effect of such adjustment or adjustments would result in a change of at least 1% in the exercise price, provided that any such adjustments that are not required to be made shall be carried forward and taken into account in any subsequent adjustment.
During the period in which the Warrants are exercisable, the Company will give notice to the warrant agent and to the holders of the Warrants of certain stated events, including events that would result in an adjustment to the exercise price for the Warrants or the number of Warrant Shares issuable upon exercise of the Warrants, at least 14 days prior to the record date or effective date of such event.
The Warrant Indenture provides that, from time to time, the Company and the warrant agent may amend or supplement the Warrant Indenture for certain purposes, without the consent of the holders of the Warrants, including curing defects or inconsistencies or making any change that does not adversely affect the rights of any holder. Any amendment or supplement to the Warrant Indenture that would adversely affect the interests of the holders of Warrants may only be made by “extraordinary resolution”, which will be defined in the Warrant Indenture as a resolution either: (i) passed at a meeting of the holders of Warrants at which there are holders of Warrants present in person or represented by proxy representing at least 20% of the aggregate number of the then outstanding Warrants (unless such meeting is adjourned to a prescribed later date due to the lack of quorum) and passed by the affirmative vote of not less than 66 and 2/3% of the aggregate number
of all the then outstanding Warrants represented at the meeting; or (ii) adopted by an instrument in writing signed by the holders of Warrants representing not less than 66 and 2/3% of the aggregate number of all the then outstanding Warrants.
MARKET FOR SECURITIES
Trading Price and Volume
The Common Shares commenced trading on the TSX on June 7, 2021 under the symbol “FTRP”. Prior to that, and to October 6, 2020, the Common Shares were listed on the CSE. Prior to that, the Common Shares were listed under the symbol “NTN” on the NEX board of the TSXV until trading was halted on June 18, 2020 in connection with the announcement of the Transaction. The following table sets out the high and low prices and aggregate volume of Common Shares traded through the CSE or the TSXV on a monthly basis from March 31, 2020 to March 31, 2021, as reported by the CSE or the TSXV, as applicable for the periods indicated:
|
|
|
|
Price Range ($)
|
|
|
Period
|
|
|
High
|
|
|
Low
|
|
|
Volume
|
|
|
CSE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March, 2021
|
|
|
|
|
7.68
|
|
|
|
|
|
5.13
|
|
|
|
|
|
2,008,883
|
|
|
|
February, 2021
|
|
|
|
|
9.88
|
|
|
|
|
|
4.66
|
|
|
|
|
|
2,734,641
|
|
|
|
January, 2021
|
|
|
|
|
5.35
|
|
|
|
|
|
3.18
|
|
|
|
|
|
2,803,362
|
|
|
|
December, 2020
|
|
|
|
|
7.00
|
|
|
|
|
|
3.90
|
|
|
|
|
|
2,946,690
|
|
|
|
November, 2020
|
|
|
|
|
5.85
|
|
|
|
|
|
2.51
|
|
|
|
|
|
1,573,601
|
|
|
|
October 6, 2020 — October 31, 2020
|
|
|
|
|
3.50
|
|
|
|
|
|
2.25
|
|
|
|
|
|
1,541,898
|
|
|
|
TSXV
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 1, 2020 — June 18, 2020
|
|
|
|
|
0.195
|
|
|
|
|
|
0.175
|
|
|
|
|
|
15,013
|
|
|
|
May 2020
|
|
|
|
|
0.170
|
|
|
|
|
|
0.170
|
|
|
|
|
|
5,000
|
|
|
|
April 2020
|
|
|
|
|
0.150
|
|
|
|
|
|
0.100
|
|
|
|
|
|
5,000
|
|
|
|
March, 2020
|
|
|
|
|
Nil
|
|
|
|
|
|
Nil
|
|
|
|
|
|
Nil
|
|
|
Prior Sales
The following table sets forth details of the issuances of Common Shares, issuances of securities convertible into or exchangeable or exercisable for Common Shares during the fiscal year ended March 31, 2020 through to June 24, 2021:
|
Date of Issue
|
|
|
Description
|
|
|
Number of
Securities Sold
|
|
|
Price Per
Share/Exercise
Price
|
|
|
Description of
Consideration
|
|
|
October, 2019 to September, 2020
|
|
|
Options to purchase FTP Common Shares(1)
|
|
|
|
|
3,765,806
|
|
|
|
$0.50 to $2.00
|
|
|
Cash
|
|
|
February 6, 2020 to May 20, 2020
|
|
|
FTP Class B Shares(2)
|
|
|
|
|
9,507,263
|
|
|
|
US$0.90
|
|
|
Cash and 20,882 FTP Class B Shares were issued in satisfaction of financing costs
|
|
|
August 11, 2020
|
|
|
Exercise of Options to purchase FTP Common Shares(1)
|
|
|
|
|
9,000,900
|
|
|
|
$0.00001
|
|
|
Cash
|
|
|
August 14, 2020
|
|
|
FTP Common Shares (1)
(FTP Private Placement)
|
|
|
|
|
5,516,724
|
|
|
|
$2.00
|
|
|
Cash
|
|
|
August 14, 2020
|
|
|
FTP Common Shares (1)
|
|
|
|
|
55,167
|
|
|
|
$2.00
|
|
|
Fee in connection with the
FTP Private Placement(3)
|
|
|
August 14, 2020
|
|
|
Private Placement Warrants
|
|
|
|
|
299,753
|
|
|
|
$2.00
|
|
|
Fee in connection with the FTP Private Placement
|
|
|
Date of Issue
|
|
|
Description
|
|
|
Number of
Securities Sold
|
|
|
Price Per
Share/Exercise
Price
|
|
|
Description of
Consideration
|
|
|
September 21, 2020
|
|
|
FTP Common Shares(1)
(FTP Private Placement)
|
|
|
|
|
816,932
|
|
|
|
$2.00
|
|
|
Cash
|
|
|
September 25, 2020
|
|
|
FTP Common Shares(1)
|
|
|
|
|
600,000
|
|
|
|
$2.00
|
|
|
Milestone Shares
|
|
|
November 2, 2020
|
|
|
Stock Options
|
|
|
|
|
65,000
|
|
|
|
$2.68
|
|
|
Cash
|
|
|
November 25, 2020
|
|
|
Exercise of Stock Options
|
|
|
|
|
57,827
|
|
|
|
$1.84
|
|
|
Cash
|
|
|
December 1, 2020
|
|
|
Stock Options
|
|
|
|
|
60,000
|
|
|
|
$4.60
|
|
|
Cash
|
|
|
December 1, 2020 to December 30,
2021
|
|
|
Exercise of Stock Options
|
|
|
|
|
125,374
|
|
|
|
$0.50-1.85
(Range)
|
|
|
Cash
|
|
|
December 31, 2021
|
|
|
Stock Options
|
|
|
|
|
220,000
|
|
|
|
$4.09
|
|
|
Cash
|
|
|
January 5, 2020
|
|
|
Units
(January BD Offering)
|
|
|
|
|
4,448,200
|
|
|
|
$4.50
|
|
|
Cash
|
|
|
January 5, 2020
|
|
|
January Compensation Warrants
|
|
|
|
|
169,565
|
|
|
|
$4.50
|
|
|
Fee in connection with the January BD Offering
|
|
|
January 5, 2020
|
|
|
Private Placement Warrants(3)
|
|
|
|
|
49,016
|
|
|
|
$2.00
|
|
|
Fee in connection with the FTP Private Placement
|
|
|
January 5, 2020
|
|
|
Common Shares(3)
|
|
|
|
|
8,170
|
|
|
|
$2.00
|
|
|
Fee in connection with the FTP Private Placement
|
|
|
January 11, 2021
|
|
|
Exercise of Stock Options
|
|
|
|
|
2,083
|
|
|
|
$0.50
|
|
|
Cash
|
|
|
January 29, 2021
|
|
|
Stock Options
|
|
|
|
|
329,997
|
|
|
|
$5.01
|
|
|
Cash
|
|
|
February 8, 2021
|
|
|
Exercise of Stock Options
|
|
|
|
|
2,083
|
|
|
|
$0.50
|
|
|
Cash
|
|
|
February 22, 2021
|
|
|
Exercise of Stock Options
|
|
|
|
|
15,000
|
|
|
|
$0.50
|
|
|
Cash
|
|
|
February 17, 2021
|
|
|
Stock Options
|
|
|
|
|
335,822
|
|
|
|
$8.25
|
|
|
Cash
|
|
|
February 17, 2021 to February 24,
2021
|
|
|
Exercise of Warrants
|
|
|
|
|
152,510
|
|
|
|
$5.60
|
|
|
Cash
|
|
|
February 26, 2021
|
|
|
Stock Options
|
|
|
|
|
110,000
|
|
|
|
$8.00
|
|
|
Cash
|
|
|
March 3, 2021
|
|
|
Stock Options
|
|
|
|
|
15,000
|
|
|
|
$0.50
|
|
|
Cash
|
|
|
March 9, 2021
|
|
|
Exercise of Compensation Warrants
|
|
|
|
|
5,500
|
|
|
|
$2.00
|
|
|
Cash
|
|
|
March 15, 2021
|
|
|
Stock Options
|
|
|
|
|
500
|
|
|
|
$0.50
|
|
|
Cash
|
|
|
March 17, 2021
|
|
|
Common Shares
(March BD Offering)
|
|
|
|
|
14,661,499
|
|
|
|
$6.50
|
|
|
Cash
|
|
|
March 17, 2021
|
|
|
March Compensation Warrants
|
|
|
|
|
763,303
|
|
|
|
$6.50
|
|
|
Fee in connection with the March BD Offering
|
|
|
March 17, 2021
|
|
|
Consultant Compensation Warrants
|
|
|
|
|
104,000
|
|
|
|
$6.50
|
|
|
Fee in connection with an advisory agreement
|
|
|
April 12, 2021
|
|
|
Stock Options
|
|
|
|
|
6,250
|
|
|
|
$2.00
|
|
|
Cash
|
|
|
May 3, 2021
|
|
|
Stock Options
|
|
|
|
|
6,250
|
|
|
|
$0.50
|
|
|
Cash
|
|
|
May 10, 2021
|
|
|
Stock Options
|
|
|
|
|
2,500
|
|
|
|
$0.50
|
|
|
Cash
|
|
|
June 3, 2021
|
|
|
Stock Options
|
|
|
|
|
16,000
|
|
|
|
$2.00
|
|
|
Cash
|
|
|
June 22, 2021
|
|
|
Common Shares
|
|
|
|
|
150,000
|
|
|
|
$6.78
|
|
|
Milestone Shares
|
|
|
June 22, 2021
|
|
|
Exercise of Compensation Warrants
|
|
|
|
|
144,377
|
|
|
|
$2.00
|
|
|
Cash
|
|
Notes:
(1)
FTP Common Shares were exchanged for Common Shares on completion of the Transaction on a 1:1 basis.
(2)
FTP Class B Shares converted into FTP Common Shares following the closing of the FTP Private Placement on a 1:1 basis.
(3)
The final short form prospectus filed in connection with the January BD Offering qualified 8,170 Common Shares and 49,016 warrants to purchase Common Shares for services rendered in connection with the FTP Private Placement.
ESCROWED SECURITIES AND SECURITIES SUBJECT TO CONTRACTUAL RESTRICTION ON TRANSFER
The following table summarizes details of the Common Shares held, to the Company’s knowledge, in escrow or that are subject to a contractual restriction on transfer as of the date hereof:
|
|
Number of Securities Held in Escrow
|
|
|
Percentage of Class
|
|
|
|
14,920,097(1)(2)(3)
|
|
|
25.89%
|
|
Notes:
(1)
In connection with the Transaction and as required by the CSE, the Company, Odyssey Trust Company (“Odyssey”) and the directors and senior officers of the Company (collectively, the “Founders”) entered into an escrow agreement dated October 1, 2020, pursuant to which the Founders deposited 19,893,465 Common Shares (collectively, the “Odyssey Escrowed Securities”) into escrow with Odyssey. 25% of the Odyssey Escrowed Securities were released from escrow on October 6, 2020, an additional 25% were released on each of April 6, 2021, and an additional 25% will be released on each of October 6, 2021 and April 6, 2022. In addition to the foregoing escrow arrangements, the Founders agreed to lock-up restriction with respect to the Odyssey Escrowed Securities, which provide for a staggered release from such restrictions on the 6, 12, 18 and 24 month anniversary of the Listing Date, being October 6, 2020.
(2)
In connection with a private placement by FTP completed in multiple tranches ending on May 20, 2020, subscribers holding, in aggregate, approximately 10,500,000 Common Shares agreed to voluntary lock-up restrictions, which provide for a staggered release from such restrictions on each 2, 4, 8 and 10 month anniversary of the Listing Date. As of the date of this AIF, 2,428,282 shares remain subject to lock-up restrictions.
(3)
In connection with a March BD Offering, the directors and officers of the Company agreed to voluntary lock-up restrictions, which provide for a staggered release from such restrictions 90 days after the date of the closing of the January BD Offering.
DIRECTORS AND EXECUTIVE OFFICERS
Name, Occupation and Security Holding
The following table sets out certain information regarding the directors and executive officers of the Company as at the date of this AIF. Each of the directors is elected to hold office until the next annual meeting of the shareholders of the Company or until a successor is duly elected or appointed.
Name, Municipality of
Residence and Position Held
|
|
|
Principal Occupation for Past Five Years
|
|
|
Appointed as of
|
|
|
Number and
Percentage of
Securities
Beneficially
Owned or
Controlled
|
|
|
Joseph del Moral
Ontario, Canada
Director, Chief Executive Officer
|
|
|
CEO of Field Trip
CEO of Trait Biosciences Inc.
CEO of CanvasRx Holdings Inc.
|
|
|
April 2019
|
|
|
5,611,048(8)
(9.7%)
|
|
|
Ronan Levy
Ontario, Canada
Director, Executive Chairman
|
|
|
Executive Chairman of Field Trip
Chief Strategy Officer of Trait Biosciences Inc.
SVP Business & Corporate Affairs, of Aurora Cannabis Inc.
Chief Corporate Officer & General Counsel of CanvasRx Holdings Inc.
Principal, TDF Debt Advisory Law Professional Corporation
President of Toronto Gold
|
|
|
April 2019
|
|
|
3,517,027(9)
(6.1%)
|
|
|
Hannan Fleiman
Ontario, Canada
Director, President
|
|
|
President of Field Trip
President of Trait Biosciences Inc
Chief Operating Officer of CanvasRx Holdings Inc.
|
|
|
April 2019
|
|
|
3,580,915(9)
(6.2%)
|
|
|
Mujeeb Jafferi(1)(2)
Ontario, Canada
Director, Chief Operating Officer
|
|
|
Chief Operating Officer of Field Trip
President of Just Energy Solar
Vice President, Sales Strategy & Transformation, of Just Energy Corp.
Partner at Lightwing Partners;
|
|
|
Officer
Appointment:
May 2019
Director
Appointment:
January 2020
|
|
|
3,622,582(9)
(6.3%)
|
|
|
Dr. Ryan Yermus
Ontario, Canada
Director, Chief Clinical Officer
|
|
|
Chief Clinical Officer of Field Trip
Physician, Ontario Addiction Treatment Centres
|
|
|
Officer
Appointment:
April 2019
Director
Appointment:
January 2020
|
|
|
3,655,915(9)
(6.3%)
|
|
|
Tyler Dyck
Ontario, Canada
Treasurer and Head of Finance
|
|
|
Treasurer and Head of Finance of Field Trip
Director of Finance at Chefs Plate
Director of Finance at Hello Fresh
Senior Accountant, KPMG
|
|
|
November 2019
|
|
|
Nil(3)
|
|
|
Donna Wong
Ontario, Canada
Chief Financial Officer
|
|
|
Chief Financial Officer of Field Trip
Managing Director of On Point Advisors Inc.;
Senior Manager, Financial Reporting of Fairfax Africa
VP, Finance of ViXS Systems Inc.
|
|
|
September 2020
|
|
|
7,693(10)
(0.01%)
|
|
Name, Municipality of
Residence and Position Held
|
|
|
Principal Occupation for Past Five Years
|
|
|
Appointed as of
|
|
|
Number and
Percentage of
Securities
Beneficially
Owned or
Controlled
|
|
|
Paula Amy Hewitt
Ontario, Canada
Vice President, General Counsel and Corporate Secretary
|
|
|
Vice President, General Counsel and Corporate Secretary to Field Trip
Senior Vice President, General Counsel, Chief Compliance Officer & Chief Privacy Officer at Raymond James Ltd.
Senior Vice President, Chief Compliance Officer (Canada) at Macquarie Group
Vice President, Legal & Compliance at Dundee Securities Ltd.
|
|
|
July 2020
|
|
|
3,827(4)
(0.01%)
|
|
|
Helen Boudreau(1)(2)
Massachusetts, USA
Director
|
|
|
Member of the board of Premier, Inc.
COO of the Bill & Melinda Gates Medical Research Institute
Chief Financial Officer, Protesostasis Therapeutics, Inc.
Board Member, Proteostasis Therapeutics, Inc.
Chief Financial Officer, FORMA Therapeutics, Inc.
|
|
|
April 2020
|
|
|
Nil(11)
|
|
|
Dieter Weinand(1)(2)
Florida, USA
Director
|
|
|
Chairman of the Board of Directors of Replimune Group Inc.
Executive Vice President of Primary Care and member of the Executive Committee at Sanofi
CEO and Chairman of the Board of Management of Bayer Pharma AG
Member of the Management Board at Bayer AG
|
|
|
April 2020
|
|
|
Nil(11)
|
|
|
Dr. Nathan Bryson
Ontario, Canada
Chief Science Officer
|
|
|
Chief Science Officer of Acerus Pharmaceuticals Corporation
|
|
|
April 2020
|
|
|
5,831
(0.01%)(5)
|
|
|
Amardeep Manhas
Ontario, Canada
Chief Technology Officer
|
|
|
Chief Technology Officer of Field Trip
Vice President Solar Operations, Crius Energy Management LLC
Senior Partner, Business Operations, SunEdison LLC
Vice President of Operations, LightWing Inc.
|
|
|
October 2019
|
|
|
55,555(6)
(0.10%)
|
|
|
Ellen Lubman
California, USA
Director
|
|
|
Chief Business Officer of Werewolf Therapeutics, Inc.
Chief Business Officer of Imperial NeuroPharma, Inc.
|
|
|
June, 2021
|
|
|
200
(0.00%)
|
|
|
Barry Fishman
Ontario, Canada
Director
|
|
|
Chief Executive Officer of VIVO Cannabis Inc.
Chief Executive Officer of Merus Labs
|
|
|
June, 2021
|
|
|
150,000
(0.26%)
|
|
|
Dr. Ben Medrano
|
|
|
Senior Vice President, Medical Director, USA, Field Trip Health USA Inc.
Owner and President of East Side Integrative Medicine P.C.
Owner and President of Benjamin Medrano MD PLLC
Psychiatrist, Metropolitan Hospital NYC
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May 2021
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Nil(7)
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Notes:
(1)
Member of the audit committee.
(2)
Member of the compensation committee.
(3)
Excludes 120,000 Company Options to acquire 120,000 Common Shares.
(4)
Excludes 138,888 Company Options to acquire 138,888 Common Shares.
(5)
Excludes 360,000 Company Options to acquire 360,000 Common Shares.
(6)
Excludes 215,000 Company Options to acquire 215,000 Common Shares.
(7)
Excludes 110,000 Company Options to acquire 110,000 Common Shares.
(8)
Excludes 60,000 Company Options to acquire 60,000 Common Shares and 27,780 Company Warrants to acquire 27,780 Common Shares.
(9)
Excludes 60,000 Company Options to acquire 60,000 Common Shares.
(10)
Excludes 50,000 Company Options to acquire 50,000 Common Shares.
(11)
Excludes 117,911 Company Options to acquire 117,911 Common Shares.
The following are brief biographical descriptions of the officers and directors of the Company:
Joseph del Moral, Director & Chief Executive Officer
Mr. del Moral is an experienced entrepreneur and a founder of Field Trip. In 2014, he was the founder and CEO of CanvasRx Inc. and Canadian Cannabis Clinics, which grew to be the largest cannabis clinic company in Canada. In 2016, CanvasRx was acquired by Aurora Cannabis Inc. (NYSE: ACB) (“Aurora”) and he joined Aurora’s board of directors. During his time at Aurora, Mr. del Moral ensured that CanvasRx continued to grow and achieve its milestones as well as assisted in corporate development, M&A and strategy. After leaving Aurora in 2018, Mr. del Moral assumed the role of CEO of Trait Biosciences Inc., a leading biotech company in the hemp and cannabis industries. Prior to his time in the cannabis industry, Mr. del Moral co-founded Newten Home Comfort, a fast growing home services company acquired by Just Energy Inc. in 2009. Mr. del Moral is also on the board of directors of Felix Health, an innovative direct to consumer healthcare company that is changing how Canadians access prescription drugs. Mr. del Moral was conferred a Bachelor of Commerce Degree (Finance and Entrepreneurship) from McGill University in June 2001.
Ronan Levy, Director & Executive Chairman
Mr. Levy is an entrepreneur and is a co-founder and Executive Chairman of Field Trip. He is also a partner at Grassfed Ventures, a venture capital and advisory firm focused on the cannabis and biotech industries, and a member of the board of directors of Trait Biosciences Inc., a leading biotech company in the hemp and cannabis industries. Prior to his current roles, Mr. Levy co-founded Canadian Cannabis Clinics and CanvasRx Inc., which was acquired by Aurora in 2016, after which he served as Senior Vice President, Business and Corporate Affairs, for Aurora. A lawyer by training, Mr. Levy started his career as a corporate lawyer at Blake, Cassels and Graydon LLP and as legal counsel at CTVglobemedia Inc. (now Bell Media Inc.). Mr. Levy earned a Juris Doctor in June 2004 and a Bachelor of Commerce degree in June 2001, both from the University of Toronto.
Hannan Fleiman, Director & President
Mr. Fleiman is a serial entrepreneur and has co-founded and operated several companies, including Field Trip., CanvasRx Inc., Canadian Cannabis Clinic and Dominion Home Insulation. Prior to founding these companies, Mr. Fleiman managed the hospital department, animal health and OTC divisions at Teva Canada. Mr. Fleiman is a board member of MedicNL, a contract research organization, and was a board member of Abacus Health, where he headed the audit and compensation committees before the successful sale to Charlotte’s Web Holdings, Inc. (CSE: CWEB). Mr. Fleiman earned his MBA from McMaster University in June 2006 and his BSc from University of Guelph in June 2003.
Mujeeb Jafferi, Director & Chief Operating Officer
Mr. Jafferi is an experienced management executive and a founder of Field Trip. Prior to joining Field Trip, Mr. Jafferi spent over a decade in the retail and renewable energy sectors in a variety of leadership roles. Between 2016 and 2019, Mr. Jafferi served as the Vice President of Sales Operations and Strategy at Just
Energy Inc. (TSX: JE) and the President of Just Energy Solar. In 2015, Mr. Jafferi served as a Partner at a renewable energy technology startup, LightWing Partners, leading its business development efforts across the US market. LightWing Partners was subsequently acquired by SunEdison. Between 2009 and 2015, Mr. Jafferi held several progressive and diverse leadership roles at Just Energy, including Director of Corporate Planning and Financial Analysis, and Assistant. Regional General Manager for US Northeast Region. He holds a BA in Information Technology, conferred in 2004, from York University and a Global Professional Master of Laws, conferred in 2014, from University of Toronto.
Dr. Ryan Yermus, Director & Chief Clinical Officer
Dr. Yermus is a physician who completed his medical training at the University of Ottawa in 2007 and his residency at the University of Toronto in 2009. As a pioneer in the Canadian medical cannabis industry, he was responsible for the development of a clinical protocol that led to the treatment of thousands of medical cannabis patients. In 2014, Dr. Yermus founded Medical Marijuana Clinics of Canada (“MMCC”), the first fully compliant cannabis clinic in Ontario. MMCC went on to be acquired by Canadian Cannabis Clinics, which grew to become the nation’s largest cannabis clinic network and was acquired by Aurora Cannabis Inc. in 2016. For the past decade, Dr. Yermus has also worked as a clinician at the Ontario Addiction Treatment Centres helping patients suffering from addictions.
Tyler Dyck, Treasurer and Head of Finance
Mr. Dyck is a dynamic CPA, CA comfortable working across all functions of an organization in high-growth environments. Most recently, Mr. Dyck was finance employee #1 at HelloFresh Canada, where starting from a 100% outsourced model, he grew the finance and accounting function to a team of 8 over 30 months. While at HelloFresh he also led the due diligence, financial analysis, and business planning relating to the acquisition of Chefs Plate. Mr. Dyck started his career in KPMG’s audit practice after obtaining an Honours BBA from Wilfrid Laurier University in May 2013.
Donna Wong, Chief Financial Officer
Ms. Wong is a financial growth expert with over 20 years of experience within private start-ups and public multi-national organizations, primarily in the technology sector. She has a proven track record in establishing the necessary corporate infrastructure to scale through change management, IT, and cross-functional collaboration among multi-location businesses. Prior to her current role, as VP, Finance of ViXS Systems, Ms. Wong guided the company from pre-revenue to $100 million in revenues and eventual listing on the TSX. Ms. Wong is a CPA, CA, CMA and earned a Master of Accounting in 1992 and Honours Bachelor of Arts degrees in 1990, both from the University of Waterloo.
Paula Amy Hewitt, Vice President, General Counsel and Corporate Secretary
Ms. Hewitt brings 16 years of broad legal experience gained through a career in private practice and in executive roles within Canadian and Multinational financial services companies. Between 2009 and 2019, Ms. Hewitt held various executive positions with investment dealer companies, including Vice President, Legal & Compliance, Head of Legal, Chief Compliance Officer, Chief Anti-Money Laundering Officer, Chief Privacy Officer and General Counsel. Prior to 2009, Ms. Hewitt worked as an associate lawyer at Bay Street law firms, practicing securities and mining law. Ms. Hewitt sits on the board of directors of Caldwell Investment Management, a portfolio manager and investment fund manager. Paula has served on the Ontario District Council of Investment Industry Regulatory Organization of Canada andon the Canadian Advisory Board of the International Association of Privacy Professionals (“IAPP”). In addition to earning a Juris Doctor from Osgoode Hall Law School in 2001, Paula earned a BA in Psychology from McGill University in June 1994, a Graduate Certificate in Risk Management from the University of Toronto in March 2015 and the CIPP/C, CIPM and CIPT designations from the IAPP.
Helen M. Boudreau, Director
Ms. Boudreau is a retired senior executive with 30 years experience across biotech, pharmaceuticals, consulting, and banking industries. She was most recently COO of the Bill & Melinda Gates Medical Research Institute, a non-profit biotech focused on diseases that cause mortality, poverty, and inequality in low and
middle-income countries from 2018 to 2019. Previously, she served as CFO for public and private biotechs, Proteostasis Therapeutics (2017-2018) and FORMA Therapeutics (2014-2017). Helen worked at Novartis (2008-2014) and Pfizer (1999-2008), serving in strategy and senior finance roles, including global CFO Oncology business unit, CFO US Corporate, VP Investor Relations, VP Finance, Customer Business Unit and Commercial Operations, and VP Finance Global R&D. Helen started her career in banking at Bank of America (1987-1991), was an engagement manager at McKinsey & Company (1993-1996), a strategic consulting firm, and a Director of Strategic Planning at YUM! Brands/PepsiCo (1996-1999). Helen is currently a member of the board of Premier, Inc. (NASDAQ: PINC), a healthcare improvement company, Shattuck Labs (NASDAQ:STTK), a biotech focused on oncology and autoimmune disease, and Rallybio, a private biotech company. Helen earned a BA in Economics, summa cum laude, from the University of Maryland in 1987, and an MBA from the Darden Graduate School of Business at the University of Virginia in 1993.
Dieter Weinand, Director
Mr. Weinand is an experienced executive with over 30 years of experience in the pharmaceuticals and biotech industries. Mr. Weinand presently serves as the chairman of the board of directors of Replimune Group Inc. (NASDAQ: REPL). Previously, Mr. Weinand served as the Executive Vice President of Primary Care and was a member of the Executive Committee at Sanofi from November 2018 to February 2020. Before moving to Sanofi, Mr. Weinand was CEO and Chairman of the Board of Management of Bayer Pharma AG and member of the Management Board at Bayer AG. Prior to his work at Sanofi and Bayer, Mr. Weinand has held various positions in commercial, operational, and strategic areas of the pharmaceutical industry. These included responsibilities spanning various therapeutic areas and geographies for companies such as Pfizer, Bristol Myers Squibb, and Otsuka. Mr. Weinand earned an MS in Pharmacology and Toxicology from Long Island University, New York, and a BA in Biology from Concordia College, New York. Mr. Weinand is a former board member of the Pharmaceutical Research and Manufacturers of America (PhRMA), the European Federation of Pharmaceutical Industries & Associations (EFPIA), and the International Federation of Pharmaceutical Manufacturers (IFPMA), and served as a member of the Board of Directors of HealthPrize Technologies.
Dr. Nathan Bryson, Ph.D, Chief Science Officer
Dr. Bryson has 30 years of experience in pharmaceutical drug development. After receiving his Ph.D. in radiopharmaceutical chemistry (MIT, 1988) and successive post-doctoral studies in catalysis and polymers at the University Louis Pasteur (Strasbourg, France) and MIT, Dr. Bryson joined Flamel Technologies (now Avadel Pharma) as a founding scientist in 1990, eventually developing and leading teams in R&D, process development and commercialization. After expanding roles, as Vice President R&D at Bionisis (FR) and Matregen (Canada), Dr. Bryson transitioned to CSO roles at Cynapsus in 2005 (formerly, Cannasat) and to Acerus Pharmaceuticals Corporation in 2014. At Cynapsus, he led Chemistry-Manufacturing-Controls and early-stage development of Kinmobil (now approved in Canada and US), while at Acerus, he headed research, clinical development, medical and regulatory affairs, as well as production. Prior to his doctorate, Nathan received a B.Sc. (chemistry), conferred in 1984, from Auburn University.
Amardeep Manhas, Chief Technology Officer
Mr. Manhas is a seasoned business technology and operations executive with over 15 years of diverse experience in both public and startup companies. In 2014, Mr. Manhas joined cleantech startup LightWing Inc as VP Operations, where he oversaw the buildout of the operational organization and a proprietary technology platform for consumers and affiliate partners. LightWing was fully acquired by SunEdison LLC in 2015, and Mr. Manhas stayed on with SunEdison to oversee business operations and technology for its residential partner division. In 2016, Mr. Manhas joined Crius Energy as VP Operations, where he built a back-office technology and support organization to scale multi-channel growth for the solar business. Prior to 2014, Mr. Manhas worked at Just Energy Group Inc in a variety of operational and technology leadership roles. Mr. Manhas holds a Bachelor of Applied Science in Engineering Physics, conferred in 2004, from Queen’s University.
Ellen Lubman, Director
Ellen has served as Chief Business Officer of Werewolf Therapeutics, Inc. since August 2020. From October 2018 to July 2020, Ms. Lubman served as the Chief Business Officer at Impel NeuroPharma, Inc., a privately held biotechnology company focused on neurological diseases. Prior to Impel, she was the Vice President of External Science & Innovation at Forest Labs, from February 2014 until its acquisition by Actavis plc in July 2014, and served in the same role at Actavis through June 2018 during which time Actavis merged with and renamed itself Allergan plc. Prior to Allergan, Ms. Lubman held numerous executive and leadership roles at Kadmon Pharmaceuticals, Bristol Myers Squibb, Celtic Pharma Management, L.P., Robertson Stephens Investment Bank and Abbott Labs. She serves on the board of directors of GeneCentric Therapeutics as well as the Advisory Board of TMRW.org. Ms. Lubman also currently serves on the Scientific Advisory Board of the Daedalus Innovation Fund of Weill-Cornell and board of directors of Gilda’s Club of NYC and is the Southern California Chairwoman of Executive Women in BIO. Ms. Lubman earned her M.B.A. from Stanford Graduate School of Business with a focus on Global Management and her B.A. in Biology from Rutgers College.
Barry Fishman, Lead Director
Barry Fishman has almost 25 years of experience as an entrepreneurial business leader, most recently as CEO of VIVO Cannabis Inc. (TSX:VIVO). Prior to joining VIVO, Mr. Fishman served as CEO of international specialty pharmaceutical company Merus Labs (TSX:MSL, NASDAQ:MSLI), through its 2017 acquisition by Norgine M.V. He also previously served as CEO of Teva Canada, a major affiliate of the world’s largest generic drug-maker and began his pharmaceutical career at Eli Lilly Canada, where he served as Vice President of Marketing. Mr. Fishman has also recently served as an independent director on a number of high-profile boards, including Aurora Cannabis Inc. (NYSE, TSX: ACB) and Canopy Growth Corporation (TSX:WEED, NASDAQ:CGC). Mr. Fishman graduated from McGill University with a concentration in finance and went on to become a CPA while working for Deloitte in Southern California.
Dr. Ben Medrano, Senior Vice President, Medical Director, USA, Field Trip Health USA Inc.
Dr. Medrano is a board-certified psychiatrist who completed his undergraduate education at Naropa University and the University of Colorado at Denver. He attended medical school at the University of Colorado School of Medicine, followed by a residency at Mount Sinai Beth Israel in New York City. His clinical practice is influenced by a lifelong interest in eastern psychology and complementary alternative medicine. These interests are further enhanced by his current fellowship at the Integrative Psychiatry Institute sponsored by the University of Colorado School of Medicine.
Cease Trade Orders, Bankruptcies, Penalties or Sanctions
Corporate Cease Trade Orders
To the best of management’s knowledge, no director or executive officer of the Company is, or within the ten years before the date of this AIF has been, a director, chief executive officer or chief financial officer of any company that:
(a)
was subject to a cease trade order, an order similar to a cease trade order, or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days that was issued while the director or executive officer was acting in the capacity as director, chief executive officer or chief financial officer; or
(b)
was subject to a cease trade order, an order similar to a cease trade order, or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days that was issued after the director or executive officer ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer.
Bankruptcies
To the best of management’s knowledge, no director or executive officer of the Company has: (i) within ten years before the date of this AIF, been a director or officer of any company that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or was subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold its assets; or (ii) within ten years before the date of this AIF, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver manager or trustee appointed to hold the assets of the director or executive officer.
Penalties and Sanctions
To the best of management’s knowledge, no director or executive officer of the Company has been subject to: (a) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with securities regulatory authority; or (b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable security holder in deciding whether to vote for a director or executive officer.
Conflicts of Interest
The Company may from time to time become involved in transactions which conflict with the interests of the directors and the officers of the Company or the interest of these persons could conflict with those of the Company. Conflicts of interest, if any, will be subject to the procedures and remedies provided under applicable laws. In particular, in the event that such a conflict of interest arises at a meeting of the directors of the Company, a director who has such a conflict will abstain from voting for or against the approval of such participation or such terms. In accordance with applicable laws, the directors of the Company are required to act honestly, in good faith and in the best interest of the Company.
PROMOTERS
In relation of the January BD Offering, the Ontario Securities Commission was of the view that Mr. del Moral, was a promoter of the Company within the meaning of applicable securities laws in Canada, as Mr. del Moral is one of five co-founders of the Company, is the Chief Executive Officer and a director of the Company, and then owned over 10% of the Common Shares directly or indirectly. Pursuant to Section 58(5) of the Securities Act (Ontario), the Director (as defined in the Securities Act (Ontario)) consented to Mr. del Moral not signing a Certificate of Promoter for the prospectus filed in connection with the January BD Offering. Neither the Company nor Mr. del Moral agree or admit that Mr. del Moral was a promoter of the Company.
In relation of the March BD Offering, the Ontario Securities Commission was no longer of the view that Mr. del Moral, was a promoter of the Company within the meaning of applicable securities laws in Canada, as Mr. del Moral, following closing, held less than 10% of the Common Shares directly or indirectly.
Other than the foregoing, no person or company has been within the two years immediately preceding the date of this AIF, a promoter of the Company.
LEGAL PROCEEDINGS AND REGULATORY ACTIONS
To the Company’s knowledge, there are no legal proceedings or regulatory actions material to the Company to which it is a party, or has been a party to, or of which any of its property is or was the subject matter, and no such proceedings or actions are known by the Company to be contemplated.
There have been no penalties or sanctions imposed against the Company by a court or regulatory authority, and the Company has not entered into any settlement agreements before any court relating to provincial or territorial securities legislation or with any securities regulatory authority, in the three years prior to the date of this AIF.
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
Other than as disclosed below and elsewhere in this AIF no director, executive officer or unitholder or shareholder that beneficially owns, or controls or directs, directly or indirectly, more than 10% of the voting securities of the Company, or any of their respective Associates or affiliates, has any material interest, direct or indirect, in any transaction within the three years before the date of this AIF which has materially affected or is reasonably expected to materially affect the Company or a subsidiary of the Company.
AUDITOR, TRANSFER AGENT AND REGISTRAR
Computershare Trust Company of Canada, at its Calgary, Alberta office acts as the Company’s transfer agent and registrar and MNP LLP, at its Waterloo, Ontario office acts as the Company’s auditor.
MATERIAL CONTRACTS
Material contracts of the Company, other than contracts entered into in the ordinary course of business, that were entered into within the two years before the date of this AIF are the:
(a)
Amalgamation Agreement;
(b)
Agency Agreement;
(c)
Escrow Agreement;
(d)
Research Agreement;
(e)
January Underwriting Agreement
(f)
Warrant Indenture;
(g)
March Underwriting Agreement; and
(h)
Listing Agreement between the Company and OTC Markets.
The Company’s material contracts described above are filed under the Company’s profile on SEDAR at www.sedar.com.
AUDIT COMMITTEE INFORMATION
From the date of the Company’s public listing until its listing on the TSX on June 7, 2021, the Company was a “venture issuer” as defined in National Instrument 52-110 — Audit Committees (“NI 52-110”) and was therefore exempt from compliance with part 3 (Composition of the Audit Committee) and part 5 (Reporting Obligations) of NI 52-110 for such period. Other than the foregoing, the Company has not relied on any of the exemptions set out in NI 52-110 during the most recently completed fiscal year.
INTERESTS OF EXPERTS
No person or corporation whose profession or business gives authority to a statement made by the person or corporation and who is named as having prepared or certified a part of this AIF or as having prepared or certified a report or valuation described or included in this AIF holds any beneficial interest, direct or indirect, in any securities or property of the Company or of an Associate or affiliate of the Company and no such person is expected to be elected, appointed or employed as a director, senior officer or employee of the Company or of an Associate or affiliate of the Company and no such person is a promoter of the Company or an Associate or affiliate of the Company. MNP LLP is independent of the Company in accordance with the rules of professional conduct of the Institute of Chartered Professional Accountants of Ontario.
ADDITIONAL INFORMATION
Additional information relating to the Company can be found under the Company’s profile on SEDAR at www.sedar.com.
Additional information, including directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s securities and securities authorized for issuance under equity compensation plans is contained in the Company’s Listing Statement, as filed on SEDAR October 5, 2020.
Additional financial information of the Company is provided in the Company’s financial statements and MD&A for the most recently completed fiscal year.
Exhibit 99.2
FIELD TRIP HEALTH LTD.
(FORMERLY NEWTON ENERGY CORPORATION)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS AND FISCAL YEAR ENDED MARCH 31, 2021
AND
PERIODS ENDED MARCH 31, 2020
(Expressed in Canadian dollars, unless otherwise noted)
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS AND FISCAL YEAR ENDED MARCH 31, 2021
AND PERIODS ENDED MARCH 31, 2020
DATED: JUNE 24, 2021
This management’s discussion and analysis (“MD&A”) for the three months and fiscal year ended March 31, 2021 and periods ended March 31, 2020, provides detailed information on the operating activities, performance and financial position of Field Trip Health Ltd. on a consolidated basis (“We”, the “Company” or “Field Trip”). This discussion should be read in conjunction with the Company’s annual audited consolidated financial statements and accompanying notes for the fiscal year ended March 31, 2021 and period from April 2, 2019 (date of incorporation) to March 31, 2020. The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and are reported in Canadian dollars, unless otherwise noted.
The Company’s fiscal year commences April 1st of each year and ends on March 31st of the following year. The Company’s current fiscal year, which ends on March 31, 2021, is referred to as the “current fiscal year”, “fiscal 2021”, or using similar words. The Company’s current three months ended March 31, 2021, is referred to as the “current fiscal quarter, “fourth quarter of fiscal 2021”, or using similar words.
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
This document includes “forward-looking information” and “forward-looking statements” within the meaning of Canadian securities laws. All statements, other than statements of historical fact, made by Field Trip that address activities, events or developments that Field Trip expects or anticipates will or may occur in the future are forward-looking statements, including statements preceded by, followed by or that include words such as “may”, “will”, “would”, “could”, “should”, “believes”, “estimates”, “projects”, “potential”, “expects”, “plans”, “intends”, “anticipates”, “targeted”, “continues”, “forecasts”, “designed”, “goal”, or the negative of those words or other similar or comparable words. Forward-looking statements may relate to future financial conditions, results of operations, plans, objectives, performance or business developments. These statements speak only as at the date they are made and are based on information currently available and on management’s current expectations and assumptions concerning Field Trip’s future events, financial conditions, results of operations, plans, objectives, performance, business developments, objectives or milestones. Actual results and developments may differ materially from those contemplated by these statements. Forward-looking statements in this document include statements related to, the business and future activities of Field Trip, and developments related to, Field Trip after the date of this document, including but not limited to, statements relating to future business strategy, competitive strengths, goals, expansion and growth of Field Trip’s business, operations and plans, including potential new revenue streams, the completion of contemplated expansion by Field Trip, changes in laws or regulatory requirements, the market for Field Trip’s services, the impact of the COVID-19 pandemic, the business objectives of Field Trip and its research and development activities, the acceptance in the medical community of ketamine and other psychedelic substances as effective treatment for depression, post-traumatic stress disorder, addiction and other mental health conditions, the funds available to Field Trip and the use of such funds, the healthcare industry in Canada and the United States, the ability of Field Trip to operate the clinics, the development, patentability and viability of FT Discovery molecule FT-104, the ability of Field Trip to complete an investigational new drug application and obtain regulatory approvals, as required, prior to initiating any additional clinical trials for FT-104, the ability of Field Trip to meet eligibility requirements for clinical testing and through to more complex clinical trials, the ability of Field Trip to obtain regulatory approvals prior to each clinical trial and the ability of Field Trip to generate patient member growth. Forward-looking statements are subject to a number of known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from that which are expressed or implied by such forward-looking statements. These risks and uncertainties include those related to: the ability of Field Trip to secure additional financing for current and future operations and capital projects, as needed; risks associated with the application to list its securities, if at all, on the NASDAQ; future issuances or actual or potential sales of securities; negative operating cash flow and going concern; discretion over the use of proceeds; unpredictability and volatility of the listed securities of Field Trip; speculative nature of an investment in the securities of Field Trip; limited operating history as a public company; a significant number
of common shares of Field Trip (the “Common Shares”) are owned by a limited number of existing shareholders; the expected future losses of Field Trip and profitability; significant risks inherent in the nature of the health clinic industry; risks associated with failure to achieve its publicly announced milestones according to schedule, or at all; risks related to potential Oregon operations; risks associated with the regulation of psilocybin containing truffles and mushrooms in The Netherlands, Jamaica and elsewhere; reliance on drug developers; reliance on contract manufacturers; violations of laws and regulations; reliance on the capabilities and experience of its key executives and scientists; the possible engagement in misconduct or other improper activities by employees; the expansion of Field Trip’s business through acquisitions or collaborations; risk of product liability claims; risks related to third-party licenses; changes in patent law; litigation regarding patents, patent applications, and other proprietary rights; reliance on third parties; no assurance of an active or liquid market; public markets and share prices; additional issuances and dilution; the ability of Field Trip to secure additional financing for current and future operations and capital projects, as needed, which may not be available on acceptable terms, or at all; Field Trip’s dependence on management and key personnel; general economic, market and business conditions, early-stage industry growth rates, the risks associated with competition from other companies directly or indirectly engaged in Field Trip’s industry; negative results from clinical trials; foreign currency exchange rate fluctuations and its effects on Field Trip’s operations; the risks and costs associated with being a publicly traded company, the market demand for the Common Shares; the impact of the COVID-19 pandemic; non-compliance with laws; medical personnel operating out of Field Trip’s clinics; unfavourable publicity or consumer perception; patient acquisitions; drug development risks; substantial risks of regulatory or political change; the ability to obtain necessary government permits and licences; ketamine as a pharmaceutical; non-referral of patients; negative cash flow from operating activities; management of growth; intellectual property; litigation; insurance coverage; Field Trip being a holding company; the industry being difficult to forecast; conflicts of interest; enforcement of legal rights; emerging market risks; enforcement of legal rights in foreign jurisdictions; inadequate internal controls over financial reporting; agriculture risks; violations of laws and regulations related to drug development; reliance on third parties for drug development; ability to produce commercial grade pharmaceuticals; clinical testing; regulatory approval process; cyber-attacks; reliance upon insurers and governments; and difficulty in enforcing judgments and effecting service of process on directors and officers. . Other risks and uncertainties not presently known to the Company or that the Company presently believe are not material could also cause actual results or events to differ materially from those expressed in the forward-looking statements contained herein.
For a more detailed discussion of risks and other factors, see Field Trip’s annual information form dated June 24, 2021 under the heading “Risk Factors”, or otherwise disclosed in the public filings made with applicable securities regulatory authorities and available under Field Trip’s SEDAR and EDGAR profiles.
There can be no assurance that such forward-looking information and statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such information and statements. Accordingly, readers should not place undue reliance on forward-looking information and statements. The forward-looking information and statements contained herein are presented for the purposes of assisting readers in understanding Field Trip’s expected financial and operating performance and Field Trip’s plans and objectives and may not be appropriate for other purposes.
The forward-looking information and statements contained in this document represent Field Trip’s views as of the date of this document and forward-looking information and statements contained in the documents incorporated by reference herein represent Field Trip’s views as of the date of such documents, unless otherwise indicated in such documents. Field Trip anticipates that subsequent events and developments may cause its views to change. However, while Field Trip may elect to update such forward-looking information and statements at a future time, it has no current intention of doing so except to the extent required by applicable law.
OVERVIEW
Corporate Structure
The Company was formed on September 30, 2008, pursuant to an amalgamation under the Business Corporations Act (Alberta) and adopted the name “Newton Energy Corporation”. On September 30, 2020, in connection with the Transaction (as defined below), the Company filed articles of amendment to:
(i) consolidated its outstanding Common Shares on an eight (8) old for one (1) new basis; and (ii) change its name from Newton Energy Corporation to “Field Trip Health Ltd.”
On October 1, 2020: (i) the Company and Field Trip Psychedelics Inc. (“FTP”) completed a series of transactions resulting in a reorganization of FTP and the Company and pursuant to which the Company became the direct parent and sole shareholder of FTP; (ii) the Company changed its year end from December 31 to March 31; and (iii) the Company was continued under the Canada Business Corporations Act (the “Continuance”) by Certificate and Articles of Continuance ((i)–(iii) collectively referred to as the “Transaction”).
The Transaction constituted a Reverse Takeover of the Company by FTP under applicable securities laws.
The Common Shares were listed on the NEX board of the TSX Venture Exchange (the “TSXV”) until September 30, 2020, when they were delisted from the TSXV in connection with the completion of the Transaction. The Common Shares commenced trading on the Canadian Securities Exchange (the “CSE”) on October 6, 2020, under the symbol “FTRP”. The Common Shares were subsequently delisted from the CSE and listed on the Toronto Stock Exchange (“TSX”) on June 7, 2021.
The Company’s registered office and head office is located at 30 Duncan Street, Suite 401, Toronto, ON M5V 2C3.The following table describes the subsidiaries of the Field Trip, their place of incorporation, continuance or formation, and the percentage of the outstanding voting securities of each subsidiary that are beneficially owned, controlled or directed by the Field Trip.
Business of the Company
Field Trip is a leader in the development and delivery of psychedelic therapies. We focus on blending operational execution with strategic investment across all aspects of the psychedelics value chain. Field Trip is focused on i) developing a body of research and therapeutic protocols designed to provide patients with informed, proven and safe access to psychedelic medicine in a variety of programs; and ii) growing a network of specialty clinics where we offer ketamine assisted psychotherapy in North America and programs leveraging psilocybin truffles in The Netherlands. With our business segments: (i) Field Trip Discovery (“FT Discovery”) leading the development of the next generation of psychedelic molecules and conducting advanced research on plant-based psychedelics; (ii) Field Trip Health clinics for psychedelic therapies opening across North America (the “Clinics”); and (iii) Field Trip Digital building the digital and technological tools to support psychedelic experiences and consciousness expansion, we help people, from those in treatment to those seeking accelerated personal growth, with a simple, evidence-based way to heal and heighten engagement with the world.
Advanced Research and Drug Development
Through FT Discovery, the Company performs research on botanical psychedelics and psychedelic-based molecules for future therapeutic application of select mental health indications. FT Discovery has two independent activities: (i) developing custom synthetic molecules targeting serotonin 5HT2A receptors, which are, in part, implicated in mood disorders; and (ii) conducting research and development related to the cultivation, as well as the identification and isolation of new substances contained in psilocybin mushrooms and other related fungi (the “Psilocybin Research”), in collaboration with the University of West Indies (“UWI”). Pursuant to a research agreement with UWI (the “UWI Agreement”), the Company has built a 2,072 sq. ft. custom-built research and cultivation facility on the UWI campus (the “Jamaica Facility”) to conduct the Psilocybin Research. Further, Field Trip anticipates that insights relating to the administration of psychedelics and psychedelic-assisted psychotherapy within the Clinics can be integrated in the Company’s approach to novel drug development.
Psilocybin, along with other synthetic and natural serotoninergic psychedelics, act to stimulate 5HT2A receptors in the brain resulting in a profound alteration of normal brain signaling and processing, creating what is generally referred to as a “psychedelic experience” or an “altered state of consciousness.” Under psychedelics, the brain “escapes” from its usual tightly constrained and predictable patterns of operation, with a global increase in connectivity of brain regions and brain networks. Often, this can allow patients new introspective insights about their past behavior, memories, actions, feelings and beliefs. Psychedelic drug administration combined with psychotherapy can lead to improvements in conditions relating to depression and addiction, which are often a result of dysfunctional brain processing. FT-104 is the first drug candidate in development by FT Discovery. FT-104 is a next generation, synthetic psychedelic molecule whose design is, in part, based on classical serotonin 2A psychedelics. Patents are pending on FT-104’s structure, formulation and use in treating a variety of central nervous system disorders.
Field Trip Health Centres
Field Trip believes there is a unique early mover opportunity to build the clinical infrastructure required to meet the anticipated significant demand for psychedelic-assisted therapies. MDMA and psilocybin are expected to receive FDA approval in the next 2 to 5 years. Our Field Trip Health centres hold significant strategic value in that they enable us to collect large amounts of data from patients on clinical outcomes associated with the set, setting and therapeutic protocols of psychedelic therapies. This data allows us to not only identify areas of unmet need in psychedelic therapies, but also innovate new models and protocols. Our focus with Field Trip Health centres is to rollout clinics across North America and Europe to position Field Trip as the leading global brand of trusted clinics for psychedelic-assisted therapies, providing ketamine-assisted therapy in North America and psilocybin-assisted therapies in The Netherlands and other jurisdictions, where permitted, for the effective and affordable treatment of depression, anxiety, addiction and other conditions.
Ketamine is the first, and until opening of the Netherlands location, the only psychedelic administered to patients in conjunction with our custom developed psychotherapy protocol. Beyond its antidepressant effects, ketamine’s ability to promote neural plasticity makes it a powerful tool to pair with Field Trip’s comprehensive psychotherapy program to affect behavioral change. More specifically, Field Trip offers or plans to offer the following types of therapy:
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Ketamine-enhanced psychotherapy (“KEP”) is a clinic-based treatment that combines the administration of ketamine dosing sessions with exploratory and integrative psychology to accelerate the process of discovery, understanding, catharsis and eventually healing. KEP sessions last longer than traditional therapy, are conducted with medical and psychological support and may include therapy-enhancing tools such as music.
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Psychedelic-enhanced psychotherapy combines the use of psychedelic medicines with psychotherapy sessions and other enhancing therapies in a clinical setting. KEP is a type of psychedelic-enhanced psychotherapy, that uses ketamine as the psychedelic catalyst.
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Psychedelic-integration psychotherapy consists of one or more psychotherapy sessions to support a patient’s understanding and processing of past psychedelic experiences through reflection and integration of those experiences. Psychedelic-integration psychotherapy can be combined with
psychedelic-enhanced psychotherapy, including KEP, or may be employed on its own to integrate patient experience outside of a clinical setting.
While the use of ketamine in KEP is considered “off-label”, such use is legal under medical supervision. As such, ketamine is currently the only legal psychedelic medicine generally available to mental health providers in Canada and the United States. As additional psychedelic medicines become available for use in a therapeutic setting and novel psychedelic medicines become available, Field Trip intends to explore the use of other methods of psychedelic-enhanced psychotherapy.
Currently, Field Trip operates and owns a clinic in Toronto, Ontario, and operates clinics in New York, NY, Santa Monica, CA, Chicago, IL, Atlanta, GA and Houston, TX through physician practices or professional medical corporations (“PCs”) which are owned solely by state-licensed physicians. The PCs’ results are consolidated with Field Trip (see Note 2 Basis of Presentation in our audited annual consolidated financial statements for the fiscal year ended March 31, 2021 and period from April 2, 2019 (date of incorporation) to March 31, 2021 for a detailed discussion of the basis for consolidation). Field Trip has also leased locations in San Diego, CA and Washington, DC. The Company completed construction of its clinic in Amsterdam (the “Amsterdam Clinic”) during the quarter and is in the process of setting up operations. Subsequent to the current fiscal year end, Field Trip entered into leases and has commenced, or will soon commence, construction to build Field Trip Health centers in San Carlos, CA, Seattle, WA, Austin, TX, Fredericton, NB, Vancouver BC, Washington DC and Stamford Connecticut.
Digital Tools: Trip and Portal
Field Trip Digital has developed Trip, a mobile application supporting consciousness expansion which is available to users in the Apple and Android app stores, and Portal, a digital health platform to support clients participating in psychedelic therapies at Field Trip Health centers. Our Trip app’s user base grew by 57% from the third fiscal quarter. Portal is a next generation telehealth platform that connects our patients and therapists with individualized patient journeys and content, along with tools such as mood monitoring, journaling, and activity tracking. The feature-sets of both platforms are expected to grow significantly in the coming fiscal year.
REGULATORY ENVIRONMENT
Field Trip operates in a highly regulated industry and in multiple jurisdictions. Below is a summary of key elements of the regulatory environment in which Field Trip operates. Please refer to Field Trip’s Annual Information Form of even date herewith (the “Annual Information Form”) for further information.
Controlled Substances
The Canadian and United States federal governments regulate drugs through the Controlled Drugs and Substances Act (Canada) (the “CDSA”) and the Controlled Substances Act (21 U.S.C. § 811) (the “CSA”), respectively, which place controlled substances in a schedule. Under the CDSA, ketamine is currently a Schedule I drug and psilocybin is currently a Schedule III drug. Under the CSA, ketamine is currently a Schedule III drug as well as being listed under the associated Narcotic Control Regulations, and psilocybin is currently a Schedule I drug.
Most US States have enacted Controlled Substances Acts (“State CSAs”), which regulate the possession, use, sale, distribution, and manufacture of specified drugs or categories of drugs and establish penalties for State CSA violations, form the basis for much state and local drug laws enforcement activity. State CSAs have either adopted drug schedules identical or similar to the federal CSA schedules or, in some instances, have incorporated the federal scheduling mechanism. Among other requirements, some States have established a prescription drug monitoring or review programs collect information about prescription and dispensing of controlled substances for the purposes of monitoring, analysis and education. Field Trip complies with all State CSAs in jurisdictions where it operates.
In the United States, facilities holding or administering controlled substances must be registered with the US Drug Enforcement Agency (“DEA”) to perform this activity. As such, medical professionals or the clinics in which they operate, as applicable, are also required to have a DEA license to obtain and administer ketamine
(a “DEA License”). To the Company’s knowledge, the Clinics in the United States and the required medical professionals hold all required DEA Licenses. Furthermore, the Clinics have in place security, control, recordkeeping, reporting and inventory mechanisms required by the DEA to prevent drug loss and diversion. Staff at Clinics in the United States, including the medical doctors and/or the nurse practitioner(s), advanced practice registered nurse(s) or other medical professionals who report to them, hold the required DEA Licenses and the Corporation has put in place policies designed to adhere to DEA requirements.
The Opium Act (Opiumwe) (the “Opium Act”) is the primary drug legislation in the Netherlands which place controlled substances on a list. The controlled substances on those lists and any preparations thereof are prohibited, including psilocybin. However, the Dutch Supreme Court (the highest court in the Netherlands) stated that the plants/fungi in which those substances occur naturally are not prohibited unless specifically listed. Psilocybin-containing truffles or sclerotia are not listed under the Opium Act and, therefore, do not qualify as a controlled substance restricted under the Opium Act. Furthermore, the Dutch Minister of Healthcare confirmed in Parliament that psilocybin-containing truffles are not illegal and can legally be sold, bought and used as a natural product in The Netherlands. Therefore, subject to certain requirements, the Opium Act does not prohibit the cultivation, production and sale of fresh, unprocessed truffles.
Unlike in Canada and the United States, psilocybin mushrooms are not an illegal drug under Jamaica’s Dangerous Drugs Act, 1948 (“Jamaica Drug Act”). Therefore, the psilocybin research is not in contravention of the laws of Jamaica and does not require any permit or authorization from the regulatory authorities in Jamaica. In addition, the Minister of Health & Wellness of Jamaica has delivered a letter to the Corporation stating his support for the Corporation’s operations in Jamaica.
Field Trip does not deal with controlled substances except in jurisdictions where such activity is legal and then only within (a) laboratory or clinical trial settings, (b) in the case of the Netherlands, within a clinical setting, and (c) in the case of ketamine, as prescribed by a licensed medical practitioner. Field Trip does not have any direct or indirect involvement with illegal selling, production or distribution of any substances in jurisdictions in which it operates.
On November 3, 2020, the State of Oregon, via Measure 109, became the first state to legalize psychedelic mushrooms for therapeutic use in supervised environments. Measure 109 is expected to allow people in the state who are age 21 or older to access psychedelic mushrooms for personal development upon passing a screening conducted by a qualified therapist. People who use the drug are expected to be able to do so at a psilocybin service centre, with the supervision of a designated service facilitator. Oregon expects to have a two-year planning period in which lawmakers will determine how the drug will be regulated, including qualifications for therapists intending to prescribe psychedelic mushrooms and for psilocybin facilitators. The program is expected to be regulated by the Oregon Health Authority.
On November 4, 2020, the District of Columbia approved an initiative that aims to effectively decriminalize the use of several psychedelic substances. Initiative 81 makes non-commercial possession, distribution, purchase and cultivation of psychedelic and hallucinogenic plants and fungi a lowest law enforcement priority for the Metropolitan Police Department. Similar to state legalization efforts in Oregon, the Company cannot comment on the regulatory framework as it has not been created nor can the Company assess when or if the US federal government will permit such activities.
In addition, since the passage of Measure 109, legislation in respect of psilocybin or psychedelics has been proposed in each of Florida, California, Hawaii and Connecticut drawing on elements of the Oregon ballot measure. In Florida, The Florida Psilocybin Mental Health Care Act, if approved, will create state-sponsored clinics where patients suffering from mental-health disorders could be administered doses of psilocybin by a licensed medical professional. The patient would go through the experience, or “trip,” with the professional present and then be offered a post-treatment counseling session. In Hawaii, Senate Bill 738, if approved, will establish treatment centers designated by the Hawaii Department of Health for the monitored, therapeutic administration of psilocybin and psilocin to treat mental illness. In California, Senate Bill 519, if approved, would decriminalize the personal use of psychedelic drugs including psilocybin mushrooms, MDMA1, LSD2, ketamine, DMT3, mescaline and ibogaine for all Californians over the age of 21. In Connecticut, House Bill 6296, if approved, will establish a task force to study the health benefits of psilocybin.
Field Trip expects that legislation of similar natures may be introduced in other jurisdictions in the coming years, as well as additional ballot measures similar to Measure 109. Field Trip cannot comment on the
regulatory framework in any such jurisdiction as it has not been created. Field Trip will assess its options to conduct legal business in such jurisdictions when State or Provincial, as applicable, and Federal regulations are established and may seek any required licenses or approvals at that time.
Regulation of Prescription Medications
In Canada, oversight of healthcare is divided between the federal and provincial governments. The federal government is responsible for regulating, among other things, the approval, import, sale, and marketing of drugs such as ketamine. Please see “Regulatory Oversight — Research and Development”.
While Ketamine is a controlled substance in Canada and the United States, it is approved as an anesthetic under the Food and Drugs Act (Canada) and the US Food, Drug, and Cosmetic Act. Once a drug is approved for use, physicians may prescribe that drug for uses that are not described in the product’s labelling or that differ from those tested by the manufacturer and approved by Health Canada or the Food and Drug Administration (the “FDA”), as applicable. This is known as “off-label” use and is a common practice among physicians. Ketamine-based treatment is gaining acceptance for treating depression. Furthermore, a Ketamine nasal spray for the treatment of major depression was approved by the FDA in March 2020 and Health Canada in July 2020.
Health Canada and the FDA have not approved psilocybin as a drug for any indication. However, there are legal routes through which psilocybin may be accessed for medical purposes.
In Canada, Section 56(1) of the CDSA permits the Health Minister to exempt any person or class of persons or any controlled substance or precursor or class thereof from the application of all or any provisions of the Canadian Controlled Substances Act if, in his or her opinion, the exemption is necessary for a medical or scientific purpose or is otherwise in the public interest. In August 2020, Health Minister Patty Hajdu approved such an exemption to allow four (4) Canadians experiencing end of life distress or other intractable mental health conditions incurable cancer to receive psilocybin therapy to treat their end-of-life anxiety. Having the exemption in question permits such individuals to legally obtain and use psilocybin.
Furthermore, on December 12, 2020, Health Canada announced its intention to remove the current prohibition on access to controlled substances through Health Canada’s Special Access Program (“SAP”). Under the SAP, medical practitioners treating patients with serious or life-threatening conditions can request access to drugs that have not yet been approved for sale in Canada when conventional therapies have failed, are unsuitable, or unavailable. Such amendments would create another means of legally accessing psilocybin through the SAP.(1)
In the United States, the FDA has granted psilocybin therapy a breakthrough therapy designation to facilitate drug trials testing its efficacy for treatment resistant depression and major depressive disorder. Similar trials are ongoing in Canada. If approved, these medications would provide a legal route to prescribe psilocybin in the United States.
Although psilocybin-containing truffles or sclerotia are not prohibited by the Opium Act, they are not approved under the Medicines Act. In light of the above and based on advice of counsel in the Netherlands, the Opium Act does not prohibit the presence and/or use of fresh, unprocessed truffles with psilocybin. The truffles with psilocybin may not be subject in any way or form to any further processing (that results in the truffles becoming a preparation prohibited under the Opium Act).
Clinical Operations
Each province and territory of Canada and each state in the United States mandates the requirements for the Field Trip Health Centers (the “Clinics”) and the conduct of the medical professionals who work in the Clinics. Please refer to the table set out in the Company’s Annual Information for of even date herewith for details concerning these regulations.
Although it is the Company’s intention to administer psilocybin-containing truffles as a food product in The Netherlands, the Company also intends to employ medical professionals in its Amsterdam Centre and has applied for an “alternative care” license under the Dutch Healthcare Quality, Complaints and Disputes Act (WKKGZ).
(1)
See gazette.gc.ca/rp-pr/p1/2020/2020-12-12/html/notice-avis-eng.html
While the treatments that occur at the Clinics are novel in some respects, the prescription of ketamine and the dispensing of ketamine are not novel and are subject to the same restrictions as would apply to any medical professional who prescribes other controlled substances to his or her patients. There are no special licenses, permits, authorizations or approvals required that are different from any other ordinary course approvals required by applicable governmental authorities for any medical clinic. As such, licensed medical practitioners may prescribe ketamine legally in Canada or the United States where they believe it will be an effective treatment in their professional judgment. It is Field Trip’s policy never to dictate or influence the professional judgement of our physicians, nurses or other clinical staff.
Administration of ketamine as part of the Ketamine Assisted Psychotherapy (“KAP”) program is performed only following prescription by a licensed physician or by a licensed nurse practitioner or other medical professional, under the supervision of a licensed physician. The Clinics may utilize, in addition to physicians, mid-level practitioners such as physician assistants and nurse practitioners and mental health practitioners such as psychologists and psychotherapists. The exact make-up of staff for each Clinic varies by location and additional professionals and/or administrative staff may also be employed.
In Canada, the provincial/territorial level of government has authority over the delivery of health care services, including regulating health facilities, administering health insurance plans such as OHIP, distributing prescription drugs within the province, and regulating health professionals such as doctors, psychologists, psychotherapists and nurse practitioners. Regulation is generally overseen by various colleges formed for that purpose, such as the College of Physicians and Surgeons of Ontario.
In the United States, the laws applicable to the Clinics and the conduct of medical professionals therein are at the State level and vary by jurisdiction. Additionally, in the United States, the Clinics or doctors, as applicable, are also required to have a DEA License to prescribe ketamine. In each State, Field Trip plans to offer KAP, psychotherapy and ancillary mental health services.
As of the date hereof, to the best of Field Trip’s knowledge, each of the medical professionals working at the Clinics are in good standing with the applicable regulatory body that governs such medical professional.
Under Field Trip’s business model, there are no state-specific licenses required to (a) operate a mental health clinic prescribing and/or administering ketamine, (b) that apply to the storage and/or administration of ketamine, other than those which mirror the CDSA requirements, and (c) operate or provide management services to the Clinics, other than standard filings with the applicable Secretary of State for out-of-state companies, which Field Trip Health USA Inc. (“Field Trip USA”) has obtained in connection with the setup of these locations.
Some states have legislation or policies relating to the “Corporate Practice of Medicine” doctrine (“CPOM”) that govern business relationships between licensed medical professionals and unlicensed individuals or companies. The following states have CPOM legislation: New York, California, Illinois, and Texas. The States of Georgia, Washington and Arizona do not have specific CPOM legislation, but case law may have established or invoked CPOM doctrine in those states. In order to comply with CPOM, Clinics in these states are owned solely by State-licensed physicians and are organized as physician practices. In such states, Field Trip USA will provide management services to the physician practices that own such clinics. The relationship between Field Trip USA and the physician practices that it manages are subject to various standards of CPOM, anti-kickback and fee-splitting rules. The District of Columbia does not have a CPOM statutes nor is there clear judicial consideration of CPOM within this jurisdiction. However, Field Trip proposes to organize the Clinics in those jurisdictions as a physician-owned Professional Corporations.
Individuals and entities that conduct business in the US health care industry must comply with applicable state and federal anti-kickback laws that limit activities that may be viewed as incentivization or inducement methods. To the best of the Company’s knowledge, no medical professionals at the Clinics receive commissions, incentives or other fees, directly or indirectly.
In The Netherlands, Field Trip’s wellness centre will make psilocybin-containing truffles available to clients in connection with wellness programs. As noted above, psilocybin-containing truffles are neither prohibited under the Opium Act nor are they approved as a medicine. As such, Field Trip is making the psilocybin-containing truffles available to clients as a whole, natural food product. As Field Trip employs medical professionals in its business, we have elected to register as an alternative care provider. In the event
that the Dutch authorities take the position that therapy with truffles qualifies as “regular care”, or that truffles containing psilocybin qualify as medicinal product, Field Trip would then need to take steps to comply with local laws applicable to a regular care provider. Should this event occur, Field Trip will evaluate its options in the Netherlands to ensure full compliance with all applicable legislation and regulations.
Field Trip’s business is also governed by laws in Canada, the United States and the Netherlands pertaining to handling, use and protection of personal health information, including the Personal Health Information Protection Act (Ontario), The Health Insurance Portability and Accountability Act of 1996, the Netherlands Personal Data Protection Act (Wet Bescherming persoonsgegevens) and similar provincial or state laws. These laws and related regulations grant a number of rights to individuals as to their personal health information and restrict the use and disclosure of such information. Field Trip has in place privacy practices designed to comply with these requirements and ensures that service providers having access to personal health information have entered into agreements that include appropriate protective clauses, including business associate agreements where applicable.
Natural Products Operations
As psilocybin is not included in the Jamaica Drug Act, it is not a controlled or restricted substance in Jamaica and therefore no other specific controls, permits, licenses or authorizations are required to conduct research on psilocybin. The psilocybin research conducted at the Jamaica Facility is governed by the Jamaica Ministry of Health (“JMH”), Ethics and Medico-Legal Affairs Panel and by the JMH Standards and Regulation Division, as would any other research conducted in a clinical setting. In addition to Good Laboratory Practices (“GLP”) and cGMP, research involving human subjects is governed by the JMH Guidelines for the Conduct of Research on Human Subjects. Furthermore, medicines, including natural products, require registration with the JMH prior to importation, distribution and sale in Jamaica, as outlined in the Food and Drugs Act, 1964.
The Psilocybin Research is not in contravention of local laws in Jamaica and the Company has received a legal opinion from local counsel confirming the same with respect to the Psilocybin Research. Through consultation with local resources and personnel with relevant knowledge and experience, as necessary, in Jamaica, the Company is satisfied that all necessary licenses, permits and regulatory approvals have been obtained in order to carry on the business as currently conducted and that such licenses, permits and regulatory approvals that have been obtained are in good standing.
The Company has received legal opinions or advice in each jurisdiction where it currently operates or proposes to operate (other than jurisdictions where the applicable legislation has not yet been created or has not yet been passed), confirming the permissibility of the Company’s operations in such jurisdictions.
Research and Development Operations
As the Company’s business spans different operational models, the Company relies on a variety of researchers, medical professionals, suppliers, manufacturers and service providers for the conduct of its operations. The Company’s research and development activities rely on the following relationships with the following three third parties: (1) the UWI Agreement in respect of the Psilocybin Research; (2) engagement by the Company of a contract research organization (“CRO”) regarding FT-104 (the “CRO Engagement”) and (3) the service agreement with the Company’s contract manufacturing organization (“CMO”) in respect of FT-104 (the “CMO Agreement” and together with the CRO Engagement, the “FT-104 Agreements”).
UWI is a globally recognized academic institution. The UWI Agreement was negotiated at arm’s length, with legal counsel acting on behalf of the Company both in Canada and Jamaica, and includes appropriate intellectual property and confidentiality provisions. With respect to the FT-104 Agreements, Health Canada and the FDA have indicated that FT-104 is not a controlled substance and therefore does not require licenses, permits or specific approvals. Notwithstanding, the CMO is Health Canada approved, FDA registered and compliant with Good Manufacturing Practices (“cGMP”) (a standard applied in the pharmaceutical industry) in synthesis, process optimization and production of drug substances and has been successfully audited by Health Canada and the FDA.
The CRO is Good Laboratory Practices (“GLP”) compliant and holds all licenses required for its activities as they relate to the Company. Both the CMO and CRO have controlled substance licenses for other
known controlled substances and are qualified for handling FT-104. For certainty, FT-104 is not currently a controlled substance in either the US or Canada (confirmed with both agencies), however since it can produce a psychoactive state, it will likely become a scheduled substance should it be approved for use by a regulatory agency and therefore, the use of a CMO and CRO in compliance with the control substances acts is critical. In addition, the Company has entered into appropriately negotiated services agreements or statements of work with the CMO and CRO that contemplate appropriate intellectual property and confidentiality provisions. In order to develop regulated medicines, including FT-104, the Company’s process must be conducted in strict compliance with the regulations of Health Canada, the FDA and other applicable federal, state, local and regulatory agencies.
FT-104 is currently in a pre-clinical stage of development, in which the primary activities are: (1) optimization and standardization of Chemistry-Manufacturing and Controls (“CMC”), including additional chemical characterization, synthesis, process optimization, stability, and development of analytical methodology to ensure drug substance quality and (2) non-clinical (same as preclinical) activities (“NCA”) that measure performance (pharmacokinetics) and safety (toxicology; pharmacology) using a variety of in-vitro and in-vivo assays. These studies will help to define parameters that would allow the safe testing of the substance in human trials. CMC activities are carried out by the CMO. NCA activities are carried out by the CRO.
The CMO is reliant on suppliers for starting materials to produce FT-104; the CRO is reliant on suppliers to carry out in-vitro and in-vivo assays, such as analytical kits, biological reagents and animal models. The Company, along with the CMO and CRO, only source starting materials from reputable and approved suppliers who hold the proper authorizations and approvals. Weekly or bi-weekly meetings occur to monitor the activities and advancements of CMO and CRO. A third-party regulatory group has been engaged to assist with the development of the regulatory and quality assurance strategies and prepare the regulatory documentation that will be required at each stage of the development.
Pharmaceutical Development and Approval Requirements — Canada
Before a prescription drug product candidate may be marketed in Canada, the process required generally involves:
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Chemical and Biological Research — Laboratory tests are carried out on tissue cultures and with a variety of small animals to determine the effects of the drug. If the results are promising, the manufacturer will proceed to the next step of development.
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Pre-Clinical Development — A combination of in-vitro and in-vivo studies assess the effects of the drug in varying amounts over differing periods of time. If it can be shown that the drug causes no serious or unexpected harm at the doses required to have an effect, the manufacturer will proceed to clinical trials.
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Clinical Trials — Phase 1 — The first administration in humans is to test if people can tolerate the drug. If this testing is to take place in Canada, the manufacturer must prepare a clinical trial application for the Therapeutic Products Directorate of Health Canada (the “TPD”). This includes the results of the first two steps and a proposal for testing in humans. If the information is sufficient, the Health Products and Food Branch of Health Canada (the “HPFB”) grants permission to start testing the drug, generally first on healthy volunteers.
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Clinical Trials — Phase 2 — Phase 2 trials are carried out on people with the target condition (patients), who are usually otherwise healthy, with no other medical condition. Trials carried out in Canada must be approved by the TPD. In Phase 2, the objectives of the trials are to continue to gather information on the safety of the drug and begin to determine its effectiveness.
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Clinical Trials — Phase 3 — If the results from Phase 2 show promise, the manufacturer provides an updated clinical trial application to the TPD for Phase 3 trials. The objectives of Phase 3 include determining whether the drug can be shown to be effective, and have an acceptable side effect profile, in people who better represent the general population. Further information will also be obtained on how the drug should be used, the optimal dosage regimen and the possible side effects.
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New Drug Submission — If the results from Phase 3 continue to be favourable, the drug manufacturer can submit a new drug submission (“NDS”) to the TPD. A drug manufacturer can submit an NDS
regardless of whether the clinical trials were carried out in Canada. The TPD reviews all the information gathered during the development of the drug and assesses the risks and benefits of the drug. If it is judged that, for a specific patient population and specific conditions of use, the benefits of the drug outweigh the known risks, the HPFB will approve the drug by issuing a notice of compliance.
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Scheduling — FT-104 is a psychoactive substance with the potential for abuse. If FT-104 is approved as a drug, we will need to hold discussions with Health Canada to determine a risk management plan to protect FT-104 from potential diversion and misuse by patients, as well as to schedule its removal from Category III (no known medical utility) to another category based on data acquired during development and based on the drug’s adverse properties, if any, related to potential abuse and addiction.
Pharmaceutical Development and Approval Requirements — United States
Before a prescription drug product candidate may be marketed in the United States, the process required generally involves:
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completion of extensive nonclinical laboratory tests, animal studies and formulation studies, all performed in accordance with the FDA’s Good Laboratory and Manufacturing Practice regulations;
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submission to the FDA of an investigational new drug application, which must become effective before human clinical trials may begin;
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for some products, performance of adequate and well-controlled human clinical trials in accordance with the FDA’s regulations, including good clinical practices, to establish the safety and efficacy of the product candidate for each proposed indication;
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submission to the FDA of a new drug application (“NDA”); and
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scheduling in collaboration with the DEA based on the drugs adverse properties, if any, related to potential abuse and addiction.
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FDA review and approval of the NDA prior to any commercial marketing, sale or shipment of the drug.
The operations of the Company, as currently conducted, do not require and are not dependent on, any licenses to conduct such operations.
COMPLIANCE PROGRAM
The Company oversees and monitors compliance with applicable laws in each jurisdiction in which it operates. In addition to the Company’s senior executives and the employees responsible for overseeing compliance, the Company has local regulatory/compliance counsel engaged in every jurisdiction (provincial, state and local) in which it operates. The principal medical professional at each Clinic serves as the liaison to provincial, state and/or local governmental authorities. The Company has developed protocols for use in all of its Clinics with the goal of ensuring that each of the Clinics’ operations and employees strictly comply with applicable laws and regulations and that operations do not endanger the health, safety or welfare of the community. Additionally, the Company has established a team of advisors with cross-functional expertise in business, neuroscience, pharmaceuticals, mental health and psychedelics to advise management.
In conjunction with the Company’s human resources and operations departments, the Company oversees and implements training on the Company’s protocols. The Company will continue to work closely with external counsel and other compliance experts, and is evaluating the engagement of one or more independent third-party providers to further develop, enhance and improve its compliance and risk management and mitigation processes and procedures in furtherance of continued compliance with the laws of the jurisdictions in which the Company operates. The programs currently in place include continued monitoring by executives of the Company to ensure that all operations conform to and comply with required laws, regulations and operating procedures. The Company further requires that each Clinic and all third parties in which it is engaged with report and disclose all instances of non-compliance, regulatory, administrative, or legal proceedings that may be initiated against them. The Company is currently in compliance with the laws and regulations in all jurisdictions and the related licencing framework applicable to its business activities. Additionally, the
Company has established a Professional Corporation (a “PC”) Advisory Committee with a mandate to provide strategic advice with respect to the structure of clinics as PCs and the protocols for operations of the PCs.
The Company has developed and continues to refine a compliance program designed to ensure operational and regulatory requirements continue to be satisfied. Field Trip has also put in place an AML Policy designed to ensure proactive, ongoing steps are taken to create and maintain operations that are conducted in compliance with all applicable AML laws, including in Canada, the United States and other jurisdictions. Through its human resources and operations departments, the Company oversees and implements training for all employees with respect to the Company’s protocols.
The Company has received legal opinions or advice in each jurisdiction where it currently operates or proposes to operate (other than jurisdictions where the applicable legislation has not yet been created or has not yet been passed into law), confirming the permissibility of the Company’s operations in such jurisdictions.
The Company’s operations are conducted in compliance with local laws where such activities are permissible and either (a) do not require any specific legal or regulatory approvals, or (b) the Company has all necessary legal and/or regulatory approvals. See Risk Factors.
KEY HIGHLIGHTS AND RECENT DEVELOPMENTS
Fourth Fiscal Quarter
Bought Deal Offerings
On January 5, 2021, the Company closed its previously announced bought deal offering (the “January BD Offering”) and issued 4,448,200 Units at a price per Unit of $4.50 for gross proceeds of $20,016,900. Each Unit comprised one Common Share of the Company and one-half of one Common Share purchase warrant (each whole Common Share purchase warrant, a “Warrant”).
Each Warrant entitles the holder thereof to purchase one Common Share at an exercise price of $5.60 per share until July 5, 2022. In the event that the volume weighted average trading price of the Common Share for ten (10) consecutive trading days exceeds $9.00, the Company shall have the right to accelerate the expiry date of the Warrants upon not less than 15 trading days’ notice (see Note 17 Warrants in the audited annual consolidated financial statements for the fiscal year ended March 31, 2021). The Warrants commenced trading on the CSE under the symbol “FTRP.WT on January 5, 2021.
In consideration of the services rendered by the underwriters in connection with the January BD Offering, the Company paid a cash commission equal to $763,046 and issued 169,565 compensation warrants (the “January Compensation Warrants”). Each January Compensation Warrant is exercisable to acquire one Common Share at an exercise price of $4.50 per share until January 5, 2023 (see Note 17 Warrants).
In connection with the January BD Offering, the short form prospectus qualified the distribution of 8,170 Common Shares and 49,016 additional compensation warrants (the “FTP Compensation Warrants”), for services rendered by the agents in connection with the August and September 2020 private placements (the “FTP Private Placements”) (see Note 17 Warrants).
On March 17, 2021 the Company completed a bought deal offering (the “March BD Offering”) resulting in the issuance of 14,661,499 Common Shares of the Company at a price of $6.50 per Common Share for gross proceeds of $95,299,744. In consideration of the services rendered by the underwriters in connection with the March BD Offering, the Company paid a cash commission equal to $4,961,472 and issued 865,303 compensation warrants (the “March Compensation Warrants” and, together with the January Compensation Warrants, collectively, the “Compensation Warrants”). Each March Compensation Warrant is exercisable to acquire one Common Share at an exercise price of $6.50 per share until March 17, 2023 (see Note 17 Warrants). The lead investor in the Offering was Soleus Capital with additional participation by Avidity Partners, Sphera Funds, Pura Vida Investments, Jennison Associates and other healthcare specialized institutional investors.
As at March 31, 2021 Field Trip had unrestricted cash and cash equivalents, funds held in trust and short-term investments of $111,817,443.
Operational Highlights
During the fourth fiscal quarter, we continued to execute on our FT-104 drug development strategy and the buildout of a globally recognized brand of psychedelic-assisted therapy clinics, positioning us as an early mover in the emerging psychedelics industry, which, according to Canaccord Genuity’s May 21, 2020 research report on Psychedelic-derived medicines and therapies, is estimated to be a $100 billion market. The Company anticipates that interest in, and demand for, psychedelic therapies will continue to rapidly expand over the coming years, and plans to continue making investments to be at the forefront of this coming opportunity.
On January 7, 2021, the Company announced, subject to completion of a final site inspection, that its Toronto clinic has been selected as a trial location for a MAPS-sponsored study on the safety, feasibility and preliminary outcomes of MDMA-assisted therapy to treat eating disorders (the “Eating Disorder Study”), including Anorexia Nervosa. Field Trip will be hosting MAPS-trained therapists who will be providing MDMA-assisted therapy to an initial cohort of individuals suffering from Anorexia Nervosa, and collecting safety, feasibility and preliminary outcome data. Field Trip also announced that it is becoming a financial supporter of MAPS, committing to making an annual contribution of $50,000, which will be matched by a one-time collective contribution from the founders of Field Trip. Site selection is conducted independently by MAPS Public Benefit Corporation and is unaffected by charitable contributions to MAPS.
On January 26, 2021, Field Trip announced the opening of a location in Atlanta, GA. The opening of the Atlanta clinic represents Field Trip’s 5th operating location and the first in 2021.
On January 28, 2021, the Company announced that its Common Shares were approved for trading on the OTCQX® Best Market (“OTCQX”) retaining its current symbol FTRPF. At the time, Field Trip’s Common Shares and Warrants continued to trade on the CSE.
On February 9, 2021, Field Trip announced the official opening of the Field Trip Natural Products Limited Research and Development Laboratory for Psychedelic Fungi in Mona, Jamaica (the “Jamaica Facility”). The Jamaica Facility, which is opening as part of Field Trip’s previously announced strategic partnership with the University of West Indies, is the world’s first legal research and cultivation facility dedicated exclusively to psilocybin-producing mushrooms and other plant-based psychedelics. The work at the new facility will leverage the research and development efforts that have been conducted by Field Trip at a temporary facility at UWI since January 2020, and will be broad-ranging, from genetics, breeding and cultivation work on many of the 180+ plus recorded species of psilocybin-producing mushrooms, to developing analytical methods for quality control, identification of novel molecules, as well as extractions and formulations for drug development purposes.
Subsequent Developments
On May 4, 2021, the Company announced the opening of its fifth location in the United States in the city of Houston, TX. The Houston location is the second Field Trip Health center to open in 2021. Field Trip also announced that it has entered into leases and has commenced, or will soon commence, construction to build Field Trip Health centers in San Diego, CA, San Carlos, CA, Seattle, WA, Washington DC and Fredericton, NB.
On May 6, 2021, Field Trip announced that its Common Shares are eligible for electronic clearing and settlement through The Depository Trust Company (“DTC”) in the United States. DTC is a subsidiary of The Depository Trust & Clearing Corporation, a United States company that manages the electronic clearing and settlement of publicly-traded companies. Securities that are eligible to be electronically cleared and settled through DTC are considered “DTC eligible.” This electronic method of clearing securities speeds up the receipt of stock and cash and thus accelerates the settlement process for investors and brokers, enabling the stock to be traded over a wider selection of brokerage firms.
On May 20, 2021, the Company announced the appointment of former US Senate Majority Leader Tom Daschle as a Special Advisor to the Company. Senator Daschle is one of the longest serving Senate Democratic leaders in history and one of only two to serve twice as both Majority and Minority Leader. In 1978, he was elected to the U.S. House of Representatives, where he served eight years. In 1986, he was elected to the U.S. Senate and was chosen as Senate Democratic Leader in 1994. Senator Daschle is also the Founder and CEO of
the Daschle Group, a Public Policy Advisory of Baker Donelson and a legal and government affairs firm that advises clients on a broad array of economic, policy and political issues.
On June 7, 2021 Field Trip’s Common Shares and Warrants commenced trading on the TSX under the ticker symbols “FTRP” and “FTRP.WT” respectively. The Common Shares continue to trade on the OTCQX market under the symbol “FTRPF”. In connection with the TSX listing, Field Trip’s Common Shares and Warrants were delisted from the CSE. In conjunction with its TSX listing, the Company announced that it has bolstered its Board of Directors with the appointments of Barry Fishman and Ellen Lubman. Mr. Fishman is an accomplished business leader and Board Director with proven success in strategy development, performance enhancement and public company governance, with an expansive global network and deep pharmaceutical knowledge. Ms. Lubman brings nearly 20 years of experience in corporate and business development, portfolio strategic planning, financial strategy and investor relations through leadership roles in small biotech and large pharma, starting her career as a Wall Street equity research analyst.
On June 8, 2021, the Company announced that it had applied to list its Common Shares on the NASDAQ Stock Market (“NASDAQ”). In advance of an anticipated listing on NASDAQ, Field Trip will file a Registration Statement with the United States Securities and Exchange Commission. The listing of Common Shares on NASDAQ remains subject to the review and approval of the listing application and the satisfaction of all applicable listing and regulatory requirements, as well as effectiveness of the registration statement. Field Trip will continue to maintain the listing of its Shares on the TSX under the symbol “FTRP”. The Company also announced that it anticipates being able to commence Phase 1 human trials for FT-104 and expects to have 20 Field Trip Health centers operating or under construction, including its existing and announced locations in New York, NY, Toronto, ON, Los Angeles, CA, Chicago, IL, Houston, TX, Atlanta, GA, San Diego, CA, San Jose, CA, Seattle, WA, Washington, DC, Fredericton, NB and Amsterdam, NL.
NON-REVENUE GENERATING PROJECTS
Field Trip currently has four significant projects, which have not yet generated any revenue or significant revenues:
a.
FT-104 drug development;
b.
psilocybin-producing fungi research and cultivation at its Jamaica Facility;
c.
the opening of clinics in San Diego, San Carlos, Seattle, Washington DC Austin, Stamford, Fredericton and Vancouver; and
d.
the development of its digital tools, being the “Trip” app and “Portal”.
FT-104
Development of the chemistry, manufacturing and controls (“CMC”) of the active ingredient, FT-104, continues to progress. During current fiscal Q4, scale-up batches and engineering batches have been completed, which have led to a better understanding of the process chemistry, potential impurities, as well as methods for isolation and purification at larger scale. In addition, analytical controls have been developed to properly characterize the drug substance and to help define drug specifications. Formal stability testing on representative batches of the drug substance have been initiated. Preliminary drug product formulation also started during the quarter.
Several pre-clinical activities were conducted with the drug substance in fiscal Q4, including in-vitro and in-vivo studies. The objectives of these studies are to define the pharmacokinetic properties of the drug, its metabolism and routes of elimination. In-vitro metabolic studies indicate that FT-104 is rapidly converted to the active substance, the primary and most abundant metabolite. Key findings from pharmacokinetic studies with FT-104 (prodrug) include: (1) after administration FT-104 is rapidly and completely converted to its active form, and the active is the major compound observed in the plasma, consistent with in-vitro assays; (2) the plasma profile in rodents achieves peak concentration at 1h after a subcutaneous dose and the drug is mostly eliminated by 4h; (3) the intensity of a head-twitch response, a model for 5HT2A activation in the rodent brain, is proportional to plasma concentration of the active form of the drug, peaking at 1h and stops by the 4th hour. These data are consistent with FT-104 as a short acting psychedelic compound (<2-3h).
In vitro binding assays show that the active form of the drug binds the 5HT2A and is approximately equipotent as psilocin, the active compound from psilocybin. Additional preclinical studies are ongoing or planned, including toxicology, safety pharmacology, genotoxicity. These studies are not expected to be completed before November 2021. There have been some minor delays in scheduling activities during the quarter due to COVID (see Effects of COVID Pandemic section in this MD&A).
Regarding future clinical studies, the Company received a first proposal for a Phase 1 study to assess pharmacokinetics, safety and tolerability of single escalating doses of FT-104 in healthy volunteers having prior experience with psychoactive substances. Measures of subjective experience and intensity of the psychedelic state will be performed using standardized questionnaires. The purpose of the Phase 1 is to determine the safe and tolerable range of doses of FT-104 that can be used in future Phase 2 development, where the drug’s efficacy can be evaluated. While, the Company initially anticipated that FT-104 would enter Phase 1 clinical trials before the end of calendar year 2021, this timeline has been revised to calendar Q1 2022, due primarily to COVID, especially with respect to in preclinical development (see Effects of COVID Pandemic section in this MD&A).
The Company’s belief that FT-104 has a product profile that is ideal for the treatment of depressed patients was bolstered by recent results published in the NEJM confirm that the 5HT2A agonist psilocybin is at least as efficacious as daily administration of escitalopram in a small randomized clinical study.
Updated budgets for preclinical, clinical and business development activities related to FT-104 through calendar Q1 2022 are provided in section Milestones and Available Funds.
Pipeline Development
The Company has also undertaken additional scientific, commercial and business development activities during the quarter to add to the drug development pipeline. This includes prospecting for opportunities for licensing and partnering, as well as synthesis of novel, patentable 5HT2A agonist families of molecules that improve convenience, safety and/or efficacy of psychedelic medicines and therapies. The Company intends to add at least one new molecule to the development pipeline before year end.
Psilocybin Research
In October 2020, the Company formally opened the “Jamaica Psilocybin research Facility.” Cultivation research initiated in our temporary facility within the UWI complex was moved to the new dedicated facility. Several psilocybe mushroom varieties are in-cultivation. Operations include parametric optimization of different growth medium and growth conditions for different species, development of analytical techniques to characterize active substances (tryptamine alkaloids), and characterization of the development of mycelia and truffle formations as a function of cultivating methods. The goal is to better understand the techniques for production of mushrooms with reproducible yields and quality, create processes for production, storage, packaging and stability, as well as analytical methods needed for complete characterization, including methods to demonstrate “food safety” (i.e., potency, bioburden, absence of pesticides (none are used), other potential environmental toxins). It is emphasized here that the psilocybin-containing mushrooms, truffles in all botanical forms, whether dried or fresh, are strictly for R&D purposes only and are destroyed when no longer useful. None of the botanical substances or extracts are sold, consumed or provided for consumption, nor are they exported to any of these ends.
We expect to spend $1,200,000 over the next 12 months on ongoing psilocybin research (see Milestones and Available Funds). We intend to continue our psilocybin research thereafter in order to further our intellectual property portfolio through the development of optimized cultivation methods, extraction techniques and pursuit of novel molecule discovery.
Clinical Operations
Our Field Trip Health centres hold significant strategic value in that they enable us to collect large amounts of data from patients on clinical outcomes associated with the set, setting and therapeutic protocols of psychedelic therapies. This data allows us to not only identify areas of unmet need in psychedelic therapies, but also innovate new models and protocols. In fact, based on the insights derived from our operations, we
plan to launch two new programs that will be offered through our centres: group ketamine sessions, and continuing therapy post-treatment for patients who have completed our therapeutic programs. We will continue to leverage the data collection and insights generated from our expansion to enable us to innovate new treatments, new offerings and increase operational efficiency.
Through our Field Trip Health centres, we are creating real world impact on the lives of our patients. Since launch, we have seen remarkable success with our ketamine-assisted therapies. Most of our patients are experiencing a significant and sustained improvement in depression and anxiety scores — often from severe levels at intake to minimal upon program completion. These outcomes have enabled us to generate a Net Promoter Score (“NPS”) amongst patients who have completed our therapies of +66. NPS is a well-recognized metric for measuring customer loyalty. It is based on patient feedback scores ranging from 0 to 10 for how likely they are to recommend Field Trip to their friends and colleagues. According to Survey Monkey’s global benchmark data, the average NPS score for businesses is +32.
In January 2021, Field Trip opened the doors to the Atlanta clinic, its first clinic opening in 2021. During the fourth fiscal quarter, we continued construction of our Amsterdam clinic and entered into lease agreements for San Diego, Seattle and Washington. The target opening of our Amsterdam clinic in April 2021 was temporarily delayed due to changing licensing requirements, but we subsequently opened in June 2021 and will begin treating patients in July 2021. In May 2021, we opened the Houston clinic, our fifth location in the US and second clinic opening in 2021. Subsequent to quarter end, Field Trip entered into lease agreements for the following locations: San Carlos, Seattle, Austin, Stamford, Fredericton and Vancouver (see Subsequent Events section of this MD&A). The chart below sets out the status and target opening date of each location:
|
Location
|
|
|
Size (Sq Ft)
|
|
|
Status
|
|
|
Target Opening Date
|
|
|
San Diego
|
|
|
3,868
|
|
|
Construction in progress
|
|
|
September 2021
|
|
|
San Carlos
|
|
|
4,947
|
|
|
Construction in progress
|
|
|
September 2021
|
|
|
Seattle
|
|
|
4,292
|
|
|
Construction in progress
|
|
|
August 2021
|
|
|
Austin
|
|
|
7,642
|
|
|
Pre-construction in progress
|
|
|
November 2021
|
|
|
Fredericton
|
|
|
4,000
|
|
|
Construction in progress
|
|
|
July 2021
|
|
|
Vancouver
|
|
|
5,150
|
|
|
Pre-construction in progress
|
|
|
October 2021
|
|
|
Washington DC
|
|
|
3,000
|
|
|
Pre-construction in progress
|
|
|
October 2021
|
|
|
Stamford
|
|
|
4,125
|
|
|
Lease signed
|
|
|
December 2021
|
|
Digital Tools: Trip and Portal
In October 2020, we launched our proprietary digital portal, along with an updated version of our Trip mobile software application. Our “Trip” app’s user base grew by 57% increase from the third fiscal quarter. We anticipate a “Trip” premium version will be released in the second half of calendar 2021, along with further enhancements to the digital portal.
Effects of COVID-19 Pandemic on Operations
The COVID-19 pandemic and various government steps to reduce the spread of COVID-19 have had and continue to have a significant impact on the way people live, work and interact and have significantly impacted and will likely continue to impact economic activity around the world.
During the COVID-19 pandemic, many of the regions in which we operate or plan to operate, including in connection with relationships with contract drug manufacturers (“CMO”) have experienced unprecedented “lockdowns” or “stay at home” orders, and other government mandated restrictions to try and reduce the spread of COVID-19. The situation continues to be uncertain and varies by market as infection rates of COVID-19 remain high in many regions throughout the world including Canada, the United States and The Netherlands where we have existing or planned clinic locations and CMOs. Because our clinics have been deemed “essential service”, we have been able to continue operating our clinics, however, the health, safety and well-being of our employees has been our first priority and has informed the rate at which we have been on-boarding new patients to ensure compliance with health and safety measures and social distancing protocols, consistent with government recommendations and requirements.
During the fourth fiscal quarter, the impact of the COVID-19 pandemic was not significant to our financial results. However, we expect to continue to experience direct and indirect consequences of the COVID-19 pandemic on our operations over the next 12 months, including construction delays that may impact the timing of our clinic openings, and potential reluctance of people to attend in-person ketamine dosing sessions and group therapy sessions at our clinics, which may cause an extended period for each clinic, on average, to breakeven, which we now estimate at 15 months from the date of first patient dosing. However, as we believe that medium- and long-term opportunities for psychedelic assisted therapies remain strong (and potentially enhanced due to the mental health considerations of the pandemic), we intend to continue to pursue our first-mover advantage in building a network of psychedelics focused therapy clinics. The COVID-19 pandemic has resulted in an estimated three-fold increase in the incidence of depression in the US. We anticipate that we will see an increase in long-term demand for our depression related psychedelic therapies as case counts start to diminish in the future.
From a drug development perspective, we continue to experience:
•
delayed deliverables due to temporary quarantining of critical personnel at contract organizations. The Company’s contract drug manufacturer (CMO) has moved to shift work to reduce risks of COVID transmission within the company, yet there has been occasional sickness that has delayed the completion of tasks according to original schedules. The CMO and the Company have, as needed adapted to the situations that have presented, but continued future delays could impact downstream non-clinical and clinical activities
•
delayed arrival of reagents to the CMO from chemical supplier warehouses, possibly due to shortages. Some critical supplies, such as the key starting material for FT-104 synthesis has been stockpiled to hedge against future shortages. Some more common reagents have become in short supply recently. The Company monitors these activities to minimize potential impacts to timelines.
•
reduced availability of animal services due to increased activity in preclinical activities at selected CRO. The CRO has informed that there has been a very significant increase in requests for preclinical studies since calendar Q3 2020. The Company has reserved scheduled slots for many critical preclinical activities, well in advance of scheduling under normal circumstances. Through the quarter, we have been able to meet all timelines, however, timelines have been increasingly challenging to meet.
We anticipate that the long-term goals of the Company will require additional capital contributions via debt or equity financings. In the event that the impact of COVID-19 worsens and negatively affects capital markets generally, there is a risk that the Company may not be able to secure funding for these long-term objectives.
MILESTONES AND AVAILABLE FUNDS
The final short form prospectus of the Company dated March 12, 2021 (the “SF Prospectus”), which is available on SEDAR at www.sedar.com, identified certain business milestones of the Company, which are re-produced below. As of the date hereof, the Company has provided the status of these milestones, the actual or revised estimated costs and the revised date of expected completion thereof, if applicable. The following are “forward-looking statements” and as such, there is no guarantee that such milestones will be achieved on the timelines indicated or at all. Forward-looking statements are based on management’s current expectations and are subject to a number of risks, uncertainties, and assumptions. See “Forward-Looking Statements”.
|
Objective
|
|
|
Milestone Description
|
|
|
March 2021
Prospectus
Estimated
Cost
|
|
|
Actual/
Revised
Estimated
Cost
|
|
|
Actual/Estimated
Timeframe for
Completion
(based on
calendar year)
|
|
|
Status
|
|
|
FT-104 Development Patenting, Phase 1 completed and Phase 2 completed
|
|
|
US utility and PCT patent filings
|
|
|
$100,000
|
|
|
$100,000
|
|
|
Q2 2021
|
|
|
In Progress
|
|
|
|
CMC development and pre-clinical studies completed
|
|
|
$2,440,000
|
|
|
$2,440,000
|
|
|
Q2 2021
|
|
|
In Progress
|
|
|
|
Phase 1 studies completed
|
|
|
$2,025,000
|
|
|
$2,025,000
|
|
|
Q2 2022
|
|
|
Not started
|
|
|
|
Phase 2 studies completed
|
|
|
$9,350,000
|
|
|
$13,550,000
|
|
|
Q2 2023
|
|
|
Not started
|
|
|
|
|
|
75 Operational Clinics
|
|
|
10th clinic operational (i.e. 4 additional clinics)
|
|
|
$1,500,000
|
|
|
$1,900,000
|
|
|
Q2 2021
|
|
|
In Progress
|
|
|
|
15th clinic operational
|
|
|
$1,250,000
|
|
|
$2,000,000
|
|
|
Q3 2021
|
|
|
In Progress
|
|
|
|
20th operational clinic
|
|
|
$2,000,000
|
|
|
$2,000,000
|
|
|
Q4 2021
|
|
|
Not started
|
|
|
|
30th operational clinic
|
|
|
$4,000,000
|
|
|
$4,000,000
|
|
|
Q4 2022
|
|
|
Not started
|
|
|
|
75th operational clinic
|
|
|
$15,500,000
|
|
|
$18,000,000
|
|
|
Q4 2024
|
|
|
Not started
|
|
|
|
|
|
Issuer Technology Platforms
|
|
|
Trip App available in app store
|
|
|
$220,000
|
|
|
$300,000
|
|
|
Q4 2021
|
|
|
Free app available. Premium version launch Q4 2021.
|
|
|
|
Patient Portal launched
|
|
|
$220,000
|
|
|
$500,000
|
|
|
Q4 2021
|
|
|
Portal completed. Further enhancements to launch Q4 2021.
|
|
|
TOTAL:
|
|
|
|
|
|
$38,605,000
|
|
|
$46,815,000
|
|
|
|
|
|
|
|
Note:
Operational clinics include opened clinics and clinics under construction.
Due to the impact of the COVID-19 pandemic on our FT-104 development, we have revised our timeframe to complete Phase 1 studies from calendar Q4 2021 to Q1 2022. See Effects of COVID-19 Pandemic on Operations section for details.
Based on the number of leases currently in negotiation, our target of 20 clinics by calendar Q4 2021 remains unchanged. However, we anticipate a backlog of openings arising from construction delays due to the COVID-19 pandemic and have revised our timeframe to achieve 30 clinics from calendar Q2 2022 to Q4 2022.
Total Funds Available
As of the closing of the March BD Offering, the Company had $107,895,033 in funds available. The table below describes sets out the anticipated use of the available funds and any variances to such uses from what was described in the SF Prospectus. The use of proceeds represents the anticipated costs for next 12 months from April 1, 2021 to March 31, 2022 and assumes that no additional funds will be raised by the Company.
The current use of funds represents the sum total of the unspent amount and additional use of funds. The Company notes the below variances do not have a material impact on the Company’s ability to achieve its business objectives and milestones.
|
Use of Available Funds
|
|
|
March 2021
Prospectus
Use of Funds
(January 1 to
December 31,
2021)
|
|
|
Amounts Spent
January 1 to
March 31,
2021
|
|
|
Additional
Amounts
Allocated
|
|
|
Current Use
of Funds
(April 1, 2021 to
March 31, 2022)
|
|
|
FT-104 Drug Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US utility and PCT patent filings
|
|
|
|
$
|
77,000
|
|
|
|
|
|
Nil.
|
|
|
|
|
$
|
13,000
|
|
|
|
|
$
|
90,000
|
|
|
|
CMC development and pre-clinical studies
|
|
|
|
$
|
1,522,804
|
|
|
|
|
$
|
605,000
|
|
|
|
|
|
Nil.
|
|
|
|
|
$
|
1,393,000
|
|
|
|
Phase 1 studies
|
|
|
|
$
|
2,025,000
|
|
|
|
|
|
Nil.
|
|
|
|
|
$
|
(920,000)
|
|
|
|
|
$
|
1,105,000
|
|
|
|
Phase 2 studies
|
|
|
|
|
Nil.
|
|
|
|
|
|
Nil.
|
|
|
|
|
$
|
350,000
|
|
|
|
|
$
|
350,000
|
|
|
|
Psilocybin Fungi Research and Cultivation (Jamaica Facility)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
|
$
|
1,320,000
|
|
|
|
|
$
|
290,000
|
|
|
|
|
$
|
(120,000)
|
|
|
|
|
$
|
1,200,000
|
|
|
|
Clinic Expansion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 additional clinics (Chicago, Amsterdam, Houston, Atlanta, San Diego)
|
|
|
|
$
|
1,270,000
|
|
|
|
|
$
|
820,000
|
|
|
|
|
$
|
25,000
|
|
|
|
|
$
|
475,000
|
|
|
|
12 additional clinics fiscal 2022
|
|
|
|
$
|
4,100,000
|
|
|
|
|
|
Nil.
|
|
|
|
|
$
|
1,000,000
|
|
|
|
|
$
|
5,100,000
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology platforms (Trip App and Patient Portal)
|
|
|
|
$
|
151,000
|
|
|
|
|
$
|
91,000
|
|
|
|
|
$
|
1,020,000
|
|
|
|
|
$
|
1,080,000
|
|
|
|
Occupancy costs
|
|
|
|
$
|
3,566,822
|
|
|
|
|
$
|
554,000
|
|
|
|
|
$
|
2,459,178
|
|
|
|
|
$
|
5,472,000
|
|
|
|
Marketing
|
|
|
|
$
|
2,596,677
|
|
|
|
|
$
|
675,068
|
|
|
|
|
$
|
848,391
|
|
|
|
|
$
|
2,770,000
|
|
|
|
General & administrative
|
|
|
|
$
|
3,854,881
|
|
|
|
|
$
|
691,000
|
|
|
|
|
$
|
2,771,119
|
|
|
|
|
$
|
5,935,000
|
|
|
|
Total use of funds
|
|
|
|
$
|
20,484,184
|
|
|
|
|
$
|
3,726,068
|
|
|
|
|
$
|
7,446,688
|
|
|
|
|
$
|
24,970,000
|
|
|
|
Unallocated working capital
|
|
|
|
$
|
87,410,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
82,925,033
|
|
|
|
TOTAL:
|
|
|
|
$
|
107,895,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
107,895,033
|
|
|
With respect to FT-104 drug development, our total CMC development and pre-clinical studies budget remains unchanged at $2,440,000 as per the “Milestones” table above. After calendar Q1 2021 spend of $605,000, we anticipate current use of proceeds of $1,893,000 to complete these milestones.
With respect to the Jamaica Facility, we reduced our use of available funds by $120,000 to align with actual quarterly costs of approximately $300,000 USD to date.
With respect to Clinic Expansion, we have allocated an additional $1,025,000 in leasehold improvement costs, or an average increase of $60,000 per clinic, based on revised assumptions relating to our most recent lease negotiations, design plans to accommodate group therapy and additional offerings, and actual costs incurred with the opening of our clinics to date.
With respect to occupancy costs, rent payments have increased over the period due to a combination of a higher clinic count over the January 1, 2022 to March 31, 2022 period and an increase in rent expense assumptions, as we are now seeking larger spaces to accommodate group therapy and additional offerings.
With respect to our technology platforms, our March 2021 use of proceeds included third party development costs only. We have now included the $280,000 cost of our internal development and product teams in our current use of funds figure, which were previously reported in general & administrative expense.
With respect to general & administrative expenses, we have increased our directors and officers insurance expenses as a result of our June 7, 2021 TSX uplisting and NASDAQ application.
The Company has negative cash flow from operating activities and has historically incurred net losses. To the extent that the Company has negative operating cash flows in future periods, it may need to deploy a portion of its existing working capital to fund such negative cash flows. See “Risks and Uncertainties”.
The expected use of funds represents the Company’s current intentions based upon its present plans and business condition, which could change in the future as its plans and business conditions evolve. The amounts and timing of the actual use of the net proceeds will depend on multiple factors and there may be circumstances where, for sound business reasons, a reallocation of funds may be necessary in order for the Company to achieve its stated business objectives. The Company may also require additional funds in order to fulfill its expenditure requirements to meet existing and any new business objectives, and the Company expects to either issue additional securities or incur debt to do so. As a result, management will retain broad discretion in the application of the available funds, and shareholders will be relying on management’s judgment regarding such application.
See “Results of Operations” section for a discussion of occupancy costs, marketing expenditures and general and administrative expenses.
The material factors or assumptions used to develop the estimated costs disclosed above are included in the “Forward-Looking Statements” section above. The actual amount that the Company spends in connection with each of the intended uses of proceeds will depend on a number of factors, including those listed under “Risks and Uncertainties” or unforeseen events.
SELECTED CONSOLIDATED FINANCIAL DATA
|
|
|
|
3 months ended
March 31, 2021
|
|
|
3 months ended
March 31, 2020
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation)
to March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient services
|
|
|
|
|
526,435
|
|
|
|
|
|
1,000
|
|
|
|
|
|
960,655
|
|
|
|
|
|
1,000
|
|
|
|
Other revenue
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
240
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
526,435
|
|
|
|
|
|
1,000
|
|
|
|
|
|
960,895
|
|
|
|
|
|
1,000
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administration
|
|
|
|
|
4,636,669
|
|
|
|
|
|
1,062,141
|
|
|
|
|
|
11,161,893
|
|
|
|
|
|
2,310,076
|
|
|
|
Occupancy costs
|
|
|
|
|
433,279
|
|
|
|
|
|
94,624
|
|
|
|
|
|
897,391
|
|
|
|
|
|
317,476
|
|
|
|
Sales and marketing
|
|
|
|
|
675,068
|
|
|
|
|
|
165,737
|
|
|
|
|
|
1,630,223
|
|
|
|
|
|
305,710
|
|
|
|
Research and development
|
|
|
|
|
871,955
|
|
|
|
|
|
112,079
|
|
|
|
|
|
3,417,690
|
|
|
|
|
|
193,192
|
|
|
|
Depreciation and amortization
|
|
|
|
|
539,321
|
|
|
|
|
|
127,048
|
|
|
|
|
|
1,394,404
|
|
|
|
|
|
146,320
|
|
|
|
Patient services
|
|
|
|
|
586,328
|
|
|
|
|
|
9,403
|
|
|
|
|
|
1,544,328
|
|
|
|
|
|
9,403
|
|
|
|
|
|
|
|
|
7,742,620
|
|
|
|
|
|
1,571,032
|
|
|
|
|
|
20,045,929
|
|
|
|
|
|
3,282,177
|
|
|
|
Other Income (Expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance expense
|
|
|
|
|
(74,214)
|
|
|
|
|
|
(16,360)
|
|
|
|
|
|
(252,259)
|
|
|
|
|
|
(19,907)
|
|
|
|
Other expense
|
|
|
|
|
(611,158)
|
|
|
|
|
|
695,152
|
|
|
|
|
|
(1,600,172)
|
|
|
|
|
|
672,760
|
|
|
|
Listing expense
|
|
|
|
|
(49,033)
|
|
|
|
|
|
—
|
|
|
|
|
|
(2,180,142)
|
|
|
|
|
|
—
|
|
|
|
Net Loss
|
|
|
|
|
(7,950,590)
|
|
|
|
|
|
(891,240)
|
|
|
|
|
|
(23,117,847)
|
|
|
|
|
|
(2,628,324)
|
|
|
|
Net Loss per Share — Basic and Diluted
|
|
|
|
|
(0.18)
|
|
|
|
|
|
(0.05)
|
|
|
|
|
|
(0.70)
|
|
|
|
|
|
(0.26)
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
38,469,057
|
|
|
|
|
|
9,590,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds held in trust
|
|
|
|
|
795,516
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
|
|
|
|
588,041
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
|
|
|
72,552,870
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Receivables
|
|
|
|
|
813,761
|
|
|
|
|
|
203,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
|
|
126,450,005
|
|
|
|
|
|
12,541,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Current Financial Liabilities
|
|
|
|
|
6,426,484
|
|
|
|
|
|
1,078,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVERSE TAKEOVER TRANSACTION
On October 1, 2020, FTP completed its previously announced going public transaction (the “Transaction”) pursuant to the terms of an agreement entered into on August 21, 2020 between FTP, Newton and Newton Subco. On September 30, 2020, immediately prior to the closing of the Transaction, Newton filed articles of amendment to: (i) consolidate its outstanding common shares on an eight (8) old for one (1) new basis; and (ii) change its name from Newton Energy Corporation to “Field Trip Health Ltd.”.
The Transaction constituted a Reverse Takeover by way of a three-cornered amalgamation under applicable securities law, with FTP as the reverse takeover acquirer and Newton as the reverse takeover acquiree. Pursuant to the terms of the agreement, Newton acquired all the issued and outstanding common shares of FTP. Holders of FTP common shares received one post-consolidation common share of Newton in exchange for each FTP share held. Newton became the direct parent and sole shareholder of FTP, changed its year end from December 31 to March 31 and continued under the Canada Business Corporations Act (“CBCA”) by Certificate and Articles of Continuance.
In connection with the completion of the Transaction, Newton common shares listed on the NEX board of the TSXV were delisted on September 30, 2020. Field Trip Health Ltd. shares commenced trading on the Canadian Stock Exchange on October 6, 2020, under the stock symbol FTRP.
The Transaction does not constitute a business combination as Newton does not meet the definition of a business under IFRS 3 — Business Combinations. Immediately after the Transaction, shareholders of FTP owned 100% of the voting rights of Newton. As a result, the Transaction has been accounted for as a capital transaction with FTP being identified as the accounting acquirer and the equity consideration being measured at fair value, using the acquisition method of accounting. The Transaction has been accounted for in the consolidated financial statements as a continuation of the financial statements of FTP.
Purchase price consideration
FTP is deemed to have acquired the former Newton as part of the Transaction. The Transaction was accounted for using the acquisition method of accounting whereby the assets acquired, and liabilities assumed were recorded at their estimated fair value at the acquisition date. The acquisition did not meet the criteria for a business combination and is therefore treated as a recapitalization under the scope of IFRS 2 — Share Based Payments. The consideration consisted entirely of shares and options of Field Trip Health Ltd. which were measured at the estimated fair value on the date of acquisition. The fair value of the Common Shares issued to the former Newton shareholders was determined to be $1,590,212 based on the fair value of the shares issued (795,106 shares at $2.00 per share). The fair value of the Newton Options was determined to be $74,982 using a Black Scholes model based on the following assumptions: Stock price volatility — 70%; Risk-free interest rate — 0.29–0.33%; Stock price at October 1, 2020 — $2.00 and an expected life of 2.52–3.86 years. In connection with the acquisition of Newton, the Company incurred transaction costs of $571,435, of which $375,713 was settled in cash and the remaining $195,722 in Company stock options.
|
|
|
|
Total
|
|
|
|
|
|
$
|
|
|
Consideration: Newton Commons Shares
|
|
|
|
|
1,590,212
|
|
|
|
Consideration: Newton Options
|
|
|
|
|
74,982
|
|
|
|
Total consideration
|
|
|
|
|
1,665,194
|
|
|
|
Transaction costs
|
|
|
|
|
571,435
|
|
|
|
|
|
|
|
|
2,236,629
|
|
|
|
Identifiable assets acquired: Newton Cash
|
|
|
|
|
66,487
|
|
|
|
Listing Expense
|
|
|
|
|
2,170,142
|
|
|
RESULTS OF OPERATIONS
For the Fourth Quarter of Fiscal 2021
Overview
For our fourth fiscal quarter ended March 31, 2021, we earned patient services revenues of $526,435 from our Toronto, New York, Santa Monica, Chicago and Atlanta clinics, a 66% increase over our third fiscal quarter patient services revenues of $316,329. Net loss for our fourth fiscal quarter of $7,950,590 was primarily due to general and administration expenses of $4,636,669, research and development expenses of $871,955, sales & marketing expenses of $675,068, patient services expenses of $586,328, depreciation and amortization of $539,321, occupancy costs of $433,279 and realized foreign exchange loss of $532,656. Net loss for our prior year’s fourth fiscal quarter of 2020 of $891,240 was primarily due to general and administration expenses of $1,062,141, sales and marketing expenses of $165,737, depreciation and amortization of $127,048 and research and development costs of $112,079, partially offset by a realized foreign exchange gain of $690,579.
For the fiscal year ended March 31, 2021, we earned patient services revenues of $960,655 from our Toronto, New York, Santa Monica, Chicago and Atlanta clinics, despite a temporary closure in Toronto from March to May and Chicago and Atlanta contributing revenues only beginning March 2021. We expect to scale our revenue as the number of patients treated at our locations increases, and with the addition of our Houston
location, which just began treating patients in May 2021. We will continue our rollout of clinics across North America and Europe, with a total target of 20 clinics by December 2021 (see Non-Revenue Generating Projects — Clinical Operations section of this MD&A).
Net loss of $23,117,607 was primarily due to general and administration expenses of $11,161,893, research and development expenses of $3,417,690, listing expenses of $2,180,142 relating mainly to the Transaction, sales and marketing expense of $1,630,223, patient services expense of $1,544,328, realized foreign exchange loss of $1,578,142, depreciation and amortization of $1,394,404 and occupancy costs of $897,391. Net loss for the period ended March 31, 2020 of $2,628,324 was primarily due to general and administration expenses of $2,310,076, occupancy costs of $317,476, sales and marketing expenses of $305,710, research and development costs of $193,192 and depreciation and amortization of $146,320, partially offset by a realized foreign exchange gain of $667,526.
General and Administration
Components of general and administrative expenses for the three months and fiscal year ended March 31, 2021 and periods ending March 31, 2020 were as follows:
|
|
|
|
3 months ended
March 31, 2021
|
|
|
3 months ended
March 31, 2020
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation)
to March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Personnel costs
|
|
|
|
|
2,350,681
|
|
|
|
|
|
577,175
|
|
|
|
|
|
5,214,979
|
|
|
|
|
|
896,227
|
|
|
|
External services
|
|
|
|
|
1,012,775
|
|
|
|
|
|
240,574
|
|
|
|
|
|
3,222,244
|
|
|
|
|
|
753,106
|
|
|
|
Share-based payments (Note 18)
|
|
|
|
|
832,979
|
|
|
|
|
|
110,830
|
|
|
|
|
|
1,516,981
|
|
|
|
|
|
330,703
|
|
|
|
Travel and entertainment
|
|
|
|
|
244,026
|
|
|
|
|
|
68,635
|
|
|
|
|
|
396,534
|
|
|
|
|
|
231,400
|
|
|
|
IT and technology
|
|
|
|
|
152,072
|
|
|
|
|
|
36,040
|
|
|
|
|
|
655,950
|
|
|
|
|
|
50,536
|
|
|
|
Office and general
|
|
|
|
|
44,136
|
|
|
|
|
|
28,887
|
|
|
|
|
|
155,205
|
|
|
|
|
|
48,104
|
|
|
|
Total general and administration
|
|
|
|
|
4,636,669
|
|
|
|
|
|
1,062,141
|
|
|
|
|
|
11,161,893
|
|
|
|
|
|
2,310,076
|
|
|
For our fourth fiscal quarter ended March 31, 2021, general and administrative expenses totaled $4,636,669 an increase of $3,574,528 compared to general and administrative expenses of $1,062,141 for the comparative quarter ended March 31, 2020. This increase was primarily due to operations and medical office administration (“MOA”) personnel costs of $1,773,505 relating to the Toronto, New York, Santa Monica, Chicago, Atlanta and Amsterdam clinics, external services of $772,201 primarily relating to professional and consulting fees, investor relations and insurance expense, share-based payments of $722,150, travel and entertainment expenses of $175,391 and IT and technology costs of $116,032.
For the fiscal year ended March 31, 2021, general and administrative expenses totaled $11,161,893, an increase of $8,851,817 compared to general and administrative expenses of $2,310,076 for the comparative period ended March 31, 2020. This increase was primarily due to operations and MOA personnel costs of $4,318,752 relating to the Toronto, New York, Santa Monica, Chicago, Atlanta and Amsterdam clinics, external services of $2,469,138 primarily relating to professional fees and consulting fees, investor relations and insurance expense, share-based payments of $1,186,278 and IT and technology costs of $605,414.
Occupancy costs
Components of occupancy costs for the three months and fiscal year ended March 31, 2021 and periods ended March 31, 2020 were as follows:
|
|
|
|
3 months ended
March 31, 2021
|
|
|
3 months ended
March 31, 2020
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation)
to March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Operating rent expense
|
|
|
|
|
88,289
|
|
|
|
|
|
10,318
|
|
|
|
|
|
249,485
|
|
|
|
|
|
172,354
|
|
|
|
Taxes, maintenance, insurance
|
|
|
|
|
8,941
|
|
|
|
|
|
34,958
|
|
|
|
|
|
37,738
|
|
|
|
|
|
73,884
|
|
|
|
Minor furniture and fixtures
|
|
|
|
|
313,980
|
|
|
|
|
|
37,312
|
|
|
|
|
|
507,976
|
|
|
|
|
|
37,312
|
|
|
|
Utilities and services
|
|
|
|
|
22,069
|
|
|
|
|
|
12,036
|
|
|
|
|
|
102,192
|
|
|
|
|
|
33,926
|
|
|
|
Total occupancy costs
|
|
|
|
|
433,279
|
|
|
|
|
|
94,624
|
|
|
|
|
|
897,391
|
|
|
|
|
|
317,476
|
|
|
Occupancy costs relate to our Toronto headquarters, Toronto, New York, Santa Monica, Chicago, San Diego, Washington, Atlanta, Houston and Amsterdam clinics and the Jamaica Facility.
For our fourth fiscal quarter ended March 31, 2021, occupancy costs totaled $433,279, an increase of $338,655 compared to occupancy costs of $94,624 for the comparative quarter ended March 31, 2020. This increase was primarily due to the purchase of minor furniture and fixtures of $276,668 and increased operating rent expense of $77,971 related to the clinics and Jamaica Facility. Occupancy costs for the quarter ended March 31, 2020 related to the Toronto headquarters lease only, as the company was in pre-operational, startup phase.
For the fiscal year ended March 31, 2021, occupancy costs totaled $897,391, an increase of $579,915 compared to occupancy costs of $317,476 for the comparative period ended March 31, 2020. This increase was primarily due to the purchase of minor furniture and fixtures of $470,664 and increased utilities and services expenses of $68,266 related to the clinics and Jamaica Facility and the higher operating rent expense of $77,131. Occupancy costs for the comparative period ended March 31, 2020 related to the Toronto headquarters lease only.
Sales and Marketing
Components of sales and marketing for the three months and fiscal year ended March 31, 2021 and periods ended March 31, 2020 were as follows:
|
|
|
|
3 months ended
March 31, 2021
|
|
|
3 months ended
March 31, 2020
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation)
to March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Brand and public relations
|
|
|
|
|
344,823
|
|
|
|
|
|
86,474
|
|
|
|
|
|
731,511
|
|
|
|
|
|
214,091
|
|
|
|
Conference fees
|
|
|
|
|
32,725
|
|
|
|
|
|
30,447
|
|
|
|
|
|
78,783
|
|
|
|
|
|
42,803
|
|
|
|
Personnel costs
|
|
|
|
|
120,899
|
|
|
|
|
|
29,147
|
|
|
|
|
|
347,027
|
|
|
|
|
|
29,147
|
|
|
|
External marketing services
|
|
|
|
|
167,838
|
|
|
|
|
|
19,669
|
|
|
|
|
|
464,119
|
|
|
|
|
|
19,669
|
|
|
|
Other marketing
|
|
|
|
|
8,783
|
|
|
|
|
|
—
|
|
|
|
|
|
8,783
|
|
|
|
|
|
—
|
|
|
|
Total sales and marketing
|
|
|
|
|
675,068
|
|
|
|
|
|
165,737
|
|
|
|
|
|
1,630,223
|
|
|
|
|
|
305,710
|
|
|
For our fourth fiscal quarter ended March 31, 2021, sales and marketing expenses totaled $675,068, an increase of $305,710 compared to sales and marketing expenses of $165,737 for the comparative quarter ended March 31, 2020. This increase was primarily due to brand and public relations costs of $258,349, external marketing services of $148,169 relating to paid social and search services to drive patient interest and personnel costs of $91,752. During the quarter, the Company continued to build out organic and paid digital acquisition channels across all Clinics, resulting in consistent growth in client enquiries week over week.
For the fiscal year ended March 31, 2021, sales and marketing expenses totaled $1,630,223, an increase of $1,324,513 compared to sales and marketing expenses of $305,710 for the comparative period ended March 31,
2020. This increase was primarily due to brand and public relations costs of $517,420, external marketing services of $444,450 relating to paid social and search services and personnel costs of $317,880.
Research and Development
Components of research and development for the three months and fiscal year ended March 31, 2021 and periods ended March 31, 2020 were as follows:
|
|
|
|
3 months ended
March 31, 2021
|
|
|
3 months ended
March 31, 2020
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation)
to March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
External services
|
|
|
|
|
539,544
|
|
|
|
|
|
—
|
|
|
|
|
|
2,254,608
|
|
|
|
|
|
—
|
|
|
|
Personnel costs
|
|
|
|
|
177,221
|
|
|
|
|
|
98,895
|
|
|
|
|
|
759,080
|
|
|
|
|
|
178,644
|
|
|
|
Supplies and services
|
|
|
|
|
155,190
|
|
|
|
|
|
13,184
|
|
|
|
|
|
404,002
|
|
|
|
|
|
14,548
|
|
|
|
Total research and development
|
|
|
|
|
871,955
|
|
|
|
|
|
112,079
|
|
|
|
|
|
3,417,690
|
|
|
|
|
|
193,192
|
|
|
External services fees relate primarily to fees paid to third parties to (i) further FT-104 development; and ii) manage the construction and project management of the Jamaica Facility, oversee the operations of the Jamaica Facility, provide legal advice and manage government relations. Construction of the Jamaica Facility was completed in October 2020 and the lab officially opened in February 2021. External services fees also include non-cash share-based payments relating to the Jamaica Facility shares (see Note 18 Share-Based Payments in the audited annual consolidated financial statements for the fiscal year ended March 31, 2021).
For our fourth fiscal quarter ended March 31, 2021, research and development expenses totaled $871,955, an increase of $759,876 compared to research and development expenses of $112,079 for the comparative quarter ended March 31, 2020. This increase was primarily due to external services of $441,938 paid to a third-party CMO and CRO to further FT-104 development, share-based payment of $97,606 relating to the Jamaica Facility shares, supplies and services of $142,006 for the Jamaica Facility and personnel costs of $78,326. Development of the chemistry, manufacturing and controls (CMC) of the active ingredient, FT-104, continues to progress. See Non-Revenue Generating Projects for a discussion of FT-104 milestones and anticipated costs.
For the fiscal year ended March 31, 2021, research and development expenses totaled $3,417,690 an increase of $3,224,498 compared to research and development expenses of $193,192 for the comparative period ended March 31, 2020. This increase was primarily due to external services of $728,171, share-based payment of $1,526,437 relating to the Jamaica Facility shares, personnel costs of $580,436 and supplies and services of $389,454.
Depreciation and Amortization
Components of depreciation and amortization for the three months and fiscal year ended March 31, 2021 and periods ended March 31, 2020 were as follows:
|
|
|
|
3 months ended
March 31, 2021
|
|
|
3 months ended
March 31, 2020
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation)
to March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Depreciation and Amortization —
Leasehold Improvements
|
|
|
|
|
122,322
|
|
|
|
|
|
8,645
|
|
|
|
|
|
221,473
|
|
|
|
|
|
8,645
|
|
|
|
Depreciation and Amortization —
Furniture & Fixtures
|
|
|
|
|
12,684
|
|
|
|
|
|
1,041
|
|
|
|
|
|
32,298
|
|
|
|
|
|
1,041
|
|
|
|
Depreciation and Amortization —
Computer Equipment & Software
|
|
|
|
|
28,449
|
|
|
|
|
|
3,538
|
|
|
|
|
|
67,740
|
|
|
|
|
|
4,111
|
|
|
|
Depreciation and Amortization —
Medical Lab and Equipment
|
|
|
|
|
13,644
|
|
|
|
|
|
239
|
|
|
|
|
|
24,500
|
|
|
|
|
|
239
|
|
|
|
Depreciation and Amortization —
Right of use asset
|
|
|
|
|
331,579
|
|
|
|
|
|
111,591
|
|
|
|
|
|
987,226
|
|
|
|
|
|
130,290
|
|
|
|
Depreciation and Amortization —
Intangible assets
|
|
|
|
|
30,643
|
|
|
|
|
|
1,994
|
|
|
|
|
|
61,167
|
|
|
|
|
|
1,994
|
|
|
|
Total depreciation and amortization
|
|
|
|
|
539,321
|
|
|
|
|
|
127,048
|
|
|
|
|
|
1,394,404
|
|
|
|
|
|
146,320
|
|
|
For our fourth fiscal quarter ended March 31, 2021, depreciation and amortization totaled $539,321, an increase of $412,273 compared to depreciation and amortization of $127,048 for the comparative quarter ended March 31, 2020. This increase was mainly due to the operation and improvement of leasehold properties (right of use assets) for the new clinics and Jamaica Facility. As at March 31, 2021, we are had leases in Toronto, New York, Santa Monica, Chicago, Atlanta, and Amsterdam clinics as well as the buildout of the Jamaica Facility.
For the fiscal year ended March 31, 2021, depreciation and amortization totaled $1,394,404 an increase of $1,248,084 compared to depreciation and amortization of $146,320 for the comparative period ended March 31, 2020. This increase in depreciation and amortization was mainly due to the Company’s expansion strategy, both for its clinics and research operations.
Patient Services Expense
Components of patient services expenses for the three months and fiscal year ended March 31, 2021 and periods ended March 31, 2020 were as follows:
|
|
|
|
3 months ended
March 31, 2021
|
|
|
3 months ended
March 31, 2020
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation)
to March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Personnel costs
|
|
|
|
|
512,869
|
|
|
|
|
|
7,568
|
|
|
|
|
|
1,411,083
|
|
|
|
|
|
7,568
|
|
|
|
Supplies and services
|
|
|
|
|
61,400
|
|
|
|
|
|
1,641
|
|
|
|
|
|
116,048
|
|
|
|
|
|
1,641
|
|
|
|
Payment provider fees
|
|
|
|
|
12,059
|
|
|
|
|
|
194
|
|
|
|
|
|
17,197
|
|
|
|
|
|
194
|
|
|
|
Total patient services expense
|
|
|
|
|
586,328
|
|
|
|
|
|
9,403
|
|
|
|
|
|
1,544,328
|
|
|
|
|
|
9,403
|
|
|
Patient services expense is comprised of direct costs incurred by the clinics to generate patient services revenue at the Toronto, New York, Santa Monica, Chicago and Atlanta clinics. Field Trip opened its first clinic in Toronto in March 2020.
Finance Expense
Components of finance expense for the three months and fiscal year ended March 31, 2021 and periods ended March 31, 2020 were as follows:
|
|
|
|
3 months ended
March 31, 2021
|
|
|
3 months ended
March 31, 2020
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation)
to March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Interest expense on leases
|
|
|
|
|
(112,083)
|
|
|
|
|
|
(19,005)
|
|
|
|
|
|
(301,503)
|
|
|
|
|
|
(22,562)
|
|
|
|
Interest income on shareholders’ loan
|
|
|
|
|
645
|
|
|
|
|
|
1,586
|
|
|
|
|
|
2,531
|
|
|
|
|
|
1,586
|
|
|
|
Interest income on refundable lease deposit
|
|
|
|
|
1,182
|
|
|
|
|
|
951
|
|
|
|
|
|
7,549
|
|
|
|
|
|
951
|
|
|
|
Interest expense on loan
|
|
|
|
|
(845)
|
|
|
|
|
|
—
|
|
|
|
|
|
(1,793)
|
|
|
|
|
|
—
|
|
|
|
Interest income on bank balances
|
|
|
|
|
36,887
|
|
|
|
|
|
108
|
|
|
|
|
|
40,957
|
|
|
|
|
|
118
|
|
|
|
Total finance expense
|
|
|
|
|
(74,214)
|
|
|
|
|
|
(16,360)
|
|
|
|
|
|
(252,259)
|
|
|
|
|
|
(19,907)
|
|
|
Other Income (Expense)
Components of other income (expense) for the three months and fiscal year ended March 31, 2021 and periods ended March 31, 2020 were as follows:
|
|
|
|
3 months ended
March 31, 2021
|
|
|
3 months ended
March 31, 2020
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation)
to March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Unrealized foreign exchange loss
|
|
|
|
|
(78,502)
|
|
|
|
|
|
(1,772)
|
|
|
|
|
|
(78,420)
|
|
|
|
|
|
(1,111)
|
|
|
|
Realized foreign exchange gain (loss)
|
|
|
|
|
(532,656)
|
|
|
|
|
|
690,579
|
|
|
|
|
|
(1,578,142)
|
|
|
|
|
|
667,526
|
|
|
|
Government assistance — wage subsidy
|
|
|
|
|
—
|
|
|
|
|
|
6,345
|
|
|
|
|
|
17,381
|
|
|
|
|
|
6,345
|
|
|
|
Government assistance — CEBA loan
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
18,681
|
|
|
|
|
|
—
|
|
|
|
Government assistance —IAP funding
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
20,328
|
|
|
|
|
|
—
|
|
|
|
Total other income (expense)
|
|
|
|
|
(611,158)
|
|
|
|
|
|
695,152
|
|
|
|
|
|
(1,600,172)
|
|
|
|
|
|
672,760
|
|
|
During the current fiscal quarter and fiscal year ended March 31, 2021, we recorded a realized foreign exchange loss of $532,656 and $1,578,142, which reflected a strengthening of the U.S. dollar against the Canadian dollar on our U.S.-denominated bank balances.
We also applied for, and received, governmental assistance related to the COVID-19 pandemic:
(i)
The Canada Emergency Business Account (CEBA) program provides an interest-free loan of $40,000, of which and if required conditions are met, only 75% or $30,000 of the loan amount is repayable by December 31, 2022. Government assistance is comprised of the fair value of the loan amount forgiven using an 15% effective interest rate (see Note 15 Loan Payable of our audited consolidated financial statements).
(ii)
The 10%Temporary Wage Subsidy for Employers (TWS) program provides a subsidy of 10% of wages from March 18, to June 19, 2020 up to $1,375 for each eligible employee. The maximum total is $25,000 for each eligible employer. For the three and fiscal year ended March 31, 2021 the Company received wage subsidies of $0 and $17,381 respectively.
(iii)
The Innovation Assistance Program (IAP) provides assistance to early stage, small to medium-sized enterprises unable to access COVID-19 support. The Company received $20,328 to cover salary expenses for the period from April 1 to June 24, 2020.
SELECTED FINANCIAL INFORMATION — SUMMARY OF QUARTERLY RESULTS
The following table sets out selected quarterly information for the previous 8 quarters of the Company up to March 31, 2021:
|
|
|
|
Q3 2021
3 Months
Ended
March 31,
2021
|
|
|
Q3 2021
3 Months
Ended
December 31,
2020
|
|
|
Q2 2021
3 Months
Ended
September 30,
2020
|
|
|
Q1 2021
3 Months
Ended
June 30,
2020
|
|
|
Q4 2020
Period
Ended
March 31,
2020
|
|
|
Q3 2020
3 Months
Ended
December 31,
2019
|
|
|
Q2 2020
3 Months
Ended
September 30,
2019
|
|
|
Q1 2020
Period
Ended
June 30,
2019
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Revenue
|
|
|
|
|
526,435
|
|
|
|
|
|
316,329
|
|
|
|
|
|
94,532
|
|
|
|
|
|
23,599
|
|
|
|
|
|
1,000
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Net Loss
|
|
|
|
|
(7,950,590)
|
|
|
|
|
|
(8,275,669)
|
|
|
|
|
|
(3,932,444)
|
|
|
|
|
|
(2,958,904)
|
|
|
|
|
|
(891,240)
|
|
|
|
|
|
(1,055,666)
|
|
|
|
|
|
(514,643)
|
|
|
|
|
|
(166,775)
|
|
|
|
Loss per share — basic and diluted
|
|
|
|
|
(0.18)
|
|
|
|
|
|
(0.22)
|
|
|
|
|
|
(0.16)
|
|
|
|
|
|
(0.21)
|
|
|
|
|
|
(0.05)
|
|
|
|
|
|
(0.10)
|
|
|
|
|
|
(0.08)
|
|
|
|
|
|
(0.03)
|
|
|
Historically, the Company’s operating results have fluctuated on a quarterly basis and we expect that quarterly financial results will continue to fluctuate. If anticipated patient services revenues in any quarter do not occur when we expect due to unexpected delays in our North American clinic rollout and the economic impact of COVID-19 outbreak, our operating results for that quarter and future quarters may be adversely affected. Furthermore, historical patterns of expenditures cannot be taken as an indication of future expenditures. The amount and timing of expenditures and therefore liquidity and capital resources vary substantially from period to period depending on the number of clinics opened, the number of research and development programs being undertaken at any one time, the stage of the development programs, the timing of significant expenditures for pre-clinical studies and clinical trials and the availability of funding from investors. Because of the historical variations in our operating results, our limited operating history and the rapidly evolving nature of our business, we believe that period-to-period comparisons of our revenue and operating results are not necessarily meaningful and should not be relied upon as indications of our future performance.
LIQUIDITY AND CAPITAL RESOURCES
Cash and Working Capital
Since inception, we have financed our operations primarily from the issuance of equity and, to a lesser degree, from patient revenues from our clinics and interest income on funds available for investment. The Company’s primary capital needs are funds to advance its research and development activities, clinic rollout and digital teletherapy tools development and for working capital purposes. These activities include staffing, preclinical studies, clinical trials and administrative costs.
We have experienced operating losses and cash outflows from operations since incorporation, and will require ongoing financing to continue its research and development, clinic rollout and digital tele-therapy development activities. We have not earned significant revenues from the clinics, nor have we earned any revenue or reached successful commercialization of any products. Our success is dependent upon the ability to finance our cash requirements to continue our activities. We have significant lease obligations related to our current clinics, newly leased property, construction and office locations.
On May 20, 2020, FTP issued 76,240 Class B Series Common Shares as follows: 11,113 Class B Series Common Shares at a price of $0.90 USD per Class B Series Common Share, yielding gross proceeds of $10,002 USD or $13,935 CAD. Real estate brokerage commissions of $63,853 were settled via the issuance of 50,911 Class B shares at a price of $0.90 USD or $1.2542 CAD per share. Share issuance costs of $17,829 were settled via the issuance of 14,216 Class B Series Common Shares at a price of $0.90 USD or $1.2542 CAD per Class B Series Common Share.
On August 11, 2020, directors of FTP exercised options to purchase 9,000,900 Class A Series Common Shares at a price of $0.00001 for gross proceeds of $90.
On August 14, 2020, FTP completed brokered and non-brokered private placements of an aggregate of 5,516,724 Class A Series Common Shares, at a price of $2.00 per Class A Series Common Share, for aggregate
gross proceeds of $11,033,448 (the “FTP Private Placements”). Canaccord Genuity Corp. and Stifel Nicolaus Canada Inc. jointly acted as lead agents in connection with the brokered portion of the Private Placement (the “Agents”), for which they were paid a cash commission of $391,082, and were issued 55,167 Class A Series Common Shares and 299,753 compensation warrants, with each warrant exercisable into one Class A Series Common Share at a price of $2.00 Class A Series Common Share until August 14, 2022 (the “FTP Compensation Warrants”).
On September 21, 2020, and as a follow on to the FTP Private Placements, FTP completed a private placement of an aggregate of 816,932 Class A Series Common Shares at a price of $2.00 per Class A Series Common Share for gross proceeds of $1,633,864.
The Company incurred share issuance costs of $707,263 relating to the August 14 and September 21, 2020 private placements.
On September 25, 2020, 600,000 Class A Series Common Shares were issued as payment of milestone shares under the Jamaican SPA.
Upon closing of the FTP Private Placements all of the Class B Series Common Shares were automatically converted into Class A Series Common Shares.
On September 17, 2020, FTP received a $40,000 interest-free loan under the federal Canadian Emergency Business Account (CEBA) program, and if required conditions are met, only 75% or $30,000 of the loan amount will need to be repaid by December 31, 2022.
On October 1, 2020, 795,106 Common Shares were issued upon closing of the Transaction (see Reverse Takeover section of this MD&A). Upon closing of the Transaction, the Company had only Common Shares outstanding.
On January 5, 2021 the Company completed the January BD Offering resulting in the issuance of 4,448,200 Units of the Company at a price per Unit of $4.50 for gross proceeds of $20,016,900 (see Key Highlights and Recent Developments for details).
On March 17, 2021 the Company completed the March BD Offering resulting in the issuance of 14,661,499 Common Shares of the Company at a price of $6.50 per Common Share for gross proceeds of $95,299,744 (see Key Highlights and Recent Developments for details).
During the fiscal year ended March 31, 2021, 9,218,767 options were exercised for gross proceeds of $208,698 and 158,510 warrants were exercised for gross proceeds of $867,856.
See “Subsequent Events” for details on issuances after March 31, 2021.
There is no assurance that additional capital or other types of financing will be available if needed or that these financings will be on terms at least as favourable to the Company as those previously obtained, or at all. See “Risks and Uncertainties”.
The table below sets out our cash, funds held in trust, restricted cash and working capital as at March 31, 2021 and 2020:
|
|
|
|
March 31, 2021
|
|
|
March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Cash
|
|
|
|
|
38,469,057
|
|
|
|
|
|
9,590,758
|
|
|
|
Funds held in trust
|
|
|
|
|
795,516
|
|
|
|
|
|
—
|
|
|
|
Restricted cash
|
|
|
|
|
588,041
|
|
|
|
|
|
100,000
|
|
|
|
Working capital
|
|
|
|
|
109,648,579
|
|
|
|
|
|
8,985,037
|
|
|
|
Working capital calculation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
116,109,442
|
|
|
|
|
|
10,027,786
|
|
|
|
Current liabilities
|
|
|
|
|
6,460,863
|
|
|
|
|
|
1,042,749
|
|
|
|
Working capital
|
|
|
|
|
109,648,579
|
|
|
|
|
|
8,985,037
|
|
|
Funds held in trust of $795,516 represents unrestricted funds held at a Canadian chartered bank by the Group’s corporate counsel, representing proceeds from the March Bought Deal Offering which were subsequently released in April 2021 (see Key Highlights and Recent Developments for details).
As at March 31, 2021, the Group had $100,501 of restricted cash held as collateral against Field Trip Psychedelics Inc. credit card limit. The funds are invested in two cashable GIC accounts. $35,176 matures on November 4, 2021, and $65,325 matures on January 20, 2022, respectively. The Group also had $487,540 of restricted cash held at the PCs which, under the terms of the MSA, must be used to pay PC personnel and expenses before satisfying prior and current management fees.
Working capital represents the excess of current assets over current liabilities. The increase in our cash was primarily due to cash provided by financing activities of $121,286,102, partially offset by cash used in investing activities of $75,072,770 and cash used in operating activities of $16,410,731.
The following table shows our cash flows from operating, investing and financing activities for the periods indicated:
|
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation)
to March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Cash used in operating activities
|
|
|
|
|
(16,410,731)
|
|
|
|
|
|
(1,930,441)
|
|
|
|
Cash used in investing activities
|
|
|
|
|
(75,072,770)
|
|
|
|
|
|
(940,907)
|
|
|
|
Cash provided by financing activities
|
|
|
|
|
121,286,102
|
|
|
|
|
|
12,612,363
|
|
|
Cash used in operating activities
During the current fiscal year, cash used in operating activities of $16,410,731 was primarily due to the net loss of $23,117,607, partially offset by the following non-cash items: share-based payments of $3,043,419, reverse take-over costs of $1,860,916, depreciation and amortization of $1,394,404 and interest expense on lease commitments of $301,503.
During the comparative period from Apr 2, 2019 (date of incorporation) to March 31, 2020, cash used in operating activities of $1,930,441 was primarily due to the net loss of $2,628,324, partially offset by non-cash share-based payments of $330,703, net changes in non-cash working capital of $199,724 and depreciation and amortization of $146,320.
Cash used in investing activities
During the current fiscal year, cash used in investing activities of $75,072,770 consisted primarily of purchase of short-term investments of $72,549,413, acquisition of property, plant and equipment of $1,978,790 for our New York, Santa Monica, Chicago, Atlanta, Houston and Amsterdam clinics and the buildout of the Jamaica Facility, acquisition of intangible assets of $363,311 relating to our digital patient portal (“Patient Portal”) and Trip App, and refundable security deposits paid for right-of-use assets of $181,256.
During the comparative period from April 2, 2019 (date of incorporation) to March 31, 2020, cash used in investing activities of $940,907 consisted primarily of acquisition of property, plant and equipment for our Toronto headquarters and clinic of $589,482, acquisition of intangible assets of $126,974 relating to our digital teletherapy tools Patient Portal and Trip App, non-refundable security deposits paid for right-of use assets of $123,465 and refundable security deposits paid for right-of-use assets of $100,986.
Cash provided by financing activities
During the current fiscal year, cash provided by financing activities of $121,286,102 was primarily due to net proceeds of $124,795,187 upon closing of the FTP Private Placements, January and March BD Offerings, net proceeds of $3,202,704 from the issuance of Warrants in connection with the January BD Offering, proceeds of $856,856 from the exercise of Warrants in connection with the January BD Offering and $11,000
from the exercise of FTP Compensation Warrants, proceeds from the exercise of stock options of $208,698 and CEBA loan proceeds of $40,000, partially offset by the repayment of lease obligation of $806,651.
During the comparative period from Apr 2, 2019 (date of incorporation) to March 31, 2020, cash provided by financing activities of $12,612,363 was primarily due to net proceeds of $12,732,645.
See also “Milestones & Available Funds” for additional commentary of the use of funds by the Company.
OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS
We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Lease obligations
The Company leases real property for its clinical and office locations. Additional (non-lease) rent payments for these locations are variable, and therefore have not been included in the right-of-use asset or lease obligations. The Company is committed for estimated additional variable (non-lease) rent and capital asset payments obligations as follows:
|
|
|
|
Expiry
|
|
|
Additional
Rent
Payments
|
|
|
< 1 year
|
|
|
1-2 years
|
|
|
2-3 years
|
|
|
3-4 years
|
|
|
4-5 years
|
|
|
More than
5 years
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Amsterdam Clinic
|
|
|
October 31, 2026
|
|
|
|
|
356,193
|
|
|
|
|
|
63,796
|
|
|
|
|
|
63,796
|
|
|
|
|
|
63,796
|
|
|
|
|
|
63,796
|
|
|
|
|
|
63,796
|
|
|
|
|
|
37,214
|
|
|
|
Atlanta Clinic
|
|
|
January 31, 2031
|
|
|
|
|
275,316
|
|
|
|
|
|
27,998
|
|
|
|
|
|
27,998
|
|
|
|
|
|
27,998
|
|
|
|
|
|
27,998
|
|
|
|
|
|
27,998
|
|
|
|
|
|
135,325
|
|
|
|
Chicago Clinic
|
|
|
September 30, 2031
|
|
|
|
|
607,459
|
|
|
|
|
|
59,264
|
|
|
|
|
|
59,264
|
|
|
|
|
|
59,264
|
|
|
|
|
|
59,264
|
|
|
|
|
|
59,264
|
|
|
|
|
|
311,138
|
|
|
|
Houston Clinic
|
|
|
March 31, 2026
|
|
|
|
|
260,303
|
|
|
|
|
|
52,061
|
|
|
|
|
|
52,061
|
|
|
|
|
|
52,061
|
|
|
|
|
|
52,061
|
|
|
|
|
|
52,061
|
|
|
|
|
|
—
|
|
|
|
Santa Monica Clinic
|
|
|
June 30, 2030
|
|
|
|
|
557,450
|
|
|
|
|
|
60,813
|
|
|
|
|
|
60,813
|
|
|
|
|
|
60,813
|
|
|
|
|
|
60,813
|
|
|
|
|
|
60,813
|
|
|
|
|
|
253,386
|
|
|
|
Toronto Clinic and Headquarters
|
|
|
October 31, 2023
|
|
|
|
|
288,119
|
|
|
|
|
|
111,530
|
|
|
|
|
|
111,530
|
|
|
|
|
|
65,059
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
2,344,840
|
|
|
|
|
|
375,462
|
|
|
|
|
|
375,462
|
|
|
|
|
|
328,991
|
|
|
|
|
|
263,932
|
|
|
|
|
|
263,932
|
|
|
|
|
|
737,063
|
|
|
In addition to variable rent payments, the Company has committed to base rent payments at its Houston, San Diego, Seattle, and Washington DC clinics that have been excluded from right-of-use asset and lease obligation balances, as the leases have been executed but have not yet commenced.
|
|
|
|
Expiry
|
|
|
Additional
Rent
Payments
|
|
|
< 1 year
|
|
|
1-2 years
|
|
|
2-3 years
|
|
|
3-4 years
|
|
|
4-5 years
|
|
|
More than
5 years
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Houston Clinic
|
|
|
March 31, 2026
|
|
|
|
|
1,166,515
|
|
|
|
|
|
183,172
|
|
|
|
|
|
231,375
|
|
|
|
|
|
231,375
|
|
|
|
|
|
231,375
|
|
|
|
|
|
231,375
|
|
|
|
|
|
57,844
|
|
|
|
San Diego Clinic
|
|
|
January 31, 2032
|
|
|
|
|
2,689,297
|
|
|
|
|
|
38,426
|
|
|
|
|
|
235,742
|
|
|
|
|
|
242,814
|
|
|
|
|
|
250,098
|
|
|
|
|
|
257,601
|
|
|
|
|
|
1,664,617
|
|
|
|
Seattle Clinic
|
|
|
December 31, 2028
|
|
|
|
|
1,652,889
|
|
|
|
|
|
53,972
|
|
|
|
|
|
217,574
|
|
|
|
|
|
224,321
|
|
|
|
|
|
231,067
|
|
|
|
|
|
237,814
|
|
|
|
|
|
688,142
|
|
|
|
Washington DC Clinic
|
|
|
March 31, 2032
|
|
|
|
|
2,155,693
|
|
|
|
|
|
78,594
|
|
|
|
|
|
112,389
|
|
|
|
|
|
197,369
|
|
|
|
|
|
202,303
|
|
|
|
|
|
207,360
|
|
|
|
|
|
1,357,678
|
|
|
|
|
|
|
|
|
|
|
|
7,664,394
|
|
|
|
|
|
354,164
|
|
|
|
|
|
797,080
|
|
|
|
|
|
895,879
|
|
|
|
|
|
914,843
|
|
|
|
|
|
934,150
|
|
|
|
|
|
3,768,281
|
|
|
Note:
(1)
See “Non-Revenue Generating Projects — Clinical Operations” for additional details.
Jamaica Facility
|
|
|
|
Expiry
|
|
|
Total
|
|
|
1 year
|
|
|
2-3 years
|
|
|
4-5 years
|
|
|
More than
5 years
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Jamaica Facility
|
|
|
April 6, 2023
|
|
|
|
|
880,493
|
|
|
|
|
|
673,135
|
|
|
|
|
|
163,925
|
|
|
|
|
|
43,433
|
|
|
|
|
|
—
|
|
|
In connection with its partnership with UWI, FTNP agreed to lease property from UWI, contribute up to US$1,000,000 of initial capital for the Jamaica Facility and psilocybin research, and a total of US$100,000 to fund student development initiatives at UWI over a 36-month period. $263,121 was transferred from construction in progress to leasehold improvements in the period ended March 31, 2021 (see Note 10 Property Plant and Equipment to the audited consolidated annual financial statements for the fiscal year ended March 31, 2021).
CONTINGENCIES
Litigation
During the prior year, we terminated a lease contract with a lessor due to circumstances which we believe constituted a breach of contract by the lessor. Should we become involved in litigation due to the termination of this contract we believe we have prepared valid legal defenses and that no material exposure exists on the eventual settlement of such litigation. This lease was treated as a short-term lease under IFRS 16 and all payments including security deposit paid were fully expensed during the period ended March 31, 2020.
OUTSTANDING SHARE DATA
The Company has an unlimited number of Common Shares and preferred shares authorized for issuance, of which the following Common Shares are issued and outstanding as at March 31, 2021 and as of the date hereof, on a fully-diluted basis and no preferred shares are issued and outstanding:
|
Class of Securities
|
|
|
Number of
Common Share
Equivalents as at
March 31, 2021
|
|
|
Number of
Common Share
Equivalents as at
March 31, 2020
|
|
|
Common Shares
|
|
|
|
|
57,297,238
|
|
|
|
|
|
20,941,923
|
|
|
|
Warrants
|
|
|
|
|
2,071,090
|
|
|
|
|
|
|
|
|
|
Compensation Warrants
|
|
|
|
|
1,034,868
|
|
|
|
|
|
—
|
|
|
|
FTP Compensation Warrants
|
|
|
|
|
343,269
|
|
|
|
|
|
—
|
|
|
|
Options to purchase Common Shares
|
|
|
|
|
5,150,798
|
|
|
|
|
|
11,377,706
|
|
|
|
Jamaica Facility Shares reserved for issuance
|
|
|
|
|
600,000
|
|
|
|
|
|
—
|
|
|
For additional information on share data please refer to Notes 4, 16, 17 and 18 of the audited annual consolidated financial statements for the fiscal year ended March 31, 2021 and Notes 16 and 17 of the audited annual consolidated financial statements for the period from April 2, 2019 (date of incorporation) to March 31, 2020.
Options
During the current fiscal year, the Company granted 3,085,742 options to employees, directors and consultants. The options vest over a period of 1 to 4 years, are exercisable for a period of 2 to 10 years from issuance, and are exercisable at a price of $0.50 to $8.25 per option. In relation to the Transaction, the Company granted 74,451 options, vested immediately, are exercisable for a period of 1.76 to 2 years from issuance, and are exercisable at a price of $1.76 to $2.00 per option. The Company also issued 9,218,767 Common Shares of the Company on the exercise of options with an exercise price of $0.0001 to $2.00 per Common Share.
During the comparative period ended April 2, 2019 (the date of incorporation) to March 31, 2020, the Company granted 11,377,706 options to employees and consultants. The options vest over a period of 1 to 4 years, are exercisable for a period of 2 to 10 years from issuance, and are exercisable at a price of $0.0001 to $0.50 per option. No options were exercised during this period.
Subsequent to the period ended March 31, 2021, the Company issued 614,888 options to employees and consultants. The options vest over a period of 4 years, are exercisable for a period of 10 years from issuance and are exercisable at a price range of $5.53 to $6.05 per option.
As at March 31, 2021, the Company had 5,150,798 stock options outstanding and as at the date of this MD&A, the Company has 5,670,686 stock options outstanding.
See “Liquidity and Capital Resources” and “Subsequent Events” for details on options.
Warrants
|
|
|
|
FTP
Compensation
Warrants
|
|
|
Compensation
Warrants
|
|
|
Warrants
|
|
|
Total Warrants
|
|
|
|
|
|
#
|
|
|
#
|
|
|
#
|
|
|
#
|
|
|
Issued
|
|
|
|
|
348,769
|
|
|
|
|
|
1,034,868
|
|
|
|
|
|
2,224,100
|
|
|
|
|
|
3,607,737
|
|
|
|
Exercised
|
|
|
|
|
(5,500)
|
|
|
|
|
|
—
|
|
|
|
|
|
(153,010)
|
|
|
|
|
|
(158,510)
|
|
|
|
Balance, March 31, 2021
|
|
|
|
|
343,269
|
|
|
|
|
|
1,034,868
|
|
|
|
|
|
2,071,090
|
|
|
|
|
|
3,449,227
|
|
|
FTP Compensation Warrants
During the current fiscal year, the Company issued 299,753 FTP Compensation Warrants to the underwriter in connection with the completion of the FTP Private Placements which closed on August 14, 2020 (see Note 16 (viii) Share Capital) to the audited annual consolidated financial statements for the fiscal year ended March 31, 2021). In connection with the January BD Offering, the short form prospectus qualified the distribution of 49,016 additional FTP Compensation Warrants, for services rendered by the agents in connection with the FTP Private Placements (see Note 16 (xiii) Share Capital). The warrants have an expiry date of August 14, 2022. Each warrant entitles the holder to purchase one Class A share at $2.00 until the expiry date.
The Company also issued 5,500 Common Shares of the Company on the exercise of the FTP Compensation Warrants with an exercise price of $2.00 per Common Share (see Note 17 Warrants).
Compensation Warrants
During the current fiscal year, the Company issued 169,565 Compensation Warrants to the underwriter in connection with the January BD Offering which was completed on January 5, 2021 (see Note 16 (xiii) Share Capital). The warrants have an expiry date of January 5, 2023. Each Compensation Warrant entitles the holder to purchase one Common Share at $4.50 until expiry.
The Company also issued 763,303 Compensation Warrants to the underwriter in connection with the March BD Offering which was completed on March 17, 2021 (see Note 16 (xiv) Share Capital). The warrants have an expiry date of March 17, 2023. Each Compensation Warrant entitles the holder to purchase one Common Share at $6.50 until expiry. An additional 102,000 Compensation Warrants were issued to a consultant in connection with the March BD Offering.
Warrants
During the current fiscal year, the Company issued 2,224,100 Warrants in connection with the completion of the January BD Offering which closed on January 5, 2021 (see Note 16 (xiii) Share Capital). The warrants have an expiry date of July 5, 2022. Each warrant entitles the holder to purchase one Common Share, at an exercise price of $5.60 until expiry.
The Company also issued 153,010 Common Shares of the Company on the exercise of the Warrants with an exercise price of $5.60 per Common Share.
As at March 31, 2020, there were no warrants issued and outstanding.
The terms of the FTP Compensation Warrants, Compensation Warrants and Warrants specify that these instruments will be settled by Field Trip exchanging a fixed amount of cash for a fixed number of its own Common Shares. These terms meet the “fixed for fixed” criteria outlined in IAS 32 Financial Instruments for the warrants to be classified and accounted for as equity in the consolidated statements of financial position.
See “Liquidity and Capital Resources” and “Subsequent Events” for details on warrants.
Jamaica Facility Shares
Field Trip Psychedelics Inc. will issue 1,200,000 fully paid-up Common Shares to Darwin Inc. (the “Jamaica Facility Shares”); 600,000 upon commencement of research in the newly renovated research facility, 150,000 one year from the initial closing date (“Cliff”), and 450,000 on a prorated basis quarterly, commencing on the first calendar quarter following the Cliff and ending on the date that is 36 months following the Cliff.
On September 25, 2020 Field Trip issued the first installment of the Jamaica Facility shares, being a total of 600,000 Common Shares at a deemed price per Field Trip Common Share of $2.00. As at March 31, 2021, the Company had the remaining 600,000 Common Shares reserved for issuance.
On June 22, 2021 Field Trip issued the second installment of the Jamaica Facility shares of 150,000 Common Shares at a price per share of $6.78 (See Note 36 Subsequent Events in our audited financial statements for the fiscal year ended March 31, 2021).
TRANSACTIONS WITH RELATED PARTIES
Field Trip entered into shareholder loan agreements with two of its advisors for a total of $60,000 in July 2019. The notes are non-interest bearing (i.e., not on commercial terms) and are due on demand or five years from the date of note issuance. These loans are expected to be repaid in full at maturity. The Group measured the loans at fair value at initial recognition using an appropriate market interest rate. The below-market element of the loans was determined at initial recognition as the difference between the loan principal amount and fair value. This difference was recognized in equity as distribution to these shareholders. Total distribution arising from the initial fair value measurement of shareholders’ loan was $13,596. The fair values at initial recognition were accounted for as amortized cost financial assets in accordance with IFRS 9. The amortized cost of the loans as at March 31, 2021 was $50,521 (see Note 9 Other Assets) and total interest income accrued at market rate in profit or loss for the fiscal year then ended was $2,531 (see Note 26 Finance Income (Expense)).
KEY MANAGEMENT PERSONNEL
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, including directors. Key management at March 31, 2021 includes ten directors and executive officers of Field Trip. Key management personnel compensation for the fiscal year ended March 31, 2021 and period ended March 31, 2020 was comprised of:
|
|
|
|
3 months ended
March 31, 2021
|
|
|
3 months ended
March 31, 2020
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation)
to March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Salaries
|
|
|
|
|
733,600
|
|
|
|
|
|
62,500
|
|
|
|
|
|
1,361,495
|
|
|
|
|
|
83,333
|
|
|
|
Share-based compensation (Note 18)
|
|
|
|
|
261,736
|
|
|
|
|
|
37,338
|
|
|
|
|
|
288,148
|
|
|
|
|
|
240,230
|
|
|
|
|
|
|
|
|
995,336
|
|
|
|
|
|
99,838
|
|
|
|
|
|
1,649,643
|
|
|
|
|
|
323,563
|
|
|
Directors and officers of the Group control 35% or 20,060,208 of the outstanding voting shares of the Group.
Grassfed Ventures
During the period ended March 31, 2020, the Group was charged for various capital and operating expenditures by Grassfed Ventures, an entity owned by three of the Group’s directors and executive officers. For the period ended March 31, 2020 amounts charged to the Group at arms-length were recorded as:
|
|
|
|
$
|
|
|
General and administration
|
|
|
|
|
146,067
|
|
|
|
Occupancy costs
|
|
|
|
|
67,000
|
|
|
|
Property, plant and equipment
|
|
|
|
|
9,122
|
|
|
|
Sales and marketing
|
|
|
|
|
616
|
|
|
|
|
|
|
|
|
222,805
|
|
|
There were no accounts payable to Grassfed Ventures as at March 31, 2020.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, revenue and expenses and the related disclosures of contingent assets and liabilities and the determination of our ability to continue as a going concern. We regularly evaluate our estimates and assumptions related to share-based transaction expense, property plant and equipment, intangible assets and shareholder loans. We base our estimates and assumption on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of costs and expenses that are not readily apparent from other sources. Actual results could differ materially from these estimates and assumptions. We review our estimates and underlying assumptions on an ongoing basis. Revisions are recognized in the period in which the estimates are revised and may impact future periods.
The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, have been set out in Note 2 of our audited annual consolidated financial statements for the fiscal year ended March 31, 2021 and are more fully described in Note 3 of our audited consolidated financial statements for the period from April 2, 2019 (date of incorporation) to March 31, 2020.
With the exception of share-based payments (see Note 18), there have been no material changes in any of critical accounting policies and estimates during the current fiscal quarter.
ACCOUNTING CHANGES AND IMPACT OF RECENTLY ISSUED ACCOUNTINGPRONOUNCEMENTS
Accounting standards or amendments to existing accounting standards that have been issued, but have future effective dates, are either not applicable or are not expected to have a significant impact on our financial statements.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Fair Value
IFRS 13 — Fair Value Measurements provides a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs are those that reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions with respect to how market participants would price an asset or liability. These two inputs to measure fair value fall into the following three different levels of the fair value hierarchy:
Level 1 —
Quoted prices in active markets for identical instruments that are observable;
Level 2 —
Quoted prices in active markets for similar instruments; inputs other than quoted prices that are observable and derived from or corroborated by observable market data; and
Level 3 —
Valuations derived from valuation techniques in which one or more significant inputs are unobservable.
The hierarchy requires the use of observable market data when available.
Cash, restricted cash, accounts receivable, and accounts payable and accrued liabilities are all short-term in nature and, as such, their carrying values approximate fair values.
Risks
The Company is exposed to credit risk, liquidity risk, interest rate risk and currency risk. The Company’s Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Audit Committee of the board of directors is responsible for review the Company’s financial risk management policies.
Credit Risk
Credit risk is the risk of an unexpected loss if a counterparty to a financial instrument fails to meet its contractual obligations. The Company is exposed to credit risk on its cash and accounts receivable. The carrying amount of these financial assets represents the maximum credit exposure. The Company’s cash is held on deposit with major banks in Canada, the United States, and Jamaica which we believe lessens the degree of credit risk.
Liquidity Risk
Group manages its liquidity risk by reviewing on an ongoing basis its capital requirements. The Group typically settles its financial obligations in cash. The ability to settle obligations in cash is dependent on the Group raising financing in a timely manner and by maintaining sufficient cash in excess of anticipated needs. As at March 31, 2021, the Group had $39,852,614 of cash and cash equivalents.
Undiscounted contractual obligations as of March 31, 2021 and 2020 are as follows:
March 31, 2021
|
|
|
|
Total
|
|
|
Less than
1 year
|
|
|
1 year to
3 years
|
|
|
3 years to
5 years
|
|
|
Over
5 years
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
5,348,110
|
|
|
|
|
|
5,348,110
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Deferred revenue
|
|
|
|
|
42,318
|
|
|
|
|
|
42,318
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Loan payable
|
|
|
|
|
30,000
|
|
|
|
|
|
—
|
|
|
|
|
|
30,000
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Lease obligations
|
|
|
|
|
9,463,505
|
|
|
|
|
|
1,477,942
|
|
|
|
|
|
2,295,745
|
|
|
|
|
|
1,988,112
|
|
|
|
|
|
3,701,706
|
|
|
|
Total financial liabilities
|
|
|
|
|
14,883,933
|
|
|
|
|
|
6,868,370
|
|
|
|
|
|
2,325,745
|
|
|
|
|
|
1,988,112
|
|
|
|
|
|
3,701,706
|
|
|
|
Total commitments
|
|
|
|
|
10,889,733
|
|
|
|
|
|
1,402,761
|
|
|
|
|
|
2,561,337
|
|
|
|
|
|
2,420,290
|
|
|
|
|
|
4,505,344
|
|
|
|
Total
|
|
|
|
|
25,773,666
|
|
|
|
|
|
8,271,131
|
|
|
|
|
|
4,887,082
|
|
|
|
|
|
4,408,402
|
|
|
|
|
|
8,207,050
|
|
|
March 31, 2020
|
|
|
|
Total
|
|
|
Less than
1 year
|
|
|
1 year to
3 years
|
|
|
3 years to
5 years
|
|
|
Over
5 years
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
577,878
|
|
|
|
|
|
577,878
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Deferred revenue
|
|
|
|
|
2,000
|
|
|
|
|
|
2,000
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Lease obligations
|
|
|
|
|
1,717,571
|
|
|
|
|
|
581,743
|
|
|
|
|
|
1,115,250
|
|
|
|
|
|
20,578
|
|
|
|
|
|
—
|
|
|
|
Total financial liabilities
|
|
|
|
|
2,297,449
|
|
|
|
|
|
1,161,621
|
|
|
|
|
|
1,115,250
|
|
|
|
|
|
20,578
|
|
|
|
|
|
—
|
|
|
|
Total commitments
|
|
|
|
|
260,237
|
|
|
|
|
|
111,530
|
|
|
|
|
|
148,707
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Total
|
|
|
|
|
2,557,686
|
|
|
|
|
|
1,273,151
|
|
|
|
|
|
1,263,957
|
|
|
|
|
|
20,578
|
|
|
|
|
|
—
|
|
|
Interest Rate Risk
Financial instruments that potentially subject the Company to cash flow interest rate risk are those assets and liabilities with a variable interest rate. Currently, the Company has no assets or liabilities with a variable interest rate. Financial assets and financial liabilities that bear interest at fixed rates are subject to fair value interest rate risk. The Company’s lease obligations are at fixed rates of interest.
Currency Risk
The Company is exposed to currency risk related to the fluctuation of foreign exchange rates and the degree of volatility of those rates. Currency risk is limited to the portion of the Company’s business transactions denominated in currencies other than the Canadian dollar, which are primarily expenses in United States dollars. As at March 31, 2021, the Company held USD dollar denominated cash of $45,902,622 USD and had USD dollar denominated accounts payable and accrued liabilities in the amounts of $487,541 USD. Therefore, a 1% change in the foreign exchange rate would have a net impact as at March 31, 2021 of $571,095. USD dollar expenses for the fiscal year ended March 31, 2021 were $6,068,168 USD. Varying the foreign exchange rate for the fiscal year ended March 31, 2021 to reflect a 1% strengthening of the U.S. dollar would have increased the net loss by approximately $80,235 assuming that all other variables remained constant.
SUBSEQUENT EVENTS
TSX Listing
On June 7, 2021 the Common Shares and warrants commenced trading on the TSX under the ticker symbols “FTRP” and “FTRP.WT” respectively. In connection with the TSX listing, the Common Shares and warrants were delisted from the CSE.
NASDAQ Listing
On June 8, 2021, the Company announced that it had applied to list its Common Shares on the NASDAQ.
Option Grants
On April 30, 2021, the Company issued 229,888 options at an issue price of $6.05 per Field Trip Share.
On May 31, 2021, the Company issued 385,000 options at an issue price of $5.53 per Field Trip Share.
Clinic Openings
San Carlos, California
On April 15, 2021, the Company executed a lease agreement to build its San Carlos, California clinic, commencing on September 1, 2021 and ending August 31, 2031. Total commitments under the lease are approximately $3,845,220.
Fredericton, New Brunswick
On April 16, 2021, the Company executed a lease agreement to build its Fredericton, New Brunswick clinic, commencing on August 1, 2021 and ending July 31, 2031. Total commitments under the lease are approximately $685,000.
Vancouver, British Columbia
On April 29, 2021, the Company executed a lease agreement to build its Vancouver, British Columbia clinic, commencing on September 1, 2021 and ending August 31, 2031. Total commitments under the lease are approximately $1,939,712.
Austin, Texas
On June 4, 2021, the Group executed a lease agreement to build its Austin, Texas clinic, commencing on November 1, 2021 and ending March 31, 2032. Total commitments under the lease are approximately $4,442,091.
Stamford, Connecticut
On June 21, 2021, the Group executed a lease agreement to build its Stamford, Connecticut clinic, commencing on December 1, 2021 and ending May 31, 2032. Total commitments under the lease are approximately $1,757,751.
Loan Payable
On June 3, 2021, the Group applied for and received a $20,000 CEBA loan expansion. The loan is interest-free and is in addition to the initial $40,000 CEBA loan received on September 17, 2020. With a total loan payable of $60,000, the debt forgiveness is not available unless the initial $40,000 is repaid. The loan forgiveness is calculated as follows: 25% on the initial $40,000; plus 50% on amounts above $40,000 and up to $60,000. The maximum amount of debt forgiven is $20,000 (see Note 15 Loan Payable to the audited annual consolidated financial statements for the fiscal year ended March 31, 2021).
Jamaica Facility Shares
On June 22, 2021, Field Trip issued the second instalment of the Jamaica Facility shares under the SPA, being a total of 150,000 shares at a price per Field Trip Common Share of $6.78 (see Note 18 Share-based payments).
Exercise of Warrants
On June 22, 2021, 144,377 FTP Compensation Warrants were exercised at a price of $2.00 for gross proceeds of $288,754.
RISKS AND UNCERTAINTIES
The Company’s Annual Information Form of even date herewith sets forth material risks and uncertainties that may affect our business, including our future financing and operating results and could cause our actual results to differ materially from those contained in forward-looking statements we have made in this MD&A. The risks and uncertainties Annual Information Form, which are incorporated in this MD&A by reference) are not the only ones we face. Additional risks and uncertainties not presently known to us or that we believe to be immaterial may also adversely affect our business. Further, if we fail to meet the future expectations of the public market in any given period now that the Company’s shares are listed, the market price of our Common Shares could decline. We operate in a highly competitive environment that involves significant risks and uncertainties, some of which are outside of our control. (See “Risk Factors” in the Annual Information Form for details).
Exhibit 99.3
FIELD TRIP HEALTH LTD.
(FORMERLY NEWTON ENERGY CORPORATION)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED MARCH 31, 2021
AND
FOR THE PERIOD FROM APRIL 2, 2019
(DATE OF INCORPORATION) TO MARCH 31, 2020
(Audited, expressed in Canadian Dollars, unless otherwise noted)
Independent Auditor’s Report
To the Shareholders of Field Trip Health Limited (formerly Newton Energy Corporation):
Opinion
We have audited the consolidated financial statements of Field Trip Health Limited (formerly Newton Energy Corporation) and its subsidiaries (the “Group”), which comprise the consolidated statements of financial position as at March 31, 2021 and 2020, and the consolidated statements of loss and comprehensive loss, changes in equity and cash flows for the year ended March 31, 2021, and for the period from April 2, 2019 (date of incorporation) to March 31, 2020, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at March 31, 2021 and 2020, and its consolidated financial performance and its consolidated cash flows for the year ended March 31, 2021 and for the period from April 2, 2019 (date of incorporation) to March 31, 2020 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Other Information
Management is responsible for the other information. The other information comprises Management’s Discussion and Analysis.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
•
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
•
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
•
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is Giacomo Angelini.
|
|
|
|
|
|
|
|
|
Waterloo, Ontario
June 24, 2021
|
|
|
Chartered Professional Accountants
Licensed Public Accountants
|
|
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
|
(Expressed in Canadian Dollars)
|
|
|
Notes
|
|
|
As at
March 31, 2021
|
|
|
As at
March 31, 2020
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
38,469,057
|
|
|
|
|
|
9,590,758
|
|
|
|
Funds held in trust
|
|
|
5
|
|
|
|
|
795,516
|
|
|
|
|
|
—
|
|
|
|
Restricted cash
|
|
|
6
|
|
|
|
|
588,041
|
|
|
|
|
|
100,000
|
|
|
|
Short-term investments
|
|
|
7
|
|
|
|
|
72,552,870
|
|
|
|
|
|
—
|
|
|
|
Accounts receivable
|
|
|
8
|
|
|
|
|
813,761
|
|
|
|
|
|
203,112
|
|
|
|
Other assets
|
|
|
9
|
|
|
|
|
2,890,197
|
|
|
|
|
|
133,916
|
|
|
|
TOTAL CURRENT ASSETS
|
|
|
|
|
|
|
|
116,109,442
|
|
|
|
|
|
10,027,786
|
|
|
|
NON-CURRENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
10
|
|
|
|
|
2,198,817
|
|
|
|
|
|
575,446
|
|
|
|
Intangible assets
|
|
|
11
|
|
|
|
|
427,124
|
|
|
|
|
|
124,980
|
|
|
|
Right-of-use assets
|
|
|
12
|
|
|
|
|
7,182,358
|
|
|
|
|
|
1,632,661
|
|
|
|
Other non-current assets
|
|
|
9
|
|
|
|
|
532,264
|
|
|
|
|
|
180,222
|
|
|
|
TOTAL NON-CURRENT ASSETS
|
|
|
|
|
|
|
|
10,340,563
|
|
|
|
|
|
2,513,309
|
|
|
|
TOTAL ASSETS
|
|
|
|
|
|
|
|
126,450,005
|
|
|
|
|
|
12,541,095
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
14
|
|
|
|
|
5,348,110
|
|
|
|
|
|
577,878
|
|
|
|
Deferred revenue
|
|
|
|
|
|
|
|
42,318
|
|
|
|
|
|
2,000
|
|
|
|
Current portion of lease obligations
|
|
|
13
|
|
|
|
|
1,070,435
|
|
|
|
|
|
462,871
|
|
|
|
TOTAL CURRENT LIABILITIES
|
|
|
|
|
|
|
|
6,460,863
|
|
|
|
|
|
1,042,749
|
|
|
|
NON-CURRENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan payable
|
|
|
15
|
|
|
|
|
23,112
|
|
|
|
|
|
—
|
|
|
|
Lease obligations
|
|
|
13
|
|
|
|
|
6,403,372
|
|
|
|
|
|
1,078,334
|
|
|
|
TOTAL LIABILITIES
|
|
|
|
|
|
|
|
12,887,347
|
|
|
|
|
|
2,121,083
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
4, 16
|
|
|
|
|
130,784,175
|
|
|
|
|
|
12,781,270
|
|
|
|
Warrants
|
|
|
17
|
|
|
|
|
6,370,660
|
|
|
|
|
|
—
|
|
|
|
Share-based payments reserve
|
|
|
18
|
|
|
|
|
1,832,224
|
|
|
|
|
|
330,703
|
|
|
|
Accumulated other comprehensive income (loss)
|
|
|
|
|
|
|
|
327,302
|
|
|
|
|
|
(49,521)
|
|
|
|
Retained deficit
|
|
|
|
|
|
|
|
(25,751,703)
|
|
|
|
|
|
(2,634,096)
|
|
|
|
Non-controlling interest
|
|
|
28
|
|
|
|
|
—
|
|
|
|
|
|
(8,344)
|
|
|
|
TOTAL EQUITY
|
|
|
|
|
|
|
|
113,562,658
|
|
|
|
|
|
10,420,012
|
|
|
|
TOTAL LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
126,450,005
|
|
|
|
|
|
12,541,095
|
|
|
|
Contingencies (Note 35) and Commitments (Note 30)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsequent events (Note 36)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approved on behalf of the Board of Directors:
|
|
|
|
|
|
|
/s/ Joseph Del Moral
Director
|
|
|
/s/ Helen Boudreau
Director
|
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
|
(Expressed in Canadian Dollars)
|
|
|
Notes
|
|
|
For the
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation)
to March 31, 2020
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
REVENUE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient services
|
|
|
3, 25
|
|
|
|
|
960,655
|
|
|
|
|
|
1,000
|
|
|
|
Other revenue
|
|
|
|
|
|
|
|
240
|
|
|
|
|
|
—
|
|
|
|
Total revenue
|
|
|
|
|
|
|
|
960,895
|
|
|
|
|
|
1,000
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administration
|
|
|
20
|
|
|
|
|
11,161,893
|
|
|
|
|
|
2,310,076
|
|
|
|
Occupancy costs
|
|
|
21
|
|
|
|
|
897,391
|
|
|
|
|
|
317,476
|
|
|
|
Sales and marketing
|
|
|
22
|
|
|
|
|
1,630,223
|
|
|
|
|
|
305,710
|
|
|
|
Research and development
|
|
|
23
|
|
|
|
|
3,417,690
|
|
|
|
|
|
193,192
|
|
|
|
Depreciation and amortization
|
|
|
24
|
|
|
|
|
1,394,404
|
|
|
|
|
|
146,320
|
|
|
|
Patient services
|
|
|
25
|
|
|
|
|
1,544,328
|
|
|
|
|
|
9,403
|
|
|
|
Total operating expenses
|
|
|
|
|
|
|
|
20,045,929
|
|
|
|
|
|
3,282,177
|
|
|
|
OTHER INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance expense
|
|
|
26
|
|
|
|
|
(252,259)
|
|
|
|
|
|
(19,907)
|
|
|
|
Other expense
|
|
|
27
|
|
|
|
|
(1,600,172)
|
|
|
|
|
|
672,760
|
|
|
|
Listing expense
|
|
|
4
|
|
|
|
|
(2,180,142)
|
|
|
|
|
|
—
|
|
|
|
Net loss before income taxes
|
|
|
|
|
|
|
|
(23,117,607)
|
|
|
|
|
|
(2,628,324)
|
|
|
|
Income taxes
|
|
|
34
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
(23,117,607)
|
|
|
|
|
|
(2,628,324)
|
|
|
|
Exchange gain (loss) from translation of foreign subsidiaries
|
|
|
|
|
|
|
|
377,341
|
|
|
|
|
|
(50,041)
|
|
|
|
NET LOSS AND COMPREHENSIVE LOSS
|
|
|
|
|
|
|
|
(22,740,266)
|
|
|
|
|
|
(2,678,365)
|
|
|
|
TOTAL COMPREHENSIVE LOSS ATTRIBUTABLE TO:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders of Field Trip Health Ltd.
|
|
|
|
|
|
|
|
(22,740,266)
|
|
|
|
|
|
(2,670,021)
|
|
|
|
Non-controlling interest
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
(8,344)
|
|
|
|
|
|
|
|
|
|
|
|
(22,740,266)
|
|
|
|
|
|
(2,678,365)
|
|
|
|
NET LOSS PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
19
|
|
|
|
|
(0.70)
|
|
|
|
|
|
(0.26)
|
|
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
|
|
|
|
Notes
|
|
|
Share Capital
|
|
|
Warrant
Reserve
|
|
|
Share-based
Payment
Reserve
|
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
Retained
Deficit
|
|
|
Non-
controlling
Interest
|
|
|
Shareholders’
Equity
|
|
|
|
|
|
|
|
|
# Shares
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Balance, April 1, 2020
|
|
|
|
|
|
|
|
20,941,923
|
|
|
|
|
|
12,781,270
|
|
|
|
|
|
—
|
|
|
|
|
|
330,703
|
|
|
|
|
|
(50,041)
|
|
|
|
|
|
(2,641,920)
|
|
|
|
|
|
8,344
|
|
|
|
|
|
10,428,356
|
|
|
|
Share issuance
|
|
|
4, 16
|
|
|
|
|
26,182,932
|
|
|
|
|
|
126,349,164
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
126,349,164
|
|
|
|
Share issuance cost
|
|
|
16
|
|
|
|
|
—
|
|
|
|
|
|
(11,835,186)
|
|
|
|
|
|
3,602,378
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(8,232,808)
|
|
|
|
Warrants issuance
|
|
|
17
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
3,202,704
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
3,202,704
|
|
|
|
Warrants issuance cost
|
|
|
17
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(225,109)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(225,109)
|
|
|
|
Share-based payments
|
|
|
18
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
2,039,387
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
2,039,387
|
|
|
|
Warrants exercised
|
|
|
18
|
|
|
|
|
158,510
|
|
|
|
|
|
1,077,169
|
|
|
|
|
|
(209,313)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
867,856
|
|
|
|
Stock options exercised
|
|
|
18
|
|
|
|
|
9,218,767
|
|
|
|
|
|
821,546
|
|
|
|
|
|
—
|
|
|
|
|
|
(612,848)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
208,698
|
|
|
|
Reverse takeover transaction (“RTO”)
|
|
|
4
|
|
|
|
|
795,106
|
|
|
|
|
|
1,590,212
|
|
|
|
|
|
—
|
|
|
|
|
|
74,982
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
1,665,194
|
|
|
|
Exchange gain from translation of foreign subsidiaries
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
376,790
|
|
|
|
|
|
(1,960)
|
|
|
|
|
|
59
|
|
|
|
|
|
374,889
|
|
|
|
Purchase of non-controlling interest
|
|
|
28
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
553
|
|
|
|
|
|
9,784
|
|
|
|
|
|
(10,337)
|
|
|
|
|
|
—
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(23,117,607)
|
|
|
|
|
|
1,934
|
|
|
|
|
|
(23,115,673)
|
|
|
|
Balance, March 31, 2021
|
|
|
|
|
|
|
|
57,297,238
|
|
|
|
|
|
130,784,175
|
|
|
|
|
|
6,370,660
|
|
|
|
|
|
1,832,224
|
|
|
|
|
|
327,302
|
|
|
|
|
|
(25,751,703)
|
|
|
|
|
|
—
|
|
|
|
|
|
113,562,658
|
|
|
|
|
|
|
Notes
|
|
|
Share Capital
|
|
|
Warrant
Reserve
|
|
|
Share-based
Payment
Reserve
|
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
Retained
Deficit
|
|
|
Non-
controlling
Interest
|
|
|
Shareholders’
Equity
|
|
|
|
|
|
|
|
|
# Shares
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Balance, April 2, 2019
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Share issuance — Class A
|
|
|
16
|
|
|
|
|
11,510,900
|
|
|
|
|
|
1,605,027
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
1,605,027
|
|
|
|
Share issuance — Class B
|
|
|
16
|
|
|
|
|
9,431,023
|
|
|
|
|
|
11,195,540
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
11,195,540
|
|
|
|
Share issuance cost
|
|
|
16
|
|
|
|
|
—
|
|
|
|
|
|
(19,297)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(19,297)
|
|
|
|
Share-based payments
|
|
|
18
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
330,703
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
330,703
|
|
|
|
Exchange loss from translation
of foreign subsidiaries
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(50,041)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(50,041)
|
|
|
|
Shareholder distributions from
issuance of below-market
loans
|
|
|
33
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(13,596)
|
|
|
|
|
|
—
|
|
|
|
|
|
(13,596)
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(2,628,324)
|
|
|
|
|
|
—
|
|
|
|
|
|
(2,628,324)
|
|
|
|
Balance, March 31, 2020
|
|
|
|
|
|
|
|
20,941,923
|
|
|
|
|
|
12,781,270
|
|
|
|
|
|
—
|
|
|
|
|
|
330,703
|
|
|
|
|
|
(50,041)
|
|
|
|
|
|
(2,641,920)
|
|
|
|
|
|
—
|
|
|
|
|
|
10,420,012
|
|
|
|
Less: equity attributable to non-controlling interest holders
|
|
|
28
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
520
|
|
|
|
|
|
7,824
|
|
|
|
|
|
—
|
|
|
|
|
|
8,344
|
|
|
|
Equity attributable to parent
|
|
|
|
|
|
|
|
20,941,923
|
|
|
|
|
|
12,781,270
|
|
|
|
|
|
—
|
|
|
|
|
|
330,703
|
|
|
|
|
|
(49,521)
|
|
|
|
|
|
(2,634,096)
|
|
|
|
|
|
—
|
|
|
|
|
|
10,428,356
|
|
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Canadian dollars in thousands)
|
|
|
Notes
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation) to
March 31, 2020
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
(23,117,607)
|
|
|
|
|
|
(2,628,324)
|
|
|
|
Items not involving current cash flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
1,394,404
|
|
|
|
|
|
146,320
|
|
|
|
Share-based payments
|
|
|
18
|
|
|
|
|
3,043,419
|
|
|
|
|
|
330,703
|
|
|
|
Fair value gain on government assistance
|
|
|
|
|
|
|
|
1,793
|
|
|
|
|
|
—
|
|
|
|
Interest expense on lease commitments
|
|
|
26
|
|
|
|
|
301,503
|
|
|
|
|
|
22,562
|
|
|
|
Interest income on shareholders’ loan
|
|
|
26
|
|
|
|
|
(2,531)
|
|
|
|
|
|
(1,586)
|
|
|
|
Interest income on refundable lease deposits
|
|
|
26
|
|
|
|
|
(7,549)
|
|
|
|
|
|
(951)
|
|
|
|
Interest income on short term investments
|
|
|
|
|
|
|
|
(3,457)
|
|
|
|
|
|
—
|
|
|
|
Unrealized foreign exchange loss
|
|
|
27
|
|
|
|
|
78,420
|
|
|
|
|
|
1,111
|
|
|
|
Reverse take over costs
|
|
|
4
|
|
|
|
|
1,860,916
|
|
|
|
|
|
—
|
|
|
|
Government assistance — CEBA loan
|
|
|
|
|
|
|
|
(18,681)
|
|
|
|
|
|
—
|
|
|
|
Net change in non-cash working capital
|
|
|
29
|
|
|
|
|
58,639
|
|
|
|
|
|
199,724
|
|
|
|
CASH USED IN OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
(16,410,731)
|
|
|
|
|
|
(1,930,441)
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of short term investments
|
|
|
|
|
|
|
|
(72,549,413)
|
|
|
|
|
|
—
|
|
|
|
Acquisition of property, plant and equipment
|
|
|
10
|
|
|
|
|
(1,978,790)
|
|
|
|
|
|
(589,482)
|
|
|
|
Acquisition of intangible assets
|
|
|
11
|
|
|
|
|
(363,311)
|
|
|
|
|
|
(126,974)
|
|
|
|
Refundable security deposit paid for right-of-use assets
|
|
|
|
|
|
|
|
(181,256)
|
|
|
|
|
|
(100,986)
|
|
|
|
Non-refundable security deposit paid for right-of-use assets
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
(123,465)
|
|
|
|
CASH USED IN INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
(75,072,770)
|
|
|
|
|
|
(940,907)
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds on issuance of common shares
|
|
|
16
|
|
|
|
|
124,795,187
|
|
|
|
|
|
12,732,645
|
|
|
|
Proceeds on issuance of warrants
|
|
|
17
|
|
|
|
|
3,202,704
|
|
|
|
|
|
—
|
|
|
|
Proceeds from exercise of stock options
|
|
|
16
|
|
|
|
|
208,698
|
|
|
|
|
|
—
|
|
|
|
Proceeds from exercise of warrants
|
|
|
17
|
|
|
|
|
867,856
|
|
|
|
|
|
—
|
|
|
|
Share issuance cost paid
|
|
|
4, 16
|
|
|
|
|
(6,796,583)
|
|
|
|
|
|
(11,375)
|
|
|
|
Warrant issuance cost paid
|
|
|
|
|
|
|
|
(225,109)
|
|
|
|
|
|
—
|
|
|
|
Repayment of lease obligation
|
|
|
13
|
|
|
|
|
(806,651)
|
|
|
|
|
|
(108,907)
|
|
|
|
Loans received
|
|
|
15
|
|
|
|
|
40,000
|
|
|
|
|
|
—
|
|
|
|
CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
121,286,102
|
|
|
|
|
|
12,612,363
|
|
|
|
Net change in cash during the period
|
|
|
|
|
|
|
|
29,802,601
|
|
|
|
|
|
9,741,015
|
|
|
|
Effect of exchange rate on changes in cash
|
|
|
|
|
|
|
|
359,255
|
|
|
|
|
|
(50,257)
|
|
|
|
Cash and cash equivalent at beginning of the year/period
|
|
|
|
|
|
|
|
9,690,758
|
|
|
|
|
|
—
|
|
|
|
CASH AND CASH EQUIVALENT AT END OF YEAR/PERIOD
|
|
|
|
|
|
|
|
39,852,614
|
|
|
|
|
|
9,690,758
|
|
|
|
SUPPLEMENTAL INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
38,469,057
|
|
|
|
|
|
9,590,758
|
|
|
|
Funds held in trust
|
|
|
|
|
|
|
|
795,516
|
|
|
|
|
|
—
|
|
|
|
Restricted cash
|
|
|
|
|
|
|
|
588,041
|
|
|
|
|
|
100,000
|
|
|
|
CASH AND CASH EQUIVALENT AT END OF YEAR/PERIOD
|
|
|
|
|
|
|
|
39,852,614
|
|
|
|
|
|
9,690,758
|
|
|
|
Composed of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
5,387,883
|
|
|
|
|
|
9,690,758
|
|
|
|
Cash equivalents
|
|
|
|
|
|
|
|
34,464,731
|
|
|
|
|
|
—
|
|
|
|
Interest income received
|
|
|
|
|
|
|
|
303,124
|
|
|
|
|
|
22,644
|
|
|
|
Interest expense paid
|
|
|
|
|
|
|
|
35,517
|
|
|
|
|
|
51
|
|
|
Represented by:
The accompanying notes are an integral part of these Consolidated Financial Statements.
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
1.
NATURE OF OPERATIONS
Field Trip Health Ltd. (formerly Newton Energy Corporation) (the “Group”, the “Company” or “Field Trip”) was formed on September 30, 2008, pursuant to an amalgamation under the Business Corporations Act (Alberta). Prior to October 1, 2020, the Company’s operations were conducted through Field Trip Psychedelics Inc. (“FTP”). FTP was incorporated under the laws of the province of Ontario, Canada as Field Trip Ventures Inc. on April 2, 2019. On October 10, 2019, the Company amended its name to Field Trip Psychedelics Inc. The Company’s registered office and head office is located at 30 Duncan Street, Suite 401, Toronto, ON, M5V 2C3.
On October 1, 2020, FTP completed a reverse takeover transaction (the “Transaction”) with Newton Energy Corporation (“Newton”) and Newton’s wholly-owned subsidiary Newton Energy Subco Limited (“Newton Subco”). The Transaction constituted a Reverse Takeover under applicable securities law and was structured as a three-cornered amalgamation, which resulted in FTP becoming a wholly-owned subsidiary of Newton by amalgamating with Newton Subco, and the security holders of FTP becoming security holders of Newton. As a result, the consolidated statements of financial position are presented as a continuance of FTP and the comparative figures presented are those of FTP (see Note 4 Reverse Takeover for details). Immediately prior to the closing of the Transaction, Newton filed an Article of Amendment to change its name from Newton Energy Corporation to “Field Trip Health Ltd.”
Field Trip is an international organization focused on blending operational execution with strategic investment across all aspects of the psychedelics value chain. Through its wholly owned subsidiary Field Trip Natural Products Ltd. (“FTNP”) and Field Trip Psychedelics research division, “Field Trip Discovery” performs research on botanical psychedelics and psychedelic-based molecules for future therapeutic application of select mental health indications. Through its wholly owned subsidiaries Field Trip Health Canada Inc. (formerly Field Trip Health Inc.), Field Trip Health USA Inc. (formerly Field Trip Ventures USA Inc.) and Field Trip Health B.V., “Field Trip Health” is building a network of world class clinics focused on psychedelics-assisted therapies. Field Trip Digital LLC, a wholly owned subsidiary of Field Trip Health USA Inc., is focused on developing digital teletherapy tools. “Trip App” is a mobile software application which provides users with a framework and tools for self-directed consciousness-expanding activities and features mood tracking, personalized music, trip record keeping, guided journaling, voice recording, and mindfulness content. “Portal” is a digital health platform which supports clients participating in psychedelic therapies at Field Trip Health centers.
![[MISSING IMAGE: TM2117321D3-FC_FIELDBW.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093537_TM2117321D3-FC_FIELDBW.JPG)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
2.
BASIS OF PREPARATION
Statement of Compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS), as issued by the International Accounting Standards Board (“IASB”) and interpreted by the IFRS Interpretations Committee (“IFRIC”).
These consolidated financial statements were approved for issue by the Board of Directors on June 24, 2021.
Basis of Presentation
These consolidated financial statements have been prepared on a going concern basis, under the historical cost convention, except for certain financial instruments that are measured at fair value, as detailed in the Group’s accounting policies in Note 3.
Functional Currency
The Group’s functional currency is the Canadian dollar. Transactions undertaken in foreign currencies are translated into Canadian dollars at daily exchange rates prevailing when the transactions occur. Monetary assets and liabilities denominated in foreign currencies are translated at period-end exchange rates and non-monetary items are translated at historical exchange rates. Realized and unrealized exchange gains and losses are recognized in the consolidated statements of loss and comprehensive loss.
The assets and liabilities of foreign operations are translated into Canadian dollars using the period-end exchange rates. Income, expenses, and cash flows of foreign operations are translated into Canadian dollars using average exchange rates. Exchange differences resulting from the translation of foreign operations into Canadian dollars are recognized in other comprehensive (loss) income and accumulated in equity.
Basis of Consolidation
These consolidated financial statements include the accounts of the Group, its subsidiaries and ketamine clinics in the United States that are owned solely by state-licensed physicians and organized as physician practices or professional medical corporations (“PCs”).
Subsidiaries
|
Subsidiary
|
|
|
Jurisdiction
|
|
|
Functional Currency
|
|
|
% Ownership
|
|
|
Field Trip Psychedelics Inc.
|
|
|
Ontario, Canada
|
|
|
Canadian Dollars
|
|
|
|
|
100%
|
|
|
|
Field Trip Health Canada Inc.
|
|
|
Ontario, Canada
|
|
|
Canadian Dollars
|
|
|
|
|
100%
|
|
|
|
Field Trip Health USA Inc.
|
|
|
Delaware, USA
|
|
|
United States Dollars
|
|
|
|
|
100%
|
|
|
|
Field Trip Health B.V.
|
|
|
Netherlands
|
|
|
Euros
|
|
|
|
|
100%
|
|
|
|
Field Trip Digital LLC(i)
|
|
|
Delaware, USA
|
|
|
United States Dollars
|
|
|
|
|
100%
|
|
|
|
Field Trip Natural Products Limited(ii)
|
|
|
Kingston, Jamaica
|
|
|
United States Dollars
|
|
|
|
|
100%
|
|
|
(i)
Field Trip Digital LLC is a wholly owned subsidiary of Field Trip Health USA Inc.
(ii)
On June 3, 2020, Field Trip Psychedelics Inc., Darwin Inc., a third party, and Field Trip Natural Products Limited (“FTNP”) entered into a Share Purchase Agreement whereby Field Trip Psychedelics Inc. purchased 120 shares of FTNP from Darwin Inc. for a nominal amount of $120 USD. As a result of the share transfer, the Group increased its ownership from 20% to 100% of the authorized capital of FTNP. The Company as part of this arrangement entered into a share-based compensation agreement with Darwin Inc. as detailed in Note 18 Share-based Payments.
Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly and indirectly, to govern the financial and operating policies of an entity and be exposed to the variable returns from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date the control ceases. All significant intercompany balances and transactions have been eliminated upon consolidation.
Professional Medical Corporations (PCs)
Field Trip’s agreements with the PCs generally consist of Management Services Agreements (“MSAs”), which provide for various administrative and management services to be provided by the Company to the PC, and Succession Agreements, which provide for transition of ownership of the PCs under certain conditions.
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
2.
BASIS OF PREPARATION (Continued)
The MSAs typically provide that the term of the arrangements is twenty years with automatic renewal for successive five-year terms, subject to termination by Field Trip or the PC in certain specified circumstances. The Company has the right to receive income as an ongoing administrative fee in an amount that represents fair value of services rendered and has provided all financial support through loans to the PCs. Field Trip is the sole and exclusive provider of all non-medical business management, information management, marketing, support and personnel, equipment and supplies as are reasonably necessary for the day-to-day administration, operation and non-medical management of the PCs. The Company directs and trains PC staff in the use of its proprietary psychotherapy protocols and establishes the guidelines for the employment and compensation of the physicians and other employees of the PCs. The PCs are branded as Field Trip clinics using its marketing collaterals and logo. In addition, Field Trip holds a security interest in all PC revenue and proceeds as collateral.
Under the terms of the Succession Agreement, Field Trip has the right to designate a successor shareholder in the event of a succession event. The outstanding voting equity instruments of the PCs are owned by successor shareholders appointed by Field Trip or other shareholders who are also subject to the terms of the Succession Agreements.
Based upon the provisions of these agreements, Field Trip determined that the PCs are controlled by the Company. The contractual arrangement to provide management services allows Field Trip to direct the economic activities that most significantly affect the PC. Accordingly, the Company is the primary beneficiary of the PCs and consolidates the PCs in accordance with IFRS 10 Consolidated Financial Statements. Furthermore, as a direct result of nominal initial equity contributions by the physicians, the financial support Field Trip provides to the PCs (e.g., loans) and the provisions of the successor shareholder succession arrangements described above, the interests held by noncontrolling interest holders lack economic substance and do not provide them with the ability to participate in the residual profits or losses generated by the PCs. Therefore, all income and expenses recognized by the PCs are allocated to Field Trip shareholders. The aggregate carrying value of the current assets and liabilities included in the consolidated balance sheets for the PCs after elimination of intercompany transactions and balances were $525,985 and $224,535 respectively, as of March 31, 2021 and $nil and $nil, respectively, as of March 31, 2020. The PCs did not have noncurrent assets or liabilities.
3.
SIGNIFICANT ACCOUNTING POLICIES
The accounting policies and use of estimates and judgments described below have been applied consistently in these consolidated financial statements by the Group and its subsidiaries.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash in bank, short-term deposits, cashable guaranteed investment certificates (GICs) and non-redeemable GICs held at financial institutions with an original maturity from the date of acquisition of 90 days or less.
Restricted Cash
Restricted cash comprises cash held as collateral against FTP’s credit card limit and cash held at the PCs which, under the terms of the MSA, must be used to pay PC personnel and expenses before satisfying prior and current management fees.
Short-Term Investments
Short-term investments comprise GICs with an original maturity from the date of acquisition of greater than 90 days and less than 365 days.
Accounts Receivable
Accounts receivable are non-interest bearing, unsecured obligations due from patients and third-party payors. The Group makes an implicit allowance for potentially uncollectible amounts to arrive at net receivables through its revenue recognition policy. In accordance with IFRS 9 Financial Instruments (“IFRS 9”), the Group evaluates the credit risk on accounts receivable and measures a loss allowance at an amount equal to the expected credit losses for the subsequent 12-month period. Estimates of expected credit losses take into account the Group’s collection history, deterioration of collection rates during the average credit period, as well as observable changes in and forecasts of future economic conditions that affect default risk. Where applicable, the carrying amount of a trade receivable is reduced for any expected credit losses through the use of an allowance for doubtful accounts (“AFDA”) provision. Changes in the AFDA provision are recognized in the statement of loss and comprehensive loss. When the Group determines that no recovery of the amount owing is possible, the amount is deemed irrecoverable and the financial asset is written off.
The methodology to arrive at net receivables is reviewed by management periodically. The balance of accounts receivable represents management’s estimate of the net realizable value of receivables after discounts and contractual adjustments. The Group performs
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
an estimation and review process periodically to identify instances on a timely basis where such estimates need to be revised to accurately assess the amount of expected revenues.
Property, Plant and Equipment
Property, plant and equipment (“PP&E”) is recorded at cost, net of accumulated depreciation and/or accumulated impairment losses.
The Group allocates the amount initially recognized in respect of an item of PP&E to its significant components and amortizes each such part separately. Residual values, method of depreciation and useful lives of the assets are reviewed annually or more frequently if required, and any changes in these estimates are adjusted prospectively.
The following estimates were effective for the fiscal year ended March 31, 2021:
|
|
Leasehold improvements
|
|
|
Shorter of asset life and term of lease
|
|
|
Straight-line
|
|
|
|
Furniture and fixtures
|
|
|
5 years
|
|
|
Straight-line
|
|
|
|
Medical and laboratory equipment
|
|
|
5 years
|
|
|
Straight-line
|
|
|
|
Computer equipment and software
|
|
|
3 years
|
|
|
Straight-line
|
|
|
|
Construction in progress
|
|
|
No term
|
|
|
Not amortized
|
|
Construction in progress is transferred to property, plant and equipment when the assets are available for use and amortization of the assets commences at that point.
Intangible Assets
Finite life intangible assets are recorded at cost less accumulated amortization and accumulated impairment losses. Amortization is provided on a straight-line basis over the following terms:
|
|
Field Trip Health website
|
|
|
4 years
|
|
|
Straight-line
|
|
|
|
Field Trip Health Portal
|
|
|
4 years
|
|
|
Straight-line
|
|
|
|
Trip App
|
|
|
4 years
|
|
|
Straight-line
|
|
|
|
Software in progress
|
|
|
4 years
|
|
|
Straight-line
|
|
The estimated success of applications and useful life are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
Indefinite intangible assets are deemed to have no foreseeable limit over which the asset is expected to generate net cash inflows. Following initial recognition, intangible assets with indefinite useful lives are carried at cost less any accumulated impairment losses and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.
IFRS 16 Leases
IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model, with certain exemptions. The standard includes two recognition exemptions for lessees — leases of “low-value” assets and short-term leases with a lease term of 12 months or less. The Group has elected not to recognize right-of-use assets and lease liabilities for short-term lease that have a lease term of 12 months or less and leases of low value assets. The lease payments associated with these leases are expensed on a straight-line basis over the lease term.
Right-of-use assets
Leased assets are capitalized at the commencement date of the lease and are comprised of the initial lease liability amount, initial direct costs incurred when entering the lease, less any lease incentives received. Right-of-use assets are amortized on a straight-line basis over the life of the underlying lease agreement.
Lease obligations
The lease liability is measured at the present value of the fixed payments and variable lease payments that pertain to an index or rate, net of cash lease incentives that are not paid at the commencement date. Lease payments are apportioned between interest expense
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
and reduction of the lease liability using the rate implicit in the lease to achieve a constant rate of interest on the remaining balance of the liability. If this rate cannot be readily determined, the Group uses its incremental borrowing rate.
Impairment of Non-Financial Assets
The carrying amounts of the Group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If such an indication exists, the recoverable amount is estimated. For the purpose of measuring recoverable amounts, assets are grouped at the lowest levels for which there are separately identifiable cash flows or cash generating units (CGUs). The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use (being the present value of the expected future cash flows of the relevant asset or CGU). An impairment loss is recognized for the amount by which the asset’s carrying value exceeds its recoverable amount.
An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
IFRS 9 Financial Instruments
Financial assets and liabilities, including derivatives, are recorded on the statement of financial position when the Group becomes a party to the financial instrument or derivative contract.
Classification and Measurement of Financial Instruments
The Group measures a financial instrument at its fair value plus, in the case of a financial instrument not at fair value through profit (loss) (“FVTPL”), transaction costs that are directly attributable to the acquisition of the financial instrument. Transaction costs of financial instruments carried at fair value through FVTPL are expensed in profit (loss).
Subsequent measurement of financial assets and liabilities depends on the Group’s business model for managing the asset or liability and the cash flow characteristics of the asset or liability. There are three measurement categories in which the Group classifies its financial instruments:
Amortized Cost
Financial assets and liabilities that are held for collection or payment of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. Finance income or expense from these financial instruments is recorded in the statement of loss and comprehensive loss using the effective interest rate method.
Fair Value through Other Comprehensive Income (“FVOCI”)
Financial assets and liabilities that are held for collection or payment of contractual cash flows and for selling or acquiring the financial instruments. Changes in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses, which are recognized in net income (loss). When the financial asset or liability is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to net income (loss).
Fair Value through Profit and Loss (“FVTPL”)
Financial assets and liabilities that do not meet the criteria for amortized cost or FVOCI are measured at fair value through profit (loss). Subsequent fair value gains or losses are recognized in profit or loss to the extent they are not part of a designated hedging relationship. The net gain or loss recognized in profit or loss includes any dividend or interest earned on the financial asset and is included in the ‘other gains and losses’ line item (if any). Fair value is determined in the manner described in Note 32 Financial Instruments.
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
The Group has classified its financial instruments as follows:
|
Financial instrument
|
|
|
Classification
|
|
|
Measurement
|
|
|
Fair Value
Hierarchy
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
FVTPL
|
|
|
Fair Value
|
|
|
Level 1
|
|
|
Funds held in trust
|
|
|
FVTPL
|
|
|
Fair Value
|
|
|
Level 1
|
|
|
Restricted cash
|
|
|
FVTPL
|
|
|
Fair Value
|
|
|
Level 1
|
|
|
Short-term investments
|
|
|
Amortized cost
|
|
|
Amortized cost
|
|
|
N/A
|
|
|
Accounts receivable
|
|
|
Amortized cost
|
|
|
Amortized cost
|
|
|
N/A
|
|
|
Shareholder loan receivable
|
|
|
Amortized cost
|
|
|
Amortized cost
|
|
|
N/A
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
Amortized cost
|
|
|
Amortized cost
|
|
|
N/A
|
|
|
Loan payable
|
|
|
Amortized cost
|
|
|
Amortized cost
|
|
|
N/A
|
|
Impairment of Financial Assets
For the impairment of financial assets under IFRS 9, the Group is required to apply an expected credit loss (“ECL”) model to all financial assets not held at FVTPL, where credit losses that are expected to transpire in future years are provided for, irrespective of whether a loss event has occurred or not as at the date of Statement of Financial Position. The Group recognizes a loss allowance for expected credit losses on loan receivables which are measured at amortized cost. The measurement of the loss allowance depends upon the Group’s assessment at the end of each reporting period as to whether the financial instrument’s credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12- month expected credit loss allowance is estimated. This represents a portion of the asset’s lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset’s lifetime expected credit losses. The amount of expected credit loss recognized is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate.
The carrying amount of financial assets is reduced by any impairment loss directly for all financial assets. When an account receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in the consolidated statement of loss and comprehensive loss.
If, in a subsequent period, the amount of the impairment loss decreases, and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through the consolidated statement of operations and comprehensive loss for the period to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.
Share-based payments
Share-based payments to employees and others providing similar services are measured at the estimated fair value of the instruments issued on the grant date and amortized over the vesting period. Share-based payments to non-employees are measured at the fair value of the goods or services received or the fair value of the equity instruments issued if it is determined that the fair value of the goods or services cannot be reliably measured and are recorded at the date the goods or services are received. The amount recognized as an expense is adjusted to reflect the number of awards expected to vest. The corresponding credit is recorded to share-based payments reserve in equity.
Consideration received on the exercise of stock options is recorded as share capital and the related share-based payments reserve is transferred to share capital. Charges for options that are forfeited before vesting are reversed from share-based payments reserve.
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Share Issuance Costs
Professional, consulting, regulatory fees and other costs that are directly attributable to the issuance of shares are charged to common shares when the related shares are issued, net of any tax effects.
Revenue Recognition
The Group generates revenue from the provision of psychotherapy services performed at its clinic locations.The Group uses the following five-step contract-based analysis of transactions to determine if, when and how much revenue can be recognized:
1.
Identify the contract with a customer;
2.
Identify the performance obligation(s) in the contract;
3.
Determine the transaction price;
4.
Allocate the transaction price to the performance obligation(s) in the contract; and
5.
Recognize revenue when or as the Group satisfies the performance obligation(s).
The Group earns revenue from patients by offering various Ketamine Assisted Psychotherapy (KAP) programs at each Field Trip clinic. The number of sessions in each KAP program vary, however the structure and pricing remain consistent at each location. The current standard ketamine-assisted psychotherapy protocol offered at each Field Trip clinic typically consists of seventeen sessions which are completed over a three-to-four-week timeframe.
The Patient Services Agreement (PSA) between the clinic and patient outlines the clinic’s protocol, pricing, payment terms, cancellation fees and refund policy. Each session in the PSA has an assigned standalone value based on a standard hourly rate. Patients can cancel their treatment at any time and receive a full refund on sessions not yet completed, if sessions are paid in advance. Based on these terms, each session is an individual performance obligation and patient service revenues are recognized over a period of time as performance of obligations are completed.
Payment of the transaction price for patient counselling is typically due prior to the services being rendered and therefore, the transaction price is recognized as a contract liability, or deferred revenue, when payment is received. Contract liabilities are subsequently recognized as revenue when the Group fulfills its performance obligations.
Patient service revenues are measured at the net patient service revenues received or receivable, which includes contractual allowances and discounts. In circumstances where the net patient service revenues have not yet been received, the amount of revenue recognized is estimated based on an expected value approach where management considers such variables as the average of previous net service revenues received by the applicable payor and fees received by other patients for similar services and management’s best estimate leveraging industry knowledge and expectations of third-party payors’ fee schedules. Third-party payors include federal and state agencies (under the Medicare programs), managed care health plans and commercial insurance companies.
Research and Development
Expenditures on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, are recognized in profit or loss as incurred.
Development expenditures are capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to complete development and has sufficient resources to complete development and to use or sell the asset. Other development expenditures are expensed as incurred.
Research and development expenses include all direct and indirect operating expenses supporting the products in development. The costs incurred in establishing and maintaining patents are expensed as incurred.
Income Taxes
Income tax expense consisting of current and deferred tax expense is recognized in the consolidated statements of loss and comprehensive loss. Current tax expense is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards to previous periods.
Deferred tax assets and liabilities and the related deferred income tax expense or recovery are recognized for deferred tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
respective tax bases. Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized or the liability settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that substantive enactment occurs.
A deferred tax asset is recognized to the extent that it is probable that future taxable income will be available against which the asset can be utilized.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Provisions
The Group recognizes provisions if there is a present obligation as a result of a past event, it is probable that the Group will be required to settle that obligation and the obligation can be reliably estimated. The amount recognized as a provision reflects management’s best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation.
Loss Per Share
Basic loss per share is computed by dividing the net loss available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted loss per share is computed similar to basic loss per share, except that the weighted average number of shares outstanding is increased to include additional shares for the assumed exercise of stock options and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding options and warrants were exercised and the proceeds from such exercises were used to acquire common stock at the average market price during the reporting period.
Given the Group’s loss position, basic and diluted loss per share are the same and stock options and warrants are excluded from the weighted average number of shares outstanding since they are anti-dilutive.
Use of Estimates and Judgments
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of these consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates and such differences could be material. The Group reviews its estimates and underlying assumptions on an ongoing basis. Revisions are recognized in the period in which the estimates are revised and may impact future periods.
Key areas of judgment and estimation or use of managerial assumptions are as follows:
Research and development
Management monitors the progress of its research and development activities. Significant judgement is required to distinguish between the research and development phases and if development cost capitalization criteria are met. Development costs are recognized as an asset when the following criteria are met: (i) technical feasibility; (ii) intention to complete the project; (iii) the ability to generate future economic benefits; (iv) availability of technical and financial resources; and (v) the ability to measure the expenditures reliably. Research costs are expensed as incurred.
Share-based payments and warrants
The fair value of share-based compensation expense and warrants is estimated using the Black-Scholes option pricing model and rely on a number of estimates, such as the expected life of the option or warrant, the volatility of the underlying share price, the risk-free rate of return, the estimated rate of forfeiture of options granted, future exercise behaviors and corporate performance. Such estimates and assumptions are inherently uncertain, and any changes in these assumptions affect the fair value estimates of share-based compensation expense and warrants.
The Group measures equity settled share-based payments based on their fair value at the grant date and recognizes compensation expense over the vesting period based on the Group’s estimate of equity instruments that will eventually vest. Expected forfeitures are estimated at the date of grant and subsequently adjusted if further non-market-based information indicates actual forfeitures
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
3.
SIGNIFICANT ACCOUNTING POLICIES (Continued)
may vary from the original estimate. Any revisions are recognized in the consolidated statements of loss and comprehensive loss such that the cumulative expense reflects the revised estimate.
Estimated useful lives and impairment considerations of property, plant and equipment and intangible assets
Depreciation of property, plant and equipment and amortization of intangible assets are dependent upon estimates of useful lives, which are determined through the exercise of judgment. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that take into account factors such as economic and market conditions and the useful lives of assets. The impairment is amount by which the carrying amount of the asset or Cash Generating Unit (CGU) exceeds its recoverable amount. The recoverable amount is the higher of the fair value less costs of disposal and its value in use. Management exercises judgement in the determination of the Company’s CGUs.
Deferred taxes
Significant estimates are required in determining the Company’s income tax provision. Some estimates are based on interpretations of existing tax laws or regulations. Various internal and external factors may have favourable or unfavourable effects on the Company’s future effective tax rate. These include, but are not limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or regulations, and results of tax audits by tax authorities.
Right of use assets and lease liabilities
For the measurement of lease liabilities, consideration was given to all factors that create an economic incentive to exercise extension, purchase and termination options available in its leasing arrangements. These options are only included in the lease term if management determines it is reasonably certain to be exercised. The assessment is reviewed if a significant event or significant changes in circumstances occur which affect this assessment.
Incremental borrowing rate
In determining the appropriate measurement of lease liabilities, the Group is required to estimate the incremental borrowing rate (“IBR”) specific to the transaction. The IBR applied reflects the interest rate that the Group would have to pay to borrow a similar amount at a similar term and with a similar security.
Impact of Coronavirus
While the precise impact of the recent novel coronavirus (“COVID-19”) outbreak remains unknown, it has introduced uncertainty and volatility in Canadian and global economies. The Group is monitoring developments and preparing for any impacts related to COVID-19. The Group has a comprehensive business continuity plan that ensures its readiness to appropriately address and mitigate regulatory and business risks as they arise including, but not limited to, mandatory closures, impacts on patients, practitioners and employees and research and development disruptions relating to FT-104 and psilocybin research.
Future Accounting Changes
IAS 1 Classification of Liabilities as Current or Non-Current
In January 2021, the International Accounting Standards Board (“IASB”) issued a narrow scope amendment to IAS 1 — Classification of Liabilities ad Current or Non-Current, which affects only the presentation of liabilities in the statement of financial position and not the amount or timing of their recognition. The amendment clarifies that the classification of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period and specifies that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability. It also introduces a definition of settlement to make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services. The amendment is effective for annual reporting periods beginning on or after January 1, 2023. Earlier application is permitted. The implementation of this amendment is not expected to have a significant impact on the Company.
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
In February 2021, the IASB issued an amendment to IAS 8 — Accounting Policies, Changes in Accounting Estimates and Errors. The amendment introduces the definition of an accounting estimate and sets criteria to help entities distinguish changes in accounting estimates from changes in accounting policies. The amendment is effective for annual periods beginning on or after January 1, 2023 and changes in accounting policies and changes in accounting estimates that occur on or after the start of that period. Earlier application is permitted. Management is currently assessing the impact of this amendment.
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
4.
REVERSE TAKEOVER
On October 1, 2020, FTP completed its previously announced going public transaction (the “Transaction”) pursuant to the terms of an agreement entered into on August 21, 2020 between FTP, Newton and Newton Subco. On September 30, 2020, immediately prior to the closing of the Transaction, Newton filed articles of amendment to: (i) consolidate its outstanding common shares on an eight (8) old for one (1) new basis; and (ii) change its name from Newton Energy Corporation to “Field Trip Health Ltd.”.
The Transaction constituted a Reverse Takeover by way of a three-cornered amalgamation under applicable securities law, with FTP as the reverse takeover acquirer and Newton as the reverse takeover acquiree.
Pursuant to the terms of the agreement, Newton acquired all the issued and outstanding common shares of FTP. Holders of FTP common shares received one post-consolidation common share of Newton in exchange for each FTP share held. Newton became the direct parent and sole shareholder of FTP, changed its year end from December 31 to March 31 and continued under the Canada Business Corporations Act (“CBCA”) by Certificate and Articles of Continuance.
In connection with the completion of the Transaction, Newton common shares listed on the NEX board of the TSXV were delisted on September 30, 2020. Field Trip Health Ltd. shares commenced trading on the Canadian Stock Exchange (“CSE”) on October 6, 2020, under the stock symbol FTRP.
The Transaction does not constitute a business combination as Newton does not meet the definition of a business under IFRS 3 Business Combinations. Immediately after the Transaction, shareholders of FTP owned 100% of the voting rights of Newton. As a result, the Transaction has been accounted for as a capital transaction with FTP being identified as the accounting acquirer and the equity consideration being measured at fair value, using the acquisition method of accounting. The Transaction has been accounted for in the consolidated financial statements as a continuation of the financial statements of FTP.
Purchase price consideration
FTP is deemed to have acquired the former Newton as part of the Transaction. The Transaction was accounted for using the acquisition method of accounting whereby the assets acquired, and liabilities assumed were recorded at their estimated fair value at the acquisition date. The acquisition did not meet the criteria for a business combination and is therefore treated a recapitalization under the scope of IFRS 2 Share Based Payments. The consideration consisted entirely of shares and options of Field Trip Health Ltd. which were measured at the estimated fair value on the date of acquisition. The fair value of the Common Shares issued to the former Newton shareholders was determined to be $1,590,212 based on the fair value of the shares issued (795,106 shares at $2.00 per share). The fair value of the Newton Options was determined to be $74,982 using a Black Scholes model based on the following assumptions: Stock price volatility — 70%; Risk-free interest rate — 0.29 ‑ 0.33%; Stock price at October 1, 2020 — $2.00 and an expected life of 2.52 ‑ 3.86 years. In connection with the acquisition of Newton, the Company incurred transaction costs of $571,435, of which $375,713 was settled in cash and the remaining $195,722 in Company stock options.
|
|
|
|
Total
|
|
|
|
|
|
$
|
|
|
Consideration: Newton Commons Shares
|
|
|
|
|
1,590,212
|
|
|
|
Consideration: Newton Options
|
|
|
|
|
74,982
|
|
|
|
Total consideration
|
|
|
|
|
1,665,194
|
|
|
|
Transaction costs
|
|
|
|
|
571,435
|
|
|
|
|
|
|
|
|
2,236,629
|
|
|
|
Identifiable assets acquired: Newton Cash
|
|
|
|
|
66,487
|
|
|
|
Listing Expense
|
|
|
|
|
2,170,142
|
|
|
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
5.
FUNDS HELD IN TRUST
|
|
|
|
As at
March 31, 2021
|
|
|
As at
March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Funds held in trust
|
|
|
|
|
795,516
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
795,516
|
|
|
|
|
|
—
|
|
|
Funds held in trust of $795,516 (March 31, 2020 — $nil) represents unrestricted funds held at a Canadian chartered bank by the Group’s corporate counsel, representing proceeds from the March Bought Deal Offering which were subsequently released in April 2021 (See Note 16 (xiv) Share Capital).
6.
RESTRICTED CASH
|
|
|
|
As at
March 31, 2021
|
|
|
As at
March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Funds held as collateral
|
|
|
|
|
100,501
|
|
|
|
|
|
100,000
|
|
|
|
Funds held at PCs
|
|
|
|
|
487,540
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
588,041
|
|
|
|
|
|
100,000
|
|
|
As at March 31, 2021, the Group had $100,501 of restricted cash held as collateral against Field Trip Psychedelics Inc. credit card limit. The funds are invested in two cashable GIC accounts. $35,176 matures on November 4, 2021, and $65,325 matures on January 20, 2022. The Group also had $487,540 of restricted cash held at the PCs which, under the terms of the MSA, must be used to pay PC personnel and expenses before satisfying prior and current management fees.
As at March 31, 2020 the Group had $100,000 of restricted cash held as collateral against Field Trip Psychedelics Inc. credit card limit.
7.
SHORT TERM INVESTMENTS
|
|
|
|
As at
March 31, 2021
|
|
|
As at
March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Short term investments
|
|
|
|
|
72,552,870
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
72,552,870
|
|
|
|
|
|
—
|
|
|
Short term investments of $72,552,870 (March 31, 2020 — $nil) represent non-redeemable GICs held with financial institutions as at March 31, 2021. These investments have maturities ranging from 6 months to one year, and interest rates from 0.35% to 0.80%.
8.
ACCOUNTS RECEIVABLE
|
|
|
|
As at
March 31, 2021
|
|
|
As at
March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Trade receivables
|
|
|
|
|
21,253
|
|
|
|
|
|
11,940
|
|
|
|
Sales tax receivable
|
|
|
|
|
768,981
|
|
|
|
|
|
191,172
|
|
|
|
Other receivables
|
|
|
|
|
23,527
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
813,761
|
|
|
|
|
|
203,112
|
|
|
Trade receivables relates to amounts receivable from patients for treatments completed at the clinics. Other receivables relate to refunds owed to Field Trip for marketing materials.
During the fiscal year ended March 31, 2021 and period ended March 31, 2020, no expected credit loss allowance was recorded for accounts receivable. No receivables were written off during these periods.
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
9.
OTHER ASSETS
|
|
|
|
As at
March 31, 2021
|
|
|
As at
March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Prepaid expenses
|
|
|
|
|
2,810,369
|
|
|
|
|
|
133,915
|
|
|
|
Lease security deposits
|
|
|
|
|
539,028
|
|
|
|
|
|
95,451
|
|
|
|
Prepaid additional (non-lease) rent
|
|
|
|
|
22,543
|
|
|
|
|
|
36,781
|
|
|
|
Shareholder loans receivable (Note 33)
|
|
|
|
|
50,521
|
|
|
|
|
|
47,991
|
|
|
|
|
|
|
|
|
3,422,461
|
|
|
|
|
|
314,138
|
|
|
|
Less amounts due within one year
|
|
|
|
|
(2,890,197)
|
|
|
|
|
|
(133,916)
|
|
|
|
Non-current balance
|
|
|
|
|
532,264
|
|
|
|
|
|
180,222
|
|
|
As at March 31, 2021, prepaid expenses included $2,180,945 of insurance costs and $629,424 of other operating expenses (March 31, 2020 — $57,412 of insurance costs and $76,503 of other operating expenses).
10.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following as at March 31, 2021 and 2020:
March 31, 2021
|
Cost
|
|
|
Leasehold
Improvements
|
|
|
Furniture &
Fixtures
|
|
|
Computer
Equipment &
Software
|
|
|
Medical &
Laboratory
Equipment
|
|
|
Construction
in Progress
|
|
|
Total
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Balance, April 1, 2020
|
|
|
|
|
342,590
|
|
|
|
|
|
56,187
|
|
|
|
|
|
78,770
|
|
|
|
|
|
5,533
|
|
|
|
|
|
106,402
|
|
|
|
|
|
589,482
|
|
|
|
Additions
|
|
|
|
|
305,944
|
|
|
|
|
|
233,167
|
|
|
|
|
|
369,392
|
|
|
|
|
|
272,045
|
|
|
|
|
|
798,242
|
|
|
|
|
|
1,978,790
|
|
|
|
Assets in use
|
|
|
|
|
594,585
|
|
|
|
|
|
45,246
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(639,831)
|
|
|
|
|
|
—
|
|
|
|
Foreign currency translation adjustment
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(409)
|
|
|
|
|
|
(629)
|
|
|
|
|
|
(12,081)
|
|
|
|
|
|
(13,119)
|
|
|
|
Balance, March 31, 2021
|
|
|
|
|
1,243,119
|
|
|
|
|
|
334,600
|
|
|
|
|
|
447,753
|
|
|
|
|
|
276,949
|
|
|
|
|
|
252,732
|
|
|
|
|
|
2,555,153
|
|
|
|
Accumulated depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 1, 2020
|
|
|
|
|
(8,645)
|
|
|
|
|
|
(1,041)
|
|
|
|
|
|
(4,111)
|
|
|
|
|
|
(239)
|
|
|
|
|
|
—
|
|
|
|
|
|
(14,036)
|
|
|
|
Depreciation expense
|
|
|
|
|
(221,473)
|
|
|
|
|
|
(32,298)
|
|
|
|
|
|
(67,740)
|
|
|
|
|
|
(24,500)
|
|
|
|
|
|
—
|
|
|
|
|
|
(346,011)
|
|
|
|
Foreign currency translation adjustment
|
|
|
|
|
1,854
|
|
|
|
|
|
522
|
|
|
|
|
|
801
|
|
|
|
|
|
534
|
|
|
|
|
|
—
|
|
|
|
|
|
3,711
|
|
|
|
Balance, March 31, 2021
|
|
|
|
|
(228,264)
|
|
|
|
|
|
(32,817)
|
|
|
|
|
|
(71,050)
|
|
|
|
|
|
(24,205)
|
|
|
|
|
|
—
|
|
|
|
|
|
(356,336)
|
|
|
|
Net book value as at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
|
|
|
1,014,855
|
|
|
|
|
|
301,783
|
|
|
|
|
|
376,703
|
|
|
|
|
|
252,744
|
|
|
|
|
|
252,732
|
|
|
|
|
|
2,198,817
|
|
|
|
March 31, 2020
|
|
|
|
|
333,945
|
|
|
|
|
|
55,146
|
|
|
|
|
|
74,659
|
|
|
|
|
|
5,294
|
|
|
|
|
|
106,402
|
|
|
|
|
|
575,446
|
|
|
On April 6, 2020, FTNP entered into a partnership with the University of West Indies (“UWI”) to provide advanced research and development on psilocybin producing mushrooms. FTNP agreed to lease property from UWI on which to construct a laboratory (the “Jamaica Facility”), contribute up to US$1,000,000 of initial capital for the Jamaica Facility and psilocybin research and a total of US$100,000 to fund student development initiatives at UWI over a 36-month period (see Note 30 Commitments). In October 2020, construction of the Jamaica Facility was completed. $263,121 was transferred from construction in progress to leasehold improvements in the period ended March 31, 2021.
During the fiscal year ended March 31, 2021, $376,710 relating to the completion of the construction of the New York, Santa Monica, Chicago and Atlanta facilities was transferred from construction in progress to leasehold improvements.
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
10.
PROPERTY, PLANT AND EQUIPMENT (Continued)
March 31, 2020
|
Cost
|
|
|
Leasehold
Improvements
|
|
|
Furniture &
Fixtures
|
|
|
Computer
Equipment &
Software
|
|
|
Medical &
Laboratory
Equipment
|
|
|
Construction
in Progress
|
|
|
Total
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Balance, April 2, 2019
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Additions
|
|
|
|
|
342,590
|
|
|
|
|
|
56,187
|
|
|
|
|
|
78,770
|
|
|
|
|
|
5,533
|
|
|
|
|
|
106,402
|
|
|
|
|
|
589,482
|
|
|
|
Balance, March 31, 2020
|
|
|
|
|
342,590
|
|
|
|
|
|
56,187
|
|
|
|
|
|
78,770
|
|
|
|
|
|
5,533
|
|
|
|
|
|
106,402
|
|
|
|
|
|
589,482
|
|
|
|
Accumulated depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 2, 2019
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Depreciation expense
|
|
|
|
|
(8,645)
|
|
|
|
|
|
(1,041)
|
|
|
|
|
|
(4,111)
|
|
|
|
|
|
(239)
|
|
|
|
|
|
—
|
|
|
|
|
|
(14,036)
|
|
|
|
Balance, March 31, 2020
|
|
|
|
|
(8,645)
|
|
|
|
|
|
(1,041)
|
|
|
|
|
|
(4,111)
|
|
|
|
|
|
(239)
|
|
|
|
|
|
—
|
|
|
|
|
|
(14,036)
|
|
|
|
Net book value as at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
|
|
|
333,945
|
|
|
|
|
|
55,146
|
|
|
|
|
|
74,659
|
|
|
|
|
|
5,294
|
|
|
|
|
|
106,402
|
|
|
|
|
|
575,446
|
|
|
11.
INTANGIBLE ASSETS
Intangible assets consist of the following as at March 31, 2021 and 2020:
March 31, 2021
|
Cost
|
|
|
Field Trip
Health Website
|
|
|
Field Trip
Health Portal
|
|
|
Trip App
|
|
|
Software in
Progress
|
|
|
Total
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Balance, April 1, 2020
|
|
|
|
|
126,974
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
126,974
|
|
|
|
Additions
|
|
|
|
|
48,340
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
314,971
|
|
|
|
|
|
363,311
|
|
|
|
Assets in use
|
|
|
|
|
—
|
|
|
|
|
|
165,854
|
|
|
|
|
|
149,117
|
|
|
|
|
|
(314,971)
|
|
|
|
|
|
—
|
|
|
|
Balance, March 31, 2021
|
|
|
|
|
175,314
|
|
|
|
|
|
165,854
|
|
|
|
|
|
149,117
|
|
|
|
|
|
—
|
|
|
|
|
|
490,285
|
|
|
|
Accumulated amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 1, 2020
|
|
|
|
|
(1,994)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(1,994)
|
|
|
|
Amortization expense
|
|
|
|
|
(41,263)
|
|
|
|
|
|
(10,728)
|
|
|
|
|
|
(9,176)
|
|
|
|
|
|
—
|
|
|
|
|
|
(61,167)
|
|
|
|
Balance, March 31, 2021
|
|
|
|
|
(43,257)
|
|
|
|
|
|
(10,728)
|
|
|
|
|
|
(9,176)
|
|
|
|
|
|
—
|
|
|
|
|
|
(63,161)
|
|
|
|
Net book value as at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
|
|
|
132,057
|
|
|
|
|
|
155,126
|
|
|
|
|
|
139,941
|
|
|
|
|
|
—
|
|
|
|
|
|
427,124
|
|
|
|
March 31, 2020
|
|
|
|
|
124,980
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
124,980
|
|
|
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
11.
INTANGIBLE ASSETS (Continued)
March 31, 2020
|
Cost
|
|
|
Field Trip
Health Website
|
|
|
Total
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Balance, April 2, 2019
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Additions
|
|
|
|
|
126,974
|
|
|
|
|
|
126,974
|
|
|
|
Balance, March 31, 2020
|
|
|
|
|
126,974
|
|
|
|
|
|
126,974
|
|
|
|
Accumulated amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 2, 2019
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Amortization expense
|
|
|
|
|
(1,994)
|
|
|
|
|
|
(1,994)
|
|
|
|
Balance, March 31, 2020
|
|
|
|
|
(1,994)
|
|
|
|
|
|
(1,994)
|
|
|
|
Net book value as at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
|
|
|
124,980
|
|
|
|
|
|
124,980
|
|
|
12.
RIGHT-OF-USE ASSETS
The Group leases real property for its Toronto office, clinical locations in North America and Europe and its research facility in Jamaica. Right-of-use assets (“ROU”) consist of the following as at March 31, 2021 and 2020:
March 31, 2021
|
Cost
|
|
|
Total
|
|
|
|
|
|
$
|
|
|
Balance, April 1, 2020
|
|
|
|
|
1,762,951
|
|
|
|
Additions
|
|
|
|
|
6,600,558
|
|
|
|
Foreign currency translation adjustment
|
|
|
|
|
(97,143)
|
|
|
|
Balance, March 31, 2021
|
|
|
|
|
8,266,366
|
|
|
|
Accumulated depreciation
|
|
|
|
|
|
|
|
|
Balance, April 1, 2020
|
|
|
|
|
(130,290)
|
|
|
|
Depreciation expense
|
|
|
|
|
(987,226)
|
|
|
|
Foreign currency translation adjustment
|
|
|
|
|
33,508
|
|
|
|
Balance, March 31, 2021
|
|
|
|
|
(1,084,008)
|
|
|
|
Net book value as at
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
|
|
|
7,182,358
|
|
|
|
March 31, 2020
|
|
|
|
|
1,632,661
|
|
|
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
12.
RIGHT-OF-USE ASSETS (Continued)
March 31, 2020
|
Cost
|
|
|
Total
|
|
|
|
|
|
$
|
|
|
Balance, April 2, 2019
|
|
|
|
|
—
|
|
|
|
Additions
|
|
|
|
|
1,766,643
|
|
|
|
Foreign currency translation adjustment
|
|
|
|
|
(3,692)
|
|
|
|
Balance, March 31, 2020
|
|
|
|
|
1,762,951
|
|
|
|
Accumulated depreciation
|
|
|
|
|
|
|
|
|
Balance, April 2, 2019
|
|
|
|
|
—
|
|
|
|
Depreciation expense
|
|
|
|
|
(130,290)
|
|
|
|
Balance, March 31, 2020
|
|
|
|
|
(130,290)
|
|
|
|
Net book value as at
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
|
|
|
1,632,661
|
|
|
13.
LEASE OBLIGATIONS
Lease obligations consist of the following as at March 31, 2021 and 2020:
March 31, 2021
|
|
|
|
Total
|
|
|
|
|
|
$
|
|
|
As at April 1, 2020
|
|
|
|
|
1,541,205
|
|
|
|
Additions during the period
|
|
|
|
|
6,514,499
|
|
|
|
Foreign currency translation adjustment
|
|
|
|
|
(76,749)
|
|
|
|
Payments during the period
|
|
|
|
|
(806,651)
|
|
|
|
Interest expense during the period
|
|
|
|
|
301,503
|
|
|
|
|
|
|
|
|
7,473,807
|
|
|
|
Less amounts due within one year
|
|
|
|
|
(1,070,435)
|
|
|
|
Long-term balance
|
|
|
|
|
6,403,372
|
|
|
March 31, 2020
|
|
|
|
Total
|
|
|
|
|
|
$
|
|
|
As at April 2, 2019
|
|
|
|
|
—
|
|
|
|
Additions during the period
|
|
|
|
|
1,626,973
|
|
|
|
Foreign currency translation adjustment
|
|
|
|
|
577
|
|
|
|
Payments during the period
|
|
|
|
|
(108,907)
|
|
|
|
Interest expense during the period
|
|
|
|
|
22,562
|
|
|
|
|
|
|
|
|
1,541,205
|
|
|
|
Less amounts due within one year
|
|
|
|
|
(462,871)
|
|
|
|
Long-term balance
|
|
|
|
|
1,078,334
|
|
|
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
13.
LEASE OBLIGATIONS (Continued)
The Group expenses payments for short-term leases and low-value leases as incurred. These payments for short-term leases and low-value leases were $249,486 for the fiscal year ended March 31, 2021 (March 31, 2020 — $172,354).
The Group’s future cash outflows may change due to variable lease payments, renewal options, termination options, residual value guarantees and leases not yet commenced to which the Group is committed that are not reflected in the lease obligations. The following is a maturity analysis for undiscounted lease payments that are reflected in the lease obligations as at March 31, 2021 and 2020:
March 31, 2021
|
|
|
|
Total
|
|
|
|
|
|
$
|
|
|
Less than 1 year
|
|
|
|
|
1,477,942
|
|
|
|
1 to 2 years
|
|
|
|
|
1,319,214
|
|
|
|
2 to 3 years
|
|
|
|
|
976,531
|
|
|
|
3 to 4 years
|
|
|
|
|
981,128
|
|
|
|
4 to 5 years
|
|
|
|
|
1,006,984
|
|
|
|
Beyond 5 years
|
|
|
|
|
3,701,706
|
|
|
|
|
|
|
|
|
9,463,505
|
|
|
March 31, 2020
|
|
|
|
Total
|
|
|
|
|
|
$
|
|
|
Less than 1 year
|
|
|
|
|
581,743
|
|
|
|
1 to 2 years
|
|
|
|
|
709,426
|
|
|
|
2 to 3 years
|
|
|
|
|
405,824
|
|
|
|
3 to 4 years
|
|
|
|
|
20,578
|
|
|
|
|
|
|
|
|
1,717,571
|
|
|
See Note 30 Commitments for additional information on estimated additional rent payment obligations related to the Group’s leases on its clinical and office locations.
14.
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
|
|
|
|
As at
March 31, 2021
|
|
|
As at
March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Trade payables
|
|
|
|
|
3,126,120
|
|
|
|
|
|
270,235
|
|
|
|
Accrued liabilities
|
|
|
|
|
2,221,990
|
|
|
|
|
|
307,643
|
|
|
|
|
|
|
|
|
5,348,110
|
|
|
|
|
|
577,878
|
|
|
As at March 31, 2021, trade payables included $1,731,213 of insurance costs and $252,882 of transaction costs incurred for the January and March 2021 bought deal offerings (see Notes 16(xiii) and (xiv) Share Capital. As at March 31, 2020, trade payables related to operating expenses incurred in the normal course of business.
As at March 31, 2021 accrued liabilities included $893,219 of transaction costs incurred for the January and March 2021 bought deal offerings (see Notes 16(xiii) and (xiv) Share Capital), $763,536 of accrued payroll liabilities and $565,235 of other expenses, primarily relating to professional fees. As at March 31, 2020, accrued liabilities included $182,759 of accrued payroll liabilities and $124,884 of other expenses relating primarily to professional fees.
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
15.
LOAN PAYABLE
The Group applied for and received on September 17, 2020, the $40,000 Canada Emergency Business Account (“CEBA”), which is an interest-free loan to cover operating costs which was offered in the context of the COVID-19 pandemic outbreak. Repaying the balance of the loan on or before December 31, 2022 will result in a loan forgiveness of $10,000. On December 31, 2022, the Corporation has the option to extend for 3 years the loan and it will bear a 5% interest rate. To estimate the fair value at initial recognition, the debt component was estimated first at $21,319, considering the forgiveness and interest free aspects. A 15% effective rate was used which corresponds to a market rate that the Corporation would have obtained for a similar loan. The $18,681 residual value was attributed to government assistance that is presented as other income in the statement of loss and other comprehensive loss.
On June 3, 2021, the Group applied for and received a $20,000 CEBA loan expansion. With a total loan payable of $60,000, the debt forgiveness is not available unless the initial $40,000 is repaid. The loan forgiveness is calculated as follows: 25% on the initial $40,000; plus 50% on amounts above $40,000 and up to $60,000. The maximum amount of debt forgiven is $20,000 (see Note 36 Subsequent Events).
16.
SHARE CAPITAL
Share Capital Authorized
The authorized share capital of the Group consists of an unlimited number of common shares (“Common Shares”), issuable in Series, and an unlimited number of preferred shares (“Preferred Shares”) issuable in series. As at March 31, 2021, the Group also has outstanding 2,071,090 warrants (“Warrants”) (March 31, 2020 — nil), which are listed and posted for trading on the CSE.
Common Shares
Holders of Common Shares are entitled to receive notice of, and to attend and vote at, all meetings of the shareholders of Field Trip. Each Common Share confers the right to one vote at all meetings of the shareholders, except meetings at which only holders of a specified class of shares are entitled to vote. Subject to the prior rights and privileges attached to any other class of shares of Field Trip, the holders of the Common Shares are entitled to receive any dividend declared by Field Trip.
In the event of the liquidation, dissolution or winding-up of Field Trip, whether voluntary or involuntary, subject to the prior rights and privileges attached to any other class of shares of Field Trip, the holders of the Common Shares are entitled to receive the remaining property and assets of Field Trip.
The Common Shares carry no pre-emptive rights, conversion or exchange rights, or redemption, retraction, repurchase, sinking fund or purchase fund provisions. There are no provisions requiring a holder of Shares to contribute additional capital, and no restrictions on the issuance of additional securities by Field Trip. There are no restrictions on the repurchase or redemption of Common Shares by Field Trip except to the extent that any such repurchase or redemption would render Field Trip insolvent. The Preferred Shares may, if issued, be made convertible into Common Shares at such rate and upon such basis as the board of directors of Field Trip (“Board”), in its discretion, may determine.
Voting Rights
Each holder of Class A Series Common Shares is entitled to receive notice of and to attend all meetings of shareholders of the Corporation and at all such meetings shall be entitled to one (1) vote in respect of each such share held by such holder. The foregoing, however, shall not apply to separate meetings of the holders of other classes or series of shares in accordance with the Shareholders Agreement. On any matter presented to the shareholders of the Corporation for their action or consideration at any meeting of shareholders of the Corporation (or by written consent of shareholders in lieu of meeting), each holder of outstanding Class B Series Common Shares is entitled to cast the number of votes equal to the number of Class B Series Common Shares held by the holder. Except as provided by law or by the other provisions of the Articles, holders of Class B Series Common Shares shall vote together with the holders of Class A Series Common Shares as a single class.
Class B Series Common Shares Automatic Conversion
Upon the completion of a private placement of Class A Series Common Shares from treasury for gross proceeds of at least USD $2,500,000 in one or multiple closings (the “Qualified Financing”), then all of the Class B Series Common Shares will automatically and concurrently be converted into Class A Series Common Shares (the “Automatic Conversion”) as follows:
(a)
If the price paid per Class A Series Common Share in the Qualified Financing is equal to or greater than USD $1.125, then each Class B Series Common Share will convert into one Class A Series Common Share; or
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
16.
SHARE CAPITAL (Continued)
(b)
If the price paid per Class A Series Common Share in the Qualified Financing is less than USD $1.125, then the Class B Series Common Shares held by each holder will be converted into a number of Class A Series Common Shares determined by dividing the Subscription Amount by an amount equal to the product of the price paid per Class A Series Common Share in the Qualified Financing, multiplied by 0.80. For the purposes of this calculation, “Subscription Amount” means the number of Class B Series 1 Shares held by the holder multiplied by USD $ 0.90.
The brokered and non-brokered private placements completed on August 14 and September 21, 2020 met the definition of a Qualified Financing and all outstanding and issued Class B Series Common Shares were converted into Class A Series Common Shares on a 1:1 basis upon closing (see (vii) and (viii) below).
Preferred Shares
The Preferred Shares may be issued at any time or from time to time in one or more series. Subject to the provisions of the Canada Business Corporations Act, the Board may by resolution alter the articles of Field Trip to create any series of Preferred Shares and to fix before issuance, the designation, rights, privileges, restrictions and conditions to attach to the Preferred Shares of each series. The issuance of Preferred Shares and the terms selected by the Board could decrease the amount of earnings and assets available for distribution to holders of Common Shares or adversely affect the rights and powers, including the voting rights, of the holders of the Common Shares without any further vote or action by the holders of the Common Shares, if permitted by the Canada Business Corporations Act. The issuance of Preferred Shares, or the issuance of rights to purchase Preferred Shares, could make it more difficult for a third-party to acquire a majority of Field Trip’s outstanding Common Shares and thereby have the effect of delaying, deferring or preventing a change of control of Field Trip or an unsolicited acquisition proposal or of making the removal of management more difficult. Additionally, the issuance of Preferred Shares may have the effect of decreasing the market price of the Common Shares.
There are currently no Preferred Shares outstanding (March 31, 2020 — nil).
Warrants
The Warrants are governed by the Warrant Indenture. Each Warrant entitles the holder thereof to acquire, subject to adjustment in certain circumstances pursuant to the Warrant Indenture, one Common Share at an exercise price of $5.60 until July 5, 2022. The Warrant Indenture provides for adjustment in the number of Common Shares issuable upon the exercise of the Warrants and/or the exercise price per Common Share upon the occurrence of certain events where the cumulative effect of such adjustment or adjustments would result in a change of at least 1% in the exercise price. No fractional Common Shares are issuable upon the exercise of any Warrants and no cash or other consideration will be paid in lieu of fractional Common Shares in such circumstances. The Warrant Indenture further provides that Field Trip has the right, but not the obligation, to accelerate the expiry date of the Warrants upon not less than fifteen (15) trading days’ notice by way of a news release, if the volume weighted average price of the Common Shares on the TSX exceeds $9.00 for any ten (10) consecutive trading days. Holders of Warrants do not have any voting or pre-emptive rights or any other rights which a holder of Common Shares would have.
Share Capital Issued as at March 30, 2020
|
Class of Shares
|
|
|
Number of
Shares Issued
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
A(i-v)
|
|
|
|
|
11,510,900
|
|
|
|
|
|
1,605,027
|
|
|
|
B(viii)
|
|
|
|
|
9,431,023
|
|
|
|
|
|
11,176,243
|
|
|
|
|
|
|
|
|
20,941,923
|
|
|
|
|
|
12,781,270
|
|
|
(i)
On April 2, 2019, the Group issued 6,300,630 Class A Series Common Shares at a price of $0.055 per share yielding gross proceeds of $350,000.
(ii)
On October 3, 2019 directors of the Group exercised options to purchase 2,700,270 Class A Series Common Shares at a price of $0.00001 for gross proceeds of $27.
(iii)
On October 19, 2019 the Group issued 2,510,000 Class A Series Common Shares at a price of $0.50 per share yielding gross proceeds of $1,255,000. As part of the issuance, shareholder loans of $50,000 and $10,000 for the purchase of 100,000 and 20,000 shares respectively were entered into with advisors of the Group, payable 5 years from the loan date and bearing zero interest.
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
16.
SHARE CAPITAL (Continued)
(iv)
On January 29, 2020 the Group issued 9,431,023 Class B Series Common Shares at a price of $0.90 USD per share, yielding gross proceeds of $8,487,962 USD or $11,195,540 CAD.
(v)
Total finance costs incurred for the issuance of share capital during the period ended March 31, 2020 was $19,297 CAD of which $7,922 CAD was settled via the issuance of 6,666 units of Class B Series Common Shares at a price of $0.90 USD or $1.1884 CAD per share.
Share Capital Issued as at March 31, 2021
|
Class of Shares
|
|
|
Number of
Shares Issued
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
A(vi-xv)
|
|
|
|
|
57,297,238
|
|
|
|
|
|
130,784,175
|
|
|
|
|
|
|
|
|
57,297,238
|
|
|
|
|
|
130,784,175
|
|
|
(vi)
On May 20, 2020, the Group issued 76,240 Class B Series Common Shares as follows: 11,113 Class B Series Common Shares at a price of $0.90 USD per share, yielding gross proceeds of $10,002 USD or $13,935 CAD. Real estate brokerage commissions of $63,853 were settled via the issuance of 50,911 Class B Series Common Shares at a price of $0.90 USD or $1.2542 CAD per share. Share issuance costs of $17,829 were settled via the issuance of 14,216 Class B Series Common shares at a price of $0.90 USD or $1.2542 CAD per share.
(vii)
On August 11, 2020, directors of FTP exercised options to purchase 9,000,900 Class A Shares at a price of $0.00001 for gross proceeds of $90.
(viii)
On August 14, 2020, the Group completed brokered and non-brokered private placements (the “FTP Private Placements”) of an aggregate of 5,516,724 Class A shares in the capital of Field Trip, at a price of $2.00 per share, for aggregate gross proceeds of $11,033,448. Canaccord Genuity Corp. and Stifel Nicolaus Canada Inc. jointly acted as lead agents in connection with the brokered portion of the Private Placement, for which they were paid a cash commission of $391,082, and were issued 55,167 Class A shares and 299,753 compensation warrants (the “FTP Compensation Warrants”). Each FTP Compensation Warrant is exercisable into one Class A Common Share of Field Trip at a price of $2.00 per share until August 14, 2022 (see Note 17 Warrants). The Series B Financing is a Qualified Financing (as defined below); therefore, all of the Class B Series Common Shares were automatically converted into Class A Series Common Shares upon closing of this transaction.
(ix)
On September 21, 2020, Field Trip completed a follow-on non-brokered private placement of an aggregate of 816,932 Class A Series Common Shares at a price of $2.00 per share for gross proceeds of $1,633,864.
(x)
The Company incurred share issuance costs of $707,263 relating to the August 14 and September 21, 2020 private placements.
(xi)
On September 25, 2020, 600,000 Class A Series Common Shares were issued as payment of milestone shares under the Jamaican SPA (see Note 18 Share-based Payments for further details).
(xii)
On October 1, 2020, 795,106 Class A Series Common Shares were issued upon closing of the Transaction (see Note 4 Reverse Takeover for details). Upon closing of the Transaction, the Group had only Common Shares outstanding.
(xiii)
On January 5, 2021 the Company completed a bought deal offering (the “January BD Offering”) resulting in the issuance of 4,448,200 Units of the Company at a price per Unit of $4.50 for gross proceeds of $20,016,900. Each Unit comprised one common share (“Common Share”) of the Company and one-half of one Common Share purchase warrant (each whole Common Share purchase warrant, a “Warrant”).
Each Warrant entitles the holder thereof to purchase one Common Share (a “Warrant Share”) at an exercise price of $5.60 per Warrant Share until July 5, 2022. In the event that the volume weighted average trading price of the Common Share for ten (10) consecutive trading days exceeds $9.00, the Company shall have the right to accelerate the expiry date of the Warrants upon not less than 15 trading days’ notice (see Note 17 Warrants). The Warrants commenced trading on the CSE under the symbol “FTRP.WT on January 5, 2021.
In consideration of the services rendered by the underwriters in connection with the January BD Offering, the Company paid a cash commission equal to $763,046 and issued 169,565 compensation warrants (the “Compensation Warrants”). Each Compensation Warrant is exercisable to acquire one Common Share at an exercise price of $4.50 per Compensation Share until January 5, 2023 (see Note 17 Warrants).
In connection with the January BD Offering, the short form prospectus qualified the distribution of 8,170 Common Shares and 49,016 additional FTP Compensation Warrants, for services rendered by the agents in connection with the FTP Private Placements (see Note 17 Warrants).
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
16.
SHARE CAPITAL (Continued)
(xiv)
On March 17, 2021 the Company completed a bought deal offering (the “March BD Offering”) resulting in the issuance of 14,661,499 Common Shares of the Company at a price of $6.50 per Common Share for gross proceeds of $95,299,744. In consideration of the services rendered by the underwriters in connection with the March BD Offering, the Company paid a cash commission equal to $4,961,472 and issued 865,303 compensation warrants (the “Compensation Warrants”). Each Compensation Warrant is exercisable to acquire one Common Share at an exercise price of $6.50 per Compensation Share until March 17, 2023 (see Note 17 Warrants).
(xv)
During the fiscal year ended March 31, 2021, 9,218,767 options were exercised for gross proceeds of $208,698.
Share Capital Reserved for Issuance
A summary of shares reserved for issuance is as per below:
|
|
|
|
|
|
Class of Shares
|
|
|
As at
March 31, 2021
|
|
|
As at
March 31, 2020
|
|
|
Common Share Stock Options
|
|
|
|
|
5,150,798
|
|
|
|
|
|
11,377,706
|
|
|
|
Warrants
|
|
|
|
|
2,071,090
|
|
|
|
|
|
—
|
|
|
|
FTP Compensation Warrants
|
|
|
|
|
343,269
|
|
|
|
|
|
—
|
|
|
|
Compensation Warrants
|
|
|
|
|
1,034,868
|
|
|
|
|
|
—
|
|
|
|
Jamaica Facility Shares (Note 18)
|
|
|
|
|
600,000
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
9,200,025
|
|
|
|
|
|
11,377,706
|
|
|
17.
WARRANTS
The following is a schedule of the warrants outstanding as at March 31, 2021:
|
|
|
|
FTP
Compensation
Warrants
|
|
|
Compensation
Warrants
|
|
|
Warrants
|
|
|
Total
Warrants
|
|
|
|
|
|
#
|
|
|
#
|
|
|
#
|
|
|
#
|
|
|
Issued
|
|
|
|
|
348,769
|
|
|
|
|
|
1,034,868
|
|
|
|
|
|
2,224,100
|
|
|
|
|
|
3,607,737
|
|
|
|
Exercised
|
|
|
|
|
(5,500)
|
|
|
|
|
|
—
|
|
|
|
|
|
(153,010)
|
|
|
|
|
|
(158,510)
|
|
|
|
Balance, March 31, 2021
|
|
|
|
|
343,269
|
|
|
|
|
|
1,034,868
|
|
|
|
|
|
2,071,090
|
|
|
|
|
|
3,449,227
|
|
|
The weighted average life for warrants outstanding as at March 31, 2021 was 1.4 years. The weighted average market fair value of shares purchased through warrant exercises during the fiscal year ended March 31, 2021 was $1.03.
FTP Compensation Warrants
|
|
|
|
August 2020
|
|
|
Warrants Issued
|
|
|
|
|
348,769
|
|
|
|
Exercised
|
|
|
|
|
(5,500)
|
|
|
|
Expired
|
|
|
|
|
—
|
|
|
|
Outstanding, March 31, 2021
|
|
|
|
|
343,269
|
|
|
|
Exercise Price
|
|
|
$2.00
|
|
|
Expiry Date
|
|
|
August 14, 2022
|
|
The Company issued 299,753 FTP Compensation Warrants to the underwriter in connection with the completion of the FTP Private Placements which closed on August 14, 2020 (see Note 16 (viii) Share Capital). In connection with the January BD Offering, the short form prospectus qualified the distribution of 49,016 additional FTP Compensation Warrants, for services rendered by the
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
17.
WARRANTS (Continued)
agents in connection with the FTP Private Placements (see Note 16(xiii) Share Capital). The warrants have an expiry date of August 14, 2022. Each warrant entitles the holder to purchase one Class A share at $2.00 until the expiry date. The fair value was estimated using the Black-Scholes option pricing model with the following assumptions: (i) expected dividend yield of 0%, (ii) expected volatility of 75 ‑ 110%, (iii) risk-free rate of 0.19 ‑ 0.31%, (vi) share price of $2, (v) forfeiture rate of 0%, and (vi) expected life of 1.6 ‑ 2 years.
Compensation Warrants
|
|
|
|
January 2021
|
|
|
March 2021
|
|
|
Total
Compensation
Warrants
|
|
|
Warrants Issued
|
|
|
|
|
169,565
|
|
|
|
|
|
865,303
|
|
|
|
|
|
1,034,868
|
|
|
|
Exercised
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Expired
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Outstanding, March 31, 2021
|
|
|
|
|
169,565
|
|
|
|
|
|
865,303
|
|
|
|
|
|
1,034,868
|
|
|
|
Exercise Price
|
|
|
$4.50
|
|
|
$6.50
|
|
|
|
|
|
|
|
|
Expiry Date
|
|
|
January 5, 2023
|
|
|
March 17, 2023
|
|
|
|
|
|
|
|
The Company issued 169,565 Compensation Warrants to the underwriter in connection with the January BD Offering which was completed on January 5, 2021(see Note 16(xiii) Share Capital). The warrants have an expiry date of January 5, 2023. Each Compensation Warrant entitles the holder to purchase one Common Share at $4.50 until expiry. The fair value was estimated using the Black-Scholes option pricing model with the following assumptions: (i) expected dividend yield of 0%, (ii) expected volatility of 110%, (iii) risk-free rate of 0.19%, (vi) share price of $3.56, (v) forfeiture rate of 0%, and (vi) expected life of 2 years.
The Company issued 763,303 Compensation Warrants to the underwriter in connection with the March BD Offering which was completed on March 17, 2021 (see Note 16(xiv) Share Capital). The warrants have an expiry date of March 17, 2023. Each Compensation Warrant entitles the holder to purchase one Common Share at $6.50 until expiry. The fair value was estimated using the Black-Scholes option pricing model with the following assumptions: (i) expected dividend yield of 0%, (ii) expected volatility of 110%, (iii) risk-free rate of 0.27%, (vi) share price of $6.16, (v) forfeiture rate of 0%, and (vi) expected life of 2 years. An additional 102,000 Compensation Warrants were issued to a consultant in connection with the March BD Offering.
Warrants
|
|
|
|
January 2021
|
|
|
Warrants Issued
|
|
|
|
|
2,224,100
|
|
|
|
Exercised
|
|
|
|
|
(153,010)
|
|
|
|
Expired
|
|
|
|
|
—
|
|
|
|
Outstanding, March 31, 2021
|
|
|
|
|
2,071,090
|
|
|
|
Exercise Price
|
|
|
$5.60
|
|
|
Expiry Date
|
|
|
July 5, 2022
|
|
The Company issued 2,224,100 Warrants in connection with the completion of the January BD Offering which closed on January 5, 2021 (see Note 16(xiii) Share Capital). The warrants have an expiry date of July 5, 2022. Each warrant entitles the holder to purchase one Common Share, at an exercise price of $5.60 until expiry. The fair value was estimated using the Black-Scholes option pricing model with the following assumptions: (i) expected dividend yield of 0%, (ii) expected volatility of 110%, (iii) risk-free rate of 0.18%, (vi) share price of $3.56, (v) forfeiture rate of 0%, and (vi) expected life of 1.5 years.
The terms of the FTP Compensation Warrants, Compensation Warrants and Warrants specify that these instruments will be settled by Field Trip exchanging a fixed amount of cash for a fixed number of its own Common Shares. These terms meet the “fixed for fixed” criteria outlined in IAS 32 Financial Instruments for the warrants to be classified and accounted for as equity in the consolidated statements of financial position.
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
18.
SHARE-BASED PAYMENTS
The Group has two share-based compensation plans: the “Stock Option Plan” and the “Long Term Incentive Option Plan”.
Long Term Incentive Option Plan
On April 2, 2019, the directors of the Group authorized option agreements with each of the five founding executives of the Group. Under the terms of the agreement, each option holder received 1,800,180 options to purchase Class A shares at an exercise price of $0.00001. The options vest over a period of four years and expire on the fifth anniversary of the grant date.
On August 11, 2020, the Group accelerated the vesting of all 9,000,900 outstanding long term incentive options which were immediately exercised and recognize in the consolidated statements of loss and comprehensive loss.
Stock Option Plan
On August 1, 2019, the directors of the Group authorized the establishment of the “Stock Option Plan”. The maximum number of common shares that will be reserved for issuance under the Stock Option Plan shall be 15% of the issued and outstanding Common Shares from time to time, on a non-diluted basis. For the avoidance of doubt, Long Term Incentive Options are excluded from the Stock Option Plan maximum. Common Shares in respect of Options that have been exercised, cancelled, surrendered, or terminated or that expire without being exercised shall again be available for issuance under the Plan.
On October 6, 2020, in conjunction with the closing of the Transaction, Field Trip amended its Stock Option Plan. The maximum number of common shares reserved for issuance under the Stock Option Plan pursuant to options not intended as Incentive Stock Options (“ISOs”) shall be 15% of the issued and outstanding Common Shares from time to time, on a non-diluted basis, excluding Long Term Incentive Options. The maximum number of Common shares reserved for issuance under the Stock Option Plan pursuant to ISOs is 7,500,000.
As at March 31, 2021, the number of Common Shares available for issuance under the Stock Option Plan pursuant to options not intended as ISO’s was 3,284,250. The number of Common Shares available for issuance under the Stock Option Plan pursuant to ISOs was 6,641,000.
Under the Stock Option Plan, the Group may grant options to purchase common shares to officers, directors, employees or consultants of the Group or its affiliates. Options issued under the Stock Option Plan are granted for a term not exceeding ten years from the date of grant. All options issued to-date have a life of ten years or less. In general, options have vested either immediately upon grant or over a period of four to ten years or upon the achievement of certain performance-related measures or milestones.
The following is a schedule of the options outstanding as at March 31, 2021 and 2020:
March 31, 2021
|
|
|
|
Options
|
|
|
Range of
Exercise Price
|
|
|
Weighted Average
Exercise Price
|
|
|
|
|
|
#
|
|
|
$
|
|
|
$
|
|
|
Balance, April 1, 2020
|
|
|
|
|
11,377,706
|
|
|
|
0.00001 - 0.50
|
|
|
|
|
0.10
|
|
|
|
Stock Option Plan — Granted
|
|
|
|
|
3,160,193
|
|
|
|
0.50 - 8.25
|
|
|
|
|
3.47
|
|
|
|
Stock Option Plan — Forfeit
|
|
|
|
|
(168,334)
|
|
|
|
0.50 - 2.00
|
|
|
|
|
0.89
|
|
|
|
Stock Option Plan — Exercised
|
|
|
|
|
(9,218,767)
|
|
|
|
0.00001 - 2.00
|
|
|
|
|
0.02
|
|
|
|
Balance, March 31, 2021
|
|
|
|
|
5,150,798
|
|
|
|
0.50 - 8.25
|
|
|
|
|
2.29
|
|
|
March 31, 2020
|
|
|
|
Options
|
|
|
Range of
Exercise Price
|
|
|
Weighted Average
Exercise Price
|
|
|
|
|
|
#
|
|
|
$
|
|
|
$
|
|
|
Balance, April 2, 2019
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
Stock Option Plan — Granted
|
|
|
|
|
2,376,806
|
|
|
|
0.5
|
|
|
|
|
0.50
|
|
|
|
Long Term Incentive Options — Granted
|
|
|
|
|
9,000,900
|
|
|
|
0.00001
|
|
|
|
|
0.00
|
|
|
|
Balance, March 31, 2020
|
|
|
|
|
11,377,706
|
|
|
|
0.00001 - 0.50
|
|
|
|
|
0.50
|
|
|
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
18.
SHARE-BASED PAYMENTS (Continued)
The fair value of each tranche is measured at the date of grant using the Black-Scholes option pricing model.
Option model inputs for options granted during the fiscal year ended March 31, 2021 and period ended April 2, 2019 (date of incorporation) to March 31, 2020 were as follows:
March 31, 2021
|
|
Options
|
|
|
Grant Date
|
|
|
Share Price
|
|
|
Exercise
Price
|
|
|
Risk-free
Interest Rate
|
|
|
Expected
Life
|
|
|
Volatility
Factor
|
|
|
Forfeiture
Rate
|
|
|
Fair Value
per Option
|
|
|
|
#
|
|
|
|
|
|
$
|
|
|
$
|
|
|
%
|
|
|
(years)
|
|
|
%
|
|
|
%
|
|
|
$
|
|
|
|
3,085,742
|
|
|
April 1, 2020 -
March 31, 2021
|
|
|
0.28(i) - 8.25
|
|
|
0.5 - 8.25
|
|
|
0.5 - 1.5
|
|
|
9.3
|
|
|
110
|
|
|
3
|
|
|
0.24 - 7.50
|
|
|
|
74,451
|
|
|
October 1, 2020
|
|
|
2
|
|
|
1.76 - 2.00
|
|
|
0.29 - 0.33
|
|
|
2.52 - 3.86
|
|
|
70
|
|
|
0
|
|
|
0.85 - 1.09
|
|
March 31, 2020
|
|
Options
|
|
|
Grant Date
|
|
|
Share Price
|
|
|
Exercise
Price
|
|
|
Risk-free
Interest Rate
|
|
|
Expected
Life
|
|
|
Volatility
Factor
|
|
|
Forfeiture
Rate
|
|
|
Fair Value
per Option
|
|
|
|
#
|
|
|
|
|
|
$
|
|
|
$
|
|
|
%
|
|
|
(years)
|
|
|
%
|
|
|
%
|
|
|
$
|
|
|
|
9,000,900
|
|
|
April 2, 2019
|
|
|
0.06
|
|
|
0.00001
|
|
|
1.55
|
|
|
5
|
|
|
75
|
|
|
0
|
|
|
0.06
|
|
|
|
2,376,806
|
|
|
March 31, 2020
|
|
|
0.5
|
|
|
0.5
|
|
|
0.7
|
|
|
10
|
|
|
75
|
|
|
0
|
|
|
0.19
|
|
On January 29, 2020, the Group issued 9,431,023 Class B shares at a price of $0.90 USD per share. The Group derived the valuation of the Class A shares on the issuance date based on the Class B issuance price on January 29, 2020, adjusted for share specific attributes resulting in an estimated fair value of Class A shares of $0.21 USD or $0.28 CAD.
During the fiscal year ended March 31, 2021, the Group issued stock options for Field Trip Shares as follows:
|
Date issued
|
|
|
Options
|
|
|
Exercise Price
|
|
|
|
|
|
#
|
|
|
$
|
|
|
7-Aug-20
|
|
|
|
|
670,000
|
|
|
|
|
|
0.50
|
|
|
|
2-Sep-20
|
|
|
|
|
490,000
|
|
|
|
|
|
2.00
|
|
|
|
30-Sep-20
|
|
|
|
|
229,000
|
|
|
|
|
|
2.00
|
|
|
|
1-Oct-20
|
|
|
|
|
317,874
|
|
|
|
|
|
2.00
|
|
|
|
2-Nov-20
|
|
|
|
|
65,000
|
|
|
|
|
|
2.68
|
|
|
|
1-Dec-20
|
|
|
|
|
60,000
|
|
|
|
|
|
4.60
|
|
|
|
31-Dec-20
|
|
|
|
|
220,000
|
|
|
|
|
|
4.09
|
|
|
|
29-Jan-21
|
|
|
|
|
329,997
|
|
|
|
|
|
5.01
|
|
|
|
17-Feb-21
|
|
|
|
|
335,822
|
|
|
|
|
|
8.25
|
|
|
|
26-Feb-21
|
|
|
|
|
110,000
|
|
|
|
|
|
8.00
|
|
|
|
31-Mar-21
|
|
|
|
|
332,500
|
|
|
|
|
|
5.74
|
|
|
|
|
|
|
|
|
3,160,193
|
|
|
|
|
|
3.47
|
|
|
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
18.
SHARE-BASED PAYMENTS (Continued)
The following table summarizes the unvested outstanding and exercisable options held by directors, officers, employees and consultants as at March 31, 2021 and 2020:
March 31, 2021
|
|
|
|
|
Outstanding
|
|
|
Exercisable
|
|
|
|
Exercise Price Range
|
|
|
Options
|
|
|
Remaining
Contractual Life
|
|
|
Weighted Average
Exercise Price
|
|
|
Vested Options
|
|
|
Weighted Average
Exercise Price
|
|
|
|
$
|
|
|
#
|
|
|
(years)
|
|
|
$
|
|
|
#
|
|
|
$
|
|
|
|
0.5 - 8.25
|
|
|
4,365,557
|
|
|
8 - 10
|
|
|
2.56
|
|
|
785,241
|
|
|
0.80
|
|
March 31, 2020
|
|
|
|
|
Outstanding
|
|
|
Exercisable
|
|
|
|
Exercise Price Range
|
|
|
Options
|
|
|
Remaining
Contractual Life
|
|
|
Weighted Average
Exercise Price
|
|
|
Vested Options
|
|
|
Weighted Average
Exercise Price
|
|
|
|
$
|
|
|
#
|
|
|
(years)
|
|
|
$
|
|
|
#
|
|
|
$
|
|
|
|
.00001 - 0.50
|
|
|
2,376,806
|
|
|
5 - 10
|
|
|
0.10
|
|
|
15,000
|
|
|
0.50
|
|
Jamaica Facility Shares
Field Trip Psychedelics Inc. will issue 1,200,000 fully paid-up Common Shares to Darwin Inc. (the “Jamaica Facility Shares”); 600,000 upon commencement of research in the newly renovated research facility, 150,000 one year from the initial closing date (“Cliff”), and 450,000 on a prorated basis quarterly, commencing on the first calendar quarter following the Cliff and ending on the date that is 36 months following the Cliff. On September 25, 2020 Field Trip issued the first installment of the Jamaica Facility shares, being a total of 600,000 Common Shares at a deemed price per Field Trip Common Share of $2.00. On June 22, 2021 Field Trip issued the second installment of the Jamaica Facility shares of 150,000 Common Shares at a price per share of $6.78 (See Note 36 Subsequent Events).
The fair value of the Jamaica Facility Shares is measured at the date of grant using the Black-Scholes pricing model.
Black-Scholes model inputs for the Jamaican Facility Shares for the fiscal year ended March 31, 2021 were as follows:
|
|
Shares to be Issued
|
|
|
Grant Date
|
|
|
Share Price
|
|
|
Risk-free
Interest Rate
|
|
|
Expected Life
|
|
|
Volatility
Factor
|
|
|
Fair Value
per Share
|
|
|
|
#
|
|
|
|
|
|
$
|
|
|
%
|
|
|
(years)
|
|
|
%
|
|
|
$
|
|
|
|
1,200,000
|
|
|
3-Jun-20
|
|
|
2.00 (i)
|
|
|
0.62
|
|
|
4
|
|
|
75
|
|
|
2
|
|
Summary of Stock-based Compensation
|
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation)
to March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Stock option compensation expense — Stock Option Plan
|
|
|
|
|
1,275,457
|
|
|
|
|
|
68,177
|
|
|
|
Stock option compensation expense — Long Term Incentive Options
|
|
|
|
|
241,524
|
|
|
|
|
|
262,526
|
|
|
|
Stock-based compensation expense — Jamaica Facility Shares
|
|
|
|
|
1,526,438
|
|
|
|
|
|
—
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
3,043,419
|
|
|
|
|
|
330,703
|
|
|
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
18.
SHARE-BASED PAYMENTS (Continued)
|
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation)
to March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Stock option compensation expense — General and administration
|
|
|
|
|
1,102,306
|
|
|
|
|
|
301,642
|
|
|
|
Stock option compensation expense — Patient service expense
|
|
|
|
|
257,599
|
|
|
|
|
|
10,041
|
|
|
|
Stock option compensation expense — Research and development
|
|
|
|
|
1,598,231
|
|
|
|
|
|
13,775
|
|
|
|
Stock option compensation expense — Sales and marketing
|
|
|
|
|
85,283
|
|
|
|
|
|
5,245
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
3,043,419
|
|
|
|
|
|
330,703
|
|
|
19.
NET LOSS PER SHARE
For the fiscal year ended March 31, 2021 and period ended March 31, 2020, basic loss per share and diluted loss per share were the same, as the Group recorded a net loss for both periods and the exercise of any potentially dilutive instruments would be anti-dilutive.
|
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation)
to March 31, 2020
|
|
|
Loss attributable to common shares ($)
|
|
|
|
|
(23,117,607)
|
|
|
|
|
|
(2,628,324)
|
|
|
|
Dilutive effect on income
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Weighted average number of shares outstanding — basic (#)
|
|
|
|
|
33,067,833
|
|
|
|
|
|
10,373,191
|
|
|
|
Weighted average number of shares outstanding — diluted (#)
|
|
|
|
|
33,067,833
|
|
|
|
|
|
10,373,191
|
|
|
|
Loss per common share, basic ($)
|
|
|
|
|
(0.70)
|
|
|
|
|
|
(0.25)
|
|
|
|
Loss per common share, diluted ($)
|
|
|
|
|
(0.70)
|
|
|
|
|
|
(0.25)
|
|
|
20.
GENERAL AND ADMINISTRATION
|
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation)
to March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Personnel costs
|
|
|
|
|
5,214,979
|
|
|
|
|
|
896,227
|
|
|
|
External services
|
|
|
|
|
3,222,244
|
|
|
|
|
|
753,106
|
|
|
|
Share-based payments (Note 18)
|
|
|
|
|
1,516,981
|
|
|
|
|
|
330,703
|
|
|
|
Travel and entertainment
|
|
|
|
|
396,534
|
|
|
|
|
|
231,400
|
|
|
|
IT and technology
|
|
|
|
|
655,950
|
|
|
|
|
|
50,536
|
|
|
|
Office and general
|
|
|
|
|
155,205
|
|
|
|
|
|
48,104
|
|
|
|
Total general and administration
|
|
|
|
|
11,161,893
|
|
|
|
|
|
2,310,076
|
|
|
Personnel costs include compensation paid to its corporate headquarters and operations staff, as well as medical office administration (“MOA”) staff located at its various clinic locations.
External services comprise professional and consulting fees, investor relations and insurance expense.
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
21.
OCCUPANCY COSTS
|
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation)
to March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Operating rent expense
|
|
|
|
|
249,485
|
|
|
|
|
|
172,354
|
|
|
|
Taxes, maintenance, insurance
|
|
|
|
|
37,738
|
|
|
|
|
|
73,884
|
|
|
|
Minor furniture and fixtures
|
|
|
|
|
507,976
|
|
|
|
|
|
37,312
|
|
|
|
Utilities and services
|
|
|
|
|
102,192
|
|
|
|
|
|
33,926
|
|
|
|
Total occupancy costs
|
|
|
|
|
897,391
|
|
|
|
|
|
317,476
|
|
|
Operating rent expense comprises additional (non-lease) variable rent payments which are excluded from the right-of-use asset or lease obligations (see Note 30 Commitments for further details).
22.
SALES AND MARKETING
|
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation)
to March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Brand and public relations
|
|
|
|
|
731,511
|
|
|
|
|
|
214,091
|
|
|
|
Conference fees
|
|
|
|
|
78,783
|
|
|
|
|
|
42,803
|
|
|
|
Personnel costs
|
|
|
|
|
347,027
|
|
|
|
|
|
29,147
|
|
|
|
External marketing services
|
|
|
|
|
464,119
|
|
|
|
|
|
19,669
|
|
|
|
Other marketing
|
|
|
|
|
8,783
|
|
|
|
|
|
—
|
|
|
|
Total sales and marketing
|
|
|
|
|
1,630,223
|
|
|
|
|
|
305,710
|
|
|
23.
RESEARCH AND DEVELOPMENT
|
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation)
to March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
External services
|
|
|
|
|
2,254,608
|
|
|
|
|
|
—
|
|
|
|
Personnel costs
|
|
|
|
|
759,080
|
|
|
|
|
|
178,644
|
|
|
|
Supplies and services
|
|
|
|
|
404,002
|
|
|
|
|
|
14,548
|
|
|
|
Total research and development
|
|
|
|
|
3,417,690
|
|
|
|
|
|
193,192
|
|
|
The expenditures above relate to research and development activities which do not qualify for capitalization based on the Group’s accounting policies for capitalization of development costs. They have therefore been recognised as an expense during the fiscal year ended March 31, 2021 and period ended March 31, 2020.
External services fees relate primarily to fees paid to third parties to (i) further FT-104 development; and ii) manage the construction and project management of the Jamaica Facility, oversee the operations of the Jamaica Facility, provide legal advice and manage government relations.
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
24.
DEPRECIATION AND AMORTIZATION
|
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation)
to March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Depreciation and Amortization — Leasehold Improvements
|
|
|
|
|
221,473
|
|
|
|
|
|
8,645
|
|
|
|
Depreciation and Amortization — Furniture & Fixtures
|
|
|
|
|
32,298
|
|
|
|
|
|
1,041
|
|
|
|
Depreciation and Amortization — Computer Equipment & Software
|
|
|
|
|
67,740
|
|
|
|
|
|
4,111
|
|
|
|
Depreciation and Amortization — Medical Lab and Equipment
|
|
|
|
|
24,500
|
|
|
|
|
|
239
|
|
|
|
Depreciation and Amortization — Right of use asset
|
|
|
|
|
987,226
|
|
|
|
|
|
130,290
|
|
|
|
Depreciation and Amortization — Intangible assets
|
|
|
|
|
61,167
|
|
|
|
|
|
1,994
|
|
|
|
Total depreciation and amortization
|
|
|
|
|
1,394,404
|
|
|
|
|
|
146,320
|
|
|
25.
PATIENT SERVICES EXPENSE
|
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation)
to March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Personnel costs
|
|
|
|
|
1,411,083
|
|
|
|
|
|
7,568
|
|
|
|
Supplies and services
|
|
|
|
|
116,048
|
|
|
|
|
|
1,641
|
|
|
|
Payment provider fees
|
|
|
|
|
17,197
|
|
|
|
|
|
194
|
|
|
|
Total patient services expense
|
|
|
|
|
1,544,328
|
|
|
|
|
|
9,403
|
|
|
Patient services expense is comprised of direct costs incurred by the clinics to generate patient services revenue.
26.
FINANCE EXPENSE
|
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation)
to March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Interest expense on leases
|
|
|
|
|
(301,503)
|
|
|
|
|
|
(22,562)
|
|
|
|
Interest income on shareholders’ loan
|
|
|
|
|
2,531
|
|
|
|
|
|
1,586
|
|
|
|
Interest income on refundable lease deposit
|
|
|
|
|
7,549
|
|
|
|
|
|
951
|
|
|
|
Interest expense on loan
|
|
|
|
|
(1,793)
|
|
|
|
|
|
—
|
|
|
|
Interest income on bank balances
|
|
|
|
|
40,957
|
|
|
|
|
|
118
|
|
|
|
Total finance expense
|
|
|
|
|
(252,259)
|
|
|
|
|
|
(19,907)
|
|
|
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
27.
OTHER INCOME (EXPENSE)
|
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation)
to March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Unrealized foreign exchange loss
|
|
|
|
|
(78,420)
|
|
|
|
|
|
(1,111)
|
|
|
|
Realized foreign exchange gain (loss)
|
|
|
|
|
(1,578,142)
|
|
|
|
|
|
667,526
|
|
|
|
Government assistance — wage subsidy
|
|
|
|
|
17,381
|
|
|
|
|
|
6,345
|
|
|
|
Government assistance — CEBA loan
|
|
|
|
|
18,681
|
|
|
|
|
|
—
|
|
|
|
Government assistance — IAP funding
|
|
|
|
|
20,328
|
|
|
|
|
|
—
|
|
|
|
Total other income (expense)
|
|
|
|
|
(1,600,172)
|
|
|
|
|
|
672,760
|
|
|
The Company applied for, and received, governmental assistance related to the COVID-19 pandemic:
(i)
The Canada Emergency Business Account (CEBA) program provides an interest-free loan of $40,000, of which and if required conditions are met, only 75% or $ 30,000 of the loan amount is repayable by December 31, 2022. Government assistance is comprised of the fair value of the loan amount forgiven using an 15% effective interest rate (see Note 15 Loan Payable).
(ii)
The 10% Temporary Wage Subsidy for Employers (TWS) program provides a subsidy of 10% of wages from March 18, to June 19, 2020 up to $1,375 for each eligible employee. The maximum total is $25,000 for each eligible employer. For the fiscal year ended March 31, 2021, the Company received wage subsidies of $18,000 (March 31, 2020 — $nil).
(iii)
The Innovation Assistance Program (IAP) provides assistance to early stage, small to medium-sized enterprises unable to access COVID-19 support. The Company received $20,328 to cover salary expenses for the period from April 1 to June 24, 2020.
28.
NON-CONTROLLING INTEREST
The following table summarizes the information relating to the Group’s subsidiary Field Trip Natural Products Limited before intercompany eliminations:
|
|
|
|
As at
March 31, 2021
|
|
|
As at
March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Current assets
|
|
|
|
|
—
|
|
|
|
|
|
30,300
|
|
|
|
Non-current assets
|
|
|
|
|
—
|
|
|
|
|
|
5,294
|
|
|
|
Current liabilities
|
|
|
|
|
—
|
|
|
|
|
|
(48,941)
|
|
|
|
Non-current liabilities
|
|
|
|
|
—
|
|
|
|
|
|
(28,374)
|
|
|
|
Total equity
|
|
|
|
|
—
|
|
|
|
|
|
(41,721)
|
|
|
|
Non-controlling interest (%)(i)
|
|
|
|
|
0%
|
|
|
|
|
|
20%
|
|
|
|
Equity attributable to Field Trip
|
|
|
|
|
—
|
|
|
|
|
|
(33,377)
|
|
|
|
Equity attributable to NCI
|
|
|
|
|
—
|
|
|
|
|
|
(8,344)
|
|
|
(i)
See Note 2 Basis of Presentation for changes to the ownership structure of the Group’s subsidiary Field Trip Natural Products during the fiscal year ended March 31, 2021.
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
29.
CHANGE IN NON-CASH WORKING CAPITAL
|
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation)
to March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Accounts receivable
|
|
|
|
|
(610,649)
|
|
|
|
|
|
(209,457)
|
|
|
|
Other current assets
|
|
|
|
|
(2,756,281)
|
|
|
|
|
|
(133,916)
|
|
|
|
Other non-current assets
|
|
|
|
|
(160,706)
|
|
|
|
|
|
(36,781)
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
3,545,957
|
|
|
|
|
|
577,878
|
|
|
|
Deferred revenue
|
|
|
|
|
40,318
|
|
|
|
|
|
2,000
|
|
|
|
Net changes in non-working capital
|
|
|
|
|
58,639
|
|
|
|
|
|
199,724
|
|
|
30.
COMMITMENTS
Lease obligations
The Group leases real property for its clinical and office locations in North America and Europe. The Group is committed for estimated additional variable (non-lease) rent payment obligations as follows:
|
|
|
|
Expiry
|
|
|
Additional
Rent
Payments
|
|
|
< 1 year
|
|
|
1-2 years
|
|
|
2-3 years
|
|
|
3-4 years
|
|
|
4-5 years
|
|
|
More than
5 years
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Amsterdam Clinic
|
|
|
October 31, 2026
|
|
|
|
|
356,193
|
|
|
|
|
|
63,796
|
|
|
|
|
|
63,796
|
|
|
|
|
|
63,796
|
|
|
|
|
|
63,796
|
|
|
|
|
|
63,796
|
|
|
|
|
|
37,214
|
|
|
|
Atlanta Clinic
|
|
|
January 31, 2031
|
|
|
|
|
275,316
|
|
|
|
|
|
27,998
|
|
|
|
|
|
27,998
|
|
|
|
|
|
27,998
|
|
|
|
|
|
27,998
|
|
|
|
|
|
27,998
|
|
|
|
|
|
135,325
|
|
|
|
Chicago Clinic
|
|
|
September 30, 2031
|
|
|
|
|
607,459
|
|
|
|
|
|
59,264
|
|
|
|
|
|
59,264
|
|
|
|
|
|
59,264
|
|
|
|
|
|
59,264
|
|
|
|
|
|
59,264
|
|
|
|
|
|
311,138
|
|
|
|
Houston Clinic
|
|
|
March 31, 2026
|
|
|
|
|
260,303
|
|
|
|
|
|
52,061
|
|
|
|
|
|
52,061
|
|
|
|
|
|
52,061
|
|
|
|
|
|
52,061
|
|
|
|
|
|
52,061
|
|
|
|
|
|
—
|
|
|
|
Santa Monica Clinic
|
|
|
June 30, 2030
|
|
|
|
|
557,450
|
|
|
|
|
|
60,813
|
|
|
|
|
|
60,813
|
|
|
|
|
|
60,813
|
|
|
|
|
|
60,813
|
|
|
|
|
|
60,813
|
|
|
|
|
|
253,386
|
|
|
|
Toronto Clinic and Headquarters
|
|
|
October 31, 2023
|
|
|
|
|
288,119
|
|
|
|
|
|
111,530
|
|
|
|
|
|
111,530
|
|
|
|
|
|
65,059
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
2,344,840
|
|
|
|
|
|
375,462
|
|
|
|
|
|
375,462
|
|
|
|
|
|
328,991
|
|
|
|
|
|
263,932
|
|
|
|
|
|
263,932
|
|
|
|
|
|
737,063
|
|
|
These additional (non-lease) rent payments are variable, and therefore have not been included in the right-of-use asset or lease obligations.
In addition to variable rent payments, the Company has committed to base rent payments at its Houston, San Diego, Seattle, and Washington DC clinics that have been excluded from right-of-use asset and lease obligation balances, as the leases have been executed but have not yet commenced.
|
|
|
|
Expiry
|
|
|
Additional
Rent
Payments
|
|
|
< 1 year
|
|
|
1-2 years
|
|
|
2-3 years
|
|
|
3-4 years
|
|
|
4-5 years
|
|
|
More than
5 years
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Houston Clinic
|
|
|
March 31, 2026
|
|
|
|
|
1,166,515
|
|
|
|
|
|
183,172
|
|
|
|
|
|
231,375
|
|
|
|
|
|
231,375
|
|
|
|
|
|
231,375
|
|
|
|
|
|
231,375
|
|
|
|
|
|
57,844
|
|
|
|
San Diego Clinic
|
|
|
January 31, 2032
|
|
|
|
|
2,689,297
|
|
|
|
|
|
38,426
|
|
|
|
|
|
235,742
|
|
|
|
|
|
242,814
|
|
|
|
|
|
250,098
|
|
|
|
|
|
257,601
|
|
|
|
|
|
1,664,617
|
|
|
|
Seattle Clinic
|
|
|
December 31, 2028
|
|
|
|
|
1,652,889
|
|
|
|
|
|
53,972
|
|
|
|
|
|
217,574
|
|
|
|
|
|
224,321
|
|
|
|
|
|
231,067
|
|
|
|
|
|
237,814
|
|
|
|
|
|
688,142
|
|
|
|
Washington DC Clinic
|
|
|
March 31, 2032
|
|
|
|
|
2,155,693
|
|
|
|
|
|
78,594
|
|
|
|
|
|
112,389
|
|
|
|
|
|
197,369
|
|
|
|
|
|
202,303
|
|
|
|
|
|
207,360
|
|
|
|
|
|
1,357,678
|
|
|
|
|
|
|
|
|
|
|
|
7,664,394
|
|
|
|
|
|
354,164
|
|
|
|
|
|
797,080
|
|
|
|
|
|
895,879
|
|
|
|
|
|
914,843
|
|
|
|
|
|
934,150
|
|
|
|
|
|
3,768,281
|
|
|
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
30.
COMMITMENTS (Continued)
Jamaica Facility
|
|
|
|
Expiry
|
|
|
Total
|
|
|
1 year
|
|
|
2-3 years
|
|
|
4-5 years
|
|
|
More than
5 years
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Jamaica Facility
|
|
|
April 6, 2023
|
|
|
|
|
880,493
|
|
|
|
|
|
673,135
|
|
|
|
|
|
163,925
|
|
|
|
|
|
43,433
|
|
|
|
|
|
—
|
|
|
In connection with its partnership with UWI, FTNP agreed to lease property from UWI, contribute up to US$1,000,000 of initial capital for the Jamaica Facility and psilocybin research, and a total of US$100,000 to fund student development initiatives at UWI over a 36-month period. $263,121 was transferred from construction in progress to leasehold improvements in the period ended March 31, 2021 (see Note 10 Property Plant and Equipment).
31.
SEGMENT REPORTING
Information reported to the Chief Operating Decision Maker (“CODM”) for the purpose of resource allocation and assessment of segment performance focuses on the nature of the operations. The Group operates in three segments:
•
Clinical Operations which encompass the Group’s psychedelic assisted psychotherapy clinics across North America.
•
Research which consists of the research of fungi at the Group’s facility in Jamaica and research focused employees of Field Trip Psychedelics, and
•
Corporate which encompasses the operations of Field Trip headquarters.
Factors considered in determining the operating segments include the Group’s business activities, the management structure directly accountable to the CODM, availability of discrete financial information and strategic priorities within the organizational structure.
|
Segment Information
|
|
|
Clinical
Operations
|
|
|
Research
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Fiscal Year Ended March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
|
|
960,895
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
960,895
|
|
|
|
Net loss
|
|
|
|
|
(7,819,810)
|
|
|
|
|
|
(3,682,256)
|
|
|
|
|
|
(11,615,541)
|
|
|
|
|
|
(23,117,607)
|
|
|
|
Property, plant, and equipment
|
|
|
|
|
1,673,103
|
|
|
|
|
|
440,168
|
|
|
|
|
|
85,546
|
|
|
|
|
|
2,198,817
|
|
|
|
Intangible assets
|
|
|
|
|
427,124
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
427,124
|
|
|
|
Segment Information
|
|
|
Clinical
Operations
|
|
|
Research
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Period from April 2, 2019 (Date of Incorporation) to March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
|
|
1,000
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
1,000
|
|
|
|
Net loss
|
|
|
|
|
(977,824)
|
|
|
|
|
|
(109,867)
|
|
|
|
|
|
(1,540,633)
|
|
|
|
|
|
(2,628,324)
|
|
|
|
Property, plant, and equipment
|
|
|
|
|
482,242
|
|
|
|
|
|
5,294
|
|
|
|
|
|
87,910
|
|
|
|
|
|
575,446
|
|
|
|
Intangible assets
|
|
|
|
|
124,980
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
124,980
|
|
|
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
31.
SEGMENT REPORTING (Continued)
|
Geographic Information
|
|
|
Canada
|
|
|
United States
|
|
|
Jamaica
|
|
|
Netherlands
|
|
|
Total
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Fiscal Year Ended March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
|
|
471,622
|
|
|
|
|
|
489,273
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
960,895
|
|
|
|
Net loss
|
|
|
|
|
(15,707,476)
|
|
|
|
|
|
(6,104,906)
|
|
|
|
|
|
(332,636)
|
|
|
|
|
|
(972,589)
|
|
|
|
|
|
(23,117,607)
|
|
|
|
Property, plant, and equipment
|
|
|
|
|
400,069
|
|
|
|
|
|
1,018,047
|
|
|
|
|
|
440,168
|
|
|
|
|
|
340,533
|
|
|
|
|
|
2,198,817
|
|
|
|
Intangible assets
|
|
|
|
|
427,124
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
427,124
|
|
|
|
Period from April 2, 2019 (Date of Incorporation) to March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
|
|
1,000
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
1,000
|
|
|
|
Net loss
|
|
|
|
|
(1,876,081)
|
|
|
|
|
|
(713,124)
|
|
|
|
|
|
(39,119)
|
|
|
|
|
|
—
|
|
|
|
|
|
(2,628,324)
|
|
|
|
Property, plant, and equipment
|
|
|
|
|
460,304
|
|
|
|
|
|
109,848
|
|
|
|
|
|
5,294
|
|
|
|
|
|
—
|
|
|
|
|
|
575,446
|
|
|
|
Intangible assets
|
|
|
|
|
124,980
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
124,980
|
|
|
32.
FINANCIAL INSTRUMENTS
Classification of Financial Instruments
Financial assets and financial liabilities are measured on an ongoing basis at fair value or amortized cost. The classification of the financial instruments, as well as their carrying values, are shown in the table below:
|
|
|
|
|
|
|
|
|
As at
March 31, 2021
|
|
|
As at
March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Financial assets at fair value through profit and loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalent (Level 1)
|
|
|
|
|
38,469,057
|
|
|
|
|
|
9,590,758
|
|
|
|
Funds held in trust (Level 1)
|
|
|
|
|
795,516
|
|
|
|
|
|
—
|
|
|
|
Restricted cash (Level 1)
|
|
|
|
|
588,041
|
|
|
|
|
|
100,000
|
|
|
|
Financial assets at amortized cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short term investment
|
|
|
|
|
72,552,870
|
|
|
|
|
|
—
|
|
|
|
Accounts receivable
|
|
|
|
|
813,761
|
|
|
|
|
|
203,112
|
|
|
|
Shareholders’ loan receivable
|
|
|
|
|
50,521
|
|
|
|
|
|
47,991
|
|
|
|
Total financial assets
|
|
|
|
|
113,269,766
|
|
|
|
|
|
9,941,861
|
|
|
|
Financial liabilities at amortized cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
5,348,110
|
|
|
|
|
|
577,878
|
|
|
|
Loan payable
|
|
|
|
|
23,112
|
|
|
|
|
|
—
|
|
|
|
Total financial liabilities
|
|
|
|
|
5,371,222
|
|
|
|
|
|
577,878
|
|
|
Fair Value
IFRS 13 — Fair Value Measurements requires disclosure of a three-level hierarchy that reflects the significance of the inputs used in making fair value measurements. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 — Unadjusted quoted prices at the measurement date for identical assets or liabilities in active markets
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
32.
FINANCIAL INSTRUMENTS (Continued)
Level 2 — Observable inputs other than quoted prices in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data
Level 3 — Significant unobservable inputs that are supported by little or no market activity
Cash, restricted cash, accounts receivable, and accounts payable and accrued liabilities are all short-term in nature and, as such, their carrying values approximate fair values.
Credit Risk
The Group, in the normal course of business, is exposed to credit risk from its customers. Credit risk is the risk of an unexpected loss if a counterparty to a financial instrument fails to meet its contractual obligations. The Group is exposed to credit risk on its cash and accounts receivable. The Group’s objective with regard to credit risk in its operating activities is to reduce its exposure to losses. As the Group does not utilize credit derivatives or similar instruments, the maximum exposure to credit risk is the full amount of the carrying value of its cash and accounts receivable.
The Group’s cash and cash equivalents, funds held in trust and restricted cash are held with financial institutions in various bank accounts. These financial institutions are major banks in Canada, the United States, and Jamaica which the Group believes lessens the degree of credit risk.
Liquidity Risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they become due. The Group manages its liquidity risk by reviewing on an ongoing basis its capital requirements. The Group typically settles its financial obligations in cash. The ability to settle obligations in cash is dependent on the Group raising financing in a timely manner and by maintaining sufficient cash in excess of anticipated needs. As at March 31, 2021, the Group had $39,852,614 of cash and cash equivalents.
Undiscounted contractual obligations as of March 31, 2021 and 2020 are as follows:
March 31, 2021
|
|
|
|
Total
|
|
|
Less than
1 year
|
|
|
1 year to
3 years
|
|
|
3 years to
5 years
|
|
|
Over 5 years
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
5,348,110
|
|
|
|
|
|
5,348,110
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Deferred revenue
|
|
|
|
|
42,318
|
|
|
|
|
|
42,318
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Loan payable
|
|
|
|
|
30,000
|
|
|
|
|
|
—
|
|
|
|
|
|
30,000
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Lease obligations
|
|
|
|
|
9,463,505
|
|
|
|
|
|
1,477,942
|
|
|
|
|
|
2,295,745
|
|
|
|
|
|
1,988,112
|
|
|
|
|
|
3,701,706
|
|
|
|
Total financial liabilities
|
|
|
|
|
14,883,933
|
|
|
|
|
|
6,868,370
|
|
|
|
|
|
2,325,745
|
|
|
|
|
|
1,988,112
|
|
|
|
|
|
3,701,706
|
|
|
|
Total commitments
|
|
|
|
|
10,889,733
|
|
|
|
|
|
1,402,761
|
|
|
|
|
|
2,561,337
|
|
|
|
|
|
2,420,290
|
|
|
|
|
|
4,505,344
|
|
|
|
Total
|
|
|
|
|
25,773,666
|
|
|
|
|
|
8,271,131
|
|
|
|
|
|
4,887,082
|
|
|
|
|
|
4,408,402
|
|
|
|
|
|
8,207,050
|
|
|
March 31, 2020
|
|
|
|
Total
|
|
|
Less than
1 year
|
|
|
1 year to
3 years
|
|
|
3 years to
5 years
|
|
|
Over 5 years
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
577,878
|
|
|
|
|
|
577,878
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Deferred revenue
|
|
|
|
|
2,000
|
|
|
|
|
|
2,000
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Lease obligations
|
|
|
|
|
1,717,571
|
|
|
|
|
|
581,743
|
|
|
|
|
|
1,115,250
|
|
|
|
|
|
20,578
|
|
|
|
|
|
—
|
|
|
|
Total financial liabilities
|
|
|
|
|
2,297,449
|
|
|
|
|
|
1,161,621
|
|
|
|
|
|
1,115,250
|
|
|
|
|
|
20,578
|
|
|
|
|
|
—
|
|
|
|
Total commitments
|
|
|
|
|
260,237
|
|
|
|
|
|
111,530
|
|
|
|
|
|
148,707
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Total
|
|
|
|
|
2,557,686
|
|
|
|
|
|
1,273,151
|
|
|
|
|
|
1,263,957
|
|
|
|
|
|
20,578
|
|
|
|
|
|
—
|
|
|
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
32.
FINANCIAL INSTRUMENTS (Continued)
Interest Rate Risk
Financial instruments that potentially subject the Group to cash flow interest rate risk are those assets and liabilities with a variable interest rate. Currently, the Group has no assets or liabilities with a variable interest rate. Financial assets and financial liabilities that bear interest at fixed rates are subject to fair value interest rate risk. The Group’s lease obligations are at fixed rates of interest.
Currency Risk
The Group is exposed to currency risk related to the fluctuation of foreign exchange rates and the degree of volatility of those rates. Currency risk is limited to the portion of the Group’s business transactions denominated in currencies other than the Canadian dollar, which are primarily expenses in United States dollars. As at March 31, 2021, the Group held USD dollar denominated cash of $45,902,622 USD and had USD dollar denominated accounts payable and accrued liabilities in the amounts of $487,541 USD. Therefore, a 1% change in the foreign exchange rate would have a net impact as at March 31, 2021 of $571,095. USD dollar expenses for the fiscal year ended March 31, 2021 were $6,068,168 USD. Varying the foreign exchange rate for the fiscal year ended March 31, 2021 to reflect a 1% strengthening of the U.S. dollar would have increased the net loss by approximately $80,235 assuming that all other variables remained constant.
33.
RELATED PARTY TRANSACTIONS
The Group’s related parties include certain investors and shareholders, key management personnel, and entities owned by key management personnel.
Shareholders
Field Trip entered into shareholder loan agreements with two of its advisors for a total of $60,000 in July 2019. The notes are non-interest bearing (i.e., not on commercial terms) and are due on demand or five years from the date of note issuance. These loans are expected to be repaid in full at maturity. The Group measured the loans at fair value at initial recognition using an appropriate market interest rate. The below-market element of the loans was determined at initial recognition as the difference between the loan principal amount and fair value. This difference was recognized in equity as distribution to these shareholders. Total distribution arising from the initial fair value measurement of shareholders’ loan was $13,596. The fair values at initial recognition were accounted for as amortized cost financial assets in accordance with IFRS 9. The amortized cost of the loans as at March 31, 2021 was $50,521 (see Note 9 Other Assets) and total interest income accrued at market rate in profit or loss for the fiscal year then ended was $2,531 (see Note 26 Finance Income (Expense)).
Key Management Personnel
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, including directors. Key management at March 31, 2021 includes ten directors and executive officers of the corporation. Key management personnel compensation for the fiscal year ended March 31, 2021 and period ended March 31, 2020 was comprised of:
|
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period from April 2, 2019
(Date of Incorporation)
to March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Salaries
|
|
|
|
|
1,361,495
|
|
|
|
|
|
83,333
|
|
|
|
Share-based compensation (Note 18)
|
|
|
|
|
288,148
|
|
|
|
|
|
240,230
|
|
|
|
|
|
|
|
|
1,649,643
|
|
|
|
|
|
323,563
|
|
|
Grassfed Ventures
During the period ended March 31, 2020, the Group was charged for various capital and operating expenditures by Grassfed Ventures, an entity owned by three of the Group’s directors and executive officers. For the period ended March 31, 2020 amounts charged to the Group at arms-length were recorded as:
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
33.
RELATED PARTY TRANSACTIONS (Continued)
|
|
|
|
$
|
|
|
General and administration
|
|
|
|
|
146,067
|
|
|
|
Occupancy costs
|
|
|
|
|
67,000
|
|
|
|
Property, plant and equipment
|
|
|
|
|
9,122
|
|
|
|
Sales and marketing
|
|
|
|
|
616
|
|
|
|
|
|
|
|
|
222,805
|
|
|
There were no accounts payable to Grassfed Ventures as at March 31, 2020.
34.
INCOME TAXES
The following table reconciles the expected income tax expenses (recovery) at the Canadian statutory tax rate to the amounts recognized in the statements of loss and comprehensive loss for the fiscal year ended March 31, 2021 and period ended March 30, 2020:
|
|
|
|
Fiscal Year Ended
March 31, 2021
|
|
|
Period Ended
March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Loss for the year/period before income tax
|
|
|
|
|
(23,117,607)
|
|
|
|
|
|
(2,628,324)
|
|
|
|
Statutory tax rate
|
|
|
|
|
26.50%
|
|
|
|
|
|
26.50%
|
|
|
|
Expected income tax (recovery)
|
|
|
|
|
(6,126,166)
|
|
|
|
|
|
(696,506)
|
|
|
|
Non-deductible items and other
|
|
|
|
|
1,309,217
|
|
|
|
|
|
92,054
|
|
|
|
Foreign tax rate differences
|
|
|
|
|
(11,766)
|
|
|
|
|
|
(3,989)
|
|
|
|
Change in deferred tax assets not recognized
|
|
|
|
|
4,828,715
|
|
|
|
|
|
608,441
|
|
|
|
Total income tax expense (recovery)
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Current tax expense (recovery)
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Deferred tax expense (recovery)
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
The deferred tax assets (liabilities) as at March 31, 2021 and 2020 are comprised of the following:
|
|
|
|
As at
March 31, 2021
|
|
|
As at
March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Lease obligations
|
|
|
|
|
1,931,677
|
|
|
|
|
|
184,768
|
|
|
|
Non-capital loss carryforwards — Canada
|
|
|
|
|
—
|
|
|
|
|
|
22,631
|
|
|
|
Shareholder loans
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Start-up Costs — USA
|
|
|
|
|
—
|
|
|
|
|
|
5,606
|
|
|
|
Right-of-use assets
|
|
|
|
|
(1,889,038)
|
|
|
|
|
|
(180,353)
|
|
|
|
Property, plant and equipment
|
|
|
|
|
(42,639)
|
|
|
|
|
|
(27,981)
|
|
|
|
Share issuance costs
|
|
|
|
|
—
|
|
|
|
|
|
(4,671)
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
34.
INCOME TAXES (Continued)
The unrecognized deductible temporary differences as at March 31, 2021 and 2020 are comprised of the following:
|
|
|
|
As at
March 31, 2021
|
|
|
As at
March 31, 2020
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Lease obligations
|
|
|
|
|
213,260
|
|
|
|
|
|
11,654
|
|
|
|
Non-capital loss carryforwards
|
|
|
|
|
21,548,363
|
|
|
|
|
|
1,530,095
|
|
|
|
Shareholder loans
|
|
|
|
|
13,596
|
|
|
|
|
|
—
|
|
|
|
Start-up Costs — USA
|
|
|
|
|
715,584
|
|
|
|
|
|
694,865
|
|
|
|
Property, plant and equipment
|
|
|
|
|
9,648,236
|
|
|
|
|
|
12,009
|
|
|
|
Share issuance costs
|
|
|
|
|
—
|
|
|
|
|
|
38,423
|
|
|
|
Total unrecognized deductible temporary differences
|
|
|
|
|
32,139,039
|
|
|
|
|
|
2,287,046
|
|
|
As at March 31, 2021, the Company has not recognized a deferred tax asset in respect of non-capital loss carryforwards of approximately $21,548,363 which may be carried forward to apply against future income for Canadian income tax purposes, subject to the final determination by taxation authorities, expiring in the year 2040.
|
|
Year of Loss
|
|
|
Expiry
|
|
|
Canada
|
|
|
Jamaica
|
|
|
Netherlands
|
|
|
United States
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
2020
|
|
|
|
|
2040
|
|
|
|
|
|
1,518,502
|
|
|
|
|
|
38,423
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
1,556,925
|
|
|
|
|
2021
|
|
|
|
|
2041
|
|
|
|
|
|
11,605,974
|
|
|
|
|
|
833,838
|
|
|
|
|
|
720,667
|
|
|
|
|
|
6,830,959
|
|
|
|
|
|
19,991,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,124,476
|
|
|
|
|
|
872,261
|
|
|
|
|
|
720,667
|
|
|
|
|
|
6,830,959
|
|
|
|
|
|
21,548,363
|
|
|
35.
CONTINGENCIES
Litigation
During the prior year, the Group terminated a lease contract with a lessor due to circumstances which it believes constituted a breach of contract by the lessor. Should the Group become involved in litigation due to the termination of this contract, the Group believes it has prepared valid legal defenses and that no material exposure exists on the eventual settlement of such litigation. This lease was treated as a short-term lease under IFRS 16 and all payments including security deposit paid were fully expensed during the period ended March 31, 2020.
36.
SUBSEQUENT EVENTS
TSX Listing
On June 7, 2021 Field Trip’s Common Shares and warrants commenced trading on the TSX under the ticker symbols “FTRP” and “FTRP.WT” respectively. In connection with the TSX listing, the Common Shares and warrants were delisted from the Canadian Securities Exchange (“CSE”).
NASDAQ Listing
On June 8, 2021, the Company announced that it had applied to list its Common Shares on the NASDAQ Stock Market (“NASDAQ”). In advance of an anticipated listing on NASDAQ, Field Trip will file a Registration Statement with the United States Securities and Exchange Commission. The listing of Common Shares on NASDAQ remains subject to the review and approval of the listing application and the satisfaction of all applicable listing and regulatory requirements, as well as effectiveness of the registration statement. Field Trip will continue to maintain the listing of its Shares on the Toronto Stock Exchange under the symbol “FTRP”.
Option Grants
On April 30, 2021, the Group issued 229,888 options at an issue price of $6.05 per Field Trip Share.
On May 31, 2021, the Group issued 385,000 options at an issue price of $5.53 per Field Trip Share.
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Consolidated Financial Statements (Continued)
For the Fiscal Year Ended March 31, 2021 and Period from
April 1, 2019 (Date of Incorporation) to March 31, 2020
36.
SUBSEQUENT EVENTS (Continued)
Clinic Openings
San Carlos, California
On April 15, 2021, the Group executed a lease agreement to build its San Carlos, California clinic, commencing on September 1, 2021 and ending August 31, 2031. Total commitments under the lease are approximately $3,845,220.
Fredericton, New Brunswick
On April 16, 2021, the Group executed a lease agreement to build its Fredericton, New Brunswick clinic, commencing on August 1, 2021 and ending July 31, 2031. Total commitments under the lease are approximately $685,000.
Vancouver, British Columbia
On April 29, 2021, the Group executed a lease agreement to build its Vancouver, British Columbia clinic, commencing on September 1, 2021 and ending August 31, 2031. Total commitments under the lease are approximately $1,939,712.
Austin, Texas
On June 4, 2021, the Group executed a lease agreement to build its Austin, Texas clinic, commencing on November 1, 2021 and ending March 31, 2032. Total commitments under the lease are approximately $4,442,091.
Stamford, Connecticut
On June 21, 2021, the Group executed a lease agreement to build its Stamford, Connecticut clinic, commencing on December 1, 2021 and ending May 31, 2032. Total commitments under the lease are approximately $1,757,751.
Loan Payable
On June 3, 2021, the Group applied for and received a $20,000 CEBA loan expansion. The loan is interest-free and is in addition to the initial $40,000 CEBA loan received on September 17, 2020. With a total loan payable of $60,000, the debt forgiveness is not available unless the initial $40,000 is repaid. The loan forgiveness is calculated as follows: 25% on the initial $40,000; plus 50% on amounts above $40,000 and up to $60,000. The maximum amount of debt forgiven is $20,000 (see Note 15 Loan Payable).
Jamaica Facility Shares
On June 22, 2021, Field Trip issued the second instalment of the Jamaica Facility shares under the SPA, being a total of 150,000 shares at a price per Field Trip Common Share of $6.78 (see Note 18 Share-based payments).
Exercise of Warrants
On June 22, 2021, 144,377 FTP Compensation Warrants were exercised at a price of $2.00 for gross proceeds of $288,754.
Exhibit 99.4
Audit
Committee Charter
(June 2021)
This
Charter (Charter) sets out the purpose, composition, member qualification, roles and responsibilities, manner of
reporting to the Board of Directors (the Board) of Field Trip Health Ltd. (Field Trip), and the general objectives &
operation of Field Trip' s audit committee (the Committee).
Mandate of the Committee
The
primary mandate of the Committee is oversight of Field Trip’s external auditors (AAuditors), financial reporting and
continuous disclosure, financial risk management, Field Trip’s whistleblower and fraud function, and compliance with tax and securities
laws.
Roles &
Responsibilities
In executing its mandate, the
Committee shall have the following roles and responsibilities:
External Auditor
The
Committee will: (a) select, evaluate and recommend to the Board, for shareholder approval, the Auditors and, if necessary, the replacement
of the Auditor; (b) prior to the annual audit, evaluate the scope of the Auditor's review, including the Auditor's engagement letter
and the annual audit plan, fee schedule and any related services proposals; (c) recommend to the Board the Auditors’ compensation;
(d) pre-approve all non-audit services to be provided by the Auditors; (e) directly oversee the work of the Auditor; (g) assist
with resolving any disputes between Field Trip's management and the Auditors regarding financial reporting; (h) ensuring that the
Auditor is in good standing with the Canadian Public Accountability Board by receiving, at least annually, a report by the external auditor
on the audit firm’s internal quality control processes and procedures; and (i) performing other audit, review or attestation
services.
Financial Reporting
The Committee
will: (a) review the audited consolidated financial statements of Field Trip, discuss those statements with management and with
the Auditor, and recommend their approval to the Board; (b) review and discuss with management the quarterly consolidated
financial statements, and if appropriate, recommend their approval by the Board; (c) review Field Trip's management discussion
and analysis, interim and annual press releases, and audit committee reports before Field Trip publicly discloses this information;
(d) review and consider any significant reports and recommendations issued by the Auditor, together with management's response,
and the extent to which recommendations made by the Auditor have been implemented; and (e) reviewing and approving Field
Trip’s hiring policies with respect to partners or employees (or former partners or employees) of a current or former
auditor.
|
Field Trip Audit Committee Charter (June 2021)
|
Page 1 of 4
|
Financial Risk
Management
The Committee will:
(a) review with the Auditors and with management, the general policies and procedures used by Field Trip with respect to internal
accounting and financial controls and remain informed of any weaknesses in internal control that could cause errors or deficiencies in
financial reporting or deviations from the accounting policies of Field Trip or from applicable laws or regulations; (b) periodically
review activities, organizational structure, and qualifications of the CFO and the staff in the financial reporting area, circumstances
surrounding the departure of any officers in charge of financial reporting, and the appointment of individuals in these functions, and
ensure that matters related to succession planning within Field Trip are raised for consideration at the Board; (c) review management
plans regarding any changes in accounting practices or policies and the financial impact thereof; and (d) establishing procedures
for: reviewing the adequacy of Field Trip’s insurance coverage, including the Directors’ and Officers’ insurance coverage.
Fraud &
Whistleblower Program
The Committee will:
(a) establish procedures for the confidential, anonymous submission by employees of Field Trip of complaints regarding questionable
accounting or auditing matters and the receipt, retention and treatment of any such complaints; and (b) review fraud prevention policies
and programs, and monitor their implementation.
Compliance with
Laws
The Committee will:
review regular reports from management and others (e.g., external auditors, legal counsel) with respect to Field Trip’s compliance
with laws and regulations relating to financial controls, records and reporting including: (a) tax and financial reporting laws and
regulations; (b) legal withholding requirements; (c) laws and regulations which expose directors to liability; and (d) orientation
of new members and continuous education of all members.
The Committee is also responsible
for the other matters as set out in this Charter and/or such other matters as may be directed by the Board from time to time.
Composition
The
Committee must be comprised of a minimum of three directors of Field Trip. All of the members of the Committee must be independent
directors of Field Trip as defined in National Instrument 52-110 – Audit Committees (NI
52-110). All members of the Committee must be financially literate as defined in NI 52-110. If upon appointment a member of the
Committee is not financially literate, the person will be given a reasonable period of time to acquire the required level of
financial literacy.
|
Field Trip Audit Committee Charter (June 2021)
|
Page 2 of 4
|
The
Board will appoint a chair of the Committee (the Chair) to serve for a term of one (1) year on an annual basis. The
Chair may serve as the chair of the Committee for any number of consecutive terms. The Chair shall be responsible for leadership of the
Committee, including scheduling and chairing meetings, preparing agendas and briefing documents, and making regular reports to the Board.
The Committee may form and delegate authority to subcommittees where appropriate.
The members of the Committee will
be appointed by the Board annually, and from time to time to fill vacancies, as required. A Committee member may be removed or replaced
at any time at the discretion of the Board and will cease to be a member of the Committee on ceasing to be an independent director.
Meetings &
Minutes
The Committee shall meet as necessary,
at a minimum at least four (4) times per year, to enable it to fulfill its responsibilities and duties as set forth herein.
The quorum required to constitute
a meeting of the Committee is set at a majority of members. The Chair will set the agenda for each meeting, after consulting with management
and the external auditor. Agenda materials such as draft financial statements must be circulated to all Committee members prior to the
meeting for members to have a reasonable amount of time to review the materials.
The external auditors (Auditors),
will be provided with notice as necessary of any Committee meeting, will be invited to attend each such meeting and will receive an opportunity
to be heard at those meetings on matters related to the Auditor's duties.
The
Committee will meet in camera separately with each of the Chief Executive Officer (CEO) and the Chief Financial
Officer (CFO) at least annually to review the financial affairs of Field Trip. The Committee will meet with the Auditor in camera
at least once each year, at such time(s) as it deems appropriate, to review the external auditor’s examination and report.
Each of the Chair of the Committee,
members of the Committee, Chair of the Board, external auditor, CEO, CFO or secretary shall be entitled to request that the Chair of the
Committee call a meeting which shall be held within 48 hours of receipt of such request to consider any matter that such individual believes
should be brought to the attention of the Board or the shareholders.
The Committee will keep minutes
of its meetings which accurately recording the decisions reached by the Committee, and which minutes are filed with the minutes of the
meetings of the Board.
Reporting
The Committee will report, at
least annually, to the Board regarding the Committee’s examinations and recommendations.
|
Field Trip Audit Committee Charter (June 2021)
|
Page 3 of 4
|
Express Authority
The Committee shall have unrestricted
access to Field Trip’s officers and employees. The Committee may conduct or authorize investigations into or studies of matters
within the Committee’s scope of responsibilities and duties. In addition to all authority required to carry out the duties and responsibilities
included in this Charter, the Committee has specific authority to: (a) engage, set and pay the compensation for independent counsel
and other advisors as it determines necessary to carry out its duties and responsibilities, and any such consultants or professional advisors
so retained by the Committee will report directly to the Committee; (b) communicate directly with management and any internal auditor,
and with the Auditors without management involvement; and (c) incur ordinary administrative expenses that are necessary or appropriate
in carrying out its duties, which expenses will be paid for by Field Trip.
Annual Review
The
Committee shall review and assess the adequacy of this Charter periodically as conditions dictate, but at least annually, to ensure compliance
with any rules or regulations and recommend any modifications to this Charter if and when appropriate to the Board for its approval.
The Board will conduct an annual
performance evaluation of the Committee, taking into account the Charter, to determine the effectiveness of the Committee.
Approved Effective June 7,
2021
|
Field Trip Audit Committee Charter (June 2021)
|
Page 4 of 4
|
Exhibit 99.5
Mandate
of the Board of Directors
(June 2021)
This
Mandate (Mandate) sets out the purpose, composition, member qualification, roles and responsibilities of the Board
of Directors (the Board) of Field Trip Health Ltd. (Field Trip).
Mandate of the Board
The
primary mandate of the Board is supervising the management of the business and affairs of Field Trip and its subsidiaries as a whole and
acting as an independent and informed monitor of both the conduct of Field Trip and the performance of its management.
Roles &
Responsibilities
In executing its mandate, the
Board shall have the following roles and responsibilities:
Board Procedures
The Board shall develop
procedures relating to its conduct and the fulfillment of its responsibilities.
Strategic Planning &
Corporate Performance
The Board will oversee
Field Trip’s strategic planning process, including broad strategic corporate objectives against which the performance of Field Trip
will be measured. In doing so, the Board will, at least annually review and approve (a) the Chief Executive Officer’s strategic
plan, including corporate performance targets, (b) strategic and operational budgets, and (c) on advice of the Compensation
Committee, set targets for executive performance and executive compensation. The Board shall monitor performance of Field Trip against
its strategic plans, including receipt of quarterly progress reports from management regarding the corporate performance targets.
Principal Risks
and Risk Management
The Board shall (a) assess
and monitor the principal risks of the businesses of Field Trip, and (b) monitor compliance with Board policies.
|
Field Trip Audit Committee Charter (June 2021)
|
Page 1 of 5
|
Oversight of Management
The Board will review
the process for the appointment, training, monitoring and succession of senior management of Field Trip and satisfy itself as to the integrity
of the Chief Executive Officer and the other executive officers of Field Trip.
The Board shall delegate
responsibility for certain tasks and functions to the Chief Executive Officer and such other executive officers as they determine appropriate
to manage the business and operations of Field Trip and ensure that any delegation of authority is reviewed annually.
Senior management of
Field Trip, primarily through the Chief Executive Officer, reports to and is accountable to the Board. The primary responsibility of management
of Field Trip is to safeguard and build Field Trip's business and assets with a view to the best interests of its shareholders.
Internal Controls &
Management Information Systems
The Board shall ensure
that Field Trip has implemented and maintains adequate and effective internal controls and management information systems to ensure the
directors are able to effectively carry out their oversight responsibilities, including legal and regulatory requirements related to financial
and continuous disclosure reporting requirements.
Information provided
by management to the Board is critical and the Board must be kept informed on a timely basis by management of any key developments and
decisions taken by management. The Board shall periodically assess the quality, completeness and timeliness of information provided by
management to the Board.
Oversight of Communications
Policy
The Board will oversee
communication between Field Trip and its stakeholders (shareholders, regulators and the public markets) by reviewing Field Trip's communication
and disclosure policies annually. Unless otherwise delegated, the Board shall review and approve the following disclosure documents: annual
report, annual information form, annual information circular, financial statements and related management discussion and analysis, and
any prospectus or similar offering document.
Oversight of Code
of Ethics
The Board expects all
directors, officers and employees of Field Trip and its subsidiaries to conduct themselves in accordance with the highest ethical standards
and to adhere to Field Trip's Code of Ethics. The Board shall annually review and approve the Code of Ethics. Waivers of the Code of Ethics
will only be granted in exceptional circumstances in consultation with legal counsel. Any waiver of the Code of Ethics for officers or
directors may only be made by the Board. Employees may seek waivers from the Chief Executive Officer, with reporting to the Board quarterly.
The Board is also responsible for the other matters
as set out in this Mandate and/or such other matters as may be directed by the Board from time to time.
|
Field Trip Audit Committee Charter (June 2021)
|
Page 2 of 5
|
Composition
The Board must be comprised
of a minimum of three directors of Field Trip. Not less than two (2) directors of the Board must
be independent directors of Field Trip as defined in National Policy 58-201 Corporate - Governance
Guidelines.
Directors are expected to have
the highest ethical standards and be dedicated to advancing the best interests of Field Trip and its stakeholders. Directors shall have
such skills and knowledge in areas relevant to Field Trip's business to enhance the ability of the Board to effectively oversee the business
and affairs of Field Trip. Each director must also have an understanding of Field Trip's business and performance relative to its principal
competitors. Directors must also have sufficient time to carry out their duties and not assume responsibilities that would conflict with
their duties as a director of Field Trip.
The
Board will appoint a chair of the Board (the Chair) to serve for a term of one (1) year on an annual basis. The Chair
may serve as the chair of the Board for any number of consecutive terms. The Chair shall be responsible for leadership of the Board, including
scheduling and chairing meetings, preparing agendas and briefing documents, and making regular reports to the Board. Where the Chair is
not an independent director, an independent director will be appointed to act as “lead director” to act as the effective leader
of the Board and ensure that the Board's agenda will enable it to successfully carry out its duties.
The
members of the Board will be appointed by the shareholders annually at its annual general meeting, and from time to time to fill vacancies,
as required. A Board member may be removed or replaced at any time at the discretion of the Board and will cease to be a member of the
Board on ceasing to be an independent director.
Majority Voting Policy
The Board is committed to fulfilling
its Mandate and believes that each member of the Board should carry the confidence and support of Field Trip’s shareholders. As
such, any management proxy solicitation circular distributed in connection with a meeting of Field Trip’s shareholders shall provide
shareholders with the ability to vote in favour of, or to withhold from voting for, each director nominee. The Chair shall ensure that
the number of votes in favour of or withheld from voting for each director nominee is recorded and promptly made public after the meeting.
If
the number of proxy votes withheld for a particular director nominee is greater than the votes in favour of such nominee, such director
nominee (a Resigning Director) shall be required to promptly submit his/her resignation to the Chair, effective upon
acceptance by the Board.
The Board must accept the resignation
of the Director, absent exceptional circumstances. In considering whether or not to accept the resignation, the Board will consider all
relevant factors, including (a) the stated reasons, if any, why shareholders withheld votes from the election of the Resigning Director,
(b) the effect that such a resignation may have on the Board’s ability to effectively continue fulfilling it responsibility
for the stewardship of Field Trip and the enhancement of shareholder value and its ability to comply with any applicable governance rules and
policies, and (c) whether the director's resignation from the Board would be in the best interests of Field Trip.
|
Field Trip Audit Committee Charter (June 2021)
|
Page 3 of 5
|
Within ninety (90) days of receiving
a Resigning Director’s resignation, the Board will make a decision and issue a press release either announcing the resignation of
the Resigning Director or explaining why it has not been accepted.
If a resignation is accepted,
subject to any corporate law restrictions, the Board may: (i) leave the resultant vacancy unfilled until the next annual meeting
of shareholders; (ii) fill the vacancy through the appointment of a new director who merits the confidence of the shareholders;
or (iii) call a special meeting of shareholders to fill the vacant position.
A director who tenders his/her
resignation pursuant to this Mandate shall not be permitted to participate in any meetings of the Board at which his/her resignation is
to be considered; provided that he/she may be counted for the purpose of determining whether the Board has a quorum where necessary.
This majority voting policy does
not apply to contested elections in which the number of director nominees for election is greater than the number of director positions
on the Board. In contested elections, the directors shall be elected by the vote of a plurality of the votes cast.
Meetings &
Minutes
The
Board shall meet as necessary, at a minimum at least four (4) times per year, to enable it to fulfill its responsibilities and duties
as set forth herein. The independent directors will hold in camera meetings, as appropriate.
The
quorum required to constitute a meeting of the Board is set at a majority of members. The Chair will set the agenda for each meeting.
The Board may invite members of management or others to attend meetings and provide such pertinent information as the Board may request
on the issues being considered, provided that the Chief Executive Officer (CEO) and other executives may not be present
during any voting or deliberations on compensation of the CEO or such other executives.
Meetings may be called by the
Chair, the Chief Executive Officer or any director at any time, in accordance with Field Trip’s bylaws. The Chair shall (a) establish
the agenda for each meeting and lead discussion on agenda items, and (b) instruct the Corporate Secretary to circulate meeting materials
to the Board members with sufficient time to review and consider them. Any director may propose items for the agenda or request information
or the presence of any member of senior management at any meeting.
Procedures
for Board meetings will be determined by the Chair, unless otherwise determined by Field Trip's by-laws and articles and the requirements
under the Business Corporations Act (Canada). In the absence of the Chair or the
Corporate Secretary at a meeting of the Board, the members in attendance must select one of them to act as chair of that meeting and/or
one of its members or any other person to act as secretary of that meeting.
The Board will keep minutes of
its meetings which accurately recording the decisions reached by the Board, and which minutes are filed with the minutes of the meetings
of the Board.
Committees of the Board
The
Board may form and delegate authority to committee where appropriate. Each committee will establish its own meeting procedures and requirements
under its charter.
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The Board, and any outside advisors
retained by it, will have access to all records and information relating to Field Trip which it deems relevant to the performance of its
duties.
Express Authority
The Board shall have unrestricted
access to Field Trip’s officers and employees. The Board may conduct or authorize investigations into or studies of matters within
the Board’s scope of responsibilities and duties. In addition to all authority required to carry out the duties and responsibilities
included in this Mandate, the Board has specific authority to: (a) engage, set and pay the compensation for independent counsel and
other advisors as it determines necessary to carry out its duties and responsibilities, and any such consultants or professional advisors
so retained by the Board will report directly to the Board; (b) communicate directly with management and any internal auditor, and
with the Auditors without management involvement; and (c) incur ordinary administrative expenses that are necessary or appropriate
in carrying out its duties, which expenses will be paid for by Field Trip.
Annual Review
The
Board shall review and assess the adequacy of this Mandate periodically as conditions dictate, but at least annually, to ensure compliance
with any rules or regulations and recommend any modifications to this Mandate if and when appropriate to the Board for its approval.
The Board, in consultation with
the Compensation Committee, will conduct an annual performance evaluation of the Board as a whole, taking into account the Mandate, and
individual director to determine the effectiveness of the Board. The Board shall also evaluate the performance and effectiveness of any
committees of the Board.
Approved Effective June 7,
2021
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Exhibit
99.6
POSITION
DESCRIPTION
Chair
of the Board
General
This
position description describes the appointment, role and responsibilities of the chair (Chair)
of the board of directors (Board) of Field Trip Health Ltd. (Field Trip). This position description is subject to the provisions
of the Canada Business Corporations Act and Field Trip's articles and by-laws, as amended from time to time. This position description
should be read together with the written Board charter (Charter), as such Charter may be amended from time to time.
Office
of the Chair
The
Chair shall be appointed by the Board for a one-year term, provided that if at the end of the term a successor is not appointed, the
incumbent Chair shall remain in office until a successor is appointed. If there is a vacancy in the office of the Chair, then the lead
director shall fill the vacancy until the vacancy is filled by the Board. The office of the Chair is to be vacated if (a) the Chair
resigns (which resignation shall become effective upon the Chair delivering a written resignation to the secretary or another officer
of Field Trip); (b) upon the death of the Chair; or (c) following the passing of a resolution of the Board removing the Chair
from office.
The
Chair shall receive such remuneration for his or her services as the Board may determine from time to time, in consultation with the
Compensation Committee of the Board.
Responsibilities
of the Chair
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1.
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The
Chair will provide leadership to the directors of Field Trip (Directors)
in discharging their mandate as set out in the Charter by promoting a thorough understanding
of the duties and responsibilities of the Directors and the distinction between the role
of the Directors and the role of management.
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2.
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The Chair
shall be the liaison between the Directors and management, promoting open and constructive
discussions between the Directors and management.
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3.
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The Chair
shall be the liaison between the independent and non-independent Directors.
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4.
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The Chair
shall promote the proper flow of information to the Directors to keep the Directors fully
apprised of all matters which are always material to the Directors and ensure that all items
requiring the approval of the Directors are appropriately presented to the Directors.
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Position Description – Chair of the Board
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5.
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The Chair
shall ensure that external advisors retained or to be retained by the Board are appropriately
qualified.
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6.
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In connection
with meetings of the Board, the Chair shall be responsible for:
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·
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scheduling
meetings of the Directors and coordinating with the chairs of the various committees of the
Board to schedule meetings of such committees;
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·
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organizing
and presenting the agenda for meetings of the Directors based on input from other Directors;
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·
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monitoring
the adequacy of the materials provided to the Directors by management in connection with
the Directors' deliberations;
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·
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ensuring
that the Directors have sufficient time to review the materials provided to them and to fully
discuss the business that comes before the Board; and
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·
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presiding
over meetings of the Directors.
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7.
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The Chair shall
preside over the meetings of Field Trip’s shareholders and respond to any questions
that are put to the Board at any meeting of shareholders.
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8.
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The Chair shall
perform such other functions as may be ancillary to the duties and responsibilities described
above and as may be delegated to the Chair by the Directors from time to time.
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Approved
by the Board effective June 7, 2021
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Position Description – Chair of the Board
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Exhibit 99.7
POSITION DESCRIPTION
Lead Director
General
The
lead director (Lead Director) provides independent leadership to the board of directors (Board) of Field Trip Health
Ltd. (Field Trip). The Lead Director shall be appointed by the members of the Board who qualify as independent directors under
applicable laws and regulations. The Lead Director has, among others, the responsibility of working in conjunction with the Compensation
Committee to conduct the annual Board and individual director's assessment process.
Responsibilities of the Lead Director
The Lead Director provides leadership
to the Board by fulfilling the following duties and responsibilities:
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1.
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Provide leadership to ensure that the Board functions independently of management.
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2.
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Review and approve meeting agendas and the annual schedule of meetings.
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3.
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Call and chair meetings of the independent directors and inform the chair of the Board (CChair)
of the issues considered at such meetings.
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4.
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Take on the responsibilities of the Chair during meetings when the Chair declares a conflict or otherwise excuses himself from the
debate on an agenda item or does not participate in a vote.
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5.
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Preside, in the absence of the Chair, at Board meetings and the annual meeting of shareholders.
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6.
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Serve as the liaison between Field Trip's independent directors and the Chair.
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7.
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Work with the Chair and the chief executive officer (CChief Executive Officer) to ensure
that the Board is provided with the resources, including external advisers and consultants as considered appropriate, to permit it to
carry out its responsibilities and bringing to the attention of the Chair and the Chief Executive Officer any issues that are preventing
the Board from being able to carry out its responsibilities.
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8.
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Perform such other duties as the Board may determine from time to time.
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Approved by the Board effective June 7,
2021
Position Description – Lead Director
Exhibit
99.8
Compensation Committee
Charter
(October 2020)
This Charter (Charter)
sets out the purpose, composition, member qualification, roles and responsibilities, manner of reporting to the Board of Directors (the
Board) of Field Trip Health Ltd. (Field Trip), and the general objectives & operation of Field Trip' s
compensation committee (the Committee).
Mandate of the
Committee
The
primary mandate of the Committee is oversight of Field Trip’s compensation of the directors and executive officers of Field Trip
with respect to compensation guidelines and the criteria by which bonuses and stock-based compensation awards are determined; compensation
plans adopted by the Board and changes in the number of shares reserved for issuance thereunder; reporting and continuous disclosure
related to compensation; Field Trip’s ethics program; and compliance with tax and securities laws.
Roles &
Responsibilities
In executing its
mandate, the Committee shall have the following roles and responsibilities:
Compensation
Arrangements
The Committee
will: (a) review and make recommendations to the Board regarding corporate goals and objectives relevant to compensation of the
CEO, evaluate the CEO’s performance in light of those goals and objectives and make recommendations to the Board regarding the
annual salary, bonus, stock-based compensation, and other benefits, direct and indirect, of the CEO; (b) review the operation of
Field Trip’s executive compensation programs to determine whether they are properly coordinated and administered; (c) review
management perquisites; (d) in conjunction with the audit committee as it relates to the finance department, oversee management
succession planning and make appropriate recommendations to the Board regarding the appointment and succession of Field Trip’s
executive officers; and (e) review and make recommendations to the Board regarding all employment, severance or change in control
agreements with, and any special or supplemental benefits provided to, any executive officers or directors of Field Trip, including the
impact of any potential material transaction, such as a merger, acquisition, or spin-off, on Field Trip’s compensation plans.
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Compensation
Plans
The
Committee will: (a) periodically review and advise the Board on current trends in regional and industry-wide compensation
practices and how Field Trip’s compensation programs and practices compare to those of comparable companies in the industry; (b) review
and make recommendations to the Board regarding the terms and conditions, design, approval, implementation, administration and
interpretation of Field Trip’s compensation plans, subject to final approval by the Board; (c) determine the eligibility
requirements applicable to participants in Field Trip’s compensation plans; (c) evaluate the performance of each
compensation plan, as required under applicable laws, rules or regulations.
Compensation
Disclosure
The Committee
shall review and make recommendations to the Board regarding Field Trip’s Statement of Executive Compensation, including the compensation
discussion and analysis and the related executive compensation information, to be included in Field Trip’s management information
circular and any other disclosure with respect to executive compensation to be included in any other public disclosure documents of Field
Trip.
Ethics
Program
The Committee
will: (a) establish procedures for the confidential, anonymous submission by employees of Field Trip of complaints regarding questionable
actions by senior management of Field Trip; (b) in conjunction with the audit committee, review incentive compensation arrangements
in place to confirm they do not encourage inappropriate or unintended risk taking; and (c) review ethics policies and programs,
and monitor their implementation.
Compliance
with Laws
The Committee
will: review regular reports from management and others (e.g., legal counsel) with respect to Field Trip’s compliance with laws
and regulations relating to compensation including: (a) employment and other human resources related laws and regulations; (b) public
disclosure requirements; (c) laws and regulations which expose directors to liability; and (d) orientation of new members and
continuous education of all members. Without limiting the generality of the foregoing, the Committee will oversee requirements related
to loans to officers and directors of Field Trip, share ownership guidelines for the executive officers of Field Trip and insider trading
oversight.
The Committee is
also responsible for the other matters as set out in this Charter and/or such other matters as may be directed by the Board from time
to time.
Composition
The Committee must
be comprised of a minimum of three directors of Field Trip. A majority of the members of the Committee must be independent directors
of Field Trip as defined in National Policy 58-201 Corporate - Governance Guidelines.
The Board will
appoint a chair of the Committee (the Chair) to serve for a term of one (1) year on an annual basis. The Chair may serve
as the chair of the Committee for any number of consecutive terms. The Chair shall be responsible for leadership of the Committee,
including scheduling and chairing meetings, preparing agendas and briefing documents, and making regular reports to the
Board. The Committee may form and delegate authority to subcommittees where appropriate.
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The members of
the Committee will be appointed by the Board annually, and from time to time to fill vacancies, as required. A Committee member may be
removed or replaced at any time at the discretion of the Board and will cease to be a member of the Committee on ceasing to be an independent
director.
Meetings &
Minutes
The Committee shall
meet as necessary, at a minimum at least four (4) times per year, to enable it to fulfill its responsibilities and duties as set
forth herein.
The quorum required
to constitute a meeting of the Committee is set at a majority of members. The Chair will set the agenda for each meeting. Agenda materials
must be circulated to all Committee members prior to the meeting for members to have a reasonable amount of time to review.
The Committee may
invite members of management or others to attend meetings and provide such pertinent information as the Committee may request on the
issues being considered, provided that the Chief Executive Officer (CEO) and other executives may not be present during any voting
or deliberations on compensation of the CEO or such other executives.
Meetings may be
called by the Chair or at the request of any member of the Committee or any member of the Board.
The Committee will
keep minutes of its meetings which accurately recording the decisions reached by the Committee, and which minutes are filed with the
minutes of the meetings of the Board.
Reporting
The Committee will
report, at least annually, to the Board regarding the Committee’s examinations and recommendations.
Express Authority
The Committee shall
have unrestricted access to Field Trip’s officers and employees. The Committee may conduct or authorize investigations into or
studies of matters within the Committee’s scope of responsibilities and duties. In addition to all authority required to carry
out the duties and responsibilities included in this Charter, the Committee has specific authority to: (a) engage, set and pay the
compensation for independent counsel and other advisors as it determines necessary to carry out its duties and responsibilities, and
any such consultants or professional advisors so retained by the Committee will report directly to the Committee; (b) communicate
directly with management and any internal auditor, and with the Auditors without management involvement; and (c) incur ordinary
administrative expenses that are necessary or appropriate in carrying out its duties, which expenses will be paid for by Field Trip.
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Annual Review
The
Committee shall review and assess the adequacy of this Charter periodically as conditions dictate, but at least annually, to ensure compliance
with any rules or regulations and recommend any modifications to this Charter if and when appropriate to the Board for its approval.
The Board will
conduct an annual performance evaluation of the Committee, taking into account the Charter, to determine the effectiveness of the Committee.
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Exhibit
99.9
Stock Option Plan
(June 2021)
Field
Trip Health Ltd. (Field Trip) hereby adopts this Stock Option Plan (Plan) for certain Employees, Directors and Consultants of Field Trip
and/or its Affiliates.
ARTICLE 1
- PURPOSE
1.1 Purpose.
The purpose of the Plan is to attract and retain Employees, Directors and Consultants of Field Trip and/or its Affiliates, and to ensure
that interests of key Persons are aligned with the success of Field Trip and its Affiliates.
ARTICLE 2
- INTERPRETATION
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2.1
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Definitions. In this Plan, the following
terms have the following meanings:
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$
or Dollars means the lawful currency of Canada except where explicitly set forth to the contrary;
Affiliate means,
with respect to any Person, any entity that is an affiliate for the purposes of National Instrument 45-106 — Prospectus Exemptions,
as amended from time to time;
Applicable
Withholding Taxes means any and all taxes and other source deductions or other amounts which Field Trip or any of its Affiliates
is required by law to withhold from any amounts to be paid or credited hereunder;
Blackout
Period means a period of time during which: (i) the trading guidelines of Field Trip, as amended or replaced from time to time,
restrict one or more Optionees from trading in securities of Field Trip; or (ii) Field Trip has determined that one or more Optionees
may not trade any securities of Field Trip, in each case, excluding any period during which a regulator has halted trading in Field Trip’s
securities;
Blackout Period
Expiry Date means the date on which a Blackout Period expires;
Board means
the board of directors of Field Trip;
Cause
means with respect to any Optionee, (a) in the case where there is an employment or service agreement in effect between Field
Trip or one of its Affiliates and the Optionee that defines cause (or words of like import) as applicable to the Optionee, cause as defined
under such agreement; or (b) in the case where there is no such agreement in effect:
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(i)
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theft,
fraud, dishonesty or misconduct by the Optionee involving the property, business or affairs
of Field Trip or any of its Affiliates or the carrying out of the Optionee’s duties
to Field Trip or any of its Affiliates;
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(ii)
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any
material breach or non-observance by the Optionee of any term of any employment or service
agreement between the Optionee and Field Trip or any of its Affiliates, this Plan or any
non-competition, non-solicitation, confidentiality or intellectual property covenants between
the Optionee and Field Trip or any of its Affiliates;
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(iii)
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the
material failure by the Optionee to perform his or her duties with or for Field Trip or any
of its Affiliates provided that the Optionee has been given notice in writing thereof and
a reasonable period in which to rectify such failure;
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(iv)
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the
failure of the Optionee to comply with his or her fiduciary duties to Field Trip or any of
its Affiliates (if any); or
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(v)
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the
Optionee’s conviction of, or plea of guilty or no contest to, a criminal offence, felony,
or a crime or offence involving moral turpitude;
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Change
in Control means: (i) a direct or indirect sale or disposition, in any single transaction or series of related transactions,
of all or substantially all of the consolidated assets of Field Trip and its subsidiaries to a Third Party Purchaser; (ii) a sale
resulting in no less than a majority of the Common Shares (or other voting securities of Field Trip) on a fully diluted basis being held
by a Third Party Purchaser, its Affiliates and any other Person acting jointly or in concert with the Third Party Purchaser; provided
that, prior to such sale, such Persons did not hold, in the aggregate, a majority of the Common Shares (or other voting securities of
Field Trip) on a fully diluted basis; (iii) a merger, consolidation, recapitalization or reorganization of Field Trip with or into
a Third Party Purchaser that results in the inability of the holders of Common Shares immediately prior to the merger, consolidation,
recapitalization or reorganization to designate or elect a majority of the board of directors (or its equivalent) of the resulting entity
or its parent company; or (iv) any additional event that the Board reasonably determines is a Change in Control; provided, that,
notwithstanding the foregoing, to the extent necessary to comply with Code Section 409A with respect to the payment of deferred
compensation to any U.S. Taxpayer, Change in Control shall be limited to a change in control event as defined in Treasury Regulations
Section 1.409A-3(i)(5) prescribed pursuant to Code Section 409A;
Code means
the U.S. Internal Revenue Code of 1986, as amended;
Common Shares
means the class A common shares in the capital of Field Trip;
Consultant
means an individual consultant or a consultant entity, other than an Employee or Director, that:
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(i)
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is
engaged to provide services on a bona fide basis to Field Trip or any of its Affiliates,
other than services provided in relation to a distribution of securities of Field Trip or
any of its Affiliates;
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(ii)
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provides
the services under a written contract with Field Trip or any of its Affiliates; and
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Field Trip Stock Option Plan (June 2021)
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17
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(iii)
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spends
or will spend a significant amount of time and attention on the affairs and business of Field
Trip or any of its Affiliates,
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and
includes, (i) for an individual consultant, (A) a company of which the individual consultant is an employee or shareholder,
or (B) a partnership of which the individual consultant is an employee or partner, and (ii) for a consultant that is not an
individual, an employee or director of the consultant, provided that the individual employee or director spends or will spend a significant
amount of time and attention on the affairs and business of Field Trip or any of its Affiliates;
Director means
a member of the Board from time to time who is not an Employee;
Employee
means (subject to any applicable securities laws) a full-time or part-time employee of Field Trip or any of its Affiliates;
Employer
means, with respect to an Optionee, Field Trip or applicable Affiliate thereof that employs or engages the Optionee or employed or
engaged the Optionee immediately prior to the relevant time;
Exchange
means the Toronto Stock Exchange or, if the Common Shares are not then listed on the Toronto
Stock Exchange, such other principal market on which the Common Shares are then listed and posted for trading;
Fair
Market Value means with respect to a Common Share, as of any date, the closing price of the Common Shares
on the Exchange on the last trading day immediately preceding the applicable date or, if the Common Shares are not then readily
tradable on an established securities market, the fair market value of such Common Shares as determined by the Board (by the reasonable
application of a reasonable valuation method) and consistent with the principles of Code Sections 409A, 422 and 424 in the case of an
Option granted to or held by a
U.S. Taxpayer;
Grant Date means,
for any Option, the date the Board grants the Option;
Grant
Resolution means the applicable resolution of the Board authorizing and approving any Option grant;
Incentive
Stock Option means an option that meets the requirements of Code Section 422 or any successor provision and is designated as
such by the Board in the applicable Grant Resolution;
Insider
has the meaning given to such term in the policies of the Exchange
Intrinsic
Value means, with respect to an Option (or relevant portion thereof), an amount equal to the product of (i) the number of Common
Shares subject to such Option (or relevant portion thereof) and (ii) the excess, if any, of the Fair Market Value of a Common Share
as of the applicable date of determination over the Option Price (and, for avoidance of doubt, if there is no such excess, then the Intrinsic
Value shall be zero);
Non-Qualified
Stock Option means an option that is not intended to be or does not meet the requirements of an Incentive Stock Option. Any Option granted
by the Board that is not designated as an
Incentive Stock Option in the applicable Grant Resolution will be a Non- Qualified Stock Option;
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Notice has
the meaning set forth in Section 6.2;
Option means
the right to purchase Common Shares granted under the Plan pursuant to the terms and conditions determined in the Grant Resolution and
set forth in an Option Agreement;
Option
Agreement means an agreement between Field Trip and an Employee, Director or Consultant evidencing the grant of an Option and the
terms and conditions of such Option in the form of Schedule A hereto or such other form(s) as may be approved by the Board from
time to time;
Option
Price means the purchase price per Optioned Share determined in accordance with Section 4.4;
Optioned
Shares means the Common Shares which may be or actually are purchased by an Optionee pursuant to an Option;
Optionee
means an Employee, Director or Consultant who holds Options granted under the Plan pursuant to an Option Agreement;
Parent
Corporation has the meaning set forth in Code Section 424(e) or any successor provision;
Person
means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or corporation with
or without share capital, unincorporated association, trust, trustee, executor, administrator or other legal personal representative,
regulatory body or agency, government or governmental agency, authority or entity however designated or constituted;
Plan means
this Stock Option Plan, as may be amended or restated from time to time;
Shareholder
means a holder of Common Shares;
Subsidiary
Corporation has the meaning set forth in Code Section 424(f) or any successor provision;
Termination
Date means: (i) in respect of an Optionee who is a Director or Consultant, the date the Optionee ceases to be a Director or
Consultant for any reason, as applicable; and (ii) in respect of an Optionee who is an Employee, the Optionee’s last day of
active employment with his or her Employer (other than in connection with the Optionee’s transfer of employment to an Affiliate
of his or her Employer); in each case, regardless of whether the Optionee’s employment or engagement with Field Trip or any of
its Affiliates is terminated with or without Cause, lawfully or unlawfully, and does not include any period of statutory, contractual,
common law, civil law or other notice of termination of employment or engagement or any period of salary continuance, severance or deemed
employment or other damages paid or payable to the Optionee in respect of the termination of employment or engagement, whether pursuant
to an employment agreement, service agreement or other agreement or at law;
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Field Trip Stock Option Plan (June 2021)
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Third Party Purchaser means
any Person who is not an Affiliate of Field Trip and is the acquirer in connection with a Change in Control; and
U.S.
Taxpayer means any Optionee who is a United States citizen or United States resident alien as defined for purposes of Section 7701(b)(1)(A) of
the Code or for whom an Option is otherwise subject to taxation under the Code; provided, that an Optionee shall be a U.S. Taxpayer solely
with respect to those affected Options.
Any
reference in this Plan to gender shall include all genders, and words importing the singular number only shall include the plural and
vice versa. The division of the Plan into Articles and Sections and the insertion of headings are for reference purposes only and shall
not affect the interpretation of the Plan. Whenever the Board is entitled to exercise discretion in the administration of the Plan, the
term “discretion” means the sole and absolute discretion of the Board. Unless otherwise indicated, any reference in the Plan
to an Article or Section refers to the specified Article or Section of the Plan.
This
Plan shall be administered by the Board, which shall have full authority to administer this Plan, including the authority to:
(i) grant Options to Employees, Directors and Consultants; (ii) determine the Option Price, vesting schedule, term,
limitations, intended tax treatment, restrictions and conditions applicable to Options; (iii) interpret and construe the Plan;
(iv) subject to the rules of the Exchange, waive or amend any vesting conditions or
vesting schedule; (v) establish, amend and rescind any rules and regulations relating to the
Plan; and (v) make any other determinations that the Board deems necessary or desirable for the administration of
the Plan; subject in all cases to compliance with regulatory requirements. The Board may correct any defect or supply any omission
or reconcile any inconsistency in the Plan, in the manner and to the extent the Board deems, in its discretion, necessary or
desirable. All actions taken and all interpretations and determinations made by the Board in good faith shall be final and
conclusive and shall be binding on the Optionees and Field Trip. No member of the Board shall be personally liable for any action
taken or determination or interpretation made in good faith in connection with this Plan and all members of the Board shall, in
addition to their rights as directors of Field Trip, be fully protected, indemnified and held harmless by Field Trip with respect to
any such action taken or determination or interpretation made. The appropriate officers of Field Trip are hereby authorized and
empowered to do all things and execute and deliver all instruments, undertakings and applications and writings as they, in their
absolute discretion, consider necessary or desirable for the implementation of this Plan and of the rules and regulations
established for administering this Plan. All costs incurred in connection with this Plan shall be for the account of Field Trip.
This Plan shall be administered in accordance with the rules and policies of the Exchange by the Board so long as the Common
Shares are listed on the Exchange.
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2.4
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Delegation to Committee.
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All
of the powers exercisable hereunder by the Board may, to the extent permitted by applicable law and as determined by resolution of the
Board, be exercised by a committee of the Board comprised of not fewer than three directors of Field Trip, who shall satisfy such additional
securities law and exchange-rule requirements as may be determined by the Board from time to time.
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Field Trip Stock Option Plan (June 2021)
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ARTICLE 3
- SHARES RESERVED FOR ISSUANCE
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3.1
|
Shares Reserved for Issuance.
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Subject
to any adjustment pursuant to Section 10.1: the maximum number of Common Shares reserved for issuance under the Plan pursuant to
Options not intended as Incentive Stock Options shall be 15% of the issued and outstanding Common Shares from time to time, on a non-diluted
basis; of which the maximum number of Common Shares reserved for issuance under the Plan pursuant to Incentive Stock Options is 7,500,000.
Common Shares in respect of Options that have been exercised, cancelled, surrendered or terminated or that expire without being exercised
shall again be available for issuance under the Plan.
If
the Board authorizes the assumption or substitution under this Plan, in connection with any merger, consolidation, acquisition of property
or stock, or reorganization, of awards granted under another plan, such assumption or substitution shall not reduce the maximum number
of Common Shares available for issuance under this Plan, and, as deemed necessary by the Board, such assumed or substituted awards shall
be subject to terms and conditions that may vary from those otherwise imposed under this Plan, all subject to applicable law and exchange
rules.
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3.2
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No Fractional Shares.
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No
fractional Common Shares shall be issued under the Plan (including as a result of any adjustment made pursuant to Article 10), and
an Optionee shall have no right to payment or other consideration in respect of a fractional Common Share the right to which is forfeited
as a result of this provision.
ARTICLE 4
- GRANT OF OPTIONS AND RIGHTS OF OPTIONEES
The
Board may, at any time and from time to time, grant Options to such Employees, Directors and Consultants as it may select for the number
of Optioned Shares that it shall designate, subject to the provisions of this Plan, and provided that the total number of Common Shares
subject to and acquired upon exercise of Options shall not at any time exceed the maximum set forth in Section 3.1. The grant of
an Option to an Optionee at any time shall neither entitle such Optionee to receive, nor preclude such Optionee from receiving, a subsequent
grant of an Option.
The
Board shall make all necessary or desirable determinations regarding the granting of Options and may take into consideration the present
and potential contributions of a particular Employee, Director or Consultant to the success of Field Trip and its Affiliates and any
other factors which it may deem proper and relevant.
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4.2
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Incentive Stock Options
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The following provisions
will apply only to Incentive Stock Options granted under the Plan:
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(a)
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No Incentive Stock Option may be granted
to any Employee, Director or Consultant who, at the time such Option is granted: (i) is
not an employee of Field Trip or any Parent Corporation or Subsidiary Corporation of Field
Trip; or (ii) owns securities possessing more than 10% of the total combined voting
power of all classes of securities of Field Trip or any Parent Corporation or Subsidiary
Corporation of Field Trip, except that with respect to provision (ii) hereof, such an
Option may be granted to an employee if, at the time the Option is granted, the Option Price
is at least 110% of the Fair Market Value of the Common Shares subject to the Option, and
the Option by its terms is not exercisable after the expiration of five years from the applicable
Grant Date.
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(b)
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To the extent that the aggregate Fair Market
Value of the Common Shares with respect to which Incentive Stock Options (without regard
to this Section 4.2(b)) are exercisable for the first time by any individual during
any calendar year (under all plans of Field Trip or any Parent Corporation or Subsidiary
Corporation of Field Trip) exceeds US$100,000 (such Fair Market Value to be determined as
of the Grant Date of the respective Incentive Stock Options), such Options will be treated
as Non-Qualified Stock Options. This Section 4.2(b) will be applied by taking Options
into account in the order in which they were granted. If some but not all Options granted
on any one day are subject to this Section 4.2(b), then such Options will be apportioned
between Incentive Stock Option and Non-Qualified Stock Option treatment in such manner as
the Board will determine.
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(c)
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No Incentive Stock Option shall be granted
more than 10 years from the date the Plan is adopted or the date the Plan is approved by
shareholders, whichever is earlier. Notwithstanding that the Plan shall be effective when
adopted by the Board, no Incentive Stock Option granted under the Plan may be exercised until
the Plan is approved by Field Trip’s shareholders, and if such approval is not obtained
within 12 months after the date of the Board’s adoption of the Plan, then all Incentive
Stock Options previously granted shall terminate for no consideration and shall cease to
be outstanding, and, further, the Board shall obtain shareholder approval within 12 months
before or after any material amendment to the Plan (including any increase in the total number
of Common Shares that may be issued as Incentive Stock Options under the Plan or any change
in the class of employees eligible to receive Incentive Stock Options under the Plan).
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(d)
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“Disability” of a holder of
an Incentive Stock Option shall mean “permanent and total disability” as defined
under Section 22(e)(3) of the Code. If the holder of an Incentive Stock Option
ceases to be employed by Field Trip and all applicable Parent Corporations and Subsidiary
Corporations other than by reason of death, his or her Incentive Stock Options shall be eligible
for treatment as such only if exercised (i) no later than 12 months following such termination
if due to Disability or (ii) no later than three months following such termination if
due to any other reason. By accepting an Option granted as an Incentive Stock Option under
this Plan, a U.S. Taxpayer agrees to notify Field Trip in writing promptly after the U.S.
Taxpayer disposes of any Common Shares acquired pursuant to the exercise of such Option if
the disposition occurs on or before the later of (A) the second anniversary of the grant
date and (B) the first anniversary of the exercise of the Option (or the first anniversary
of the date of vesting of such Option-acquired Common Shares, if initially subject to a substantial
risk of forfeiture), such notification to include the date and terms of the disposition and
such other information as Field Trip may reasonably require. The following shall be prohibited
with respect to an Incentive Stock Option absent disclosure of potential United States federal
income tax consequences to the Optionee affected thereby: (x) net exercise (pursuant
to Section 6.2 hereof); (y) exercise while unvested; and (z) modification
of an outstanding Incentive Stock Option in such a manner as would provide an additional
benefit to the holder, including a reduction of the Exercise Price or extension of the Option
expiration date.
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(e)
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The maximum number of Options that may be
granted under this Plan to Insiders of Field Trip is limited such that the number of Common
Shares issued from treasury to Insiders within a one-year period, or issuable to Insiders
at any time, under the Plan and any other security compensation arrangements, shall not exceed
10% of the number of Common Shares then outstanding.
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Each
Option granted by the Board shall be evidenced by an Option Agreement between the Optionee and Field Trip in the form attached as Schedule
A or such other form(s) as may be approved by the Board from time to time. Each Option Agreement shall specify the number of Optioned
Shares, the Option Price, and the terms and conditions of the Option as specified in the Grant Resolution.
The Option Price
per Optioned Share at the time any Option is granted shall be the greater of:
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(a)
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the
Fair Market Value of the Common Shares on the Grant Date; and
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(b)
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the
closing price of the Common Shares on the Exchange on the Grant Date, if applicable.
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4.5
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Prohibition on Transfer, Assignment or Pledge
of Options.
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Options
are personal to the Optionee. No Optionee may deal with any Option or any interest in it or transfer or assign any Option held by the
Optionee, except in the event of death or incapacity, where an Option may be transferred to the Optionee’s heirs, executors, administrators,
trustees, personal legal representatives or the like, subject to all the terms of the Plan and applicable Option Agreement, which shall
be binding upon them; provided, that an Incentive Stock Option shall not be transferable by an Optionee otherwise than by will
or the laws of descent and distribution, and may be exercised during the Optionee’s lifetime only by the Optionee. A purported
transfer or assignment of any Option in any other circumstances will not be valid, and Field Trip will not issue any Common Shares upon
the attempted exercise of any such improperly transferred or assigned Option. An Optionee may not mortgage, hypothecate, pledge or grant
a security interest in any Option.
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ARTICLE 5
- VESTING
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5.1
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Vesting
Specified in the Option Agreement.
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The
Option Agreement shall specify the date or dates upon which an Optionee’s right to purchase the Optioned Shares shall vest (including
subject to the attainment of certain financial results or other performance criteria). The Board shall have the discretion to provide
for early vesting of any Option or Options.
ARTICLE 6
- EXERCISE OF OPTIONS
Options
shall be exercisable in the manner determined in the Grant Resolution and set forth in the Option Agreement (subject to acceleration
by the Board) as to all or any lesser number of the Optioned Shares in respect of which the Optionee’s right to purchase Optioned
Shares has vested.
Options
shall be exercised by written notice to Field Trip specifying the number of Optioned Shares in respect of which such Option is then being
exercised (the “Notice”), and such Notice shall include payment in full of the applicable Option Price and any Applicable
Withholding Taxes by way of cash or by certified cheque, bank draft, money order or wire transfer payable to Field Trip or by such other
means as may be specified from time to time by Field Trip.
Subject
to the approval of the Board, an Optionee may exercise any Option on a cashless basis. In such event, an Optionee may file a Notice in
a form satisfactory to Field Trip and elect to surrender a number of vested Options in exchange for an amount equal to (i) the aggregate
Fair Market Value of the Optioned Shares underlying the vested Options being surrendered, minus (ii) the aggregate Option Price
of the Optioned Shares underlying the vested Options being surrendered, minus (iii) any Applicable Withholding Taxes. Field Trip
shall satisfy the payment of such amount by issuing to the Optionee such number of Common Shares (rounded down to the nearest whole number)
with an aggregate Fair Market Value equal to such amount. Employees in the United States are hereby notified that utilizing the cashless
exercise feature may result in negative tax consequences for both Incentive Stock Options and Non- Qualified Stock Options.
Subject
to the approval of the Board, an Optionee may exercise any Option pursuant to a broker-assisted cashless exercise, whereby the Optionee
shall elect on the Notice to receive:
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(a)
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an
amount in cash equal to the cash proceeds realized upon the sale in the capital markets of
the Common Shares underlying the Options by a securities dealer designated by Field Trip,
less the aggregate Option Price, any Applicable Withholding Taxes, and any transfer costs
charged by the securities dealer to sell the Common Shares;
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(b)
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an
aggregate number of Common Shares that is equal to the number of Common Shares underlying
the Options minus the number of Common Shares sold in the capital markets by a securities
dealer designated by Field Trip as required to realize cash proceeds equal to the aggregate
Option Price, any Applicable Withholding Taxes and any transfer costs charged by the securities
dealer to sell the Common Shares; or
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(c)
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a
combination of (a) and (b).
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Following
the exercise of the Option, Field Trip shall take all actions necessary to issue fully paid and non-assessable Optioned Shares to the
Optionee, following which the Optionee shall have no further rights, title or interest with respect to such Option. The
obligation of Field Trip to issue and deliver any Common Shares in accordance with this Plan shall be subject to any necessary approval
of any stock exchange or regulatory authority having jurisdiction over the securities of Field Trip. If any Common Shares cannot be issued
to any Optionee upon the exercise of an Option for whatever reason, the obligation of Field Trip to issue such Common Shares shall terminate,
and any Option Price paid to Field Trip in respect of the exercise of such Option shall be returned to the Optionee.
ARTICLE 7
- EXPIRATION AND TERMINATION
The
Board will, at the time the Option is granted, determine the date(s) upon which an Option will expire, which date(s) cannot
be greater than 10 years from the Grant Date. On the expiry of an Option, the Option will be null, void and of no effect. Notwithstanding
the foregoing, if the expiration date of an Option falls within a Blackout Period or within ten days after a Blackout Period Expiry Date,
the expiration date of the Option will be the date which is ten business days after the Blackout Period Expiry Date.
Options
that are not vested as of the Optionee’s Termination Date for any reason shall automatically terminate on the Termination Date,
and no amount shall be payable to the Optionee in respect thereof as compensation, damages or otherwise.
In
the event an Optionee ceases to be an Employee, Director or Consultant other than as a result of a termination for Cause or the Optionee’s
death, then unless otherwise provided in the Grant Resolution, the Optionee may, within 90 days after the Optionee’s Termination
Date, or such shorter period as is remaining in the term of the Options, exercise the Optionee’s vested Options in accordance with
Article 6. At the end of such 90-day period or such shorter period as is remaining in the term of the Options, the unexercised Options
shall automatically terminate, be forfeited for no consideration and be of no further force or effect.
In
the event an Optionee ceases to be an Employee, Director or Consultant as a result of the Optionee’s death, then unless otherwise
provided in the Grant Resolution, the legal representative of the Optionee’s estate may, within one year after the Optionee’s
Termination Date, or such shorter period as is remaining in the term of the Options, exercise the Optionee’s vested Options in
accordance with Article 6. At the end of such one-year period or such shorter period as is remaining in the term of the Options,
the unexercised Options shall automatically terminate, be forfeited for no consideration and be of no further force or effect.
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Field Trip Stock Option Plan (June 2021)
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In
the event an Optionee ceases to be an Employee, Director or Consultant as a result of being terminated for Cause, all Options that are
held by such Optionee, whether vested or unvested, shall automatically terminate on the Termination Date, and no amount shall be payable
to the Optionee in respect thereof as compensation, damages or otherwise.
ARTICLE 8
- CHANGE IN CONTROL
In
the event of a Change in Control, except as otherwise provided in the Grant Resolution, the Board shall provide for the treatment of
each outstanding Option as it determines in its sole discretion, which treatment need not be uniform for all Optionees and/or Options
and which may include, without limitation, one or more of the following:
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(a)
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(i) continuation
of such Option or (ii) conversion of such Option into, or substitution or replacement
of such Option with, an award with respect to shares of the successor corporation (or a parent
or subsidiary thereof) with substantially equivalent terms and value as such Option (which
value as of immediately following such Change in Control shall not exceed the Intrinsic Value
of such Option as of immediately prior to such Change in Control), effected in accordance
with Code Sections 409A and 424 to the extent applicable; and/or
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(b)
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acceleration
of the vesting and the right to exercise such Option as of immediately, or during a specified
period, prior to such Change in Control, and the termination of such Option to the extent
such Option is not timely exercised.
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For
purposes of the application of this Section 8.1 to any outstanding Option, if such Option is subject to performance criteria, the
level of attainment of such criteria shall be determined by the Board in its sole discretion, including, without limitation, by deeming
such criteria attained at the applicable target or maximum level regardless of actual performance, or measuring the attainment of such
criteria based on actual performance through such Change in Control or a specified date prior thereto.
ARTICLE 9
- SHAREHOLDER RIGHTS
An
Optionee shall have no rights whatsoever as a shareholder in respect of any of the Optioned Shares (including any right to vote or to
receive dividends or other distributions therefrom), unless and only to the extent that the Optionee shall from time to time duly exercise
an Option and become a Shareholder.
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Field Trip Stock Option Plan (June 2021)
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ARTICLE 10
- CERTAIN ADJUSTMENTS
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10.1
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Adjustment
in the Number of Shares.
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In
the event of any corporate event or transaction involving Field Trip or an Affiliate (including, but not limited to, a change in the
Common Shares of Field Trip or the capitalization of Field Trip), such as a merger, consolidation, reorganization, recapitalization,
separation, stock dividend, stock split, reverse stock split, split-up, spin-off, combination of shares, exchange of shares, dividend
in kind, extraordinary cash dividend, amalgamation or other like change in capital structure (other than normal cash dividends to shareholders
of Field Trip), or any similar corporate event or transaction, the Board, to prevent dilution or enlargement of Optionees’ rights
under the Plan, shall substitute or adjust, in its sole discretion: (i) the number and kind of shares or other securities that may
be granted pursuant to Options; (ii) the number and kind of shares or other securities subject to outstanding Options; (iii) the
Option Price applicable to outstanding Options; and/or (iv) other value determinations (including performance conditions) applicable
to the Plan or outstanding Options; provided, however, that no adjustment will obligate Field Trip to issue or sell fractional securities.
All adjustments shall be made in good-faith compliance with paragraph 7(1.4)(c) of the Income Tax Act (Canada), Code Section 409A
and/or Code Section 424, as applicable. For the avoidance of doubt, the purchase of Common Shares or other equity securities of
Field Trip by a shareholder of Field Trip or by any third party from Field Trip shall not constitute a corporate event or transaction
giving rise to an adjustment pursuant to this Section 10.1.
ARTICLE 11
- GENERAL
Any
notice required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand
or telecopied and addressed to the recipient, and if to Field Trip, at its principal office, and if to the Optionee, at the address indicated
in the Option Agreement or at the Optionee’s last known address shown in the records of Field Trip or any Affiliate. It is the
responsibility of the Optionee to advise Field Trip of any change in address, and neither Field Trip nor any Affiliate shall have any
responsibility for any failure by the Optionee to do so. Any Optionee may change his or her address from time to time by notice in writing
to Field Trip. Field Trip shall give written notice to each Optionee of any change of Field Trip’s address. Any such notice shall
be effective, if delivered, on the date of delivery and, if sent by facsimile, on the day following receipt of the facsimile.
No
Optionee shall be induced to acquire or exercise Options by expectation of employment, engagement or service or continued employment,
engagement or service. Nothing contained in the Plan or by the grant of any Options shall confer upon any Optionee any right with respect
to employment, engagement or service or in continuance of employment, engagement or service with Field Trip or any of its Affiliates
or interfere in any way with the right of Field Trip or any of its Affiliates to terminate an Optionee’s employment, engagement
or service at any time. Nothing in this Plan may be construed to provide any Optionee with any rights whatsoever to compensation or damages
in lieu of notice or continued participation in, or entitlements under, the Plan as a consequence of an Optionee’s termination
of employment or service (regardless of the reason for the termination and the party causing the termination, including a termination
without Cause). The Plan does not give any Optionee any right to claim any benefit or compensation except to the extent specifically
provided in the Plan. Participation in the Plan by an Option shall be voluntary.
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11.3
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Other Employee Benefits.
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The
amount of any compensation received or deemed to be received by an Optionee as a result of his or her participation in the Plan will
not constitute compensation, earnings or wages with respect to which any other employee benefits of that Optionee are determined, including,
without limitation, benefits under any bonus, pension, profit-sharing, insurance, termination, severance or salary continuation plan
or any other employee benefit plans, nor under any applicable employment standards or other legislation, except as otherwise specifically
determined by the Board.
The
Board may amend or suspend any provision of the Plan or any Option or Option Agreement, or terminate this Plan, at any time without approval
of security holders, subject to those provisions of applicable law and the rules, regulations and policies of the Exchange, if any, that
require the approval of security holders or any governmental or regulatory body regardless of whether any such amendment or suspension
is material, fundamental or otherwise, and notwithstanding any rule of common law or equity to the contrary. However, except as
expressly set forth herein, including in Section 11.7 and Section 11.11(b), or as required pursuant to applicable law, no action
of the Board or security holders may materially adversely alter or impair the rights of an Optionee under any Option previously granted
to the Optionee without the consent of the affected Optionee.
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(a)
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Without limiting the generality of the
foregoing, the Board may make the following types of amendments to this Plan or any Option
without seeking security holder approval:
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(i)
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amendments of a “housekeeping”
or administrative nature, including any amendment for the purpose of curing any ambiguity,
error or omission in this Plan or any Option or to correct or supplement any provision of
this Plan or any Option that is inconsistent with any other provision of this Plan or any
Option;
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(ii)
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amendments necessary to comply with the
provisions of applicable law or the rules, regulations and policies of any stock exchange
on which the Common Shares are listed;
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(iii)
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amendments necessary for Options to
qualify for favourable treatment under applicable tax laws;
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(iv)
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amendments to the vesting provisions
of this Plan or any Option;
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(v)
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amendments to include or modify a cashless
exercise feature, payable in cash or Common Shares, which provides for a full deduction of
the number of underlying Common Shares from the Plan maximum;
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(vi)
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amendments to the termination or early
termination provisions of this Plan or any Option, whether or not such Option is held by
an Insider, provided such amendment does not entail an extension beyond the original expiry
date of the Option; and
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(vii)
|
amendments necessary to suspend or terminate
this Plan.
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(b)
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Security holder approval will be required
for the following types of amendments:
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Field Trip Stock Option Plan (June 2021)
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Page 13 of 17
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|
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(i)
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any amendment to increase the maximum
number of Common Shares issuable under this Plan, other than pursuant to Section 10.1;
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(ii)
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any amendment which reduces the Option
Price of an Option or that would be treated as a “repricing” under the then-applicable
rules, regulations or listing requirements adopted by the exchange(s) on which the Common
Shares are then listed, in each case, other than pursuant to Sections 10.1;
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(iii)
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any amendment extending the term of
an Option beyond the original expiry date, except as provided in Section 7.1;
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(iv)
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any amendment which deletes or reduces
the range of amendments which require approval by the security holders of Field Trip under
this Section 11.4;
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(v)
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any amendment which would allow for the
transfer or assignment of Options under this Plan, other than for normal estate settlement
purposes; and
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(vi)
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amendments required to be approved by
security holders under applicable law or the rules, regulations and policies of any stock
exchange on which the Common Shares are listed.
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11.5
|
No Undertaking or Representation; No Constraint
on Corporate Action.
|
Each Optionee,
by participating in the Plan and upon executing an Option Agreement, shall be deemed to have accepted all risks associated with acquiring
Optioned Shares pursuant to the Plan. Field Trip hereby informs each Optionee that the Options and the Optioned Shares are subject to,
and may be required to be held indefinitely under, applicable securities laws. Field Trip, its Affiliates and the Board make no undertaking,
representation, warranty or guarantee as to the future value or price, or as to the listing on any stock exchange or other market, of
any Common Shares issued in accordance with the provisions of the Plan, and shall not be liable to any Optionee for any loss whatsoever
resulting from that Optionee’s participation in the Plan or as a result of the amendment, suspension or termination of the Plan
or any Option.
Nothing
herein shall be construed to (i) limit, impair or otherwise affect Field Trip’s right or power to make adjustments, reclassifications,
reorganizations or changes of or to its capital or business structure or to merge or consolidate, or dissolve, liquidate, sell or transfer
all or any part of its business or assets; or (ii) limit the right or power of Field Trip to take any action that it deems to be
necessary or appropriate.
This
Plan and the provisions hereof shall be governed by and interpreted and enforced in accordance with the laws of the Province of Ontario
and the federal laws of Canada applicable therein.
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Field Trip Stock Option Plan (June 2021)
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11.7
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Compliance with Applicable Law.
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If
any provision of the Plan or any Option contravenes any law or any order, policy, by-law, rule or regulation of any regulatory body
or stock exchange having jurisdiction or authority over the securities of Field Trip or its Affiliates or the Plan, then such provision
may in the sole discretion of the Board be amended to the extent considered necessary or desirable to bring such provision into compliance
therewith, and appropriate consideration shall be paid by Field Trip to the extent that an Optionee is adversely affected by such amendment.
This
Plan is unfunded. To the extent any individual holds any rights under the Plan, such rights (unless otherwise determined by the Board)
are no greater than the rights of a general unsecured creditor of Field Trip. The Plan is not subject to the U.S. Employee Retirement
Income Security Act of 1974, as amended.
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11.9
|
Priority of Agreements.
|
In
the event of any inconsistency or conflict between the provisions of the Plan and any Option Agreement, the provisions of the Plan shall
prevail. Unless otherwise provided herein, in the event of any inconsistency or conflict between the provisions of the Plan or any Option
Agreement, on the one hand, and an Optionee’s employment or service agreement with Field Trip or its Affiliate, on the other hand,
the provisions of the employment or service agreement shall prevail.
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|
11.10
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Successors and Assigns.
|
The
Plan shall be binding on all successors and assigns of Field Trip and each Optionee, including without limitation, the legal representative
of an Optionee, or any receiver or trustee in bankruptcy or representative of the creditors of Field Trip or an Optionee.
(a) It
is the responsibility of the Optionee to complete and file any tax returns which may be required under any applicable tax laws within
the periods specified in those laws as a result of the Optionee’s participation in the Plan. Field Trip shall not be held responsible
for any tax consequences to the Optionee as a result of the Optionee’s participation in the Plan. Notwithstanding any other provision
of this Plan, an Optionee shall be solely responsible for all Applicable Withholding Taxes resulting from his or her receipt of Common
Shares or other property pursuant to this Plan. The exercise of each Option granted under the Plan is subject to the condition that if
at any time Field Trip determines, in its discretion, that the satisfaction of any Applicable Withholding Taxes is required under applicable
law in respect of such exercise, such exercise is not effective unless such withholding has been affected to the satisfaction of Field
Trip. In such circumstances, Field Trip may require an Optionee to: (i) pay to Field Trip sufficient cash as is reasonably determined
by Field Trip to be the amount necessary to permit the required tax remittance to the relevant taxing authority; or (ii) make other
arrangements acceptable to Field Trip to fund the Applicable Withholding Taxes.
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Field Trip Stock Option Plan (June 2021)
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(b)
Each Option granted to or held while a U.S. Taxpayer is intended to be exempt from Code Section 409A, and
this Plan and all Option Agreements entered into with U.S. Taxpayers hereunder shall be construed and interpreted consistent with
such intent, and any provisions that cannot be so construed or interpreted shall be disregarded. Notwithstanding the foregoing, to
the extent that any Option granted to a U.S. Taxpayer is determined to constitute “nonqualified deferred compensation”
within the meaning of Code Section 409A, such Option will be subject to such additional rules and requirements as
specified by the Board from time to time in order to comply with Code Section 409A. If any provision of the Plan contravenes
Code Section 409A or could cause the U.S. Taxpayer to incur any tax, interest or penalties under Code Section 409A, the
Board may, in its sole discretion and without the U.S. Taxpayer’s consent, modify such provision to: (i) comply with, or
avoid being subject to, Code Section 409A, or to avoid the incurrence of taxes, interest and penalties under Code
Section 409A; and/or (ii) maintain, to the maximum extent practicable, the original intent and economic benefit to
the U.S. Taxpayer of the applicable provision without materially increasing the cost to Field Trip or contravening Code
Section 409A. However, Field Trip will have no obligation to modify the Plan or any Option and does not guarantee that Options
will not be subject to taxes, interest and penalties under Code Section 409A, and neither Field Trip nor any of its Affiliates
shall be liable for any taxes, penalties or interest that may be imposed on an Optionee under Section 409A or for any damages
for failing to comply with or be exempt from Code Section 409A. A Non-Qualified Stock Option shall not be granted to a U.S.
Taxpayer unless the Common Shares constitute “service recipient stock” with respect to such U.S. Taxpayer within the
meaning of Code Section 409A. In the case of an Option subject to Code Section 409A, all payments to be made upon (or on a
timeline determined by reference to) a U.S. Taxpayer’s termination date shall only be made upon a “separation from
service” as defined under Code Section 409A, and “termination,” “termination of employment” and
like terms will be construed accordingly. If on the date of the U.S. Taxpayer’s separation from service Field Trip’s
Common Shares (or stock of any other company that is required to be aggregated with Field Trip in accordance with the requirements
of Code Section 409A) is publicly traded on an established securities market or otherwise and the U.S. Taxpayer is a
“specified employee” for purposes of Code Section 409A, then the benefits payable to the U.S. Taxpayer under the
Plan due to the U.S. Taxpayer’s separation from service shall be postponed until the earlier of the originally scheduled
payment date and six months following the U.S. Taxpayer’s separation from service. Any postponed amount shall be paid to the
U.S. Taxpayer in a lump sum within 30 days after the earlier of the originally scheduled payment date and the date that is six
months following the U.S. Taxpayer’s separation from service. If the U.S. Taxpayer dies during such six-month period and prior
to the payment of the postponed amounts hereunder, the amounts delayed on account of Code Section 409A shall be paid to the
U.S. Taxpayer’s estate within 60 days following the U.S. Taxpayer’s death.
(c)
The Company and the Board make no guarantees regarding, and shall have no liability to any person in connection with, the tax treatment
of any Options or Common Shares or payments in respect thereof, including their taxation, qualification or exemption from Section 409A,
457A, 422, 424 and/or 4999 of the Code, and neither of them has any obligation to take action to prevent the assessment of tax thereunder
or otherwise.
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Field Trip Stock Option Plan (June 2021)
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If
any provision of this Plan shall be determined by any court of competent jurisdiction to be illegal, invalid or unenforceable, that provision
shall be severed from this Plan and the remaining provisions shall continue in full force and effect.
This Plan is effective
as of June 7, 2021.
|
Field Trip Stock Option Plan (June 2021)
|
Page 17 of 17
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Exhibit
99.10
FORM 51-102F3
MATERIAL CHANGE
REPORT
UNDER NATIONAL INSTRUMENT 51-102
|
|
Item 1.
|
Name and Address of Company
|
Field Trip Health Ltd. (the "Company")
30 Duncan Street, Suite 401
Toronto, Ontario M5V 2C3
|
|
Item 2.
|
Date of Material Change
|
June 3, 2021 and June 8,
2021
News releases dated June 3, 2021
and June 8, 2021 were disseminated via GlobeNewswire. Copies of the news releases have been filed on SEDAR and is available at www.sedar.com.
|
|
Item 4.
|
Summary of Material Change
|
The Company announced on June 3,
2021 that its common shares (the "Common Shares") and warrants (the "Warrants") would commence trading
on the Toronto Stock Exchange ("TSX") under the ticker symbols "FTRP" and "FTRP.WT", respectively,
at the opening of the market on June 7, 2021. The Company also announced that it has bolstered its Board of Directors with the appointments
of Barry Fishman and Ellen Lubman.
On June 7, 2021, the Common Shares
and Warrants commenced trading on the TSX. In connection with the TSX listing, the Company's Common Shares and Warrants were delisted
from the Canadian Securities Exchange ("CSE").
On June 8, 2021, the Company announced
that it has applied to list its Common Shares on the NASDAQ Stock Market ("NASDAQ").
|
|
Item 5.
|
Full Description of Material Change
|
See Item 4.
There will be no change to the Common
Shares, Warrants or to the Company's share structure. The Company's Common Shares continue to be quoted in the United States on the OTCQX
under the symbol "FTRPF". The TSX and CSE have each published bulletins announcing the listing and delisting, respectively.
No action is required on the part of shareholders.
Biographical information regarding
Mr. Fishman and Ms. Lubman is set forth below.
Barry Fishman
Mr. Fishman has almost 25
years of experience as an entrepreneurial business leader, most recently as CEO of VIVO Cannabis Inc. Prior to joining VIVO, he
served as CEO of international specialty pharmaceutical company Merus Labs, through its 2017 acquisition by Norgine B.V. He also
previously served as CEO of Teva Canada, a major affiliate of the world's largest generic drug-maker and began his pharmaceutical
career at Eli Lilly Canada, where he served as Vice President of Marketing. Mr. Fishman has also recently served as an
independent director on a number of high-profile boards, including Aurora Cannabis Inc. and Canopy Growth Corporation.
Ellen Lubman
Ms. Lubman is currently Chief
Business Officer of Werewolf Therapeutics, Inc. From October 2018 to July 2020, she served as the Chief Business Officer
at Impel NeuroPharma, Inc., a privately held biotechnology company focused on neurological and neuropsychiatric diseases. Prior to
Impel, she was the Vice President of External Science & Innovation at Forest Labs, from February 2014 until its acquisition
by Actavis plc in July 2014, and served in the same role at Actavis through June 2018 during which time Actavis merged with
and renamed itself Allergan plc. Prior to Allergan, Ms. Lubman held numerous executive business, investment and strategic leadership
roles at Kadmon Pharmaceuticals, Bristol Myers Squibb, Celtic Pharma Management, L.P., Robertson Stephens Investment Bank and Abbott Labs.
She serves on the board of directors of GeneCentric Therapeutics and on the Advisory Board of TMRW.org. In addition, Ms. Lubman serves
on the Scientific Advisory Board of the Daedalus Innovation Fund of Weill- Cornell and board of directors of Gilda’s Club of NYC
and is the Southern California Chairwoman of Executive Women in BIO.
|
|
Item 6.
|
Reliance on subsection 7.1(2) of National Instrument 51-102
|
Not applicable.
|
|
Item 7.
|
Omitted Information
|
Not applicable.
|
|
Item 8.
|
Executive Officer
|
For further information, please contact:
Paula Amy Hewitt
Vice President, General Counsel and
Corporate Secretary
Telephone: (416) 617-6277
June 10, 2021
Exhibit
99.11
FORM 51-102F3
MATERIAL CHANGE REPORT
UNDER NATIONAL INSTRUMENT 51-102
|
Item 1.
|
Name and Address of Company
|
|
|
|
|
|
Field Trip Health Ltd. (the “Company”)
30 Duncan Street, Suite 401
Toronto, Ontario M5V 2C3
|
|
|
|
|
Item 2.
|
Date of Material Change
|
|
|
|
|
|
March 17, 2021
|
|
|
|
|
Item 3.
|
News Release
|
|
|
|
|
|
News release dated March 17,
2021 was disseminated via GlobeNewswire. Copy of the news release have been filed on SEDAR and is available at www.sedar.com.
|
|
|
|
|
Item 4.
|
Summary of Material Change
|
|
|
|
|
|
On March 17, 2021, the Company announced that it closed its previously announced bought deal short form prospectus offering, including the exercise in full of the underwriters’ over-allotment option (the “Offering”). In connection with the Offering, the Company issued 14,661,499 common shares of the Company (the “Common Shares”) at a price of CAD$6.50 per Common Share, for aggregate gross proceeds of approximately $95 million.
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|
|
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Item 5.
|
Full Description of Material Change
|
|
|
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|
5.1
|
Full Description of Material Change
|
|
|
|
|
|
The Offering was conducted by Bloom Burton Securities Inc. (the “Lead Underwriter”), as lead underwriter and sole bookrunner with Stifel GMP and Canaccord Genuity Corp. forming the syndicate of underwriters (together with the Lead Underwriter, the “Underwriters”).
In consideration for their services, the Company paid to the Underwriters a cash commission equal to $4,961,472 and issued to the Underwriters an aggregate of 763,303 compensation warrants (the “Compensation Warrants”). Each Compensation Warrant may be exercised to acquire one Common Share (each, a “Compensation Share”) at an exercise price of $6.50 per Compensation Share until March 17, 2023.
Joseph del Moral, the Chief Executive Officer, Nathan Bryson, Chief Scientific Officer, Donna Wong, Chief Financial Officer, and Paula Amy Hewitt, Vice President and General Counsel (collectively, the “Participating Insiders”), purchased 38,462, 5,831, 7,693, and 3,847 Common Shares in the Offering, respectively, and, as such, the issuance of the Common Shares to such insiders is a “related-party transaction” within the meaning of Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions (“MI 61-101”). However, the issuance is exempt from: (i) the valuation requirement of MI 61-101 by virtue of the exemption contained in Section 5.5(a), as the fair market value of the Common Shares does not exceed 25% of the Company’s market capitalization, and (ii) from the minority shareholder approval requirement of MI 61-101 by virtue of the exemption contained in Section 5.7(1)(a) of MI 61- 101, as the fair market value of the Common Shares does not exceed 25% of The Company’s market capitalization. A material change report was not filed by the Company 21 days before the closing of the Offering as the level of insider participation was not known at that time and the Company moved to close the Offering immediately upon satisfaction of all applicable closing conditions. In the view of the Company, this was reasonable in the circumstances because The Company wished to complete the Offering as soon as possible.
|
|
|
Bennett Jones LLP acted as legal advisors to the Company and Borden Ladner Gervais LLP acted as legal advisors to the Underwriters on the Offering.
The Common Shares have not been, nor will they be, registered under the United States Securities Act of 1933, as amended (the “1933 Act”) and may not be offered or sold in the United States or to, or for the account or benefit of, “U.S. persons” (as defined in Regulation S under the 1933 Act) absent registration or an applicable exemption from the registration requirements. The Common Shares may be offered in the United States to Qualified Institutional Buyers (as defined in Rule 144A under the 1933 Act) pursuant to exemptions from the registration requirements under rule 144A of the 1933 Act and to “accredited investors” as such term is defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D promulgated under the 1933 Act. This news release will not constitute an offer to sell or the solicitation of an offer to buy nor will there be any sale of the securities in any State in which such offer, solicitation or sale would be unlawful.
|
|
|
|
|
|
Disclosure Required by MI 61-101
|
|
|
|
|
|
Pursuant to MI 61-101, the Offering constituted a “related party transaction” by virtue of the participation in the Offering by the Participating Insiders.
The following supplementary information is provided in accordance with Section 5.2 of MI 61-101.
|
|
|
|
|
|
|
(a)
|
description of the transaction and its material terms:
|
|
|
|
|
|
|
|
See Item 4 above for a description of the Offering.
|
|
|
|
|
|
|
(b)
|
the purpose and business reasons for the transaction:
|
|
|
|
|
|
|
|
The Company completed the Offering in order to acquire additional funds: (i) to progress its FT-104 program into Phase 2; (ii) fund clinic development strategy through to cash flow positive operations; and (iii) for working capital and general corporate purposes.
|
|
|
|
|
|
|
(c)
|
the anticipated effect of the transaction on the issuer’s business and affairs:
|
|
|
|
|
|
|
|
Other than in relation to the use of proceeds discussed above, the Company does not anticipate any material effect on the Company’s business and affairs as a result of the completion of the Offering.
|
|
|
|
|
|
|
(d)
|
a description of:
|
|
|
|
|
|
|
|
(i)
|
the interest in the transaction of every interested party and of the related parties and associated entities of the interested parties:
|
|
|
|
|
|
|
|
|
|
The Participating Insiders, as set out in (d)(ii) below, were issued Common Shares for aggregate for gross proceeds to the Company of $361,614.50.
|
|
|
|
|
|
|
|
|
(ii)
|
the anticipated effect of the transaction on the percentage of securities of the issuer, or of an affiliated entity of the issuer, beneficially owned or controlled by each person or company referred to in subparagraph (i) for which there would be a material change in that percentage:
|
|
Name and Position
|
|
Dollar Amount
of Common
Shares
Purchased
|
|
Number of
Common
Shares
Purchased
|
|
Number of
Common
Shares held
prior to the
Offering
|
|
Percentage of
Issued and
Outstanding
Common Shares
prior to the
Offering(1)(2)
|
|
Number of
Common
Shares held
following the
Offering
|
|
Percentage of
Issued and
Outstanding
Common Shares
prior to the
Offering(1)(2)
|
|
Joseph del Moral
Chief Executive Officer, Director
(via 2360203 Ontario Limited)
|
|
$250,003
|
|
38,462
|
|
5,572,581
|
|
Undiluted: 13.07%
Diluted: 13.25%
|
|
5,611,043
|
|
Undiluted: 9.79%
Diluted: 9.93%
|
|
Nathan Bryson
Chief Scientific Officer
|
|
$37,901.50
|
|
5,831
|
|
Nil.
|
|
Undiluted: Nil.
Diluted: 0.23%
|
|
5,831
|
|
Undiluted: 0.01%
Diluted: 0.53%
|
|
Donna Wong
Chief Financial Officer
|
|
$50,004.50
|
|
7,693
|
|
Nil.
|
|
Undiluted: Nil.
Diluted: 0.70%
|
|
7,693
|
|
Undiluted: 0.01%
Diluted: 0.10%
|
|
Paula Amy Hewitt
Vice President and General Counsel
|
|
$23,705.50
|
|
3,647
|
|
Nil.
|
|
Undiluted: Nil.
Diluted: 0.23%
|
|
3,647
|
|
Undiluted: 0.01%
Diluted: 0.18%
|
|
(1)
|
Based
on 57,291,238 Common Shares issued and outstanding as of the date hereof.
|
|
(2)
|
“Undiluted”
means the total number of Common Shares issued and outstanding as of relevant date of calculation;
and “Diluted” means on a on a partially diluted-basis as of relevant
date of calculation, comprised of the Undiluted figure for a beneficial holder plus any Common Shares
which would be issued to that beneficial holder on closing if all convertible securities held
such beneficial holder were converted.
|
|
|
(e)
|
unless this information will be included in another disclosure document for the transaction, a discussion of the review and approval process adopted by the board of directors and the special committee, if any, of the issuer for the transaction, including a discussion of any materially contrary view or abstention by a director and any material disagreement between the board and the special committee:
|
|
|
|
|
|
|
|
All of the disinterested members of the board of directors of the Company (the “Board”) unanimously approved the Offering. The interested member of the Board, disclosed their interest to the Company with respect to the part of the Offering in which such director had a disclosable interest.
|
|
|
|
|
|
|
(f)
|
a summary in accordance with section 6.5 of MI 61-101, of the formal valuation, if any, obtained for the transaction, unless the formal valuation is included in its entirety in the material change report or will be included in its entirety in another disclosure document for the transaction:
|
|
|
|
|
|
|
|
Not applicable.
|
|
|
|
|
|
|
(g)
|
disclosure, in accordance with section 6.8 of MI 61-101, of every prior valuation in respect of the issuer that related to the subject matter of or is otherwise relevant to the transaction:
|
|
|
|
|
|
|
|
(i)
|
that has been made in the 24 months before the date of the material change report:
|
|
|
|
|
|
|
|
|
|
Not applicable.
|
|
|
|
|
|
|
|
|
(ii)
|
the existence of which is known, after reasonable enquiry, to the issuer or to any director or officer of the issuer:
|
|
|
|
|
|
|
|
|
|
Not applicable.
|
|
|
(h)
|
the general nature and material terms of any agreement entered into by the issuer, or a related party of the issuer, with an interested party or a joint actor with an interested party, in connection with the transaction:
|
|
|
|
|
|
|
|
Not applicable.
|
|
|
|
|
|
|
(i)
|
disclosure of the formal valuation and minority approval exemptions, if any, on which the issuer is relying under sections 5.5 and 5.7 of MI 61-101 respectively, and the facts supporting reliance on the exemptions:
|
|
|
|
|
|
|
|
The Offering is exempt from the formal valuation requirement and minority shareholder approval requirement of MI 61-101 by virtue of the exemption contained in Section 5.5(a) and 5.7(1)(a) thereof, respectively, as the fair market value of the Common Shares does not exceed 25% of the Company’s market capitalization as at the applicable date specified in MI 61-101.
As this material change report was filed following the closing of the Offering (and therefore less than 21 days before the closing of the Offering), there is a requirement under MI 61-101 to explain why the shorter period is reasonable or necessary in the circumstances. A material change report was not filed by the Company 21 days before the closing of the Offering as the level of insider participation was not known at that time and the Company moved to close the Offering immediately upon satisfaction of all applicable closing conditions. In the view of the Company, this was reasonable in the circumstances because the Company wished to complete the Offering as soon as practicable.
|
|
|
|
|
5.2
|
Disclosure for Restructuring Transactions
|
|
|
|
|
|
Not applicable.
|
|
|
|
|
Item 6.
|
Reliance on subsection 7.1(2) of National Instrument 51-102
|
|
|
|
|
|
Not applicable.
|
|
|
|
|
Item 7.
|
Omitted Information
|
|
|
|
|
|
Not applicable.
|
|
|
|
|
Item 8.
|
Executive Officer
|
|
|
|
|
|
For further information, please contact:
Paula Amy Hewitt
Vice President, General Counsel and Corporate Secretary
Telephone: (416) 617-6277
|
|
|
|
|
Item 9.
|
Date of Report
|
|
|
|
|
|
March 22, 2021
|
Exhibit 99.12
FORM 62-103F1
EARLY WARNING REPORT
Item 1 – Security and Reporting Issuer
|
1.1
|
State the designation of securities to which this report relates and the name and address of the head office of the issuer of the securities.
|
The designation of securities to which this report relates is common shares (“Common Shares”) of Field Trip Health Ltd. (the “Company”).
The address of the head office of the Company is: 30 Duncan Street, Suite 401, Toronto, Ontario, M5V 2C3
|
1.2
|
State the name of the market in which the transaction or other occurrence that triggered the requirement to file this report took place.
|
On March 17, 2021 the Company completed bought deal short form prospectus offering of 14,661,499 Common Shares at a price of C$6.50 per Common Share, for aggregate gross proceeds of approximately $95 million (the “Offering”).
Item 2 – Identity of the Acquiror
|
2.1
|
State the name and address of the acquiror.
|
2360203 Ontario Limited, a holding company beneficially owned by Joseph del Moral (“Joseph”). Its address is: 30 Duncan Street, Suite 401, Toronto, Ontario, M5V 2C3
|
2.2
|
State the date of the transaction or other occurrence that triggered the requirement to file this report and briefly describe the transaction or other occurrence.
|
See Item 1.1. In addition, Joseph purchased 38,462 Common Shares in the Offering.
|
2.3
|
State the names of any joint actors.
|
Not applicable.
Item 3 – Interest in Securities of the Reporting Issuer
|
3.1
|
State the designation and number or principal amount of securities acquired or disposed of that triggered the requirement to file this report and the change in the acquiror’s securityholding percentage in the class of securities.
|
Joseph purchased 38,462 Common Shares in the Offering. Following the Offering, Joseph’s holdings decreased to less than 10% of the issued and outstanding Common Shares, which was the subject of the most recent early warning report required to be filed by Joseph in respect of the Company. Following this filing, Joseph will no longer file early warning reports in respect of his ownership of Common Shares, except as may be required by applicable law.
|
3.2
|
State whether the acquiror acquired or disposed ownership of, or acquired or ceased to have control over, the securities that triggered the requirement to file this report.
|
See Item 3.1 above.
|
3.3
|
If the transaction involved a securities lending arrangement, state that fact.
|
Not applicable.
|
3.4
|
State the designation and number or principal amount of securities and the acquiror’s securityholding percentage in the class of securities, immediately before and after the transaction or other occurrence that triggered the requirement to file this report.
|
Immediately prior to the Offering, Joseph had beneficial ownership of or control over, an aggregate of 5,572,581 Common Shares, representing approximately 13.07% of the issued and outstanding Common Shares.
Immediately after the Offering, Joseph had beneficial ownership of or control over, an aggregate of 5,611,043 Common Shares, representing approximately 9.79% of the issued and outstanding Common Shares, on a non-diluted basis, and approximately 9.93% of the issued and outstanding Common Shares on a partially-diluted basis (assuming the exercise in full of the 27,777 Common Share purchase warrants and 60,000 options to purchase Common Shares held by Joseph).
|
3.5
|
State the designation and number or principal amount of securities and the acquiror’s securityholding percentage in the class of securities referred to in Item 3.4 over which
|
|
|
(a)
|
the acquiror, either alone or together with any joint actors, has ownership and control,
|
See Item 3.4 above.
|
|
(b)
|
the acquiror, either alone or together with any joint actors, has ownership but control is held by persons or companies other than the acquiror or any joint actor, and
|
Not applicable.
|
|
(c)
|
the acquiror, either alone or together with any joint actors, has exclusive or shared control but does not have ownership.
|
Not applicable.
|
3.6
|
If the acquiror or any of its joint actors has an interest in, or right or obligation associated with, a related financial instrument involving a security of the class of securities in respect of which disclosure is required under this item, describe the material terms of the related financial instrument and its impact on the acquiror’s securityholdings.
|
Not applicable.
|
3.7
|
If the acquiror or any of its joint actors is a party to a securities lending arrangement involving a security of the class of securities in respect of which disclosure is required under this item, describe the material terms of the arrangement including the duration of the arrangement, the number or principal amount of securities involved and any right to recall the securities or identical securities that have been transferred or lent under the arrangement.
|
Not applicable.
|
3.8
|
If the acquiror or any of its joint actors is a party to an agreement, arrangement or understanding that has the effect of altering, directly or indirectly, the acquiror’s economic exposure to the security of the class of securities to which this report relates, describe the material terms of the agreement, arrangement or understanding.
|
Not applicable.
Item 4 – Consideration Paid
|
4.1
|
State the value, in Canadian dollars, of any consideration paid or received per security and in total.
|
In connection with the Offering, Joseph subscribed for 38,462 Common Shares at a price of $6.50 per Common Share, for total consideration of $250,003.
|
4.2
|
In the case of a transaction or other occurrence that did not take place on a stock exchange or other market that represents a published market for the securities, including an issuance from treasury, disclose the nature and value, in Canadian dollars, of the consideration paid or received by the acquiror.
|
See Item 4.1 above.
|
4.3
|
If the securities were acquired or disposed of other than by purchase or sale, describe the method of acquisition or disposition.
|
Not applicable.
Item 5 – Purpose of the Transaction
State the purpose or purposes of the acquiror and any joint actors for the acquisition or disposition of securities of the reporting issuer. Describe any plans or future intentions which the acquiror and any joint actors may have which relate to or would result in any of the following: (a) the acquisition of additional securities of the reporting issuer, or the disposition of securities of the reporting issuer; (b) a corporate transaction, such as a merger, reorganization or liquidation, involving the reporting issuer or any of its subsidiaries; (c) a sale or transfer of a material amount of the assets of the reporting issuer or any of its subsidiaries; (d) a change in the board of directors or management of the reporting issuer, including any plans or intentions to change the number or term of directors or to fill any existing vacancy on the board; (e) a material change in the present capitalization or dividend policy of the reporting issuer; (f) a material change in the reporting issuer’s business or corporate structure; (g) a change in the reporting issuer’s charter, bylaws or similar instruments or another action which might impede the acquisition of control of the reporting issuer by any person or company; (h) a class of securities of the reporting issuer being delisted from, or ceasing to be authorized to be quoted on, a marketplace; (i) the issuer ceasing to be a reporting issuer in any jurisdiction of Canada; (j) a solicitation of proxies from securityholders; (k) an action similar to any of those enumerated above.
Joseph acquired the Common Shares for investment purposes. Joseph may acquire or dispose of additional securities of the Company in the future through the market, privately, or otherwise, as circumstances or market conditions warrant. Any transaction that Joseph may pursue may be made at any time and from time to time without prior notice and will depend on a variety of factors, including, without limitation, the price and availability of the Company’s securities, subsequent developments affecting the Company, its business and prospects, other investment and business opportunities available to Joseph, general industry and economic conditions, the securities markets in general, tax considerations and other factors deemed relevant by Joseph.
Item 6 – Agreements, Arrangements, Commitments or Understandings With Respect to Securities of the Reporting Issuer
Describe the material terms of any agreements, arrangements, commitments or understandings between the acquiror and a joint actor and among those persons and any person with respect to securities of the class of securities to which this report relates, including but not limited to the transfer or the voting of any of the securities, finder’s fees, joint ventures, loan or option arrangements, guarantees of profits, division of profits or loss, or the giving or withholding of proxies. Include such information for any of the securities that are pledged or otherwise subject to a contingency, the occurrence of which would give another person voting power or investment power over such securities, except that disclosure of standard default and similar provisions contained in loan agreements need not be included.
Not applicable.
Item 7 – Change in Material Fact
If applicable, describe any change in a material fact set out in a previous report filed by the acquiror under the early warning requirements or Part 4 in respect of the reporting issuer’s securities.
Not applicable.
Item 8 – Exemption
If the acquiror relies on an exemption from requirements in securities legislation applicable to formal bids for the transaction, state the exemption being relied on and describe the facts supporting that reliance.
Not applicable.
Item 9 – Certification
I, as the acquiror, certify, or I, as the agent filing this report on behalf of an acquiror, certify to the best of my knowledge, information and belief, that the statements made in this report are true and complete in every respect.
DATED as of the 18th day of March, 2021.
|
|
2360203 ONTARIO LIMITED
|
|
|
|
|
|
|
Per:
|
(signed) “Joseph del Moral”
|
|
|
|
Joseph del Moral
President
|
Exhibit
99.13
Execution
Copy
UNDERWRITING AGREEMENT
March 3, 2021
Field Trip Health Ltd.
30 Duncan Street, Suite 401
Toronto, Ontario
M5V 2C3
|
Attention:
|
Joseph Del Moral, Founder and Chief Executive Officer and Ronan Levy, Founder and Executive Chairman
|
Dear Sirs:
Bloom Burton Securities Inc. (“Bloom Burton” or the “Lead Underwriter”), as lead underwriter and sole bookrunner, along with Stifel Nicolaus Canada Inc., and Canaccord Genuity Corp. (collectively, the “Underwriters” and each individually, an “Underwriter”), hereby severally, and not jointly, nor jointly and severally, in their respective percentages set out in Section 18 below, offer to purchase from Field Trip Health Ltd. (the “Corporation”), and the Corporation hereby agrees to issue and sell to the Underwriters, 12,750,000 common shares (“Common Shares”) in the capital of the Corporation (the “Initial Shares”) at a price of $6.50 per Initial Share (the “Offering Price”) for aggregate gross proceeds of $82,875,000.
The Corporation has granted to the Underwriters an option (the “Over-Allotment Option”), exercisable in whole or in part, in one or more tranches, at any time and from time to time by the Lead Underwriter giving written notice to the Corporation as set forth in Section 12, until that date which is 30 days following the Closing Date (as defined below), to purchase, on the same terms as the Initial Shares, such number of additional Common Shares (the “Over–Allotment Shares”) as is equal to 15% of the number of Initial Shares issued under the Offering (as defined below) for additional gross proceeds of $12,431,250, to cover over-allotments, if any, and for market stabilization purposes. The Underwriters shall be under no obligation whatsoever to exercise the Over-Allotment Option in whole or in part.
The Initial Shares and the Over-Allotment Shares are collectively referred to in this Agreement as the “Offered Securities” and the offering of the Offered Securities by the Corporation is referred to in this Agreement as the “Offering”.
The Offered Securities shall have the attributes described in and contemplated by the Prospectus (as defined below).
In consideration of the services rendered by the Underwriters in connection with the Offering, the Corporation shall pay to the Underwriters at the Closing Time, and on such other date following the Closing Date on which the purchase of any Over-Allotment Shares is closed in connection to the exercise of the Over-Allotment Option, as set forth in Section 14, (i) a cash commission equal to 5.25% of the aggregate gross proceeds raised from the sale of Offered Securities (the “Underwriting Fee”); plus, as additional compensation for the services provided, the Corporation shall issue to the Underwriters, in aggregate, that number of compensation warrants (the “Broker Warrants”) which is equal to 5.25% of the aggregate number of Offered Securities sold. Each Broker Warrant shall be exercisable to acquire one Common Share (each, a “Broker Warrant Share”) at an exercise price equal to the Offering Price for a period of 24 months following the Closing Date, pursuant to the terms of the certificates representing the Broker Warrants (the “Broker Warrant Certificates”).
The Underwriters may arrange for substituted purchasers (the “Substituted Purchasers”) for the Offered Securities, where such Substituted Purchasers are resident in the Selling Jurisdictions (as defined below). Each Substituted Purchaser shall purchase the Offered Securities at the Offering Price, and to the extent that Substituted Purchasers purchase Offered Securities, the obligations of the Underwriters to do so will be reduced by the number of Offered Securities purchased by the Substituted Purchasers from the Corporation.
The Underwriters propose to distribute the Offered Securities in each of the provinces of Canada, other than Quebec (the “Qualifying Jurisdictions”), pursuant to the Final Prospectus (as defined below) and may also distribute the Offered Securities in the United States (as defined below) in transactions that are exempt from the registration requirements of the U.S. Securities Act (as defined below) pursuant to the U.S. Private Placement Memorandum (as defined below), all in the manner contemplated by this Agreement.
Subject to applicable law, including Applicable Securities Laws (as defined below) and the terms of this Agreement, the Offered Securities may also be distributed outside of Canada and the United States, in each jurisdiction as mutually agreed to in writing by the Corporation and the Underwriters where they may be lawfully sold by the Underwriters without: (i) giving rise to any requirement under the laws of such jurisdiction to prepare and/or file a prospectus or document having similar effect; or (ii) creating any ongoing compliance or continuous disclosure obligations for the Corporation pursuant to the laws of such jurisdiction.
The Underwriters shall be entitled to appoint a selling group consisting of other registered dealers in accordance with Applicable Securities Laws for the purposes of arranging for purchasers of the Offered Securities. Any member of any selling group formed by the Underwriters pursuant to the provisions of this Agreement or with whom any Underwriter has a contractual relationship with respect to the Offering, if any, shall agree with such Underwriter to comply with the covenants and obligations given by the Underwriters herein. The fee payable to any such member of any selling group shall be for the account of the Underwriters.
The Underwriters may offer the Offered Securities at a price less than the Offering Price as described in further detail in Section 18 below, in compliance with Canadian Securities Laws and, specifically, the requirements of NI 44-101 (as defined below) and the disclosure concerning the same contained in the Prospectus, provided that the net proceeds received by the Corporation for the Offered Securities shall not be reduced as a result thereof.
TERMS AND CONDITIONS
The following are additional terms and conditions of this Agreement between the Corporation and the Underwriters:
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Section 1
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Definitions and Interpretation
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(1)
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Where used in this Agreement or in any amendment hereto, the following terms have the following meanings, respectively:
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“Accredited Investor” means “accredited investor” as such term is defined in Rule 501(a) of Regulation D;
“Advisory Agreement”
means the advisory consulting agreement entered into between the Corporation and [*****] dated May 1, 2020;
“Advisory Warrants” means up to 102,000 warrants to purchase Common Shares issuable under the Advisory Agreement upon Closing on the same terms as the Broker Warrants;
“Agreement” means this underwriting agreement, as it may be amended from time to time;
“Applicable Laws” means, in relation to any person, the Business or the Offering, all applicable laws, statutes, Authorizations, ordinances, decrees, rules, regulations, by-laws, legally enforceable policies, codes or guidelines, judicial, arbitral, administrative, ministerial, departmental or regulatory judgements, orders, decisions, directives, rulings, subpoenas, or awards, and conditions of any grant or maintenance of any approval, permission, certification, consent, registration, authority or licence, any applicable federal or provincial pricing policies, and any other requirements of any Governmental Authority, by which such person is bound or having application to the Business or the Offering and any amendments or supplements to, or replacements and substitutions of, any of the foregoing;
“Applicable Securities Laws” means collectively, Canadian Securities Laws and all applicable securities laws, rules, regulations, policies and other instruments promulgated by the Securities Regulators in any of the other Selling Jurisdictions;
“associate”, “affiliate” and “insider” have the respective meanings given to them in the Securities Act;
“Authorizations” means any approval, consent, exemption, ruling, authorization, notice, permit, including an import permit or export permit, or acknowledgement that may be required from any Governmental Authority pursuant to Applicable Law, or which is otherwise required under Applicable Law for the parties to perform their obligations under this Agreement or in relation to the Business, including any, ethical review board approval or other authorization for a study, including authorizations related to medical clinics, authorizations necessary to administer ketamine to patients, or other authorizations related to the Business;
“Broker Warrant Certificate” has the meaning ascribed thereto on the second page of this Agreement;
“Broker Warrant Shares” has the meaning ascribed thereto on the second page of this Agreement;
“Broker Warrants” has the meaning ascribed thereto on the second page of this Agreement;
“Business” means the business carried on by the Corporation and the Subsidiaries as described in the Offering Documents, including, for the avoidance of doubt, of delivery of Drug Products, or other drug substances for therapeutic purposes, including the development, formulation and compounding of Drug Products or other drug substances, in the jurisdictions in which the Corporation and the Subsidiaries operate, including in the context of clinical trials, research, development, service delivery or other contexts, and the business of developing, cultivating fungal inputs for, and manufacturing natural health products, and the operation of clinics for physicians engaged in any of the foregoing activities;
“Business Assets” means all tangible and intangible property and assets owned (either directly or indirectly), leased, licensed, loaned, operated or used, including all real property, fixed assets, facilities, equipment, inventories and accounts receivable, by the Corporation and the Subsidiaries in connection with the Business;
“Business Day” means a day, other than a Saturday, a Sunday or statutory or civic holiday in the City of Toronto, Ontario;
“Canadian Securities Laws” means, collectively, all applicable securities laws of each of the Qualifying Jurisdictions and the respective rules and regulations under such laws together with applicable published instruments, notices and orders of the securities regulatory authorities in the Qualifying Jurisdictions, including the rules and policies of the Exchange;
“CBCA” means the Canada Business Corporations Act;
“CDS” means CDS Clearing and Depository Services Inc.;
“CDSA” means the Controlled Drugs and Substances Act (Canada);
“Closing” means the completion of the sale of the Offered Securities and the purchase by the Underwriters of the Offered Securities pursuant to this Agreement;
“Closing Date” means March 16, 2021 or such earlier or later date as may be agreed to in writing by the Corporation and the Lead Underwriter, each acting reasonably provided that the Closing Date shall not be more than 42 days after the date of the receipt of the final short form prospectus;
“Closing Time” means 8:00 a.m. (Toronto time) on the Closing Date, or such other time on the Closing Date as may be agreed to by the Corporation and the Lead Underwriter;
“Common Shares” has the meaning ascribed thereto on the first page of this Agreement;
“controlled substance” has the meaning ascribed thereto in section 2(1) of the CDSA;
“Corporation” has the meaning ascribed thereto on the first page of this Agreement;
“Corporation’s Auditors” means MNP LLP;
“CPSO” means the College of Physicians and Surgeons of Ontario;
“Criminal Code” means the Criminal Code (Canada);
“Debt Instrument” means any and all loans, bonds, notes, debentures, indentures, promissory notes, mortgages, guarantees or other instruments evidencing indebtedness (demand or otherwise) for borrowed money or other liability to which the Corporation or a Subsidiary are a party or to which their property or assets are otherwise bound;
“distribution” means distribution or distribution to the public, as the case may be, for the purposes of Canadian Securities Laws or any of them;
“Documents Incorporated by Reference” means, without limitation, all financial statements, related management’s discussion and analysis, management information circulars, joint information circulars, annual information forms, material change reports or other documents filed by the Corporation, whether before or after the date of this Agreement, that are required to be incorporated by reference into the Prospectus under Applicable Securities Laws;
“Drug Product” means any drug product regulated for sale or use under supervision of a health care practitioner and that includes an active pharmaceutical ingredient that is ketamine, psilocin, psilocybin, and other restricted drugs or controlled substances in the jurisdictions in which the Corporation operates;
“Employee Plans” has the meaning ascribed thereto in Section 7(ii) of this Agreement;
“Engagement Letter” has the meaning ascribed thereto in Section 17(1)(c) of this Agreement;
“Environmental Laws” means all Applicable Laws relating to the environment or environmental issues (including air, surface, water and stratospheric matters), pollution or protection of human health and safety, including without limitation relating to the release, threatened release, manufacture, processing, blending, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials;
“Exchange” means the Canadian Securities Exchange;
“FDA” mean the Food and Drugs Act (Canada);
“FDR-J” means part J of the Food and Drugs Regulations (Canada) of the CDSA;
“Field Trip Psychedelics” means Field Trip Psychedelics Inc.;
“Final Prospectus” means the (final) short form prospectus of the Corporation relating to the Offering, including all of the Documents Incorporated by Reference prepared and to be filed by the Corporation with the Securities Commissions in accordance with the Passport System and NI 44-101 in the Qualifying Jurisdictions in respect of the Offering and for which a Final Receipt has been issued;
“Final Receipt” means the receipt issued by the Principal Regulator, evidencing that a receipt has been, or has been deemed to be, issued for the Final Prospectus in each of the Qualifying Jurisdictions;
“Financial Statements” means (a) audited financial statements of the Corporation for the fiscal year ended December 31, 2019 and 2018, together with the independent auditors’ report thereon and the notes thereto; (b) audited consolidated financial statements of Field Trip Psychedelics for the fiscal period from April 2, 2019 to March 31, 2020, together with the independent auditors’ report thereon and the notes thereto; and (c) the unaudited condensed interim consolidated financial statements of the Corporation for the three and nine months ended December 31, 2020 and 2019, together with the notes thereto;
“Former Auditors” means De Visser Gray LLP;
“Government Official” means (a) any official, officer, employee, or representative of, or any person acting in an official capacity for or on behalf of, any Governmental Authority, (b) any salaried political party official, elected member of political office or candidate for political office, or (c) any company, business, enterprise or other entity owned or controlled by any person described in the foregoing clauses;
“Governmental Authority” means any provincial, territorial or federal, and as applicable in the circumstances, any foreign: (a) government; (b) court, arbitral or other tribunal or governmental or quasi-governmental authority of any nature (including any governmental agency, political subdivision, instrumentality, branch, department, official, or entity); (c) body or other instrumentality exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature pertaining to government, including Health Canada, the New York State Medical Board and/or the California Medical Board; (d) any formulary body with responsibility for determining listability of a Drug Product on any applicable formulary or for determining the pricing of Drug Products for reimbursement, with jurisdiction to review the pricing of and payment for Drug Products under Applicable Law; (e) any provincial, state, territorial or federal government or review board with jurisdiction over pricing of patented products or with jurisdiction over competition aspects of pricing of products; or (f) any other body or entity created under the authority of or otherwise subject to the jurisdiction of any of the foregoing and any stock exchange or self-regulatory authority and, for greater certainty, includes the Securities Commissions, the Exchange and the Investment Industry Regulatory Organization of Canada;
“Hazardous Material” means, collectively, (a) any chemicals or other materials or substances which are defined as or included in the definition of “hazardous recyclables,” “extremely hazardous wastes,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants,” “contaminants,” “pollutants” or words of similar import under any Environmental Law, and (b) any other chemical, contaminant, pollutant, deleterious substance, dangerous good or other material or substance, which is limited or regulated under any Environmental Law;
“IFRS” means International Financial Reporting Standards as issued by the International Accounting Standards Board;
“including” means including but not limited to;
“Indemnified Party” or “Indemnified Parties” have the meanings ascribed thereto in Section 13 of this Agreement;
“Initial Shares” has the meaning ascribed thereto on the first page of this Agreement;
“Intellectual Property Rights” means all industrial and other intellectual property rights comprising or relating to (a) trademarks, trade dress, trade and business names, branding, brand names, logos, design rights, corporate names and domain names and other similar designations of source, sponsorship, association or origin, together with the goodwill symbolized by any of the foregoing; (b) internet domain names registered by any authorized private registrar or Governmental Authority, web addresses, web pages, website and URLs; (c) works of authorship, expressions, designs and industrial design registrations, whether or not copyrightable, including copyrights and copyrightable works, software and firmware, data, data files, and databases and other specifications and documentation; (d) inventions, discoveries, trade secrets, business and technical information, know-how, databases, data collections, patent disclosures and other confidential or proprietary information; (e) plant or fungal varieties, strains or cultivars; and (f) all industrial and other intellectual property rights, and all rights, interests and protections that are associated with, equivalent or similar to, or required for the exercise of, any of the foregoing, however arising, in each case whether registered or unregistered, such registered rights including patent, registered plant breeders’ rights, trademark, industrial design and copyright, and including all registrations and applications for, and renewals or extensions of, such rights or forms of protection under the Applicable Law of any jurisdiction which the Corporation operates;
“ketamine” means 2-(2-chlorophenyl)-2-(methylamino)cyclohexanone;
“knowledge of the Corporation” (or similar phrases or knowledge qualifiers) means, with respect to the Corporation, the actual knowledge of its directors and officers after reasonable inquiry;
“Liens” means any encumbrance or title defect of whatever kind or nature, regardless of form, whether or not registered or registrable and whether or not consensual or arising by law (statutory or otherwise), including any mortgage, lien, charge, pledge or security interest, whether fixed or floating, or any assignment, lease, option, right of pre-emption, privilege, easement, servitude, right of way, restrictive covenant, right of use or any other right or claim of any kind or nature whatever which affects ownership or possession of, or title to, any interest in, or right to use or occupy such property or assets;
“marketing materials” has the meaning ascribed thereto in NI 41-101;
“Marketing Materials” means the term sheet in respect of the Offering dated February 26, 2021, as agreed to between the Corporation and Bloom Burton;
“Material Adverse Effect” means (a) any event, occurrence, state of facts, effect or change on the Corporation and the Subsidiaries or the Business, taken as a whole and as a going concern, that has had or would reasonably be expected to have a material adverse effect on the results of operations, financial condition, assets, properties, capital, liabilities (contingent or otherwise), cash flow, income, prospects or business operations of the Corporation and its Subsidiaries or the Business, taken as a whole and as a going concern, or (b) any event, occurrence, state of facts, effect or change that would result in any Offering Document containing a misrepresentation;
“Material Agreement” means any and all contracts, commitments, agreements (written or oral), instruments, leases or other documents, including licences, sub-licences, supply agreements, manufacturing agreements, distribution agreements, sales agreements, or any other similar type agreements, to which the Corporation or any Subsidiary is a party or to which their Business Assets are otherwise bound, and which is material to the Corporation and the Subsidiaries on a consolidated basis;
“material change”, “material fact” and “misrepresentation” have the respective meanings ascribed thereto in the Securities Act;
“MI 11-102” means Multilateral Instrument 11-102 – Passport System;
“NI 41-101” means National Instrument 41-101 – General Prospectus Requirements;
“NI 44-101” means National Instrument 44-101 - Short Form Prospectus Distributions;
“NI 51-102” means National Instrument 51-102 – Continuous Disclosure Obligations;
“NP 11-202” means National Policy 11-202 – Process for Prospectus Reviews in Multiple Jurisdictions;
“Offered Securities” has the meaning ascribed thereto on the first page of this Agreement;
“Offering” has the meaning ascribed thereto on the first page of this Agreement;
“Offering Documents” means the Preliminary Prospectus, the Final Prospectus, any Supplementary Material and, if applicable, the U.S. Private Placement Memorandum;
“Offering Price” has the meaning ascribed thereto on the first page of this Agreement;
“Option Closing Date” means the date, not earlier than the Closing Date or later than 30 days following the Closing Date, for the closing of the Over-Allotment Option set out in the written notice of exercise of the Over-Allotment Option;
“Option Closing Time” means 8:00 a.m. (Toronto time) on the Option Closing Date or such other time on the Closing Date as may be agreed to by the Corporation and the Lead Underwriter;
“Ordinary Course” means, with respect to an action taken by a person, that such action is consistent in all material respects with past practices of the person and is taken in the ordinary course of the normal day-to-day operations of the person, in each case, as is determined as of the relevant date;
“OSC” means the Ontario Securities Commission;
“Over-Allotment Option” has the meaning ascribed thereto on the first page of this Agreement;
“Over-Allotment Shares” has the meaning ascribed thereto on the first page of this Agreement;
“Passport System” means the system for review of prospectus filings set out in MI 11-102 and NP 11-202;
“person” shall be broadly interpreted and shall include any individual, corporation, partnership, joint venture, association, trust or other legal entity;
“Personnel” has the meaning ascribed thereto in Section 13 of this Agreement;
“Preliminary Prospectus” means the preliminary short form prospectus of the Corporation dated March 3, 2021, including all of the Documents Incorporated by Reference, prepared and filed by the Corporation in accordance with the Passport System and NI 44-101 in the Qualifying Jurisdictions in respect of the Offering;
“Preliminary Receipt” means the receipt issued by the Principal Regulator, evidencing that a receipt has been, or has been deemed to be, issued for the Preliminary Prospectus in each of the Qualifying Jurisdictions;
“Principal Regulator” means the Ontario Securities Commission;
“Prospectus” means, collectively, the Preliminary Prospectus and the Final Prospectus;
“provide” in the context of sending or making available marketing materials to a potential investor of Offered Securities has the meaning ascribed thereto under Canadian Securities Laws;
“psilocin” means 3–[2–(dimethylamino)ethyl]–4–hydroxyindole and any salt thereof;
“psilocybin” means 3–[2–(dimethylamino)ethyl]–4–phosphoryloxyindole and any salt thereof;
“purchasers” means, collectively, each of the purchasers of Offered Securities arranged by the Underwriters, including the Substituted Purchasers, in connection with the Offering, including, if applicable, the Underwriters;
“Qualified Institutional Buyer” means a “qualified institutional buyer” as such term is defined in Rule 144A;
“Qualifying Jurisdictions” has the meaning ascribed thereto on the second page of this Agreement;
“Regulation D” means Regulation D adopted by the SEC under the U.S. Securities Act;
“Regulation S” means Regulation S adopted by the SEC under the U.S. Securities Act;
“Repayment Event” means any event or condition which gives the holder of any Debt Instrument (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a material portion of such indebtedness by the Corporation or the Subsidiaries;
“Rule 144A” means Rule 144A under the U.S. Securities Act;
“SEC” means the United States Securities and Exchange Commission;
“Securities Act” means the Securities Act (Ontario);
“Securities Commissions” means the securities regulatory authority in each of the Qualifying Jurisdictions;
“Securities Laws” means collectively, Canadian Securities Laws, U.S. Securities Laws and all applicable securities laws, rules, regulations, policies and other instruments promulgated by the Securities Regulators in any of the other Selling Jurisdictions;
“Securities Regulators” means collectively, the securities regulators or other securities regulatory authorities in the Selling Jurisdictions;
“Selling Jurisdictions” means, collectively, each of the Qualifying Jurisdictions and may also include, the United States and any other jurisdictions outside of Canada and the United States as mutually agreed to by the Corporation and the Underwriters;
“Subsidiaries” has the meaning ascribed thereto in Section 7(b) of this Agreement;
“subsidiary” or “subsidiaries” has the meaning ascribed thereto in the Securities Act;
“Substituted Purchasers” has the meaning ascribed thereto on the second page of this Agreement;
“Supplementary Material” means, collectively, any amendment to the Preliminary Prospectus or the Final Prospectus, and any amendment or supplemental prospectus that may be filed by or on behalf of the Corporation under Canadian Securities Laws relating to the distribution of the Offered Securities;
“template version” has the meaning ascribed thereto under NI 41-101 and includes any revised template version of marketing materials as contemplated by NI 41-101;
“Transfer Agent” means Computershare Trust Company of Canada;
“Underwriters” has the meaning ascribed thereto on the first page of this Agreement;
“Underwriting Fee” has the meaning ascribed thereto on the first page of this Agreement;
“U.S. Affiliates” means a United States registered broker-dealer acting in connection with the Offering that is (i) an affiliate of an Underwriter, (ii) appointed by the Underwriters as a sub-agent, or (iii) acting with an Underwriter in compliance with Rule 15a-6 under the U.S. Exchange Act;
“U.S. Exchange Act” means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder;
“U.S. Private Placement Memorandum” means the private placement offering memorandum in the event of an offering of the Offered Securities in the United States, which will include and supplement the Prospectus;
“U.S. Securities Act” means the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder;
“U.S. Securities Laws” means all applicable securities legislation in the United States, including, without limitation, the U.S. Exchange Act and U.S. Securities Act; and
“United States” means the United States of America, its territories and possessions, any state of the United States and the District of Columbia.
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(2)
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Any reference in this Agreement to a section or subsection shall refer to a section or subsection of this Agreement.
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(3)
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All words and personal pronouns relating thereto shall be read and construed as the number and gender of the party or parties referred to in each case required and the verb shall be construed as agreeing with the required word and/or pronoun.
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(4)
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Any reference in this Agreement to $ or to “dollars” shall refer to the lawful currency of Canada, unless otherwise specified.
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(5)
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The following are the schedules to this Agreement, which schedules are deemed to be a part hereof and are hereby incorporated by reference herein:
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Schedule “A” Subsidiaries
Schedule “B” Compliance with United States Securities Laws (if applicable)
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Section 2
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Attributes of the
Offered Securities.
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(1)
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The Offered Securities to be sold by the Corporation hereunder shall have the rights, privileges, restrictions and conditions that conform in all material respects to the rights, privileges, restrictions and conditions set forth in the Offering Documents.
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(2)
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The Underwriters severally agree not to offer or sell the Offered Securities in such a manner as to require registration of any of them or the filing of a prospectus or any similar document under the laws of any jurisdiction outside the Qualifying Jurisdictions and to distribute or offer the Offered Securities only in the Qualifying Jurisdictions and in accordance with all Applicable Securities Laws. However, the Corporation and each Underwriter acknowledge that, in the event of any offer, sale or resale of the Offered Securities in the United States, the Underwriters acting through their U.S. Affiliates will offer, sell and resell the Offered Securities in the United States only to Qualified Institutional Buyers or Accredited Investors, all in accordance with Schedule “B”, which terms and conditions are hereby incorporated by reference in and shall form a part of this Agreement, provided that no such action on the part of the Underwriters or their U.S. Affiliates shall in any way oblige the Corporation to register any Offered Securities under the U.S. Securities Act or the securities laws of any state of the United States. Any agreements between the Underwriters and the members of any selling group will contain restrictions which are substantially the same as those contained in this Section 2.
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(3)
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Notwithstanding the foregoing, an Underwriter will not be liable to the Corporation under this section or Schedule “B” with respect to a violation by another Underwriter or its U.S. Affiliate(s) of the provisions of this section or Schedule “B” if the former Underwriter or its U.S. Affiliate, as applicable, is not itself also in violation.
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Section 3
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Filing of Prospectus.
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(1)
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The Corporation shall:
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(a)
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not
later than 5:00 p.m. (Toronto time) on the date hereof, have filed the Preliminary Prospectus pursuant to the Passport System
with the Securities Commissions and obtain a Preliminary Receipt not later than 5:00 p.m.
(Toronto time) on March 4, 2021;
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(b)
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use commercially reasonable efforts to: (i) promptly resolve all comments made and deficiencies raised in respect of the Preliminary Prospectus by the Principal Regulator, and (ii) file the Final Prospectus and obtain a Final Receipt not later than 5:00 p.m. (Toronto time) on March 10, 2021, and otherwise fulfill all legal requirements to qualify the Offered Securities for distribution to the public in the Qualifying Jurisdictions through the Underwriters or any other investment dealer or broker properly registered to transact such business in the applicable Qualifying Jurisdictions contracting with the Underwriters, and to qualify the grant of the Over-Allotment Option; and
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(c)
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until the date on which the distribution of the Offered Securities is completed, promptly take, or cause to be taken, all additional steps and proceedings that may from time to time be required under Canadian Securities Laws to continue to qualify the distribution of the Offered Securities for sale to the public and the grant of the Over-Allotment Option to the Underwriters or, in the event that the Offered Securities or the Over-Allotment Option have, for any reason, ceased to so qualify, to again so qualify the Offered Securities and the Over-Allotment Option.
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(2)
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Prior to the filing of the Offering Documents and thereafter, during the period of distribution of the Offered Securities, the Corporation shall have allowed the Underwriters to participate fully in the preparation of, and to approve the form and content of, such documents and shall have allowed the Underwriters to conduct all due diligence investigations (which shall include the attendance of management of the Corporation, the Corporation’s Auditors and the Former Auditors at one or more due diligence sessions to be held) which they may reasonably require in order to fulfill their obligations as underwriters and in order to enable them to responsibly execute the certificate required to be executed by them at the end of the Prospectus.
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(3)
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It shall be a condition precedent to (i) the Underwriters’ execution of any certificate in any Prospectus, that the Underwriters be satisfied as to the form and substance of the document, and (ii) the delivery of each U.S. Private Placement Memorandum (if applicable) to any purchaser or prospective purchaser in the United States, that the Underwriters and their U.S. Affiliates be satisfied as to the form and substance of such document.
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Section 4
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Deliveries on Filing
and Related Matters.
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(1)
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The Corporation shall deliver to each of the Underwriters:
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(a)
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prior to the time of each filing thereof, a copy of the Preliminary Prospectus and the Final Prospectus each manually signed on behalf of the Corporation, by the persons and in the form signed and certified as required by Canadian Securities Laws;
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(b)
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a copy of the preliminary U.S. Private Placement Memorandum or the final U.S. Private Placement Memorandum, if and as applicable;
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(c)
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prior to the time of filing thereof, a copy of any Supplementary Material, or other document required to be filed with or delivered to, the Securities Commissions by the Corporation under Canadian Securities Laws in connection with the Offering, including any document incorporated by reference in the Final Prospectus (other than documents already filed publicly with a Securities Commission);
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(d)
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concurrently with the filing of the Final Prospectus with the Securities Commissions, a “long-form” comfort letter of the Corporation’s Auditors dated the date of the Final Prospectus (with the requisite procedures to be completed by such auditor within two Business Days of the date of such letter), in form and substance satisfactory to the Underwriters, acting reasonably, addressed to the Underwriters, the Corporation and the board of directors of the Corporation, with respect to the verification of financial and accounting information and other financial information contained in the Final Prospectus (including all Documents Incorporated by Reference) and matters involving changes or developments since the respective dates as of which specific financial information is given therein which letter shall be in addition to the auditor’s consent letter and comfort letter (if any) addressed to the Securities Commissions; and
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(e)
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concurrently with the filing of the Final Prospectus with the Securities Commissions, a “long form” comfort letter of the Former Auditors, dated to the date of the Final Prospectus (with the requisite procedures to be completed by such auditors no later than two Business Days prior to the date of the Final Prospectus) with respect to the financial and accounting information relating to the Corporation addressed to the Underwriters, in form and substance satisfactory to the Underwriters, acting reasonably, containing statements and information of the type ordinarily included in “comfort letters” to underwriters in connection with the Offering.
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Unless otherwise advised in writing, such deliveries shall also constitute the Corporation’s consent to the Underwriters’ use of the Offering Documents in connection with the distribution of the Offered Securities in compliance with this Agreement and Securities Laws.
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(2)
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The Corporation represents and warrants to the Underwriters with respect to the Offering Documents that as at their respective dates of delivery to the Underwriters as set out in Section 4(1) above:
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(a)
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all information and statements in such documents (including information and statements incorporated by reference to the extent they have not been superseded by the information and statements in the Offering Documents) (except information and statements relating solely to the Underwriters and furnished by them specifically for use in a Prospectus) are true and correct, in all material respects, and contain no misrepresentation and constitute full, true and plain disclosure of all material facts relating to the Corporation, the Offering and the Offered Securities, as required by Canadian Securities Laws;
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(b)
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no material fact or information in such documents (including information and statements incorporated by reference) (except information and statements relating solely to the Underwriters and furnished by them specifically for use in a Prospectus) has been omitted therefrom which is required to be stated in such disclosure or is necessary to make the statements or information contained in such disclosure not misleading in light of the circumstances under which they were made; and
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(c)
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the Prospectus and any Supplementary Material comply in all material respects with the requirements of Canadian Securities Laws.
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(3)
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The Corporation shall cause commercial copies of the Preliminary Prospectus, the Final Prospectus and the U.S. Private Placement Memorandum, as the case may be, to be delivered to the Underwriters without charge, in such quantities and in such cities as the Underwriters may reasonably request by written instructions to the printer of such documents as soon as possible after obtaining the Preliminary Receipt or the Final Receipt, as the case may be, but, in any event on or before noon (Toronto time) on the next Business Day (or for delivery locations outside of Toronto, on the second Business Day). Such deliveries shall constitute the consent of the Corporation to the Underwriters’ use of the Preliminary Prospectus, the Final Prospectus and the U.S. Private Placement Memorandum for the distribution of the Offered Securities in the Qualifying Jurisdictions in compliance with the provisions of this Agreement and Canadian Securities Laws; the offer and sale of the Offered Securities in the United States in compliance with the provisions of this Agreement (including, without limitation, Schedule “B” hereto) and U.S. Securities Laws; and the offer and sale of the Offered Securities in such other Selling Jurisdictions agreed to between the Corporation and the Lead Underwriter, in compliance with the provisions of this Agreement and Applicable Securities Laws. The Corporation shall similarly cause to be delivered commercial copies of any Supplementary Material and hereby similarly consents to the Underwriters’ use thereof. The Corporation shall cause to be provided to the Underwriters, without cost, such number of copies of any Documents Incorporated by Reference as the Underwriters may reasonably request for use in connection with the distribution of the Offered Securities.
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(4)
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Each of the Corporation and the Underwriters have approved the Marketing Materials, including any template version thereof which the Corporation has filed with the Securities Commissions and which is and will be incorporated by reference into the Prospectus, as the case may be. The Corporation and the Underwriters each covenant and agree that during the distribution of the Offered Securities, it will not provide any potential investor of Offered Securities with any marketing materials except for marketing materials that comply with, and have been approved in accordance with, NI 44-101. If requested by the Underwriter, in addition to the Marketing Materials, the Corporation will cooperate, acting reasonably, with the Underwriter in approving any other marketing materials to be used in connection with the Offering.
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(5)
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Subject to compliance with Securities Laws, during the period commencing on the date hereof and until completion of the distribution of the Offered Securities, the Corporation will promptly provide to the Underwriters drafts of any press releases of the Corporation for review by the Underwriters prior to issuance, and shall obtain the prior approval of the Underwriters as to the content and form of any press release relating to the Offering prior to issuance, such approval not to be unreasonably withheld or delayed. If required by Securities Laws, any press release announcing or otherwise referring to the Offering disseminated in the United States shall comply with the requirements of Rule 135c under the U.S. Securities Act and any press release announcing or otherwise referring to the Offering disseminated outside the United States shall include (i) an appropriate notation on each page as follows: “Not for distribution to the U.S. news wire services, or dissemination in the United States” and (ii) the following (or similar) disclosure:
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“The Common Shares have not been, nor will they be, registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) and may not be offered or sold in the United States (as defined in Regulation S under the U.S. Securities Act) absent registration under the U.S. Securities Act and all applicable state securities laws or in compliance with an applicable exemption from such registration requirements. This news release will not constitute an offer to sell or the solicitation of an offer to buy nor will there be any sale of the securities in any State in which such offer, solicitation or sale would be unlawful.”
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(6)
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Notwithstanding any provision hereof, nothing in this Agreement will create any obligation of the Corporation to file a registration statement or otherwise register or qualify the Offered Securities for sale or distribution outside of Canada.
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Section 5
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Material Change.
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(1)
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During the period from the date of this Agreement to the completion of the distribution of the Offered Securities, the Corporation covenants and agrees with the Underwriters that it shall promptly notify the Underwriters in writing with full particulars of:
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(a)
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any material change (actual, anticipated, contemplated or threatened) in respect of the Corporation and the Subsidiaries considered on a consolidated basis or any development involving a prospective material change;
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(b)
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any new or any change in a material fact which has arisen or has been discovered and would have been required to have been stated in any of the Offering Documents had the fact arisen or been discovered on, or prior to, the date of such document; and
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(c)
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any change in any material fact (which for the purposes of this Agreement shall be deemed to include the disclosure of any previously undisclosed material fact) contained in the Offering Documents which fact or change is, or may be, of such a nature as to render any statement in such Offering Document misleading or untrue in any material respect or which would result in a misrepresentation in the Offering Document or which would result in any of the Offering Documents not complying (to the extent that such compliance is required) with Securities Laws.
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The Corporation shall promptly,
and in any event within any applicable time limitation, comply, to the satisfaction of the Underwriters, acting reasonably, with
all applicable filings and other requirements under Canadian Securities Laws and U.S. Securities Laws as a result of such fact
or change; provided that the Corporation shall not file any Supplementary Material or other document without first providing the
Underwriters with a copy of such Supplementary Material or other document and consulting with the Underwriters with respect to
the form and content thereof. The Corporation shall in good faith discuss with the Underwriters any fact or change in circumstances
(actual, anticipated, contemplated or threatened, financial or otherwise) which is of such a nature that there is or could be
reasonable doubt whether written notice need be given under this Section 5.
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(2)
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If during the period of distribution of the Offered Securities there shall be any change in Canadian Securities Laws or other laws which results in any requirement to file Supplementary Material, the Corporation will promptly prepare and file such Supplementary Material with the appropriate Securities Commissions where such filing is required, provided that the Corporation shall have allowed the Underwriters and its counsel to participate in the preparation and review of any Supplementary Material.
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(3)
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During the period from the date of this Agreement to the completion of the distribution of the Offered Securities, the Corporation will notify the Underwriters promptly:
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(a)
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when any supplement to any of the Offering Documents or any Supplementary Material shall have been filed;
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(b)
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of any request by any Securities Commission to amend or supplement the Prospectus or for additional information;
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(c)
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of any request by any Governmental Authority for any information, meeting or hearing relating to the Corporation or the Offering;
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(d)
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of the suspension of the qualification of the Common Shares or the Over-Allotment Option for offering, sale, issuance, or grant, as applicable, in any jurisdiction, or of any order suspending or preventing the use of the Offering Documents (or any Supplementary Material) or of the institution or, to the knowledge of the Corporation, threatening of any proceedings for any such purpose; and
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(e)
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of the issuance by any Securities Commission or any stock exchange of any order having the effect of ceasing or suspending the distribution of the Common Shares or the trading in any securities of the Corporation, or, to the knowledge of the Corporation, of the institution or threatening of any proceeding for any such purpose. The Corporation will use its reasonable efforts to prevent the issuance of any such stop order or of any order preventing or suspending such use or such order ceasing or suspending the distribution of the Common Shares or the trading in the Common Shares and, if any such order is issued, to obtain the lifting thereof at the earliest possible time.
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Section 6
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Regulatory Approvals.
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The Corporation will make all necessary filings, obtain all necessary consents and approvals (if any) and pay all filing fees required to be paid in connection with the transactions contemplated by this Agreement. The Corporation will cooperate with the Underwriters in connection with the qualification of the distribution of the Offered Securities for offer and sale in the Qualifying Jurisdictions and the grant of the Over-Allotment Option under Canadian Securities Laws and in maintaining such qualifications in effect for so long as required for the distribution of the Offered Securities.
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Section 7
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Representations and
Warranties of the Corporation.
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The Corporation represents and warrants to each of the Underwriters, and acknowledges that each of them is relying upon such representations and warranties in connection with the purchase of the Offered Securities, that:
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(a)
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Good Standing of the Corporation. The Corporation (i) is a corporation existing under the laws of Canada and is and will at the Closing Time be current and up-to-date with all material filings required to be made and in good standing under the CBCA, (ii) has all requisite corporate power and capacity to own, lease and operate its properties and assets, including its Business Assets, and to conduct the Business as now carried on by it, and (iii) has, and at the Closing Time will have, all requisite corporate power and authority to issue and sell the Offered Securities, to create and issue the Broker Warrants and to execute, deliver and perform its obligations under this Agreement and the Broker Warrant Certificates.
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(b)
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Good Standing of Subsidiaries. The Corporation’s only subsidiaries are listed in Schedule “A” (collectively, the “Subsidiaries”), which schedule is true, complete and accurate in all respects. Each Subsidiary is formed, organized and existing under the laws of the jurisdiction set out in Schedule “A”, is current and up-to-date with all material filings required to be made and has all requisite corporate power and capacity to own, lease and operate its properties and assets, including its Business Assets, and to conduct its Business as is now carried on by it, and is duly qualified to transact business and is in good standing in each jurisdiction in which such qualification is required in all material respects. All of the issued and outstanding shares in the capital of the Subsidiaries have been duly authorized and validly issued, are fully paid and, except as set out in Schedule “A”, are directly or indirectly beneficially owned by the Corporation. All of the issued and outstanding shares in the capital of the Subsidiaries owned by the Corporation are owned free and clear of any Liens, and none of the outstanding securities of the Subsidiaries were issued in violation of the pre-emptive or similar rights of any security holder of the Subsidiaries. There exist no options, warrants, purchase rights, or other contracts or commitments that could require the Corporation to sell, transfer or otherwise dispose of any securities of the Subsidiaries.
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(c)
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No Proceedings for Dissolution. No act or proceeding has been taken by or against the Corporation or the Subsidiaries in connection with their liquidation, winding-up or bankruptcy, or, to the knowledge of the Corporation, is pending.
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(d)
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Share Capital of the Corporation. The Corporation has an authorized capital consisting of an unlimited number of Common Shares, and an unlimited number of preferred shares of which (i) 42,614,239 Common Shares, and (ii) no preferred shares are issued and outstanding as of the date hereof. Except as disclosed in the Offering Documents, no securities exchangeable or convertible into Common Shares or preferred shares are issued and outstanding as of the date hereof, other than (A) the Over-Allotment Option, (B) an aggregate of 4,877,548 options to purchase 4,877,548 Common Shares under the Corporation’s stock option plan, and (C) an aggregate of 2,589,924 warrants to purchase 2,589,924 Common Shares. The rights, privileges, restrictions, conditions and other terms attaching to the Common Shares and preferred shares, respectively, conform in all material respects to the description thereof contained in the Offering Documents.
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(e)
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Form of Broker Warrant Certificate. At the Closing time, the form of Broker Warrant Certificate respecting the Broker Warrants will have been approved and adopted by the board of directors of the Corporation and will not conflict with any Applicable Law.
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(f)
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Common Shares Validly Issued. The Initial Shares and the Over-Allotment Shares, at or prior to the Closing Time, and the Broker Warrant Shares, upon the exercise of the Broker Warrants, respectively, shall be duly and validly authorized for issuance and sale pursuant to this Agreement, and when issued and delivered by the Corporation pursuant to this Agreement, against payment of the consideration therefor, will be validly issued as fully paid and non-assessable Common Shares and will not be issued in violation of any pre-emptive rights or contractual rights to purchase securities issued by the Corporation.
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(g)
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Forms of Certificates. At the Closing Time, the forms of the certificates representing the Common Shares will have been duly approved and adopted by the Corporation and comply in all respects with the applicable requirements of the CBCA and the Exchange.
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(h)
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Broker Warrants Validly Issued. At the Closing Time, the Broker Warrants will have been duly authorized for issuance pursuant to this Agreement and the maximum number of Broker Warrant Shares issuable upon due exercise of the Broker Warrants will have been duly authorized for issuance upon due exercise of such Broker Warrants and, when so issued, will be validly issued, fully paid and non-assessable. Such Broker Warrant Shares, upon due exercise of any Broker Warrants, will not be issued in violation of any pre-emptive rights or contractual rights to purchase securities issued by the Corporation.
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(i)
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Registrar and Transfer Agent. The Transfer Agent at its principal office in Calgary, Alberta has been duly appointed as transfer agent and registrar for the Common Shares.
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(j)
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Absence of Rights. Except as disclosed in the Offering Documents, no person has any existing right, agreement or option, present or future, contingent or absolute, or any right capable of becoming a right, agreement or option, for the issue or allotment of any unissued shares of the Corporation or any other agreement or option, for the issue or allotment of any unissued shares of the Corporation or any other security convertible into or exchangeable for any such shares, or to require the Corporation to purchase, redeem or otherwise acquire any of the issued and outstanding shares of the Corporation, other than pursuant to outstanding stock options. The Initial Shares, Over-Allotment Shares and Broker Warrant Shares, upon issuance, will not be issued in violation of any pre-emptive rights or contractual rights to purchase securities issued by the Corporation.
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(k)
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Corporate Actions. The Corporation has taken, or will have taken prior to the Closing Time, all necessary corporate action, (i) to authorize the execution, delivery and performance of this Agreement and the Broker Warrant Certificates, (ii) to authorize the execution and filing, as applicable, of the Offering Documents, (iii) to validly issue and sell the Offered Securities, (iv) to validly reserve for issuance the Broker Warrant Shares, (v) to validly issue the Broker Warrants and (vi) to validly issue the Broker Warrant Shares upon due exercise of the Broker Warrants, respectively, as fully paid and non-assessable Common Shares.
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(l)
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Valid and Binding Documents. The Corporation has the power and capacity to enter into and perform its obligations under this Agreement and to carry out the transactions contemplated in the Offering Documents. This Agreement will have been duly authorized, executed and delivered by the Corporation and will be legal, valid and binding obligations of the Corporation, enforceable against the Corporation in accordance with its terms, subject to exceptions as to applicable bankruptcy, insolvency and similar laws and the availability of equitable remedies and the provisions of the Limitations Act (Ontario).
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(m)
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No Consents, Approvals etc. The execution and delivery of this Agreement and the Broker Warrant Certificates, as applicable, and the fulfilment of the terms of such documents by the Corporation, including the issuance, sale and delivery of the Offered Securities and the issuance and delivery of the Broker Warrants, do not and will not require any Authorization of, or registration or qualification of or with, any Governmental Authority, stock exchange or other third party (including under the terms of any Material Agreement or Debt Instrument), except: (i) those which may be required and shall be obtained prior to the Closing Time under Applicable Securities Laws, and (ii) such customary post-closing notices or filings required to be submitted within the applicable time frame pursuant to Applicable Securities Laws, as may be required in connection with the Offering.
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(n)
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Financial Statements. The Financial Statements:
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(i)
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present fairly, in all material respects, the financial position of the Corporation on a consolidated basis and the statements of operations, retained earnings, cash flow from operations and changes in financial information of the Corporation on a consolidated basis for the periods specified in such Financial Statements;
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(ii)
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have been prepared in accordance with IFRS, applied on a consistent basis throughout the periods involved; and
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(iii)
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do not contain any misrepresentations with respect to the period covered by the Financial Statements.
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(o)
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Off-Balance Sheet Transactions. There are no off-balance sheet transactions, arrangements, obligations or liabilities of the Corporation or its Subsidiaries, whether direct, indirect, absolute, contingent or otherwise.
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(p)
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Accounting Policies. There has been no change in accounting policies or practices of the Corporation or its Subsidiaries other than as disclosed in the Financial Statements.
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(q)
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Liabilities. Neither the Corporation nor the Subsidiaries have any liabilities, obligations, indebtedness or commitments, whether accrued, absolute, contingent or otherwise, which are not disclosed in the disclosed in the Offering Documents, including the Financial Statements, other than liabilities, obligations, or indebtedness or commitments: (i) incurred in the normal course of business; or (ii) which would not, individually or in the aggregate, have a Material Adverse Effect.
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(r)
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Independent Auditors. The Corporation’s Auditors are, and the Former Auditors were, at the time they were auditors of the Corporation, independent with respect to the Corporation and Field Trip Psychedelics within the meaning of the rules of professional conduct applicable to auditors in Canada and there has never been a “reportable event” (within the meaning of NI 51-102) with such auditors.
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(s)
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Accounting Controls. The Corporation maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with IFRS and to maintain asset accountability, (iii) access to monies and investments is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
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(t)
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Purchases and Sales. Neither the Corporation nor any of the Subsidiaries has approved, has entered into any agreement in respect of, or has any knowledge, as the case may be, of:
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(i)
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the sale, transfer or other disposition of any Business Assets or any interest therein currently owned, directly or indirectly, by the Corporation or any Subsidiary, whether by asset sale, transfer of shares, or otherwise;
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(ii)
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a transaction which would result in the change of control (by sale or transfer of Common Shares or sale of all or substantially all of the Business Assets) of the Corporation or any Subsidiary; or
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(iii)
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a proposed or planned disposition of Common Shares by any shareholder who owns, directly or indirectly, 10% or more of the outstanding Common Shares.
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(u)
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Title to Business Assets. The Corporation and the Subsidiaries have good, valid and marketable title to, and have all necessary rights in respect of, all of their Business Assets as owned, leased, licensed, loaned, operated or used by them or over which they have rights, free and clear of Liens and, except as set out in the Offering Documents, no other material rights or Business Assets are necessary for the conduct of the Business as currently conducted. The Corporation knows of no claim or basis for any claim that would reasonably be likely to result in a Material Adverse Effect on the rights of the Corporation or the Subsidiaries to use, transfer, lease, licence, operate, sell or otherwise exploit such Business Assets and neither the Corporation nor any Subsidiary has any obligation to pay any commission, licence fee or similar payment to any person in respect thereof and there are no outstanding rights of first refusal or other pre-emptive rights of purchase which entitle any person to acquire any of the rights, title or interests in such Business Assets.
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(v)
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Standard Operating Procedures. All research and development activities, including quality assurance, quality control, testing, and research and analysis activities, conducted or contemplated by the Corporation and the Subsidiaries in connection with the Business are being or will be conducted in compliance, in all material respects, with all industry, laboratory safety, management and training standards in the jurisdiction where such activities take place which are applicable to the Business, and all such processes, procedures and practices required in connection with such activities are or will be in place as necessary at the applicable time, and are or will be being complied with in all material respects.
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(w)
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Business Relationships. All agreements with third parties in connection with the Business have been entered into and are being performed by the Corporation and the Subsidiaries and, to the knowledge of the Corporation, by all other third parties thereto, in compliance with their terms in all material respects. There exists no actual or, to the knowledge of the Corporation, threatened termination, cancellation or limitation of, or any material adverse modification or material change in, the business relationship of the Corporation or the Subsidiaries, with any supplier or customer, or any group of suppliers or customers, whose business with or whose purchases or inventories/components provided to the Business are, individually or in the aggregate, material to the assets, Business, properties, operations or financial condition of the Corporation or the Subsidiaries.
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(x)
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Privacy Protection. Each of the Corporation and the Subsidiaries have complied, in all material respects, with all applicable privacy and consumer protection legislation and neither the Corporation nor the Subsidiaries has collected, received, stored, disclosed, transferred, used, misused or permitted unauthorized access to any information protected by privacy laws, whether collected directly or from third parties, in an unlawful manner.
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(y)
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Intellectual Property. The Corporation and the Subsidiaries, as applicable, own or possess the right to use all material Intellectual Property Rights necessary for the conduct of the Business, and the Corporation is not aware of any bona fide claim to the contrary or any challenge by any other person to the rights of the Corporation and the Subsidiaries with respect to the foregoing. To the knowledge of the Corporation, the Business of the Corporation, including that of the Subsidiaries, as now conducted does not infringe any Intellectual Property Rights of any person. The Corporation has not received notice of any bona fide claim made against the Corporation or the Subsidiaries alleging the infringement by the Corporation or the Subsidiaries of any Intellectual Property Rights of any person, other than as disclosed to the Underwriters in writing.
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(z)
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Environmental and Workplace Laws. To the Corporation’s knowledge, each of the Corporation and the Subsidiaries is currently in compliance, in all material respects, with all Environmental Laws, and there are no pending or, to the knowledge of the Corporation, any threatened, administrative, regulatory or judicial actions, suits, demands, claims, liens, notices of non-compliance or violation, investigation or proceedings relating to any Environmental Laws. Neither the Corporation nor the Subsidiaries have ever received any notice of any non-compliance in respect of Environmental Laws, there are no events or circumstances that might reasonably be expected to form the basis of an order for clean up or remediation under Environmental Laws or relating to any Hazardous Materials, and there are no permits required under Environmental Laws for the conduct of the Business. The facilities and operations of the Corporation and the Subsidiaries are currently being conducted, and to the knowledge of the Corporation have been conducted, in all material respects in accordance with all applicable workers’ compensation and health and safety and workplace laws, regulations and policies.
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(aa)
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Insurance. The Corporation and the Subsidiaries maintain in good standing insurance, or where insurance has not yet been obtained, shall use commercially reasonable efforts to obtain and maintain insurance, by insurers of recognized financial responsibility, against such losses, risks and damages to their Business Assets in such amounts that are customary for the business in which they are engaged and on a basis consistent with reasonably prudent persons in comparable businesses. Each of the Corporation and the Subsidiaries has complied with the terms of such policies and instruments in all material respects and there are no material claims by the Corporation or the Subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause. The Corporation has no reason to believe that it will not be able to renew such existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue the Business at a cost that would not have a Material Adverse Effect, and neither the Corporation nor the Subsidiaries have failed to promptly give any notice of any material claim thereunder.
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(bb)
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Material Agreements and Debt Instruments. Each Material Agreement and Debt Instrument has been provided to the Underwriters and is valid, subsisting, in good standing in all material respects and in full force and effect, enforceable in accordance with the terms thereof, subject to bankruptcy, insolvency and other laws affecting the rights of creditors generally, and subject to other standard assumptions and qualifications, including the qualifications that equitable remedies may be granted in the discretion of a court of competent jurisdiction and that enforcement of rights to indemnity, contribution and waiver of contribution set out in such agreements may be limited by Applicable Law. The Corporation and the Subsidiaries have, in all material respects, performed all obligations in a timely manner under, and are in compliance, in all material respects, with all terms and conditions (including any financial covenants) contained in, each Material Agreement and Debt Instrument.
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(cc)
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No Material Changes. Except as disclosed in the Prospectus, since March 31, 2020 (i) there has been no material change in the assets, liabilities, obligations (absolute, accrued, contingent or otherwise) business, condition (financial or otherwise), properties, capital or results of operations of the Corporation and the Subsidiaries considered as one enterprise, and (ii) there have been no transactions entered into by the Corporation or the Subsidiaries, other than those in the ordinary course of business, which are material with respect to the Corporation and the Subsidiaries considered as one enterprise.
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(dd)
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Absence of Proceedings. There is no action, suit, proceeding, inquiry or investigation before or brought by any Governmental Authority, domestic or foreign, now pending or, to the knowledge of the Corporation, threatened against or affecting the Corporation, any Subsidiary or the Business Assets (including in respect of any product liability claims) which would have a Material Adverse Effect, or would materially and adversely affect the consummation of the transactions contemplated in this Agreement or the performance by the Corporation of its obligations hereunder. The aggregate of all pending legal or governmental proceedings to which the Corporation or the Subsidiaries is a party or of which any of their respective property or assets is subject would not reasonably be expected to result in a Material Adverse Effect.
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(ee)
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Absence of Defaults and Conflicts. Neither the Corporation nor any of the Subsidiaries is in material violation, default or breach of, and the execution, delivery and performance of this Agreement, the Offering Documents and the consummation of the transactions and compliance by the Corporation with its obligations hereunder and thereunder, the sale of the Offered Securities and the issuance of the Broker Warrants, do not and will not, whether with or without the giving of notice or passage of time or both, result in a material violation, default or breach of, or conflict with, or result in a Repayment Event or the creation or imposition of any Lien upon any property or assets of the Corporation, including the Business Assets, or the Subsidiaries, under the terms or provisions of (i) any Material Agreements or Debt Instruments, (ii) the articles or by-laws or other constating documents or resolutions of the directors or shareholders of the Corporation or the Subsidiaries, (iii) to the knowledge of the Corporation, any existing Applicable Law, including Applicable Securities Laws, or (iv) to the knowledge of the Corporation, any judgment, order, writ or decree of any Governmental Authority.
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(ff)
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Labour Matters. No material work stoppage, strike, lock-out, labour disruption, dispute, grievance, arbitration, proceeding or other conflict with the employees of the Corporation or the Subsidiaries currently exists or, to the knowledge of the Corporation, is imminent or pending and the Corporation and the Subsidiaries are in material compliance with all Applicable Law respecting employment and employment practices, terms and conditions of employment and wages and hours.
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(gg)
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Employment Standards. To the knowledge of the Corporation, there are no material complaints against the Corporation or the Subsidiaries before any employment standards branch or tribunal or human rights tribunal, nor any complaints or any occurrence which would reasonably be expected to lead to a complaint under any human rights legislation or employment standards legislation that would be material to the Corporation. There are no outstanding decisions or settlements or pending settlements under applicable employment standards legislation, which place any material obligation upon the Corporation or the Subsidiaries to do or refrain from doing any act. The Corporation and the Subsidiaries are currently in material compliance with all workers’ compensation, occupational health and safety and similar legislation, including payment in full of all amounts owing thereunder, and there are no pending claims or outstanding orders of a material nature against either of them under applicable workers’ compensation legislation, occupational health and safety or similar legislation nor has any event occurred which may give rise to any such material claim.
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(hh)
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Collective Bargaining Agreements. Neither the Corporation nor any Subsidiary is party to any collective bargaining agreements with unionized employees. To the knowledge of the Corporation, no action has been taken or is being threatened to organize or unionize any employees of the Corporation or any Subsidiary that would have a Material Adverse Effect.
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(ii)
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Employee Plans. Each material plan for retirement, bonus, stock purchase, profit sharing, stock option, deferred compensation, severance or termination pay, insurance, medical, hospital, dental, vision care, drug, sick leave, disability, salary continuation, legal benefits, unemployment benefits, vacation, incentive or other benefits contributed to, or required to be contributed to, by the Corporation for the benefit of any current or former director, officer, employee or consultant of the Corporation (the “Employee Plans”) has been maintained in all material respects with its terms and with the requirements prescribed by any and all statutes, orders, rules and regulations that are applicable to such Employee Plans.
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(jj)
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Taxes. All tax returns, reports, elections, remittances and payments of the Corporation and the Subsidiaries required by Applicable Law to have been filed or made in any applicable jurisdiction, have been filed or made (as the case may be) and are true, complete and correct, except where the failure to make such filing, election, or remittance and payment would not constitute a Material Adverse Effect on the Corporation taken as a whole, and all taxes of the Corporation and of the Subsidiaries have been paid or accrued in the Financial Statements (except as any extension may have been requested or granted and in any case in which the failure to file, pay or accrue such taxes would not result in a Material Adverse Effect). To the knowledge of the Corporation, there are no examinations of any tax return of the Corporation or the Subsidiaries currently in progress and there are no disputes outstanding with any Governmental Authority respecting any taxes that have been paid, or may be payable, by the Corporation or the Subsidiaries.
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(kk)
|
Anti-Bribery Laws. Neither the Corporation nor any Subsidiary nor, to the knowledge of the Corporation, any director, officer, employee, consultant, representative or agent of the foregoing, has (i) violated any anti-bribery or anti-corruption laws applicable to the Corporation and the Subsidiaries, including Canada’s Corruption of Foreign Public Officials Act, or (ii) offered, paid, promised to pay, or authorized the payment of, any money, or offered, given, promised to give, or authorized the giving of, anything of value, that goes beyond what is reasonable and customary and/or of modest value: (X) to any Government Official, whether directly or through any other person, for the purpose of influencing any act or decision of a Government Official in his or her official capacity; inducing a Government Official to do or omit to do any act in violation of his or her lawful duties; securing any improper advantage; inducing a Government Official to influence or affect any act or decision of any Governmental Authority; or assisting any representative of the Corporation or the Subsidiaries in obtaining or retaining business for or with, or directing business to, any person; or (Y) to any person in a manner which would constitute, or have the purpose or effect of, public or commercial bribery, or the acceptance of or acquiescence in extortion, kickbacks, or other unlawful or improper means of obtaining business or any improper advantage. Neither the Corporation nor the Subsidiaries, nor, to the knowledge of the Corporation, any director, officer, employee, consultant, representative or agent of the foregoing, has (i) conducted or initiated any review, audit or internal investigation that concluded the Corporation, a Subsidiary, or any director, officer, employee, consultant, representative or agent of the foregoing, violated such laws or committed any material wrongdoing, or (ii) made a voluntary, directed, or involuntary disclosure to any Governmental Authority responsible for enforcing anti-bribery or anti-corruption laws, in each case with respect to any alleged act or omission arising under or relating to non-compliance with any such laws, or received any notice, request, or citation from any person alleging non-compliance with any such laws.
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(ll)
|
No Significant Acquisitions. Other than as disclosed in the Offering Documents, no acquisitions or dispositions have been made by the Corporation or any Subsidiary in the most recently completed fiscal year that are “significant acquisitions” or “significant dispositions,” no acquisitions or dispositions have been made by the Corporation or any Subsidiary since October 1, 2020 for which a business acquisition report has not been filed under NI 51-102, and other than as contemplated in the Offering Documents, neither the Corporation nor any Subsidiary is a party to any contract with respect to any transaction that would constitute a “probable acquisition,” in each case which would require disclosure in the Offering Documents under Canadian Securities Laws.
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(mm)
|
Compliance with Applicable Law. The Corporation acknowledges that the Business is subject to restrictions, requirements and prohibitions under Applicable Law in force (including the CDSA, the FDA, the FDR-J, the Criminal Code, and provincial, territorial and municipal laws relating to controlled substances, the Controlled Substances Act, the Racketeering and Influenced and Corrupt Practices Act, the Secure Air Travel Act, the Bank Secrecy Act, the Agricultural Improvement Act of 2018, any applicable state corporate practice of medicine statues or any applicable anti-money laundering statute), which may change from time to time. The Corporation and the Subsidiaries have obtained, are in compliance with, have complied with, will continue to comply with or will have complied with, in all material respects, all Applicable Law, including all Authorizations, prior to the Closing Time in connection with the Offering. All Authorizations issued to date are valid and in full force and effect and neither the Corporation nor any Subsidiary has received any correspondence or notice from the Office of Controlled Substances, other offices of Health Canada, the CPSO, the New York State Medical Board, the California Medical Board or any Governmental Authority alleging or asserting material non-compliance with any Applicable Law or Authorization. Neither the Corporation nor any Subsidiary has received any notice of proceedings or actions relating to the revocation, suspension, limitation or modification of any Authorizations or any notice advising of the refusal to grant any Authorization that has been applied for or is in process of being granted under Applicable Law including the FDA, the FDR-J or the Out of Hospital Premise Program of the CPSO, and has no knowledge or reason to believe that any such Governmental Authority is considering taking or would have reasonable ground to take any such action. Neither the Corporation nor any Subsidiary is aware of any non-compliance with any Applicable Law, including the CDSA, the FDA, the FDR-J, the Criminal Code or any provincial, territorial or municipal legislation that the Corporation or any Subsidiary has reason to believe could result in a Material Adverse Effect.
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(nn)
|
No Loans. Except as disclosed in the Prospectus, neither the Corporation nor any Subsidiary has made any material loans to or guaranteed the material obligations of any person.
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(oo)
|
Directors and Officers. To the knowledge of the Corporation, none of the directors or officers of the Corporation are now, or have been, subject to an order or ruling of any securities regulatory authority or stock exchange prohibiting such individual from acting as a director or officer of a public company or of a company listed on a particular stock exchange.
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(pp)
|
Minute Books and Records. The minute books and records of the Corporation and the Subsidiaries made available to counsel for the Underwriters in connection with their due diligence investigation of the Corporation for the periods requested to the date hereof are all of the minute books and material records of the Corporation and the Subsidiaries and contain copies of all material proceedings (or certified copies thereof or drafts thereof pending approval) of the shareholders, the directors and all committees of directors of the Corporation and the Subsidiaries, as the case may be, to the date of review of such corporate records and minute books and there have been no other meetings, resolutions or proceedings of the shareholders, directors or any committees of the directors of the Corporation and the Subsidiaries to the date hereof not reflected in such minute books and other records, other than those which have been disclosed to the Underwriters or which are not material in the context of the Corporation and the Subsidiaries.
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(qq)
|
No Dividends. During the previous 12 months, the Corporation has not, directly or indirectly, declared or paid any dividend, or declared or made any other distribution on any of its shares or securities of any class, or, directly or indirectly, redeemed, purchased or otherwise acquired any of its Common Shares or other securities, or agreed to do any of the foregoing. There are no restrictions upon the declaration or payment of dividends by the directors of the Corporation or the payment of dividends by the Corporation in the constating documents or in any Material Agreements or Debt Instruments.
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(rr)
|
Fees and Commissions. Other than: (i) in connection with the Advisory Warrants issuable under the Advisory Agreement; and (ii) the Underwriters (and their selling group members) pursuant to this Agreement, there is no other person acting at the request of the Corporation, or to the knowledge of the Corporation, purporting to act, who is entitled to any brokerage, agency or other fiscal advisory or similar fee in connection with the Offering or transactions contemplated herein.
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(ss)
|
Entitlement to Proceeds. Other than the Corporation, there is no person that is or will be entitled to demand any of the net proceeds of the Offering.
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(tt)
|
Related Parties. Except as disclosed in the Prospectus, none of the directors, officers or employees of the Corporation, any known holder of more than 10% of any class of securities of the Corporation or securities of any person exchangeable for more than 10% of any class of securities of the Corporation, or any known associate or affiliate of any of the foregoing persons or companies (as such terms are defined in the Securities Act), has had any material interest, direct or indirect, in any material transaction with the Corporation since the incorporation of the Corporation, or any proposed material transaction which, as the case may be, materially affected or is reasonably expected to materially affect the Corporation and any Subsidiary, on a consolidated basis. Neither the Corporation nor any Subsidiary has any material loans or other indebtedness outstanding which has been made to any of its shareholders, officers, directors or employees, past or present, or any person not dealing at “arm’s length” (within the meaning of the Income Tax Act (Canada)) with them.
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(uu)
|
Anti-Money Laundering. The operations of the Corporation and the Subsidiaries (or any related party thereof) are and have been conducted at all times in compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, all applicable financial recordkeeping and reporting requirements, the applicable anti-money laundering statutes of jurisdictions where the Corporation and the Subsidiaries (or any related party thereof) conduct business, the rules and regulations thereunder and any related or similar rules or regulations, issued, administered or enforced by any governmental agency applicable to the Corporation and the Subsidiaries (or any related party thereof) (collectively, the “Anti-Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Corporation and the Subsidiaries (or any related party thereof) with respect to the Anti-Money Laundering Laws is, to the knowledge of the Corporation, pending or threatened.
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(vv)
|
Exchange Compliance. The Corporation is, and will at the Closing Time be, in compliance in all material respects with the by-laws, policies, rules and regulations of the Exchange existing on the date hereof. The outstanding Common Shares will be listed and posted for trading on the Exchange at the Closing Time and neither the Corporation nor the Subsidiaries has taken any action which would reasonably be expected to result in the delisting or suspension of the Common Shares on or from the Exchange.
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(ww)
|
Short-Form Eligibility. The Corporation is qualified under NI 44-101 to file a prospectus in the form of a short form prospectus in each of the Qualifying Jurisdictions and on the date of and upon filing of the Prospectus there will be no documents required to be filed under Canadian Securities Laws in connection with the distribution of the Offered Securities that will not have been filed as required.
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(xx)
|
No Orders. Neither any Securities Commissions, nor any stock exchange or comparable authority has issued any order preventing or suspending the use of the Preliminary Prospectus, or preventing the suspending the offer, sale or distribution of the Offered Securities or other securities of the Corporation in the manner contemplated herein, if any, nor instituted proceedings for that purpose and no such proceedings are, to the knowledge of the Corporation, pending or threatened.
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(yy)
|
Prospectus. The information and statements contained in the Prospectus (except information and statements relating solely to the Underwriters and furnished by them in writing specifically for use therein) will, at the time of delivery of the Prospectus: (i) be true and correct in all material respects; (ii) contain no misrepresentation relating to the Corporation and its Subsidiaries or the Offering and will be in compliance with applicable Canadian Securities Laws in all material respects; and (iii) not omit any material fact or information which is necessary to make the statements or information contained therein not misleading in light of the circumstances under which they were made.
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(zz)
|
Forward-Looking
Information. The Corporation has a reasonable basis for disclosing any forward-looking or future-oriented
financial information contained in the Offering Documents and is not, as at the date hereof, required to update any such
forward-looking information pursuant to NI 51-102.
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(aaa)
|
Continuous Disclosure Obligations. Except as provided herein, to its knowledge, the Corporation is in compliance in all material respects with its continuous and timely disclosure obligations under Canadian Securities Laws and the rules and regulations of the Exchange and has filed all documents required to be filed by it with the Securities Commissions under applicable Canadian Securities Laws, and no document has been filed on a confidential basis with the Securities Commissions that remains confidential at the date hereof. None of the documents filed in accordance with applicable Canadian Securities Laws contained, as at the date of filing thereof, a misrepresentation.
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Section 8 Covenants of the Corporation
The Corporation covenants and agrees with the Underwriters, and acknowledges that each of them is relying on such covenants in connection with the purchase of the Offered Securities, as follows:
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(1)
|
Prospectus Filing. Promptly after the execution and delivery of this Agreement by the parties hereto, the Corporation shall file under Canadian Securities Laws the Preliminary Prospectus and other documents relating to the proposed distribution of the Offered Securities in the Qualifying Jurisdictions, and the Corporation shall use its commercially reasonable efforts to obtain the Preliminary Receipt from the OSC (as principal regulator) and each of the other Securities Commissions pursuant to the Passport System dated the date hereof.
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(2)
|
Final Receipt. The Corporation shall use its commercially reasonable efforts to satisfy all comments with respect to the Preliminary Prospectus as soon as possible after receipt of such comments. The Corporation shall prepare and file under Canadian Securities Laws the Final Prospectus and other documents relating to the proposed distribution of the Offered Securities in the Qualifying Jurisdictions, and the Corporation shall use its commercially reasonable efforts to obtain the Final Receipt from the OSC (as principal regulator) and each of the other Securities Commissions pursuant to the Passport System dated on or before March 10, 2021.
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(3)
|
Notification of Filings. The Corporation will advise the Underwriters, promptly after receiving notice thereof, of the time when the Offering Documents have been filed and receipts, as applicable, therefor have been obtained, and will provide evidence reasonably satisfactory to the Underwriters of each such filing and copies of such receipts.
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(4)
|
Qualification of Offered Securities. Until the earlier of the date on which the distribution of the Offered Securities is completed or this Agreement is terminated, the Corporation will promptly take, or cause to be taken, all additional steps and proceedings that may from time to time be required under Canadian Securities Laws to continue to qualify the distribution of the Offered Securities and the Broker Warrants or, in the event that the Offered Securities, Broker Warrants or any of them, have, for any reason, ceased to so qualify, to so qualify again such securities, as applicable, for distribution.
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(5)
|
Standstill. The Corporation agrees not to issue, agree to issue, or announce an intention to issue, any additional debt, Common Shares or securities or other financial instruments convertible, exchangeable or exercisable into Common Shares, or enter into any agreement or arrangement under which the Corporation acquires or transfers to another, in whole or in part, any of the economic consequences of ownership of Common Shares, or agree to become bound to do so, or disclose to the public any intention to do so, other than (i) in connection with the exchange, transfer, conversion or exercise of existing outstanding securities or existing commitments to issue securities as of February 25, 2021, (ii) in connection with an arm’s length merger, acquisition, business combination, tender offer, take-over bid, arrangement, asset purchase, joint venture or similar transaction, or (iii) pursuant to the grant and/or exercise of securities under any Employee Plans, including the Corporation’s stock option plan, or any long term incentive plan that the Corporation may adopt from time to time for the benefit of its, directors, officers, employees and consultants, provided that the total number of securities reserved for issuance under such long term incentive plan and the Corporation’s option plan does not exceed the number of securities reserved for issuance under the Corporation’s stock option plan; from February 25, 2021 through a period of 90 days from the Closing Date without the prior written consent of Bloom Burton (on its own behalf and on behalf of the other Underwriters), which will not be unreasonably withheld or delayed.
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(6)
|
Lock-Up Agreements. The Corporation shall cause each of the directors and officers of the Corporation and their respective associates to execute agreements, in favour of the Underwriters, agreeing not to, directly or indirectly, offer, sell, contract to sell, lend, swap, or enter into any other agreement to transfer the economic consequences of, or otherwise dispose of or deal with, or publicly announce any intention to offer, sell, contract to sell, grant or sell any option to purchase, hypothecate, pledge, transfer, assign, purchase any option or contract to sell, lend, swap, or enter into any agreement to transfer the economic consequences of, or otherwise dispose of or deal with, whether through the facilities of a stock exchange, by private placement or otherwise, any Common Shares or other securities of the Corporation held by them, directly or indirectly, for a period ending 90 days from the Closing Date unless (a) they first obtain the prior written consent of Bloom Burton (on its own behalf and on behalf of the other Underwriters), which consent will not be unreasonably withheld or delayed, or (b) there occurs a take-over bid or similar transaction involving a change of control of the Corporation; excluding, for greater clarity, any transfer among a locked-up holder and any of its affiliates for tax or planning purposes, provided that the transferee(s) are bound by these restrictions.
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(7)
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Maintain Reporting Issuer Status. The Corporation will use its commercially reasonable efforts to maintain its status as a “reporting issuer” (or the equivalent thereof) not in default of the requirements of Canadian Securities Laws in each of the Qualifying Jurisdictions, and following the filing of the Final Prospectus in each of the Qualifying Jurisdictions, to the date that is at least 24 months following the Closing Date, provided that the foregoing requirement is subject to the obligations of the directors to comply with their fiduciary duties to the Corporation, and further provided that the Corporation shall not be required to comply with this Section 8(7) following the completion of a merger, amalgamation, arrangement, business combination or take-over bid pursuant to which the Corporation ceases to be a “reporting issuer” (within the meaning of Applicable Securities Laws).
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(8)
|
Maintain Stock Exchange Listing. The Corporation will use its commercially reasonable efforts to maintain the listing of the Common Shares (including those issuable pursuant to the Offering) on the Exchange, the Toronto Stock Exchange, New York Stock Exchange, the TSX Venture Exchange, the NASDAQ, or such other recognized stock exchange or quotation system as the Underwriters may approve, acting reasonably, with such approval not to be unreasonably delayed, for a period of at least 24 months following the Closing Date, provided that the foregoing requirement is subject to the obligations of the directors to comply with their fiduciary duties to the Corporation, and further provided that the Corporation shall not be required to comply with this Section 8(8) following the completion of a merger, amalgamation, arrangement, business combination or take-over bid pursuant to which the Corporation ceases to be a “reporting issuer” (within the meaning of applicable Securities Laws).
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(9)
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Exchange Listing. The Corporation will use its commercially reasonable efforts to obtain the listing of the Offered Securities and the Broker Warrant Shares on the Exchange or such other recognized stock exchange or quotation system as the Underwriters may approve, acting reasonably, prior to the Closing Date.
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(10)
|
Validly Issued Shares. The Corporation will, provided it receives payment therefor, ensure that, at the Closing Time, the Offered Securities have been duly and validly issued as fully paid and non-assessable Common Shares.
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(11)
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Validly Issued Broker Warrants. The Corporation will ensure that, at the Closing Time, the Broker Warrants shall be validly created and issued and shall have attributes corresponding in all material respects to the description set forth in the Broker Warrant Certificates.
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(12)
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Reservation of Shares. The Corporation will ensure that that, at all times following the issue of the Broker Warrants, until the expiry date thereof, that a sufficient number of applicable Common Shares are allotted and reserved for issuance upon the due exercise of the Broker Warrants.
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(13)
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Use of Proceeds. The Corporation will use the proceeds of the Offering in the manner specified in the Prospectus under the heading “Use of Proceeds”.
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(14)
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Consents and Approvals. The Corporation will have made or obtained, as applicable, using commercially reasonable efforts at or prior to the Closing Time, all consents, approvals, permits, authorizations or filings as may be required by the Corporation under Applicable Securities Laws necessary for the consummation of the transactions contemplated herein, other than customary post-closing filings required to be submitted within the applicable time frame pursuant to Applicable Securities Laws and the rules of the Exchange.
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(15)
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Closing Conditions. The Corporation will have, at or prior to the Closing Time, fulfilled or caused to be fulfilled, each of the conditions set out in Section 10 hereof.
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Section
9
|
Representations,
Warranties and Covenants of the Underwriters
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(1)
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Each Underwriter hereby severally, and not jointly, nor jointly and severally, represents and warrants to the Corporation, the following:
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(a)
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Registration. The Underwriters are, and will remain so, until the completion of the Offering, appropriately registered under applicable Canadian Securities Laws so as to permit it to lawfully fulfill its obligations hereunder;
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(b)
|
Authority. The Underwriters have good and sufficient right and authority to enter into this Agreement and complete the transactions contemplated under this Agreement on the terms and conditions set forth herein; and
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(c)
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Marketing Materials. Other than the Marketing Materials, the Underwriters have not provided any marketing materials to any potential investors in connection with the Offering.
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(2)
|
The Underwriters hereby severally, and not jointly, nor jointly and severally, covenant and agree with the Corporation, the following:
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(a)
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Jurisdictions and Offering Price. During the period of distribution of the Offered Securities by or through the Underwriters, the Underwriters will offer and sell Offered Securities to the public only in the Selling Jurisdictions where they may lawfully be offered for sale by such Underwriters upon the terms and conditions set forth in the Prospectus and this Agreement either directly or through other duly registered investment dealers and brokers. The Underwriters shall be entitled to assume that the Offered Securities are qualified for distribution in any Qualifying Jurisdiction where the Final Receipt shall have been obtained following the filing of the Prospectus.
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(b)
|
Compliance with Securities Laws. The Underwriters will comply with applicable Securities Laws in connection with the offer and sale and distribution of the Offered Securities.
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(c)
|
U.S. Sales. The Underwriters will not, directly or indirectly, solicit offers to purchase or sell the Offered Securities or deliver any Offering Document to purchasers so as to require registration of the Offered Securities or the filing of a prospectus or registration statement with respect to the Offered Securities under the Applicable Laws of any jurisdiction other than the Qualifying Jurisdictions, including without limitation, the United States.
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(d)
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Completion of Distribution. The Underwriters will use their commercially reasonable efforts to complete the distribution of the Offered Securities as promptly as possible after the Closing Time. The Lead Underwriter will notify the Corporation when the Underwriters have ceased the distribution of the Offered Securities, and, within 30 days after the Closing Date, will provide the Corporation, in writing, with a written breakdown of the number of Offered Securities distributed (i) in each of the Qualifying Jurisdictions, and (ii) in any other Selling Jurisdictions.
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(e)
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Liability on Default. No Underwriter shall be liable to the Corporation under this Section with respect to a breach or default under this Agreement by another Underwriter.
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Section 10 Conditions of Closing
The obligation of the Underwriters under this Agreement to purchase the Offered Securities at the Closing Time and at any Option Closing Time shall be subject to the satisfaction of each of the following conditions (it being understood that the Underwriters may waive in whole or in part, or extend the time for compliance with, any of such terms and conditions without prejudice to their rights in respect of any other of the following terms and conditions or any other or subsequent breach or non-compliance of the Corporation, provided that to be binding on the Underwriters any such waiver or extension must be in writing and signed by each of them):
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(1)
|
the Underwriters receiving favourable legal opinions from Bennett Jones LLP, counsel to the Corporation (who may provide the opinions of local counsel acceptable to counsel to the Underwriters as to the qualification of the Offered Securities for sale to the public and as to other matters governed by the laws of jurisdictions in Canada other than the provinces in which they are qualified to practice and may rely, to the extent appropriate in the circumstances, as to matters of fact on certificates of officers, public and exchange officials or of the auditor or Transfer Agent of the Corporation), substantially to the effect set forth below, subject to customary assumptions, qualifications and limitations:
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(a)
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the Corporation is a corporation existing under the CBCA and has not been dissolved under the CBCA;
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(b)
|
the Corporation has the corporate power and corporate capacity under the CBCA and the constating documents of the Corporation to (i) carry on its Business and activities and to own, lease and operate its properties and Business Assets, as described in the Prospectus, (ii) execute and deliver this Agreement, the Offering Documents and the Broker Warrant Certificates, as applicable, and perform its obligations thereunder, (iii) create, offer, issue and sell the Offered Securities, (iv) create, offer, issue and deliver the Broker Warrants, and (v) grant the Over-Allotment Option to the Underwriters;
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(c)
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as to the authorized share capital of the Corporation and that the Prospectus describes, in all material respects, the attributes of the Common Shares and preferred shares of the Corporation;
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(d)
|
all necessary corporate action has been taken by the Corporation to authorize the execution and delivery of this Agreement and the Broker Warrant Certificates, and the performance by the Corporation of its obligations under this Agreement and the Broker Warrant Certificates, and this Agreement and the Broker Warrant Certificates have been duly authorized, executed and delivered by the Corporation and constitute legal, valid and binding obligations of the Corporation, enforceable against it in accordance with their terms, subject to bankruptcy, insolvency and other laws affecting the rights of creditors generally and subject to other standard assumptions and qualifications, including the qualifications that equitable remedies may be granted in the discretion of a court of competent jurisdiction and that enforcement of rights to indemnity, contribution and waiver of contribution set out in this Agreement may be limited by Applicable Laws;
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(e)
|
all necessary corporate action has been taken by the Corporation to authorize the execution and delivery of the Preliminary Prospectus, the Final Prospectus, the U.S. Memorandum and any Supplementary Material and the filing of such documents, as applicable, under Canadian Securities Laws;
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(f)
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the execution and delivery of this Agreement and the Broker Warrant Certificates and the performance by the Corporation of its obligations thereunder, including the issuance, sale and delivery of the Offered Securities, the issuance and delivery of the Broker Warrants and the grant of the Over-Allotment Option in accordance with this Agreement and the Broker Warrant Certificates, do not and will not result in a breach of, or constitute a default under, and do not and will not create a state of facts which, after notice or lapse of time or both, will result in a breach of or constitute a default under (i) constating documents of the Corporation, (ii) resolutions of the directors or shareholders of the Corporation, or (iii) the CBCA;
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(g)
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the Initial Shares have been validly issued as fully paid and non-assessable Common Shares;
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(h)
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the Broker Warrants have been validly created and issued as warrants of the Corporation;
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(i)
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the Over-Allotment Option has been duly and validly authorized and granted by the Corporation, and the Over-Allotment Shares issuable upon the exercise of the Over-Allotment Option have been duly and validly created, allotted and reserved for issuance by the Corporation and, upon the exercise of the Over-Allotment Option, including receipt by the Corporation of payment in full therefor, the Over-Allotment Shares will be duly and validly created, authorized, issued and outstanding and the Over-Allotment Shares will be fully paid and non-assessable shares;
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(j)
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the Broker Warrant Shares have been duly and validly authorized, allotted and reserved for issuance, and upon due exercise of the Broker Warrants, in accordance with the terms of the Broker Warrant Certificates, the Broker Warrant Shares will be validly issued as fully paid and non-assessable shares in the capital of the Corporation;
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(k)
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all necessary documents have been filed, all requisite proceedings have been taken and all necessary authorizations, approvals, permits and consents have been obtained by the Corporation under Applicable Securities Laws in order to qualify the distribution of the Offered Securities and the Broker Warrant Shares in the Qualifying Jurisdictions by or through dealers who are duly and properly registered in the appropriate category under the Securities Laws and who have complied with all relevant provisions of such Securities Laws and the terms of their registration;
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(l)
|
the issuance of the Broker Warrant Shares issuable upon exercise of the Broker Warrants will be exempt from the prospectus requirements of applicable Canadian Securities Laws and no documents are required to be filed, proceedings taken or approvals, permits, consents or authorizations obtained under applicable Canadian Securities Laws to permit such issuance;
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(m)
|
the Corporation is a “reporting issuer” under Canadian Securities Laws in each of the Qualifying Jurisdictions and it is not listed as in default of applicable Canadian Securities Laws in any of the Qualifying Jurisdictions which maintain such a list;
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(n)
|
the Offered Securities and the Broker Warrant Shares have been approved for listing on the Exchange, subject to the Corporation fulfilling all of the requirements of the Exchange, including those set forth in any conditional approval letter of the Exchange;
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|
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(o)
|
Computershare Investor Services Inc. has been duly appointed as registrar and transfer agent of the Common Shares;
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(p)
|
subject to the limitations, qualifications and assumptions set out therein, the statements set forth in the Prospectus under the headings “Eligibility for Investment” and “Certain Canadian Federal Income Tax Considerations”, insofar as they purport to describe the provisions of the laws referred to therein, are fair summaries of the matters discussed therein;
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(q)
|
the attributes of the Offered Securities and the Broker Warrants conform in all material respects with the description thereof contained in the Final Prospectus; and
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(r)
|
the form of Broker Warrant Certificate has been duly approved and adopted by the board of directors of the Corporation and complies in all material respects with the constating documents of the Corporation,
|
in form and substance acceptable to the Underwriters and their counsel, acting reasonably;
|
(2)
|
the Underwriters receiving legal opinions from counsel to each Subsidiary (who may rely, to the extent appropriate in the circumstances, as to matters of fact on certificates of officers, public and exchange officials related to each Subsidiary), in form and substance acceptable to the Underwriters and their counsel, acting reasonably, substantially to the effect set forth below, subject to customary assumptions, qualifications and limitations:
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|
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(a)
|
such Subsidiaries having been incorporated and existing under the Applicable Laws of their respective jurisdictions of incorporation;
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(b)
|
such Subsidiaries having the corporate capacity and power to own and lease their properties and Business Assets and to conduct their Business as currently being conducted;
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(c)
|
as to the authorized and issued share capital of such Subsidiaries and to the ownership thereof; and
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(d)
|
such Subsidiaries being current with all corporate filings required to be made under their respective jurisdictions of incorporation and all other jurisdictions in which they exist or carry on any material business, and having all necessary licences, leases, permits, authorizations and other approvals necessary to permit them to conduct their respective Business as currently conducted;
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(3)
|
if any of the Offered Securities are offered or sold in the United States, the Underwriters shall have received at the Closing Time a customary and favourable legal opinion dated the Closing Date in form and substance reasonably satisfactory to the Underwriters to the effect that no registration is required under the U.S. Securities Act in connection with the offer, sale and resale of the Offered Securities, provided, in each case, that such offer, sale and resale and delivery of Offered Securities in the United States is made in compliance with this Agreement and the terms set out in Schedule “B” hereto and provided further that it is understood that no opinion is expressed as to any subsequent resale of any Offered Securities. In providing the foregoing opinion, such counsel may rely upon the covenants, representation and warranties of the Corporation and the Underwriters set forth in this Agreement and Schedule “B” hereto, and upon the covenants, representation and warranties of any purchasers in the United States;
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(4)
|
the Underwriters having received certificates dated the Closing Date and signed by two senior officers of the Corporation as may be acceptable to the Underwriters, acting reasonably, in form and substance satisfactory to the Underwriters, acting reasonably, with respect to:
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|
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(a)
|
the constating documents of the Corporation;
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(b)
|
the resolutions of the directors of the Corporation relevant to the Offering Documents, the sale of the Offered Securities, the grant of the Over-Allotment Option, the issuance and delivery of the Broker Warrants and the authorization of this Agreement and the transactions contemplated herein and therein; and
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(c)
|
the incumbency and signatures of signing officers for the Corporation;
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(5)
|
the Underwriters receiving certificates of status and/or compliance, where issuable under Applicable Laws, for the Corporation and the Subsidiaries, each dated within one Business Day prior to the Closing Date;
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(6)
|
the Underwriters receiving an auditors “bring down” comfort letter dated the Closing Date from the Corporation’s Auditors, in form and substance satisfactory to the Underwriters, acting reasonably, bringing forward to a date not more than two Business Days prior to the Closing Date the information contained in the comfort letter referred to in Section 4(1)(d) hereof;
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(7)
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the Underwriters receiving an auditors “bring down” comfort letter dated the Closing Date from the Former Auditors, in form and substance satisfactory to the Underwriters, acting reasonably, bringing forward to a date not more than two Business Days prior to the Closing Date the information contained in the comfort letter referred to in Section 4(1)(e) hereof;
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(8)
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the Underwriters receiving a certificate dated the Closing Date and signed by the Chief Executive Officer and the Chief Financial Officer or such other senior officer(s) of the Corporation as may be acceptable to the Underwriters, certifying for and on behalf of the Corporation and without personal liability, after having made due enquiries, that:
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(a)
|
the representations and warranties of the Corporation contained in this Agreement, and in any certificates of the Corporation delivered pursuant to or in connection with this Agreement, are true and correct in all material respects as of the Closing Time as if such representations and warranties were made as at the Closing Time, after giving effect to the transactions contemplated hereby;
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(b)
|
the Corporation has complied in all material respects with all the covenants and satisfied in all respects all the terms and conditions of this Agreement on its part to be complied with and satisfied at or prior to the Closing Time;
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(c)
|
no order, ruling or determination having the effect of suspending the sale or ceasing the trading or prohibiting the sale of the Offered Securities or any other securities of the Corporation (including the Common Shares) has been issued by any regulatory authority and is continuing in effect and no proceedings for that purpose have been instituted or are pending or, to the knowledge of such officers, contemplated or threatened by any regulatory authority;
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(d)
|
since the respective dates as of which information is given in the Final Prospectus (A) there has been no material change (actual, anticipated, contemplated or threatened, whether financial or otherwise) in the business, affairs, operations, assets, liabilities (contingent or otherwise), or capital of the Corporation on a consolidated basis, and (B) no transaction has been entered into by the Corporation or any Subsidiary which is material to the Corporation on a consolidated basis, other than as disclosed in the Final Prospectus or the Supplementary Material, as the case may be;
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(e)
|
there has been no change in any material fact (which includes the disclosure of any previously undisclosed material fact) contained in the Final Prospectus which fact or change is, or may be, of such a nature as to render any statement in the Final Prospectus misleading or untrue in any material respect or which would result in a misrepresentation in the Final Prospectus or which would result in the Final Prospectus not complying with applicable Canadian Securities Laws; and
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(f)
|
the Prospectus is true and correct in all material respects and contains no misrepresentation, constitutes full, true and plain disclosure of all material facts relating to the Offered Securities and to the Corporation and its Subsidiaries considered as a whole and does not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they were made, not misleading;
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(9)
|
the Underwriters receiving the executed lock-up agreements, in favour of the Underwriters, from each director and officer of the Corporation and their respective associates in a form satisfactory to the Underwriters as required pursuant to Section 8(6) of this Agreement;
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(10)
|
the Underwriters receiving a certificate from Computershare Trust Company of Canada as to the number of Common Shares issued and outstanding as at the end of business on the Business Day prior to the Closing Date;
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(11)
|
no order, ruling or determination having the effect of ceasing or suspending trading in any securities of the Corporation or prohibiting the sale of the Common Shares or any of the Corporation’s issued securities being issued, and no proceeding for such purpose being, to the knowledge of the Corporation, pending or threatened by any securities regulatory authority or the Exchange;
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(12)
|
the Corporation having delivered to the Underwriters evidence of the approval (or conditional approval) of the listing and posting for trading of the Initial Shares, Over-Allotment Shares, and Broker Warrant Shares on the Exchange, subject only to satisfaction by the Corporation of standard listing conditions;
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(13)
|
the Corporation complying with all of its covenants and obligations under this Agreement required to be satisfied at or prior to the Closing Time;
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(14)
|
the Underwriters receiving duly executed copies of the Broker Warrant Certificates in form and substance satisfactory to the Underwriters, acting reasonably;
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(15)
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the Underwriters not having exercised any rights of termination set forth herein; and
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(16)
|
the Underwriters receiving such further certificates, documents and other information as is customary for transactions of this nature as the Underwriters may have reasonably requested.
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Section 11 Closing
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(1)
|
Location of Closing. The Closing will be completed electronically at the Closing Time.
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(2)
|
Securities. At the Closing Time, subject to the terms and conditions contained in this Agreement, the Corporation shall deliver to the Underwriters in Toronto, Ontario, the Offered Securities in electronic form, unless otherwise directed by the Lead Underwriter, and physical copies of the Broker Warrant Certificates, immediately following the receipt of payment to the Corporation by the Underwriters of the aggregate Offering Price for the Offered Securities by wire transfer, net of the Underwriting Fee and expenses of the Underwriters payable by the Corporation as set out in this Agreement.
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(3)
|
Settlement. Except for issuances to purchasers that are in the United States (except Qualified Institutional Buyers) who shall be issued the Offered Securities in a certificated form, the Corporation shall cause the Transfer Agent to issue electronically and register through the non-certificated inventory process, the Offered Securities against payment therefor in the manner as set forth above, such electronic issuance being registered in the name of CDS (or in such other name as Bloom Burton, on behalf of the Underwriters, may direct); and
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(a)
|
Bloom Burton will create an instant deposit in CDS’s automated clearing and settlement system in the aggregate amount of the Offered Securities to be purchased through the non-certificated inventory process and shall provide the deposit identification number (the “Deposit ID”) to the Transfer Agent prior to the Closing Time to permit the further crediting of the accounts of those participants of CDS acting on behalf of purchasers of such Offered Securities;
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(b)
|
the Corporation shall provide an executed treasury direction, dated as of the Closing Date, to the Transfer Agent authorizing and directing the Transfer Agent to issue a non-certificated inventory credit to CDS in the amount equal to the aggregate number of Offered Securities to be purchased through the non-certificated inventory process; and
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(c)
|
the Corporation shall cause the Transfer Agent to electronically confirm the CDS deposit represented by the Deposit ID.
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Section 12 Closing of the Over-Allotment Option
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(1)
|
Written Notice of Exercise. The Over-Allotment Option may be exercised for a period of 30 days from and including the Closing Date. Bloom Burton, on behalf of the Underwriters, shall provide written notice to the Corporation of its election to exercise the Over-Allotment Option, which notice will set forth: (i) the aggregate number of Over-Allotment Shares to be purchased; and (ii) the closing date for the Over-Allotment Shares, provided that such closing date shall not be less than two Business Days and no more than seven Business Days following the date of such notice, and in any event not later than the 30th day following the Closing Date.
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(2)
|
Closing. The purchase and sale of the Over-Allotment Shares, if required, shall be completed at such time and place as the Underwriters and the Corporation may agree, and in accordance with Section 12(1) above.
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(3)
|
Securities. At the closing of the Over-Allotment Option, subject to the terms and conditions contained in this Agreement, the Corporation shall deliver to the Underwriters the Over-Allotment Shares, in electronic or certificated form, registered as directed by the Underwriters, against payment to the Corporation by the Underwriters of the aggregate Offering Price for the Over-Allotment Shares being issued and sold by wire transfer or certified cheque, net of the Underwriting Fee and any expenses of the Underwriters payable by the Corporation as set out in this Agreement.
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(4)
|
Deliveries. The applicable terms, conditions and provisions of this Agreement (including the provisions of Section 10 relating to closing deliveries) shall apply mutatis mutandis to the Closing of the issuance of any Over-Allotment Shares pursuant to any exercise of the Over-Allotment Option.
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|
(5)
|
Adjustments. In the event that the Corporation shall subdivide, consolidate, reclassify or otherwise change its Common Shares during the period in which the Over-Allotment Option is exercisable, appropriate adjustments will be made to the Offering Price and to the number of Over-Allotment Shares issuable on exercise thereof such that the Underwriters are entitled to arrange for the sale of the same number and type of securities that the Underwriters would have otherwise arranged for had they exercised such Over-Allotment Option immediately prior to such subdivision, consolidation, reclassification or change.
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Section 13 Indemnification and Contribution
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(1)
|
The Corporation shall indemnify and hold the Underwriters their respective affiliates and directors, officers, employees, partners and agents (collectively, the “Indemnified Parties” and individually, an “Indemnified Party”) from and against any and all losses (except loss of profit), inquiry, claims, actions, suits, proceedings, damages, liabilities or expenses of whatsoever nature or kind, including the aggregate amount paid in reasonable settlement of any actions, suits, proceedings, investigations or claims and the reasonable fees and expenses of their counsel in connection with any inquiry, action, suit, proceeding, investigation or claim that may be made or threatened against any Indemnified Party or in enforcing this indemnity (collectively, the “Claims”) to which an Indemnified Party may become subject or otherwise involved in any capacity insofar as the Claims relate to, are caused by, result from, arise out of or are based upon, directly or indirectly, this Agreement whether performed before or after execution of this Agreement or the Engagement Letter, including in connection with Claims relating to or arising from the following:
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|
|
(a)
|
any information or statement (except any information or statement relating solely to and provided by the Underwriters) contained in the Offering Documents, including any Documents Incorporated by Reference therein, which at the time and in light of the circumstances under which it was made contains or is alleged to contain a misrepresentation or any omission or any alleged omission to state therein any fact or information (except facts or information relating solely to the Underwriters and provided by the Underwriters) required to be stated therein or necessary to make any of the statements therein not misleading in light of the circumstances in which they are made;
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|
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(b)
|
the omission or alleged omission to state in any certificate of the Corporation or of any officers of the Corporation delivered in connection with the Offering any material fact (except facts or information relating solely to the Underwriters and provided by the Underwriters) required to be stated therein where such omission or alleged omission constitutes or is alleged to constitute a misrepresentation;
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(c)
|
any order made or any Claim commenced or threatened by any securities regulatory authority, stock exchange or by any other competent authority, based upon any misrepresentation (as defined in the Securities Act) or alleged misrepresentation (except a misrepresentation relating solely to the Underwriters and provided by the Underwriters) in the Offering Documents (except any document or material delivered or filed solely by the Underwriters) based upon any failure or alleged failure to comply with applicable securities laws (other than any failure or alleged failure to comply by the Underwriters) preventing and restricting the trading in or the sale of the Offered Shares in any of the Qualifying Jurisdictions;
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|
|
(d)
|
the non-compliance or alleged non-compliance by the Corporation with any material requirement of Applicable Securities Laws, including the Corporation’s non-compliance with any statutory requirement to make any document available for inspection; or
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|
|
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|
|
|
(e)
|
the breach of any representation, warranty or covenant of the Corporation contained in this Agreement or the failure of the Corporation to comply in all material respects with any of its obligations hereunder; and
|
further agrees to immediately reimburse each Indemnified Party forthwith upon demand for any reasonable legal or other expenses reasonably incurred by such Indemnified Party in connection with any Claim; provided that such indemnity shall not be applicable to any Indemnified Party in respect of any Claim to the extent the losses, expenses, claims, actions, damages or liabilities covered such Claim are determined by a court of competent jurisdiction in a final judgment that has become non-appealable to have resulted from the gross negligence, dishonesty, willful misconduct, or fraud of such Indemnified Party. In the event and to the extent that a court of competent jurisdiction in a final judgement that has become non-appealable determines that an Indemnified Party was grossly negligent, dishonest or guilty of willful misconduct or fraud in connection with a Claim in respect of which the Corporation has advanced funds to the Indemnified Party pursuant to this indemnity, such funds shall be reimbursed to the Corporation and thereafter this indemnity shall not apply to such Indemnified Party in respect of such Claim.
|
(2)
|
The Corporation also agrees that no Indemnified Party shall have any liability (either direct or indirect, in contract or tort or otherwise) to the Corporation or any person asserting Claims on the Corporation’s behalf or in right for or in connection with this Agreement, except to the extent that any losses, expenses, Claims, actions, damages or liabilities incurred by the Corporation are determined by a court of competent jurisdiction in a final judgment that has become non-appealable to have resulted from the Indemnified Party’s breach of this Agreement, or the gross negligence, dishonesty, willful misconduct, or fraud of such Indemnified Party.
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|
(3)
|
In case any Claim is brought against an Indemnified Party or an Indemnified Party has received notice of the commencement of any investigation in respect of which indemnity may be sought against the Corporation, the Indemnified Party will give the Corporation prompt written notice of any such Claim of which the Indemnified Party has knowledge and the Corporation will undertake the investigation and defence thereof on behalf of the Indemnified Party, including the prompt employment of counsel reasonably acceptable to the Indemnified Parties affected and the payment of all reasonable fees and out-of-pocket expenses. Failure by the Indemnified Party to so notify shall not relieve the Corporation of its obligation of indemnification hereunder unless (and only to the extent that) such failure results in forfeiture by the Corporation of substantive rights or defences or to the extent that the Corporation is materially prejudiced thereby.
|
|
(4)
|
No admission of liability and no settlement, compromise or termination of any Claim shall be made without the Corporation’s consent and the consent of the Indemnified Parties affected, such consents not to be unreasonably withheld.
|
|
(5)
|
Notwithstanding that the Corporation will undertake the investigation and defence of any Claim, an Indemnified Party will have the right to employ separate counsel with respect to any Claim and participate in the defence thereof, but the fees and expenses of such counsel will be at the expense of the Indemnified Party unless:
|
|
|
(a)
|
employment of such counsel has been authorized in writing by the Corporation;
|
|
|
(b)
|
the Corporation has not assumed the defence of the action within a reasonable period of time after receiving notice of the Claim;
|
|
|
(c)
|
the named parties to any such Claim include both the Corporation and the Indemnified Party and the Indemnified Party shall have been advised by counsel in writing that there may be a conflict of interest between the Corporation and the Indemnified Party; or
|
|
|
(d)
|
the Indemnified Party has been advised in writing by counsel that there are one or more defences available to the Indemnified Party which are different from or in addition to those available to the Corporation, which makes representation by the same counsel inappropriate.
|
|
(6)
|
The rights accorded to the Indemnified Parties hereunder shall be in addition to any rights an Indemnified Party may have at common law or otherwise.
|
|
(7)
|
If for any reason the foregoing indemnification is unavailable (other than in accordance with the terms hereof) to the Indemnified Parties (or any of them) or insufficient to hold them harmless, the Corporation will contribute to the amount paid or payable by the Indemnified Parties as a result of such Claims in such proportion as is appropriate to reflect not only the relative benefits received by the Corporation on the one hand and the Indemnified Parties on the other, but also the relative fault of the parties and other equitable considerations which may be relevant. Notwithstanding the foregoing, the Corporation will in any event contribute to the amount paid or payable by the Indemnified Parties as a result of such Claim any excess of such amount over the amount of the fees actually received by the Indemnified Parties hereunder in which case such fees and expenses will be for the Corporation’s account.
|
|
(8)
|
The Corporation hereby acknowledges Bloom Burton as trustee for each of the other Indemnified Parties of the Corporation’s covenants under this indemnity with respect to such persons and Bloom Burton agrees to accept such trust and to hold and enforce such covenants on behalf of such persons.
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|
(9)
|
The foregoing provisions shall survive the completion of professional services rendered under the Agreement or any termination of this Agreement.
|
Section 14 Compensation of the Underwriters
|
(1)
|
At the Closing Time, the Corporation shall:
|
|
|
(a)
|
pay to Bloom Burton, on behalf of the Underwriters, the Underwriting Fee. The Underwriting Fee will be netted out of the gross proceeds of the Offering.
|
|
|
(b)
|
Create and issue to the Underwriters, or as directed by the Underwriters, in the aggregate, a number of Broker Warrants equal to 5.25% of the aggregate number of Offered Securities sold under the Offering.
|
Section 15 Expenses
The Corporation will pay all reasonable expenses and fees (plus HST, if applicable) in connection with the Offering, whether completed or not, including, without limitation: (i) all reasonable expenses of or incidental to the creation, issue, sale or distribution of the Offered Securities and the filing of the Preliminary Prospectus and the Final Prospectus; (ii) the reasonable fees and expenses of the Corporation’s legal counsel; (iii) the reasonable fees and expenses of the Underwriters’ Canadian legal counsel, subject to a maximum of $100,000 (exclusive of applicable taxes and disbursements); and (iv) all reasonable costs incurred in connection with the preparation of documentation relating to the Offering, excluding those out-of-pocket costs incurred by the Underwriters. All fees and expenses of the Underwriters shall be immediately payable by the Corporation upon receipt of an invoice, or, at the option of the Underwriters, may be deducted from the gross proceeds of the Offering.
Section 16 All Terms to be Conditions
The Corporation agrees that all terms and conditions set out in this Agreement shall be construed as conditions and any breach or failure by the Corporation to comply with any such conditions in favour of the Underwriters in any material respect shall entitle the Underwriters (or any of them) to terminate their obligation to complete the Offering, by written notice to that effect given to the Corporation prior to the Closing Time. The Corporation shall use commercially reasonable efforts to cause all conditions in this Agreement to be satisfied. It is understood that the Underwriters may waive, in whole or in part, or extend the time for compliance with, any of such conditions without prejudice to the rights of the Underwriters in respect of any such conditions or any other or subsequent breach or non-compliance, provided that to be binding on an Underwriter any such waiver or extension must be in writing and signed by such Underwriter.
Section 17 Termination by Underwriters in Certain Events
|
(1)
|
Each Underwriter shall also be entitled to terminate its obligation to purchase the Offered Securities by written notice to that effect given to the Corporation prior to the Closing Time if:
|
|
|
(a)
|
Material Change Out - there should occur or come into effect any material change in the Business, affairs, financial condition, prospects, capital or control of the Corporation, taken as a whole, or any change in any material fact, or any new material fact, or there should be discovered any previously undisclosed fact which, in each case, in the reasonable opinion of the Underwriters, or any one of them, has or could reasonably be expected to have a significant adverse effect on the market price or value or marketability of the Common Shares;
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|
|
(b)
|
Disaster Out – (i) there should develop, occur or come into effect or existence any event, action, state, or condition, including, without limitation, any act of terrorism, war or like event, any pandemic (including matters caused by, related to or resulting from the COVID-19 outbreak, to the extent that there is a material adverse development related thereto after the date of this Agreement), national emergency or similar event or the escalation thereof, or major financial occurrence of national or international consequence or a new or change in any law or regulation which in the reasonable opinion of the Underwriters, seriously adversely affects or involves or may seriously adversely affect or involve the financial markets generally or the Business, operations or affairs of the Corporation and its Subsidiaries taken as a whole or the market price or value of the Offered Securities; (ii) any inquiry, action, suit, proceeding or investigation (whether formal or informal) is commenced, announced or threatened in relation to the Corporation or the Subsidiaries or any one of the officers or directors or principal shareholders of the Corporation where wrong-doing is alleged or any order is made by any Governmental Authority including without limitation the Exchange or Securities Regulators which involves a finding of wrong-doing, and which, in the opinion of the Underwriters, acting reasonably, seriously adversely affects or may seriously adversely affect, the Business, operations or affairs of the Corporation taken as a whole or prevents or restricts trading in or the distribution of the Common Shares or adversely affects or might reasonably be expected to adversely affect the market price or value of the Common Shares; or (iii) any order, action or proceeding which cease trades or otherwise operates to prevent or restrict the trading of the Common Shares or any other securities of the Corporation is made or threatened by a Securities Regulator; or
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|
|
(c)
|
Breach Out - the Underwriters or any one of them, acting reasonably, determines that the Corporation is in breach of a material term, condition or covenant of the letter agreement between the Corporation and Bloom Burton dated February 25, 2021, as amended on February 26, 2021 (the “Engagement Letter”) or this Agreement or any representation or warranty given by the Corporation in the Engagement Letter or this Agreement becomes or is false, in any material respect; or
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|
|
(d)
|
Outside Date - the Corporation has not obtained a Final Receipt qualifying the Offered Securities and Broker Warrants for distribution in the Qualifying Jurisdictions by March 25, 2021, or such other date as may be agreed to between the Corporation and the Lead Underwriter, on behalf of the Underwriters, acting reasonably.
|
|
(2)
|
If this Agreement is terminated by any of the Underwriters pursuant to Section 17(1), there shall be no further liability on the part of such Underwriter or of the Corporation to such Underwriter, except in respect of any liability, which may have arisen or may thereafter arise under Section 13 and Section 15.
|
|
(3)
|
The right of the Underwriters or any of them to terminate their respective obligations under this Agreement is in addition to such other remedies as they may have in respect of any default, act or failure to act of the Corporation in respect of any of the matters contemplated by this Agreement. A notice of termination given by one Underwriter under this Section 17 shall not be binding upon the other Underwriters.
|
|
(4)
|
Notwithstanding the foregoing and for the avoidance of doubt, this Agreement may be terminated at any time prior to the Closing Time upon the mutual written agreement of the Corporation and Bloom Burton if the parties hereto decide not to proceed with the Offering.
|
Section 18 Obligations of the Underwriters to be Several
|
(1)
|
The obligations of the Underwriters under this Agreement shall be several in all respects and not joint or joint and several. For certainty, the obligations of the Underwriters to purchase the Offered Securities shall be several and not joint or joint and several, and shall be limited to the percentages of the aggregate number of Offered Securities to be purchased set out opposite the names of the Underwriters respectively below. Furthermore, subject to the terms of this Agreement, the parties hereto agree and acknowledge that the Underwriting Fee and Broker Warrants shall be apportioned as follows:
|
|
Bloom Burton
|
60%
|
|
|
|
|
Stifel Nicolaus Canada Inc.
|
25%
|
|
|
|
|
Canaccord Genuity Corp.
|
15%
|
|
(2)
|
If an Underwriter shall not complete the purchase and sale of its applicable percentage of the aggregate amount of the Offered Securities at the Closing Time for any reason whatsoever, including by reason of Section 17 hereof, the other Underwriters shall have the right, but shall not be obligated, to purchase the Offered Securities which would otherwise have been purchased by the Underwriter which fails to purchase. If, with respect to the Offered Securities, the non-defaulting Underwriter elects not to exercise such rights to assume the entire obligations of the defaulting Underwriter, then the Corporation shall have the right to either (i) proceed with the sale of the Offered Securities (less the defaulted Offered Securities) to the non-defaulting Underwriter; or (ii) terminate its obligations hereunder without liability except pursuant to the provisions of Section 15 in respect of the non-defaulting Underwriter. If the defaulted Offered Securities do not exceed 10% of the total number of Offered Securities obligated to be purchased under this Agreement, then the non-defaulting Underwriter or Underwriters will be obligated to purchase, on a pro-rata basis (based on the percentages shown above) all, but not less than all of, the defaulted Offered Securities on the terms set out in this Agreement.
|
|
(3)
|
Subject to compliance with Canadian Securities Laws, without affecting the firm obligation of the Underwriters to purchase from the Corporation 12,750,000 Initial Shares at the Offering Price in accordance with this Agreement, after the Underwriters have made reasonable effort to sell all of the Offered Securities at the Offering Price, the Offering Price may be decreased by the Underwriters and further changed from time to time to an amount not greater than the Offering Price. Such decrease in the Offering Price will not affect the Underwriting Fee to be paid by the Corporation to the Underwriters, and it will not decrease the amount of the net proceeds of the Offering to be paid by the Underwriters to the Corporation, before deducting expenses of the Offering. The Underwriters will inform the Corporation if the Offering Price is decreased.
|
Section 19 Notices
Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be delivered,
in the case of the Corporation, to:
Field Trip Health Ltd.
30 Duncan Street, Suite 401
Toronto, Ontario M5V 2C3
Attention: Ronan Levy, Executive Chairman & Director
Email: [*****]
with a copy to (which copy shall not constitute notice hereunder):
Bennett Jones LLP
100 King St. W., Suite 3400
Toronto, Ontario M5X 1A4
Attention: Aaron Sonshine
Email: [*****]
in the case of the Underwriters, to:
Bloom Burton Securities Inc.
65 Front Street East, Suite 300
Toronto, ON M5E 1B5
Attention: James Rowland, cc. Sonia Yung
Email: [*****] and [*****]
with a copy of any such notice (which copy shall not constitute notice hereunder) to:
Borden Ladner Gervais LLP
Bay Adelaide Centre
22 Adelaide Street West, Suite 2800
Toronto, ON M5H 4E3
Attention: Andrew Powers
Email: [*****]
The Corporation and the Underwriters may change their respective addresses for notices by notice given in the manner aforesaid. Any such notice or other communication shall be in writing, and unless delivered personally to the addressee or to a responsible officer of the addressee, as applicable, shall be given by email and shall be deemed to have been given when: (i) in the case of a notice delivered personally to a responsible officer of the addressee, when so delivered; and (ii) in the case of a notice delivered or given by email, on the day of transmission.
Section 20 Miscellaneous
|
(1)
|
Actions of Underwriters. Except with respect to Section 13, Section 17 and Section 18, all transactions and notices on behalf of the Underwriters hereunder or contemplated hereby may be carried out or given on behalf of the Underwriters by Bloom Burton, and the Underwriters shall in good faith discuss with each other the nature of any such transactions and notices prior to giving effect thereto or the delivery thereof, as the case may be.
|
|
(2)
|
Successors and Assigns. This Agreement shall enure to the benefit of, and shall be binding upon, the Underwriters and the Corporation and their respective successors and legal representatives.
|
|
(3)
|
Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein.
|
|
(4)
|
Time of the Essence. Time shall be of the essence hereof and, following any waiver or indulgence by any party, time shall again be of the essence hereof.
|
|
(5)
|
Interpretation. The words, “hereunder”, “hereof” and similar phrases mean and refer to the Agreement formed as a result of the acceptance by the Corporation of this offer by the Underwriters to purchase the Offered Securities.
|
|
(6)
|
Survival. All representations, warranties, covenants and agreements of the Corporation and/or the Underwriters herein contained or contained in documents submitted pursuant to this Agreement and in connection with the transaction of purchase and sale herein contemplated shall survive for a period ending on the date that is two years following the Closing Date. Notwithstanding the preceding sentence, Section 13 shall survive the purchase and sale of the Offered Securities and the termination of this Agreement and shall continue in full force and effect for the benefit of the Underwriters or the Corporation, as the case may be, regardless of any subsequent disposition of the Offered Securities or any investigation by or on behalf of the Underwriters with respect thereto without limitation other than any limitation requirements of Applicable Laws. The Underwriters and the Corporation shall be entitled to rely on the representations and warranties of the Corporation or the Underwriters, as the case may be, contained herein or delivered pursuant hereto notwithstanding any investigation which the Underwriters or the Corporation may undertake or which may be undertaken on their behalf.
|
|
(7)
|
Severability. If one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be construed as if such invalid, illegal or unenforceable provision or provisions had never been contained herein.
|
|
(8)
|
Several and Joint. In performing their respective obligations under this Agreement, the Underwriters shall be acting severally and not jointly and severally. Nothing in this Agreement is intended to create any relationship in the nature of a partnership, or joint venture between the Underwriters.
|
|
(9)
|
Market Stabilization Activities. In connection with the distribution of the Offered Securities, the Underwriters (or any of them) may effect transactions which stabilize or maintain the market price of the Common Shares at levels other than those which might otherwise prevail in the open market, but in each case as permitted by Canadian Securities Laws. Such stabilizing transactions, if any, may be discontinued by the Underwriters at any time.
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(10)
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No Fiduciary Duty. The Corporation hereby acknowledges that the Underwriters are acting solely as underwriters in connection with the purchase and sale of the Offered Securities. The Corporation further acknowledges that the Underwriters are acting pursuant to a contractual relationship created solely by this Agreement entered into on an arm’s length basis, and in no event do the parties intend that the Underwriters act or be responsible as a fiduciary to the Corporation, its management, shareholders or creditors or any other person in connection with any activity that the Underwriters may undertake or have undertaken in furtherance of such purchase and sale of the Corporation’s securities, either before or after the date hereof. The Underwriters hereby expressly disclaim any fiduciary or similar obligations to the Corporation, either in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions, and the Corporation hereby confirms its understanding and agreement to that effect. The Corporation and the Underwriters agree that they are each responsible for making their own independent judgments with respect to any such transactions and that any opinions or views expressed by the Underwriters to the Corporation regarding such transactions, including any opinions or views with respect to the price or market for the Corporation’s securities, do not constitute advice or recommendations to the Corporation. The Corporation and the Underwriters agree that the Underwriters are acting as principal and not the agent or fiduciary of the Corporation and no Underwriter has assumed, and no Underwriter will assume, any advisory responsibility in favour of the Corporation with respect to the transactions contemplated hereby or the process leading thereto (irrespective of whether any Underwriter has advised or is currently advising the Corporation on other matters). The Corporation hereby waives and releases, to the fullest extent permitted by law, any claims that the Corporation may have against the Underwriters with respect to any breach or alleged breach of any fiduciary, advisory or similar duty to the Corporation in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions.
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(11)
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Underwriters’ Advice. The Corporation acknowledges and agrees that all written and oral opinions, advice, analyses and materials provided by the Underwriters in connection with this Agreement and their engagement hereunder are intended solely for the Corporation’s benefit and the Corporation’s internal use only with respect to the Offering and the Corporation agrees that no such opinion, advice, analysis or material will be used for any other purpose whatsoever or reproduced, disseminated, quoted from or referred to in whole or in part at any time, in any manner or for any purpose, without the Underwriters’ prior written consent in each specific instance. Any advice or opinions given by any of the Underwriters hereunder will be made subject to, and will be based upon, such assumptions, limitations, qualifications, and reservations as such Underwriter(s), in its/their sole judgment, deems necessary or prudent in the circumstances. The Underwriters expressly disclaim any liability or responsibility by reason of any unauthorized use, publication, distribution of or reference to any oral or written opinions or advice or materials provided by the Underwriters or any unauthorized reference to any of the Underwriters or this Agreement.
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(12)
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Conflict. The Corporation acknowledges that the Underwriters and their affiliates carry on a range of businesses, including providing stockbroking, investment advisory, research, investment management and custodial services to clients and trading in financial products as agent or principal. It is possible that the Underwriters and other entities in their respective groups that carry on those businesses may hold long or short positions in securities of companies or other entities, which are or may be involved in the transactions contemplated in this Agreement and effect transactions in those securities for their own account or for the account of their respective clients. The Corporation agrees that these divisions and entities may hold such positions and effect such transactions without regard to the Corporation’s interests under this Agreement.
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(13)
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Entire Agreement. This Agreement constitutes the only agreement between the parties with respect to the subject matter hereof and shall supersede any and all prior negotiations and understandings in respect of the Offering, including the Engagement Letter. This Agreement may be amended or modified in any respect by written instrument only.
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(14)
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Further Assurances. Each of the parties hereto shall do or cause to be done all such acts and things and shall execute or cause to be executed all such documents, agreements and other instruments as may reasonably be necessary or desirable for the purpose of carrying out the provisions and intent of this Agreement.
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(15)
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Electronic Copies. Each of the parties hereto shall be entitled to rely on delivery of a facsimile or PDF copy of this Agreement and acceptance by each such party of any such facsimile or PDF copy shall be legally effective to create a valid and binding agreement between the parties hereto in accordance with the terms hereof.
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(16)
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Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.
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[Remainder of page intentionally left blank]
If this Agreement accurately reflects the terms of the transactions which we are to enter into and are agreed to by you, please communicate your acceptance by executing the enclosed copies of this Agreement where indicated and returning them to us.
Yours very truly,
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BLOOM BURTON SECURITIES INC.
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By:
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(Signed) “James Rowland”
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Name:
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James Rowland
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Title:
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Director, Investment Banking
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STIFEL NICOLAUS CANADA INC.
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By:
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(Signed) “Harris Fricker”
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Name:
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Harris Fricker
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Title:
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President
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CANACCORD GENUITY CORP.
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By:
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(Signed) “Graham Saunders”
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Name:
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Graham Saunders
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Title:
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Head of Capital Markets Origination
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The foregoing is hereby accepted and agreed to by the undersigned as of the date first written above.
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FIELD TRIP HEALTH LTD.
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By:
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(Signed) “Joseph del Moral”
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Joseph del Moral
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Chief Executive Officer
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SCHEDULE “A”
SUBSIDIARIES
SCHEDULE “B”
COMPLIANCE
WITH UNITED STATES SECURITIES LAWS
(In the event of any U.S. offers or sales)
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1.
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Capitalized terms used in this Schedule “B” and not defined in this Schedule “B” shall have the meanings given in the Underwriting Agreement to which this Schedule “B” is annexed and the following terms shall have the meanings indicated:
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“Directed Selling Efforts” means “directed selling efforts” as that term is defined in Regulation S. Without limiting the foregoing, but for greater clarity in this Schedule “B”, it means, subject to the exclusions from the definition of directed selling efforts contained in Regulation S, any activity undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for any of the Offered Securities and shall include, without limitation, the placement of any advertisement in a publication with a general circulation in the United States that refers to the offering of any of such Offered Securities;
“Foreign Issuer” means a “foreign issuer” as that term is defined in Regulation S. Without limiting the foregoing, but for greater clarity in this Schedule “B”, it means any issuer that is (a) the government of any country, or of any political subdivision of a country, other than the United States, or (b) a national of any country other than the United States, or (c) a corporation or other organization incorporated or organized under the laws of any country other than the United States, except an issuer meeting the following conditions as of the last business day of its most recently completed second fiscal quarter: (1) more than 50 percent of the outstanding voting securities of such issuer are directly or indirectly owned of record by residents of the United States, and (2) any of the following: (i) the majority of the executive officers or directors are United States citizens or residents, (ii) more than 50 percent of the assets of the issuer are located in the United States, or (iii) the business of the issuer is administered principally in the United States;
“Offshore Transaction” means “offshore transaction” as defined in Rule 902(h) of Regulation S;
“Selling Firms” means the Underwriters together with other investment dealers and brokers which participate in the offer and sale of the Offered Securities under the terms of this Agreement, including this Schedule “B”;
“Substantial U.S. Market Interest” means “substantial U.S. market interest” as that term is defined in Rule 902(j) of Regulation S; and
“U.S. Purchaser” means any purchaser of the Offered Securities that is, or is acting for the account or benefit of, a person in the United States, or any person offered the Offered Securities in the United States.
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2.
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The Corporation represents, warrants and covenants to the Underwriters and the U.S. Affiliates that, as of the date of this Agreement, the Closing Time and any Option Closing Time:
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(a)
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the Corporation is a Foreign Issuer, and reasonable believes there is no Substantial U.S. Market Interest with respect to the Common Shares of the Corporation;
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(b)
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none of the Corporation, its affiliates (as defined in Rule 405 under the U.S. Securities Act) or any person acting on its or their behalf (except for the Underwriters, their respective U.S. Affiliates and any person acting on their behalf, as to whom no representation, warranty or covenant is made) (i) has engaged or will engage in any Directed Selling Efforts, (ii) has taken or will take any action that would cause the exemption afforded by Rule 144A or Rule 506(b) of Regulation D and/or Section 4(a)(2) of the U.S. Securities Act to be unavailable for offers and resales of Offered Securities in the United States in accordance with this Schedule “B”, or the exclusion from registration afforded by Rule 903 of Regulation S to be unavailable for offers and sales of the Offered Securities in Offshore Transactions in accordance with the Underwriting Agreement, or (iii) has engaged in or will engage in any conduct involving a public offering within the meaning of Section 4(a)(2) of the U.S. Securities Act or any action which would constitute a violation of Regulation M under the U.S. Exchange Act with respect to offers or sales of the Offered Securities in the United States;
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(c)
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so long as any Offered Securities which have been sold in the United States in reliance upon Rule 144A are outstanding and are “restricted securities” within the meaning of Rule 144(a)(3) under the U.S. Securities Act, and if the Corporation is neither exempt from reporting pursuant to Rule 12g3-2(b) of the U.S. Exchange Act nor subject to and in compliance with Section 13 or 15(d) of the U.S. Exchange Act, the Corporation will furnish to any holder of such Offered Securities and any prospective purchaser of the Offered Securities designated by such holder, upon request of such holder, the information required to be delivered pursuant to Rule 144A(d)(4) under the U.S. Securities Act (so long as such requirement is necessary in order to permit holders of such Offered Securities to effect resales under Rule 144A);
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(d)
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except with respect to the offer and sale of the Offered Securities offered under this Agreement, the Corporation has not, within six months before the commencement of the offer and sale of the Offered Securities, and will not during and within six months after the latest of the Closing Date and any Option Closing Date, offer or sell any securities in a manner that would be integrated with the offer and sale of the Offered Securities and would cause the exemptions from registration pursuant to Rule 144A or Rule 506(b) of Regulation D and/or Section 4(a)(2) of the U.S. Securities Act or the exclusion from registration set forth in Rule 903 of Regulation S to become unavailable with respect to the offer and sale of the Offered Securities;
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(e)
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except with respect to offers and resales of Offered Securities by the Underwriters through their U.S. Affiliates to Qualified Institutional Buyers and offers of Offered Securities by the Underwriters through their U.S. Affiliates for sale by the Corporation to Accredited Investors, pursuant to the terms of this Agreement, none of the Corporation, any of its affiliates, or any person acting on their behalf has made or will make (i) any offer to sell, or any solicitation of an offer to buy, any Offered Securities in the United States, or (ii) any sale of the Offered Securities unless, at the time the buy order was or will have been originated, the purchaser is outside the United States or the Corporation, its affiliates an any person acting on their behalf reasonably believe that the purchaser is outside the United States;
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(f)
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the Corporation is not, and after giving effect to the offer and sale of the Offered Securities and the application of the proceeds as described in the Prospectus, will not be, an “investment company” within the meaning of the United States Investment Company Act of 1940, as amended, registered or required to be registered under such Act;
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(g)
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the Offered Securities are not and, as of the Closing Date and the Option Closing Date, as applicable, will not be, and no securities of the same class as the Offered Securities are or will be:
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(i)
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listed on a national securities exchange registered under Section 6 of the U.S. Exchange Act;
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(ii)
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quoted in a “U.S. automated inter-dealer quotation system”, as such term is used in Rule 144A; or
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(iii)
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convertible or exchangeable at an effective conversion premium (calculated as specified in paragraph (a)(6) and (a)(7) of Rule 144A) of less than 10% for securities so listed or quoted;
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(h)
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the Corporation will file within the prescribed time period(s) any required filings with the SEC and with any applicable state securities commissions in connection with any sales of Offered Securities in the United States;
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(i)
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none of the Corporation or any of its predecessors or subsidiaries has had the registration of a class of securities under the U.S. Exchange Act revoked by the SEC pursuant to Section 12(j) of the U.S. Exchange Act and any rules or regulations promulgated under the U.S. Exchange Act; and
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(j)
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for each taxable year in which the Corporation is a “passive foreign investment company” as defined in Section 1297 of the United States Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), if requested in writing by a U.S. Purchaser, the Corporation will provide such U.S. Purchaser with the required information to enable it to make a qualified electing fund election under Section 1295 of the Internal Revenue Code and the applicable treasury regulations promulgated thereunder, and will satisfy all requirements described therein (which, for the avoidance of doubt, shall include providing a PFIC Annual Information Statement).
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3.
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Each of the Underwriters, severally and not jointly, represents, warrants and covenants to and with the Corporation that, as of the date of this Agreement, the Closing Time and any Option Closing Time:
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(a)
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it acknowledges that the Offered Securities have not been and will not be registered under the U.S. Securities Act or applicable state securities laws and may not be offered or resold in the United States, except pursuant to transactions exempt from or not subject to the registration requirements under the U.S. Securities Act and exemptions from registration under applicable state securities laws. In addition, until 40 days after the commencement of the offering of the Offered Securities, an offer or sale of the Offered Securities within the United States by any dealer (whether or not participating in the Offering) may violate the registration requirements of the U.S. Securities Act if such offer or sale is made otherwise than in accordance with an available exemption from such registration requirements. Accordingly, it has offered and resold (if applicable), and will offer and resell (if applicable), the Offered Securities forming part of its allotment only (a) in an Offshore Transaction in accordance with Rule 903 of Regulation S or (b) as provided in paragraphs 3(b) through 3(k) below. None of it, its U.S. Affiliate or any person acting on its or their behalf, has made or will make (except as permitted in paragraphs 3(b) through 3(k) below): (i) any offer to sell or any solicitation of an offer to buy, any Offered Securities in the United States; or (ii) any sale of Offered Securities to any purchaser unless, at the time the buy order was or will have been originated, the purchaser was outside the United States, or it, its U.S. Affiliate or persons acting on their behalf reasonably believed that such purchaser was outside the United States. None of it, its U.S. Affiliate, or any persons acting on its or their behalf has engaged or will engaged in any Directed Selling Efforts;
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(b)
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it has not entered and will not enter into any contractual arrangement with respect to the offer and sale of the Offered Securities, except with its U.S. Affiliate, any Selling Firms, or with the prior written consent of the Corporation. It shall require each Selling Firm and its U.S. Affiliate to agree, for the benefit of the Corporation, to be bound by and to comply with, and shall use its commercially reasonable efforts to ensure that each Selling Firm and its U.S. Affiliate complies with, the provisions of this Schedule “B” as if such provisions applied to such Selling Firm or affiliate;
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(c)
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all offers and sales of the Offered Securities by it in the United States have been and will be effected only by its U.S. Affiliate, and in all such cases in compliance with all applicable United States federal and state laws relating to the registration and conduct of securities brokers and dealers and all applicable state securities laws;
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(d)
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its U.S. Affiliate is, and will be on the date of each offer and sale of Offered Securities in the United States, duly registered as a broker-dealer under the U.S. Exchange Act and under all applicable state securities laws (unless exempt therefrom) and a member of, and in good standing with, the Financial Industry Regulatory Authority, Inc.;
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(e)
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immediately prior to soliciting any offerees of Offered Securities in the United States, the Underwriter, its U.S. Affiliate and any person acting on its or their behalf had reasonable grounds to believe and did believe that each offeree solicited by it was a Qualified Institutional Buyer or Accredited Investor, as applicable, with which it has a pre-existing relationship, and at the time of completion of each sale of Offered Securities in the United States, the Underwriter, its U.S. Affiliate, and any person acting on its or their behalf will have reasonable ground to believe and will believe, that each purchaser thereof is a Qualified Institutional Buyer or Accredited Investor, as applicable;
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(f)
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each offeree of Offered Securities solicited by it that is in the United States shall be provided with a copy of the U.S. Private Placement Memorandum and each U.S. Purchaser of Offered Securities solicited by it shall be provided, prior to the time of its purchase of any Offered Securities, with a copy of the final U.S. Private Placement Memorandum and no other written material will be used in connection with the offer and sale of the Offered Securities in the United States;
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(g)
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at least one Business Day prior to the time of delivery, the Corporation and its transfer agent will be provided with a list of all U.S. Purchasers of the Offered Securities solicited by it;
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(h)
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prior to any sale of Offered Securities to a U.S. Purchaser, it shall cause each such U.S. Purchaser that is (i) a Qualified Institutional Buyer purchasing such Offered Securities pursuant to Rule 144A to execute a U.S. Purchaser’s Letter for Qualified Institutional Buyers in the form attached as Exhibit A to the final U.S. Private Placement Memorandum, or (ii) an Accredited Investor purchasing such Offered Securities pursuant to Rule 506(b) of Regulation D and/or Section 4(a)(2) of the U.S. Securities Act to execute a U.S. Purchaser’s Letter for Accredited Investors in the form attached as Exhibit B to the final U.S. Private Placement Memorandum;
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(i)
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at the Closing, the Underwriter (together with its U.S. Affiliate) will provide a certificate, substantially in the form of Appendix I to this Schedule “B”, relating to the manner of the offer and sale of the Offered Securities in the United States, or will be deemed to have represented that neither it nor its U.S. Affiliate offered or sold Offered Securities in the United States;
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(j)
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it will inform, and will cause its U.S. Affiliate to inform, all purchasers of the Offered Securities in the United States that the Offered Securities have not been and will not be registered under the U.S. Securities Act and are “restricted securities” as defined in Rule 144(a)(3) under the U.S. Securities Act and are being offered and sold to them without registration under the U.S. Securities Act in reliance upon the exemption from such registration pursuant to Rule 144A or Rule 506(b) of Regulation D and/or Section 4(a)(2) of the U.S. Securities Act; and
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(k)
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none of the Underwriter, its affiliates or any person acting on any of its or their behalf has taken or will take, directly or indirectly, any action in violation of Regulation M under the U.S. Exchange Act with respect to the offer and sale of the Offered Securities.
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Appendix I to Schedule “B”
UNDERWRITERS’ CERTIFICATE
In connection with the private placement in the United States of Offered Securities of Field Trip Health Ltd. (the “Corporation”) pursuant to the underwriting agreement dated March 3, 2021, between the Corporation and the Underwriters named in the underwriting agreement (the “Underwriting Agreement”), each of the undersigned does hereby certify as follows:
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(a)
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the U.S. Affiliate is a duly registered broker or dealer with the United States Securities and Exchange Commission, and is a member of, and in good standing with, the Financial Industry Regulatory Authority, Inc. on the date of this certificate and on the date of each offer and resale of Offered Securities made by it, and all offers and resales of the Offered Securities in the United States have been effected by the U.S. Affiliate in accordance with all applicable U.S. broker-dealer requirements;
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(b)
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each purchaser of Offered Securities that is in the United States solicited by us was, prior to the sale of Offered Securities to such purchaser, provided with a copy of the final U.S. Private Placement Memorandum, and we and our U.S. Affiliates have not used and will not use any written material other than the U.S. Private Placement Memorandum in connection with the offering of the Offered Securities in the United States;
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(c)
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immediately prior to our transmitting the U.S. Private Placement Memorandum to offerees of Offered Securities in the United States, we had reasonable grounds to believe, and did believe, that each offeree was a Qualified Institutional Buyer or Accredited Investor, as applicable, with whom we have a pre-existing relationship, and on the date of this certificate we continue to believe that each purchaser of the Offered Securities purchasing from us through our U.S. Affiliate is a Qualified Institutional Buyer or Accredited Investor, as applicable;
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(d)
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in connection with each sale of Offered Securities in the United States to a Qualified Institutional Buyer or an Accredited Investor solicited by us, we caused each such U.S. Purchaser to execute and deliver a U.S. Purchaser’s Letter for Qualified Institutional Buyers in the form attached as Exhibit A to the final U.S. Private Placement Memorandum or a U.S. Purchaser’s Letter for Accredited Investors in the form attached as Exhibit B to the final U.S. Private Placement Memorandum;
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(e)
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no Directed Selling Efforts were engaged in by us with respect to the offer or sale of the Offered Securities by us;
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(f)
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no form of “general solicitation” or “general advertising” (as those terms are used in Rule 502(c) of Regulation D under the U.S. Securities Act) or “directed selling efforts” (as such term is defined in Rule 902(c) of Regulation S under the U.S. Securities Act) was used by us in connection with the offer or sale of the Offered Securities in the United States; and
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(g)
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the offering of the Offered Securities in the United States has been conducted by us in accordance with the Underwriting Agreement, including Schedule “B” to the Underwriting Agreement.
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[remainder of page intentionally left blank]
Capitalized terms used in this certificate and not defined in this certificate have the meanings ascribed thereto in the Underwriting Agreement (including the Schedule “B” to the Underwriting Agreement).
DATED the ______ day of ____________, 2021.
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[UNDERWRITER]
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[U.S. AFFILIATE]
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By:
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By:
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Name:
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Name:
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Title:
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Title:
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Exhibit 99.14
FORM 51-102F3
MATERIAL CHANGE REPORT
UNDER NATIONAL INSTRUMENT 51-102
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Item 1.
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Name and Address of Company
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Field Trip Health Ltd. (formerly, Newton Energy Corporation) (the “Company”)
30 Duncan Street, Suite 401
Toronto, Ontario M5V 2C3
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Item 2.
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Date of Material Change
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February 25, 2021 and February 26, 2021
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News releases dated February
25, 2021 and February 26, 2021 were disseminated via CanadaNewswire. Copies of the news releases have been filed on SEDAR and
is available at www.sedar.com.
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Item 4.
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Summary of Material Change
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The Company announced on February 25, 2021 that it has entered into an agreement with Bloom Burton Securities Inc. (“BBS” or the “Lead Underwriter”) on behalf of a syndicate of underwriters (together with the Lead Underwriter, the “Underwriters”), pursuant to which the Underwriters have agreed to purchase, on a “bought deal” basis 7,692,310 common shares (the “Common Shares”) of the Company at a price of $4.50 per Common Share (the “Issue Price”), for aggregate gross proceeds of $50,000,015.
On February 26, 2021, the Company announced to increase the size of its previously announced $50,000,015 bought deal offering. Pursuant to the upsized deal terms, the Underwriters have agreed to purchase, on a “bought deal” basis, 12,750,000 Common Shares at a price of $6.50 per Common Share, for aggregate gross proceeds of $82,875,000 (the “Offering”).
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Item 5.
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Full Description of Material Change
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The Company plans to use the net proceeds from the Offering to: (i) fund the FT-104 program into Phase II development and provide a reserve of capital for further pipeline development; (ii) fund the clinic development strategy through to cash flow positive operations; and (iii) add additional growth capital to further expand clinical development team and other opportunistic growth initiatives.
The Offering is scheduled to close on or about March 16, 2021 and is subject to certain conditions including, but not limited to, the receipt of all necessary approvals including the approval of the Canadian Securities Exchange and the securities regulatory authorities.
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The Company has granted the Underwriters an option (the “Over-Allotment Option”), exercisable in whole or in part at any time on or up to 30 days after the closing of the Offering, to purchase, or to find substituted purchasers for, up to an additional number of Common Shares equal to 15% of the number of Common Shares sold pursuant to the Offering at the Issue Price to cover over- allotments, if any, and for market stabilization purposes. In the event that the Over-Allotment Option is exercised in its entirety, the aggregate gross proceeds of the Offering will be $95,306,250.
The Common Shares will be offered by way of a short form prospectus to be filed in each of the Provinces of Canada, other than Quebec, pursuant to National Instrument 44-101 - Short Form Prospectus Distributions and by private placement to eligible purchasers resident in jurisdictions other than Canada that are mutually agreed by the Company and BBS, provided that no prospectus filing or comparable obligation arises and the Company does not therefore become subject to continuous disclosure obligations in such jurisdiction.
The Common Shares, have not been, nor will they be, registered under the United States Securities Act of 1933, as amended (the “1933 Act”) and may not be offered or sold in the United States or to, or for the account or benefit of, “U.S. persons” (as defined in Regulation S under the 1933 Act) absent registration or an applicable exemption from the registration requirements. The Units may be offered in the United States to Qualified Institutional Buyers (as defined in Rule 144A under the 1933 Act) pursuant to exemptions from the registration requirements under rule 144A of the 1933 Act and to “accredited investors” as such term is defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D promulgated under the 1933 Act. This news release will not constitute an offer to sell or the solicitation of an offer to buy nor will there be any sale of the securities in any State in which such offer, solicitation or sale would be unlawful.
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Item 6.
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Reliance on subsection 7.1(2) of National Instrument 51-102
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Not applicable.
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Item 7.
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Omitted Information
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Not applicable.
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Item 8.
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Executive Officer
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For further information, please contact:
Paula Amy Hewitt
Vice President, General Counsel and Corporate Secretary
Telephone: (416) 617-6277
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Item 9.
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Date of Report
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February 26, 2021
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Exhibit
99.15
FIELD
TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
MANAGEMENT’S
DISCUSSION AND ANALYSIS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2020
AND
PERIODS
ENDED DECEMBER 31, 2019
(Expressed
in Canadian dollars, unless otherwise noted)
MANAGEMENT’S
DISCUSSION AND ANALYSIS
FOR
THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2020 AND PERIODS ENDED DECEMBER 31, 2019
DATED:
FEBRUARY 16, 2021
This
management’s discussion and analysis (“MD&A”) for the three and nine months ended December 31, 2020
and periods ended December 31, 2019, provides detailed information on the operating activities, performance and financial position
of Field Trip Health Ltd. on a consolidated basis (“We”, the “Company” or “Field Trip”). This
discussion should be read in conjunction with the Company’s unaudited condensed interim consolidated financial statements
and accompanying notes for the three and nine months ended December 31, 2020 and periods ended December 31, 2019 and the audited
consolidated financial statements and accompanying notes for the period from April 2, 2019 (date of incorporation) to March 31,
2020. The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”)
and are reported in Canadian dollars, unless otherwise noted.
The
Company’s fiscal year commences April 1st of each year and ends on March 31st of the following year. The Company’s
current fiscal year, which ends on March 31, 2021, is referred to as the “current fiscal year”, “fiscal 2021”,
or using similar words. The Company’s current three months ended December 31, 2020, is referred to as the “current
fiscal quarter, “third quarter of fiscal 2021”, or using similar words.
CAUTIONARY
STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
This
MD&A includes “forward-looking information” and “forward-looking statements” within the meaning of
Canadian securities laws. All statements, other than statements of historical fact, made by the Company that address activities,
events or developments that the Company expects or anticipates will or may occur in the future are forward-looking statements,
including statements preceded by, followed by or that include words such as “may”, “will”, “would”,
“could”, “should”, “believes”, “estimates”, “projects”, “potential”,
“expects”, “plans”, “intends”, “anticipates”, “targeted”, “continues”,
“forecasts”, “designed”, “goal”, or the negative of those words or other similar or comparable
words. Forward-looking statements may relate to future financial conditions, results of operations, plans, objectives, performance
or business developments. These statements speak only as at the date they are made and are based on information currently available
and on management’s current expectations and assumptions concerning the Company’s future events, financial conditions,
results of operations, plans, objectives, performance, business developments, objectives or milestones. Actual results and developments
may differ materially from those contemplated by these statements. Forward-looking statements in this MD&A include statements
related to, the business and future activities of the Company, and developments related to, the Company after the date of this
MD&A, including but not limited to, the expectations for the effects of the Transaction, statements relating as future business
strategy, competitive strengths, goals, expansion and growth of the Company’s business, operations and plans, including
new revenue streams, the completion of contemplated expansion by the Company, changes in laws or regulatory requirements, the
market for the Company’s services, the impact of the COVID-19 pandemic, the business objectives of the Company and its research
and development activities, the acceptance in the medical community of ketamine and other psychedelic substances as effective
treatment for depression, PTSD, addiction and other mental health conditions, the funds available to the Company and the use of
such funds, the healthcare industry in Canada and the United States, the ability of the Company to operate the Toronto Clinic,
New York Clinic, California Clinic, Chicago Clinic and additional clinics, the development, patentability and viability of FT
Discovery molecule FT-104, the ability of the Company to prepare sufficient new drug application, as required, prior to initiating
any additional clinical trials for FT-104, the ability of the Company to meet eligibility requirements for clinical testing and
through to more complex clinical trials, the ability of the Company to obtain regulatory approvals prior to each clinical trial
and the ability of the Company to generate patient member growth.
The
forward-looking statements contained herein are based on certain key management expectations and assumptions, including with respect
to expectations and assumptions concerning: (i) receipt of required shareholder and regulatory approvals in a timely manner or
at all; (ii) receipt and/or maintenance of required licenses and third-party consents in a timely manner or at all; and (iii)
the success of the operations of the Company.
Forward-looking
statements are subject to a number of known and unknown risks, uncertainties and other factors that may cause actual results,
performance or achievements to be materially different from that which are expressed or implied by such forward-looking statements.
These risks and uncertainties include those related to: the ability of the Company to secure additional financing for current
and future operations and capital projects, as needed; forward-looking statements may prove to be inaccurate; future issuances
or actual or potential sales of securities; negative operating cash flow and going concern; discretion over the use of proceeds;
unpredictability and volatility of the listed securities of the Company; speculative nature of an investment in the securities
of the Company; limited operating history as a public company; a significant number of common shares of the Company (the “Common
Shares”) are owned by a limited number of existing shareholders; the expected future losses of the Company and profitability;
significant risks inherent in the nature of the health clinic industry; risks associated with failure to achieve its publicly
announced milestones according to schedule, or at all; risks related to potential Oregon operations; reliance on drug developers;
reliance on contract manufacturers; violations of laws and regulations; reliance on the capabilities and experience of its key
executives and scientists; the possible engagement in misconduct or other improper activities by employees; the expansion of the
Company’s business through acquisitions or collaborations; risk of product liability claims; risks related to third-party
licenses; changes in patent law; litigation regarding patents, patent applications, and other proprietary rights; reliance on
third parties; no assurance of an active or liquid market; public markets and share prices; additional issuances and dilution;
the ability of the Company to secure additional financing for current and future operations and capital projects, as needed, which
may not be available on acceptable terms, or at all; the Company’s dependence on management and key personnel; general economic,
market and business conditions, early-stage industry growth rates, the risks associated with competition from other companies
directly or indirectly engaged in the Company’s industry; negative results from clinical trials; foreign currency exchange
rate fluctuations and its effects on the Company’s operations; the risks and costs associated with being a publicly traded
company, the market demand for the Common Shares; the impact of the COVID-19 pandemic; non-compliance with laws; medical personnel
operating out of the Company’s clinics; unfavourable publicity or consumer perception; patient acquisitions; drug development
risks; substantial risks of regulatory or political change; the ability to obtain necessary government permits and licences; ketamine
as a pharmaceutical; non-referral of patients; negative cash flow from operating activities; management of growth; intellectual
property; litigation; insurance coverage; the Company being a holding company; the industry being difficult to forecast; conflicts
of interest; enforcement of legal rights; emerging market risks; enforcement of legal rights in foreign jurisdictions; inadequate
internal controls over financial reporting; agriculture risks; violations of laws and regulations related to drug development;
reliance on third parties for drug development; ability to produce commercial grade pharmaceuticals; clinical testing; regulatory
approval process; cyber-attacks; reliance upon insurers and governments; difficulty in enforcing judgments and effecting service
of process on directors and officers; any other risks described in this MD&A and the documents filed by the Company with Canadian
securities regulatory authorities; other factors beyond the Company’s control; and the risk factors described under the
heading “Risks and Uncertainties” in this MD&A.
There
can be no assurance that such forward-looking information and statements will prove to be accurate as actual results and future
events could differ materially from those anticipated in such information and statements. Accordingly, readers should not place
undue reliance on forward-looking information and statements. The forward-looking information and statements contained herein
are presented for the purposes of assisting readers in understanding the Company’s expected financial and operating performance
and the Company’s plans and objectives and may not be appropriate for other purposes.
The
forward-looking information and statements contained in this MD&A represent the Company’s views as of the date of this
MD&A and forward-looking information and statements contained in the documents incorporated by reference herein represent
the Company’s views as of the date of such documents, unless otherwise indicated in such documents. The Company anticipates
that subsequent events and developments may cause its views to change. However, while the Company may elect to update such forward-looking
information and statements at a future time, it has no current intention of doing so except to the extent required by applicable
law.
OVERVIEW
Corporate
Structure
The
Company was formed on September 30, 2008, pursuant to an amalgamation under the Business Corporations Act (Alberta) and
adopted the name “Newton Energy Corporation”. On September 30, 2020, in connection with the Transaction (as defined
below), the Company filed articles of amendment to: (i) consolidated its outstanding Common Shares on an eight (8) old for one
(1) new basis; and (ii) change its name from Newton Energy Corporation to “Field Trip Health Ltd.”
On
October 1, 2020: (i) the Company and Field Trip Psychedelics Inc. (“FTP”) completed a series of transactions
resulting in a reorganization of FTP and the Company and pursuant to which the Company became the direct parent and sole shareholder
of FTP; (ii) the Company changed its year end from December 31 to March 31; and (iii) the Company was continued under the Canada
Business Corporations Act (the “Continuance”) by Certificate and Articles of Continuance ((i) – (iii)
collectively referred to as the “Transaction”).
The
Transaction constituted a Reverse Takeover of the Company by FTP under applicable securities laws.
The
Common Shares were listed on the NEX board of the TSXV until September 30, 2020, when they were delisted from the TSXV in connection
with the completion of the Transaction. The Common Shares commenced trading on the Canadian Securities Exchange (the “CSE”)
on October 6, 2020, under the symbol “FTRP”.
The
Company’s registered office and head office is located at 30 Duncan Street, Suite 401, Toronto, ON M5V 2C3.
The
following table describes the subsidiaries of the Field Trip, their place of incorporation, continuance or formation, and the
percentage of the outstanding voting securities of each subsidiary that are beneficially owned, controlled or directed by the
Field Trip.
Business
of the Company
Field
Trip is a leader in the development and delivery of psychedelic therapies. We focus on blending operational execution with strategic
investment across all aspects of the psychedelics value chain. With the business segments: (i) Field Trip Discovery (“FT
Discovery”) leading the development of the next generation of psychedelic molecules and conducting advanced research
on plant-based psychedelics; (ii) Field Trip Health clinics for psychedelic therapies opening across North America (the “Clinics”);
and (iii) Field Trip Digital building the digital and technological tools to support psychedelic experiences and consciousness
expansion, We help people, from those in treatment to those seeking accelerated personal growth, with a simple, evidence-based
way to heal and heighten engagement with the world.
Advanced
Research and Drug Development
Through
FT Discovery, the Company performs research on botanical psychedelics and psychedelic-based molecules for future therapeutic application
of select mental health indications. FT Discovery has two independent activities: (i) developing custom synthetic molecules targeting
serotonin 5HT2A receptors, which are, in part, implicated in mood disorders; and (ii) conducting research and development related
to the cultivation, as well as the identification and isolation of new substances contained in psilocybin mushrooms and other
related fungi (the “Psilocybin Research”), in collaboration with the University of West Indies (“UWI”).
Pursuant to a research agreement with UWI (the “UWI Agreement”), the Company has built a 2,072 sq. ft. custom-built
research and cultivation facility on the UWI campus (the “Jamaica Facility”) to conduct the Psilocybin Research.
Further, Field Trip anticipates that insights relating to the administration of psychedelics and psychedelic-assisted psychotherapy
within the Clinics can be integrated in the Company’s approach to novel drug development.
Psilocybin,
along with other synthetic and natural serotoninergic psychedelics, act to stimulate 5HT2A receptors in the brain resulting in
a profound alteration of normal brain signaling and processing, creating what is generally referred to as a “psychedelic
experience” or an “altered state of consciousness.” Under psychedelics, the brain “escapes” from
its usual tightly constrained and predictable patterns of operation, with a global increase in connectivity of brain regions and
brain networks. Often, this can allow patients new introspective insights about their past behavior, memories, actions, feelings
and beliefs. Psychedelic drug administration combined with psychotherapy can lead to improvements in conditions relating to depression
and addiction, which are often a result of dysfunctional brain processing. FT-104 is the first drug candidate in development by
FT Discovery. FT-104 is a next generation, synthetic psychedelic molecule whose design is, in part, based on classical serotonin
2A psychedelics. Patents are pending on FT104’s structure, formulation and use in treating a variety of central nervous
system disorders.
Field
Trip Health Centres
Field
Trip is focused on: (i) building out the clinical infrastructure needed to deliver psychedelic therapies at scale; and (ii) developing
digital tools to enhance and optimize the therapeutic outcomes in our health centers and beyond.
We
are seeking to create a global brand of trusted clinics for ketamine-enhanced psychotherapy, psychedelic-enhanced psychotherapy
and psychedelic-integration psychotherapy, enabling patients to more effectively and affordably address depression, anxiety, addiction
and other conditions. Ketamine was the first, and is currently the only, psychedelic administered to patients in conjunction with
our custom developed psychotherapy protocol. Beyond its antidepressant effects, ketamine’s ability to promote neural plasticity
makes it a powerful tool to pair with Field Trip’s comprehensive psychotherapy program to affect behavioral change. More
specifically, Field Trip offers or plans to offer the following types of therapy:
|
|
•
|
Ketamine-enhanced
psychotherapy (“KEP”) is a clinic-based treatment that combines the
administration of ketamine dosing sessions with exploratory and integrative psychology
to accelerate the process of discovery, understanding, catharsis and eventually healing.
KEP sessions last longer than traditional therapy, are conducted with medical and psychological
support and may include therapy-enhancing tools such as music.
|
|
|
•
|
Psychedelic-enhanced
psychotherapy combines the use of psychedelic medicines with psychotherapy sessions and
other enhancing therapies in a clinical setting. KEP is a type of psychedelic-enhanced
psychotherapy, that uses ketamine as the psychedelic catalyst.
|
|
|
•
|
Psychedelic-integration
psychotherapy consists of one or more psychotherapy sessions to support a patient’s
understanding and processing of past psychedelic experiences through reflection and integration
of those experiences. Psychedelic-integration psychotherapy can be combined with psychedelic-enhanced
psychotherapy, including KEP, or may be employed on its own to integrate patient experience
outside of a clinical setting.
|
While
the use of ketamine in KEP is considered “off-label”, such use is legal under medical supervision. As such, ketamine
is currently the only legal psychedelic medicine generally available to mental health providers in Canada and the United States.
As additional psychedelic medicines become available for use in a therapeutic setting and novel psychedelic medicines become available,
Field Trip intends to explore the use of other methods of psychedelic-enhanced psychotherapy.
Currently,
Field Trip operates and owns a clinic in Toronto, Ontario, and operates clinics in New York, New York, Santa Monica, California
and Chicago, Illinois through physician practices or professional medical corporations (“PCs”) which are owned
solely by state-licensed physicians. The PCs’ results are consolidated with Field Trip (see Note 2 Basis of Presentation
in our unaudited condensed interim consolidated financial statements for the three and nine months ended December 31, 2020
and periods ended December 31, 2019 for a detailed discussion of the basis for consolidation). Field Trip has also leased a location
in Amsterdam and is in the process of setting up operations (the “Amsterdam Clinic”).
Digital
Tools: Trip and Portal
Field
Trip Digital has developed Trip, a mobile application supporting consciousness expansion which is available to users in the Apple
and Android app stores, and Portal, a digital health platform to support clients participating in psychedelic therapies at Field
Trip Health centers. Our Trip app’s user base grew by 144% from the second fiscal quarter. Portal is a next generation telehealth
platform that connects our patients and therapists with individualized patient journeys and content, along with tools such as
mood monitoring, journaling, and activity tracking. The feature-sets of both platforms are expected to grow significantly in the
coming fiscal year.
REGULATORY
ENVIRONMENT
Clinical
Operations
The
Canadian and United States federal governments regulate drugs through the Controlled Drugs and Substances Act (Canada)
(the “CDSA”) and the Controlled Substances Act (21 U.S.C. § 811) (the “CSA”),
respectively, which place controlled substances in a schedule. Under the CDSA, ketamine is currently a Schedule I drug and psilocybin
is currently a Schedule III drug. Under the CSA, ketamine is currently a Schedule III drug as well as being listed under the associated
Narcotic Control Regulations, and psilocybin is currently a Schedule I drug.
In
the United States, facilities holding or administering controlled substances must be registered with the US Drug Enforcement Agency
(“DEA”) to perform these activities. As such, medical professionals or the clinics in which they operate, as
applicable, are also required to have a DEA license to obtain and administer ketamine (a “DEA License”). To
the Company’s knowledge, the Clinics in the United States and the required medical professionals hold all required DEA Licenses.
Furthermore, the Clinics have in place security, control, recordkeeping, reporting and inventory mechanisms required by the DEA
to prevent drug loss and diversion. Staff at Clinics in the United States, including the medical doctors and/or the nurse practitioner(s),
advanced practice registered nurse(s) or other medical professionals who report to them, hold the required DEA Licenses and the
Company has put in place policies designed to adhere to DEA requirements.
Health
Canada and the United States Food and Drug Administration (the “FDA”) have not approved psilocybin as a drug
for any indication, however ketamine is a legally permissible medication for the treatment of certain psychological conditions.
It is illegal to possess such substances without a prescription. On August 4, 2020, it was announced that a legal exemption from
the CDSA was granted to four Canadians with incurable cancer, allowing them to receive psilocybin therapy to treat their anxiety
as part of end-of-life care. Health Minister Patty Hajdu approved the request under Section 56(1) of the CDSA, which permits the
Health Minister to exempt persons or controlled substances, if “the exemption is necessary for a medical or scientific purpose
or is otherwise in the public interest”.
In
both Canada and the United States, the applicable federal government is responsible for regulating, among other things, the approval,
import, sale and marketing of drugs such as ketamine and other psychedelic substances, whether natural or novel. The Company
does not directly engage in any activities that would trigger the need to comply with any federal laws related to ketamine and
other psychedelic substances. See “Regulatory Environment – Research and Development Operations”.
Under
the Company’s business model, there are no state-specific licenses required to (a) operate a mental health clinic prescribing
and/or administering ketamine, (b) that apply to the storage and/or administration of ketamine, other than those which mirror
the CDSA requirements, and (c) operate or provide management services to the Clinics, other than standard business licenses for
out-of-state companies which Field Trip has obtained in connection with the setup of these locations.
Each
province and territory of Canada and each state in the United States mandates the requirements for the Clinics and the conduct
of medical professionals therein. While the treatments that occur at the Clinics are novel in some respects, the prescription
of ketamine and the dispensing of ketamine are not novel and are subject to the same restrictions as would apply to any medical
professional who prescribes other controlled substances to his or her patients. There are no special licenses, permits, authorizations
or approvals required that are different from any other ordinary course approvals required by applicable governmental authorities
for any medical clinic.
The
Clinics may utilize, in addition to physicians, mid-level practitioners such as physician assistants and nurse practitioners and
mental health practitioners such as psychologists and psychotherapists. The exact make-up of staff for each Clinic varies by location
and additional professionals and/or administrative staff may also be employed.
The
Ontario government has authority over the delivery of health care services, including regulating health facilities, administering
health insurance plans, such as OHIP, distributing prescription drugs within the province, and regulating health professionals
such as doctors, psychologists, psychotherapists and nurse practitioners. The table below includes a summary of the laws applicable
to the Company’s business that it operates in Ontario, Canada.
Although
it is the Company’s intention to administer psilocybin-containing truffles as a food product in The Netherlands, the Company
intends to employ medical professionals in its Amsterdam Centre. The table below includes a summary of the laws applicable to
the Company’s business that it proposes to operate in Amsterdam.
In
the United States, the laws applicable to the Clinics and the conduct of medical professionals therein are also at the state level
and vary by jurisdiction. The table below includes a summary of the laws applicable to the Company’s business that it operates
or is proposed to operate in the states of New York, California, Illinois, Georgia, and Texas.
As
of the date hereof, each of the medical professionals working at the Clinics are in good standing with the applicable regulatory
body that governs such medical professionals.
|
|
|
|
|
Province
/
State
|
Medical
Professional
|
Governing
Law
|
Regulatory
Bodies
|
|
Ontario(1)
|
Medical
Doctors
|
Regulated
Health Professions Act, 1991 (Ontario) (“RPHA”), Medicine Act, 1991 (Ontario)
|
College
of Physicians and Surgeons of Ontario (“CPSO”)
|
|
Psychologists
|
RPHA,
Psychology Act, 1991(Ontario)
|
College
of Psychologists of Ontario (“CPO”)
|
|
Nurses(3)
|
RPHA,
Nursing Act, 1991(Ontario)
|
College
of Nurses of Ontario (“CNO”)
|
|
Psychotherapists
|
RPHA,
Psychotherapy Act, 2007(Ontario)
|
College
of Registered Psychotherapists of Ontario, CPSO, CPO, CNO, College of Occupational Therapists of Ontario, or Ontario College
of Social Workers and Social Service Workers
|
|
Respiratory
therapist
|
Respiratory
Therapy Act, 1991(Ontario)
|
College
of Respiratory Therapists of Ontario
|
|
New
York
|
Medical
Doctors
|
State
of New York are New York Education Law §§ 6500 –6516 and 6520 –6532 and 8 New York Codes, Rules and
Regulations (“NYCRR”)
|
New
York State Education Department, Office of the Professions, State Board for Medicine (“NY Medical Board”)
|
|
Psychologists
|
New
York Education Law (“NYEL”) §§ 7600 and 8 NY CRR §§ 72.1
|
New
York State Education Department, Office of the Professions (“NYOP”), State Board for Psychology
|
|
Psychotherapists
|
NYEL
§§ 8400, 8 NY CRR § 52.35 and 8 NY CRR §§ 79.12.
|
NYOP,
State Board for Mental Health Practitioners
|
|
Nurses
|
NYEL
§§ 6900 and additional regulations that apply only to nurses at NYCRR §§ 64.1.
|
NYOP,
State Board for Nursing
|
|
California
|
Medical
Doctors
|
Business
and Professions Code, §2190.5 (“CA BPC”)
|
Medical
Board of California (“CA Medical Board”)
|
|
Psychologists
|
CA
BPC
|
California
Board of Psychology
|
|
Psychotherapists
|
CA
BPC
|
Board
of Registered Nursing
|
|
Nurses
|
CA
BPC
|
Board
of Registered Nursing
|
|
Illinois
|
Medical
Doctors
|
Medical
Practice Act (225 ILCS 60/2)
|
Illinois
Department of Financial and Professional Regulation (“IDFPR”)
|
|
Psychologists
|
Nurse
Practice Act (225 ILCS 65/)
|
IDFPR
|
|
Professional
Counselors and Clinical Professional Counselors
|
Professional
Counselor and Clinical Professional Counselor Licensing and Practice Act (225 ILCS 107/1)
|
IDFPR
|
|
Nurses
|
Clinical
Psychologist Licensing Act (225 ILCS 15/)
|
IDFPR
|
|
Georgia
|
Medical
Doctors
|
Medical
Practice Act, Official Code of Georgia (“OCGA”) §§43-34 and 34A
|
Georgia
Composite Medical Board (“GA Medical Board”)
|
|
Psychologists
|
OCGA
Title 43, Chapter 39
|
Georgia
State Board of Examiners of Psychologists
|
|
Professional
Counselors
|
OCGA
Title 43, Chapters 7A and 10A
|
Georgia
Composite Board of Professional Counselors, Social Workers and Marriage and Family Therapists
|
|
Nurses
|
Nurse
Practice Act, OCGA § 43-26
|
Georgia
State Board of Nursing
|
|
Texas
|
Medical
Doctors
|
Texas
Occupations Code Chapter 155 and 22 TAC Chapter 163
|
Texas
Medical Board
|
|
Psychologists
|
Texas
Occupations Code Chapter 501
|
Texas
Behavioral Health Executive Council (“TBHEC”)
|
|
Professional
Counselor
|
Texas
Occupations Code Chapter 503
|
TBHEC
|
|
Nurses
|
Texas
Occupations Code Chapter 301
|
Texas
Board of Nursing
|
|
|
|
|
|
|
Netherlands(2)
|
Medical
Doctors
|
Individual
Healthcare Act (Wet op de Beroepen in de Individuele Gezondheidszor, “BIG”), and if other care is provided,
the Healthcare Quality, Complaints and Disputes Act (Wet kwaliteit, klachten en geschillen zorg, “WKKGZ”)
|
Ministry
of Health, Welfare and Sport (Ministerie van Volksgezondheid, Welzijn en Sport, “VWS”), the Inspectorate for Heath
and Youth Care (Inspectie gezondheidszorg en jeugd (“IGJ”) and the Royal Dutch Medical Association (Koninklijke
Nederlandsche Maatschappij tot bevordering der Geneeskunst)
|
|
Health
Psychologists
|
BIG,
and if other care is provided, WKKGZ
|
VWS,
IGJ and the Federation of Healthcare psychologists (Federatie van Gezondheidzorgpsychologen en Psychotherapeuten, “FGZPT”)
|
|
Psychotherapists
|
BIG,
and if other care is provided, WKKGZ
|
VWS,
IGJ and FGZPT
|
|
|
Certified
Nurse Specialist
|
BIG,
and if other care is provided, WKKGZ
|
VWS,
Registration Commission for Nurse Specialists (Registratiecommissie Specialismen Verpleegkunde)
|
Notes:
|
|
(1)
|
Represents
the regulatory oversight of professionals working in the Company’s Field Trip Health
Centre in Toronto, Ontario, which may vary according to staffing from time to time.
|
|
|
(2)
|
Represents
the regulatory oversight of professionals who may be engaged in the Company’s Field
Trip Health Centre in Amsterdam, Netherlands, which may vary according to staffing from
time to time.
|
|
|
(3)
|
In
this table, the term “nurses” includes nurse practitioners, advanced practice
nurses, registered nurse practitioners and other similar enhanced licenses for those
in the nursing profession.
|
Some
states have legislation or policies relating to the “Corporate Practice of Medicine” doctrine (“CPOM”)
that govern business relationships between licensed medical professionals and unlicensed individuals or companies. The following
states have CPOM legislation: New York, California, Illinois, and Texas. The State of Georgia does not have specific CPOM legislation,
but case law may have established or invoked CPOM doctrine in that state. In order to comply with CPOM, Clinics in these states
are owned solely by State-licensed physicians and are organized as physician practices. In such states, Field Trip USA will provide
management services to the physician practices that own such clinics. The relationship between Field Trip USA and the physician
practices that it manages are subject to various standards of CPOM and fee-splitting rules.
The
Company’s business is also governed by laws in Canada, the United States and The Netherlands pertaining to handling, use
and protection of personal health information, including the Personal Health Information Protection Act (Ontario), The
Health Insurance Portability and Accountability Act of 1996, The Netherlands Personal Data Protection Act (Wet Bescherming
persoonsgegevens) and similar provincial or state laws. These laws and related regulations grant a number of rights to individuals
as to their personal health information and restrict the use and disclosure of such information. The Company has in place privacy
practices designed to comply with these requirements and ensures that service providers having access to personal health information
have entered into agreements that include appropriate protective clauses, including business associate agreements where applicable.
To
the best of the Company’s knowledge, no medical professionals at the Clinics receive commissions, incentives or other fees,
directly or indirectly.
The
Dutch Opium Act (Opiumwet) (“Opium Act”) regulates and controls (the use of) various sorts of addictive drugs
in The Netherlands, which substances are specified in two lists (List I and List II) accompanying the Opium Act (“Dutch
Controlled Substances”), as well as preparations containing one or more of these Dutch Controlled Substances. The Dutch
legislation stipulates that it is in principle not allowed to import or export the Dutch Controlled Substances included in the
Opium Act Lists I and II, nor to grow, prepare, process, sell, deliver, supply, transport, have present, produce or promote these
Dutch Controlled Substances in The Netherlands.
The
Dutch Supreme Court (the highest court in The Netherlands) stated that, insofar as preparations of Dutch Controlled Substances
are included in the Opium Act Lists I and II but the plants/fungi or part of the plants/fungi within which those substances occur
naturally are not included, the prohibitions of the Opium Act do not relate to those unlisted plants (and parts thereof). The
substance psilocybin qualifies as a Controlled Substance included in the Opium Act List I. Since 2008, all mushrooms from which
it is known that they contain psilocybin are prohibited under the Opium Act List II. Although it is possible that they may be
added in the future, truffles containing psilocybin are not currently included in the Opium Act List I or II. In fact, the Minister
of Healthcare in 2012 confirmed that psilocybin-containing truffles are not illegal and that they can legally be sold, bought
and used as a natural product in The Netherlands. Therefore, as of the date of this MD&A, truffles containing psilocybin do
not qualify as a Controlled Substance restricted under the Opium Act. In light of the above and based on advice of counsel in
The Netherlands, the Opium Act does not prohibit the presence and/or use of fresh, unprocessed truffles with psilocybin. The truffles
with psilocybin may not be subject in any way or form to any further processing (that results in the truffles becoming a preparation
prohibited under the Opium Act).
In
The Netherlands, truffles containing psilocybin are not registered as a medicinal product under the Dutch Medicines Act and
the Company will not present or advertise the truffles as medicinal product or otherwise as having therapeutic or preservative
properties. Thus, the care provided by the Company in The Netherlands will not consider medical care under domestic laws. However,
in keeping with the Company’s position that certain psychedelic medicines are an effective adjunct to therapy, the truffles
for a natural health product component of protocols which include screening by a psychiatrist and therapy.
In
the event that the Dutch authorities take the position that therapy with truffles qualifies as “other care” (alternative
therapy) or “regular care”, or that truffles containing psilocybin qualify as medicinal product, the Company would
then need to take steps to comply with local laws applicable to a healthcare provider. Should this event occur, the Company will
evaluate its options in The Netherlands.
So
long as the truffles do not qualify as medicinal product and the treatment with truffles is not publicly funded, it is likely
that the Company would not fall within the scope of the collective labour agreement for the mental health care sector (collectieve
arbeidsovereenkomst geestelijke gezondheidszorg, “CLA GGZ”) in The Netherlands.
On
November 3, 2020, the State of Oregon, via Measure 109, became the first state to legalize psychedelic mushrooms for therapeutic
use in supervised environments. Measure 109 is expected to allow people in the state who are age 21 or older to access psychedelic
mushrooms for personal development upon passing a screening conducted by a qualified therapist. People who use the drug are expected
to be able to do so at a psilocybin service centre, with the supervision of a designated service facilitator. Oregon expects to
have a two-year planning period in which lawmakers will determine how the drug will be regulated, including qualifications for
therapists intending to prescribe psychedelic mushrooms and for psilocybin facilitators. The program is expected to be regulated
by the Oregon Health Authority. The Company cannot comment on the regulatory framework as it has not been created nor can the
Company assess when or if the US federal government will permit such activities. The Company will assess its options in the State
of Oregon when such regulations are established and may seek any required licenses or approvals at that time. See “Risks
and Uncertainties”.
On
November 4, 2020, the District of Columbia approved an initiative that aims to effectively decriminalize the use of several psychedelic
substances. Initiative 81 makes non-commercial possession, distribution, purchase and cultivation of psychedelic and hallucinogenic
plants and fungi a lowest law enforcement priority for the Metropolitan Police Department. Similar to state legalization efforts
in Oregon, the Company cannot comment on the regulatory framework as it has not been created nor can the Company assess when or
if the US federal government will permit such activities.
Natural
Products Operations
Through
consultation with local resources and personnel with relevant knowledge and experience, as necessary, in Jamaica, the Company
is satisfied that all necessary licenses, permits and regulatory approvals have been obtained in order to carry on the business
as currently conducted and that such licenses, permits and regulatory approvals that have been obtained are in good standing.
The
Psilocybin Research is not in contravention of local laws in Jamaica and the Company has received a legal opinion from local counsel
confirming the same with respect to the Psilocybin Research. Psilocybin mushrooms are not an illegal drug under Jamaica’s
Dangerous Drugs Act, 1948 (the “Jamaica Drug Act”), therefore the Psilocybin Research is not in contravention
of the laws of Jamaica and does not require any permit or authorization from the regulatory authorities in Jamaica. In addition,
the Minister of Health & Wellness of Jamaica has delivered a letter to the Company stating his support for the Company’s
operations in Jamaica
As
psilocybin is not included in the Jamaica Drug Act, it is not a controlled or restricted substance in Jamaica and therefore no
other specific controls, permits, licenses or authorizations are required to conduct research on psilocybin. The Psilocybin Research
conducted at the Jamaica Facility is governed by the Jamaica Ministry of Health (“JMH”), Ethics and Medico-Legal
Affairs Panel and by the JMH Standards and Regulation Division, as would any other research conducted in a clinical setting. In
addition to GLP and cGMP, research involving human subjects is governed by the JMH Guidelines for the Conduct of Research on Human
Subjects. Furthermore, medicines, including natural products, require registration with the JMH prior to importation, distribution
and sale in Jamaica, as outlined in the Food and Drugs Act, 1964.
The
Company has received legal opinions or advice in each jurisdiction where it currently operates or proposes to operate (other than
Oregon, where the applicable legislation has not yet been created), confirming the permissibility of the Company’s operations
in such jurisdictions.
Research
and Development Operations
As
the Company’s business spans different operational models, the Company relies on a variety of researchers, medical professionals,
suppliers, manufacturers and service providers for the conduct of its operations. The Company’s research and development
activities rely on the following relationships with the following three third parties: (1) the UWI Agreement in respect of the
Psilocybin Research; (2) engagement by the Company of a contract research organization (“CRO”) regarding FT-104
(the “CRO Engagement”) and (3) the service agreement with the Company’s contract manufacturing organization
(“CMO”) in respect of FT-104 (the “CMO Agreement” and together with the CRO Engagement,
the “FT-104 Agreements”).
UWI
is a globally recognized academic institution. The UWI Agreement was negotiated at arm’s length, with legal counsel acting
on behalf of the Company both in Canada and Jamaica, and includes appropriate intellectual property and confidentiality provisions.
With respect to the FT-104 Agreements, Health Canada and the FDA have indicated that FT-104 is not a controlled substance and
therefore does not require licenses, permits or specific approvals. Notwithstanding, the CMO is Health Canada approved, FDA registered
and compliant with Good Manufacturing Practices (“cGMP”) (a standard applied in the pharmaceutical industry)
in synthesis, process optimization and production of drug substances and has been successfully audited by Health Canada and the
FDA.
The
CRO is Good Laboratory Practices (“GLP”) compliant and holds all licenses required for its activities as they
relate to the Company. Both the CMO and CRO have controlled substance licenses for other known controlled substances and are qualified
for handling FT-104, which, for certainty, is not a controlled substance. In addition, the Company has entered into appropriately
negotiated services agreements or statements of work with the CMO and CRO that contemplate appropriate intellectual property and
confidentiality provisions. In order to develop regulated medicines, including FT-104, the Company’s process must be conducted
in strict compliance with the regulations of Health Canada, the FDA and other applicable federal, state, local and regulatory
agencies.
FT-104
is currently in a pre-clinical stage of development, in which the primary activities are: (1) optimization and standardization
of Chemistry-Manufacturing and Controls (“CMC”), including additional chemical characterization, synthesis,
process optimization, stability, and development of analytical methodology to ensure drug substance quality and (2) non-clinical
(same as preclinical) activities (“NCA”) that measure performance (pharmacokinetics) and safety (toxicology;
pharmacology) using a variety of in-vitro and in-vivo assays. These studies will help to define parameters that would allow the
safe testing of the substance in human trials. CMC activities are carried out by the CMO. NCA activities are carried out by the
CRO.
The
CMO is reliant on suppliers for starting materials to produce FT-104. The Company, along with the CMO, only source starting materials
from reputable and approved suppliers who hold the proper authorizations and approvals. Weekly or bi-weekly meetings occur to
monitor the activities and advancements of CMO and CRO. It is expected that, at the appropriate time, a third-party regulatory
group will be engaged to assist with the development of the regulatory strategy and the regulatory documentation that will be
required for approval at each stage of the development.
Pharmaceutical
Development and Approval Requirements – Canada
Before
a prescription drug product candidate may be marketed in Canada, the process required generally involves:
|
|
•
|
Chemical
and Biological Research - Laboratory tests are carried out on tissue cultures and
with a variety of small animals to determine the effects of the drug. If the results
are promising, the manufacturer will proceed to the next step of development.
|
|
|
•
|
Pre-Clinical
Development – Animals are given the drug in varying amounts over differing
periods of time. If it can be shown that the drug causes no serious or unexpected harm
at the doses required to have an effect, the manufacturer will proceed to clinical trials.
|
|
|
•
|
Clinical
Trials — Phase 1 - The first administration in humans is to test if people
can tolerate the drug. If this testing is to take place in Canada, the manufacturer must
prepare a clinical trial application for the Therapeutic Products Directorate of Health
Canada (the “TPD”). This includes the results of the first two steps
and a proposal for testing in humans. If the information is sufficient, the Health Products
and Food Branch of Health Canada (the “HPFB”) grants permission to
start testing the drug, generally first on healthy volunteers.
|
|
|
•
|
Clinical
Trials — Phase 2 - Phase 2 trials are carried out on people with the target
condition, who are usually otherwise healthy, with no other medical condition. Trials
carried out in Canada must be approved by the TPD. In Phase 2, the objectives of the
trials are to continue to gather information on the safety of the drug and begin to determine
its effectiveness.
|
|
|
•
|
Clinical
Trials — Phase 3 - If the results from Phase 2 show promise, the manufacturer
provides an updated clinical trial application to the TPD for Phase 3 trials. The objectives
of Phase 3 include determining whether the drug can be shown to be effective, and have
an acceptable side effect profile, in people who better represent the general population.
Further information will also be obtained on how the drug should be used, the optimal
dosage regimen and the possible side effects.
|
|
|
•
|
New
Drug Submission - If the results from Phase 3 continue to be favourable, the drug
manufacturer can submit a new drug submission (“NDS”) to the TPD.
A drug manufacturer can submit an NDS regardless of whether the clinical trials were
carried out in Canada. The TPD reviews all the information gathered during the development
of the drug and assesses the risks and benefits of the drug. If it is judged that, for
a specific patient population and specific conditions of use, the benefits of the drug
outweigh the known risks, the HPFB will approve the drug by issuing a notice of compliance.
|
|
|
•
|
Scheduling
- FT-104 is a psychoactive substance with the potential for abuse. If FT-104 is approved
as a drug, we will need to hold discussions with Health Canada to determine a risk management
plan to protect FT-104 from potential diversion and misuse by patients, as well as to
schedule its removal from Category III (no known medical utility) to another category
based on data acquired during development and based on the drug’s adverse properties,
if any, related to potential abuse and addiction.
|
Pharmaceutical
Development and Approval Requirements – United States
Before
a prescription drug product candidate may be marketed in the United States, the process required generally involves:
|
|
•
|
completion
of extensive nonclinical laboratory tests, animal studies and formulation studies, all
performed in accordance with the FDA’s Good Laboratory and Manufacturing Practice
regulations;
|
|
|
•
|
submission
to the FDA of an investigational new drug application, which must become effective before
human clinical trials may begin;
|
|
|
•
|
for
some products, performance of adequate and well-controlled human clinical trials in accordance
with the FDA’s regulations, including good clinical practices, to establish the
safety and efficacy of the product candidate for each proposed indication;
|
|
|
•
|
submission
to the FDA of a new drug application (“NDA”); and
|
|
|
•
|
scheduling
in collaboration with the DEA based on the drugs adverse properties, if any, related
to potential abuse and addiction.
|
|
|
•
|
FDA
review and approval of the NDA prior to any commercial marketing, sale or shipment of
the drug.
|
The
operations of the Company, as currently conducted, do not require and are not dependent on, any licenses to conduct such operations.
COMPLIANCE
PROGRAM
The
Company oversees and monitors compliance with applicable laws in each jurisdiction in which it operates. In addition to the Company’s
senior executives and the employees responsible for overseeing compliance, the Company has local regulatory/compliance counsel
engaged in every jurisdiction (provincial, state and local) in which it operates. The principal medical professional at each Clinic
serves as the liaison to provincial, state and/or local governmental authorities. The Company has developed protocols for use
in all of its Clinics with the goal of ensuring that each of the Clinics’ operations and employees strictly comply with
applicable laws and regulations and that operations do not endanger the health, safety or welfare of the community. Additionally,
the Company has established a team of advisors with cross-functional expertise in business, neuroscience, pharmaceuticals, mental
health and psychedelics to advise management.
In
conjunction with the Company’s human resources and operations departments, the Company oversees and implements training
on the Company’s protocols. The Company will continue to work closely with external counsel and other compliance experts,
and is evaluating the engagement of one or more independent third-party providers to further develop, enhance and improve its
compliance and risk management and mitigation processes and procedures in furtherance of continued compliance with the laws of
the jurisdictions in which the Company operates. The programs currently in place include continued monitoring by executives of
the Company to ensure that all operations conform to and comply with required laws, regulations and operating procedures. The
Company further requires that each Clinic and all third parties in which it is engaged with report and disclose all instances
of non-compliance, regulatory, administrative, or legal proceedings that may be initiated against them. The Company is currently
in compliance with the laws and regulations in all jurisdictions and the related licencing framework applicable to its business
activities. Additionally, the Company has established a Professional Company (a “PC”) Advisory Committee with
a mandate to provide strategic advice with respect to the structure of clinics as PCs and the protocols for operations of the
PCs.
The
Company has developed and continues to refine a compliance program designed to ensure operational and regulatory requirements
continue to be satisfied. Through its human resources and operations departments, the Company oversees and implements training
for all employees with respect to the Company’s protocols.
The
Company has received legal opinions or advice in each jurisdiction where it currently operates or proposes to operate (other than
Oregon, where the applicable legislation has not yet been created), confirming the permissibility of the Company’s operations
in such jurisdictions.
KEY
HIGHLIGHTS AND RECENT DEVELOPMENTS
Third
Fiscal Quarter
On
October 1, 2020, Field Trip completed its previously announced going public transaction via a reverse takeover and began trading
on the Canadian Securities Exchange (the “CSE”) under the stock symbol “FTRP”, as well as the OTCBB under
the symbol FTRPF (see Reverse Takeover Transaction section of this MD&A for details).
On
October 8, 2020, Field Trip added Andrew Weil, M.D., a pioneer in the field of integrative medicine, to its medical advisory board.
Dr. Weil will provide Field Trip with medical advice and expertise on healing-oriented approaches to healthcare, as well as guidance
on extending the influence and reach of psychedelic therapies. Dr. Weil is the founder and director of the Andrew Weil Center
for Integrative Medicine at the University of Arizona, which is leading the effort to develop a comprehensive curriculum in integrative
medicine.
On
October 14, 2020, Field Trip entered into a strategic partnership with the Heroic Hearts Project (“HHP”), an international
non-profit organization that connects military veterans struggling with mental trauma to psychedelic therapies, to increase access
to, and awareness of, psychedelic therapies for veterans struggling from mental health disorders such as PTSD. Under the terms
of the relationship, HHP will be conducting active outreach and education programs for military veterans about the therapeutic
potential of ketamine-assisted psychotherapy.
On
October 22, 2020, Field Trip completed construction at its Chicago location, its third in the United States, and began providing
therapies to people in December.
On
November 27, 2020, Field Trip announced entry into a lease to establish a Field Trip Health location in Amsterdam, The Netherlands.
The Amsterdam location is Field Trip’s first clinic in Europe is slated to be the first Field Trip Health location that
treats people with programs using truffles containing psilocybin.
During
the month of December 2020, Field Trip successfully supported an application by a Canadian military veteran for reimbursement
for Field Trip’s “Core+” program from the Medavie Blue Cross/Veterans Affairs Canada insurance program. This
marks a significant milestone for military veterans wishing to explore psychedelic therapies to help treat the post-traumatic
stress and other mental health challenges experienced by military veterans, as insurance coverage will make Field Trip’s
treatment programs more affordable and accessible.
On
December 9, 2020, Field Trip entered into an agreement with Stifel GMP, as lead underwriter and sole bookrunner with Canaccord
Genuity Corp., Bloom Burton Securities Inc. and Eight Capital forming the syndicate of underwriters (collectively, the “Underwriters”),
pursuant to which the Underwriters agreed to purchase, on a “bought deal” basis 3,333,333 units (the “Units”)
of the Company at a price of $4.50 per Unit (the “Issue Price”), for aggregate gross proceeds of $14,999,999 (the
“BD Offering”). Each Unit is comprised of one Common Share and one-half of one warrant (“Listed Warrant”).
Each Listed Warrant is exercisable to acquire one Common Share until July 5, 2022 at an exercise price of $5.60 per Common Share,
subject to customary adjustments. In the event that the volume weighted average trading price of the Common Shares for ten (10)
consecutive trading days exceeds $9.00, the Company shall have the right to accelerate the expiry date of the Listed Warrants
upon not less than fifteen (15) trading days’ notice.
The
Company granted the Underwriters an option (the “Over-Allotment Option”), exercisable in whole or in part at
any time on or up to 30 days after the closing of the Offering, to purchase, up to an additional number of Units equal to 15%
of the number of Units sold pursuant to the BD Offering at the Issue Price.
Subsequent
Developments
On
January 5, 2021, the Company closed the BD Offering and issued 4,448,200 Units (including the full exercise of the Over-Allotment
Option) for gross proceeds of $20,016,900 (see Subsequent Events section of this MD&A for details).
On
January 7, 2021, the Company announced, subject to completion of a final site inspection, that its Toronto clinic has been selected
as a trial location for a MAPS-sponsored study on the safety, feasibility and preliminary outcomes of MDMA-assisted therapy to
treat eating disorders (the “Eating Disorder Study”), including Anorexia Nervosa. Field Trip will be hosting MAPS-trained
therapists who will be providing MDMA-assisted therapy to an initial cohort of individuals suffering from Anorexia Nervosa, and
collecting safety, feasibility and preliminary outcome data. Field Trip also announced that it is becoming a financial supporter
of MAPS, committing to making an annual contribution of $50,000, which will be matched by a collective contribution from the founders
of Field Trip on a dollar-for-dollar basis. Site selection is conducted independently by MAPS Public Benefit Corporation and is
unaffected by charitable contributions to MAPS.
On
January 26, 2021, Field Trip announced the opening of a location in Atlanta, GA. The opening of the Atlanta clinic represents
Field Trip’s 5th operating location and the first in 2021.
On
January 28, 2021, the Company announced that its common shares were approved for trading on the OTCQX® Best Market (“OTCQX”)
retaining its current symbol FTRPF. Field Trip’s shares and warrants continue to trade on the Canadian Securities Exchange
under the tickers FTRP and FTRP.WT, respectively.
On
February 9, 2021, Field Trip announced the official opening of the Field Trip Natural Products Limited Research and Development
Laboratory for Psychedelic Fungi in Mona, Jamaica (the “Jamaica Facility”). The Jamaica Facility, which is opening
as part of Field Trip’s previously announced strategic partnership with the University of West Indies, is the world’s
first legal research and cultivation facility dedicated exclusively to psilocybin-producing mushrooms and other plant-based psychedelics.
The work at the new facility will leverage the research and development efforts that have been conducted by Field Trip at a temporary
facility at UWI since January 2020, and will be broad-ranging, from genetics, breeding and cultivation work on many of the 180+
plus recorded species of psilocybin-producing mushrooms, to developing analytical methods for quality control, identification
of novel molecules, as well as extractions and formulations for drug development purposes.
NON-REVENUE
GENERATING PROJECTS
Field
Trip currently has four significant projects, which have not yet generated any revenue or significant revenues:
|
|
a.
|
FT-104
drug development;
|
|
|
b.
|
psilocybin-producing
fungi research and cultivation at its Jamaica Facility;
|
|
|
c.
|
the
opening of clinics in Amsterdam, Houston and San Diego and explorations into Oregon;
and
|
|
|
d.
|
the
development of its digital tools, being the “Trip” app and “Portal”.
|
FT-104
FT-104
is concurrently undergoing optimization of the chemical synthesis to maximize yields and purity of the drug substance, in addition
to performing scale up of synthetic methods and development of analytical methods. As the drug substance methods are finalized,
a GMP methodology for manufacture will be implemented with the creation of formal manufacturing processes within a cGMP framework.
Drug product formulation will begin in calendar Q1 2021 to develop dosage forms for administration of FT-104.
CMC
(chemistry manufacturing and controls) of the drug substance and the drug product, as well as all pre-clinical studies are expected
to be completed by September 2021. A global CRO with a specialty in Central Nervous System diseases has been identified who has
the capabilities to perform all preclinical and clinical Phase 1 studies. We anticipate that FT-104 will enter into Phase 1 clinical
trials before the end of the calendar year 2021. The Phase 1 clinical design is anticipated to be performed with healthy male
volunteers having prior experience with psychoactive substances. The Phase 1 studies will assess pharmacokinetic parameters and
safety in a dose escalation design with analysis of subjective experience of the intensity of the psychedelic experience using
standardized questionnaires. The Phase 1 studies will also determine a safe range of doses with FT-104 that can be carried into
the second phase of the development. We expect to spend $2,025,000 to complete Phase 1 studies by calendar Q1 2022 (see Milestones
and Available Funds). We cannot at this time estimate the cost of bringing FT-104 to market as much of the associated costs
depend on the outcomes of the Phase 1 and Phase 2 clinical trials.
Preliminary
results of our FT-104 molecule experiments demonstrate that: (i) FT-104 is a near equipotent 5HT2A receptor agonist to psilocybin
that can be delivered with high bioavailability; and (ii) FT-104 will likely produce a reliably short-duration of psychedelic
experience in the range of two to four hours, which is approximately half the duration of psilocybin.
Psilocybin
Research
We
are cultivating psilocybin-producing fungi and truffles at our temporary facility at UWI (the “Jamaica Facility”)
which became fully operational in February 2021. We are investigating the cultivation of a variety of psilocybe mushroom varieties
that may be used in psychedelic therapy, including the cultivation of species that have not yet been domesticated. The goal of
such operations is to develop analytical techniques to characterize active drug substances (tryptamine alkaloids) contained within
the mushroom species, mycelia and truffle formations, as a function of cultivating methods. In addition, we will develop optimized
techniques for production of mushrooms to give reproducible yields and quality, as well as the methods needed for safe storage
and packaging. We will also develop safety analysis methods that would be required before eventual use or consumption in therapy.
We expect to spend $1,320,000 over the next 12 months on ongoing psilocybin research (see Milestones and Available Funds).
We intend to continue our psilocybin research thereafter in order to further our intellectual property portfolio through the development
of optimized cultivation methods, extraction techniques and pursuit of novel molecule discovery.
Clinical
Operations
In
October 2020, Field Trip completed construction at its Chicago location and became operational in December. In January 2021, Field
Trip opened the doors to the Atlanta clinic. During the third fiscal quarter, we began clinic construction in Amsterdam, Houston
and signed a letter of intent to open a clinic in San Diego. The chart below sets out the status and target opening date of each
location:
|
Location
|
|
Size (Sq Ft)
|
|
Status
|
|
Target Opening Date
|
|
Amsterdam
|
|
7,158
|
|
Construction in progress
|
|
April, 2021
|
|
Houston
|
|
4,600
|
|
Construction in progress
|
|
April, 2021
|
|
San Diego
|
|
3,868
|
|
Letter of Intent Executed
|
|
To be determined
|
Subsequent
to quarter end, Field Trip signed a lease for its San Diego clinic (see Subsequent Events section of this MD&A).
The
Company expects to spend $1,300,000 to open these clinics. Furthermore, the Corporation expects to open an additional 12 clinics
by March 2022 and has allocated $4,100,000 to achieve this objective. See Milestones and Available Funds for additional
details.
Digital
Tools: Trip and Portal
In
October 2020, we launched our proprietary digital portal, along with an updated version of our Trip mobile software application.
Our “Trip” app’s user base grew by 144% increase from the second fiscal quarter. We anticipate a “Trip”
premium version will be released in the second half of calendar 2021, along with further enhancements to the digital portal at
a cost of $186,000.
Effects
of COVID-19 Pandemic on Operations
During
the third fiscal quarter, Field Trip was not significantly affected by the COVID-19 pandemic. California’s regional coronavirus
stay-at-home order for the months of December 2020 and January 2021 temporarily impacted the patient flow at our Santa Monica
clinic, which remained open during the seven weeks the order was in effect. We expect patient growth to accelerate in Santa Monica
over the next two quarters as COVID-19 restrictions continue to abate. During the initial outbreak of the pandemic, the Toronto
clinic was temporarily closed from March to May 2020; however, however, since reopening, the number of completed patient sessions
in Toronto continues to be in line with management’s expectations. Since June 2020, the Clinics have not been subject to
any “lock-down” restrictions as they are medical clinics and deemed an “essential service”. The COVID-19
pandemic has resulted in an estimated three-fold increase in the incidence of depression the US1. We anticipate that
we will see an increase in long-term demand for our depression related psychedelic therapies as case counts start to diminish
in the future. We anticipate that the long-term goals of the Company will require additional capital contributions via debt or
equity financings. In the event that the impact of COVID-19 worsens and negatively affects capital markets generally, there is
a risk that the Company may not be able to secure funding for these long-term objectives.
MILESTONES
AND AVAILABLE FUNDS
The
final short form prospectus of the Company dated December 29, 2020 (the “SF Prospectus”), which is available
on SEDAR at www.sedar.com, identified certain business milestones of the Company, which are re-produced below. As of the
date hereof, the Company has provided the status of these milestones, the actual or revised estimated costs and the revised date
of expected completion thereof, if applicable. The following are “forward-looking statements” and as such, there is
no guarantee that such milestones will be achieved on the timelines indicated or at all. Forward-looking statements are based
on management’s current expectations and are subject to a number of risks, uncertainties, and assumptions. See “Forward-Looking
Statements”.
1Ettman
CK, Abdalla SM, Cohen GH, Sampson L, Vivier PM, Galea S. Prevalence of Depression Symptoms in US Adults Before and During the
COVID-19 Pandemic. JAMA Network Open. 2020;3(9):e2019686. doi:10.1001/jamanetworkopen.2020.19686
|
Objective
|
|
Milestone
Description
|
|
SF
Prospectus
Estimated
Cost
|
|
Actual/Revised
Estimated
Cost
|
|
Actual/Estimated
Timeframe
for
Completion
(based
on
calendar
year)
|
|
Status
|
|
FT-104
Development Patenting and Phase 1
completed
|
|
US
utility and PCT patent filings
|
|
$
|
100,000
|
|
$
|
100,000
|
|
Q2
2021
|
|
In
Progress
|
|
|
CMC
development and pre-clinical studies completed
|
|
$
|
2,440,000
|
|
$
|
2,440,000
|
|
Q2
2021
|
|
In
Progress
|
|
|
Phase
1 studies completed
|
|
$
|
2,025,000
|
|
$
|
2,025,000
|
|
Q1
2022
|
|
Not
Started Yet
|
|
Jamaica
Facility
|
|
New
research facility renovations completed
|
|
$
|
400,000
|
|
$
|
400,000
|
|
Q4
2020
|
|
Complete
|
|
30
Operational Clinics(1)
|
|
New
York City clinic operational
|
|
$
|
160,000
|
|
$
|
160,000
|
|
Q2
2020
|
|
Complete
|
|
|
Santa
Monica clinic operational
|
|
$
|
318,000
|
|
$
|
318,000
|
|
Q2
2020
|
|
Complete
|
|
|
Chicago
Clinic operational
|
|
$
|
250,000
|
|
$
|
250,000
|
|
Q4
2020
|
|
Complete
|
|
|
10th
clinic operational (i.e. 6 additional clinics)
|
|
$
|
1,500,000
|
|
$
|
1,500,000
|
|
Q2
2021
|
|
In
Progress
|
|
|
15th
clinic operational
|
|
$
|
1,250,000
|
|
$
|
1,250,000
|
|
Q3
2021
|
|
Not
Started Yet
|
|
|
20th
operational clinic
|
|
$
|
1,250,000
|
|
$
|
2,000,000
|
|
Q4
2021
|
|
Not
Started Yet
|
|
|
30th
operational clinic
|
|
$
|
2,500,000
|
|
$
|
4,000,000
|
|
Q2
2022
|
|
Not
Started Yet
|
|
Issuer
Technology Platforms
|
|
Trip
App available in app store
|
|
$
|
220,000
|
|
$
|
220,000
|
|
Q2
2020
|
|
Beta
version launched. Premium version launch Q4 2021.
|
|
|
Patient
Portal launched
|
|
$
|
220,000
|
|
$
|
220,000
|
|
Q4
2020
|
|
First
version launched. Further enchancements to launch Q4 2021.
|
|
TOTAL:
|
|
|
|
$
|
12,633,000
|
|
$
|
14,883,000
|
|
|
|
|
Total
Funds Available
As
of the closing of the BD Offering (See “Subsequent Events”), the Company had $29,870,970 in funds available.
The table below describes sets out the anticipated use of the available funds and any variances to such uses from what was described
in the SF Prospectus. The use of proceeds represents the anticipated costs for next 12 months from January 1, 2021 to December
31, 2021 and assumes that no additional funds will be raised by the Company.
The
current use of funds represents the sum total of the unspent amount and additional use of funds. The Company notes the below variances
do not have a material impact on the Company’s ability to achieve its business objectives and milestones.
|
Use of Available Funds
|
|
SF Prospectus Previous
Use of Proceeds
(December 1, 2020 to
November 30, 2021)
|
|
|
Amounts Spent
in December,
2020
|
|
|
Additional
Amounts
Allocated in
December
2020
|
|
|
Current Use of
Funds (January 1
to December 31,
2021)
|
|
|
FT-104 Drug Development
|
|
US utility and PCT patent filings
|
|
$
|
77,000
|
|
|
|
Nil.
|
|
|
|
Nil.
|
|
|
$
|
77,000
|
|
|
CMC development and pre- clinical studies
|
|
$
|
2,440,000
|
|
|
$
|
497,196
|
|
|
|
Nil.
|
|
|
$
|
1,942,804
|
|
|
Phase 1 studies
|
|
$
|
2,025,000
|
|
|
|
Nil.
|
|
|
|
Nil.
|
|
|
$
|
2,025,000
|
|
|
Psilocybin Fungi Research and Cultivation (Jamaica Facility)
|
|
|
Facility renovations
|
|
|
Nil.
|
|
|
|
Nil.
|
|
|
|
Nil.
|
|
|
|
Nil.
|
|
|
Research and development
|
|
$
|
910,000
|
|
|
$
|
138,000
|
|
|
$
|
548,000
|
|
|
$
|
1,320,000
|
|
|
Clinic Expansion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York and Santa Monica Clinics
|
|
|
Nil.
|
|
|
|
Nil.
|
|
|
|
Nil.
|
|
|
|
Nil.
|
|
|
5 additional clinics (Chicago, Amsterdam, Houston, Atlanta, San Diego)
|
|
$
|
1,105,263
|
|
|
|
Nil.
|
|
|
$
|
164,737
|
|
|
$
|
1,270,000
|
|
|
12 additional clinics fiscal 2022
|
|
$
|
3,000,000
|
|
|
|
Nil.
|
|
|
$
|
1,100,000
|
|
|
$
|
4,100,000
|
|
|
Other
|
|
Technology platforms (Trip App and Patient Portal)
|
|
$
|
186,000
|
|
|
$
|
35,000
|
|
|
|
Nil.
|
|
|
$
|
151,000
|
|
|
Transaction costs (legal fees, audit fees, and other expenses)
|
|
$
|
450,000
|
|
|
$
|
483,000
|
|
|
|
Nil.
|
|
|
|
Nil.
|
|
|
Total use of funds
|
|
$
|
10,193,263
|
|
|
$
|
1,153,196
|
|
|
$
|
1,812,737
|
|
|
$
|
10,885,804
|
|
|
Unallocated working
capital
|
|
$
|
19,677,707
|
|
|
|
|
|
|
|
|
|
|
$
|
18,985,166
|
|
|
TOTAL:
|
|
$
|
29,870,970
|
|
|
|
|
|
|
|
|
|
|
$
|
29,870,970
|
|
With
respect to FT-104 drug development, we initially planned to commence pre-clinical studies in calendar Q4 2020. We have secured
proposals for the pre-clinical studies commencing in calendar Q1 2021. As a result, we have shifted forward our use of proceeds,
resulting in current use of proceeds of $1,942,804 after CMC development spend of $497,196 in December 2020.
With
respect to the Jamaica Facility, additional funds of $548,000 are required for the period January 1 to December 31, 2021. This
is due to underspend prior to December 2020, as the official grand opening of the clinic was delayed to February 10th,
2021, as well as additional funds allocated to the Natural Products division from Corporate, as Dr. Nathan Bryson has assumed
a more active role in the Psylocibin Fungi research.
With
respect to Clinic Expansion, we have allocated an additional $1,264,737 in costs for leasehold improvements in each new clinic,
based on revised assumptions relating to our most recent lease negotiations, design plans, and actual costs incurred with the
opening of our clinics to date.
The
Company has negative cash flow from operating activities and has historically incurred net losses. To the extent that the Company
has negative operating cash flows in future periods, it may need to deploy a portion of its existing working capital to fund such negative
cash flows. See “Risks and Uncertainties”.
The
expected use of funds represents the Company’s current intentions based upon its present plans and business condition, which
could change in the future as its plans and business conditions evolve. The amounts and timing of the actual use of the net proceeds
will depend on multiple factors and there may be circumstances where, for sound business reasons, a reallocation of funds may
be necessary in order for the Company to achieve its stated business objectives. The Company may also require additional funds
in order to fulfill its expenditure requirements to meet existing and any new business objectives, and the Company expects to
either issue additional securities or incur debt to do so. As a result, management will retain broad discretion in the application
of the available funds, and shareholders will be relying on management’s judgment regarding such application.
See
“Results of Operations” section for a discussion of occupancy costs, marketing expenditures and general and
administrative expenses.
The
material factors or assumptions used to develop the estimated costs disclosed above are included in the “Forward-Looking
Statements” section above. The actual amount that the Company spends in connection with each of the intended uses of
proceeds will depend on a number of factors, including those listed under “Risks and Uncertainties” or unforeseen
events.
SELECTED
CONSOLIDATED FINANCIAL DATA
|
(unaudited)
|
|
3
months ended
December 30, 2020
|
|
|
3
months ended
December 30, 2019
|
|
|
9
months ended
December 30, 2020
|
|
|
Period
from April 2,
2019 (Date of
Incorporation) to
December 30, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Revenue
|
|
|
316,329
|
|
|
|
-
|
|
|
|
434,460
|
|
|
|
-
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administration
|
|
|
2,989,160
|
|
|
|
683,604
|
|
|
|
6,525,224
|
|
|
|
1,247,935
|
|
|
Occupancy
costs
|
|
|
288,452
|
|
|
|
149,380
|
|
|
|
464,112
|
|
|
|
222,852
|
|
|
Sales
and marketing
|
|
|
534,848
|
|
|
|
96,391
|
|
|
|
955,155
|
|
|
|
139,973
|
|
|
Research
and development
|
|
|
1,064,744
|
|
|
|
81,113
|
|
|
|
2,545,735
|
|
|
|
81,113
|
|
|
Depreciation
and amortization
|
|
|
375,745
|
|
|
|
19,239
|
|
|
|
855,083
|
|
|
|
19,272
|
|
|
Patient
services
|
|
|
668,911
|
|
|
|
-
|
|
|
|
958,000
|
|
|
|
-
|
|
|
|
|
|
5,921,860
|
|
|
|
1,029,727
|
|
|
|
12,303,309
|
|
|
|
1,711,145
|
|
|
Other
Income (Expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance
expense
|
|
|
(84,688
|
)
|
|
|
(3,547
|
)
|
|
|
(178,045
|
)
|
|
|
(3,547
|
)
|
|
Other
expense
|
|
|
(454,341
|
)
|
|
|
(22,392
|
)
|
|
|
(989,014
|
)
|
|
|
(22,392
|
)
|
|
Listing
expense
|
|
|
(2,131,109
|
)
|
|
|
-
|
|
|
|
(2,131,109
|
)
|
|
|
-
|
|
|
Net
Loss
|
|
|
(8,275,669
|
)
|
|
|
(1,055,666
|
)
|
|
|
(15,167,017
|
)
|
|
|
(1,737,084
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss per Share - Basic and Diluted
|
|
|
(0.22
|
)
|
|
|
(0.10
|
)
|
|
|
(0.52
|
)
|
|
|
(0.22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
(including Restricted Cash)
|
|
|
9,979,319
|
|
|
|
1,057,334
|
|
|
|
|
|
|
|
|
|
|
Other
Receivables
|
|
|
585,236
|
|
|
|
7,297
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
|
20,066,620
|
|
|
|
1,175,561
|
|
|
|
|
|
|
|
|
|
|
Total
Non-Current Financial Liabilities
|
|
|
5,541,331
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Distributions
|
|
|
-
|
|
|
|
13,596
|
|
|
|
|
|
|
|
|
|
REVERSE
TAKEOVER TRANSACTION
On
October 1, 2020, FTP completed its previously announced going public transaction (the “Transaction”) pursuant to the
terms of an agreement entered into on August 21, 2020 between FTP, Newton and Newton Subco. On September 30, 2020, immediately
prior to the closing of the Transaction, Newton filed articles of amendment to: (i) consolidate its outstanding common shares
on an eight (8) old for one (1) new basis; and (ii) change its name from Newton Energy Corporation to “Field Trip Health
Ltd.”.
The
Transaction constituted a Reverse Takeover by way of a three-cornered amalgamation under applicable securities law, with FTP as
the reverse takeover acquirer and Newton as the reverse takeover acquiree. Pursuant to the terms of the agreement, Newton acquired
all the issued and outstanding common shares of FTP. Holders of FTP common shares received one post-consolidation common share
of Newton in exchange for each FTP share held. Newton became the direct parent and sole shareholder of FTP, changed its year end
from December 31 to March 31 and continued under the Canada Business Corporations Act (“CBCA”) by Certificate and
Articles of Continuance.
In
connection with the completion of the Transaction, Newton common shares listed on the NEX board of the TSXV were delisted on
September 30, 2020. Field Trip Health Ltd. shares commenced trading on the Canadian Stock Exchange (“CSE”) on
October 6, 2020, under the stock symbol FTRP.
The
Transaction does not constitute a business combination as Newton does not meet the definition of a business under IFRS 3 –
Business Combinations. Immediately after the Transaction, shareholders of FTP owned 100% of the voting rights of Newton. As a
result, the Transaction has been accounted for as a capital transaction with FTP being identified as the accounting acquirer and
the equity consideration being measured at fair value, using the acquisition method of accounting. The Transaction has been accounted
for in the consolidated financial statements as a continuation of the financial statements of FTP.
Purchase
price consideration
FTP
is deemed to have acquired the former Newton as part of the Transaction. The Transaction was accounted for using the acquisition
method of accounting whereby the assets acquired, and liabilities assumed were recorded at their estimated fair value at the acquisition
date. The acquisition did not meet the criteria for a business combination and is therefore treated as a recapitalization under
the scope of IFRS 2 – Share Based Payments. The consideration consisted entirely of shares of Field Trip Health Ltd. which
were measured at the estimated fair value on the date of acquisition. The fair value of the Common Shares issued to the former
Newton shareholders was determined to be $1,590,212 based on the fair value of the shares issued (795,106 shares at $2.00 per
share). The fair value of the Newton Options was determined to be $74,212 using a Black Scholes model based on the following assumptions:
Stock price volatility - 70%; Risk-free interest rate – 0.29 - 0.33%; Stock price at October 1, 2020 - $2.00 and an expected
life of 2.52 – 3.86 years. In connection with the acquisition of Newton, the Company incurred acquisition costs of $573,435.
|
Consideration: Newton Commons Shares
|
|
|
1,590,212
|
|
|
Consideration: Newton Options
|
|
|
74,982
|
|
|
Total consideration
|
|
|
1,665,194
|
|
|
Transaction costs paid
|
|
|
573,435
|
|
|
|
|
|
2,238,629
|
|
|
Identifiable assets acquired: MJO Cash
|
|
|
107,520
|
|
|
Listing Expense
|
|
|
2,131,109
|
|
RESULTS
OF OPERATIONS
For
the Third Quarter of Fiscal 2021
Overview
Since
inception, we have incurred losses while opening our clinics in North America and Europe, advancing the research and development
of our products and developing digital tools such as Trip App and our patient portal to complement in-clinic therapies.
For
our third fiscal quarter ended December 31, 2020, we earned patient services revenues of $316,329 from our Toronto, New York and
Santa Monica clinics, a 235% increase over our second fiscal quarter patient services revenues of $94,532. Net loss for our third
fiscal quarter of $8,275,669 was primarily due to general and administration expenses of $2,989,160, listing expenses of $2,131,109
relating to the Transaction, research and development expenses of $1,064,744, patient services expenses of $668,911, sales &
marketing expenses of $534,848, depreciation and amortization of $375,745, occupancy costs of $288,452 and realized foreign exchange
loss of $454,475. Net loss for our prior year’s third fiscal quarter of 2020 of $1,055,666 was primarily due to general
and administration expenses of $683,604, occupancy costs of $149,380, sales and marketing expenses of $96,391 and research and
development costs of $81,113.
For
the nine months ended December 31, 2020, we earned patient services revenues of $434,220 from our Toronto, New York and Santa
Monica clinics, despite a temporary closure in Toronto from March to May and New York and Santa Monica contributing revenues only
beginning in August and September 2020 respectively. We expect to scale our revenue as the number of patients treated at our locations
increases, with the addition of our Chicago location, which just began treating patients in late December, and the opening of
our Atlanta location in January 2021. We will continue our rollout of clinics across North America and Europe, with target openings
in Amsterdam and Houston in April 2021.
Net
loss of $15,167,017 was primarily due to general and administration expenses of $6,525,224, research and development expenses
of $2,545,735, listing expenses of $2,131,109 relating to the Transaction, foreign exchange loss of $1,045, 486, patient services
expenses of $958,000, sales & marketing expenses of $955,155, depreciation and amortization of $855,083 and occupancy costs
of $464,112. Net loss for the period ended December 31, 2019 of $1,737,084 was primarily due to general and administration expenses
of $1,247,935, occupancy costs of $222,852, sales and marketing expenses of $139,973 and research and development costs of $81,113.
General
and Administration
Components
of general and administrative expenses for the three and nine months ended December 31, 2020 and periods ending December 31, 2019
were as follows:
|
|
|
3 months ended
December 31, 2020
|
|
|
3 months ended
December 31, 2019
|
|
|
9 months ended
December 31, 2020
|
|
|
Period from April 2,
2019 (Date of
Incorporation)
to
December 31, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Personnel costs
|
|
|
1,157,124
|
|
|
|
240,286
|
|
|
|
2,864,298
|
|
|
|
319,052
|
|
|
External services
|
|
|
1,105,343
|
|
|
|
220,865
|
|
|
|
2,209,469
|
|
|
|
512,532
|
|
|
Share-based payments (Note 15)
|
|
|
232,957
|
|
|
|
88,390
|
|
|
|
684,002
|
|
|
|
219,873
|
|
|
Travel and entertainment
|
|
|
103,855
|
|
|
|
108,182
|
|
|
|
152,508
|
|
|
|
162,765
|
|
|
IT and technology
|
|
|
321,198
|
|
|
|
13,701
|
|
|
|
503,878
|
|
|
|
14,496
|
|
|
Office and general
|
|
|
68,683
|
|
|
|
12,180
|
|
|
|
111,069
|
|
|
|
19,217
|
|
|
Total general and administration
|
|
|
2,989,160
|
|
|
|
683,604
|
|
|
|
6,525,224
|
|
|
|
1,247,935
|
|
For
our third fiscal quarter ended December 31, 2020, general and administrative expenses totaled $2,989,160, an increase of
$2,305,556 compared to general and administrative expenses of $683,604 for the comparative quarter ended December 31, 2019.
This increase was primarily due to operations and medical office administration (“MOA”) personnel costs of
$916,838 relating to the opening of the Toronto, New York and Santa Monica clinics, external services of $884,478 primarily
relating to investor relations, professional fees and consulting fees, IT and technology costs of $307,497 and share-based
payments of $144,567.
For
the nine-month period ended December 31, 2020, general and administrative expenses totaled $6,525,224, an increase of $$5,277,289
compared to general and administrative expenses of $1,247,935 for the comparative period ended December 31, 2019. This increase
was primarily due to operations and MOA personnel costs of $2,545,246 relating to the opening of the Toronto, New York and Santa
Monica clinics external services relating of $1,696,973 primarily relating to investor relations, professional fees and consulting
fees, IT and technology costs of $489,382 and share-based payments of $464,129.
Occupancy
costs
Components
of occupancy costs for the three and nine months ended December 31, 2020 and periods ended December 31, 2019 were as follows:
|
|
|
3 months ended
December 31, 2020
|
|
|
3 months ended
December 31, 2019
|
|
|
9 months ended
December 31, 2020
|
|
|
Period from April 2,
2019 (Date of
Incorporation)
to
December 31, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Operating rent expense
|
|
|
150,826
|
|
|
|
102,205
|
|
|
|
161.196
|
|
|
|
162,036
|
|
|
Taxes, maintenance, insurance
|
|
|
11,196
|
|
|
|
28,675
|
|
|
|
28,797
|
|
|
|
38,926
|
|
|
Minor furniture and fixtures
|
|
|
89,572
|
|
|
|
-
|
|
|
|
193,996
|
|
|
|
-
|
|
|
Utilities and services
|
|
|
36,858
|
|
|
|
18,500
|
|
|
|
80,123
|
|
|
|
21,890
|
|
|
Total occupancy costs
|
|
|
288,452
|
|
|
|
149,380
|
|
|
|
464,112
|
|
|
|
222,852
|
|
Occupancy
costs relate to our Toronto headquarters, Toronto, New York, Santa Monica and Chicago clinics. As we continue our rollout of clinics
across North America and Europe, we anticipate we will open up to 6 additional clinics by the end of March 2021.
For
our third fiscal quarter ended December 31, 2020, occupancy costs totaled $288,452, an increase of $139,072 compared to
occupancy costs of $149,380 for the comparative quarter ended December 31, 2019. This increase was primarily due to the
purchase of minor furniture and fixtures of $89,572 and increased operating rent expense of $48,621 related to the
Company’s Toronto headquarters, the Toronto, New York, Santa Monica and Chicago clinics. Occupancy costs for the
quarter ended December 31, 2019 related to the Toronto headquarters lease only, as the company was in pre-operational,
startup phase.
For
the nine-month period ended December 31, 2020, occupancy costs totaled $464,112, an increase of $241,260 compared to
occupancy costs of $222,852 for the comparative period ended December 31, 2020. This increase was primarily due to the
purchase of minor furniture and fixtures of $193,996 and increased utilities and services expenses of $58,233 related to the
Company’s Toronto headquarters, the Toronto, New York, Chicago and Santa Monica clinics. Occupancy costs for the
comparative period ended December 31, 2019 related to the Toronto headquarters lease only.
Sales
and Marketing
Components
of sales and marketing for the three and nine months ended December 31, 2020 and periods ended December 31, 2019 were as follows:
|
|
|
3 months ended
December 31, 2020
|
|
|
3 months ended
December 31, 2019
|
|
|
9 months ended
December 31, 2020
|
|
|
Period from April 2,
2019 (Date of
Incorporation)
to
December 31, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Brand and public relations
|
|
|
185,968
|
|
|
|
90,835
|
|
|
|
386,688
|
|
|
|
127,617
|
|
|
Conference fees
|
|
|
14,007
|
|
|
|
5,556
|
|
|
|
46,058
|
|
|
|
12,356
|
|
|
Personnel costs
|
|
|
140,964
|
|
|
|
-
|
|
|
|
226,128
|
|
|
|
-
|
|
|
External marketing services
|
|
|
193,909
|
|
|
|
-
|
|
|
|
296,281
|
|
|
|
-
|
|
|
Total sales and marketing
|
|
|
534,848
|
|
|
|
96,391
|
|
|
|
955,155
|
|
|
|
139,973
|
|
For
our third fiscal quarter ended December 31, 2020, sales and marketing expenses totaled $534,848, an increase of $438,457 compared
to sales and marketing expenses of $96,391 for the comparative quarter ended December 31, 2019. This increase was primarily due
to external marketing services of $193,909, personnel costs of $140,964 and brand and public relations costs of $95,133. During
the quarter, the
Company
continued to build out organic and paid digital acquisition channels across all Clinics, resulting in consistent growth in client
enquiries week over week.
For
the nine-months ended December 31, 2020, sales and marketing expenses totaled $955,155, an increase of $815,182 compared to sales
and marketing expenses of $139,973 for the comparative period ended December 31, 2019. This increase was primarily due to external
marketing services of $296,281, brand and public relations costs of $259,071, personnel costs of $226,128 and conference fees
of $33,702.
Research
and Development
Components
of research and development for the three and nine months ended December 31, 2020 and periods ended December 31, 2019 were as
follows:
|
|
|
3 months ended
December 31, 2020
|
|
|
3 months ended
December 31, 2019
|
|
|
9 months ended
December 31, 2020
|
|
|
Period from April 2,
2019 (Date of
Incorporation)
to
December 31, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
External services
|
|
|
655,420
|
|
|
|
-
|
|
|
|
1,715,064
|
|
|
|
-
|
|
|
Personnel costs
|
|
|
287,073
|
|
|
|
79,749
|
|
|
|
581,859
|
|
|
|
79,749
|
|
|
Supplies and services
|
|
|
122.251
|
|
|
|
1,364
|
|
|
|
248,812
|
|
|
|
1,364
|
|
|
Total research and development
|
|
|
1,064,744
|
|
|
|
81,113
|
|
|
|
2,545,735
|
|
|
|
81,113
|
|
External
services fees relate primarily to fees paid to third parties to (i) further FT-104 development; and ii) manage the construction
and project management of the Jamaica Facility, oversee the operations of the Jamaica Facility, provide legal advice and manage
government relations. Construction of the Jamaica Facility was completed in October 2020 and the lab officially opened in February
2021. External services fees also include non-cash share-based payments relating to the Jamaica Facility shares (see Note 15 Share-Based
Payments in the condensed interim consolidated financial statements for the three and nine months ended December 31, 2020).
For
our third fiscal quarter ended December 31, 2020, research and development expenses totaled $1,064,744, an increase of
$983,631 compared to research and development expenses of $81,113 for the comparative quarter ended December 31, 2019. This
increase was primarily due to external services of $178,549 paid to a third-party CMO and CRO to further FT-104 development,
share-based payment of $476,831 relating to the Jamaica Facility shares, personnel costs of $207,324 and supplies and
services of $120,887 for the Jamaica Facility. FT-104 is concurrently undergoing optimization of the chemical synthesis to
maximize yields and purity of the drug substance, in addition to performing scale up of synthetic methods and development of
analytical methods. See Non-Revenue Generating Projects for a discussion of FT-104 milestones and anticipated
costs.
For
the nine-months ended December 31, 2020, research and development expenses totaled $2,545,735 an increase of $2,464,522 compared
to research and development expenses of $81,113 for the comparative period ended December 31, 2019. This increase was primarily
due to external services of $286,195, share-based payment of $1,428,831 relating to the Jamaica Facility shares, personnel costs
of $502,110 and supplies and services of $247,448
Depreciation
and Amortization
Components
of depreciation and amortization for the three and nine months ended December 31, 2020 and periods ended December 31, 2019 were
as follows:
|
|
|
3
months ended
December 31, 2020
|
|
|
3
months ended
December 31, 2019
|
|
|
9
months ended
December 31, 2020
|
|
|
Period
from April 2,
2019 (Date of
Incorporation to
December 31, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Depreciation
and Amortization - Leasehold Improvement
|
|
|
45,616
|
|
|
|
-
|
|
|
|
99.151
|
|
|
|
-
|
|
|
Depreciation and Amortization - Furniture & Fixtures
|
|
|
11,036
|
|
|
|
-
|
|
|
|
19,614
|
|
|
|
-
|
|
|
Depreciation and Amortization -
Computer Equipment & Software
|
|
|
17,407
|
|
|
|
541
|
|
|
|
39,291
|
|
|
|
574
|
|
|
Depreciation and Amortization -
Medical Lab and Equipment
|
|
|
9,888
|
|
|
|
-
|
|
|
|
10,858
|
|
|
|
-
|
|
|
Total depreciation and amortization
|
|
|
83,947
|
|
|
|
541
|
|
|
|
168,912
|
|
|
|
574
|
|
Depreciation
and amortization – Leasehold Improvements for the three and nine months ended December 30, 2020 related to leasehold improvements
for the Toronto, New York and Santa Monica clinics as well as the buildout of the Jamaica Facility. Depreciation and amortization
– Medical Lab and Equipment for the same periods related to the buildout of the Jamaica Facility.
Patient
Services Expense
Components
of patient services expenses for the three and nine months ended December 31, 2020 and periods ended December 31, 2019 were as
follows:
|
|
|
3 months ended
December 30, 2020
|
|
|
3 months ended
December 30, 2019
|
|
|
9 months ended
December 30, 2020
|
|
|
Period from April 2,
2019 (Date of
Incorporation)
to
December 30, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Personnel costs
|
|
|
645,091
|
|
|
|
-
|
|
|
|
898,214
|
|
|
|
-
|
|
|
Supplies and services
|
|
|
20,334
|
|
|
|
-
|
|
|
|
54,648
|
|
|
|
-
|
|
|
Payment provider fees
|
|
|
3,486
|
|
|
|
-
|
|
|
|
5,138
|
|
|
|
-
|
|
|
Total patient services expense
|
|
|
668,911
|
|
|
|
-
|
|
|
|
958,000
|
|
|
|
-
|
|
Patient
services expense is comprised of direct costs incurred by the clinics to generate patient services revenue at the Toronto, New
York, Santa Monica and Chicago clinics. Field Trip opened its first clinic in Toronto in March 2020.
Finance
Expense
Components
of finance expense for the three and nine months ended December 31, 2020 and periods ended December 31, 2019 were as follows:
|
|
|
3 months ended
December 30, 2020
|
|
|
3 months ended
December 30, 2019
|
|
|
9 months ended
December 30, 2020
|
|
|
Period from April 2,
2019 (Date of
Incorporation)
to
December 30, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Interest expense on leases
|
|
|
(91,357
|
)
|
|
|
(3,557
|
)
|
|
|
(189,419
|
)
|
|
|
(3,557
|
)
|
|
Interest income on shareholders’ loan
|
|
|
634
|
|
|
|
-
|
|
|
|
1,883
|
|
|
|
-
|
|
|
Interest income on refundable lease deposit
|
|
|
2,805
|
|
|
|
-
|
|
|
|
6,367
|
|
|
|
-
|
|
|
Interest expense on loan
|
|
|
(815
|
)
|
|
|
-
|
|
|
|
(948
|
)
|
|
|
-
|
|
|
Interest income on bank balances
|
|
|
4,045
|
|
|
|
10
|
|
|
|
4,072
|
|
|
|
10
|
|
|
Total finance expense
|
|
|
(84,688
|
)
|
|
|
(3,547
|
)
|
|
|
(178,045
|
)
|
|
|
(3,547
|
)
|
Other
Income (Expense)
Components
of other income (expense) for the three and nine months ended December 31, 2020 and periods ended December 31, 2019 were as follows:
|
|
|
3 months ended
December 31, 2020
|
|
|
3 months ended
December 31, 2019
|
|
|
9 months ended
December 31, 2020
|
|
|
Period from April 2,
2019 (Date of
Incorporation)
to
December 31, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Unrealized foreign exchange gain
|
|
|
754
|
|
|
|
661
|
|
|
|
82
|
|
|
|
661
|
|
|
Realized foreign exchange loss
|
|
|
(454,475
|
)
|
|
|
(23,053
|
)
|
|
|
(1,045,486
|
)
|
|
|
(23,053
|
)
|
|
Government assistance
|
|
|
(620
|
)
|
|
|
-
|
|
|
|
56,390
|
|
|
|
-
|
|
|
Total other income (expense)
|
|
|
(454,341
|
)
|
|
|
(22,392
|
)
|
|
|
(989,014
|
)
|
|
|
(22,392
|
)
|
During
the current fiscal quarter and nine months ended December 31, 2020, we recorded a realized foreign exchange loss of $454,475 and
$1,045,486, which reflected a strengthening of the U.S. dollar against the Canadian dollar on our U.S.-denominated bank balances.
We
also applied for, and received, governmental assistance related to the COVID-19 pandemic:
|
|
(i)
|
The
Canada Emergency Business Account (CEBA) program provides an interest-free loan of $40,000,
of which and if required conditions are met, only 75% or $ 30,000 of the loan amount
is repayable by December 31, 2022. Government assistance is comprised of the fair value
of the loan amount forgiven using an 15% effective interest rate (see Note 13 Loan Payable
of our unaudited condensed interim consolidated financial statements for the three and
nine months ended December 31, 2020 and periods ended December 31, 2019).
|
|
|
(ii)
|
The
10%Temporary Wage Subsidy for Employers (TWS) program provides a subsidy of 10% of wages
from March 18, to June 19, 2020 up to $1,375 for each eligible employee. The maximum
total is $25,000 for each eligible employer. For the three and nine months ended December
31, 2020 the Company received wage subsidies of $0 and $18,000 respectively.
|
|
|
(iii)
|
The
Innovation Assistance Program (IAP) provides assistance to early stage, small to medium-sized
enterprises unable to access COVID-19 support. The Company received $20,328 to cover
salary expenses for the period from April 1 to June 24, 2020.
|
SELECTED
FINANCIAL INFORMATION – SUMMARY OF QUARTERLY RESULTS
The
following table sets out selected quarterly information for all completed fiscal quarters of the Company up to December 31, 2020:
|
|
|
Q3 2021
3 Months Ended
December 31, 2020
|
|
|
Q2 2021
3 Months Ended
September 30, 2020
|
|
|
Q1 2021
3 Months Ended
June 30, 2020
|
|
|
Q4 2020
Period Ended
March 31, 2020
|
|
|
Q3 2020
3 Months Ended
December 31, 2019
|
|
|
02 2020
3 Months Ended
September 30, 2019
|
|
|
Q1 2020
Period Ended
June 30, 2019
|
|
|
FY 2020
Period Ended
March
31, 2020
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Revenue
|
|
|
316,329
|
|
|
|
94,532
|
|
|
|
23,599
|
|
|
|
1,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,000
|
|
|
Net Loss
|
|
|
(8,275,669
|
)
|
|
|
(3,932,444
|
)
|
|
|
(2,958,904
|
)
|
|
|
(891,240
|
)
|
|
|
(1,055,666
|
)
|
|
|
(514,643
|
)
|
|
|
(166,775
|
)
|
|
|
(2,628,324
|
)
|
|
Loss per share - basic and diluted
|
|
|
(0.22
|
)
|
|
|
(0.16
|
)
|
|
|
(0.21
|
)
|
|
|
(0.05
|
)
|
|
|
(0.10
|
)
|
|
|
(0.08
|
)
|
|
|
(0.03
|
)
|
|
|
(0.26
|
)
|
Historically,
the Company’s operating results have fluctuated on a quarterly basis and we expect that quarterly financial results will
continue to fluctuate. If anticipated patient services revenues in any quarter do not occur when we expect due to unexpected delays
in our North American clinic rollout and the economic impact of COVID-19 outbreak, our operating results for that quarter and
future quarters may be adversely affected. Furthermore, historical patterns of expenditures cannot be taken as an indication of
future expenditures. The amount and timing of expenditures and therefore liquidity and capital resources vary substantially from
period to period depending on the number of clinics opened, the number of research and development programs being undertaken at
any one time, the stage of the development programs, the timing of significant expenditures for pre-clinical studies and clinical
trials and the availability of funding from investors. Because of the historical variations in our operating results, our limited
operating history and the rapidly evolving nature of our business, we believe that period-to-period comparisons of our revenue
and operating results are not necessarily meaningful and should not be relied upon as indications of our future performance.
LIQUIDITY
AND CAPITAL RESOURCES
Cash
and Working Capital
Since
inception, we have financed our operations primarily from the issuance of equity and, to a lesser degree, from patient
revenues from our clinics and interest income on funds available for investment. To-date, the Company has raised $24,308,640
in gross proceeds through brokered and non-brokered private placements and $20,016,900 in gross proceeds through a bought
deal offering (see “Subsequent Events’). The Company’s primary capital needs are funds to advance
its research and development activities, clinic rollout and digital teletherapy tools development and for working capital
purposes. These activities include staffing, preclinical studies, clinical trials and administrative costs.
On
April 2, 2019, the FTP issued 6,300,630 class A shares of FTP (the “Class A Shares”) at a price of $0.055 per
share yielding gross proceeds of $350,000.
On
October 3, 2019, directors of FTP exercised options to purchase 2,700,270 Class A Shares at a price of $0.00001 for gross proceeds
of $27.
On
October 19, 2019, FTP issued 2,510,000 Class A Shares at a price of $0.50 per share yielding gross proceeds of $1,255,000. As
part of the issuance, shareholder loans of $50,000 and $10,000 for the purchase of 100,000 and 20,000 Class A Shares, respectively
were entered into with advisors of FTP, payable 5 years from the loan date and bearing zero interest.
On
January 29, 2020, FTP issued 9,431,023 class B shares of FTP (the “Class B Shares”) at a price of $0.90 USD
per Class B Share, yielding gross proceeds of $8,487,962 USD or $11,195,540 CAD.
Total
finance costs incurred for the issuance of share capital during the period ended March 31, 2020, was $19,297 CAD of which $7,299
CAD was settled via the issuance of 6,666 Class B Shares at a price of $0.90 USD or $1.1884 CAD per share.
On
May 20, 2020, FTP issued 76,240 Class B Shares as follows: 11,113 Class B shares at a price of $0.90 USD per Class B Share, yielding
gross proceeds of $10,002 USD or $13,935 CAD. Real estate brokerage commissions of $63,853 were settled via the issuance of 50,900
Class B shares at a price of $0.90 USD or $1.2542 CAD per share. Share issuance costs of $17,829 were settled via the issuance
of 14,216 Class B Shares at a price of $0.90 USD or $1.2542 CAD per Class B Share.
On
August 11, 2020, directors of FTP exercised options to purchase 9,000,900 Class A Shares at a price of $0.00001 for gross proceeds
of $90.
On
August 14, 2020, FTP completed brokered and non-brokered private placements of an aggregate of 5,516,724 Class A Shares, at a
price of $2.00 per Class A Share, for aggregate gross proceeds of $11,033,448 (the “FTP Offering”). Canaccord
Genuity Corp. and Stifel Nicolaus Canada Inc. jointly acted as lead agents in connection with the brokered portion of the Private
Placement (the “Agents”), for which they were paid a cash commission of $391,082, and were issued 55,167 Class
A Shares and 299,753 compensation warrants, with each warrant exercisable into one Class A Share at a price of $2.00 Class A Share
until August 14, 2022 (the “FTP Compensation Warrants”).
On
September 21, 2020, and as a follow on to the FTP Offering, FTP completed a private placement of an aggregate of 816,932 Class
A Shares at a price of $2.00 per Class A Share for gross proceeds of $1,633,864.
The
Company incurred share issuance costs of $707,263 relating to the August 14 and September 21, 2020 private placements.
On
September 25, 2020, 600,000 Class A Shares were issued as payment of milestone shares under the Jamaican SPA.
Upon
closing of the FTP Offering, all of the Class B Shares were automatically converted into Class A Shares.
On
September 17, 2020, FTP received a $40,000 interest-free loan under the federal Canadian Emergency Business Account (CEBA) program,
and if required conditions are met, only 75% or $30,000 of the loan amount will need to be repaid by December 31, 2022.
On
October 1, 2020, 795,106 Class A Field Trip Shares were issued upon closing of the Transaction (see Reverse Takeover section
of this MD&A).
During
the current third fiscal quarter, 183,201 options were exercised for gross proceeds of $191,278.
See
“Subsequent Events” for details on issuances after December 31, 2020.
We
have experienced operating losses and cash outflows from operations since incorporation, and will require ongoing financing to
continue its research and development, clinic rollout and digital tele-therapy development activities. As we have not yet achieved
profitability, there are uncertainties regarding our ability to continue as a going concern. We have not earned significant revenues
from the clinics, nor have we earned any revenue or reached successful commercialization of any products. Our success is dependent
upon the ability to finance our cash requirements to continue our activities. We have significant lease obligations related to
our current clinics, newly leased property, construction and office locations. There is significant risk of defaults on these
liabilities and other liabilities of the Company if we cannot raise additional funds through the issuance of additional equity
securities, through loan financing, or other means.
There
is no assurance that additional capital or other types of financing will be available if needed or that these financings will
be on terms at least as favourable to the Company as those previously obtained, or at all. See “Risks and Uncertainties”.
The
table below sets out our cash, restricted cash and working capital as at December 31 and March 31, 2020:
|
|
|
3 months
ended
December 31, 2020
|
|
|
3 months
ended
March 31, 2020
|
|
|
|
|
$
|
|
|
$
|
|
|
Cash
|
|
|
9,828,870
|
|
|
|
9,590,758
|
|
|
Restricted cash
|
|
|
150,449
|
|
|
|
100,000
|
|
|
Working capital
|
|
|
8,204,487
|
|
|
|
8,985,037
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital
calculation:
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
11,377,844
|
|
|
|
10,027,786
|
|
|
Current liabilities
|
|
|
3,173,357
|
|
|
|
1,042,749
|
|
|
Working capital
|
|
|
8,204,487
|
|
|
|
8,985,037
|
|
As
at December 31, 2020, we had $100,000 of restricted cash held as collateral against Field Trip Psychedelics Inc. credit card limit.
We also had $150,449 of restricted cash held at the PCs which, under the terms of the MSA, must be used to pay PC personnel and
expenses before satisfying prior and current management fees.
Working
capital represents the excess of current assets over current liabilities. The increase in our cash was primarily due to cash provided
by financing activities of $12,935,960, partially offset by cash used in operating activities of $11,203,971 and cash used in
investing activities of $1,519,019.
The
following table shows our cash flows from operating, investing and financing activities for the periods indicated:
|
|
|
9 months ended
December 31, 2020
|
|
|
Period from April 2,
2019 (Date of
Incorporation)
to
December 31, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
Cash used in operating activities
|
|
|
(9,064,234
|
)
|
|
|
(1,437,480
|
)
|
|
Cash used in investing activities
|
|
|
(1,600,630
|
)
|
|
|
(134,000
|
)
|
|
Cash provided by financing activities
|
|
|
11,123,147
|
|
|
|
3,575,694
|
|
Cash
used in operating activities
During
the nine months ended December 31, 2020, cash used in operating activities of $9,064,234 was primarily due to the net loss of
$15,167,017, partially offset by the following non-cash items: share-based payments of $2,308,555, reverse take-over costs of
$2,131,109, depreciation and amortization of $855,083 and net changes in non-cash working capital of $631,621.
During
the period from Apr 2 (date of incorporation) to December 31, 2019, cash used in operating activities of $1,437,480 was primarily
due to the net loss of $1,737,084, partially offset by non-cash share-based payments of $219,873.
Cash
used in investing activities
During
the nine months ended December 31, 2020, cash used in investing activities of $1,600,630 consisted primarily of acquisition
of property, plant and equipment of $1,359,272 for our New York, Santa Monica and Chicago clinics and the buildout of the
Jamaica Facility, acquisition of intangible assets of $200,075 relating to our digital patient portal (“Patient
Portal”) and Trip App, and refundable security deposits paid for right-of-use assets of $41,283. Our Chicago clinic
became operational in December 2020. We opened the doors to our Atlanta clinic in January 2021. We expect our Amsterdam and
Houston clinics to become operational in April 2021.
During
the period from April 2 (date of incorporation) to December 31, 2019, cash used in investing activities of $134,000 consisted
primarily of refundable security deposits paid for right-of-use assets of $123,465 and the acquisition of property, plant and
equipment for our Toronto corporate asset of $10,535.
Cash
provided by financing activities
During
the nine months ended December 31, 2020, cash provided by financing activities of $11,123,147 was primarily due to net proceeds
of $11,582,902 upon closing of the August 14 and September 21, 2020 private placements, proceeds from the exercise of stock options
of $191,368 and CEBA loan proceeds of $40,000, partially offset by the repayment of lease obligation of $691,123.
During
the period from Apr 2 (date of incorporation) to December 31, 2019, cash provided by financing activities of $3,575,694 was primarily
due to net proceeds of $3,585,983.
See
also “Milestones & Available Funds” for additional commentary of the use of funds by the Company.
OFF-BALANCE
SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS
We
do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our
financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are
material to investors.
Lease
obligations
The
Company leases real property for its clinical and office locations. Additional (non-lease) rent payments for these locations are
variable, and therefore have not been included in the right-of-use asset or lease obligations. In addition, the Company has committed
purchase orders related to capital asset expansion all of which are expected to be paid within the next year. The Company is committed
for estimated additional variable (non-lease) rent and capital asset payments obligations as follows:
|
|
|
Expiry
|
|
|
Additional Rent
Payments
|
|
|
1 year
|
|
|
2-3 years
|
|
|
4-5 years
|
|
|
More than
5 years
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Toronto corporate office and clinic
|
|
|
October 31, 2023
|
|
|
|
260,237
|
|
|
|
111,530
|
|
|
|
148,707
|
|
|
|
-
|
|
|
|
-
|
|
|
Chicago Clinic
|
|
|
September 30, 2031
|
|
|
|
506,633
|
|
|
|
47,129
|
|
|
|
94,257
|
|
|
|
94,257
|
|
|
|
270,990
|
|
|
Amsterdam Clinic
|
|
|
October 31, 2026
|
|
|
|
392,087
|
|
|
|
67,215
|
|
|
|
134,430
|
|
|
|
134,430
|
|
|
|
56,012
|
|
|
Santa Monica clinic
|
|
|
June 30, 2030
|
|
|
|
598,613
|
|
|
|
63,012
|
|
|
|
126,024
|
|
|
|
126,024
|
|
|
|
283,553
|
|
|
|
|
|
|
|
|
|
1,757,569
|
|
|
|
288,885
|
|
|
|
503,417
|
|
|
|
354,711
|
|
|
|
610,556
|
|
Notes:
(1) See
“Non-Revenue Generating Projects – Clinical Operations” for additional details.
Jamaica
Facility
|
|
|
Expiry
|
|
|
Total
|
|
|
1 year
|
|
|
2-3 years
|
|
|
4-5 years
|
|
|
More than
5 years
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Jamaica Facility
|
|
|
April 6, 2023
|
|
|
|
880,492
|
|
|
|
673,135
|
|
|
|
163,925
|
|
|
|
43,433
|
|
|
|
0
|
|
In
connection with its partnership with UWI, FTNP agreed to lease property from UWI, contribute up to US$1,000,000 of initial capital
for the Jamaica Facility and psilocybin research, and a total of US$100,000 to fund student development initiatives at UWI over
a 36-month period. To-date, we have incurred $$152,172 in capital costs related to the Jamaica Facility which transferred from
construction-in-progress to leasehold improvements upon the completion of construction (see Note 8 of the condensed interim
consolidated financial statements for three and nine months ended December 31, 2020 and periods ended December 31, 2019).
CONTINGENCIES
Litigation
During
the prior year, we terminated a lease contract with a lessor due to circumstances which we believe constituted a breach of contract
by the lessor. Should we become involved in litigation due to the termination of this contract we believe we have prepared valid
legal defenses and that no material exposure exists on the eventual settlement of such litigation. This lease was treated as a
short-term lease under IFRS 16 and all payments including security deposit paid were fully expensed during the period ended March
31, 2020.
OUTSTANDING
SHARE DATA
The
Company has an unlimited number of Common Shares and preferred shares authorized for issuance, of which the following Common Shares
are issued and outstanding as at December 31, 2020 and as of the date hereof, on a fully-diluted basis and no preferred shares
are issued and outstanding:
|
Class of Securities
|
|
Number of Common Share
Equivalent as of December 31,
2020
|
|
|
Number of Common Share
Equivalent as of March
31,
2020
|
|
|
Common Shares
|
|
|
37,986,193
|
|
|
|
20,941,923
|
|
|
Compensation Warrants
|
|
|
299,753
|
|
|
|
-
|
|
|
Options to purchase Common Shares
|
|
|
3,980,479
|
|
|
|
11,377,706
|
|
For
additional information on share data please refer to notes 4, 14 and 15 of the unaudited condensed interim consolidated financial
statements for the three and nine months ended December 31, 2020 and periods ending December 31, 2019 and notes 3, 10 and 11 of
the audited consolidated financial statements for the period from April 2, 2019 (date of incorporation) to March 31, 2020.
Options
& Warrants
During
the nine months ended December 31, 2020, the Company granted 1,812,423 options to employees and consultants. The options vest
over a period of 1 to 4 years, are exercisable for a period of 2 to 10 years from issuance, and are exercisable at a price of
$2.00 to $4.60 per option.
During
the nine months ended December 31, 2020, the Company issued 9,184,101 Common Shares of the Company on the exercise of options
with an exercise price of $0.0001 to $2.00 per Common Shares.
Subsequent
to the period ended December 31, 2020, the Company issued 229,997 options to employees and consultants. The options vest over
a period of 4 years, are exercisable for a period of 10 years from issuance and are exercisable at a price of $5.01 per option.
As
at December 31, 2020, the Company had 3,980,479 stock options outstanding and as at the date of this MD&A, the Company has
4,141,726 stock options outstanding.
See
“Liquidity and Capital Resources” and “Subsequent Events” for details on warrant issuances.
As at December 31, 2020, the Company had 299,753 common share purchase warrants outstanding and as at the date of this MD&A,
the Company has 2,742,434 common share purchase warrants outstanding.
TRANSACTIONS
WITH RELATED PARTIES
Field
Trip entered into shareholder loan agreements with two of its advisors for a total of $60,000 in July 2019. The notes are non-interest
bearing (i.e., not on commercial terms) and are due on demand or five years from the date of note issuance. These loans are expected
to be repaid in full at maturity. The Company measured the loans at fair value at initial recognition using an appropriate market
interest rate. The below-market element of the loans was determined at initial recognition as the difference between the loan
principal amount and fair value. This difference was recognized in equity as distribution to these shareholders. Total distribution
arising from the initial fair value measurement of shareholders’ loan was $13,596. The fair values at initial recognition
were accounted for as amortized cost financial assets in accordance with IFRS 9. The amortized cost of the loans as at December
31, 2020 was $49,876 (see Note 7) and total interest income accrued at market rate in profit or loss for the 3 months then ended
was $633 (see Note 23).
KEY
MANAGEMENT PERSONNEL
Key
management personnel are those persons having authority and responsibility for planning, directing and controlling the activities
of the Company, including directors. Key management personnel at December 31, 2020 included ten directors and executive officers
of the corporation.
Compensation
for key management personnel for the three- and nine-month period ended December 31, 2020 consisted of salaries, short-term benefits
and other compensation of $283,073 and $922,396 respectively. Directors and officers of the Company control 52% or 19,643,465
outstanding voting shares of the Company.
CRITICAL
ACCOUNTING ESTIMATES
The
preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported amounts of assets and liabilities, revenue and expenses and
the related disclosures of contingent assets and liabilities and the determination of our ability to continue as a going concern.
We regularly evaluate our estimates and assumptions related to share-based transaction expense, property plant and equipment,
intangible assets and shareholder loans. We base our estimates and assumption on current facts, historical experience and various
other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities and the recording of costs and expenses that are not readily apparent from
other sources. Actual results could differ materially from these estimates and assumptions. We review our estimates and underlying
assumptions on an ongoing basis. Revisions are recognized in the period in which the estimates are revised and may impact future
periods.
The
areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the
financial statements, have been set out in note 2 of our unaudited condensed interim consolidated financial statements for
the three and six months ended December 31, 2020 and the period from April 2, 2019 and (date of incorporation) to December
31, 2019 are more fully described in note 3 of our audited consolidated financial statements for the period from April 2,
2019 (date of incorporation) to March 31, 2020.
There
have been no material changes in any of critical accounting policies and estimates during the three months ended December 31,
2020.
ACCOUNTING
CHANGES AND IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Accounting
standards or amendments to existing accounting standards that have been issued, but have future effective dates, are either not
applicable or are not expected to have a significant impact on our financial statements.
FINANCIAL
INSTRUMENTS AND RISK MANAGEMENT
Fair
Value
IFRS
13 – Fair Value Measurements provides a hierarchy of valuation techniques based on whether the inputs to those valuation
techniques are observable or unobservable. Observable inputs are those that reflect market data obtained from independent sources,
while unobservable inputs reflect the Company’s assumptions with respect to how market participants would price an asset
or liability. These two inputs to measure fair value fall into the following three different levels of the fair value hierarchy:
|
Level 1–
|
Quoted prices in active markets
for identical instruments that are observable;
|
|
Level 2–
|
Quoted prices in active markets
for similar instruments; inputs other than quoted prices that are observable and derived from or corroborated by observable market
data; and
|
|
Level 3–
|
Valuations derived from valuation
techniques in which one or more significant inputs are unobservable.
|
The
hierarchy requires the use of observable market data when available.
Cash,
restricted cash, accounts receivable, and accounts payable and accrued liabilities are all short-term in nature and, as such,
their carrying values approximate fair values.
Risks
The
Company is exposed to credit risk, liquidity risk, interest rate risk and currency risk. The Company’s Board of Directors
has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Audit Committee
of the board of directors is responsible for review the Company’s financial risk management policies.
Credit
Risk
Credit
risk is the risk of an unexpected loss if a counterparty to a financial instrument fails to meet its contractual obligations.
The Company is exposed to credit risk on its cash and accounts receivable. The carrying amount of these financial assets represents
the maximum credit exposure. The Company’s cash is held on deposit with major banks in Canada, the United States, and Jamaica
which we believe lessens the degree of credit risk.
Liquidity
Risk
Liquidity
risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its
liquidity risk by reviewing on an ongoing basis its capital requirements. As at December 31, 2020, the Company had $9,828,870
of cash and cash equivalents.
The
Company is obligated to pay accounts payable and accrued liabilities with total carrying amounts and contractual cash flows amounting
to $2,273,136 due in the next 12 months. The carrying values of cash, trade receivable, accounts payable and accrued liabilities
approximate their fair values due to their short term to maturity.
Interest
Rate Risk
Financial
instruments that potentially subject the Company to cash flow interest rate risk are those assets and liabilities with a variable
interest rate. Currently, the Company has no assets or liabilities with a variable interest rate. Financial assets and financial
liabilities that bear interest at fixed rates are subject to fair value interest rate risk. The Company’s lease obligations
are at fixed rates of interest.
Currency
Risk
The
Company is exposed to currency risk related to the fluctuation of foreign exchange rates and the degree of volatility of those
rates. Currency risk is limited to the portion of the Company’s business transactions denominated in currencies other than
the Canadian dollar, which are primarily expenses in United States dollars. As at December 31, 2020, the Company held USD dollar
denominated cash of $1,688,952 USD and had USD dollar denominated accounts payable and accrued liabilities in the amounts of $136,956
USD. Therefore, a 1% change in the foreign exchange rate would have a net impact as at December 31, 2020 of $19,760. USD dollar
expenses for the three months ended December 31, 2020 were $3,777,513 USD. Varying the foreign exchange rate for the three months
ended December 31, 2020 to reflect a 1% strengthening of the U.S. dollar would have increased the net loss by approximately $50,641
assuming that all other variables remained constant.
SUBSEQUENT
EVENTS
Bought
Deal
On
January 5, 2021, the Company closed its previously announced BD Offering and issued 4,448,200 Units (including the full
exercise of the Over-Allotment Option) for gross proceeds of $20,016,900. Each Unit is comprised of one common share in the
capital of the Company (a “Common Share”) and one-half of one Common Share purchase warrant (each whole Common
Share purchase warrant, a “Warrant”). Each Warrant is exercisable to acquire one Common Share (a “Warrant
Share”) at an exercise price of $5.60 per Warrant Share until July 5, 2022. In the event that the volume weighted
average trading price of the Common Shares exceeds $9.00 for ten (10) consecutive trading days, the Company shall have the
right to accelerate the expiry date of the Warrants upon not less than fifteen (15) trading days’ notice. The Warrants
commenced trading on the CSE under the symbol “FTRP.WT on January 5, 2021.
In
consideration of the services rendered by the Underwriters in connection with the BD Offering, the Company paid to the Underwriters
a cash commission equal to $763,046.10 and issued to the Underwriters 169,565 compensation warrants (the “BD Compensation
Warrants” and together with the FTP Compensation Warrants, collectively, the “Compensation Warrants”).
Each Compensation Warrant is exercisable to acquire one Common Share at an exercise price of $4.50 per Compensation Share until
January 5, 2023.
In
connection with the BD Offering, the short form prospectus qualified the distribution of 8,170 Common Shares; and (iii) 49,016
additional FTP Compensation Warrants, for services rendered in by the Agents in connection with the FTP Offering.
The
Company plans to use the net proceeds from the offering for working capital and general corporate requirements.
Option
Grants
On
January 29, 2021, the Group issued 229,997 options at an issue price of $5.01 per Field Trip Share.
Clinic
Openings
San
Diego
On
February 4, 2021, the Group executed a lease agreement to build its San Diego clinic, commencing on July 1, 2021 and ending 127
months from the first day of the first full month of the term. Total commitments under the lease are approximately $2,001,264.
RISKS
AND UNCERTAINTIES
The
following information sets forth material risks and uncertainties that may affect our business, including our future financing
and operating results and could cause our actual results to differ materially from those contained in forward-looking statements
we have made in this MD&A. The risks and uncertainties below are not the only ones we face. Additional risks and uncertainties
not presently known to us or that we believe to be immaterial may also adversely affect our business. Further, if we fail to meet
the future expectations of the public market in any given period now that the Company’s shares are listed, the market price
of our Common Shares could decline. We operate in a highly competitive environment that involves significant risks and uncertainties,
some of which are outside of our control.
Risks
Related to the Company
Speculative
Nature of Investment Risk
An
investment in the securities of Field Trip carries a high degree of risk and should be considered as a speculative investment.
We have no history of earnings, limited cash reserves, limited operating history, have not paid dividends, and are unlikely to
pay dividends in the immediate or near future.
Forward-looking
Statements
Existing
and potential investors should not place undue reliance on forward-looking statements. By their nature, forward-looking statements
involve numerous assumptions, known and unknown risks and uncertainties, of both general and specific nature, that could cause
actual results to differ materially from those suggested by the forward-looking statements or contribute to the possibility that
predictions, forecasts or projections will prove to be materially inaccurate. Additional information on the risks, assumptions
and uncertainties can be found in this MD&A under the heading “Cautionary Statement About Forward-Looking Statements”.
Future
Issuances or Actual or Potential Sales of Securities
The
issuance by the Company of Common Shares or other securities convertible into Common Shares could result in significant
dilution in the equity interest of existing shareholders and adversely affect the market price of the Common Shares. In
addition, in the future, we may issue additional Common Shares or securities convertible into Common Shares, which may dilute
existing shareholders. The Company’s articles permit the issuance of an unlimited number of Common Shares and an
unlimited number of Preferred Shares, and shareholders will have no pre-emptive rights in connection with such further
issuances. Also, additional Common Shares may be issued by the Company upon the exercise of stock options and upon the
exercise or conversion of other securities convertible into Common Shares. The issuance of these additional equity securities
may have a similar dilutive effect on then existing holders of Common Shares.
The
market price of the Common Shares could decline as a result of future issuances by the Company, including issuance of shares issued
in connection with strategic alliances, or sales by its existing holders of Common Shares, or the perception that these sales
could occur. Sales by shareholders might also make it more difficult for the Company to sell equity securities at a time and price
that it deems appropriate, which could reduce its ability to raise capital and have an adverse effect on its business.
Negative
Operating Cash Flow and Going Concern
Field
Trip has negative cash flow from operating activities and has historically incurred net losses. There is no assurance that sufficient
revenues will be generated in the near future. To the extent that the Company has negative operating cash flows in future periods,
we may need to deploy a portion of our existing working capital to fund such negative cash flows. We will be required to raise
additional funds through the issuance of additional equity securities or through loan financing. There is no assurance that additional
capital or other types of financing will be available if needed or that these financings will be on terms at least as favourable
to us as those previously obtained, or at all. Our ability to successfully raise additional capital and maintain liquidity may
by impaired by factors outside of its control, such as a shift in consumer attitudes towards certain therapeutic methods or a
downturn in the economy.
Any
inclusion in the Company’s financial statements of a going concern opinion may negatively impact our ability to raise future
financing and achieve future revenue. The threat of our ability to continue as a going concern will be removed only when, in the
opinion of our auditor, our revenues have reached a level that is able to sustain its business operations. If we are unable to
obtain additional financing from outside sources and eventually generate enough revenues, we may be forced to sell a portion or
all of our assets, or curtail or discontinue our operations. If any of these events happen, investors could lose all or part of
their investment. Our financial statements do not include any adjustments to the recorded assets or liabilities that might be
necessary if we become unable to continue as a going concern.
Discretion
Over the Use of Proceeds
We
have discretion concerning the use of the net proceeds received from our Aug 14 and September 2020 private placements and the
January 5, 2021 bought deal offering, as well as the timing of our expenditures, and may apply the net proceeds in ways other
than as described herein. As a result, an investor will be relying on the judgment of the Company for the application of the net
proceeds. We may use the net proceeds in ways that an investor may not consider desirable. The results and the effectiveness of
the application of the net proceeds are uncertain. If the net proceeds are not applied effectively, our business, prospects, financial
position, financial condition or results of operations may suffer.
Unpredictability
and Volatility of the Common Shares
Publicly-traded
securities, such as those of the Company, will not necessarily trade at values determined by reference to the underlying
value of its business. The prices at which the Common Shares will trade cannot be predicted. The market price of the Common
Shares could be subject to significant fluctuations in response to a variety of factors, including the following: actual or
anticipated fluctuations in our quarterly results of operations; recommendations by securities research analysts; changes in
the economic performance or market valuations of companies in the industry in which we operate; additions or departures by
our executive officers and other key personnel; significant acquisitions or business combinations, strategic partnerships,
joint ventures or capital commitments by or involving the Company or our competitors; operating and share price performance
of other companies that investors deem comparable to the Company; and news reports relating to trends, concerns,
technological or competitive developments, regulatory changes and other related issues in the Company’s industry or
target markets.
In
addition, the securities markets have experienced significant price and volume fluctuations from time to time in recent years
that often have been unrelated or disproportionate to the operating performance of particular issuers. These broad fluctuations
may adversely affect the market price of the Common Shares. Accordingly, investors may not be able to sell their Common Shares
at their initial purchase price.
Warrants
The
warrants do not confer any rights of Common Share ownership on their holders, such as voting rights or the right to receive dividends,
but rather merely represent the right to acquire Common Shares at a fixed price for a limited period of time. Specifically, commencing
on the date of issuance, holders of the warrants may exercise their right to acquire Common Shares and pay an exercise price of
$5.60 per Common Share, subject to certain adjustments, prior to July 5, 2022, the date that is eighteen (18) months following
the Closing Date of January 5, 2021, subject to acceleration in certain circumstances, after which date any unexercised warrants
will expire and have no further value. Moreover, the market value of the warrants, if any, is uncertain and there can be no assurance
that the market value of the warrants will equal or exceed their imputed offering price. There can be no assurance that the market
price of the Common Shares will ever equal or exceed the exercise price of the warrants, and consequently, whether it will ever
be profitable for holders of the warrants to exercise the warrants.
Limited
Operating History as a Public Company
Field
Trips Common Shares commenced trading on the CSE on October 6, 2020 and therefore we have limited operating history as a public
company. To operate effectively, we will be required to continue to implement changes in certain aspects of our business, improve
information systems and develop, manage and train management-level and other employees to comply with ongoing public company requirements.
Failure to take such actions, or delay in implementation thereof, could adversely affect our business, financial condition, liquidity
and results of operations and, more specifically, could result in regulatory penalties, market criticism or the imposition of
cease trade orders in respect of the Common Shares.
A
Significant Number of Common Shares are owned by a Limited Number of Existing Shareholders
Our
management, directors and employees own a substantial number of the outstanding Common Shares (on a non-diluted and partially-diluted
basis). As such, our management, directors and employees, as a group, are in a position to exercise influence over matters requiring
shareholder approval, including the election of directors and the determination of corporate actions. As well, these shareholders
could delay or prevent a change in control of the Company that could otherwise be beneficial to our shareholders.
Risks
Related to Our Financial Position and Need for Additional Capital
Liquidity
and Future Financing Risk
We
have historically incurred losses and expect to incur an operating loss for the year ending March 31, 2021. We believe that operating
losses will continue as we are planning to incur significant costs associated with the expansion of our clinic locations, our
research and development initiatives with UWI and the clinical development of FT-104 and other projects. Our net losses have had
and will continue to have an adverse effect on, among other things, shareholders’ equity, total assets and working capital.
We expect that losses will fluctuate from quarter to quarter and year to year, and that such fluctuations may be substantial.
We cannot predict when it will become profitable, if at all.
As
a clinic operator and service provider and a research and development company, we expect to spend substantial funds to
continue these initiatives. We will also require significant additional funds if we expand our current clinical plans for
FT-104. Therefore, for the foreseeable future, we will have to fund all of our operations and development expenditures from
cash on hand, equity financings, through collaborations with other companies or through financings from other sources. If we
do not succeed in raising additional funds on acceptable terms, we might not be able to complete our planned expansion of our
clinic locations, our research and development initiatives with UWI and the clinical development of FT-104 and other
projects. It is possible that future financing will not be available or, if available, may not be on favorable terms. The
availability of financing will be affected by the achievement of our corporate goals, the results of operations, the ability
to obtain regulatory approvals (where applicable) and the state of the capital markets generally and with particular
reference to psychedelics companies. If adequate funding is not available, we may be required to delay, reduce or eliminate
certain operations, or obtain funds on less favourable terms than we would otherwise accept. To the extent that external
sources of capital become limited or unavailable or available on onerous terms, our intangible assets and our ability to
continue our plans may become impaired, and our assets, liabilities, business, financial condition and results of operations
may be materially or adversely affected.
Risks
Related to Our Business and Industry
Impact
of the COVID-19 Pandemic
The
novel coronavirus commonly referred to as “COVID-19” was identified in December 2019 in Wuhan, China. On January 30,
2020, the World Health Organization declared the outbreak a global health emergency, and on March 11, 2020, the spread of COVID-19
was declared a pandemic by the World Health Organization. The outbreak has spread throughout Europe, the Middle East and North
America, causing companies and various international jurisdictions to impose restrictions such as quarantines, business closures
and travel restrictions. While these effects are expected to be temporary, the duration of the business disruptions internationally
and related financial impact cannot be reasonably estimated at this time. Governments and central banks have reacted with significant
monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 outbreak
is unknown at this time, as is the efficacy of the government and central bank interventions. It is not possible to reliably estimate
the length and severity of these developments and the impact on our financial results and condition and our operating subsidiaries
in future periods. However, depending on the length and severity of the pandemic, COVID- 19 could impact our operations, could
cause delays relating to approval from the FDA and equivalent organizations in other countries, could postpone research activities,
and could impair our ability to raise funds depending on COVID-19’s effect on capital markets.
The
rapid development of the COVID-19 pandemic and the measures being taken by governments and private parties to respond to it are
extremely fluid. While we have continuously sought to assess the potential impact of the pandemic on our operations, any assessment
is subject to extreme uncertainty as to probability, severity and duration. We have attempted to assess the impact of the pandemic
by identifying risks in the following principal areas: mandatory closures, patient impact and research and development disruptions
and staffing disruption.
We
are actively addressing the risk to business continuity represented by each of the above factors through the implementation of
a broad range of measures throughout our structure and are re-assessing our response to the COVID-19 pandemic on an ongoing basis.
The above risks individually or collectively may have a material impact on our ability to generate revenue.
We
have sufficient cash on hand raised via equity financings to fund its operations for the next 12-months and meet its working
capital requirements. To-date, Field Trip has not been significantly affected by the COVID-19 pandemic. California’s
regional coronavirus stay-at-home order for the months of December 2020 and January 2021 temporarily impacted the patient
flow at our Santa Monica clinic, which remained open during the seven weeks the order was in effect. We expect patient growth
to accelerate in Santa Monica over the next two quarters as COVID-19 restrictions continue to abate. During the initial
outbreak of the pandemic, the Toronto clinic was temporarily closed from March to May 2020; however, since reopening, the
number of completed patient sessions in Toronto continues to be in line with management’s expectations. Since June
2020, our clinics have not been subject to any “lock-down” restrictions as they are medical clinics and deemed an
“essential service”. It is anticipated that our long-term goals will require additional capital contributions via
debt or equity financings. In the event that the impact of COVID-19 worsens and negatively affects capital markets generally,
there is a risk that we may not be able to secure funding for these long-term objectives.
Our
partners, such as CMO and CRO used in the development of FT-104, as well as any upstream suppliers of starting materials, supplies
or animal models, are equally subject to COVID-19 risks and can affect timelines. Upstream interruptions can place a severe stress
on the ability to schedule activities and maintain downstream timelines as well as current milestones.
Risks
Associated with Publicly Announced Milestones
From
time to time, we may announce the timing of certain events we expect to occur, such as the anticipated timing of future clinics
becoming operational, research and development updates and results from our trials on FT-104. These statements are forward-looking
and are based on the best estimates of management at the time relating to the occurrence of such events. However, the actual timing
of such events may differ from what has been publicly disclosed. These variations in timing may occur as a result of different
events, beyond our control having the effect of delaying the publicly announced timeline. We undertake no obligation to update
or revise any forward-looking information or statements, whether as a result of new information, future events or otherwise, except
as otherwise required by law. Any variation in the timing of previously announced milestones could have a material adverse effect
on our business plan, financial condition or operating results and the trading price of the Common Shares.
Drug
Development
Given
the early stage of FT Discovery’s product development, we can make no assurance that our research and development programs
will result in regulatory approval or commercially viable products. To achieve profitable operations, the Company, alone or with
others, must successfully develop, gain regulatory approval for, and market our future products. We currently have no products
that have been approved by the FDA, Health Canada or any similar regulatory authority. To obtain regulatory approvals for its
product candidates being developed and to achieve commercial success, clinical trials must demonstrate that the product candidates
are safe for human use and that they demonstrate efficacy. We have not yet completed later stage clinical trials for any of our
product candidates.
Many
product candidates never reach the stage of clinical testing and even those that do have only a small chance of successfully completing
clinical development and gaining regulatory approval. Product candidates may fail for a number of reasons, including being unsafe
for human use or due to the failure to provide therapeutic benefits equal to or better than the standard of treatment at the time
of testing. Unsatisfactory results obtained from a particular study relating to a research and development program may cause the
Company or our collaborators to abandon commitments to that program. Positive results of early pre-clinical research may not be
indicative of the results that will be obtained in later stages of preclinical or clinical research. Similarly, positive results
from early-stage clinical trials may not be indicative of favourable outcomes in later-stage clinical trials, and we can make
no assurance that any future studies, if undertaken, will yield favourable results.
The
early stage of FT Discovery’s product development makes it particularly uncertain whether any of our product development
efforts will prove to be successful and meet applicable regulatory requirements, and whether any of our product candidates will
receive the requisite regulatory approvals, be capable of being manufactured at a reasonable cost or be successfully marketed.
If we are successful in developing our current and future product candidates into approved products, we will still experience
many potential obstacles, which would affect our ability to successfully market and commercialize such approved products, such
as the need to develop or obtain manufacturing, marketing and distribution capabilities, price pressures from third-party payors,
or proposed changes in health care systems. If we are unable to successfully market and commercialize any of our products, our
financial condition and results of operations may be materially and adversely affected.
We
can make no assurance that any future studies, if undertaken, will yield favorable results. Many companies in the pharmaceutical
and biotechnology industries have suffered significant setbacks in later-stage clinical trials after achieving positive results
in early-stage development, and we cannot be certain that we will not face similar setbacks. These setbacks have been caused by,
among other things, pre-clinical findings made while clinical trials were underway or safety or efficacy observations made in
clinical trials, including previously unreported adverse events. Moreover, preclinical and clinical data are often susceptible
to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in
preclinical studies and clinical trials nonetheless failed to obtain FDA approval. If we fail to produce positive results in our
future clinical trials of FT-104, the development timeline and regulatory approval and commercialization prospects for FT-104,
would be materially adversely affected which may in turn materially adversely impact our business.
Regulation
of Truffles Containing Psilocybin under the Opium Act
In
the event that the Dutch authorities take the position that therapy with truffles qualifies as “other care” (alternative
therapy) or “regular care”, we would then need to take steps to comply with local laws applicable to a health care
provider, including but not limited to: (i) implementing a complaints procedure, a complaint register and a complaint officer
in the organization; (ii) joining a recognized independent dispute body; (iii) having a quality statute in place which has been
registered at The Netherlands Healthcare Institute and made public; (iv) verifying that care providers have not functioned in
a way that impedes the provision of care; (v) reporting emergencies in the provision of care and the dismissal of care providers
due to underperformance, and (vi) in certain circumstances, installing a client council. In the event that the Dutch authorities
take the position that truffles containing psilocybin qualify as medicinal product, either through actions by the Company or by
third parties (such as registering truffles containing psilocybin as medicinal product) the Company would need to ensure that
storing, selling and providing the truffles complies with local laws applicable to placing medicinal products on the market. Any
changes in applicable laws and regulations could have an adverse effect on our business prospects in The Netherlands. We cannot
predict the impact, cost or time required to comply with any change to the Dutch legal regime, which may significantly delay or
impact the development of its business in The Netherlands. There is no assurance that our activities in The Netherlands will continue
to be legally permissible or viable.
Oregon
Operations, Including Access to Capital
As
result of Measure 109, there is a possibility that we may choose to expand our operations to the State of Oregon. While any activity
in Oregon will be in compliance with laws applicable to Oregon, the decision to pursue operations in Oregon will depend on the
regulatory framework established by the state government. There is a possibility that operations of the Company that are in compliance
with the laws of Oregon could conflict or be in contravention of the federal laws of the United States. In such a circumstance,
our existing operations in the United States, and any future operations or investments, may become the subject of heightened scrutiny
or enforcement by regulators, stock exchanges and other authorities in Canada and the United States. There can be no assurance
that this heightened scrutiny will not in turn lead to the imposition of certain restrictions on our ability to operate or invest
in the United States or any other jurisdiction. While currently we operate in compliance with applicable laws in the province
and states where are clinics are located, and as such are not prohibited from sourcing any access public or private capital, in
the event our activities in Oregon are in violation of applicable United States federal laws, it may have difficulty accessing
the service of banks or sourcing financing on commercially reasonable terms or at all.
Regulatory
Risk
In
Canada, psilocybin is classified as a Schedule III drug and ketamine as a Schedule I drug under the CDSA. In the United
States, psilocybin is classified as a Schedule I drug and ketamine is classified as a Schedule III drug under the CSA All
activities involving such substances by or on behalf of the Company are conducted in accordance with applicable federal,
provincial, state and local laws. While we are focused on programs using ketamine and psychedelic inspired compounds, we do
not have any direct or indirect involvement with the illegal selling, production or distribution of any substances in the
jurisdictions in which it operates and does not intend to have any such involvement. However, a violation of any applicable
laws the jurisdictions in which we operate could result in significant fines, penalties, administrative sanctions,
convictions or settlements arising from civil proceedings initiated by either government entities in the jurisdictions in
which we operate, or private citizens or criminal charges.
Any
changes in applicable laws and regulations could have an adverse effect on the Company’s operations. The psychedelic drug
industry is a fairly new industry and we cannot predict the impact of the ever-evolving compliance regime in respect of this industry.
Similarly, we cannot predict the time required to secure all appropriate regulatory approvals for future products, or the extent
of testing and documentation that may, from time to time, be required by governmental authorities. The impact of compliance regimes,
any delays in obtaining, or failure to obtain regulatory approvals may significantly delay or impact the development of markets,
its business and products, and sales initiatives and could have a material adverse effect on our business, financial condition
and operating results.
The
success of our business is dependent on our activities being permissible under applicable laws and any reform of controlled substances
laws or other laws may have a material impact on our business and success. There is no assurance that our activities will continue
to be legally permissible.
The
potential reclassification of psilocybin and other psychedelic drugs in the United States could create additional regulatory burdens
on our operations and negatively affect our results of operations.
If
psilocybin and/or other psychedelic drugs are rescheduled under the CSA as a Schedule II or lower controlled substance (i.e.,
Schedule III, IV or V), it may materially alter enforcement policies across many federal agencies, primarily the FDA and DEA.
The FDA is responsible for ensuring public health and safety through regulation of food, drugs, supplements, and cosmetics, among
other products, through its enforcement authority pursuant to the Federal Food, Drug, and Cosmetic Act. The FDA’s responsibilities
include regulating the ingredients as well as the marketing and labeling of drugs sold in interstate commerce. Since it is currently
illegal under federal law to produce and sell psilocybin and psychedelic drugs other than Ketamine and as there are no federally
recognized medical uses, the FDA has historically deferred enforcement related to these products to the DEA. If psilocybin and/or
other psychedelic drugs were to be rescheduled to a federally controlled, yet legal, substance, the FDA would likely play a more
active regulatory role. The DEA would continue to be active in regulating manufacturing, distribution and dispensing of such substances.
Multi-agency regulation and enforcement could materially affect our costs associated with research and/or therapeutic uses of
these substances in its business.
Reliance
on Third-Parties – Drug Development
We
rely and will continue on third parties to conduct a significant portion of our pre-clinical and clinical development activities.
Pre-clinical activities include in vivo studies providing access to specific disease models, pharmacology and toxicology studies,
and assay development. Clinical development activities include trial design, regulatory submissions, clinical patient recruitment,
clinical trial monitoring, clinical data management and analysis, safety monitoring and project management. If there is any dispute
or disruption in our relationship with third parties, or if they are unable to provide quality services in a timely manner and
at a feasible cost, our active development programs will face delays. Further, if any of these third parties fails to perform
as we expect or if their work fails to meet regulatory requirements, our testing could be delayed, cancelled or rendered ineffective.
Pre-clinical
and clinical development activities must be carried out in accordance with Good Laboratory Practices (“GLP”).
GLP was originally established by the Organization for Economic Co-operation and Development (“OECD”) to promote
the quality and validity of test data and to establish a basis for mutual acceptance of data among member states at the
international level. GLP was adopted by both Health Canada and the Standards Council of Canada, which has monitoring
authority for GLP compliance of test facilities within Canada, and by the FDA as (Good Laboratory Practice regulations, 21
CFR 58). Labs must adopt these GLP practices to ensure they are producing valuable test results, and each lab has its own set
of approaches to staying compliant. If any of these third parties or service providers fails to meet GLP requirements, our
pre-clinical and clinical development activities could be delayed, cancelled or rendered ineffective.
Reliance
on Contract Manufacturers
We
have limited manufacturing experience and rely on the contract manufacturing organizations (“CMO”) to manufacture
FT-104 for pre-clinical studies and clinical trials. We rely on the CMO for manufacturing, filling, packaging, storing and shipping
of FT-104 in compliance with current Good Manufacturing Practices (“cGMP”) regulations. There can be no assurances
that the CMO will be able to meet our timetable and requirements. We have not contracted with alternate third parties for FT-104
drug substance production in the event that the current CMO is unable to scale up production, or if it otherwise experiences any
other significant problems. If we are unable to arrange for alternative third-party manufacturing sources on commercially reasonable
terms or in a timely manner, we may be delayed in the development of FT-104. Further, the CMO must operate in compliance with
cGMP and ensure that their appropriate permits and licenses remain in good standing and failure to do so could have a material
detrimental impact on the Company and may adversely affect its profit margins. The CMO is in turn reliant on suppliers for starting
materials, some of which have been somewhat difficult to procure, possibly due to heightened activities in psilocybin synthesis/manufacture.
The CMO has been partially delayed in obtaining portions of the starting material, however, it has planned to source sufficient
amounts to sustain through Phase 1 and possibly Phase 2 clinical trials.
Commercial
Grade Development
To
date, FT-104 has been manufactured in small quantities for pre-clinical studies. In order to commercialize our product, we need
to manufacture commercial quality drug supply for use in registration clinical trials. Most, if not all, of the clinical material
used in phase 3/pivotal/registration studies must be derived from the defined commercial process, including scale, manufacturing
site, process controls and batch size. If we have not scaled up and validated the commercial production of our product prior to
the commencement of pivotal clinical trials, we may have to employ a bridging strategy during the trial to demonstrate equivalency
of early-stage material to commercial drug product, or potentially delay the initiation or completion of the trial until drug
supply is available. The manufacturing of commercial quality drug product has long lead times, is very expensive and requires
significant efforts, including scale-up of production to anticipated commercial scale, process characterization and validation,
analytical method validation, identification of critical process parameters and product quality attributes, and multiple process
performance and validation runs. If we do not have commercial drug supply available when needed for pivotal clinical trials, our
regulatory and commercial progress may be delayed, and we may incur increased product development costs. This may have a material
adverse effect on our business, financial condition and prospects, and may delay marketing of our product.
Clinical
Testing
Before
obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct pre-clinical
studies in animals and extensive clinical trials in humans to demonstrate the safety and efficacy of the product candidates. Clinical
testing is expensive and difficult to design and implement, can take many years to complete and has uncertain outcomes. The outcome
of pre-clinical studies and early clinical trials may not predict the success of later clinical trials, and interim results of
a clinical trial do not necessarily predict final results. A number of companies in the pharmaceutical and biotechnology industries
have suffered significant setbacks in advanced clinical trials due to lack of efficacy or unacceptable safety profiles, notwithstanding
promising results in earlier trials. We do not know whether the clinical trials we may conduct will demonstrate adequate efficacy
and safety to result in regulatory approval to market any of our product candidates in any jurisdiction. A product candidate may
fail for safety or efficacy reasons at any stage of the testing process. A major risk we face is the possibility that none of
our product candidates under development will successfully gain market approval from the FDA or other regulatory authorities,
resulting in the Company being unable to derive any commercial revenue from this business segment after investing significant
amounts of capital in its development.
We
cannot predict whether any clinical trials will begin as planned, will need to be restructured, or will be completed on schedule,
or at all. Our product development costs will increase if we experience delays in clinical testing. Significant clinical trial
delays could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow
our competitors to bring products to market before us, which would impair our ability to successfully commercialize our product
candidates and may harm our financial condition, results of operations and prospects. Our product development costs will increase
if we experience delays in testing or approval or if we need to perform more or larger clinical trials than planned. Additionally,
changes in regulatory requirements and policies may occur, and we may need to amend study protocols to reflect these changes.
Amendments may require us to resubmit our study protocols for re-examination, which may impact the cost, timing or successful
completion of that trial. Delays or increased product development costs may have a material adverse effect on our business, financial
condition and prospects.
Prior
to commencing clinical trials in Canada, the United States or other jurisdictions, including Jamaica, for FT-104 or any other
product candidates if developed by us, we may be required to have an allowed investigational new drug application (“IND”)
(or equivalent) for each product candidate and to file additional INDs prior to initiating any additional clinical trials for
FT-104. We believe that the data from our studies will support the filing of additional INDs to enable us to undertake additional
clinical studies as we have planned. However, submission of an IND (or equivalent) may not result in the FDA (or equivalent authorities)
allowing further clinical trials to begin and, once begun, issues may arise that will require us to suspend or terminate such
clinical trials. Additionally, even if relevant regulatory authorities agree with the design and implementation of the clinical
trials set forth in an IND, these regulatory authorities may change their requirements in the future. Failure to submit or have
effective INDs (or equivalent) and commence or continue clinical programs will significantly limit our opportunity to generate
revenue.
Patients
for Clinical Trials
If
FT-104 advances from pre-clinical testing to clinical testing, and then through progressively larger and more complex clinical
trials, we will need to enroll an increasing number of patients that meet our eligibility criteria. There is significant competition
for recruiting patients in clinical trials, and we may be unable to enroll the patients we need to complete clinical trials on
a timely basis or at all.
Regulatory
Approval Process
Our
development and commercialization activities related to FT-104 or other product candidates are significantly regulated by a number
of governmental entities, including the FDA, HC, and comparable authorities in other countries, including Jamaica. Regulatory
approvals are required prior to each clinical trial and we may fail to obtain the necessary approvals to commence or continue
clinical testing. We must comply with regulations concerning the manufacture, testing, safety, effectiveness, labeling, documentation,
advertising, and sale of products and product candidates and ultimately must obtain regulatory approval before we can commercialize
a product candidate. The time required to obtain approval by such regulatory authorities is unpredictable but typically takes
many years following the commencement of preclinical studies and clinical trials. Any analysis of data from clinical activities
we perform is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory
approval. Even if we believe results from our clinical trials are favourable to support the marketing of our product candidates,
the FDA or other regulatory authorities may disagree. In addition, approval policies, regulations, or the type and amount of clinical
data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary
among jurisdictions. We have not obtained regulatory approval for any product candidate and it is possible that none of our existing
product candidates or any future product candidates will ever obtain regulatory approval.
A
regulatory authority may require more information, including additional preclinical or clinical data to support approval,
which may delay or prevent approval and our commercialization plans, or we may decide to abandon the development program. If
we were to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited
indications than we request, may grant approval contingent on the performance of costly post-marketing clinical trials, or
may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the
successful commercialization of that product candidate. Moreover, depending on any safety issues associated with our product
candidates that garner approval, the FDA may impose a risk evaluation and mitigation strategy, thereby imposing certain
restrictions on the sale and marketability of such products.
Non-Compliance
with Laws and Regulations
Under
the CDSA, ketamine is currently a Schedule I drug and psilocybin is currently a Schedule III drug. Under the CSA, ketamine is
currently a Schedule III drug and psilocybin is currently a Schedule I drug. Our operations are conducted in strict compliance
with the laws and regulations regarding our activities with such substances. As such, all facilities engaged with such substances
by or on our behalf do so under current licenses, permits and approvals, as applicable, issued by appropriate federal, provincial,
state and local governmental agencies. While we are focused on programs using ketamine and psychedelic inspired compounds, we
do not have any direct or indirect involvement with the illegal selling, production or distribution of any substances in the jurisdictions
in which we operate and do not intend to have any such involvement. However, a violation of any applicable laws and regulations,
such as the CDSA and CSA, or of similar legislation in the jurisdictions in which we operate, including The Netherlands, could
result in significant fines, penalties, administrative sanctions, convictions or settlements arising from civil proceedings initiated
by either government entities in the jurisdictions in which we operate, or private citizens or criminal charges. Any such violations
could have an adverse effect on our operations.
Reliance
on Third Parties
We
have entered into agreements with third parties with respect to our operations. Such relationships could present unforeseen obstacles
or costs and may involve risks that could adversely affect us, including significant amounts of management time that may be diverted
from operations in order to pursue and maintain such relationships. There can be no assurance that such third parties will achieve
the expected benefits to our business or that we will be able to consummate any future relationships on satisfactory terms, or
at all. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.
Any violation of any applicable laws and regulations, such as the CDSA and CSA, or of similar legislation in the jurisdictions
in which we operate, could result in such third parties suspending or withdrawing their services to us. The termination or cancellation
of any such agreements or our failure and/or the failure of other parties to these arrangements to fulfill their obligations could
have a material adverse effect on our business, financial condition and results of operations. In addition, disagreements between
the Company and any third parties we contract with could lead to delays or time consuming and expensive legal proceedings, which
could have a material adverse effect on our business, financial condition and results of operations.
Competitive
Conditions
The
psychedelic therapy business in Canada is an emerging industry with high levels of competition. Our current business plan is substantially
the establishment of a North American chain of KAP, psychedelic-enhanced psychotherapy and psychedelic-integration psychotherapy
clinics. We expect that, due to the urgent need for new and innovative treatments for mental health conditions and the evidence-based
studies showing the impact of psychedelics as a treatment for mental health conditions, psychedelics as a treatment for these
conditions will become more accepted in the medical community. As such, we expect to compete with other similar businesses as
well as with individual medical professionals who undertake the prescribing and supervising of psychedelics to their patients.
While we are an early entrant to the psychedelic-enhanced psychotherapy market in Canada, other market participants have emerged.
We expect to face intense competition from new or existing market participants, some of which may have greater financial resources.
Increased competition by larger and better financed competitors could materially and adversely affect our business, financial
condition and results of operations.
FT
Discovery competes in the biotechnology and pharmaceutical industries, which are intensely competitive and subject to rapid
and significant technological change. Our competitors include large, well-established pharmaceutical companies, biotechnology
companies, and academic and research institutions developing therapeutics for the same indications we are targeting. We are
also competing with providers of existing marketed therapies. Many of our competitors have substantially greater financial,
technical and human resources and have significantly greater experience in conducting pre-clinical testing and human clinical
trials of product candidates, scaling up manufacturing operations and obtaining regulatory approvals of products.
Accordingly, our competitors may succeed in obtaining regulatory approval for products more rapidly.
Negative
Results from Clinical Trials or Studies of Others
From
time to time, studies or clinical trials on various aspects of psychedelics may be conducted by academic researchers, competitors
or others. The results of these studies or trials, when published, may have a significant effect on the marketability of the substance
that is the subject of the study. The publication of negative results of studies or clinical trials, or the occurrence of adverse
safety events related to psychedelics could adversely affect our clinical operations, research, share price and ability to finance
future operations.
Dependence
on Key Personnel
The
loss of our executive officers or other key members of our staff could harm us. We also depend on our scientific and clinical
collaborators and advisors, all of whom have outside commitments that may limit their availability to us. In addition, we believe
that our future success will depend in large part upon our ability to attract and retain highly skilled scientific, managerial,
medical, manufacturing, clinical and regulatory personnel, particularly as we expand our operations. We enter into agreements
with our scientific and clinical collaborators and advisors, key opinion leaders and academic partners in the ordinary course
of its business. We also enter into agreements with physicians in the ordinary course of our business. Notwithstanding these arrangements,
we face significant competition for these types of personnel from other companies, research and academic institutions, government
entities and other organizations. We cannot predict our success in hiring or retaining the personnel we require for continued
growth. The loss of the services of any of our executive officers or other key personnel could potentially harm our business,
operating results or financial condition.
Employee
Misconduct or Other Improper Activities
The
Company is exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include failures to comply
with applicable regulations, provide accurate information to the governmental authorities, comply with protocol and standards
we have established, comply with federal, provincial, state and local laws, healthcare, fraud and abuse laws and regulations,
report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and
business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks,
self-dealing, and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting,
marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could
also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions
and serious harm to our reputation. If any such actions are instituted against the Company, and we are not successful in defending
itself or asserting our rights, those actions could have a substantial impact on our business and results of operations, including
the imposition of substantial fines or other sanctions.
Acquisitions
and Strategic Collaborations
We
have in the past and may in the future seek to expand our pipeline and capabilities by acquiring one or more companies or
businesses or entering into collaborations. Acquisitions and collaborations involve numerous risks, including, but not
limited to: substantial cash expenditures; technology development risks; potentially dilutive issuances of equity securities;
incurrence of debt and contingent liabilities, some of which may be difficult or impossible to identify at the time of
acquisition; difficulties in assimilating the operations of the acquired companies; potential disputes regarding contingent
consideration; diverting management’s attention away from other business concerns; entering markets in which we have
limited or no direct experience; and potential loss of our key employees or key employees of the acquired companies or
businesses.
Management
has experience in making acquisitions and entering collaborations; however, we cannot provide assurance that any acquisition or
collaboration will result in short-term or long-term benefits to it. We may incorrectly judge the value or worth of an acquired
company or business. In addition, our future success depends in part on our ability to manage the rapid growth associated with
some of these acquisitions and collaborations. We cannot provide assurance that we would be able to successfully combine our business
with that of acquired businesses or manage a collaboration. Furthermore, the development or expansion of our business may require
a substantial capital investment by the Company.
Product
Liability Claims
If
and when we develop any product, including FT-104, if ever developed, we would be exposed to the risk of product liability claims
alleging that use of our product caused an injury or harm. These claims can arise at any point in the development, testing, manufacture,
marketing or sale of a product and may be made directly by patients involved in clinical trials of its product candidates, by
consumers or healthcare providers or by individuals, organizations or companies selling our products. Product liability claims
can be expensive to defend, even if the product or product candidate did not actually cause the alleged injury or harm.
Insurance
covering product liability claims becomes increasingly expensive as a product moves through the development pipeline to commercialization.
We currently maintain what we view as sufficient liability insurance coverage for our current operations; however, there can be
no assurance that such insurance coverage is or will continue to be adequate or available to us at a cost acceptable to us or
at all. We may choose or find it necessary to increase our insurance coverage in the future. We may not be able to secure greater
or broader product liability insurance coverage on acceptable terms or at reasonable costs when needed. Any liability for damages
resulting from a product liability claim could exceed the amount of our coverage, require us to pay a substantial monetary award
from our own cash resources and have a material adverse effect on our business, financial condition and results of operations.
Moreover, a product recall, if required, could generate substantial negative publicity about our products and business, inhibit
or prevent commercialization of other products and product candidates or negatively impact existing or future collaborations.
Intellectual
Property
Failure
to obtain or register trademarks used or proposed to be used in our business could require us to rebrand, resulting in a material
adverse impact on our business. If we are unable to register or, if registered, maintain effective patent rights for our product
candidates, we may not be able to effectively compete in the market. If we are not able to protect our proprietary information
and know-how, such proprietary information may be used by others to compete against us. We may not be able to identify infringements
of our patents (if and when granted), and, accordingly, the enforcement of our intellectual property rights may be difficult.
Once such infringements are identified, enforcement could be costly and time consuming. Third party claims of intellectual property
infringement, whether or not reasonable, may prevent or delay our development and commercialization efforts.
Our
success will depend in part upon our ability to protect our intellectual property and proprietary technologies and upon the
nature and scope of the intellectual property protection we receive. The ability to compete effectively and to achieve
partnerships will depend on our ability to develop and maintain proprietary aspects of our technology and to operate without
infringing on the proprietary rights of others. The presence of such proprietary rights of others could severely limit our
ability to develop and commercialize our products and to conduct our existing research, and could require financial resources
to defend litigation, which may be in excess of the Company’s ability to raise such funds. There is no assurance that
our patent applications submitted or those that we intend to acquire will be approved in a form that will be sufficient to
protect our proprietary technology and gain or keep any competitive advantage that we may have or, once approved, will be
upheld in any post-grant proceedings brought by any third parties.
The
patent positions of pharmaceutical companies can be highly uncertain and involve complex legal, scientific and factual questions
for which important legal principles remain unresolved. Patents issued to the Company may be challenged, invalidated or circumvented.
To the extent our intellectual property offers inadequate protection, or is found to be invalid or unenforceable, we will be exposed
to a greater risk of direct competition. If our intellectual property does not provide adequate protection against our competitors,
our competitive position could be adversely affected, as could our business, financial condition and results of operations. Both
the patent application process and the process of managing patent disputes can be time consuming and expensive, and the laws of
some foreign countries may not protect our intellectual property rights to the same extent as do the laws of Canada and the United
States. The Company will be able to protect our intellectual property from unauthorized use by third parties only to the extent
that our proprietary technologies, key products, and any future products are covered by valid and enforceable intellectual property
rights, including patents, or are effectively maintained as trade secrets, and provided we have the funds to enforce our rights,
if necessary.
Third-Party
Development and Manufacturing Licenses
A
substantial number of patents have already been issued to other biotechnology and pharmaceutical companies. To the extent that
valid third-party patent rights cover any future products or services, we would be required to seek licenses from the holders
of these patents in order to manufacture, use or sell these products and services, and payments under them would reduce our profits
from these products and services. We are currently unable to predict the extent to which we may wish or be required to acquire
rights under such patents, the availability and cost of acquiring such rights, and whether a license to such patents will be available
on acceptable terms or at all. There may be patents in Canada, the United States or in foreign countries or patents issued in
the future that are unavailable to license on acceptable terms. Our inability to obtain such licenses may hinder or eliminate
our ability to manufacture and market our products.
Changes
in Patent Law
We
are dependent on intellectual property rights, particularly patents. Obtaining and enforcing patents in the biopharmaceutical
industry involves technological and legal complexity, and obtaining and enforcing biopharmaceutical patents is costly, time consuming
and inherently uncertain. The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope
of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition
to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty
with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the
USPTO the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new
patents or to enforce existing patents.
Patent
Litigation
The
pharmaceutical industry is characterized by extensive patent litigation. Other parties may have patents that allege our
patent application infringes upon existing patents. Such proceedings could result in adverse decisions regarding: the
patentability of FT-104; and the enforceability, validity, or scope of protection offered to FT-104. If we are unable to
avoid infringing the patent rights of others, we may be required to seek a license, defend an infringement action, or
challenge the validity of the patents in court. Regardless of the outcome, patent litigation is costly and time consuming. In
some cases, we may not have sufficient resources to bring these actions to a successful conclusion. In addition, if we do not
obtain a license, develop or obtain non-infringing technology, fail to defend an infringement action successfully or have
infringed patents declared invalid, we may incur substantial monetary damages, encounter significant delays in bringing its
key products to market and be precluded from the manufacture, use or sale of FT-104. Even if we are successful in these
proceedings, we may incur substantial costs and divert management time and attention in pursuing these proceedings, which
could have a material adverse effect on the Company.
Reliance
on Third Parties – Trade Secrets
Because
we rely on third parties at our clinics, including patients and employees, and in relation to FT-104, we must share trade secrets
with them. We seek to protect our proprietary technology in part by entering into confidentiality agreements and other similar
agreements prior to disclosing proprietary information. These agreements typically restrict the ability to publish data potentially
relating to our trade secrets. Our academic and clinical collaborators typically have rights to publish data, provided that we
are notified in advance and may delay publication for a specified time in order to secure our intellectual property rights arising
from the collaboration. In other cases, publication rights are controlled exclusively by us, although in some cases we may share
these rights with other parties. We may also conduct joint research and development programs which may require us to share trade
secrets under the terms of research and development collaborations or similar agreements. Despite our efforts to protect our trade
secrets, competitors may discover our trade secrets, either through breach of these agreements, independent development or publication
of information including our trade secrets in cases where we do not have proprietary or otherwise protected rights at the time
of publication. A competitor’s discovery of our trade secrets may impair our competitive position and could have a material
adverse effect on our business and financial condition.
Corporate
Practice of Medicine and Fee Splitting in the United States
Our
clinic operations in the United States are subject to Corporate practice of medicine and fee-splitting prohibitions which vary
widely from state to state. The corporate practice of medicine prohibition exists in some form, by statute, regulation, board
of medicine or attorney general guidance, or case law, in various states that we operate. These laws generally prohibit the practice
of medicine by lay persons or entities and are intended to prevent unlicensed persons or entities from interfering with or inappropriately
influencing providers’ professional judgment. Due to the prevalence of the corporate practice of medicine doctrine, we contract
with Professional Corporations, who in turn employ or retain physicians and other medical providers to deliver professional clinical
services in our New York, Santa Monica, Chicago and Atlanta clinics. The PC Clinics are wholly owned by providers licensed in
their respective states, including Dr. Ben Medrano, Dr. Randy Scharlach, Dr. Kiran Chekka and Dr. Michael Muench, who are members
of the Professional Corporation (PC) Advisory Committee.
Under
our MSA’s, when our PC Clinics provide professional clinical services to patients, we, as administrator, perform billing
and collection services on behalf of the PC Clinics, and the PC Clinics receive the fees for the services provided. In return
for these professional clinical, management, operational and administrative services, we receive fees from the PC Clinics that
represent fair value. As a result, our ability to receive cash fees from the PC Clinics is limited to the fair market value of
the services provided under the MSA’s. To the extent our ability to receive cash fees from the PC Clinics is limited, our
ability to use that cash for growth, debt service or other uses at PC Clinics may be impaired and, as a result, our results of
operations and financial condition may be adversely affected.
Our
ability to perform medical and digital health services in a particular U.S. state is directly dependent upon the applicable
laws governing the practice of medicine, healthcare delivery and fee splitting in such locations, which are subject to
changing political, regulatory and other influences. The extent to which a U.S. state considers particular actions or
relationships to constitute the practice of medicine is subject to change and to evolving interpretations by medical boards
and state attorneys general, among others, each of which has broad discretion. There is a risk that U.S. state authorities in
some jurisdictions may find that our contractual relationships with the PC Clinics, which govern the provision of medical and
digital health services and the payment of administrative and operations support fees, violate laws prohibiting the corporate
practice of medicine and fee splitting. The extent to which each state may consider particular actions or contractual
relationships to constitute improper influence of professional judgment varies across the states and is subject to change and
to evolving interpretations by state boards of medicine and state attorneys general, among others. Accordingly, we must
monitor our compliance with laws in every jurisdiction in which we operate on an ongoing basis, and we cannot provide
assurance that our activities and arrangements, if challenged, will be found to be in compliance with the law. Additionally,
it is possible that the laws and rules governing the practice of medicine, including the provision of digital health
services, and fee splitting in one or more jurisdictions may change in a manner adverse to our business. While the
MSA’s prohibit us from controlling, influencing or otherwise interfering with the practice of medicine at each PC
Clinic, and provide that physicians retain exclusive control and responsibility for all aspects of the practice of
medicine and the delivery of medical services, there can be no assurance that our contractual arrangements and activities
with the PC Clinics will be free from scrutiny from U.S. state authorities, and we cannot guarantee that subsequent
interpretation of the corporate practice of medicine and fee splitting laws will not circumscribe our business operations.
State corporate practice of medicine doctrines also often impose penalties on physicians themselves for aiding the corporate
practice of medicine, which could discourage providers from participating in our network of physicians. If a successful legal
challenge or an adverse change in relevant laws were to occur, and we were unable to adapt our business model accordingly,
our operations in affected jurisdictions would be disrupted, which could harm our business.
While
we expect that our relationships with the PC Clinics will continue, a material change in our relationship with these entities,
or among the PC Clinics, whether resulting from a dispute among the entities, a challenge from a governmental regulator, a change
in government regulation, or the loss of these relationships or contracts with the PC Clinics, could impair our ability to provide
services to our patients and could harm our business.
Risks
Related to CPOM Laws
Many
states prohibit or otherwise regulate under the CPOM doctrine the extent to which non-licensed personnel may be involved in
the practice of medicine or otherwise employ licensed personnel. Related state rules further limit the extent to which fees
for professional services may be shared or “split” between parties. In connection with the Field Trip Health
Centers line of business, such rules in some states my impact our relationship with the Medical doctors who own the
Professional Corporations through which therapy is delivered. We are structuring our financial and billing relationships with
such Professional Corporations to be in compliance with applicable state rules. Failure to comply with state CPOM and fee
splitting rules, however, may result in fines and other liabilities, which may adversely affect the Professional
Corporation’s business, financial condition and results of operations.
Non-Compliance
with Anti-Kickback Laws
The
anti-kickback statute (“AKS”) applies to Medicare and other state and federal programs. AKS prohibits the solicitation,
offer, payment or receipt of remuneration in return for referrals or the purchase, or in return for recommending or arranging
for the referral or purchase, of goods covered by the federal health care programs. The AKS is a criminal statute with criminal
penalties, as well as potential civil and administrative penalties. The AKS, however, provides a number of statutory exceptions
and regulatory “safe harbors” for particular types of transactions. At present, neither the Company nor the clinics
participate in any federal programs as their services are not reimbursed by Medicare, Medicaid or any other state or federal program.
Many states have similar fraud and abuse laws and their own anti-kickback laws, some of which can apply to all payors, and not
just governmental payors. While we believe that we are in material compliance with both federal and state AKS laws, if it were
determined that we are not in compliance with the AKS, we could be subject to liability, and our operations could be curtailed,
which could have a material adverse effect on our business, financial condition and results of operations. Moreover, if the activities
of a Professional Corporation with which we have a business relationship were found to constitute a violation of the AKS and the
Company, as a result of the provision of products or services to such Professional Corporations, were found to have knowingly
participated in such activities, we could be subject to sanctions or liability under such laws, including civil and/or criminal
penalties, as well as exclusion from government health programs. As a result of exclusion from government health programs, neither
products nor services could be provided to any beneficiaries of any federal healthcare program.
Emerging
Market Risks
We
have operations in Jamaica, an emerging market country, and may have operations in additional emerging markets in the future.
Such operations expose us to the socio-economic conditions as well as the laws governing our activities in Jamaica and any other
jurisdiction where we may have operations in the future. Inherent risks with conducting foreign operations include, but are not
limited to: high rates of inflation; extreme fluctuations in currency exchange rates, military repression; war or civil war; social
and labour unrest; organized crime; hostage taking; terrorism; violent crime; expropriation and nationalization; renegotiation
or nullification of existing licenses, approvals, permits and contracts; changes in taxation policies; restrictions on foreign
exchange and repatriation; and changing political norms, banking and currency controls and governmental regulations that favour
or require the Company to award contracts in, employ citizens of, or purchase supplies from, the jurisdiction.
The
Jamaican government, or other governments in emerging markets where we may have operations in the future, may intervene in its
economies, sometimes frequently, and occasionally make significant changes in policies and regulations. Changes, if any, in the
research, cultivation and development of psilocybin mushroom and other botanicals policies or shifts in political attitude in
Jamaica or other countries where we may have operations in the future may adversely affect our operations or profitability. Operations
may be affected in varying degrees by government regulations with respect to, but not limited to, restrictions on production,
price controls, export controls, currency remittance, importation of product and supplies, income and other taxes, royalties,
the repatriation of profits, expropriation of property, foreign investment, maintenance of licenses, approvals and permits, environmental
matters, land use, land claims of local people, water use and workplace safety. Failure to comply strictly with applicable laws,
regulations and local practices could materially impact our operations in Jamaica or other countries where we may have operations
in the future. We continue to monitor developments and policies in Jamaica to assess the impact thereof to our operations or future
operations; however, such developments cannot be predicted and could have an adverse effect on our operations in Jamaica.
Jamaica
has a history of economic instability (such as inflation or recession). In 2013, Jamaica launched an ambitious reform program
to stabilize the economy, reduce debt, and fuel growth, gaining national and international support. While there is no current
political instability, and historically there has been no change in laws and regulations, this is subject to change in the future
and could adversely affect our business, financial condition and results of operations. Jamaica is vulnerable to natural disasters
such as hurricanes and flooding and the effects of climate change. It is an upper middle-income economy that is nevertheless struggling
due to low growth, high public debt, and exposure to external shocks.
Global
economic crises could negatively affect investor confidence in emerging markets or the economies of emerging markets, including
Jamaica. Such events could materially and adversely affect our business, financial condition and results of operations.
Financial
and securities markets in Jamaica are influenced by the economic and market conditions in other countries, including other emerging
market countries and other global markets. Although economic conditions in these countries may differ significantly from economic
conditions in Jamaica, investors’ reactions to developments in these other countries, such as the recent developments in
the global financial markets, may substantially affect the capital flows into Jamaica and the market value of the securities of
the Company. Due to our Jamaican subsidiary being a foreign entity, an investor’s ability to exercise statutory rights and
remedies under Canadian laws against it may be limited.
The
legal and regulatory requirements and local business culture and practices in Jamaica and the foreign countries in which we
may expand are different from those in which we currently operate. The officers and directors of the Company will rely, to a
great extent, on our local legal counsel and local consultants and advisors in respect of legal, banking, labour, financing
and tax matters in order to ensure compliance with material legal, regulatory and governmental developments as they pertain
to and affect our operations, particularly with respect to psilocybin or related operations. Increased compliance costs may
be incurred by us. Further, there can be no assurance that we will develop a marketable product or service in Jamaica or any
other foreign country. These factors may have a material adverse effect on our research and development business and the
results of our research and development operations.
In
the event of a dispute arising in connection with our operations in Jamaica or another a foreign jurisdiction where we may conduct
business, we may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons
to the jurisdictions of the courts of Canada or enforcing Canadian judgments in such other jurisdictions. We may also be hindered
or prevented from enforcing our rights with respect to a governmental instrumentality because of the doctrine of sovereign immunity.
Accordingly, our activities in foreign jurisdictions could be substantially affected by factors beyond our control.
Other
risks include the potential for fraud and corruption by suppliers or personnel or government officials which may implicate the
Company, compliance with applicable anti-corruption laws, including the Corruption of Foreign Public Officials Act (Canada) by
virtue of us operating in jurisdictions that may be vulnerable to the possibility of bribery, collusion, kickbacks, theft, improper
commissions, facilitation payments, conflicts of interest and related party transactions and our possible failure to identify,
manage and mitigate instances of fraud, corruption, or violations applicable regulatory requirements.
The
Board has effective control over our Jamaican subsidiary in that it is wholly-owned and thus has the ability to pass all shareholder
resolutions with respect thereof and can cause it to distribute dividends, subject to requirements of local laws. We do not believe
that we face any material risks outside of the normal course with respect to our corporate structure. The directors and executive
officers of our Jamaican subsidiary are also directors and officers of the Company, which allows the Company to exercise a level
of control over the Jamaican subsidiary. To mitigate risk when operating in Jamaica, we may, in part, engage local counsel and/or
consultants to advise on applicable regulatory and/or operational matters, as applicable, and it is anticipated that our personnel
will visit local operations as required to maintain regular involvement in such operations. No material language barriers exist.
The books and records of the Jamaican subsidiary are maintained by it as well as by the Company such that there are no access
restrictions to such books and records by us.
Enforcement
of Legal Rights in Foreign Jurisdictions
In
the event of a dispute arising from our foreign operations, we may be subject to the exclusive jurisdiction of foreign courts
or may not be successful in subjecting foreign persons to the jurisdictions of courts in Canada. Similarly, to the extent that
our assets are located outside of Canada, investors may have difficulty collecting from the Company any judgments obtained in
the Canadian courts and predicated on the civil liability provisions of securities laws. Consequently, investors may be effectively
prevented from pursuing remedies against the Company under Canadian securities laws or otherwise. We may also be hindered or prevented
from enforcing our rights with respect to a governmental entity or instrumentality because of the doctrine of sovereign immunity.
Foreign
Exchange Risk
We
may be adversely affected by foreign currency fluctuations. We have operations in Canada, the United States, Jamaica and The Netherlands.
Also, a significant portion of our expenditures are in other currencies, and we are therefore subject to foreign currency fluctuations
which may, from time to time, impact our financial position and results of operations.
Risks
Related to the Company’s Common Shares
Ineffective
Internal Controls
If
we fail to maintain an effective system of internal controls, we might not be able to report our financial results accurately
or prevent misstatement; and in that case, our shareholders could lose confidence in our financial reporting, which would harm
our business and could negatively impact the value of our shares. While we believe that we have sufficient personnel and review
procedures to allow us to maintain an effective system of internal controls, there can be no assurance that we will always successfully
detect misstatements or implement necessary improvements in a timely fashion.
Lack
of an Active or Liquid Market
No
assurance can be given that an active or liquid trading market for the Common Shares will be sustained. If an active or liquid
market for the Common Shares fails to be sustained, the prices at which such securities trade may be adversely affected. Whether
or not the Common Shares will trade at lower prices depends on many factors, including the liquidity of the Common Shares, prevailing
interest rates, the markets for similar securities, general economic conditions and our financial condition, historic financial
performance and future prospects.
Volatility
of Field Trip Common Share Price
The
market price of the Common Shares on the Canadian Stock Exchange (“CSE”) could be subject to significant fluctuations
in response to variations in our operating results or other factors. In addition, fluctuations in the stock market may adversely
affect the market price of the Common Shares that may become listed and posted for trading on the CSE or any other stock exchange
regardless of our operating performance. Securities markets have also experienced significant price and volume fluctuations from
time to time. In some instances, these fluctuations have been unrelated or disproportionate to the operating performance of issuers.
Market fluctuations may adversely impact the market price of the Common Shares.
Additional
Issuances and Dilution
We
may issue and sell additional securities to finance our operations. We cannot predict the size or type of future issuances of
our securities or the effect, if any, that future issuances and sales of securities will have on the market price of any of our
securities issued and outstanding from time to time. Sales or issuances of substantial amounts of our securities, or the perception
that such sales could occur, may adversely affect prevailing market prices for our securities issued and outstanding from time
to time. With any additional sale or issuance of our securities, holders will suffer dilution with respect to voting power and
may experience dilution in the Company’s earnings per share.
Exhibit 99.16
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON
ENERGY CORPORATION)
UNAUDITED CONDENSED INTERIM CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED
DECEMBER 31, 2020
AND
PERIODS ENDED DECEMBER 31, 2019
(Expressed in Canadian Dollars, unless
otherwise noted)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON
ENERGY CORPORATION)
CONDENSED INTERIM CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
(unaudited)
|
|
|
|
|
|
As at
December 31, 2020
|
|
|
As at
March 31, 2020
|
|
|
(Expressed in Canadian Dollars)
|
|
Notes
|
|
|
$
|
|
|
$
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
9,828,870
|
|
|
|
9,590,758
|
|
|
Restricted cash
|
|
5
|
|
|
|
150,449
|
|
|
|
100,000
|
|
|
Accounts receivable
|
|
6
|
|
|
|
585,236
|
|
|
|
203,112
|
|
|
Other assets
|
|
7
|
|
|
|
813,429
|
|
|
|
133,916
|
|
|
TOTAL CURRENT ASSETS
|
|
|
|
|
|
11,377,984
|
|
|
|
10,027,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
8
|
|
|
|
1,741,627
|
|
|
|
575,446
|
|
|
Intangible assets
|
|
9
|
|
|
|
294,531
|
|
|
|
124,980
|
|
|
Right-of-use assets
|
|
10
|
|
|
|
6,271,766
|
|
|
|
1,632,661
|
|
|
Other non-current assets
|
|
7
|
|
|
|
380,712
|
|
|
|
180,222
|
|
|
TOTAL NON-CURRENT ASSETS
|
|
|
|
|
|
8,688,636
|
|
|
|
2,513,309
|
|
|
TOTAL ASSETS
|
|
|
|
|
|
20,066,620
|
|
|
|
12,541,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
12
|
|
|
|
2,273,136
|
|
|
|
577,878
|
|
|
Deferred revenue
|
|
|
|
|
|
-
|
|
|
|
2,000
|
|
|
Current portion of lease obligations
|
|
11
|
|
|
|
900,361
|
|
|
|
462,871
|
|
|
TOTAL CURRENT LIABILITIES
|
|
|
|
|
|
3,173,497
|
|
|
|
1,042,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan payable
|
|
13
|
|
|
|
22,266
|
|
|
|
-
|
|
|
Lease obligations
|
|
11
|
|
|
|
5,519,065
|
|
|
|
1,078,334
|
|
|
TOTAL LIABILITIES
|
|
|
|
|
|
8,714,828
|
|
|
|
2,121,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
4, 14
|
|
|
|
26,731,485
|
|
|
|
12,781,270
|
|
|
Share-based payments reserve
|
|
15
|
|
|
|
2,210,190
|
|
|
|
330,703
|
|
|
Accumulated other comprehensive gain (loss)
|
|
|
|
|
|
211,204
|
|
|
|
(49,521
|
)
|
|
Retained deficit
|
|
|
|
|
|
(17,801,087
|
)
|
|
|
(2,634,096
|
)
|
|
Non-controlling interest
|
|
25
|
|
|
|
-
|
|
|
|
(8,344
|
)
|
|
TOTAL EQUITY
|
|
|
|
|
|
11,351,792
|
|
|
|
10,420,012
|
|
|
TOTAL LIABILITIES AND EQUITY
|
|
|
|
|
|
20,066,620
|
|
|
|
12,541,095
|
|
Contingencies (Note 31) and Commitments (Note 27)
Subsequent events (Note 32)
The accompanying notes are an integral part of these Condensed
Interim Consolidated Financial Statements.
Approved on behalf of the Board of Directors:
|
/s/ Joseph Del Moral
|
|
/s/ Helen Boudreau
|
|
Director
|
|
Director
|
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON
ENERGY CORPORATION)
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF
LOSS AND
COMPREHENSIVE LOSS
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from April 2,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 (Date of
|
|
|
|
|
|
|
|
3 months ended
|
|
|
3 months ended
|
|
|
9 months ended
|
|
|
Incorporation) to
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
(Expressed in Canadian Dollars)
|
|
Notes
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
REVENUE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient services
|
|
|
|
|
|
|
316,329
|
|
|
|
-
|
|
|
|
434,220
|
|
|
|
-
|
|
|
Other revenue
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
240
|
|
|
|
-
|
|
|
Total revenue
|
|
|
|
|
|
|
316,329
|
|
|
|
-
|
|
|
|
434,460
|
|
|
|
-
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administration
|
|
|
17
|
|
|
|
2,989,160
|
|
|
|
683,604
|
|
|
|
6,525,224
|
|
|
|
1,247,935
|
|
|
Occupancy costs
|
|
|
18
|
|
|
|
288,452
|
|
|
|
149,380
|
|
|
|
464,112
|
|
|
|
222,852
|
|
|
Sales and marketing
|
|
|
19
|
|
|
|
534,848
|
|
|
|
96,391
|
|
|
|
955,155
|
|
|
|
139,973
|
|
|
Research and development
|
|
|
20
|
|
|
|
1,064,744
|
|
|
|
81,113
|
|
|
|
2,545,735
|
|
|
|
81,113
|
|
|
Depreciation and amortization
|
|
|
21
|
|
|
|
375,745
|
|
|
|
19,239
|
|
|
|
855,083
|
|
|
|
19,272
|
|
|
Patient services
|
|
|
22
|
|
|
|
668,911
|
|
|
|
-
|
|
|
|
958,000
|
|
|
|
-
|
|
|
Total operating expenses
|
|
|
|
|
|
|
5,921,860
|
|
|
|
1,029,727
|
|
|
|
12,303,309
|
|
|
|
1,711,145
|
|
|
OTHER INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance expense
|
|
|
23
|
|
|
|
(84,688
|
)
|
|
|
(3,547
|
)
|
|
|
(178,045
|
)
|
|
|
(3,547
|
)
|
|
Other expense
|
|
|
24
|
|
|
|
(454,341
|
)
|
|
|
(22,392
|
)
|
|
|
(989,014
|
)
|
|
|
(22,392
|
)
|
|
Listing expense
|
|
|
4
|
|
|
|
(2,131,109
|
)
|
|
|
-
|
|
|
|
(2,131,109
|
)
|
|
|
-
|
|
|
Net loss before income taxes
|
|
|
|
|
|
|
(8,275,669
|
)
|
|
|
(1,055,666
|
)
|
|
|
(15,167,017
|
)
|
|
|
(1,737,084
|
)
|
|
Income taxes
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Net loss
|
|
|
|
|
|
|
(8,275,669
|
)
|
|
|
(1,055,666
|
)
|
|
|
(15,167,017
|
)
|
|
|
(1,737,084
|
)
|
|
Exchange gain (loss) from translation of foreign subsidiaries
|
|
|
|
|
|
|
194,831
|
|
|
|
(79
|
)
|
|
|
260,692
|
|
|
|
121
|
|
|
NET LOSS AND COMPREHENSIVE LOSS
|
|
|
|
|
|
|
(8,080,838
|
)
|
|
|
(1,055,745
|
)
|
|
|
(14,906,325
|
)
|
|
|
(1,736,963
|
)
|
|
TOTAL COMPREHENSIVE LOSS ATTRIBUTABLE TO:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders of Field Trip Health Ltd.
|
|
|
|
|
|
|
(8,080,838
|
)
|
|
|
(1,055,741
|
)
|
|
|
(14,906,325
|
)
|
|
|
(1,736,959
|
)
|
|
Non-controlling interest
|
|
|
|
|
|
|
-
|
|
|
|
(4
|
)
|
|
|
-
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
(8,080,838
|
)
|
|
|
(1,055,745
|
)
|
|
|
(14,906,325
|
)
|
|
|
(1,736,963
|
)
|
|
NET LOSS PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
16
|
|
|
|
(0.22
|
)
|
|
|
(0.10
|
)
|
|
|
(0.52
|
)
|
|
|
(0.22
|
)
|
The accompanying notes are an integral part of these Condensed
Interim Consolidated Financial Statements.
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY
NEWTON ENERGY CORPORATION)
CONDENSED INTERIM CONSOLIDATED
STATEMENTS OF CHANGES IN EQUITY
(unaudited)
|
|
|
|
|
|
Share Capital
|
|
|
Share-based
Payment Reserve
|
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
Retained Deficit
|
|
|
Non-controlling
Interest
|
|
|
Shareholders’
Equity
|
|
|
|
|
Notes
|
|
|
# Shares
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Balance, April 1, 2020
|
|
|
|
|
|
20,941,923
|
|
|
|
12,781,270
|
|
|
|
330,703
|
|
|
|
(50,041
|
)
|
|
|
(2,641,920
|
)
|
|
|
8,344
|
|
|
|
10,428,356
|
|
|
Share issuance
|
|
4, 14
|
|
|
|
7,065,063
|
|
|
|
12,762,929
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
12,762,929
|
|
|
Share issuance cost
|
|
|
|
|
|
-
|
|
|
|
(1,098,344
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,098,344
|
)
|
|
Share-based payments
|
|
15
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,308,555
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,308,555
|
|
|
Stock options exercised
|
|
15
|
|
|
|
9,184,101
|
|
|
|
695,418
|
|
|
|
(504,050
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
191,368
|
|
|
Reverse takeover transaction (“RTO”)
|
|
4
|
|
|
|
795,106
|
|
|
|
1,590,212
|
|
|
|
74,982
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,665,194
|
|
|
Exchange gain from translation of foreign subsidiaries
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
260,692
|
|
|
|
-
|
|
|
|
59
|
|
|
|
260,751
|
|
|
Purchase of non-controlling interest
|
|
25
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
553
|
|
|
|
9,784
|
|
|
|
(10,337
|
)
|
|
|
-
|
|
|
Net loss
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(15,168,951
|
)
|
|
|
1,934
|
|
|
|
(15,167,017
|
)
|
|
Balance, December 31, 2020
|
|
|
|
|
|
37,986,193
|
|
|
|
26,731,485
|
|
|
|
2,210,190
|
|
|
|
211,204
|
|
|
|
(17,801,087
|
)
|
|
|
-
|
|
|
|
11,351,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 2, 2019
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Share issuance - Class A
|
|
14
|
|
|
|
11,510,900
|
|
|
|
1,545,027
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
1,545,027
|
|
|
Deposit for shares
|
|
14
|
|
|
|
-
|
|
|
|
2,100,956
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,100,956
|
|
|
Share-based payments
|
|
15
|
|
|
|
-
|
|
|
|
-
|
|
|
|
219,873
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
219,873
|
|
|
Exchange gain from translation of foreign subsidiaries
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
121
|
|
|
|
-
|
|
|
|
-
|
|
|
|
121
|
|
|
Shareholder distributions from issuance of below-market loans
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,596
|
)
|
|
|
-
|
|
|
|
(13,596
|
)
|
|
Net loss
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,737,080
|
)
|
|
|
(4
|
)
|
|
|
(1,737,084
|
)
|
|
Balance, December 31, 2019
|
|
|
|
|
|
11,510,900
|
|
|
|
3,645,983
|
|
|
|
219,873
|
|
|
|
121
|
|
|
|
(1,750,676
|
)
|
|
|
(4
|
)
|
|
|
2,115,297
|
|
The accompanying notes are an integral part of these Condensed
Interim Consolidated Financial Statements.
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020 and
periods ended December 31, 2019
FIELD TRIP HEALTH
LTD. (FORMERLY NEWTON ENERGY CORPORATION)
CONDENSED INTERIM
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
|
|
|
|
9 months ended
December 31, 2020
|
|
|
Period from April 2,
2019 (Date of
Incorporation) to
December 31, 2019
|
|
|
(Canadian dollars in thousands)
|
|
Notes
|
|
|
$
|
|
|
$
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
(15,167,017
|
)
|
|
|
(1,737,084
|
)
|
|
Items not involving current cash flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
855,083
|
|
|
|
19,272
|
|
|
Share-based payments
|
|
15
|
|
|
|
2,308,555
|
|
|
|
219,873
|
|
|
Fair value gain on government assistance
|
|
|
|
|
|
(7,733
|
)
|
|
|
-
|
|
|
Interest expense on lease commitments
|
|
23
|
|
|
|
189,420
|
|
|
|
3,557
|
|
|
Interest income on shareholders’ loan
|
|
23
|
|
|
|
(1,886
|
)
|
|
|
-
|
|
|
Interest income on refundable lease deposits
|
|
23
|
|
|
|
(3,386
|
)
|
|
|
-
|
|
|
Reverse take over costs
|
|
4
|
|
|
|
2,131,109
|
|
|
|
-
|
|
|
Net change in non-cash working capital
|
|
26
|
|
|
|
631,621
|
|
|
|
56,902
|
|
|
CASH USED IN OPERATING ACTIVITIES
|
|
|
|
|
|
(9,064,234
|
)
|
|
|
(1,437,480
|
)
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of property, plant and equipment
|
|
8
|
|
|
|
(1,359,272
|
)
|
|
|
(10,535
|
)
|
|
Acquisition of intangible assets
|
|
9
|
|
|
|
(200,075
|
)
|
|
|
-
|
|
|
Refundable security deposit paid for right-of-use assets
|
|
|
|
|
|
(41,283
|
)
|
|
|
(123,465
|
)
|
|
CASH USED IN INVESTING ACTIVITIES
|
|
|
|
|
|
(1,600,630
|
)
|
|
|
(134,000
|
)
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds on issuance of common shares
|
|
14
|
|
|
|
12,681,247
|
|
|
|
3,585,983
|
|
|
Proceeds from exercise of stock options
|
|
14
|
|
|
|
191,368
|
|
|
|
-
|
|
|
Share issuance cost paid
|
|
4, 14
|
|
|
|
(1,098,345
|
)
|
|
|
-
|
|
|
Repayment of lease obligation
|
|
11
|
|
|
|
(691,123
|
)
|
|
|
(10,289
|
)
|
|
Loans received
|
|
13
|
|
|
|
40,000
|
|
|
|
-
|
|
|
CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
|
|
|
11,123,147
|
|
|
|
3,575,694
|
|
|
Net change in cash during the period
|
|
|
|
|
|
458,283
|
|
|
|
2,004,214
|
|
|
Effect of exchange rate on changes in cash
|
|
|
|
|
|
(169,722
|
)
|
|
|
120
|
|
|
Cash, beginning of the period
|
|
|
|
|
|
9,690,758
|
|
|
|
-
|
|
|
CASH, END OF PERIOD
|
|
|
|
|
|
9,979,319
|
|
|
|
2,004,334
|
|
|
|
|
|
|
|
|
|
|
|
|
68,616
|
|
|
Cash
|
|
|
|
|
|
9,828,870
|
|
|
|
11,033,448
|
|
|
Restricted cash
|
|
|
|
|
|
150,449
|
|
|
|
35,000
|
|
|
CASH, END OF PERIOD
|
|
|
|
|
|
9,979,319
|
|
|
|
11,068,448
|
|
Represented
by:
The accompanying notes are an integral part of these Condensed
Interim Consolidated Financial Statements.
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020 and
periods ended December 31, 2019
1. NATURE OF OPERATIONS
Field Trip Health Ltd. (formerly Newton Energy Corporation)
(the “Group”, the “Company” or “Field Trip”) was formed on September 30, 2008, pursuant to
an amalgamation under the Business Corporations Act (Alberta). Prior to October 1, 2020, the Company’s operations were conducted
through Field Trip Psychedelics Inc. (“FTP”). FTP was incorporated under the laws of the province of Ontario, Canada
as Field Trip Ventures Inc. on April 2, 2019. On October 10, 2019, the Company amended its name to Field Trip Psychedelics Inc.
On October 1, 2020, FTP completed a reverse takeover transaction
(the “Transaction”) with Newton Energy Corporation (“Newton”) and Newton’s wholly-owned subsidiary
Newton Energy Subco Limited (“Newton Subco”). The Transaction constituted a Reverse Takeover under applicable securities
law and was structured as a three-cornered amalgamation, which resulted in FTP becoming a wholly-owned subsidiary of Newton by
amalgamating with Newton Subco, and the security holders of FTP becoming security holders of Newton. As a result, the consolidated
statements of financial position are presented as a continuance of FTP and the comparative figures presented are those of FTP
(see Note 3 – Reverse Takeover for details). Immediately prior to the closing of the Transaction, Newton filed an
Article of Amendment to change its name from Newton Energy Corporation to “Field Trip Health Ltd.”
Field Trip is an international organization focused on blending
operational execution with strategic investment across all aspects of the psychedelics value chain. Through its wholly owned subsidiary
Field Trip Natural Products Ltd. and Field Trip Psychedelics research division, “Field Trip Discovery” performs research
on botanical psychedelics and psychedelic-based molecules for future therapeutic application of select mental health indications.
Through its wholly owned subsidiaries Field Trip Health Canada Inc. (formerly Field Trip Health Inc.), Field Trip Health USA Inc.
(formerly Field Trip Ventures USA Inc.) and Field Trip Health B.V., “Field Trip Health” is building a network of world
class clinics focused on psychedelics-assisted therapies. Field Trip Digital LLC, a wholly owned subsidiary of Field Trip Health
USA Inc., is focused on developing digital teletherapy tools. “Trip App” is a mobile software application which provides
users with a framework and tools for self-directed consciousness-expanding activities and features mood tracking, personalized
music, trip record keeping, guided journaling, voice recording, and mindfulness content. “Portal” is a digital health
platform which supports clients participating in psychedelic therapies at Field Trip Health centers.
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020 and
periods ended December 31, 2019
2. BASIS OF PREPARATION
Going Concern Assumption
The condensed interim consolidated financial statements were
prepared on a going concern basis which assumes that the Group will be able to realize its assets and discharge liabilities in
the normal course of business. At December 31, 2020, the Group had not yet achieved profitable operations, has a retained deficit
of $17,801,087 since its inception, and expects to incur further losses in the development of its business, all of which creates
a material uncertainty that may cast significant doubt about the Group’s ability to continue as a going concern. The Group’s
ability to continue as a going concern is dependent upon its ability to generate future profitable operations, the successful development
of new products and their marketing and the conduct of its clinical studies and their results, as well as its ability to obtain
the necessary financing to conduct its planned business, meet its on-going levels of corporate overhead and discharge its liabilities
as they come due.
In addition, the outbreak of the novel strain of coronavirus,
commonly referred to as “COVID-19", has resulted in governments worldwide enacting emergency measures to combat the
spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social
distancing, have caused material disruption to businesses globally resulting in an economic slowdown. Global equity markets have
experienced significant volatility and weakness. Governments and central banks have reacted with significant monetary and fiscal
interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 outbreak is unknown at this time,
as is the efficacy of the government and central bank interventions. It is not possible to reliably estimate the length and severity
of these developments and the impact on the financial results and condition of the Company and its operating subsidiaries in future
periods. However, depending on the length and severity of the pandemic, COVID-19 could impact our operations, could cause delays
relating to approval from U.S. Food and Drug Administration (“FDA”) and equivalent organizations in other countries,
could postpone research activities, and could impair our ability to raise funds depending on COVID-19’s effect on capital
markets.
Accordingly, these financial statements do not give effect to
adjustments, if any that would be necessary should the Company be unable to continue as a going concern and, therefore, be required
to realize its assets and liquidate its liabilities in other than the normal course of business and at amounts which may differ
from those shown in these financial statements.
Statement of Compliance
The condensed interim consolidated financial statements have
been prepared in accordance with International Financial Reporting Standards (“IFRS) and with IAS 34, Interim Financial Reporting,
as issued by the International Accounting Standards Board (“IASB”) and interpreted by the IFRS Interpretations Committee
(“IFRIC”). These condensed interim consolidated financial statements do not include all of the information required
for full annual financial statements and should be read in conjunction with the most recent audited annual consolidated financial
statements of the Company, including the notes thereto, for the year ended March 31, 2020.
These consolidated financial statements were approved for issue
by the Board of Directors on February 16, 2021.
Basis of Presentation
These consolidated financial statements have been prepared on
a going concern basis, under the historical cost convention, except for certain financial instruments that are measured at fair
value, as detailed in the Group’s accounting policies in the most recent audited annual consolidated financial statements
for the year ended March 31, 2020.
Functional Currency
The Group’s functional currency is the Canadian dollar.
Transactions undertaken in foreign currencies are translated into Canadian dollars at daily exchange rates prevailing when the
transactions occur. Monetary assets and liabilities denominated in foreign currencies are translated at period-end exchange rates
and non-monetary items are translated at historical exchange rates. Realized and unrealized exchange gains and losses are recognized
in the consolidated statements of loss and comprehensive loss.
Field Trip Health Ltd. (Formerly Newton Energy
Corporation) • Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020 and
periods ended December 31, 2019
The assets and liabilities of foreign operations are translated
into Canadian dollars using the period-end exchange rates. Income, expenses, and cash flows of foreign operations are translated
into Canadian dollars using average exchange rates. Exchange differences resulting from the translation of foreign operations into
Canadian dollars are recognized in other comprehensive (loss) income and accumulated in equity.
Basis of Consolidation
These condensed interim consolidated financial statements include
the accounts of the Group, its subsidiaries and ketamine clinics in the United States that are owned solely by state-licensed physicians
and organized as physician practices or professional medical corporations (“PCs”).
Subsidiaries
|
Subsidiary
|
|
Jurisdiction
|
|
Functional Currency
|
|
% Ownership
|
|
Field Trip Psychedelics Inc.
|
|
Ontario, Canada
|
|
Canadian Dollars
|
|
100%
|
|
Field Trip Health Canada Inc.
|
|
Ontario, Canada
|
|
Canadian Dollars
|
|
100%
|
|
Field Trip Health USA Inc.
|
|
Delaware, USA
|
|
United States Dollars
|
|
100%
|
|
Field Trip Health B.V.
|
|
Netherlands
|
|
Euros
|
|
100%
|
|
Field Trip Digital LLC(i)
|
|
Delaware, USA
|
|
United States Dollars
|
|
100%
|
|
Field Trip Natural Products Limited (ii)
|
|
Kingston, Jamaica
|
|
United States Dollars
|
|
100%
|
|
|
(i)
|
Field Trip Digital LLC is a wholly owned subsidiary of
Field Trip Health USA Inc.
|
|
|
(ii)
|
On June 3, 2020, Field Trip Psychedelics Inc., Darwin
Inc., a third party, and Field Trip Natural Products Limited entered into a Share Purchase Agreement whereby Field Trip Psychedelics
Inc. purchased 120 shares of Field Trip Natural Products Limited from Darwin Inc. for a nominal amount of $120 USD. As a result
of the share transfer, the Group owns 100% of the authorized capital of Field Trip Natural Products Limited. The Company as part
of this arrangement entered into a share-based compensation agreement with Darwin Inc. as detailed in Note 15 Share-based Payments.
|
Subsidiaries are entities controlled by the Company. Control
exists when the Company has the power, directly and indirectly, to govern the financial and operating policies of an entity and
be exposed to the variable returns from its activities. The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date the control ceases. All significant intercompany balances
and transactions have been eliminated upon consolidation.
Professional Medical Corporations (PCs)
Field Trip’s agreements with the PCs generally consist
of Management Services Agreements (“MSAs”), which provide for various administrative and management services to be
provided by the Company to the PC, and Succession Agreements, which provide for transition of ownership of the PCs under certain
conditions.
The MSAs typically provide that the term of the arrangements
is twenty years with automatic renewal for successive five-year terms, subject to termination by Field Trip or the PC in certain
specified circumstances. The Company has the right to receive income as an ongoing administrative fee in an amount that represents
fair value of services rendered and has provided all financial support through loans to the PCs. Field Trip is the sole and exclusive
provider of all non-medical business management, information management, marketing, support and personnel, equipment and supplies
as are reasonably necessary for the day-to-day administration, operation and non-medical management of the PCs. The Company directs
and trains PC staff in the use of its proprietary psychotherapy protocols and establishes the guidelines for the employment and
compensation of the physicians and other employees of the PCs. The PC’s are branded as Field Trip clinics using its marketing
collaterals and logo. In addition, Field Trip holds a security interest in all PC revenue and proceeds as collateral.
Under the terms of the Succession Agreement, Field Trip has
the right to designate a successor shareholder in the event of a succession event. The outstanding voting equity instruments of
the PCs are owned by successor shareholders appointed by Field Trip or other shareholders who are also subject to the terms of
the Succession Agreements.
Based upon the provisions of these agreements, Field Trip determined
that the PCs are controlled by the Company. The contractual arrangement to provide management services allows Field Trip to direct
the economic activities that most significantly affect the PC. Accordingly, the Company
is the primary beneficiary of the PCs and consolidates the PCs in accordance with IFRS 10 Consolidated Financial Statements. Furthermore,
as a direct result of nominal initial equity contributions by the physicians, the financial support Field Trip provides to the
PCs (e.g., loans) and the provisions of the successor shareholder succession arrangements described above, the interests held by
noncontrolling interest holders lack economic substance and do not provide them with the ability to participate in the residual
profits or losses generated by the PCs. Therefore, all income and expenses recognized by the PCs are allocated to Field Trip shareholders.
The aggregate carrying value of the current assets and liabilities included in the condensed consolidated balance sheets for the
PCs after elimination of intercompany transactions and balances were $90,611 and $79,388, respectively, as of December 31, 2020
and $nil and $nil, respectively, as of March 31, 2020. The PCs did not have noncurrent assets or liabilities.
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020
and periods ended December 31, 2019
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies and use of estimates and judgments described
in the Company’s annual consolidated financial statements have been applied consistently to all periods presented in these
condensed interim consolidated statements unless otherwise indicated. The accounting policies have been applied consistently by
all subsidiaries.
Accounts Receivable
Accounts receivable are non-interest bearing, unsecured obligations
due from patients and third-party payors. The Group makes an implicit allowance for potentially uncollectible amounts to arrive
at net receivables through its revenue recognition policy. In accordance with IFRS 9 Financial Instruments (“IFRS 9"),
the Group evaluates the credit risk on accounts receivable and measures a loss allowance at an amount equal to the expected credit
losses for the subsequent 12-month period. Estimates of expected credit losses take into account the Group’s collection history,
deterioration of collection rates during the average credit period, as well as observable changes in and forecasts of future economic
conditions that affect default risk. Where applicable, the carrying amount of a trade receivable is reduced for any expected credit
losses through the use of an allowance for doubtful accounts (“AFDA”) provision. Changes in the AFDA provision are
recognized in the statement of loss and comprehensive loss. When the Group determines that no recovery of the amount owing is possible,
the amount is deemed irrecoverable and the financial asset is written off.
The methodology to arrive at net receivables is reviewed by
management periodically. The balance of accounts receivable represents management’s estimate of the net realizable value
of receivables after discounts and contractual adjustments. The Group performs an estimation and review process periodically to
identify instances on a timely basis where such estimates need to be revised to accurately assess the amount of expected revenues.
Property, Plant and Equipment
Property, plant and equipment (“PP&E”) is recorded
at cost, net of accumulated depreciation and/or accumulated impairment losses.
The Group allocates the amount initially recognized in respect
of an item of PP&E to its significant components and amortizes each such part separately. Residual values, method of depreciation
and useful lives of the assets are reviewed annually or more frequently if required, and any changes in these estimates are adjusted
prospectively.
The following estimates were effective for the period ended
December 31, 2020:
|
Leasehold improvements
|
|
Shorter of asset life and term of lease
|
|
Straight-line
|
|
Furniture and fixtures
|
|
5 years
|
|
Straight-line
|
|
Medical and laboratory equipment
|
|
5 years
|
|
Straight-line
|
|
Computer equipment and software
|
|
3 years
|
|
Straight-line
|
|
Construction in progress
|
|
No term
|
|
Not amortized
|
Construction in progress is transferred to property, plant and
equipment when the assets are available for use and amortization of the assets commences at that point.
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020
and periods ended December 31, 2019
Revenue Recognition
The Group generates revenue from the provision of psychotherapy
services performed at its clinic locations. The Group uses the following five-step contract-based analysis of transactions to determine
if, when and how much revenue can be recognized:
1. Identify
the contract with a customer;
2. Identify
the performance obligation(s) in the contract;
3. Determine
the transaction price;
4. Allocate
the transaction price to the performance obligation(s) in the contract; and
5. Recognize
revenue when or as the Group satisfies the performance obligation(s).
The Group earns revenue from patients by offering various Ketamine
Assisted Psychotherapy (KAP) programs at each Field Trip clinic. The number of sessions in each KAP program vary, however the structure
and pricing remain consistent at each location. The current standard ketamine-assisted psychotherapy protocol offered at each Field
Trip clinic typically consists of seventeen sessions which are completed over a three-to-four-week timeframe.
The Patient Services Agreement (PSA) between the clinic and
patient outlines the clinic’s protocol, pricing, payment terms, cancellation fees and refund policy. Each session in the
PSA has an assigned standalone value based on a standard hourly rate. Patients can cancel their treatment at any time and receive
a full refund on sessions not yet completed, if sessions are paid in advance. Based on these terms, each session is an individual
performance obligation and patient service revenues are recognized over a period of time as performance of obligations are completed.
Payment of the transaction price for patient counselling is
typically due prior to the services being rendered and therefore, the transaction price is recognized as a contract liability,
or deferred revenue, when payment is received. Contract liabilities are subsequently recognized as revenue when the Group fulfills
its performance obligations.
Patient service revenues are measured at the net patient service
revenues received or receivable, which includes contractual allowances and discounts. In circumstances where the net patient service
revenues have not yet been received, the amount of revenue recognized is estimated based on an expected value approach where management
considers such variables as the average of previous net service revenues received by the applicable payor and fees received by
other patients for similar services and management’s best estimate leveraging industry knowledge and expectations of third-party
payors’ fee schedules. Third-party payors include federal and state agencies (under the Medicare programs), managed care
health plans and commercial insurance companies.
Use of Estimates and Judgments
The preparation of financial statements requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of these Consolidated Financial Statements and the reported amounts of revenue and expenses during
the reporting periods. Actual results could differ from these estimates and such differences could be material.
Key areas of judgment and estimation or use of managerial assumptions
are as follows:
Share-based payments
The fair value of share-based compensation expense is estimated
using the Black-Scholes option pricing model and rely on a number of estimates, such as the expected life of the option, the volatility
of the underlying share price, the risk-free rate of return, and the estimated rate of forfeiture of options granted. The Group
measures equity settled share-based payments based on their fair value at the grant date and recognizes compensation expense over
the vesting period based on the Group’s estimate of equity instruments that will eventually vest. Expected forfeitures are
estimated at the date of grant and subsequently adjusted if further non-market-based information indicates actual forfeitures may
vary from the original estimate. Any revisions are recognized in the consolidated statements of loss and comprehensive loss such
that the cumulative expense reflects the revised estimate.
Field Trip Health Ltd. (Formerly Newton
Energy Corporation) • Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020 and
periods ended December 31, 2019
Estimated useful lives and
impairment considerations of property, plant and equipment and intangible assets
Depreciation of property, plant and
equipment and amortization of intangible assets are dependent upon estimates of useful lives, which are determined through
the exercise of judgment. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts
that take into account factors such as economic and market conditions and the useful lives of assets. The impairment is
amount by which the carrying amount of the asset or Cash Generating Unit (CGU) exceeds its recoverable amount. The
recoverable amount is the higher of the fair value less costs of disposal and its value in use. Management exercises
judgement in the determination of the Company’s CGUs.
Deferred taxes
Significant estimates are required in determining the Company’s
income tax provision. Some estimates are based on interpretations of existing tax laws or regulations. Various internal and external
factors may have favourable or unfavourable effects on the Company’s future effective tax rate. These include, but are not
limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or regulations, and results
of tax audits by tax authorities.
Impact of Coronavirus
While the precise impact of the recent novel coronavirus (“COVID-19")
outbreak remains unknown, it has introduced uncertainty and volatility in Canadian and global economies. The Group is monitoring
developments and preparing for any impacts related to COVID-19. The Group has a comprehensive business continuity plan that ensures
its readiness to appropriately address and mitigate regulatory and business risks as they arise including, but not limited to,
mandatory closures, impacts on patients, practitioners and employees and research and development disruptions relating to FT-104
and psilocybin research.
4. REVERSE TAKEOVER
On October 1, 2020, FTP completed its previously announced going
public transaction (the “Transaction”) pursuant to the terms of an agreement entered into on August 21, 2020 between
FTP, Newton and Newton Subco. On September 30, 2020, immediately prior to the closing of the Transaction, Newton filed articles
of amendment to: (i) consolidate its outstanding common shares on an eight (8) old for one (1) new basis; and (ii) change its name
from Newton Energy Corporation to “Field Trip Health Ltd.”.
The Transaction constituted a Reverse Takeover by way of a
three-cornered amalgamation under applicable securities law, with FTP as the reverse takeover acquirer and Newton as the reverse
takeover acquiree. Pursuant to the terms of the agreement, Newton acquired all the issued and outstanding common shares of FTP.
Holders of FTP common shares received one post-consolidation common share of Newton in exchange for each FTP share held. Newton
became the direct parent and sole shareholder of FTP, changed its year end from December 31 to March 31 and continued under the
Canada Business Corporations Act (“CBCA”) by Certificate and Articles of Continuance.
In connection with the completion of the Transaction, Newton
common shares listed on the NEX board of the TSXV were delisted on September 30, 2020. Field Trip Health Ltd. shares commenced
trading on the Canadian Stock Exchange (“CSE”) on October 6, 2020, under the stock symbol FTRP.
The Transaction does not constitute a business combination as
Newton does not meet the definition of a business under IFRS 3 – Business Combinations. Immediately after the Transaction,
shareholders of FTP owned 100% of the voting rights of Newton. As a result, the Transaction has been accounted for as a capital
transaction with FTP being identified as the accounting acquirer and the equity consideration being measured at fair value, using
the acquisition method of accounting. The Transaction has been accounted for in the consolidated financial statements as a continuation
of the financial statements of FTP.
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020 and
periods ended December 31, 2019
Purchase price consideration
FTP is deemed to have acquired the former Newton as part of
the Transaction. The Transaction was accounted for using the acquisition method of accounting whereby the assets acquired, and
liabilities assumed were recorded at their estimated fair value at the acquisition date. The acquisition did not meet the criteria
for a business combination and is therefore treated a recapitalization under the scope of IFRS 2 – Share Based Payments.
The consideration consisted entirely of shares of Field Trip Health Ltd. which were measured at the estimated fair value on the
date of acquisition. The fair value of the Common Shares issued to the former Newton shareholders was determined to be $1,590,212
based on the fair value of the shares issued (795,106 shares at $2.00 per share). The fair value of the Newton Options was determined
to be $74,212 using a Black Scholes model based on the following assumptions: Stock price volatility - 70%; Risk-free interest
rate – 0.29 - 0.33%; Stock price at October 1, 2020 - $2.00 and an expected life of 2.52 – 3.86 years. In connection
with the acquisition of Newton, the Company incurred acquisition costs of $573,435.
|
Consideration: Newton Commons Shares
|
|
|
1,590,212
|
|
|
Consideration: Newton Options
|
|
|
74,982
|
|
|
Total consideration
|
|
|
1,665,194
|
|
|
Transaction costs paid
|
|
|
573,435
|
|
|
|
|
|
2,238,629
|
|
|
Identifiable assets acquired
|
|
|
107,520
|
|
|
Listing Expense
|
|
|
2,131,109
|
|
5. RESTRICTED CASH
|
|
|
As at
December 31, 2020
|
|
|
As at
March 31, 2020
|
|
|
|
|
$
|
|
|
$
|
|
|
Funds held as collateral
|
|
|
100,176
|
|
|
|
100,000
|
|
|
Funds held at PCs
|
|
|
50,273
|
|
|
|
-
|
|
|
|
|
|
150,449
|
|
|
|
100,000
|
|
As at December 31, 2020, the Group had $100,176 of restricted
cash held as collateral against Field Trip Psychedelics Inc. credit card limit. The funds are invested in two cashable GIC accounts.
$35,176 matures on November 4, 2021, and $65,000 matures on January 20, 2021 respectively. The Group also had $50,273 of restricted
cash held at the PCs which, under the terms of the MSA, must be used to pay PC personnel and expenses before satisfying prior and
current management fees.
As at March 31, 2020 the Group had $100,000 of restricted cash.
6. ACCOUNTS RECEIVABLE
|
|
|
As at
December 31, 2020
|
|
|
As at
March 31, 2020
|
|
|
|
|
$
|
|
|
$
|
|
|
Trade receivables
|
|
|
27,376
|
|
|
|
11,940
|
|
|
Sales tax receivable
|
|
|
557,860
|
|
|
|
191,172
|
|
|
|
|
|
585,236
|
|
|
|
203,112
|
|
Trade receivables relates to amounts receivable from patients
for treatments completed at the clinics.
During the 3 and 9 months ended December 31, 2020 and periods
ended March 31, 2020, no expected credit loss allowance was recorded for accounts receivable & no receivables were written
off.
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020 and
periods ended December 31, 2019
7. OTHER ASSETS
|
|
|
As at
December 31, 2020
|
|
|
As at
March 31, 2020
|
|
|
|
|
$
|
|
|
$
|
|
|
Prepaid expenses
|
|
|
813,429
|
|
|
|
133,915
|
|
|
Lease security deposits
|
|
|
203,017
|
|
|
|
95,451
|
|
|
Prepaid additional (non-lease) rent
|
|
|
127,819
|
|
|
|
36,781
|
|
|
Shareholder loans receivable (Note 29)
|
|
|
49,876
|
|
|
|
47,991
|
|
|
|
|
|
1,194,141
|
|
|
|
314,138
|
|
|
Less amounts due within one year
|
|
|
(813,429
|
)
|
|
|
(133,916
|
)
|
|
Non-current balance
|
|
|
380,712
|
|
|
|
180,222
|
|
$227,678 of prepaid expenses relate to transactions costs incurred
for the January 2021 Bought Deal Offering (see Note 32 Subsequent Events), and the remaining balance of $585,751 relates to prepaid
operating expenses.
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
|
|
|
Leasehold
Improvements
|
|
|
Furniture &
Fixtures
|
|
|
Computer
Equipment
& Software
|
|
|
Medical &
Laboratory
Equipment
|
|
|
Construction
in Progress
|
|
|
Total
|
|
|
Cost
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Balance, April 1, 2020
|
|
|
342,590
|
|
|
|
56,187
|
|
|
|
78,770
|
|
|
|
5,533
|
|
|
|
106,402
|
|
|
|
589,482
|
|
|
Additions
|
|
|
379,929
|
|
|
|
176,744
|
|
|
|
126,443
|
|
|
|
242,517
|
|
|
|
433,639
|
|
|
|
1,359,272
|
|
|
Assets in use
|
|
|
493,340
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(493,340
|
)
|
|
|
-
|
|
|
Foreign currency translation adjustment
|
|
|
(7,741
|
)
|
|
|
(6,594
|
)
|
|
|
10,935
|
|
|
|
(1,542
|
)
|
|
|
(21,167
|
)
|
|
|
(26,109
|
)
|
|
Balance, December 31, 2020
|
|
|
1,208,118
|
|
|
|
226,337
|
|
|
|
216,148
|
|
|
|
246,508
|
|
|
|
25,534
|
|
|
|
1,922,645
|
|
|
Accumulated depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 1, 2020
|
|
|
(8,645
|
)
|
|
|
(1,041
|
)
|
|
|
(4,111
|
)
|
|
|
(239
|
)
|
|
|
-
|
|
|
|
(14,036
|
)
|
|
Depreciation expense
|
|
|
(99,151
|
)
|
|
|
(19,614
|
)
|
|
|
(39,291
|
)
|
|
|
(10,856
|
)
|
|
|
-
|
|
|
|
(168,912
|
)
|
|
Foreign currency translation adjustment
|
|
|
807
|
|
|
|
318
|
|
|
|
502
|
|
|
|
303
|
|
|
|
-
|
|
|
|
1,930
|
|
|
Balance, December 31, 2020
|
|
|
(106,989
|
)
|
|
|
(20,337
|
)
|
|
|
(42,900
|
)
|
|
|
(10,792
|
)
|
|
|
-
|
|
|
|
(181,018
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value as at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
1,101,129
|
|
|
|
206,000
|
|
|
|
173,248
|
|
|
|
235,716
|
|
|
|
25,534
|
|
|
|
1,741,627
|
|
|
March 31, 2020
|
|
|
333,945
|
|
|
|
55,146
|
|
|
|
74,659
|
|
|
|
5,294
|
|
|
|
106,402
|
|
|
|
575,446
|
|
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020 and
periods ended December 31, 2019
On April 6, 2020, FTNP entered into a partnership with the University
of West Indies (“UWI”) to provide advanced research and development on psilocybin producing mushrooms. FTNP agreed
to lease property from UWI on which to construct a laboratory (the “Jamaica Facility”), contribute up to US$1,000,000
of initial capital for the Jamaica Facility and psilocybin research and a total of US$100,000 to fund student development initiatives
at UWI over a 36-month period (see Note 27 – Commitments). In October 2020, construction of the Jamaica Facility was
completed and $152,172 was transferred from construction in progress to leasehold improvements.
$341,168 relating to the completion of the construction of the
New York Facility was transferred from construction in progress to leasehold improvements.
9. INTANGIBLE ASSETS
Intangible assets consist of the following:
|
|
|
Software in
Progress
|
|
|
Field Trip
Health
Website
|
|
|
Total
|
|
|
Cost
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Balance, April 1, 2020
|
|
|
-
|
|
|
|
126,974
|
|
|
|
126,974
|
|
|
Additions
|
|
|
159,028
|
|
|
|
41,048
|
|
|
|
200,076
|
|
|
Balance, December 31, 2020
|
|
|
159,028
|
|
|
|
168,022
|
|
|
|
327,050
|
|
|
Accumulated amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 1, 2020
|
|
|
-
|
|
|
|
(1,994
|
)
|
|
|
(1,994
|
)
|
|
Amortization expense
|
|
|
-
|
|
|
|
(30,525
|
)
|
|
|
(30,525
|
)
|
|
Balance, December 31, 2020
|
|
|
-
|
|
|
|
(32,519
|
)
|
|
|
(32,519
|
)
|
|
Net book value as at December 31, 2020
|
|
|
159,028
|
|
|
|
135,503
|
|
|
|
294,531
|
|
|
Net book value as at March 31, 2020
|
|
|
-
|
|
|
|
124,980
|
|
|
|
124,980
|
|
10. Right-of-Use Assets
The Group leases real property for its Toronto office, clinical
locations in North America and Europe and its research facility in Jamaica. Right-of-use assets (“ROU”) consist of
the following as at December 31, 2020:
|
|
|
Total
|
|
|
Cost
|
|
$
|
|
|
Balance, April 1, 2020
|
|
|
1,762,951
|
|
|
Additions
|
|
|
5,525,781
|
|
|
Foreign currency translation adjustment
|
|
|
(253,353
|
)
|
|
Balance, December 31, 2020
|
|
|
7,035,379
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
|
|
|
Balance, April 1, 2020
|
|
|
(130,290
|
)
|
|
Depreciation expense
|
|
|
(655,646
|
)
|
|
Foreign currency translation adjustment
|
|
|
22,323
|
|
|
Balance, December 31, 2020
|
|
|
(763,613
|
)
|
|
Net book value as at
|
|
|
|
|
|
December 31, 2020
|
|
|
6,271,766
|
|
|
March 31, 2020
|
|
|
1,632,661
|
|
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020 and
periods ended December 31, 2019
11. LEASE OBLIGATIONS
Lease obligations consist of the following as at December 31,
2020:
|
|
|
$
|
|
|
As at April 1, 2020
|
|
|
1,541,205
|
|
|
Additions during the period
|
|
|
5,382,787
|
|
|
Foreign currency translation adjustment
|
|
|
(2,863
|
)
|
|
Payments during the period
|
|
|
(691,123
|
)
|
|
Interest expense during the period
|
|
|
189,420
|
|
|
|
|
|
6,419,426
|
|
|
Less amounts due within one year
|
|
|
(900,361
|
)
|
|
Long-term balance
|
|
|
5,519,065
|
|
The Group expenses payments for short-term leases and low-value
leases as incurred. These payments for short-term leases and low-value leases were $150,827 for the 3 months ended December 31,
2020 (December 31, 2019 - $102,205) and $161,197 for the 9 months ended December 31, 2020 (December 31, 2019 - $162,036).
The Group’s future cash outflows may change due to variable
lease payments, renewal options, termination options, residual value guarantees and leases not yet commenced to which the Group
is committed that are not reflected in the lease obligations. The following is a maturity analysis for undiscounted lease payments
that are reflected in the lease obligations as at December 31, 2020:
|
|
|
$
|
|
|
Less than 1 year
|
|
|
1,260,913
|
|
|
1 to 2 years
|
|
|
1,281,812
|
|
|
2 to 3 years
|
|
|
889,342
|
|
|
3 to 4 years
|
|
|
740,112
|
|
|
4 to 5 years
|
|
|
759,094
|
|
|
Beyond 5 years
|
|
|
3,219,765
|
|
|
|
|
|
8,151,038
|
|
See Note 27, Commitments for additional information on
estimated additional rent payment obligations related to the Group’s leases on its clinical and office locations.
12. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
|
|
|
As at
December 31, 2020
|
|
|
As at
March 31, 2020
|
|
|
|
|
$
|
|
|
$
|
|
|
Trade payables
|
|
|
1,127,330
|
|
|
|
270,235
|
|
|
Accrued liabilities
|
|
|
1,145,806
|
|
|
|
307,643
|
|
|
|
|
|
2,273,136
|
|
|
|
577,878
|
|
Trade payables includes RTO acquisition costs of $573,435 which
were settled in January (see Note 4 Reverse Takeover).
$227,678 of accrued liabilities relates to transactions costs
incurred for the January 2021 Bought Deal Offering (see Note 32 Subsequent Events), $525,003 relates to amounts accrued
for payroll liabilities and the remaining balance of $393,125 relates primarily to professional fees.
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020 and
periods ended December 31, 2019
13. LOAN PAYABLE
The Group applied for and received on September 17, 2020, the
$40,000 Canada Emergency Business Account (“CEBA”), which is an interest-free loan to cover operating costs which was
offered in the context of the COVID-19 pandemic outbreak. Repaying the balance of the loan on or before December 31, 2022 will
result in a loan forgiveness of $10,000. On December 31, 2022, the Corporation has the option to extend for 3 years the loan and
it will bear a 5% interest rate. To estimate the fair value at initial recognition, the debt component was estimated first at $21,319,
considering the forgiveness and interest free aspects. A 15% effective rate was used which corresponds to a market rate that the
Corporation would have obtained for a similar loan. The $18,681 residual value was attributed to government assistance that is
presented as other income in the statement of loss and other comprehensive loss.
14. SHARE CAPITAL
Share Capital Authorized
The authorized share capital of the Group consists of the following:
Class A shares – unlimited
Class B shares – unlimited
Class C shares – unlimited
Share Capital Issued as at December 31, 2020
|
|
|
Number of
|
|
|
Amount
|
|
|
Class of Shares
|
|
Shares Issued
|
|
|
$
|
|
|
A (i - v)
|
|
|
37,986,193
|
|
|
|
26,731,485
|
|
|
|
|
|
37,986,193
|
|
|
|
26,731,485
|
|
Share Capital Issued as at March 31, 2020
|
|
|
Number of
|
|
|
Amount
|
|
|
Class of Shares
|
|
Shares Issued
|
|
|
$
|
|
|
A
|
|
|
11,510,900
|
|
|
|
1,605,027
|
|
|
B
|
|
|
9,431,023
|
|
|
|
11,176,243
|
|
|
|
|
|
20,941,923
|
|
|
|
12,781,270
|
|
|
|
(i)
|
On May 20, 2020, the Group issued 76,240 Class B shares as follows: 11,113 Class B shares at a price of $0.90 USD per share,
yielding gross proceeds of $10,002 USD or $13,935 CAD. Real estate brokerage commissions of $63,853 were settled via the issuance
of 50,911 Class B shares at a price of $0.90 USD or $1.2542 CAD per share. Share issuance costs of $17,829 were settled via the
issuance of 14,216 Class B shares at a price of $0.90 USD or $1.2542 CAD per share.
|
|
|
(ii)
|
On August 11, 2020, directors of FTP exercised options to purchase 9,000,900 Class A Shares at a price of $0.00001 for gross
proceeds of $90.
|
|
|
(iii)
|
On August 14, 2020, the Group completed brokered and non-brokered private placements of an aggregate of 5,516,724 Class A shares
in the capital of Field Trip, at a price of $2.00 per share, for aggregate gross proceeds of $11,033,448. Canaccord Genuity Corp.
and Stifel Nicolaus Canada Inc. jointly acted as lead agents in connection with the brokered portion of the Private Placement,
for which they were paid a cash commission of $391,082, and were issued 55,167 Class
A shares and 299,753 compensation warrants, with each warrant exercisable into one Class A share of Field Trip at a price of $2.00
per share until August 14, 2022. The Series B Financing is a Qualified Financing (as defined below); therefore, all of the Class
B Series 1 Shares were automatically converted into Class A Shares upon closing of this transaction.
|
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020
and periods ended December 31, 2019
|
|
(iv)
|
On September 21, 2020, Field Trip completed a follow-on non-brokered private placement of an aggregate of 816,932 Class A Field
Trip Shares at a price of $2.00 per share for gross proceeds of $1,633,864.
|
|
|
(v)
|
The Company incurred share issuance costs of $707,263 relating to the August 14 and September 21, 2020 private placements.
|
|
|
(vi)
|
On September 25, 2020, 600,000 Class A Field Trip Shares were issued as payment of milestone shares under the Jamaican SPA.
|
|
|
(vii)
|
On October 1, 2020, 795,106 Class A Field Trip Shares were issued upon closing of the Transaction (see Note 4 - Reverse
Takeover for details).
|
|
|
(viii)
|
During the current third fiscal quarter, 183,201 options were exercised for gross proceeds of $191,278.
|
Voting Rights
Each holder of Class A Shares is entitled to receive notice
of and to attend all meetings of shareholders of the Corporation and at all such meetings shall be entitled to one (1) vote in
respect of each such share held by such holder. The foregoing, however, shall not apply to separate meetings of the holders of
other classes or series of shares in accordance with the Shareholders Agreement. On any matter presented to the shareholders of
the Corporation for their action or consideration at any meeting of shareholders of the Corporation (or by written consent of shareholders
in lieu of meeting), each holder of outstanding Class B Series Shares is entitled to cast the number of votes equal to the number
of Class B Series Shares held by the holder. Except as provided by law or by the other provisions of the Articles, holders of Class
B Series Shares shall vote together with the holders of Class A Shares as a single class.
Class B Shares Automatic Conversion
Upon the completion of a private placement of Class A Shares
from treasury for gross proceeds of at least USD $2,500,000 in one or multiple closings (the “Qualified Financing”),
then all of the Class B Series 1 Shares will automatically and concurrently be converted into Class A Shares (the “Automatic
Conversion”) as follows:
|
|
(a)
|
If the price paid per Class A Share in the Qualified Financing is equal to or greater than USD $1.125, then each Class B Series
1 Share will convert into one Class A Share; or
|
|
|
(b)
|
If the price paid per Class A Share in the Qualified Financing is less than USD $1.125, then the Class B Series 1 Shares held
by each holder will be converted into a number of Class A Shares determined by dividing the Subscription Amount by an amount equal
to the product of the price paid per Class A Share in the Qualified Financing, multiplied by 0.80. For the purposes of this calculation,
“Subscription Amount” means the number of Class B Series 1 Shares held by the holder multiplied by USD $ 0.90.
|
The brokered and non-brokered private placements
completed on August 14 and September 21, 2020 met the definition of a Qualified Financing and all outstanding and issued Class
B Series 1 Shares were converted into Class A Shares on a 1:1 basis upon closing.
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020 and
periods ended December 31, 2019
15. SHARE-BASED PAYMENTS
The Group has two share-based compensation plans: the “Stock
Option Plan” and the “Long Term Incentive Option Plan”.
Long Term Incentive Option Plan
On April 2, 2019, the directors of the Group authorized option
agreements with each of the five founding executives of the Group. Under the terms of the agreement, each option holder received
1,800,180 options to purchase Class A shares at an exercise price of $0.00001. The options vest over a period of four years and
expire on the fifth anniversary of the grant date.
On August 11, 2020, the Group accelerated the vesting of all
9,000,900 outstanding long term incentive options which were immediately exercised.
Stock Option Plan
On August 1, 2019, the directors of the Group authorized the
establishment of the “Stock Option Plan”. The maximum number of common shares that will be reserved for issuance under
the Stock Option Plan shall be 15% of the issued and outstanding Common Shares from time to time, on a non-diluted basis. For the
avoidance of doubt, Long Term Incentive Options are excluded from the Stock Option Plan maximum. Common Shares in respect of Options
that have been exercised, cancelled, surrendered, or terminated or that expire without being exercised shall again be available
for issuance under the Plan.
On October 6, 2020, in conjunction with the closing of the Transaction,
Field Trip amended its Stock Option Plan. The maximum number of common shares reserved for issuance under the Stock Option Plan
pursuant to options not intended as Incentive Stock Options (“ISOs”) shall be 15% of the issued and outstanding Common
Shares from time to time, on a non-diluted basis, excluding Long Term Incentive Options. The maximum number of Common shares reserved
for issuance under the Stock Option Plan pursuant to ISOs is 7,500,000.
As at December 31, 2020, the number of Common Shares available
for issuance under the Stock Option Plan pursuant to options not intended as ISO’s was 5,697,928. The number of Common Shares
available for issuance under the Stock Option Plan pursuant to ISOs was 6,716,000.
Under the Stock Option Plan, the Group may grant options to
purchase common shares to officers, directors, employees or consultants of the Group or its affiliates. Options issued under the
Stock Option Plan are granted for a term not exceeding ten years from the date of grant. All options issued to-date have a life
of ten years or less. In general, options have vested either immediately upon grant or over a period of four to ten years or upon
the achievement of certain performance-related measures or milestones.
The following is a schedule of the options outstanding as at:
|
|
|
|
|
|
Range of
Exercise Price
|
|
|
Weighted
Average
Exercise Price
|
|
|
|
|
Options
|
|
|
$
|
|
|
$
|
|
|
Balance, April 1, 2020
|
|
|
11,377,706
|
|
|
|
0.00001-0.50
|
|
|
|
0.10
|
|
|
Stock Option Plan - Granted
|
|
|
1,886,874
|
|
|
|
0.5-4.09
|
|
|
|
1.77
|
|
|
Stock Option Plan - Forfeit
|
|
|
(100,000
|
)
|
|
|
0.5
|
|
|
|
0.5
|
|
|
Stock Option Plan - Exercised
|
|
|
(9,184,101
|
)
|
|
|
0.00001-2.00
|
|
|
|
0.02
|
|
|
Balance, December 31, 2020
|
|
|
3,980,479
|
|
|
|
0.50-2.00
|
|
|
|
1.05
|
|
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020 and
periods ended December 31, 2019
The fair value of each tranche is measured at the date of grant
using the Black-Scholes option pricing model.
Options model inputs for options granted during the 9 months ended December 31, 2020
were as follows:
|
Options
|
|
|
Grant Date
|
|
Share
Price
|
|
|
Exercise Price
|
|
|
Risk-free
Interest
Rate
|
|
|
Expected
Life
|
|
|
Volatility
Factor
|
|
|
Fair Value per Option
|
|
|
|
1,886,874
|
|
|
April 1, 2020-31-Dec-20
|
|
|
0.28 (i) - 4.09
|
|
|
|
0.5 - 4.09
|
|
|
|
0.7
|
|
|
|
10
|
|
|
|
75
|
|
|
|
0.19 - 3.55
|
|
|
|
(i)
|
On January 29, 2020, the Group issued 9,431,023 Class B shares at a price of $0.90 USD per share. The Group derived the valuation
of the Class A shares on the issuance date based on the Class B issuance price on January 29, 2020, adjusted for share specific
attributes resulting in an estimated fair value of Class A shares of $0.21 USD or $0.28 CAD.
|
|
|
(ii)
|
On August 7, 2020, the Group issued 670,000 options at an issue price of $0.50 per Field Trip Share.
|
|
|
(iii)
|
On September 2, 2020, the Group issued 410,000 options at an issue price of $2.00 per Field Trip Share.
|
|
|
(iv)
|
On September 30, 2020, the Group issued 164,000 options at an issue price of $2.00 per Field Trip Share.
|
|
|
(v)
|
On November 2, 2020, the Group issued 65,000 options at an issue price of $2.68 per Field Trip Share.
|
|
|
(vi)
|
On December 1, 2020, the Group issued 60,000 options at an issue price of $4.60 per Field Trip Share.
|
|
|
(vii)
|
On December 31, 2020, the Group issued 200,000 options at an issue price of $4.09 per Field Trip Share.
|
The following table summarizes the unvested outstanding and
exercisable options held by directors, officers, employees and consultants as at December 31, 2020:
|
|
|
|
Outstanding
|
|
|
Exercisable
|
|
Exercise
Price Range
|
|
|
Options
|
|
|
Remaining
Contractual Life
|
|
|
Weighted
Average
Exercise Price
|
|
|
Vested
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
$
|
|
|
#
|
|
|
years
|
|
|
$
|
|
|
|
|
|
$
|
|
|
|
0.50 - 4.09
|
|
|
|
3,718,778
|
|
|
|
10
|
|
|
|
1.05
|
|
|
|
261,701
|
|
|
|
0.5
|
|
The following table summarizes the outstanding and exercisable
options held by directors, officers, employees and consultants as at March 31, 2020:
|
|
|
|
Outstanding
|
|
|
Exercisable
|
|
|
Exercise
|
|
|
|
|
|
Remaining
|
|
Weighted Average
|
|
|
Vested
|
|
|
Weighted Average
|
|
|
Price Range
|
|
|
Options
|
|
|
Contractual Life
|
|
Exercise Price
|
|
|
Options
|
|
|
Exercise Price
|
|
|
$
|
|
|
#
|
|
|
years
|
|
$
|
|
|
#
|
|
|
$
|
|
|
|
.00001 - 0.50
|
|
|
|
11,362,706
|
|
|
5 - 10
|
|
|
0.10
|
|
|
|
15,000
|
|
|
|
0.50
|
|
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020 and
periods ended December 31, 2019
Jamaica Facility Shares
Field Trip Psychedelics Inc. will issue 1,200,000 fully paid-up
Common Shares to Darwin Inc. (the “Jamaica Facility Shares”); 600,000 upon commencement of research in the newly renovated
research facility, 150,000 one year from the initial closing date (“Cliff”), and 450,000 on a prorated basis quarterly,
commencing on the first calendar quarter following the Cliff and ending on the date that is 36 months following the Cliff. On September
25, 2020 Field Trip issued the first installment of the Jamaica Facility shares, being a total of 600,000 common shares at a deemed
price per Field Trip Common Share of $2.00.
The fair value of the Jamaica Facility Shares is measured at
the date of grant using the Black-Scholes pricing model.
Black-Scholes model inputs for the Jamaican Facility Shares
for the 9 months ended December 31, 2020 were as follows:
|
Shares to be
|
|
|
|
|
Share
|
|
|
Risk-free
|
|
|
Expected
|
|
|
Volatility
|
|
|
Fair Value per
|
|
|
Issued
|
|
|
Grant Date
|
|
Price
|
|
|
Interest Rate
|
|
|
Life
|
|
|
Factor
|
|
|
Share
|
|
|
#
|
|
|
|
|
$
|
|
|
%
|
|
|
(years)
|
|
|
%
|
|
|
|
|
|
|
1,200,000
|
|
|
June 3, 2020
|
|
|
2.00
|
|
|
|
0.62
|
|
|
|
4
|
|
|
|
75
|
|
|
|
2.00
|
|
Warrants
The following is a schedule of the warrants outstanding as at:
|
|
|
Warrants
|
|
|
Range of
Exercise
Price
|
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
#
|
|
|
$
|
|
|
$
|
|
|
Balance, April 1, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Issued
– August 14, 2020
|
|
|
299,753
|
|
|
|
2.00
|
|
|
|
2.00
|
|
|
Balance,
December 31, 2020
|
|
|
299,753
|
|
|
|
2.00
|
|
|
|
2.00
|
|
The weighted average life for warrants outstanding as at December
31, 2020 was 1.6 years.
Summary of Stock-based Compensation
|
|
|
3 Months ended
|
|
|
3 Months ended
|
|
|
9 Months ended
|
|
|
9 Months ended
|
|
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Stock option compensation expense - Stock Option Plan
|
|
|
428,679
|
|
|
|
16,981
|
|
|
|
638,199
|
|
|
|
16,981
|
|
|
Stock option compensation expense - Long Term Incentive Options
|
|
|
-
|
|
|
|
71,408
|
|
|
|
241,524
|
|
|
|
202,892
|
|
|
Stock-based compensation expense – Jamaica Facility Shares
|
|
|
476,832
|
|
|
|
-
|
|
|
|
1,428,832
|
|
|
|
-
|
|
|
Stock-based compensation expense
|
|
|
905,511
|
|
|
|
88,389
|
|
|
|
2,308,555
|
|
|
|
219,873
|
|
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020 and
periods ended December 31, 2019
16. NET LOSS PER SHARE
For the three and nine months ended December 31, 2020 and periods
ended December 31, 2019, basic loss per share and diluted loss per share were the same, as the Group recorded a net loss for both
periods and the exercise of any potentially dilutive instruments would be anti-dilutive.
|
|
|
3 months
ended
December 31,
2020
|
|
|
3 months
ended
December 31,
2019
|
|
|
9 months
ended
December 31,
2020
|
|
|
Period from
April 2, 2019
(Date of
Incorporation)
to December
31, 2019
|
|
|
Loss attributable to common shares ($)
|
|
|
(8,275,669
|
)
|
|
|
(1,055,666
|
)
|
|
|
(15,167,017
|
)
|
|
|
(1,737,084
|
)
|
|
Dilutive effect on income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Weighted average number of shares outstanding – basic (#)
|
|
|
37,855,791
|
|
|
|
10,955,070
|
|
|
|
29,295,441
|
|
|
|
7,852,110
|
|
|
Weighted average number of shares outstanding – diluted (#)
|
|
|
37,855,791
|
|
|
|
10,955,070
|
|
|
|
29,295,441
|
|
|
|
7,852,110
|
|
|
Loss per common share, basic ($)
|
|
|
(0.22
|
)
|
|
|
(0.10
|
)
|
|
|
(0.52
|
)
|
|
|
(0.22
|
)
|
|
Loss per common share, diluted ($)
|
|
|
(0.22
|
)
|
|
|
(0.10
|
)
|
|
|
(0.52
|
)
|
|
|
(0.22
|
)
|
17. GENERAL AND ADMINISTRATION
|
|
|
3 months ended
December 31, 2020
|
|
|
3 months ended
December 31, 2019
|
|
|
9 months ended
December 31, 2020
|
|
|
Period from April 2,
2019 (Date of
Incorporation) to
December 31, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Personnel costs
|
|
|
1,157,124
|
|
|
|
240,286
|
|
|
|
2,864,298
|
|
|
|
319,052
|
|
|
External services
|
|
|
1,105,343
|
|
|
|
220,865
|
|
|
|
2,209,469
|
|
|
|
512,532
|
|
|
Share-based payments (Note 15)
|
|
|
232,957
|
|
|
|
88,390
|
|
|
|
684,002
|
|
|
|
219,873
|
|
|
Travel and entertainment
|
|
|
103,855
|
|
|
|
108,182
|
|
|
|
152,508
|
|
|
|
162,765
|
|
|
IT and technology
|
|
|
321,198
|
|
|
|
13,701
|
|
|
|
503,878
|
|
|
|
14,496
|
|
|
Office and general
|
|
|
68,683
|
|
|
|
12,180
|
|
|
|
111,069
|
|
|
|
19,217
|
|
|
Total general and administration
|
|
|
2,989,160
|
|
|
|
683,604
|
|
|
|
6,525,224
|
|
|
|
1,247,935
|
|
18. OCCUPANCY COSTS
|
|
|
3 months ended
December 31, 2020
|
|
|
3 months ended
December 31, 2019
|
|
|
9 months ended
December 31, 2020
|
|
|
Period from April 2,
2019 (Date of
Incorporation) to
December 31, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Operating rent expense
|
|
|
150,826
|
|
|
|
102,205
|
|
|
|
161,196
|
|
|
|
162,036
|
|
|
Taxes, maintenance, insurance
|
|
|
11,196
|
|
|
|
28,675
|
|
|
|
28,797
|
|
|
|
38,926
|
|
|
Minor furniture and fixtures
|
|
|
89,572
|
|
|
|
-
|
|
|
|
193,996
|
|
|
|
-
|
|
|
Utilities and services
|
|
|
36,858
|
|
|
|
18,500
|
|
|
|
80,123
|
|
|
|
21,890
|
|
|
Total occupancy costs
|
|
|
288,452
|
|
|
|
149,380
|
|
|
|
464,112
|
|
|
|
222,852
|
|
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020 and
periods ended December 31, 2019
19. SALES AND MARKETING
|
|
|
3 months ended
December
31, 2020
|
|
|
3 months ended
December
31, 2019
|
|
|
9 months ended
December
31, 2020
|
|
|
Period from April 2,
2019 (Date of
Incorporation) to
December 31, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Brand and public relations
|
|
|
185,968
|
|
|
|
90,835
|
|
|
|
386,688
|
|
|
|
127,617
|
|
|
Conference fees
|
|
|
14,007
|
|
|
|
5,556
|
|
|
|
46,058
|
|
|
|
12,356
|
|
|
Personnel costs
|
|
|
140,964
|
|
|
|
-
|
|
|
|
226,128
|
|
|
|
-
|
|
|
External marketing services
|
|
|
193,909
|
|
|
|
-
|
|
|
|
296,281
|
|
|
|
-
|
|
|
Total sales and marketing
|
|
|
534,848
|
|
|
|
96,391
|
|
|
|
955,155
|
|
|
|
139,973
|
|
20. RESEARCH AND DEVELOPMENT
|
|
|
3 months ended
December 31, 2020
|
|
|
3 months ended
December 31, 2019
|
|
|
9 months ended
December 31, 2020
|
|
|
Period from April 2,
2019 (Date of
Incorporation) to
December 31, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
External services
|
|
|
655,420
|
|
|
|
-
|
|
|
|
1,715,064
|
|
|
|
-
|
|
|
Personnel costs
|
|
|
287,073
|
|
|
|
79,749
|
|
|
|
581,859
|
|
|
|
79,749
|
|
|
Supplies and services
|
|
|
122,251
|
|
|
|
1,364
|
|
|
|
248,812
|
|
|
|
1,364
|
|
|
Total research and development
|
|
|
1,064,744
|
|
|
|
81,113
|
|
|
|
2,545,735
|
|
|
|
81,113
|
|
The expenditures above relate to research and development activities
which do not qualify for capitalization based on the Group’s accounting policies for capitalization of development costs.
They have therefore been recognised as an expense during the 3 and 9 months ended December 31, 2020.
21. DEPRECIATION AND AMORTIZATION
|
|
|
3 months ended
December 31, 2020
|
|
|
3 months ended
December 31, 2019
|
|
|
9 months ended
December 31, 2020
|
|
|
Period from April 2,
2019 (Date of
Incorporation) to
December 31, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Depreciation and Amortization - Leasehold Improvements
|
|
|
45,616
|
|
|
|
-
|
|
|
|
99,151
|
|
|
|
-
|
|
|
Depreciation and Amortization - Furniture & Fixtures
|
|
|
11,036
|
|
|
|
-
|
|
|
|
19,614
|
|
|
|
-
|
|
|
Depreciation and Amortization - Computer Equipment & Software
|
|
|
17,407
|
|
|
|
540
|
|
|
|
39,291
|
|
|
|
573
|
|
|
Depreciation and Amortization - Medical Lab and Equipment
|
|
|
9,888
|
|
|
|
-
|
|
|
|
10,856
|
|
|
|
-
|
|
|
Depreciation and Amortization - Right of use asset
|
|
|
281,210
|
|
|
|
18,699
|
|
|
|
655,647
|
|
|
|
18,699
|
|
|
Depreciation and Amortization - Intangible assets
|
|
|
10,588
|
|
|
|
-
|
|
|
|
30,524
|
|
|
|
-
|
|
|
Total depreciation and amortization
|
|
|
375,745
|
|
|
|
19,239
|
|
|
|
855,083
|
|
|
|
19,272
|
|
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020 and
periods ended December 31, 2019
22. PATIENT SERVICES EXPENSE
|
|
|
3 months ended
December 30, 2020
|
|
|
3 months ended
December 30, 2019
|
|
|
9 months ended
December 30, 2020
|
|
|
Period from April 2,
2019 (Date of
Incorporation) to
December 30, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Personnel costs
|
|
|
645,091
|
|
|
|
-
|
|
|
|
898,214
|
|
|
|
-
|
|
|
Supplies and services
|
|
|
20,334
|
|
|
|
-
|
|
|
|
54,648
|
|
|
|
-
|
|
|
Payment provider fees
|
|
|
3,486
|
|
|
|
-
|
|
|
|
5,138
|
|
|
|
-
|
|
|
Total patient services expense
|
|
|
668,911
|
|
|
|
-
|
|
|
|
958,000
|
|
|
|
-
|
|
Patient services expense is comprised of direct costs incurred
by the clinics to generate patient services revenue.
23. FINANCE EXPENSE
|
|
|
3 months ended
December 30, 2020
|
|
|
3 months ended
December 30, 2019
|
|
|
9 months ended
December 30, 2020
|
|
|
Period from April 2,
2019 (Date of
Incorporation) to
December 30, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Interest expense on leases
|
|
|
(91,358
|
)
|
|
|
(3,557
|
)
|
|
|
(189,420
|
)
|
|
|
(3,557
|
)
|
|
Interest income on shareholders’ loan
|
|
|
637
|
|
|
|
-
|
|
|
|
1,886
|
|
|
|
-
|
|
|
Interest income on refundable lease deposit
|
|
|
2,805
|
|
|
|
-
|
|
|
|
6,367
|
|
|
|
-
|
|
|
Interest expense on loan
|
|
|
(815
|
)
|
|
|
-
|
|
|
|
(948
|
)
|
|
|
-
|
|
|
Interest income on bank balances
|
|
|
4,043
|
|
|
|
10
|
|
|
|
4,070
|
|
|
|
10
|
|
|
Total finance expense
|
|
|
(84,688
|
)
|
|
|
(3,547
|
)
|
|
|
(178,045
|
)
|
|
|
(3,547
|
)
|
24. OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
Period from April 2,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 (Date of
|
|
|
|
|
3 months ended
|
|
|
3 months ended
|
|
|
9 months ended
|
|
|
Incorporation) to
|
|
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Unrealized foreign exchange gain
|
|
|
754
|
|
|
|
661
|
|
|
|
82
|
|
|
|
661
|
|
|
Realized foreign exchange loss
|
|
|
(454,475
|
)
|
|
|
(23,053
|
)
|
|
|
(1,045,486
|
)
|
|
|
(23,053
|
)
|
|
Government assistance - wage subsidy
|
|
|
(620
|
)
|
|
|
-
|
|
|
|
17,381
|
|
|
|
-
|
|
|
Government assistance - CEBA loan
|
|
|
-
|
|
|
|
-
|
|
|
|
18,681
|
|
|
|
-
|
|
|
Government assistance - IAP funding
|
|
|
-
|
|
|
|
-
|
|
|
|
20,328
|
|
|
|
-
|
|
|
Total other income (expense)
|
|
|
(454,341
|
)
|
|
|
(22,392
|
)
|
|
|
(989,014
|
)
|
|
|
(22,392
|
)
|
We also applied for, and received, governmental assistance related
to the COVID-19 pandemic:
|
|
(i)
|
The Canada Emergency Business Account (CEBA) program provides an interest-free loan of $40,000, of which and if required conditions
are met, only 75% or $ 30,000 of the loan amount is repayable by December 31, 2022. Government assistance is comprised of the fair
value of the loan amount forgiven using an 15% effective interest rate (see Note 13 Loan Payable of our unaudited condensed
interim consolidated financial statements for the 3 and 9 months ended December 31, 2020 and periods ended December 31, 2019).
|
|
|
(ii)
|
The 10%Temporary Wage Subsidy for Employers (TWS) program provides a subsidy of 10% of wages from March 18, to June 19, 2020
up to $1,375 for each eligible employee. The maximum total is $25,000 for each eligible employer. For the 3 and 9 months ended
December 31, 2020 the Company received wage subsidies of $0 and $18,000 respectively.
|
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020 and
periods ended December 31, 2019
|
|
(iii)
|
The Innovation Assistance Program (IAP) provides assistance to early stage, small to medium-sized enterprises unable to access
COVID-19 support. The Company received $20,328 to cover salary expenses for the period from April 1 to June 24, 2020.
|
25.
NON-CONTROLLING INTEREST
The following table summarizes the information
relating to the Group’s subsidiary Field Trip Natural Products Limited before intercompany eliminations:
|
|
|
As at
|
|
|
As at
|
|
|
|
|
December 31, 2020
|
|
|
March 31, 2020
|
|
|
|
|
$
|
|
|
$
|
|
|
Current assets
|
|
|
-
|
|
|
|
30,300
|
|
|
Non-current assets
|
|
|
-
|
|
|
|
5,294
|
|
|
Current liabilities
|
|
|
-
|
|
|
|
(48,941
|
)
|
|
Non-current liabilities
|
|
|
-
|
|
|
|
(28,374
|
)
|
|
Total equity
|
|
|
-
|
|
|
|
(41,721
|
)
|
|
Non-controlling interest (%) (i)
|
|
|
0
|
%
|
|
|
20
|
%
|
|
Equity attributable to Field Trip
|
|
|
-
|
|
|
|
(33,377
|
)
|
|
Equity attributable to NCI
|
|
|
-
|
|
|
|
(8,344
|
)
|
|
|
(i)
|
See Note 2 Basis of Presentation for changes to the ownership structure of the Group’s subsidiary Field Trip Natural Products during the 9 months ended December 31,
2020.
|
26. CHANGE IN NON-CASH WORKING CAPITAL
|
|
|
9 months ended
December 30, 2020
|
|
|
Period from April 2,
2019 (Date of
Incorporation) to
December 30, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
Accounts receivable
|
|
|
(382,124
|
)
|
|
|
(79,952
|
)
|
|
Other current assets
|
|
|
(679,513
|
)
|
|
|
(93,361
|
)
|
|
Accounts payable and accrued liabilities
|
|
|
1,695,258
|
|
|
|
230,215
|
|
|
Deferred revenue
|
|
|
(2,000
|
)
|
|
|
-
|
|
|
Net changes in non-working capital
|
|
|
631,621
|
|
|
|
56,902
|
|
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020 and
periods ended December 31, 2019
27. COMMITMENTS
Lease obligations
The Group leases real property for its clinical and office locations
in Canada. The Group is committed for estimated additional variable (non-lease) rent payment obligations as follows:
|
|
|
Expiry
|
|
|
Additional Rent
Payments
|
|
|
1 year
|
|
|
2-3 years
|
|
|
4-5 years
|
|
|
More than
5 years
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Toronto corporate office and clinic
|
|
October 31, 2023
|
|
|
260,237
|
|
|
111,530
|
|
|
148,707
|
|
|
-
|
|
|
-
|
|
|
Chicago Clinic
|
|
September 30, 2031
|
|
|
506,633
|
|
|
47,129
|
|
|
94,257
|
|
|
94,257
|
|
|
270,990
|
|
|
Amsterdam Clinic
|
|
October 31, 2026
|
|
|
392,087
|
|
|
67,215
|
|
|
134,430
|
|
|
134,430
|
|
|
56,012
|
|
|
Santa Monica clinic
|
|
June 30, 2030
|
|
|
598,613
|
|
|
63,012
|
|
|
126,024
|
|
|
126,024
|
|
|
283,553
|
|
|
|
|
|
|
|
1,757,569
|
|
|
288,885
|
|
|
503,417
|
|
|
354,711
|
|
|
610,556
|
|
These additional (non-lease) rent payments are variable, and
therefore have not been included in the right-of-use asset or lease obligations.
Jamaica Facility
|
|
|
Expiry
|
|
|
Total
|
|
|
1 year
|
|
|
2-3 years
|
|
|
4-5 years
|
|
|
More than
5 years
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Jamaica Facility
|
|
April 6, 2023
|
|
|
880,492
|
|
|
673,135
|
|
|
163,925
|
|
|
|
43,433
|
|
|
-
|
|
In connection with its partnership with UWI, FTNP agreed to
lease property from UWI, contribute up to US$1,000,000 of initial capital for the Jamaica Facility and psilocybin research, and
a total of US$100,000 to fund student development initiatives at UWI over a 36-month period. To-date, we have incurred $152,172
in capital costs related to the Jamaica Facility which were transferred from construction-in-progress to leasehold improvements
upon the completion of construction (see Note 8 – Property Plant and Equipment).
28. SEGMENT REPORTING
Information reported to the Chief Operating
Decision Maker (“CODM”) for the purpose of resource allocation and assessment of segment performance focuses on the
nature of the operations. The Group operates in three segments:
|
|
•
|
Clinical Operations which encompasses the Group’s psychedelic assisted psychotherapy clinics across North America.
|
|
|
•
|
Research which consists of the research of fungi at the Group’s facility in Jamaica and research focused employees
of Field Trip Psychedelics, and
|
|
|
•
|
Corporate which encompasses the operations of Field Trip headquarters.
|
Factors considered in determining the operating segments include
the Group’s business activities, the management structure directly accountable to the CODM, availability of discrete financial
information and strategic priorities within the organizational structure.
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020 and
periods ended December 31, 2019
|
Segment Information
|
|
Clinical
Operations
|
|
|
Research
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
3 months ended December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
316,329
|
|
|
|
-
|
|
|
|
-
|
|
|
|
316,329
|
|
|
Net loss
|
|
|
(2,203,060
|
)
|
|
|
(138,577
|
)
|
|
|
(5,934,032
|
)
|
|
|
(8,275,669
|
)
|
|
Property, plant, and equipment
|
|
|
1,233,737
|
|
|
|
422,483
|
|
|
|
85,407
|
|
|
|
1,741,627
|
|
|
Intangible assets
|
|
|
294,531
|
|
|
|
-
|
|
|
|
-
|
|
|
|
294,531
|
|
|
3 months ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Net loss
|
|
|
(275,145
|
)
|
|
|
(20
|
)
|
|
|
(780,501
|
)
|
|
|
(1,055,666
|
)
|
|
9 months ended December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
434,460
|
|
|
|
-
|
|
|
|
-
|
|
|
|
434,460
|
|
|
Net loss
|
|
|
(4,289,624
|
)
|
|
|
(224,036
|
)
|
|
|
(10,653,357
|
)
|
|
|
(15,167,017
|
)
|
|
Property, plant, and equipment
|
|
|
1,233,737
|
|
|
|
422,483
|
|
|
|
85,407
|
|
|
|
1,741,627
|
|
|
Intangible assets
|
|
|
294,531
|
|
|
|
-
|
|
|
|
-
|
|
|
|
294,531
|
|
|
Period from April 2, 2019 (Date of Incorporation) to December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Net loss
|
|
|
(332,473
|
)
|
|
|
(20
|
)
|
|
|
(1,404,591
|
)
|
|
|
(1,737,084
|
)
|
|
|
|
Canada
|
|
|
United States
|
|
|
Jamaica
|
|
|
Total
|
|
|
Geographic Information
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
3 months ended December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
150,473
|
|
|
|
165,856
|
|
|
|
-
|
|
|
|
316,329
|
|
|
Net loss
|
|
|
(6,194,370
|
)
|
|
|
(1,942,722
|
)
|
|
|
(138,577
|
)
|
|
|
(8,275,669
|
)
|
|
Property, plant, and equipment
|
|
|
402,150
|
|
|
|
916,994
|
|
|
|
422,483
|
|
|
|
1,741,627
|
|
|
Intangible assets
|
|
|
294,531
|
|
|
|
-
|
|
|
|
-
|
|
|
|
294,531
|
|
|
3 months ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Net loss
|
|
|
(780,501
|
)
|
|
|
(275,145
|
)
|
|
|
(20
|
)
|
|
|
(1,055,666
|
)
|
|
9 months ended December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
252,321
|
|
|
|
182,139
|
|
|
|
-
|
|
|
|
434,460
|
|
|
Net loss
|
|
|
(11,235,364
|
)
|
|
|
(3,707,617
|
)
|
|
|
(224,036
|
)
|
|
|
(15,167,017
|
)
|
|
Property, plant, and equipment
|
|
|
402,150
|
|
|
|
916,994
|
|
|
|
422,483
|
|
|
|
1,741,627
|
|
|
Intangible assets
|
|
|
294,531
|
|
|
|
-
|
|
|
|
-
|
|
|
|
294,531
|
|
|
Period from April 2, 2019 (Date of Incorporation) to December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Net loss
|
|
|
(1,404,591
|
)
|
|
|
(332,473
|
)
|
|
|
(20
|
)
|
|
|
(1,737,084
|
)
|
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020 and
periods ended December 31, 2019
29. FINANCIAL INSTRUMENTS
Classification of Financial Instruments
Financial assets and financial liabilities are measured on an
ongoing basis at fair value or amortized cost. The classification of the financial instruments, as well as their carrying values,
are shown in the table below:
|
|
|
As at
December 31, 2020
|
|
|
As at
March 31, 2020
|
|
|
|
|
|
|
|
$
|
|
|
Financial assets at fair value through profit and loss
|
|
|
|
|
|
|
|
|
|
Cash (Level 1)
|
|
|
9,828,870
|
|
|
|
9,590,758
|
|
|
Restricted cash (Level 1)
|
|
|
150,449
|
|
|
|
(100,000
|
)
|
|
Financial assets at amortized cost
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
585,236
|
|
|
|
203,112
|
|
|
Shareholders’ loan receivable
|
|
|
49,876
|
|
|
|
47,991
|
|
|
Total financial assets
|
|
|
10,614,431
|
|
|
|
9,741,861
|
|
|
Financial liabilities at amortized cost
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
2,273,136
|
|
|
|
577,878
|
|
|
CEBA loan
|
|
|
22,266
|
|
|
|
-
|
|
|
Total financial liabilities
|
|
|
2,295,402
|
|
|
|
577,878
|
|
Fair Value
IFRS 13 - Fair Value Measurements requires disclosure
of a three-level hierarchy that reflects the significance of the inputs used in making fair value measurements. All assets and
liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy,
described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1 - Unadjusted quoted prices at the measurement date for
identical assets or liabilities in active markets
Level 2 - Observable inputs other than quoted prices in Level
1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and
liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data
Level 3 - Significant unobservable inputs that are supported
by little or no market activity
Cash, restricted cash, accounts receivable, and accounts payable
and accrued liabilities are all short-term in nature and, as such, their carrying values approximate fair values.
Credit Risk
The Group, in the normal course of business, is exposed to credit
risk from its customers. Credit risk is the risk of an unexpected loss if a counterparty to a financial instrument fails to meet
its contractual obligations. The Group is exposed to credit risk on its cash and accounts receivable. The Group’s objective
with regard to credit risk in its operating activities is to reduce its exposure to losses. As the Group does not utilize credit
derivatives or similar instruments, the maximum exposure to credit risk is the full amount of the carrying value of its cash and
accounts receivable.
The Group’s cash is held with four financial institutions
in various bank accounts. These financial institutions are major banks in Canada, the United States, and Jamaica which the Group
believes lessens the degree of credit risk.
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020 and
periods ended December 31, 2019
Liquidity Risk
Liquidity risk is the risk that the Company will not be able
to meet its financial obligations as they become due. The Company manages its liquidity risk by reviewing on an ongoing basis its
capital requirements. As at December 31, 2020, the Company had $9,828,870 of cash and cash equivalents.
The Company is obligated to pay accounts payable and accrued
liabilities with total carrying amounts and contractual cash flows amounting to $2,273,136 due in the next 12 months. The carrying
values of cash, trade receivable, accounts payable and accrued liabilities approximate their fair values due to their short term
to maturity.
Interest Rate Risk
Financial instruments that potentially subject the Group to
cash flow interest rate risk are those assets and liabilities with a variable interest rate. Currently, the Group has no assets
or liabilities with a variable interest rate. Financial assets and financial liabilities that bear interest at fixed rates are
subject to fair value interest rate risk. The Group’s lease obligations are at fixed rates of interest.
Currency Risk
The Group is exposed to currency risk related to the fluctuation
of foreign exchange rates and the degree of volatility of those rates. Currency risk is limited to the portion of the Group’s
business transactions denominated in currencies other than the Canadian dollar, which are primarily expenses in United States dollars.
As at December 31, 2020, the Group held USD dollar denominated cash of $1,688,952 USD and had USD dollar denominated accounts payable
and accrued liabilities in the amounts of $136,956 USD. Therefore, a 1% change in the foreign exchange rate would have a net impact
as at December 31, 2020 of $19,760. USD dollar expenses for the December 31, 2020 were $3,777,513 USD. Varying the foreign exchange
rate for the period ended December 31, 2020 to reflect a 1% strengthening of the U.S. dollar would have increased the net loss
by approximately $50,641 assuming that all other variables remained constant.
30. RELATED PARTY TRANSACTIONS
The Group’s related parties include certain investors
and shareholders, key management personnel, and entities owned by key management personnel.
Shareholders
Field Trip entered into shareholder loan agreements with two
of its advisors for a total of $60,000 in July 2019. The notes are non-interest bearing (i.e., not on commercial terms) and are
due on demand or five years from the date of note issuance. These loans are expected to be repaid in full at maturity. The Group
measured the loans at fair value at initial recognition using an appropriate market interest rate. The below-market element of
the loans was determined at initial recognition as the difference between the loan principal amount and fair value. This difference
was recognized in equity as distribution to these shareholders. Total distribution arising from the initial fair value measurement
of shareholders’ loan was $13,596. The fair values at initial recognition were accounted for as amortized cost financial
assets in accordance with IFRS 9. The amortized cost of the loans as at December 31, 2020 was $49,876 (see Note 7) and total interest
income accrued at market rate in profit or loss for the 3 months then ended was $633 (see Note 23).
Key Management Personnel
Key management personnel are those persons having authority
and responsibility for planning, directing and controlling the activities of the Group, including directors. Key management at
December 31, 2020 includes ten directors and executive officers of the corporation. Key management personnel compensation for the
3 and 9 months ended December 31, 2020 was comprised of:
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020 and
periods ended December 31, 2019
|
|
|
3 months ended
December 30, 2020
|
|
|
3 months ended
December 30, 2019
|
|
|
9 months ended
December 30, 2020
|
|
|
Period from April 2,
2019 (Date of
Incorporation) to
December 30, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Salaries
|
|
|
256,661
|
|
|
|
20,833
|
|
|
|
627,895
|
|
|
|
20,833
|
|
|
Share-based compensation
|
|
|
26,412
|
|
|
|
71,408
|
|
|
|
294,501
|
|
|
|
202,892
|
|
|
|
|
|
283,073
|
|
|
|
92,241
|
|
|
|
922,396
|
|
|
|
223,725
|
|
Directors and officers of the Group control 52% or 19,643,465
of the outstanding voting shares of the Group.
31. CONTINGENCIES
Litigation
During the prior year, the Group terminated a lease contract
with a lessor due to circumstances which it believes constituted a breach of contract by the lessor. Should the Group become involved
in litigation due to the termination of this contract, the Group believes it has prepared valid legal defenses and that no material
exposure exists on the eventual settlement of such litigation. This lease was treated as a short-term lease under IFRS 16 and all
payments including security deposit paid were fully expensed during the period ended March 31, 2020.
32. SUBSEQUENT EVENTS
Bought Deal
On December 9, 2020, Field Trip entered into an agreement with
Stifel GMP, as lead underwriter and sole bookrunner with Canaccord Genuity Corp., Bloom Burton Securities Inc. and Eight Capital
forming the syndicate of underwriters (collectively, the “Underwriters”), pursuant to which the Underwriters agreed to
purchase, on a “bought deal” basis 3,333,333 units (the “Units”) of the Company at a price of $4.50 per Unit
(the “Issue Price”), for aggregate gross proceeds of $14,999,999 (the “BD Offering”). Each Unit is comprised
of one Common Share and one-half of one Warrant. Each Warrant is exercisable to acquire one Common Share until July 5, 2022 at
an exercise price of $5.60 per Common Share, subject to customary adjustments. In the event that the volume weighted average trading
price of the Common Shares for ten (10) consecutive trading days exceeds $9.00, the Company shall have the right to accelerate
the expiry date of the Warrants upon not less than fifteen (15) trading days’ notice.
The Company granted the Underwriters an option (the “Over-Allotment
Option”), exercisable in whole or in part at any time on or up to 30 days after the closing of the Offering, to purchase,
up to an additional number of Units equal to 15% of the number of Units sold pursuant to the BD Offering at the Issue Price.
On January 5, 2021, the Company closed the BD Offering and issued
4,448,200 Units (including the full exercise of the Over-Allotment Option). In consideration of the services rendered by the Underwriters
in connection with the BD Offering, the Company paid to the Underwriters a cash commission equal to $763,046 and issued to the
Underwriters 169,565 compensation warrants (the “Compensation Warrants”). Each Compensation Warrant is exercisable to
acquire one Common Share at an exercise price of $4.50 per Compensation Share until January 5, 2023. The Warrants commenced trading
on the CSE under the symbol “FTRP.WT on January 5, 2021.
In connection with the BD Offering, the short form prospectus
qualified the distribution of 8,170 Common Shares and 49,016 additional FTP Compensation Warrants, for services rendered by the
agents in connection with the FTP Offering.
The Company plans to use the net proceeds from the offering
for working capital and general corporate requirements.
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
FIELD TRIP HEALTH LTD. (FORMERLY NEWTON ENERGY CORPORATION)
Notes to the Condensed Interim Consolidated Financial Statements
For the three & nine months ended December 31, 2020 and
periods ended December 31, 2019
Option Grants
On January 29, 2021, the Group issued 229,997 options at an
issue price of $5.01 per Field Trip Share.
Clinic Openings
San Diego
On February 4, 2021, the Group executed a lease agreement to
build its San Diego clinic, commencing on July 1, 2021 and ending 127 months from the first day of the first full month of the
term. Total commitments under the lease are approximately $2,001,264.
Field Trip Health Ltd. (Formerly Newton Energy Corporation)
• Condensed Interim Consolidated Financial Statements (unaudited)
Exhibit 99.17
FORM 51-102F3
MATERIAL CHANGE REPORT
UNDER NATIONAL INSTRUMENT 51-102
|
Item 1.
|
Name and Address of Company
|
|
|
Field Trip Health Ltd. (the “Company”)
30 Duncan Street, Suite 401
Toronto, Ontario M5V 2C3
|
|
Item 2.
|
Date of Material Change
|
|
|
January 28, 2021
|
|
Item 3.
|
News Release
|
|
|
News release dated January
28, 2021 was disseminated via GlobeNewswire. Copy of the news release have been filed on SEDAR and is available at www.sedar.com.
|
|
Item 4.
|
Summary of Material Change
|
|
|
On January 28, 2021, the Company announced that its common shares have been approved for trading on the OTCQX® Best Market (“OTCQX”) retaining its current symbol FTRPF, effective as of the opening of trading on January 28, 2021. The Company’s shares and warrants continue to trade on the Canadian Securities Exchange under the tickers FTRP and FTRP.WT, respectively.
|
|
Item 5.
|
Full Description of Material Change
|
|
|
The OTCQX Best Market is for established, investor-focused, U.S. and international companies. To qualify for the OTCQX market, companies must meet high financial standards, follow best practice corporate governance, demonstrate compliance with U.S. securities laws, be current in their disclosure and have a professional third-party sponsor.
In addition to the quotation of its shares on the OTCQX, Field Trip the Company continues to explore options to enhance liquidity and access for global investors interested in investing in the Company, including potential up-listings or cross-listings to US or international exchanges and/or up-listing to senior exchanges in Canada and also continues the process of securing Depository Trust Company (DTC) eligibility for its common shares. DTC is a subsidiary of the Depository Trust & Clearing Corporation, a U.S. company that manages the electronic clearing and settlement of US publicly traded companies. DTC eligibility is expected to simplify the process of trading and enhance liquidity of the Company’s common shares in the United States.
|
|
Item 6.
|
Reliance on subsection 7.1(2) of National Instrument 51-102
|
|
|
Not applicable.
|
|
Item 7.
|
Omitted Information
|
|
|
Not applicable.
|
|
Item 8.
|
Executive Officer
|
|
|
For further information, please contact:
Paula Amy Hewitt
Vice President, General Counsel and Corporate Secretary
Telephone: (416) 617-6277
|
|
Item 9.
|
Date of Report
|
|
|
January 29, 2021
|
Cautionary Note Regarding Forward-Looking Information.
This material change report includes “forward-looking information” within the meaning of Canadian securities laws regarding the Company and its business. Forward-looking information is frequently, but not always, identified by words such as “expects”, “anticipates”, “believes”, “intends”, “estimates”, “potential”, “possible”, and similar expressions, or statements that events, conditions, or results “will”, “may”, “could”, or “should” occur or be achieved. The forward-looking information reflects the beliefs, opinions and projections on the date the statements are made and are based upon a number of assumptions and estimates, primarily the assumption that the Atlanta Clinic will be successful in developing and the Company’s business objectives and strategies, that, while considered reasonable by the Company, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies including, primarily but without limitation, the risk that the treatments offered will not be effective and/or that the Company will not develop an adequate patient base to maintain operations, risks regarding the COVID-19 epidemic, the medical clinic industry, market conditions, economic factors, management’s ability to manage and to operate the business and the equity markets generally. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in herein, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Accordingly, readers should not place undue reliance on any forward-looking information. No forward-looking information can be guaranteed. Except as required by applicable securities laws, the contents of this material change report speak only as of the date on which it is made and the Company does not undertake any obligation to publicly update or revise any of the statements herein, whether as a result of new information, future events, or otherwise.
Exhibit
99.18
FORM
51-102F3
MATERIAL
CHANGE REPORT
UNDER
NATIONAL INSTRUMENT 51-102
|
Item
1.
|
Name
and Address of Company
|
Field
Trip Health Ltd. (the “Company”)
30
Duncan Street, Suite 401
Toronto,
Ontario M5V 2C3
|
Item
2.
|
Date
of Material Change
|
January
26, 2021
News
release dated January 26, 2021 was disseminated via GlobeNewswire. Copy of the news release have been filed on SEDAR and is available
at www.sedar.com.
|
Item
4.
|
Summary
of Material Change
|
On
January 26, 2021, the Company announced the opening of their fifth clinic location in the United States in the city of Atlanta,
GA (the “Atlanta Clinic”).
|
Item
5.
|
Full
Description of Material Change
|
The
Atlanta Clinic is located in the Glenwood Park neighborhood and is the first clinic to open this year, following the opening of
Toronto, New York, Los Angeles and Chicago in 2020.
The
Atlanta Clinic will continue to allow the Company to execute on its strategy to demonstrate the efficacy and safety of psychedelic-enhanced
therapies to promote mental and emotional health and well-being.
The
Atlanta Clinic will utilize the Company’s step-by-step, integrated treatment programs which are medically supervised and utilize
ketamine (a legal, dissociative psychedelic molecule) in conjunction with psychotherapy, mindfulness, and self-care in a comfortable,
spa-like environment to support those struggling with depression and other mental health challenges.
|
Item
6.
|
Reliance
on subsection 7.1(2) of National Instrument 51-102
|
Not
applicable.
|
Item
7.
|
Omitted
Information
|
Not
applicable.
|
Item
8.
|
Executive
Officer
|
For
further information, please contact:
Paula
Amy Hewitt
Vice
President, General Counsel and Corporate Secretary
Telephone:
(416) 617-6277
January
28, 2021
Cautionary
Note Regarding Forward-Looking Information.
This
material change report includes “forward-looking information” within the meaning of Canadian securities laws regarding
the Company and its business. Forward-looking information is frequently, but not always, identified by words such as “expects”,
“anticipates”, “believes”, “intends”, “estimates”, “potential”, “possible”,
and similar expressions, or statements that events, conditions, or results “will”, “may”, “could”,
or “should” occur or be achieved. The forward-looking information reflects the beliefs, opinions and projections on
the date the statements are made and are based upon a number of assumptions and estimates, primarily the assumption that the Atlanta
Clinic will be successful in developing and the Company’s business objectives and strategies, that, while considered reasonable
by the Company, are inherently subject to significant business, economic, competitive, political and social uncertainties and
contingencies including, primarily but without limitation, the risk that the treatments offered will not be effective and/or that
the Company will not develop an adequate patient base to maintain operations, risks regarding the COVID-19 epidemic, the medical
clinic industry, market conditions, economic factors, management’s ability to manage and to operate the business and the equity
markets generally. Although the Company has attempted to identify important factors that could cause actual actions, events or
results to differ materially from those described in herein, there may be other factors that cause actions, events or results
to differ from those anticipated, estimated or intended. Accordingly, readers should not place undue reliance on any forward-looking
information. No forward-looking information can be guaranteed. Except as required by applicable securities laws, the contents
of this material change report speak only as of the date on which it is made and the Company does not undertake any obligation
to publicly update or revise any of the statements herein, whether as a result of new information, future events, or otherwise.
Exhibit
99.19
[*****]
OTCQX
COMPANY AGREEMENT COVER SHEET
THIS
AGREEMENT, dated as of the date executed by OTC Markets Group Inc. (“OTC Markets Group”), a corporation
organized under the laws of the State of Delaware, located at 300 Vesey Street, 12th Floor, New York, NY 10282, by and between
OTC Markets Group and the COMPANY, as identified below.
The
Company’s eligibility to have its securities designated as OTCQX securities is more fully defined in, and is governed by, the
OTCQX Company Agreement, as amended from time to time, which, together with all attachments, appendices, addenda, cover sheets,
amendments, exhibits, schedules and other materials referenced therein (collectively, the “Agreement”), are
attached hereto and incorporated herein by reference in their entirety.
The
Company requests to have its securities designated on OTCQX.
All
notices and other communications (except for invoices) required to be given in writing under the Agreement shall be delivered
to the individuals identified in subsections (a) and (b) below and shall be deemed to have been duly provided at the time of delivery
if sent by certified mail, return receipt requested, or any other delivery method that actually obtains a signed delivery receipt,
to the following addresses or to such other address as any party hereto shall hereafter specify by prior written notice to the
other party or parties below. If an email address provided, OTC Markets Group or the Company may, in lieu of the above, give notice
to or communicate with the Company or OTC Markets Group, as the case may be. by email to the persons identified in subsections
(a) or (b) below, or to such other email address or persons as the Company or OTC Markets Group shall hereafter specify by prior
written notice. Each of the Company and OTC Markets Group agrees that any receipt obtained by either of them from their respective
service provider or Internet computer server indicating that the email was received at the email address provided by each of them,
respectively, shall be deemed proof that the Company or OTC Markets Group, as the case may be, received any notice set forth in
the email.
|
(a) If to OTC
Markets Group,
|
|
(b)
If to the Company,
|
|
|
|
|
|
|
Ms. Lisabeth Heese
|
|
Name:
|
Joseph
del Moral
|
|
EVP, Issuer and Information Services
|
|
Title:
|
CEO
|
|
300 Vesey Street (One North End Ave)
|
|
Address:
|
|
|
12th Floor
|
|
401
- 30 Duncan Street, Toronto, ON, m5v 2c3
|
|
New York,. NY 10282
|
|
|
|
|
Telephone: [*****]
|
|
Telephone:
|
[*****]
|
|
Fax: [*****]
|
|
Fax:
|
[*****]
|
|
Email: [*****]
|
|
Email:
|
[*****]
|
|
with a copy to,
|
|
with a copy to,
|
|
|
|
Legal@fieldtriphealth.com
|
|
Mr. Daniel Zinn, Esq.
|
|
|
|
General Counsel
|
|
|
|
300 Vesey Street, 12th Floor
|
|
|
|
New York, NY 10282
|
|
|
|
Telephone: [*****]
|
|
|
|
Email: [*****]
|
|
|
OTC
Markets Group Inc.
OTCQX Company Agreement (v.4.4 November 13, 2019)
|
Page
1 of 17
|
[*****]
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers. Signature on
this Cover Sheet is in lieu of, and has the same effect as, signature on each document referenced herein.
|
|
Company
|
|
|
Field Trip Health Ltd
|
|
|
Company Name
|
|
|
|
|
|
|
Address:
|
|
|
401 - 30 Duncan Street, Toronto, ON, M5V 2C3
|
|
|
By (signature)
|
/s/ Joseph del Moral
|
|
|
|
|
|
Name:
|
Joseph del Moral
|
|
|
|
|
|
|
Title:
|
CEO
|
|
|
|
|
|
|
Date:
|
1/14/2021
|
|
|
|
|
|
|
|
OTC Markets Group Inc.
|
|
|
|
|
|
|
By:
|
/s/ Lisabeth
Heese
|
|
|
|
|
|
|
Name:
|
Lisabeth Heese
|
|
|
|
|
|
|
Title:
|
EVP, Issuer and Information Services
|
|
|
|
|
|
|
Date of Execution by OTC Markets
Group:
|
|
|
|
|
|
|
|
1/15/2021
|
|
|
|
OTC
Markets Group Inc.
OTCQX Company Agreement (v.4.4 November 13, 2019)
|
Page
2 of 17
|
[*****]
OTCQX
COMPANY AGREEMENT
W I T
N E S S E T H:
WHEREAS,
OTC Markets Group,: a provider of pricing and financial information for the securities markets, operates, through its wholly
owned subsidiary OTC Link LLC. OTC Link® ATS, a Securities and Exchange Commission (“SEC”) registered
Alternative Trading System that facilitates transactions in securities for market makers and other broker-dealers registered under
the Securities Exchange Act of 1934;
WHEREAS,
OTC Markets Group has developed OTCQX, a system for companies to provide information to investors, whereby the securities of such
companies will be designated on one of two tiers. depending on their ability to meet certain quantitative standards and their
level of disclosure of financial information;
WHEREAS,
OTC Markets Group provides each company with securities designated as OTCQX with its Issuer Services, a collection of proprietary
products and services that are designed to facilitate compliance with this Agreement and provide other useful services to the
company; and
WHEREAS,
OTC Markets Group and the Company desire to enter into this Agreement to provide for, among other things, (i) the designation
of the Company’s securities as on OTCQX and (ii) the subscription of the Company to certain Issuer Services.
NOW
THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE
1
DEFINITIONS
1.1.
Definitions. Capitalized terms used in this Agreement shall have
the meanings given in the OTCQX Rules (as defined below), unless otherwise defined herein (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
“Advertising”
shall mean any one-way communication used to publicize a product that is published at the direction of OTC Markets Group or the
Company, as the case may be, in any electronic or public media, including any Internet site, newspaper, magazine or other periodical,
radio, telephone or tape recording, videotape display, sign or billboard, motion picture, telephone directory (other than routine
listings) or other form of media, and for which payment is made for such publication to the operator of such media, provided,,
however, that the term shall not include any communication posted by OTC Markets Group on www.otcmarkets.com, or other
proprietary website operated by OTC Markets Group, or by the Company on any proprietary website operated by the Company, as applicable,
provided that no payment is made to the operator of any other media for its publication.
“Authorized
User” shall mean each person that the Company authorizes to access OTCIQ in the OTCQX Application, the OTCIQ User Change
Request Form or any individual that OTC Markets Group provides with Company Credentials.
“Blue
Sky Monitoring Service” shall mean a Service consisting of an initial compliance audit and ongoing monitoring of the
Company’s compliance with the securities laws of each U.S. state and territory.
“Content”
shall mean information, data, text, software, music, sound, photographs, graphics, video, messages, logos, trademarks, service
marks, and other works and materials, whether publicly posted or privately delivered, transmitted, uploaded, posted, emailed or
otherwise, in each case only to the
extent submitted to OTC Markets Group by or on behalf of the Company in connection with the Issuer Services using Company Credentials
or otherwise.
OTC Markets Group Inc.
OTCQX Company Agreement (v.4.4 November 13, 2019)
|
Page 3
of 17
|
[*****]
“Information”
shall mean the information and data contained in OTC Link ATS provided to the Company.
“Inside
Market Quote” shall mean Information consisting of the best bid price and size and the best ask price and size for a
quoted security.
“Issuer
Services”, each a “Service” shall mean the OTC Disclosure & News Service, the Blue Sky Monitoring
Service, the Real-Time Level 2 Quote Display Service, Morningstar Reports and other Services as OTC Markets Group shall provide
from time to time.
“Level
2 Quote Display Service” shall mean a Service that publishes OTC Markets Group Level 2 Quotations for the securities issued
by the Company that are quoted on OTC Link ATS on (i) www.otcmarkets.com in a manner that is available without charge to any person accessing
the site, and (ii) Company’s Website.
“OTC
Disclosure & News Service” shall mean Services consisting of online publication and management of Disclosure
Statements, Financial Reports and News Releases.
“OTC
Link ATS” shall mean an SEC registered Alternative Trading System (“ATS”), operated by OTC Link LLC,
a wholly owned subsidiary of OTC Markets Group, that facilitates quotes and trade messages in securities for market makers and
other broker-dealers registered under the Securities Exchange Act of 1934.
“OTC
Market Report” shall mean a Service consisting of a market report furnished by OTC Markets Group to the Company each
week, which contains a comprehensive summary of the Company’s OTC market performance, including daily high, low, and closing bid
and ask information for the OTC Securities issued by the Company, as applicable, as well as a list of market makers for such OTC
Securities
“OTCIQ”
shall mean the web portal, www.OTCIQ.com, accessed through one or more secure www.OTCIQ.com user logins, as specified by
the Company in Exhibit A, through which the Company shall access the Services.
“OTCQX
Rules” shall mean either the OTCQX Rules for U.S. Companies, the OTCQX Rules for U.S. Banks: or the OTCQX
Rules for International Companies, as applicable, which contain certain regulations adopted and published by OTC Markets Group,
which prescribe the rights, privileges and obligations of Companies whose securities are designated as OTCQX securities and the
nature of the securities that may be designated as any particular premium tier, as such rules are amended and republished from
time to time in the sole and absolute discretion of OTC Markets Group.
“OTCQX
Rules Release” shall mean a notice, published by OTC Markets Group on www.otcmarkets.com that sets forth the
reasons for, and text of. any amendment to the OTCQX Rules for U.S. Companies, the OTCQX Rules for U.S. Banks, or the OTCQX Rules
for International Companies.
“OTC
Markets Group Level 2” shall mean Information consisting of the most recent Inside Market Quote and the underlying broker-dealer
quotes, each of which is continuously updated in real time from 8:00 AM to 5:00 PM Eastern Standard Time, and contact information
“Real-Time
Inside and Full OTC Markets Group Level 2 Quotation Montage” shall mean a Service that publishes real-time OTC Markets
Group Level 2 Quotations on www.otcmarkets.com for each of the Company’s securities on OTCQX, providing current and potential
investors in the Company with access to detailed pricing information on such securities, updated in real-time.
OTC Markets Group Inc.
OTCQX Company Agreement (v.4.4 November 13, 2019)
|
Page
4 of 17
|
[*****]
“Secure
Company Information Management” shall mean access by the Authorized User(s) to update the Company’s profile information
displayed on www.otcmarkets.com and disseminated via OTC Markets Groups’ market data products.
ARTICLE
2
DESIGNATION AS OTCQX
2.1 Terms. OTC Markets Group hereby agrees that the Company’s equity securities
shall be designated OTCQX securities, provided that the Company qualifies, and to provide the Company with the Issuer Services,
in reliance on the Company’s representations and warranties and subject to the terms and conditions herein. In exchange therefor,
the Company agrees to pay all applicable fees required by the OTCQX Rules when due and to comply at all times with all applicable
OTCQX Rules. The arrangements set forth herein between the parties are non-exclusive.
2.2 OTCQX Rules. The OTCQX Rules are incorporated herein by reference in their
entirety.
2.3 Fees.
The Company acknowledges and agrees that the Annual Fee and the Application Fee are not refundable, unless otherwise provided
in the OTCQX Rules.
The
Company agrees that any fees payable to its OTCQX Sponsor are paid according to a separate fee agreement between the Company and
the OTCQX Sponsor. If the OTCQX Sponsor is an attorney, the Company agrees that it will not offer payment for services rendered
by the OTCQX Sponsor in the form of securities of the Company or any of its affiliates.
2.4 Company’s Withdrawal from OTCQX. The Company upon 24 hours written notice to OTC Markets Group may withdraw its securities
from the OTCQX designation at any time. Subsequent to withdrawal of its securities from the OTCQX designation, the Company may
continue to use any Service for which it is subscribed, except Services reserved for the use of companies with securities designated
as OTCQX.
ARTICLE
3
REPRESENTATIONS AND WARRANTIES
3.1
Organization. The Company is duly organized, validly existing and in good
standing under the laws of each jurisdiction in which the Company is organized or does business.
3.2
Authority. The Company has all necessary power and authority to enter
into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement has been duly authorized
by all requisite action, and assuming due authorization, execution and delivery by OTC Markets Group, the Agreement constitutes
a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.
ARTICLE
4
COVENANTS OF THE COMPANY
4.1 Tier
Eligibility. The qualifications for OTCQX U.S., OTCQX U.S. Premier, OTCQX International, and OTCQX International Premier
are set forth in the OTCQX Rules. The Company shall promptly notify OTC Markets Group in writing of any corporate action or other
event that may cause the Company to cease to be in compliance with the appropriate eligibility requirements set forth in the OTCQX
Rules.
4.2 Compliance with OTC Markets Group Policies. The Company acknowledges
receipt of the OTCQX Rules and. if applicable, the OTCQX U.S. Disclosure Guidelines, and the Company understands and agrees to
comply with any and all policies and guidelines of OTC Markets Group. including the OTCQX Rules, as such policies and guidelines
may be amended from time to time
OTC Markets Group Inc.
OTCQX Company Agreement (v.4.4 November 13, 2019)
|
Page
5 of 17
|
[*****]
4.3
Authorization to Use Corporate Logo, Website, Trade Names, Etc. Subject
to the terms and conditions of this Agreement, in order to publicize that the Company’s securities are designated as OTCQX securities,
the Company hereby grants OTC Markets Group a royalty-free license to use the Company’s corporate logos, website address, trade
names and trade or service marks as may be provided by the Company to OTC Markets Group from time to time (the “Company
Marks”) for the specific uses of publicizing the OTCQX market and its companies, as well as to convey quotation information,
transactional reporting information, and other information regarding the Company in connection with the Information and the Issuer
Services. To ensure the accuracy of such information, the Company agrees to provide OTC Markets Group with current versions of
any Company Marks promptly after any modification thereto. Any and all goodwill associated with the Company Marks that is generated
by any such use of the Company Marks by OTC Markets Group shall inure to the benefit of the Company; provided, however, that
OTC Markets Group shall under no circumstances be required to make any payment or reimbursement to the Company for its use of
the Company Marks to the extent such use is authorized hereunder.
ARTICLE
5
COVENANTS OF OTC MARKETS GROUP
5.1
Designation as OTCQX. OTC Markets Group shall designate the Company’s securities as the OTCQX tier for which
the Company and its securities are qualified, provided that the Company (a) qualifies for such designation as prescribed by the
OTCQX Rules and (b) is in compliance with the OTCQX Rules.
5.2
Designation of OTCQX Sponsor. OTC Markets Group will identify the OTCQX Sponsor as the OTCQX Sponsor to the
Company and this designation will be publicly available to all interested persons on www.otcmarkets.com. and through other
web portals and data feeds.
5.3 Amendments to the OTCQX Rules. OTC Markets Group may, in its
sole and absolute discretion, amend the OTCQX Rules for any reason. Each amendment shall be effective 30 days subsequent to its
publication by OTC Markets Group in an OTCQX Rules Release, provided, however, that in the event that OTC Markets Group
determines, in its sole and absolute discretion, that the amendment is non-controversial, such amendment may be effective immediately
or at any subsequent time provided in the Release, pursuant to Section 1.2 of the OTCQX Rules.
5.4
Eligibility to Subscribe to the Issuer Services. Subject to the terms
and conditions of this Agreement, upon designating the Company’s securities as OTCQX securities and for the duration of
such designation as OTCQX, the Company shall be entitled to receive each of the Issuer Services, to the extent such Services are
available, provided that the Company has submitted to OTC Markets Group a completed Exhibit A. The Company agrees to resubmit
an amended Exhibit A to OTC Markets Group as soon as practicable after there has occurred any change in the information previously
submitted to OTC Markets Group. The Company shall be responsible for making certain that the information submitted to OTC Markets
Group on Exhibit A is and remains true and correct at all times. The Company agrees that OTC Markets Group may, in its sole and
absolute discretion, terminate or suspend the Company’s access to all or any of the Issuer Services, except the designation
of the Company’s securities as OTCQX, for any reason.
OTC Markets Group Inc.
OTCQX Company Agreement (v.4.4 November 13, 2019)
|
Page
6 of 17
|
[*****]
5.5
Access and Use. The Company understands and agrees that access to and
use of the Issuer Services by the Company is accomplished by means of the Internet. OTC Markets Group shall issue preliminary
user names and passwords to the Company to enable the Company to access OTCIQ and post Content through the OTC Disclosure &
News Service, which OTC Markets Group shall review in making its determination on whether to qualify the Company. As soon as practicable
after the execution and delivery of this Agreement, OTC Markets Group will deliver to the Company, for purposes of posting and
updating the Content provided by the Company for publication through the OTC Disclosure & News Service and use of the other
Issuer Services (a) the account designations and initial passwords requested by the Company on Exhibit A hereto, (b) instructions,
and, (c) to the extent deemed necessary, in the sole and absolute discretion of OTC Markets Group, other security related codes
(collectively, “Company Credentials”). OTC Markets Group may refuse to grant a user name that impersonates
someone else, is or may be illegal, is or may be protected by trademark or other proprietary rights law, is vulgar or otherwise
offensive, or may cause confusion, as determined by OTC Markets Group in its sole discretion. The Company must obtain at its own
expense (i) access to the Internet and (ii) any workstations, software, network connectivity, and other equipment and services
that may be required, or that may require updating, from time to time to access the Issuer Services and the Information, in each
case: compatible with the OTC Disclosure & News Service and the System through the use of the Company Credentials.
The Company shall have complete and absolute responsibility, and the Company understands and agrees that OTC Markets Group will
have no responsibility or liability whatsoever. except for gross negligence or willful misconduct, for any misuse of the Company
Credentials, whether through theft, misappropriation, deceit. Company employee misconduct, negligence, inadvertence or otherwise.
The Company will cooperate with OTC Markets Group, including without limitation, by making reports to appropriate law enforcement
authorities as. if and when requested by OTC Markets Group, to prevent and deter misuse of the Company Credentials, and will comply
with reasonable security and other procedures distributed by OTC Markets Group from time to time. OTC Markets Group may. at any
time and from time to time, without notice of any kind, in its sole and absolute discretion, revoke the Company Credentials, and
may refuse to issue replacement Company Credentials, except upon conditions determined by OTC Markets Group; provided,, however,
that in the event of any such revocation or refusal, OTC Markets Group will provide alternative means for the Company to comply
with its obligations hereunder. In the event the Company suspects or becomes aware of any unauthorized use of Company Credentials,
the Company will give OTC Markets Group prompt written notice thereof. OTC Markets Group will revoke existing, or provide new,
Company Credentials to the extent reasonably requested in writing by the Company with a view to preventing any misuse of the Company
Credentials.
5.6
Authorized Users. No one may use the Company Credentials at any time without express prior written
consent of OTC Markets Group, except Authorized Users. An Authorized User may not give or lend its Company Credentials to anyone
else, even another Authorized User. The Authorized User must contact OTC Markets Group immediately if it believes that the Company
Credentials have been compromised. In the event an Authorized User leaves the Company, or is otherwise no longer an Authorized
User, the Company must notify OTC Markets Group at the address identified on the Coversheet or by email at issuers@otcmarkets.com.
In the event the Company wished to designate a new Authorized User, the Company must submit an OTCIQ User Change Request Form
located at www.OTCIQ.com.
5.7
Changes to the Issuer Services. Except for the designation of the
Company’s securities as OTCQX securities, OTC Markets Group may at any time and from time to time in its sole
discretion, without prior notice to the Company, modify or amend the format, content and other particulars of the Issuer
Services, including terminating one or more of them, whether or not such modifications. amendments, or changes adversely
affect the Company. The Company agrees that OTC Markets Group shall have no responsibility or liability whatsoever for any
such adverse effects. OTC Markets Group shall provide information to the Company regarding any material modifications or
amendments to any of the Issuer Services by e-mail.
IN
THE EVENT THAT THE COMPANY DETERMINES THAT ANY AMENDMENT TO OR MODIFICATION OF ANY OF THE ISSUER SERVICES IS UNACCEPTABLE, THE
COMPANY’S ONLY RECOURSE IS TO TERMINATE THIS AGREEMENT IN THE MANNER SET FORTH IN SECTION 11.2 BELOW. THE COMPANY’S CONTINUED
USE OF THE ISSUER SERVICES FOR MORE THAN 30 DAYS SUBSEQUENT TO ITS RECEIPT OF INFORMATION REGARDING A MATERIAL MODIFICATION OR
AMENDMENT BY AN E-MAIL FROM OTC MARKETS GROUP WILL CONSTITUTE ACCEPTANCE BY THE COMPANY OF SUCH AMENDMENT OR MODIFICATION. IN
THE EVENT OF TERMINATION. ALL PREVIOUSLY PAID FEES ARE NON-REFUNDABLE.
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5.8
Effect of Removing the OTCQX Designation. In the event that the
Company’s securities are no longer designated as OTCQX securities for any reason whatsoever, the Company shall not be
eligible to subscribe to the Issuer Services, except under the terms and conditions applicable to a Company without
securities designated as OTCQX, as amended from time to time.
ARTICLE
6
OTC DISCLOSURE & NEWS SERVICE
6.1
Publishing Services. The Company may publish news releases,
financial reports and other disclosures generated by and about the Company through the OTC Disclosure & News Service,
subject to the terms and conditions of this Article 6.
6.2
Review of Content. The Company understands and agrees that it is responsible to review
Content posted through the OTC Disclosure & News Service and that continued use of the OTC Disclosure & News Service
is expressly subject to the OTCQX Rules and this Agreement, and any guidelines, forms or other notices that may be
posted through the OTC Disclosure & News Service by OTC Markets Group from time to time.
6.3 OTC Markets Group Facilitated Access and Use. In the event that the
Company desires to post Content through the OTC Disclosure & News Service by means other than the Internet, the Company may
send Content to OTC Markets Group (i) as a Portable Document Format (PDF) attachment to an email, or (ii) in the case of a news
release or other brief information update, as a free- form text message, provided that, in either case, the Company provides
specific written authorization to OTC Markets Group to post such Content on the Company’s behalf through the OTC Disclosure &
News Service.
6.4
Responsibility for Content. The Company shall have
complete responsibility, and the Company understands and agrees that OTC Markets Group will have no responsibility or
liability whatsoever, for any and all Content. The Company shall not submit any Content (A) known by the Company to (i)
infringe in any manner any copyright, patent, trademark, trade secret or other intellectual property right of any third
party, (ii) breach any duty toward or rights of any person including, without limitation, rights of publicity or privacy, or
otherwise result in any consumer fraud, product liability, tort. breach of contract, injury, damage or harm of any kind to
any person, or (iii) contain any viruses, scripts. macros, programs or links to scripts, macros or programs, or (B) which is
known or should have been known by the Company to (i) violate any law or regulation, (ii) be defamatory, libelous, slanderous
or threatening, or (iii) contain any untrue statement of a material fact or omit to state a material fact necessary in order
to make the statements made, in the light of the circumstances under which they were made, not misleading (collectively, the
restrictions described in (A) and (B), the “Content Restrictions”). The Company agrees to notify OTC Markets
Group promptly of any defacement, alteration or other condition that causes Content to violate this Agreement or the OTCQX
Rules. In all such cases, the Company will cooperate with OTC Markets Group in investigating the incident and instituting
appropriate procedures to prevent a recurrence of any such condition. OTC Markets Group has no duty to review, and will not
edit the substance of, any Content, but may reformat submitted material to improve its conformity to the systems requirements
of the OTC Disclosure & News Service and for any other reasonable purpose. OTC Markets Group will not alter any Content
submitted by the Company in Portable Document Format (PDF). OTC Markets Group may, at any time and from time to time, in its
sole, absolute and unfettered discretion, decline to post, or remove, Content that in its reasonable good faith belief
violates any of the Content Restrictions.
6.5 Modifying Financial Reports. The Company may supplement or issue corrections
to the disclosure statements, news releases, and financial reports that the Company has posted through the OTC Disclosure &
News Service; provided,, however, that the Company may not delete any previously submitted disclosure statement, news release
or financial report. OTC Markets Group will delete any Content promptly upon receiving written notice from the Company that (i)
Content that is clearly erroneous has been mistakenly submitted by the Company or (ii) the Company or an affiliate is legally
required to request its deletion.
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ARTICLE
7
OTCIQ
7.1
License to Use OTCIQ and OTC Market Report. OTC Markets Group hereby grants to
the Company and its affiliates a non-exclusive, non-assignable and non-transferable, license to receive, reproduce and
use the Information provided in connection with OTCIQ and OTC Market Report for the Company’s private use at the
Company’s and its affiliates’ location(s), by each Authorized User indicated in the OTCQX Application and for no
other purpose. The Company and its affiliates may not sell, lease, furnish or otherwise permit or provide access to such
Information to any other person, except that the Company and its affiliates may furnish the Information to (i) its
shareholders, potential investors or customers, on a non-continuous basis, using the following methods, and no other method:
(a) in written advertisements, correspondence, or other literature, or (b) during voice telephonic conversations not
entailing computerized voice, automated information inquiry systems, or any similar technology and (ii) for internal
purposes, to its and its affiliates’ directors, officers, employees and advisers. The Company and its affiliates shall
take reasonable security precautions to prevent persons who are not Authorized Users or otherwise permitted to receive such
Information from gaining access to such Information.
7.2
License to Use Real-Time Inside Quotes and Full OTC Markets Group Level 2 Quotation
Montage. OTC Markets Group hereby grants to the Company and its affiliates a non-exclusive, non-assignable and non-transferable
license to receive, reproduce, publish and use the Information provided in connection with Real-Time Inside Quotes and Full OTC
Markets Group Level 2 Quotation Montage on any website maintained by the Company or any of its affiliates so that such Information
can be viewed on the Internet, and for no other purpose.
7.3
License to Use Blue Sky Monitoring Service. OTC Markets Group hereby grants to
the Company and its affiliates a non-exclusive, non-assignable and non-transferable license to receive, reproduce and use the
information provided in connection with Blue Sky Monitoring Service in the ordinary course of the business of the Company and
its affiliates (including for any securities and other compliance matters), and for no other purpose.
7.4
Limitations and Restrictions on Use. The Company may not sell, lease, furnish or
otherwise provide access to the Information or Services received pursuant to the three preceding sub-paragraphs 7.1, 7.2. and
7.3 to any person for any purpose, except as set forth therein. The Company will not engage in the operation of any illegal
business or use or permit anyone else to use the Services or the Information, or any part thereof, for any illegal purpose.
The Company may not present the Services or the Information in any unfair, misleading, or deceptive format.
ARTICLE
8
INTELLECTUAL PROPERTY
8.1
Intellectual Property Rights to Services and Information. Except for the limited
licenses granted herein, the Services, Information and any proprietary rights therein, are the property of OTC Markets Group
and its licensors. Subject to the licenses granted to the Company hereunder, OTC Markets Group will retain the
patents, trademarks, corporate logos, service marks, trade and service names, copyrights, topography rights, database rights
and design rights whether or not any of them are registered and including applications for any of them, trade secrets and
rights of confidence; all rights or forms of protection of a similar nature or having similar or equivalent effect to any of
them that may subsist anywhere in the world from time to time contained in the Services or the Information, as provided by
OTC Markets Group to the Company. The Services and all Information, including, without limitation, any and all intellectual
property rights inherent therein or appurtenant thereto, shall, as between the parties, be and remain the sole and exclusive
property of OTC Markets Group. The Company further acknowledges and agrees that OTC Markets Group’s third-party
information providers have exclusive proprietary rights in their respective information. The Company shall not, by act or
omission, diminish or impair in any manner the acquisition, maintenance, and full enjoyment by OTC Markets Group, its
licensees, transferees and assignees, of the proprietary rights of OTC Markets Group, or any of its third party information
providers, in the Services and the Information. Except as permitted herein or otherwise with the express written permission
of OTC Markets Group, the Company will not copy, modify, adapt, translate, distribute, reverse engineer, decompile or
disassemble any aspect of the Services or the Information.
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8.2 Intellectual Property Rights to Content. Except for the limited licenses
granted herein. the Content and any proprietary rights therein are the property of the Company and its licensors. The Company
acknowledges and agrees that OTC Markets Group has the non-exclusive license, for the full term of copyright, by itself or through
third parties, to republish and reuse any Content submitted hereunder in any form in which the Content may be published or used
(in any media now in existence or hereafter developed) in whole or in part. Without limiting the generality of the foregoing,
and subject to the provisions of Section 6.4 herein, the Company hereby grants OTC Markets Group the right to sell, license, distribute,
copy, transmit, publicly display, publish, adapt, or create derivative works of the Content, provided that OTC Markets
Group does not alter or present the Content in any way that renders the Content unfair, misleading or deceptive. The Company also
grants OTC Markets Group the right to authorize the downloading and printing of such Content, or any portion thereof, by investors
or other users for their personal use. The Company agrees that information about the Company and each Authorized User, and Content
posted through the OTC Disclosure & News Service or any other Service, may be accessed and disclosed by OTC Markets Group
to securities regulators or other law enforcement officials to comply with applicable laws and lawful government requests, to
operate OTC Markets Group’s systems properly, or to protect OTC Markets Group or investors.
8.3
Corporate Names. The Company acknowledges and agrees that OTC
Markets Group has proprietary rights in certain names, including, but not limited to, “OTC Markets Group Inc.”,
“OTC Link’, “Pink Sheets”, “OTCQX”, “OTCQB “OTC Pink” and
“OTCIQ.” The Company shall not use these names in any way that would infringe upon such names and shall not use
these names in any Advertising, except to the extent permitted herein or otherwise with OTC Markets Groups prior written
consent. The Company acknowledges and agrees that OTC Markets Group has proprietary rights in certain corporate logos,
trademarks, service marks, copyrights or patents, registered or unregistered, and except to the extent permitted herein the
Company shall not use these corporate logos, trademarks, service marks, copyrights or patents, registered or unregistered, in
any way that would infringe upon such logos, marks, copyrights or patents. OTC Markets Group acknowledges and agrees that the
Company has proprietary rights in the Company Marks and except to the extent permitted herein, OTC Markets Group shall not
use any Company Mark in any way that would infringe upon any Company Mark. OTC Markets Group acknowledges and agrees that the
Company has proprietary rights in certain other corporate logos, trademarks, service marks, copyrights or patents, registered
or unregistered, and OTC Markets Group shall not use these corporate logos, trademarks, service marks, copyrights or patents,
registered or unregistered, in any way that would infringe upon such logos, marks, copyrights or patents. OTC Markets Group
may include the name or logo of the Company in connection with any distribution of Content; provided, however, that
OTC Markets Group shall not include the name or logo of the Company in any Advertising without the Company’s prior
written consent.
8.4
Intellectual Property Infringement Claims. OTC Markets Group shall respond
promptly to claims of intellectual property infringement, shall promptly investigate notices of alleged infringements and shall
take appropriate actions under applicable intellectual property laws in response to such infringements. In the event that the
Company is a repeat infringer of intellectual property rights, OTC Markets Group shall terminate the Company’s access to the OTC
Disclosure & News Service or any other Issuer Service, as appropriate. OTC Markets Group shall act expeditiously to remove
from the Issuer Services any Content or any link to any Content that is claimed to be infringing.
8.5
Notices of Infringement. In the event that OTC Markets Group receives
information claiming that any Content on any of the Issuer Services infringes the intellectual property of some person, OTC Markets
Group shall notify the Company in order to give the Company an opportunity to respond to the notice of infringement. Any and all
responses to the notice of infringement shall be furnished to the complaining party. OTC Markets Group shall give the complaining
party an opportunity to seek judicial relief prior to restoring any Content as a result of the response to the notice of infringement
Complaining parties may submit notices of any claimed infringement to Ms. Lisabeth Heese via e-mail to info@otcmarkets.com
or via mail to OTC Markets Group Inc., 300 Vesey Street (One North End Ave), 12th Floor, New York, NY 10282. The subject line
of each such notice of infringement should include the words “NOTICE OF INFRINGEMENT”.
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ARTICLE
9
INDEMNIFICATION
9.1
Indemnification by the Company. The Company agrees to indemnify
and hold OTC Markets Group and its licensors, and its and their shareholders, members, officers, employees and agents (each an
“OTC Markets Group Indemnified Person”) harmless from and against any and all losses, claims, damages or liabilities
as incurred, (including any and all reasonable and duly documented legal or other out-of-pocket expenses and costs of investigation
and preperation) that are imposed on or asserted against an OTC Markets Group Indemnified Person by a third party, to which any
of them may become subject and which are related to or which have arisen out of (i) the Content, provided that the Content was
published or used pursuant to and in accordance with this Agreement, or (ii) OTC Markets Group’s use of the Company Marks
as and to the extent authorized under this Agreement. Notwithstanding the preceding sentence, no OTC Markets Group Indemnified
Person shall be indemnified for any losses, claims, damages or liabilities arising from its own gross negligence or willful misconduct.
The Company hereby agrees that if any indemnification sought by an OTC Markets Group Indemnified Person hereunder with respect
to the Content is held by a court to be unavailable for any reason, then the Company shall contribute to the costs for which such
indemnification is held unavailable in such proportion as is appropriate to reflect the relative benefits to OTC Markets Group,
on the one hand, and the Company on the other, in connection with the Company’s use of OTCQX or the Issuer Services, and
the relative fault, as between OTC Markets Group, the Company and the OTC Markets Group Indemnified Person in respect of such
costs. The Company’s obligation to indemnify, hold harmless and make contribution under this subsection shall be conditioned
on the following: (i) OTC Markets Group shall promptly notify the Company in writing of any claim, action or allegation (but,
in any event, in a timely manner that does not prejudice the rights of the Company or OTC Markets Group); (ii) OTC Markets Group
shall cooperate reasonably with the Company in the defense thereof and the Company shall be liable to OTC Markets Group for OTC
Markets Group’s reasonable and duly documented expenses incurred in such cooperation (excluding reimbursement for the time
value of OTC Markets Group’s employees, managers, directors, other agents and affiliates in providing such cooperation);
and (iii) the Company shall have sole control of the defense and all related settlement negotiations, but upon OTC Markets Group’s
request, shall apprise OTC Markets Group of the status of any proceedings or negotiations.
9.2
Indemnification by OTC Markets Group for Use of Trademarks. OTC
Markets Group agrees to indemnify and hold the Company and its affiliates and its and their shareholders, members. officers, employees
and agents (each a “Company Indemnified Person”) harmless from and against any and all losses, claims, damages
or liabilities as incurred (including reasonable and duly documented legal or other out-of-pocket expenses and costs of investigation
and preparation) that are imposed on or asserted against a Company Indemnified Person by a third party, to which any of them may
become subject and which are related to or which have arisen out of the Company’s use of OTC Markets Group’s company
logo, website address, trade names, trade or service marks, as and to the extent authorized under this Agreement. Notwithstanding
the preceding sentence, no Company Indemnified Person shall be indemnified for any losses, claims, damages or liabilities arising
from its own gross negligence or willful misconduct. OTC Markets Group’s obligation to indemnify and hold harmless under
this subsection shall be conditioned on the following: (i) the Company shall promptly notify OTC Markets Group in writing of any
claim, action or allegation (but. in any event, in a timely manner that does not prejudice the rights of the Company or OTC Markets
Group); (ii) the Company shall cooperate reasonably with OTC Markets Group in the defense thereof and OTC Markets Group shall
be liable to the Company for the Company’s reasonable expenses incurred in such cooperation (excluding reimbursement for
the time value of the Company’s employees, directors, other agents and affiliates in providing such cooperation); and (iii)
OTC Markets Group shall have sole control of the defense and all related settlement negotiations, but upon the Company’s
request, shall apprise the Company of the status of any proceedings or negotiations.
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9.3 Indemnification
by OTC Markets Group for Use of the Information or Services. OTC Markets Group shall defend each Company Indemnified Person
against any and all losses, claims, damages or liabilities imposed on or asserted against any Company Indemnified Person by a
third party, as evidenced by any fully adjudicated and non-appealable judgment or OTC Markets Group-negotiated settlement arising
as a result of any alleged infringement or misappropriation by the Information or the Services of such third party’s U.S. or European
Community intellectual property rights. OTC Markets Group shall indemnify and hold all of the Company Indemnified Persons harmless
from any and all such losses, claims, damages or liabilities imposed on. incurred by or asserted against all such Company Indemnified
Persons by all such judgments or settlements up to the amount paid by the Company for the Information and the Services. OTC Markets
Group’s obligation to defend, indemnify and hold harmless under this subsection shall be conditioned on the following: (i) the
Company shall promptly notify OTC Markets Group in writing of any claim, action or allegation (but, in any event, in a timely
manner that does not prejudice the rights of the Company or OTC Markets Group); (ii) the Company shall cooperate reasonably with
OTC Markets Group in the defense thereof and OTC Markets Group shall be liable to the Company for the Company’s reasonable expenses
incurred in such cooperation (excluding reimbursement for the time value of the Company’s employees, directors, other agents and
affiliates in providing such cooperation); and (iii) OTC Markets Group shall have sole control of the defense and all related
settlement negotiations, but upon the Company’s request, shall apprise the Company of the status of any proceedings or negotiations.
9.4 Limitations
on Indemnification. For any and all losses, claims, damages or liabilities imposed on. incurred by or asserted against
any Company Indemnified Person as a result of any alleged infringement or misappropriation by the Information or the Services
of any third parties’ intellectual property rights other than U.S. or European Community intellectual property rights,
the Company shall notify OTC Markets Group in writing of any claim, action or allegation at least 5 business days before a responsive
action is needed, so as not to prejudice the rights of the Company or OTC Markets Group. but, in any event, said notification
to OTC Markets Group shall not be given later than 15 days after the Company receives notification of any alleged non-U.S. or
non-European Community infringement or misappropriation, and OTC Markets Group shall have the right, but not the obligation, to
defend, indemnify and hold the Company Indemnified Person harmless on the same terms otherwise set forth in this Agreement. An
initial response by OTC Markets Group shall not waive its rights to choose not to defend, indemnify and hold harmless. Nothing
in this paragraph is intended or shall be construed to limit or otherwise affect the indemnification provided in paragraph 9.2
herein.
9.5
Exceptions. OTC Markets Group shall not have the obligation to defend,
indemnify and hold the Company’s Indemnified Parties harmless from any and all losses, claims, damages or liabilities imposed
on, incurred by or asserted against any Company Indemnified Person by any fully adjudicated and non-appealable judgment or OTC
Markets Group-negotiated settlement as a result of any allegation of infringement or misappropriation by the Information or the
Services of any third parties’ intellectual property rights in the event that the Information or any of the Services have
not been used in accordance with this Agreement or if the infringement or misappropriation claim, action, or allegation is the
result of the combination, operation, or use of the Information or any of the Services with hardware, software or materials owned
by the Company if such infringement or misappropriation would have been avoided by the use of the Information or any of the Services
without such hardware, software or materials.
9.6 Mitigation. In the event of a claim, action or allegation of infringement
or misappropriation by the Information or the Services of any third parties’ intellectual property rights, or if, in OTC Markets
Group’s opinion, such a claim, action or allegation is likely to occur or if the use of the Information or of any of the Services
is enjoined because of infringement or misappropriation, OTC Markets Group may. at its sole option and expense, (i) procure for
the Company the right to continue using the Information or any Service; (ii) replace or modify the Information or any Service
to be non- infringing, and require the return of the potentially infringing or misappropriating items, if applicable, without
liability to the Company or any other person; or (iii) terminate this Agreement immediately without liability to the Company or
any other person, except for the indemnification provided by OTC Markets Group herein.
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9.7
Limitations on Liability for Infringement or Misappropriation.
This section and Section 10 set forth the entire liability and the exclusive remedy of OTC Markets Group for the infringement
or misappropriation of intellectual property by the Information or the Services.
ARTICLE
10
LIMITATION OF LIABILITY
10.1
DISCLAIMER OF WARRANTIES. OTC MARKETS GROUP WILL MAKE COMMERCIALLY REASONABLE EFFORTS TO
PROVIDE THE ISSUER SERVICES ACCURATELY AND WITHOUT INTERRUPTION. HOWEVER, NO WARRANTY IS GIVEN THAT THE ISSUER SERVICES ARE ERROR-FREE.
THE ISSUER SERVICES OR ANY OTHER PRODUCT OR SERVICE THAT OTC MARKETS GROUP DIRECTLY OR INDIRECTLY PROVIDES HEREUNDER IS PROVIDED
“AS IS.” EXCEPT AS SPECIFICALLY SET FORTH HEREIN. NEITHER OTC MARKETS GROUP NOR ANY OF ITS LICENSORS AND SUPPLIERS
MAKE ANY EXPRESS OR IMPLIED WARRANTIES OR CONDITIONS, INCLUDING QUALITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE
AND NON-INFRINGEMENT.
10.2
LIMITATION OF LIABILITY. EXCEPT TO THE EXTENT THAT OTC MARKETS GROUP IS INDEMNIFYING THE
COMPANY AS SET FORTH IN SECTION 9 OF THIS AGREEMENT, IN NO EVENT SHALL OTC MARKETS GROUP, ITS LICENSORS OR ITS SUPPLIERS BE LIABLE
TO THE COMPANY OR ANY OTHER PERSON, REGARDLESS OF THE CAUSE, FOR ANY FAILURE OF PERFORMANCE, OR FOR ANY DELAYS, INTERRUPTIONS,
OR DEFECTS IN ANY OF THE ISSUER SERVICES, OR FOR ELIMINATING, AMENDING OR MODIFYING ONE OR MORE OF THE ISSUER SERVICES, OR FOR
ANY SPECIAL. INDIRECT, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, INCLUDING TRADING LOSSES, LOST PROFITS. LOST BUSINESS REVENUE,
OR FAILURE TO REALIZE EXPECTED SAVINGS OR GAINS. EVEN IF ONE OR MORE OF THEM WAS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER,
THAT IN THE EVENT THAT OTC MARKETS GROUP, ITS LICENSORS OR ITS SUPPLIERS IS HELD LIABLE FOR ANY REASON WHATSOEVER, SUCH LIABILITY
SHALL BE LIMITED TO THE AMOUNT OF THE FEE PAID BY THE COMPANY DURING THE TWELVE MONTHS PRECEDING THE DATE OF THE EVENT GIVING
RISE TO THE ACCRUAL OF THE CLAIM.
10.3
GROSS NEGLIGENCE AND WILLFUL MISCONDUCT. THIS ARTICLE 10 SHALL NOT RELIEVE OTC MARKETS GROUP FROM
LIABILITY FOR DAMAGES THAT RESULT FROM ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
10.4
Acceptance of Limitation of Liability. The Company agrees that the terms of this Article 10 reflect
a reasonable allocation of risk and limitation of liability.
10.5
Application. This Article 10 applies to all claims irrespective of the cause of action
underlying the claim, including, but not limited to breach of contract (even if in the nature of a breach of condition or a
fundamental term or a fundamental breach) and tort (including but not limited to negligence or misrepresentation).
ARTICLE
11
TERMINATION
11.1
Term. This Agreement shall commence on the date of this Agreement and shall continue
(unless sooner terminated by the provisions hereof) for the period during which the Company’s securities are designated
as OTCQX securities.
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11.2 Termination.
This Agreement may be terminated in each of the following circumstances:
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(a)
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By
the Company upon withdrawing its securities from the OTCQX designation on 24 hours’ written
notice pursuant to Section 2.4 herein, provided that notice of the termination is included
in such notice of withdrawal;
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(b)
|
By
the Company upon thirty (30) days’ prior written notice to OTC Markets Group or by OTC
Markets Group upon thirty (30) days’ prior written notice to the Company;
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(c)
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By
OTC Markets Group after not less than thirty (30) days’ prior written notice to the Company,
in the event of a breach of the Agreement by the Company, unless such breach is cured
within the notice period, provided however that where such breach is not capable
of cure, OTC Markets Group may terminate this Agreement on 48 hours’ prior written notice
to the Company;
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(d)
|
By
the Company after not less than thirty (30) days’ prior written notice to OTC Markets
Group, in the event of a breach of the Agreement by OTC Markets Group, unless such breach
is cured within the notice period, provided, however, that where such breach
is not capable of cure, the Company may terminate this Agreement on 48 hours’ prior written
notice to OTC Markets Group;
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(e)
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By
OTC Markets Group without prior written notice to the Company, in the event that the
Company becomes insolvent; or the Company makes an assignment for the benefit of creditors;
or the Company does not pay its debts as they become due or admits its inability to pay
its debts when due; or the Company files or has filed against it any petition under any
provision of the United States Bankruptcy Code or any other bankruptcy or insolvency
statute; or an application for a receiver, trustee, or custodian is made by anyone; or
the Company becomes the subject of any proceedings of Bankruptcy, insolvency, reorganization,
dissolution, receivership, liquidation or arrangement, adjustment, or composition with
creditors;
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(f)
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By
OTC Markets Group on 48 hours’ prior written notice to the Company, in the event that
any representation, warranty or certification made or furnished by the Company is, as
of the time made or furnished, false or misleading; or by OTC Markets Group upon not
less than thirty (30) days’ prior written notice to the Company, in the event that any
representation, warranty or certification made by the Company in the Agreement or in
any other document furnished by the Company becomes untrue or inaccurate and is not made
true or accurate within the notice period; or
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(g)
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By
OTC Markets Group without prior written notice to the Company, in the event that the
Company proceeds with a proposed action that would result in a default of its obligations
or covenants under this Agreement or in a breach of any representation, warranty or certification,
that is material to OTC Markets Group or OTCQX for regulatory, commercial or other reasons,
made by the Company in connection herewith, after OTC Markets Group has notified the
Company that such proposed action would constitute a default hereunder; or by OTC Markets
Group on 48 hours’ prior written notice to the Company, in the event that OTC Markets
Group, in its reasonable good faith discretion, determines that (x) the Company has failed
to comply with the Agreement and (y) any delay in termination will or is likely to have
an adverse impact on OTCQX or is likely to cause disproportionate harm to OTC Markets
Group’s interests.
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In
the event of termination, all previously paid Fees are non-refundable.
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11.3
Obligations. The Company acknowledges that this Agreement does not (i)
create any obligation on the Company’s part to select a specific OTCQX Sponsor or (ii) create any obligation on OTC Markets Group’s
part to maintain the Company’s inclusion on OTCQX.
ARTICLE
12
MISCELLANEOUS
12.1 Binding
Effect and Assignment. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns. The Company may not assign this Agreement, in whole or in part, without the prior
written consent of OTC Markets Group, which consent shall not be unreasonably withheld. OTC Markets Group shall have the right
to assign this Agreement to successors and subsidiaries.
12.2 Entire
Agreement. The Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof,
and supersedes all prior negotiations, communications, writings, and understandings.
12.3 Applicable
Law. This Agreement and the rights of the parties hereunder shall be interpreted, construed and enforced in accordance
with the laws of the State of New York. Each party hereby irrevocably submits to the jurisdiction of any court of the United States
or the State of New York located in New York, New York, over any suit, action, or proceeding brought by the other party hereto
arising out of or relating to this Agreement.
12.4
Claim Time Limit and Waiver of Claims. In no event shall any claim: dispute,
controversy or other matter in question be made against any party hereto by the other party or any person claiming by or
through the other party later than one year after the claim, dispute, controversy or other matter in question has arisen.
Both parties and their respective employees, directors, and other agents expressly waive any claims, disputes, controversies,
and other matters not brought within the period above.
12.5
Interpretation. In the event of any conflict between the provisions of this Agreement
and any of the other attachments, appendices, addenda, cover sheets, amendments, exhibits, schedules and other materials
referenced herein, the provisions of this Agreement will prevail. When the context in which words are used in this Agreement
indicates that such is the intent, words in the singular shall include the plural and vice versa, and words in the masculine
gender shall include the feminine and neuter genders
and vice versa.
12.6
Headings. The headings used in this Agreement are for convenience only and do not constitute
substantive matter to be considered in construing its terms.
12.7
No Solicitation. The Company agrees that, in providing the Issuer Services, OTC
Markets Group is not soliciting or recommending the purchase or sale of any security and, by use of the Issuer Services, the
Company is not making solicitations or recommendations in any jurisdiction within which any such solicitation or
recommendation would be unlawful. OTC Markets Group agrees that it will not solicit or recommend the purchase or sale of any
security, except in connection with a lawful offering of its own securities.
12.8
Modification and Waiver. Except as may otherwise be set forth in the Agreement, OTC Markets
Group may alter any term or condition of this Agreement on sixty (60) days written notice to the Company, and any use after such
date is deemed acceptance of the new term or condition. No failure on the part of OTC Markets Group or the Company to exercise,
no delay in exercising, and no course of dealing with respect to any right, power, or privilege under the Agreement shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right, power, or privilege preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege under the Agreement.
OTC Markets Group Inc.
OTCQX Company Agreement (v.4.4 November 13, 2019)
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Page
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[*****]
12
9 Force Majeure. Neither party shall be liable for any delays or failures
to perform any of its obligations hereunder to the extent that such delays or failures are due to circumstances beyond its reasonable
control, including act of God, strikes, riots, acts of war or terror, or governmental regulations imposed after the date of this
Agreement.
12.10 Status
of Parties. Nothing in the Agreement, express or implied, is intended to or shall (a) confer on any person other than
the parties hereto, or their respective permitted successors or assigns, any rights to remedies under or by reason of the Agreement;
(b) constitute the parties hereto partners or participants in a joint venture; or (c) appoint one party the agent of the other.
12.11 Survival.
Notwithstanding the expiration or termination of this Agreement for any reason, Sections 2.3, 6.4, 6.5, 7.4, and Articles 8,
9, 10 and 12 shall survive any termination of this Agreement.
12
12 Severability of Invalid Provisions. The presence in the text of this
Agreement of any clause, sentence, provision, paragraph or article held to be invalid, illegal or ineffective by a court of competent
jurisdiction shall not impair, invalidate or nullify the remainder of this Agreement and the effect of such holding shall be confined
to the portion so held invalid.
OTC Markets Group Inc.
OTCQX Company Agreement (v.4.4 November 13, 2019)
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Page
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Exhibit 99.20
FIELD TRIP HEALTH LTD.
as the Corporation
and
COMPUTERSHARE TRUST COMPANY OF CANADA
as the Warrant Agent
WARRANT INDENTURE
Providing for the Issue of Warrants
Dated as of January 5, 2021
TABLE OF CONTENTS
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Page
No.
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ARTICLE 1
INTERPRETATION
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Section 1.1
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Definitions
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2
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Section 1.2
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Gender and Number
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6
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Section 1.3
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Headings, Etc.
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6
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Section 1.4
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Day not a Business Day
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6
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Section 1.5
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Time of the Essence
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6
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Section 1.6
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Monetary References
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6
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Section 1.7
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Applicable Law
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6
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Article 2
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ISSUE OF WARRANTS
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Section 2.1
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Creation and Issue of Warrants
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6
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Section 2.2
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Terms of Warrants
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7
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Section 2.3
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Warrantholder not a Shareholder
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7
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Section 2.4
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Warrants to Rank Pari Passu
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8
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Section 2.5
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Form of Warrants and Certificated Warrants
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8
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Section 2.6
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Book Entry Only Warrants
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8
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Section 2.7
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Certificated Warrant
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10
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Section 2.8
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Legends
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11
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Section 2.9
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Register of Warrants
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13
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Section 2.10
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Issue in Substitution for Warrant Certificates Lost, etc.
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14
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Section 2.11
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Exchange of Warrant Certificates
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14
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Section 2.12
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Transfer and Ownership of Warrants
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15
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Section 2.13
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Cancellation of Surrendered Warrants
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16
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Article 3
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EXERCISE OF WARRANTS
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Section 3.1
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Right of Exercise
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16
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Section 3.2
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Warrant Exercise
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16
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Section 3.3
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Prohibition on Exercise by U.S. Persons; Legended Certificates
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19
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Section 3.4
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Transfer Fees and Taxes
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20
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Section 3.5
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Warrant Agency
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20
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Section 3.6
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Effect of Exercise of Warrant Certificates
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21
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Section 3.7
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Partial Exercise of Warrants; Fractions
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21
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Section 3.8
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Acceleration Right
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21
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Section 3.9
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Expiration of Warrants
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22
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Section 3.10
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Accounting and Recording
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22
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Section 3.11
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Securities Restrictions
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22
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Article 4
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ADJUSTMENT OF NUMBER OF Common ShareS
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AND EXERCISE PRICE
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Section 4.1
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Adjustment of Number of Common Shares and Exercise Price
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23
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Section 4.2
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Entitlement to Common Shares on Exercise of Warrant
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27
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Section 4.3
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No Adjustment for Certain Transactions
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27
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Section 4.4
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Determination by Independent Firm
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27
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Section 4.5
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Proceedings Prior to any Action Requiring Adjustment
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27
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TABLE OF CONTENTS
(continued)
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Page No.
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Section 4.6
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Certificate of Adjustment
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27
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Section 4.7
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Notice of Special Matters
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27
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Section 4.8
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No Action after Notice
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28
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Section 4.9
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Other Action
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28
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Section 4.10
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Protection of Warrant Agent
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28
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Section 4.11
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Participation by Warrantholder
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28
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Article 5
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RIGHTS OF THE CORPORATION AND COVENANTS
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Section 5.1
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Optional Purchases by the Corporation
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29
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Section 5.2
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General Representations, Warranties and Covenants
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29
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Section 5.3
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Warrant Agent’s Remuneration and Expenses
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30
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Section 5.4
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Performance of Covenants by Warrant Agent
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30
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Section 5.5
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Enforceability of Warrants
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30
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Article 6
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ENFORCEMENT
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Section 6.1
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Suits by Registered Warrantholders
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31
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Section 6.2
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Suits by the Corporation
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31
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Section 6.3
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Immunity of Shareholders, etc.
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31
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Section 6.4
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Waiver of Default
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31
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Article 7
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MEETINGS OF REGISTERED WARRANTHOLDERS
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Section 7.1
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Right to Convene Meetings
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32
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Section 7.2
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Notice
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32
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Section 7.3
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Chairman
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32
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Section 7.4
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Quorum
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32
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Section 7.5
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Power to Adjourn
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33
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Section 7.6
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Show of Hands
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33
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Section 7.7
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Poll and Voting
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33
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Section 7.8
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Regulations
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33
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Section 7.9
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Corporation and Warrant Agent May be Represented
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34
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Section 7.10
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Powers Exercisable by Extraordinary Resolution
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34
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Section 7.11
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Meaning of Extraordinary Resolution
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35
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Section 7.12
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Powers Cumulative
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35
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Section 7.13
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Minutes
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35
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Section 7.14
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Instruments in Writing
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36
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Section 7.15
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Binding Effect of Resolutions
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36
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Section 7.16
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Holdings by Corporation Disregarded
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36
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Article 8
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SUPPLEMENTAL INDENTURES
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Section 8.1
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Provision for Supplemental Indentures for Certain Purposes
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36
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Section 8.2
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Successor Entities
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37
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TABLE OF CONTENTS
(continued)
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Page
No.
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Article
9
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CONCERNING
THE WARRANT Agent
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Section
9.1
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Trust
Indenture Legislation
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37
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Section
9.2
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Rights
and Duties of Warrant Agent
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38
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Section
9.3
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Evidence,
Experts and Advisers
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38
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Section
9.4
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Documents,
Monies, etc. Held by Warrant Agent
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39
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Section
9.5
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Actions
by Warrant Agent to Protect Interest
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39
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Section
9.6
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Warrant
Agent Not Required to Give Security
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39
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Section
9.7
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Protection
of Warrant Agent
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40
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Section
9.8
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Replacement
of Warrant Agent; Successor by Merger
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41
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Section
9.9
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Acceptance
of Agency
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41
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Section
9.10
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Warrant
Agent Not to be Appointed Receiver
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41
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Section
9.11
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Warrant
Agent Not Required to Give Notice of Default
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42
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Section
9.12
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Anti-Money
Laundering
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42
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Section
9.13
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Compliance
with Privacy Code
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42
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Section
9.14
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Securities
Exchange Commission Certification
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43
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Article
10
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GENERAL
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Section
10.1
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Notice
to the Corporation and the Warrant Agent
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43
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Section
10.2
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Notice
to Registered Warrantholders
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44
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Section
10.3
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Ownership
of Warrants
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45
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Section
10.4
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Counterparts
|
45
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Section
10.5
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Satisfaction
and Discharge of Indenture
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45
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Section
10.6
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Provisions
of Indenture and Warrants for the Sole Benefit of Parties and Registered Warrantholders
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46
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Section
10.7
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Common
Shares or Warrants Owned by the Corporation or its Subsidiaries - Certificate to be Provided
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46
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Section
10.8
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Severability
|
46
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Section
10.9
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Force
Majeure
|
46
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Section
10.10
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Assignment,
Successors and Assigns
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46
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Section
10.11
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Rights
of Rescission and Withdrawal for Holders
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47
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SCHEDULES
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SCHEDULE
“A”
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FORM
OF WARRANT
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SCHEDULE
“B”
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EXERCISE
FORM
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SCHEDULE
“C”
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FORM
OF DECLARATION FOR REMOVAL OF LEGEND
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SCHEDULE
“D”
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FORM
OF U.S. PURCHASER CERTIFICATION UPON EXERCISE OF WARRANTS
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WARRANT INDENTURE
THIS WARRANT INDENTURE is dated as of January 5, 2021.
BETWEEN:
FIELD TRIP HEALTH LTD., a corporation incorporated under the laws of Canada (the “Corporation”),
- AND -
COMPUTERSHARE TRUST COMPANY OF CANADA, a trust company existing under the laws of Canada and authorized to carry on business in all provinces of Canada (the “Warrant Agent”)
WHEREAS in connection with a short form prospectus offering (the “Offering”) by the Corporation pursuant to the terms and conditions of an underwriting agreement dated December 15, 2020, between the Corporation and Stifel Nicolaus Canada Inc. (the “Lead Underwriter”), as lead underwriter and sole bookrunner, and Canaccord Genuity Corp., Bloom Burton Securities Inc. and Eight Capital (collectively with the Lead Underwriter, the “Underwriters”), the Corporation proposes to issue and sell up to 3,868,000 units (“Units”) of the Corporation, each Unit comprised of one Common Share (as defined herein) and one-half of one Warrant (as defined herein);
AND WHEREAS in connection with the Offering, the Corporation proposes to issue 1,934,000 Warrants, subject to an over-allotment option granted by the Corporation to the Underwriters in respect of which the Corporation may issue up to an additional 290,100 Warrants (the “Over-Allotment Option”), for an aggregate maximum of up to 2,224,100 Warrants (assuming the full exercise of the Over-Allotment Option) in accordance with the terms of this Indenture;
AND WHEREAS each Warrant shall, subject to adjustment, entitle the holder thereof to acquire one (1) Common Share upon payment of the Exercise Price prior to the Expiry Time upon the terms and conditions herein set forth;
AND WHEREAS all acts and deeds necessary have been done and performed to make the Warrants, when created and issued as provided in this Indenture, legal, valid and binding upon the Corporation with the benefits and subject to the terms of this Indenture;
AND WHEREAS the foregoing recitals are made as representations and statements of fact by the Corporation and not by the Warrant Agent;
NOW THEREFORE, in consideration of the premises and mutual covenants hereinafter contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Corporation hereby appoints the Warrant Agent as warrant agent to hold the rights, interests and benefits contained herein for and on behalf of those persons who from time to time become the holders of Warrants issued pursuant to this Indenture and the parties hereto agree as follows:
Article 1
INTERPRETATION
Section 1.1 Definitions.
In this Indenture, including the recitals and schedules hereto, and in all indentures supplemental hereto:
“Acceleration Notice” means the written notice from the Corporation to each of the holders, as well the distribution of a press release of the Corporation and an exchange bulletin of the CSE (or other applicable exchange), advising that the preconditions to the exercise of the Acceleration Right have been met and the Acceleration Right has been exercised by the Corporation. The Acceleration Notice shall also state the Expiry Date of the Warrants, which shall be a minimum of fifteen (15) Trading Days from the date on which the Acceleration Notice is delivered to the holders;
“Acceleration Right” means the right of the Corporation to accelerate the Expiry Date to a date that is not the less than fifteen (15) Trading Days following the Acceleration Notice if, at any time following the Effective Date, the VWAP of the Common Shares exceeds $9.00 for a period of ten (10) consecutive Trading Days;
“Adjustment Period” means the period from the Effective Date up to and including the Expiry Time;
“Applicable Legislation” means any statute of Canada or a province thereof, and the regulations under any such named or other statute, relating to warrant indentures or to the rights, duties and obligations of warrant agents under warrant indentures, to the extent that such provisions are at the time in force and applicable to this Indenture;
“Applicable Securities Laws” means, as applicable, the applicable securities laws and regulations, of each of the provinces and territories of Canada, the applicable federal and state securities laws and regulations of the United States, and the applicable securities laws and regulations of any other jurisdiction to which a Warrantholder is subject, together with all related rules, policies, notices and orders of applicable Regulatory Authorities;
“Auditors” means MNP LLP or such other firm of chartered accountants duly appointed as auditors of the Corporation, from time to time;
“Authenticated” means (a) with respect to the issuance of a Warrant Certificate, one which has been duly signed by the Corporation or on which the signatures of the Corporation have been printed, lithographed or otherwise mechanically reproduced and authenticated by signature of an authorized officer of the Warrant Agent, and (b) with respect to the issuance of an Uncertificated Warrant, one in respect of which the Warrant Agent has completed all Internal Procedures such that the particulars of such Uncertificated Warrant as required by Section 2.7 are entered in the register of holders of Warrants, “Authenticate”, “Authenticating” and “Authentication” have the appropriate correlative meanings;
“Book Entry Only Participants” means institutions that participate directly or indirectly in the Depository’s book entry registration system for the Warrants;
“Book Entry Only Warrants” means Warrants that are to be or are held only by or on behalf of the Depository;
“Business Day” means any day other than Saturday, Sunday or a statutory or civic holiday, or any other day on which banks are not open for in-person business in the City of Toronto, Ontario, and shall be a day on which the CSE is open for trading;
“Certificated Warrant” means a Warrant evidenced by a writing or writings substantially in the form of Schedule “A”, attached hereto;
“Common Shares” means, subject to Article 4, fully paid and non-assessable common shares in the capital of the Corporation as presently constituted;
“Common Share Reorganization” has the meaning set forth in Article 4;
“Counsel” means a barrister or solicitor or a firm of barristers and/or solicitors retained by the Warrant Agent or retained by the Corporation, which may or may not be counsel for the Corporation;
“CSE” means the Canadian Securities Exchange
“Current Market Price” of the Common Shares at any date means the weighted average of the trading price per Common Share for such Common Shares for each day there was a closing price for the twenty (20) consecutive Trading Days ending five (5) days prior to such date on the CSE or if on such date the Common Shares are not listed on the CSE, on such stock exchange upon which such Common Shares are listed and as selected by the directors of the Corporation, or, if such Common Shares are not listed on any stock exchange then on such over-the-counter market as may be selected for such purpose by the directors of the Corporation;
“Depository” means CDS Clearing and Depository Services Inc. or such other person as is designated in writing by the Corporation to act as depository in respect of the Warrants;
“Depository Global Warrants” means Warrants representing all or a portion of the aggregate number of Warrants issued in the name of the Depository and applicable Depository represented by an Uncertificated Warrant, or if requested by the applicable Depository or the Corporation, by a Warrant Certificate;
“Dividends” means any dividends paid by the Corporation;
“Effective Date” means the date of this Indenture;
“Exchange Rate” means the number of Common Shares subject to the right of purchase under each Warrant;
“Exercise Date” means, in relation to a Warrant, the Business Day on which such Warrant is validly exercised or deemed to be validly exercised in accordance with Article 3 hereof;
“Exercise Notice” has the meaning set forth in Section 3.2(1);
“Exercise Price” at any time means the price at which a whole Common Share may be purchased by the exercise of a whole Warrant, which is initially $5.60 per Common Share, payable in immediately available Canadian funds, subject to adjustment in accordance with the provisions of Article 4;
“Expiry Date” means the earlier of (i) July 5, 2022; and (ii) the date indicated in the Acceleration Notice that is not less than 15 Trading Days following the date of delivery of such Acceleration Notice in accordance with Section 10.2;
“Expiry Time” means 4:30 p.m. (Toronto time) on the Expiry Date or such earlier time on the Expiry Date as may be required by the Depository pursuant to their internal procedures;
“Extraordinary Resolution” has the meaning set forth in Section 7.11(1);
“Internal Procedures” means in respect of the making of any one or more entries to, changes in or deletions of any one or more entries in the register at any time (including without limitation, original issuance or registration of transfer of ownership) the minimum number of the Warrant Agent’s internal procedures customary at such time for the entry, change or deletion made to be complete under the operating procedures followed at the time by the Warrant Agent, it being understood that neither preparation and issuance shall constitute part of such procedures for any purpose of this definition;
“Issue Date” for any Warrant is the date such Warrant was issued as indicated on the register in accordance with written instructions delivered by the Corporation;
“person” means an individual, body corporate, partnership, trust, warrant agent, executor, administrator, legal representative or any unincorporated organization;
“register” means the one set of records and accounts maintained by the Warrant Agent pursuant to Section 2.9:
“Registered Warrantholders” means the persons who are registered owners of Warrants as such names appear on the register, and for greater certainty, shall include the Depository as well as the holders of Uncertificated Warrants appearing on the register of the Warrant Agent;
“Regulation D” means Regulation D as promulgated by the United States Securities and Exchange Commission under the U.S. Securities Act;
“Regulation S” means Regulation S as promulgated by the United States Securities and Exchange Commission under the U.S. Securities Act;
“Regulatory Authorities” means the securities regulatory authorities in each of the provinces and territories of Canada;
“Rights Offering” has the meaning set forth in Article 4;
“Shareholders” means holders of Common Shares;
“Tax Act” means the Income Tax Act (Canada) and the regulations thereunder;
“this Warrant Indenture”, “this Indenture”, “this Agreement”, “hereto” “herein”, “hereby”, “hereof” and similar expressions mean and refer to this Indenture and any indenture, deed or instrument supplemental hereto; and the expressions “Article”, “Section”, “subsection” and “paragraph” followed by a number, letter or both mean and refer to the specified article, section, subsection or paragraph of this Indenture;
“Trading Day” means, with respect to the CSE, a day on which such exchange is open for the transaction of business and with respect to another exchange or an over-the-counter market means a day on which such exchange or market is open for the transaction of business;
“Uncertificated Warrant” means any Warrant which is not evidenced by a Certificated Warrant;
“United States” means the United States of America, its territories and possessions, any state of the United States, and the District of Columbia;
“U.S. Exchange Act” means the United States Securities Exchange Act of 1934, as amended;
“U.S. Person” has the meaning set forth in Rule 902(k) of Regulation S;
“U.S. Purchaser Letter” means the U.S. Purchaser letter in substantially the form attached hereto as Schedule “D”;
“U.S. Securities Act” means the United States Securities Act of 1933, as amended;
“U.S. Warrantholder” means any Warrantholder that is a U.S. Person, acquired Warrants in the United States or for the account or benefit of any U.S. Person or Person in the United States;
“VWAP” means the volume weighted average trading price of the Common Shares on the CSE or, if on such date the Common Shares are not listed on the CSE, on the Toronto Stock Exchange, New York Stock Exchange, the TSX Venture Exchange, the NASDAQ, or such other recognized stock exchange or quotation system as the Underwriters and the directors of the Corporation may approve;
“Warrants” means the Common Share purchase warrants created by and authorized by and issuable under this Indenture, to be issued and countersigned hereunder in certificated form and /or held through the book entry registration system on a no certificate issued basis, entitling the holder or holders thereof to purchase up to one Common Share per Common Share purchase warrant held (subject to adjustment as herein provided) at the Exercise Price prior to the Expiry Time and, where the context so requires, also means the Common Share purchase warrants issued and Authenticated hereunder, whether by way of Warrant Certificate or Uncertificated Warrant;
“Warrant Agency” means the principal office of the Warrant Agent in the Cities of Toronto, Ontario and Calgary, Alberta or such other place as may be designated in accordance with Section 3.5;
“Warrant Agent” means Computershare Trust Company of Canada, in its capacity as warrant agent of the Warrants, or its successors from time to time;
“Warrant Certificate” means a certificate, substantially in the form set forth in Schedule “A” hereto, to evidence those Warrants that will be evidenced by a certificate;
“Warrantholders”, or “holders” without reference to Warrants, means the warrantholders as and in respect of Warrants registered in the name of the Depository and includes owners of Warrants who beneficially hold securities entitlements in respect of the Warrants through a Book Entry Only Participant or means, at a particular time, the persons entered in the register hereinafter mentioned as holders of Warrants outstanding at such time;
“Warrantholders’ Request” means an instrument signed in one or more counterparts by Registered Warrantholders entitled to acquire in the aggregate not less than 50% of the aggregate number of Common Shares which could be acquired pursuant to all Warrants then unexercised and outstanding, requesting the Warrant Agent to take some action or proceeding specified therein; and
“written order of the Corporation”, “written request of the Corporation”, “written consent of the “Corporation” and “certificate of the Corporation” mean, respectively, a written order, request, consent and certificate signed in the name of the Corporation by any two duly authorized signatories of the Corporation and may consist of one or more instruments so executed;
Section 1.2 Gender and Number.
Words importing the singular number or masculine gender shall include the plural number or the feminine or neuter genders, and vice versa.
Section 1.3 Headings, Etc.
The division of this Indenture into Articles and Sections, the provision of a Table of Contents and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Indenture or of the Warrants.
Section 1.4 Day not a Business Day.
If any day on or before which any action or notice is required to be taken or given hereunder is not a Business Day, then such action or notice shall be required to be taken or given on or before the requisite time on the next succeeding day that is a Business Day.
Section 1.5 Time of the Essence.
Time shall be of the essence in this Indenture and each Warrant.
Section 1.6 Monetary References.
Whenever any amounts of money are referred to herein, such amounts shall be deemed to be in lawful money of Canada unless otherwise expressed.
Section 1.7 Applicable Law.
This Indenture, the Warrants and the Warrant Certificates (including all documents relating thereto, which by common accord have been and will be drafted in English) shall be construed in accordance with the laws of the Province of Ontario, and the federal laws of Canada applicable therein and shall be treated in all respects as legally-binding contracts. Each of the parties hereto, which shall include the Warrantholders, irrevocably attorns to the exclusive jurisdiction of the courts of the Province of Ontario with respect to all matters arising out of this Indenture and the transactions contemplated herein.
Article 2
ISSUE OF WARRANTS
Section 2.1 Creation and Issue of Warrants.
A maximum of 2,224,100 Warrants (subject to adjustment as herein provided) are hereby created and authorized to be issued on the Issue Date in accordance with the terms and conditions hereof. By written order of the Corporation, the Warrant Agent shall deliver Warrants in certificate or uncertificated form pursuant to Section 2.5 hereof to Registered Warrantholders and record the name of the Registered Warrantholders on the Warrant register. Registration of interests in Warrants held by the Depository may be evidenced by a position appearing on the register for Warrants of the Warrant Agent for an amount representing the aggregate number of such Warrants outstanding from time to time.
Section 2.2 Terms of Warrants.
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(1)
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Subject to the applicable conditions for exercise set out in Article 3 having been satisfied and subject to adjustment in accordance with Article 4, each whole Warrant shall entitle each Warrantholder thereof, upon exercise at any time after the Issue Date and prior to the Expiry Time, to acquire one (1) Common Share upon payment of the Exercise Price.
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(2)
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No fractional Warrants shall be issued or otherwise provided for hereunder and Warrants may only be exercised in a sufficient number to acquire whole numbers of Common Shares. Any fractional Warrants shall be rounded down to the nearest whole number and no consideration shall be paid for any such fractional Warrants.
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(3)
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Each whole Warrant shall entitle the holder thereof to such other rights and privileges as are set forth in this Indenture.
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(4)
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The number of Common Shares which may be purchased pursuant to the Warrants and the Exercise Price therefor shall be adjusted upon the events and in the manner specified in Article 4.
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(5)
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If after the Effective Date, the VWAP of the Common Shares shall exceed $9.00 for a period of ten (10) consecutive Trading Days, the Corporation shall be entitled, at the option of the Corporation, to exercise the Acceleration Right by distributing the Acceleration Notice. The Acceleration Notice shall be delivered to each Registered Warrantholder in the manner set out in Section 10.2, and shall also be distributed by press release of the Corporation and exchange bulletin of the CSE (or other applicable exchange).
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(6)
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Neither the Corporation nor the Warrant Agent shall have any obligation to deliver Common Shares upon the exercise of any Warrant if the person to whom such shares are to be delivered is a resident of a country or political subdivision thereof in which the Common Shares may not lawfully be issued pursuant to applicable securities legislation. The Corporation or the Warrant Agent may require any person to provide proof of an applicable exemption from such securities legislation to the Corporation and Warrant Agent before Common Shares are delivered pursuant to the exercise of any Warrant.
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Section 2.3 Warrantholder not a Shareholder.
Except as may be specifically provided herein, nothing in this Indenture or in the holding of a Warrant Certificate, entitlement to a Warrant or otherwise, shall, in itself, confer or be construed as conferring upon a Warrantholder any right or interest whatsoever as a Shareholder, including, but not limited to, the right to vote at, to receive notice of, or to attend, meetings of Shareholders or any other proceedings of the Corporation, or the right to Dividends and other allocations.
Section 2.4 Warrants to Rank Pari Passu.
All Warrants shall rank equally and without preference over each other, whatever may be the actual date of issue thereof.
Section 2.5 Form of Warrants and Certificated Warrants.
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(1)
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The Warrants may be issued in both certificated and uncertificated form. Each Warrant originally issued to a U.S. Warrantholder will be evidenced in certificated form only and bear the applicable legends as set forth in Schedule “A” hereto. All Warrants issued in certificated form shall be evidenced by Warrant Certificates (including all replacements issued in accordance with this Indenture), substantially in the form and bearing the applicable legends as set out in Schedule “A” hereto, which shall be dated as of the Issue Date, shall bear such distinguishing letters and numbers as the Corporation may, with the approval of the Warrant Agent, prescribe, and shall be issuable in any denomination excluding fractions. All Warrants issued to the Depository may be in either a certificated or uncertificated form, such uncertificated form being evidenced by a book position on the register of Warrantholders to be maintained by the Warrant Agent in accordance with Section 2.6.
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(2)
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Each Warrantholder by purchasing such Warrant acknowledges and agrees that the terms and conditions set forth in the form of the Warrant Certificate set out in Schedule “A: hereto shall apply to all Warrants and Warrantholders regardless of whether such Warrants are issued in certificated or uncertificated form or whether such Warrantholders are Registered Warrantholders or owners of Warrant who beneficially hold security entitlements in respect of the Warrants through a Depository.
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Section 2.6 Book Entry Only Warrants.
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(1)
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Reregistration of beneficial interests in and transfers of Warrants held by the Depository shall be made only through the book entry registration system and no Warrant Certificates shall be issued in respect of such Warrants except where physical certificates evidencing ownership in such securities are required or as set out herein or as may be requested by the Depository, as determined by the Corporation, from time to time. Except as provided in this Section 2.6, owners of beneficial interests in any Depository Global Warrants shall not be entitled to have Warrants registered in their names and shall not receive or be entitled to receive Warrants in definitive form or to have their names appear in the register referred to in Section 2.9 herein. Notwithstanding any terms set out herein, Warrants held in the name of the Depository having any legend set forth in Section 2.9 herein and may only be held in the form of Uncertificated Warrants with the prior consent of the Warrant Agent and in accordance with the Internal Procedures of the Warrant Agent.
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(2)
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Notwithstanding any other provision in this Indenture, no Depository Global Warrants may be exchanged in whole or in part for registered Warrants, and no transfer of any Depository Global Warrants in whole or in part may be registered, in the name of any person other than the Depository for such Depository Global Warrants or a nominee thereof unless:
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(a)
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the Depository notifies the Corporation that it is unwilling or unable to continue to act as depository in connection with the Book Entry Only Warrants and the Corporation is unable to locate a qualified successor;
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(b)
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the Corporation determines that the Depository is no longer willing, able or qualified to properly discharge its responsibilities as holder of the Depository Global Warrants and the Corporation is unable to locate a qualified successor;
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(c)
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the Depository ceases to be a clearing agency or otherwise ceases to be eligible to be a depository and the Corporation is unable to locate a qualified successor;
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(d)
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the Corporation determines that the Warrants shall no longer be held as Book Entry Only Warrants through the Depository and has communicated such determination to the Warrant Agent;
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(e)
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such right is required by Applicable Legislation or Applicable Securities Laws, as determined by the Corporation and the Corporation’s Counsel;
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(f)
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the Warrant is to be Authenticated to or for the account or benefit of a person in the United States or a U.S. Person; or
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(g)
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such registration is effected in accordance with the internal procedures of the Depository and the Warrant Agent,
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following which, Warrants for those holders requesting the same shall be registered and issued to the beneficial owners of such Warrants or their nominees as directed by the holder. The Corporation shall provide a certificate executed by an officer of the Corporation giving notice to the Warrant Agent of the occurrence of any event outlined in this Section 2.6(2).
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(3)
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Subject to the provisions of this Section 2.6, any exchange of Depository Global Warrants for Warrants which are not Depository Global Warrants may be made in whole or in part in accordance with the provisions of Section 2.11, mutatis mutandis. All such Warrants issued in exchange for a Depository Global Warrant or any portion thereof shall be registered in such names as the Depository for such Depository Global Warrants shall direct and shall be entitled to the same benefits and be subject to the same terms and conditions (except insofar as they relate specifically to Depository Global Warrants or to the legend required by Section 2.8(2) and the restrictions set out in such legend) as the Depository Global Warrants or portion thereof surrendered upon such exchange.
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(4)
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Every Warrant that is Authenticated upon registration or transfer of a Depository Global Warrant, or in exchange for or in lieu of a Depository Global Warrant or any portion thereof, whether pursuant to this Section 2.6, or otherwise, shall be Authenticated in the form of, and shall be, a Depository Global Warrant, unless such Warrant is registered in the name of a person other than the Depository for such Depository Global Warrant or a nominee thereof.
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(5)
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Notwithstanding anything to the contrary in this Indenture, subject to Applicable Legislation, the Depository Global Warrant will be issued as an Uncertificated Warrant, unless otherwise requested in writing by the Depository or the Corporation.
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(6)
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The rights of beneficial owners of Warrants who hold securities entitlements in respect of the Warrants through the book entry registration system shall be limited to those established by applicable law and agreements between the Depository and the Book Entry Only Participants and between such Book Entry Only Participants and the beneficial owners of Warrants who hold securities entitlements in respect of the Warrants through the book entry registration system, and such rights must be exercised through a Book Entry Only Participant in accordance with the rules and procedures of the Depository.
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(7)
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Notwithstanding anything herein to the contrary, neither the Corporation nor the Warrant Agent nor any agent thereof shall have any responsibility or liability for:
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(a)
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the electronic records maintained by the Depository relating to any ownership interests or any other interests in the Warrants or the depository system maintained by the Depository, or payments made on account of any ownership interest or any other interest of any person in any Warrant represented by an electronic position in the book entry registration system (other than the Depository or its nominee);
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(b)
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maintaining, supervising or reviewing any records of the Depository or any Book Entry Only Participant relating to any such interest; or
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(c)
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any advice or representation made or given by the Depository or those contained herein that relate to the rules and regulations of the Depository or any action to be taken by the Depository on its own direction or at the direction of any Book Entry Only Participant.
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(8)
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The Corporation may terminate the application of this Section 2.6 in its sole discretion in which case all Warrants shall be evidenced by Warrant Certificates registered in the name of a Person other than the Depository.
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Section 2.7 Certificated Warrant.
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(1)
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For Warrants issued in certificated form, the form of certificate representing such Warrants shall be substantially as set out in Schedule “A” hereto or such other form as is authorized from time to time by the Warrant Agent. Each Warrant Certificate shall be Authenticated on behalf of the Warrant Agent. Each Warrant Certificate shall be signed by any two duly authorized signatories of the Corporation; whose signature shall appear on the Warrant Certificate and may be printed, lithographed or otherwise mechanically reproduced thereon and, in such event, certificates so signed are as valid and binding upon the Corporation as if it had been signed manually. Any Warrant Certificate which has two signatures duly executed by the Corporation as hereinbefore provided shall be valid notwithstanding that one or more of the persons whose signature is printed, lithographed or mechanically reproduced no longer holds office at the date of issuance of such Warrant Certificate. The Warrant Certificates may be engraved, printed or lithographed, or partly in one form and partly in another, as the Warrant Agent may determine.
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(2)
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The Warrant Agent shall Authenticate Uncertificated Warrants (whether upon original issuance, exchange, registration of transfer, partial payment, or otherwise) by completing its Internal Procedures and the Corporation shall, and hereby acknowledges that it shall, thereupon be deemed to have duly and validly issued such Uncertificated Warrants under this Indenture. Such Authentication shall be conclusive evidence that such Uncertificated Warrant has been duly issued hereunder and that the holder or holders are entitled to the benefits of this Indenture. The register shall be final and conclusive evidence as to all matters relating to Uncertificated Warrants with respect to which this Indenture requires the Warrant Agent to maintain records or accounts. In case of differences between the register at any time and any other time the register at the later time shall be controlling, absent manifest error and such Uncertificated Warrants are binding on the Corporation.
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(3)
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Any Warrant Certificate validly issued in accordance with the terms of this Indenture in effect at the time of issue of such Warrant Certificate shall, subject to the terms of this Indenture and Applicable Legislation, validly entitle the holder to acquire Common Shares, notwithstanding that the form of such Warrant Certificate may not be in the form currently required by this Indenture.
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(4)
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No Warrant shall be considered issued and shall be valid or obligatory or shall entitle the holder thereof to the benefits of this Indenture, until it has been Authenticated by the Warrant Agent. Authentication by the Warrant Agent, including by way of entry on the register, shall not be construed as a representation or warranty by the Warrant Agent as to the validity of this Indenture or of such Warrant Certificates or Uncertificated Warrants (except the due Authentication thereof) or as to the performance by the Corporation of its obligations under this Indenture and the Warrant Agent shall in no respect be liable or answerable for the use made of the Warrants or any of them or of the consideration thereof. Authentication by the Warrant Agent shall be conclusive evidence as against the Corporation that the Warrants so Authenticated have been duly issued hereunder and that the holder thereof is entitled to the benefits of this Indenture.
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(5)
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No Certificated Warrant shall be considered issued and Authenticated or, if Authenticated, shall be obligatory or shall entitle the holder thereof to the benefits of this Indenture, until it has been Authenticated by signature by or on behalf of the Warrant Agent substantially in the form of the Warrant set out in Schedule “A” hereto. Such Authentication on any such Certificated Warrant shall be conclusive evidence that such Certificated Warrant is duly Authenticated and is valid and a binding obligation of the Corporation and that the holder is entitled to the benefits of this Indenture.
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(6)
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No Uncertificated Warrant shall be considered issued and shall be obligatory or shall entitle the holder thereof to the benefits of this Indenture, until it has been Authenticated by entry on the register of the particulars of the Uncertificated Warrant. Such entry on the register of the particulars of an Uncertificated Warrant shall be conclusive evidence that such Uncertificated Warrant is a valid and binding obligation of the Corporation and that the holder is entitled to the benefits of this Indenture.
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Section 2.8 Legends.
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(1)
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Neither
the Warrants nor the Common Shares have been or will be registered under the U.S. Securities
Act or under any United States state securities laws. If required under United States
securities laws, Warrant Certificates originally issued for the benefit or account of
a U.S. Warrantholder and each Warrant Certificate issued in exchange therefor or in substitution
thereof shall bear or be deemed to bear the following legends or such variations thereof
as the Corporation may prescribe from time to time:
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“THESE WARRANTS AND THE SECURITIES DELIVERABLE UPON THE EXERCISE THEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO FIELD TRIP HEALTH LTD. (THE “CORPORATION”) (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT AND IN COMPLIANCE WITH LOCAL LAWS AND REGULATIONS, (C) WITHIN THE UNITED STATES IN ACCORDANCE WITH (1) RULE 144A UNDER THE U.S. SECURITIES ACT, OR (2) RULE 144 UNDER THE U.S. SECURITIES ACT AND, IN EACH CASE, IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS, OR (D) IN ANOTHER TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, PROVIDED THAT IN THE CASE OF TRANSFERS PURSUANT TO (C)(2) OR (D) ABOVE, A LEGAL OPINION SATISFACTORY TO THE CORPORATION MUST FIRST BE PROVIDED TO COMPUTERSHARE TRUST COMPANY OF CANADA TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE U.S. SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.
THE SECURITIES EVIDENCED HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OR U.S. STATE SECURITIES LAWS. THESE WARRANTS MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR ON BEHALF OF, OR FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON UNLESS THIS SECURITY AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS SECURITY HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LEGISLATION OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE U.S. SECURITIES ACT.”;
provided that, if the Warrants are being sold outside the United States in accordance with Rule 904 of Regulation S under the U.S. Securities Act, and if the Corporation is a “foreign issuer” within the meaning of Regulation S at the time of sale, this legend may be removed by the transferor providing a declaration to the Warrant Agent in the form set forth in Schedule “C” attached hereto or as the Warrant Agent or the Corporation may prescribe from time to time, and if required by the Warrant Agent, including an opinion of counsel, of recognised standing reasonably satisfactory to the Corporation and the Warrant Agent, that the proposed transfer may be effected without registration under the U.S. Securities Act.
The Warrant Agent shall be entitled to request any other documents that it may require in accordance with its internal policies for the removal of the legend set forth above.
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(2)
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Each Depository Global Warrant, if issued on a certificated basis, originally issued in Canada and held by the Depository, and each Depository Global Warrant issued in exchange therefor or in substitution thereof shall bear or be deemed to bear the following legend or such variations thereof as the Corporation may prescribe from time to time:
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“UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF CDS CLEARING AND DEPOSITORY SERVICES INC. (“CDS”) TO FIELD TRIP HEALTH LTD. (THE “ISSUER”) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN RESPECT THEREOF IS REGISTERED IN THE NAME OF CDS & CO, OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CDS (AND ANY PAYMENT IS MADE TO CDS & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CDS), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED HOLDER HEREOF, CDS & CO., HAS A PROPERTY INTEREST IN THE SECURITIES REPRESENTED BY THIS CERTIFICATE HEREIN AND IT IS A VIOLATION OF ITS RIGHTS FOR ANOTHER PERSON TO HOLD, TRANSFER OR DEAL WITH THIS CERTIFICATE.”
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(3)
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Notwithstanding any other provisions of this Indenture, in processing and registering transfers of Warrants, no duty or responsibility whatsoever shall rest upon the Warrant Agent to determine the compliance by any transferor or transferee with the terms of the legend contained in Section 2.8(1) or Section 2.8(2), or with the relevant securities laws or regulations, including, without limitation, Regulation S, and the Warrant Agent shall be entitled to assume that all transfers are legal and proper.
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Section 2.9 Register of Warrants
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(1)
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The Warrant Agent shall maintain records and accounts concerning the Warrants, whether certificated or uncertificated, which shall contain the information called for below with respect to each Warrant, together with such other information as may be required by law or as the Warrant Agent may elect to record. All such information shall be kept in one set of accounts and records which the Warrant Agent shall designate (in such manner as shall permit it to be so identified as such by an unaffiliated party) as the register of the holders of Warrants. The information to be entered for each account in the register of Warrants at any time shall include (without limitation):
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(a)
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the
name and address of the Registered Warrantholder, the date of
Authentication thereof and the number of Warrants;
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(b)
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whether such Warrant is a Certificated Warrant or an Uncertificated Warrant and, if a Warrant Certificate, the unique number or code assigned to and imprinted thereupon and, if an Uncertificated Warrant, the unique number or code assigned thereto if any;
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(c)
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whether such Warrant has been cancelled; and
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(d)
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a register of transfers in which all transfers of Warrants and the date and other particulars of each transfer shall be entered.
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The register shall be available for inspection by the Corporation and or any Registered Warrantholder during the Warrant Agent’s regular business hours on a Business Day and upon payment to the Warrant Agent of its reasonable fees. Any Registered Warrantholder exercising such right of inspection shall first provide an affidavit in form satisfactory to the Corporation and the Warrant Agent stating the name and address of the Registered Warrantholder and agreeing not to use the information therein except in connection with an effort to call a meeting of Warrantholders or to influence the voting of Warrantholders at any meeting of Warrantholders.
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(2)
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Once an Uncertificated Warrant has been Authenticated, the information set forth in the register with respect thereto at the time of Authentication may be altered, modified, amended, supplemented or otherwise changed only to reflect exercise or proper instructions to the Warrant Agent from the holder as provided herein, except that the Warrant Agent may act unilaterally to make purely administrative changes internal to the Warrant Agent and changes to correct errors. Each person who becomes a holder of an Uncertificated Warrant, by his, her or its acquisition thereof shall be deemed to have irrevocably (i) consented to the foregoing authority of the Warrant Agent to make such minor error corrections and (ii) agreed to pay to the Warrant Agent, promptly upon written demand, the full amount of all loss and expense (including without limitation reasonable legal fees of the Corporation and the Warrant Agent plus interest, at an appropriate then prevailing rate of interest to the Warrant Agent), sustained by the Corporation or the Warrant Agent as a proximate result of such error if but only if and only to the extent that such present or former holder realized any benefit as a result of such error and could reasonably have prevented, forestalled or minimized such loss and expense by prompt reporting of the error or avoidance of accepting benefits thereof whether or not such error is or should have been timely detected and corrected by the Warrant Agent; provided, that no person who is a bona fide purchaser shall have any such obligation to the Corporation or to the Warrant Agent.
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Section 2.10 Issue in Substitution for Warrant Certificates Lost, etc.
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(1)
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If any Warrant Certificate becomes mutilated or is lost, destroyed or stolen, the Corporation, subject to applicable law, shall issue and thereupon the Warrant Agent shall certify and deliver, a new Warrant Certificate of like tenor, and bearing the same legend, if applicable, as the one mutilated, lost, destroyed or stolen in exchange for and in place of and upon cancellation of such mutilated Warrant Certificate, or in lieu of and in substitution for such lost, destroyed or stolen Warrant Certificate, and the substituted Warrant Certificate shall be in a form approved by the Warrant Agent and the Warrants evidenced thereby shall be entitled to the benefits hereof and shall rank equally in accordance with its terms with all other Warrants issued or to be issued hereunder.
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(2)
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The applicant for the issue of a new Warrant Certificate pursuant to this Section 2.10 shall bear the cost of the issue thereof and in case of loss, destruction or theft shall, as a condition precedent to the issuance thereof, furnish to the Corporation and to the Warrant Agent such evidence of ownership and of the loss, destruction or theft of the Warrant Certificate so lost, destroyed or stolen as shall be satisfactory to the Corporation and to the Warrant Agent, in their sole discretion, and such applicant shall also be required to furnish an indemnity and surety bond in amount and form satisfactory to the Corporation and the Warrant Agent, in their sole discretion, and shall pay the reasonable charges of the Corporation and the Warrant Agent in connection therewith.
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Section 2.11 Exchange of Warrant Certificates.
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(1)
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Any one or more Warrant Certificates representing any number of Warrants may, upon compliance with the reasonable requirements of the Warrant Agent (including compliance with Applicable Securities Laws), be exchanged for one or more other Warrant Certificates representing the same aggregate number of Warrants, and bearing the same legend, if applicable, as represented by the Warrant Certificate or Warrant Certificates so exchanged.
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(2)
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Certificated Warrants may be exchanged only at the Warrant Agency or at any other place that is designated by the Corporation with the approval of the Warrant Agent. Any Warrant Certificate from the holder (or such other instructions, in form satisfactory to the Warrant Agent), tendered for exchange shall be surrendered to the Warrant Agency and cancelled by the Warrant Agent.
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(3)
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Certificated Warrants exchanged for Warrant Certificates that bear the legend set forth in Section 2.8(1) shall bear the same legend.
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Section 2.12 Transfer
and Ownership of Warrants.
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(1)
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The Warrants may only be transferred on the register kept by the Warrant Agent at the Warrant Agency by the Registered Warrantholder or its legal representatives or its attorney duly appointed by an instrument in writing in form and execution satisfactory to the Warrant Agent only upon (a) in the case of a Warrant Certificate, surrendering to the Warrant Agent at the Warrant Agency the Warrant Certificates representing the Warrants to be transferred together with a duly executed transfer form as set forth in Schedule “A” attached hereto, (b) in the case of Book Entry Only Warrants, in accordance with procedures prescribed by the Depository under the book entry registration system, and (c) upon compliance with:
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(i)
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the conditions herein;
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(ii)
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such reasonable requirements as the Warrant Agent may prescribe; and
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(iii)
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all Applicable Securities Laws and requirements of Regulatory Authorities;
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and such transfer shall be duly noted in such register by the Warrant Agent. Upon compliance with such requirements, the Warrant Agent shall issue to the transferee of a Certificated Warrant, a Warrant Certificate and to the transferee of an Uncertificated Warrant, an Uncertificated Warrant (or the Warrant Agent shall Authenticate and deliver a Certificated Warrant upon request), representing the Warrants transferred and the transferee of a Book Entry Only Warrant shall be recorded through the relevant Book Entry Only Participant in accordance with the book entry registration system as the entitlement holder in respect of such Warrants. Transfers within the systems of the Depository are not the responsibility of the Warrant Agent and will not be noted on the register maintained by the Warrant Agent.
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(2)
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If a Warrant Certificate tendered for transfer bears any of the legends set forth in Section 2.8(1), the Warrant Agent shall not register such transfer unless the transferor has provided the Warrant Agent with the Warrant Certificate and (A) the transfer is made to the Corporation or (B) a declaration to the effect set forth in Schedule “C” to this Warrant Indenture, or in such other form as the Corporation may from time to time prescribe, is delivered to the Warrant Agent, and if required by the Warrant Agent, the transferor provides an opinion of counsel of recognized standing, reasonably satisfactory to the Corporation and the Warrant Agent that the proposed transfer is exempt from registration with applicable state laws and the U.S. Securities Act and that such legends may be removed.
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(3)
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Subject to the provisions of this Indenture, Applicable Legislation and applicable law, the Warrantholder shall be entitled to the rights and privileges attaching to the Warrants, and the issue of Common Shares by the Corporation upon the exercise of Warrants in accordance with the terms and conditions herein contained shall discharge all responsibilities of the Corporation and the Warrant Agent with respect to such Warrants and neither the Corporation nor the Warrant Agent shall be bound to inquire into the title of any such holder.
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(4)
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If a Warrant Certificate (or certificate representing the Common Shares) tendered for transfer bears the legend set forth in Section 2.8(1), the Warrant Agent (or the Corporation’s registrar and transfer agent, as applicable) shall not register such transfer unless the transferor has provided the Warrant Agent (or the Corporation’s registrar and transfer agent, as applicable) with the Warrant Certificate (or the certificate representing the Common Shares) and the holder certifies in the Form of Transfer, either (A) the transfer is made to the Corporation; or (B) the transfer is made outside of the United States in a transaction meeting the requirements of Rule 904 of Regulation S and in compliance with applicable local laws and regulations; or (C) the transfer is being made pursuant to the exemption from the registration requirements of the U.S. Securities Act provided by (i) Rule 144 under the U.S. Securities Act, if available, or (ii) Rule 144A, if available, and, in both cases, in compliance with applicable state securities laws; (D) in another transaction that does not require registration under the U.S. Securities Act or any applicable state securities laws; or (E) pursuant to an effective registration statement under the U.S. Securities Act, and in the case of (C)(i) and (D) above (and, if required by the Corporation or the Warrant Agent or the Corporation’s registrar and transfer agent, in the case of (B)), the Corporation and the Warrant Agent (or the Corporation’s registrar and transfer agent, as applicable) shall first have received an opinion of counsel of recognized standing, or other evidence, in either case in form and substance reasonably satisfactory to the Corporation, and the Warrant Agent (or the Corporation’s registrar and transfer agent, as applicable), to such effect.
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Section 2.13 Cancellation of Surrendered Warrants.
All Warrant Certificates surrendered pursuant to Article 3 shall be cancelled by the Warrant Agent and upon such circumstances all such Uncertificated Warrants shall be deemed cancelled and so noted on the register by the Warrant Agent. Upon request by the Corporation, the Warrant Agent shall furnish to the Corporation a cancellation certificate identifying the Warrant Certificates so cancelled, the number of Warrants evidenced thereby, the number of Common Shares, if any, issued pursuant to such Warrants and the details of any Warrant Certificates issued in substitution or exchange for such Warrant Certificates cancelled.
Article 3
EXERCISE OF WARRANTS
Section 3.1 Right of Exercise.
Subject to the provisions hereof, each Registered Warrantholder may exercise the right conferred on such holder to subscribe for and purchase one (1) Common Share for each Warrant held by such Warrantholder after the Issue Date and prior to the Expiry Time and in accordance with the conditions herein.
Section 3.2 Warrant Exercise.
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(1)
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Other than Warrants held by the Depository, Registered Warrantholders of Warrant Certificates who wish to exercise the Warrants held by them in order to acquire Common Shares must complete the exercise form (the “Exercise Notice”) attached to the Warrant Certificate(s) which form is attached hereto as Schedule “B”, which may be amended by the Corporation with the consent of the Warrant Agent, if such amendment does not, in the reasonable opinion of the Corporation and the Warrant Agent, which may be based on the advice of Counsel, materially and adversely affect the rights, entitlements and interests of the Warrantholders, and deliver such certificate(s), the executed Exercise Notice and a certified cheque, bank draft or money order payable to or to the order of the Corporation for the aggregate Exercise Price to the Warrant Agent at the Warrant Agency prior to the Expiry Time. The Warrants represented by a Warrant Certificate shall be deemed to be surrendered upon personal delivery of such certificate, Exercise Notice and aggregate Exercise Price or, if such documents are sent by mail or other means of transmission, upon actual receipt thereof by the Warrant Agent at the office referred to above.
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(2)
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In addition to completing the Exercise Notice attached to the Warrant Certificate(s), a Warrantholder who is a person in the United States, a U.S. Person, a person exercising for the account or benefit of a U.S. Person, or person requesting delivery of the Common Shares issuable upon the exercise of the Warrants in the United States must (a) provide a completed and executed U.S. Purchaser Letter or (b) an opinion of counsel of recognised standing in form and substance reasonably satisfactory to the Corporation and the Warrant Agent that the exercise is exempt from the registration requirements of applicable securities laws of any state of the United States and the U.S. Securities Act; provided however that in the case of a Warrantholder that is the original purchaser of Warrants and who delivered the U.S. Accredited Investor Certificate attached to the subscription agreement of the Corporation in connection with its purchase of Units pursuant to the private placement under which the Warrants were issued, such Warrantholder will not be required to deliver a U.S. Purchaser Letter or an opinion of counsel in connection with the due exercise of the Warrant at a time when the representations, warranties and covenants made by the Warrantholder in the U.S. Accredited Investor Certificate remain true and correct and the Warrantholder represents to the Corporation as such.
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(3)
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A Registered Warrantholder of Uncertificated Warrants evidenced by a security entitlement in respect of Warrants must complete the Exercise Notice and deliver the executed Exercise Notice and a certified cheque, bank draft or money order payable to or to the order of the Corporation for the aggregate Exercise Price to the Warrant Agent at the Warrant Agency. The Uncertificated Warrants shall be deemed to be surrendered upon receipt of the Exercise Notice and aggregate Exercise Price or, if such documents are sent by mail or other means of transmission, upon actual receipt thereof by the Warrant Agent at the office referred to above.
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(4)
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A beneficial owner of Uncertificated Warrants evidenced by a security entitlement in respect of Warrants in the book entry registration system who desires to exercise his or her Warrants must do so by causing a Book Entry Only Participant to deliver to the Depository on behalf of the entitlement holder, notice of the owner’s intention to exercise Warrants in a manner acceptable to the Depository. Forthwith upon receipt by the Depository of such notice, as well as payment for the aggregate Exercise Price, the Depository shall deliver to the Warrant Agent confirmation of its intention to exercise Warrants (a “Confirmation”) in a manner acceptable to the Warrant Agent, including by electronic means through a book based registration system. An electronic exercise of the Warrants initiated by the Book Entry Only Participant through a book based registration system, shall constitute a representation to both the Corporation and the Warrant Agent that the beneficial owner at the time of exercise of such Warrants (a) is not in the United States; (b) is not a U.S. Person and is not exercising such Warrants on behalf of a U.S. Person or a person in the United States; and (c) did not execute or deliver the notice of the owner’s intention to exercise such Warrants in the United States. If the Book Entry Only Participant is not able to make or deliver the foregoing representations by initiating the electronic exercise of the Warrants, then such Warrants shall be withdrawn from the Depository Global Warrants, by the Book Entry Only Participant and an individually registered Warrant Certificate shall be issued by the Warrant Agent to such beneficial owner or Book Entry Only Participant and the exercise procedures set forth in Section 3.2(4) shall be followed.
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(5)
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Payment representing the aggregate Exercise Price must be provided to the appropriate office of the Book Entry Only Participant in a manner acceptable to it. A notice in form acceptable to the Book Entry Only Participant and payment from such beneficial holder should be provided to the Book Entry Only Participant sufficiently in advance so as to permit the Book Entry Only Participant to deliver notice and payment to the Depository and for the Depository in turn to deliver notice and payment to the Warrant Agent prior to the Expiry Time. The Depository will initiate the exercise by way of the Confirmation and forward the aggregate Exercise Price electronically to the Warrant Agent for prompt onward payment by the Warrant Agent to the Corporation which the Warrant Agent will promptly pay to the Corporation and the Warrant Agent will execute the exercise by issuing to the Depository through the book entry registration system the Common Shares to which the exercising Warrantholder is entitled pursuant to the exercise. Any expense associated with the exercise process will be for the account of the entitlement holder exercising the Warrants and/or the Book Entry Only Participant exercising the Warrants on its behalf.
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(6)
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By causing a Book Entry Only Participant to deliver notice to the Depository, a Warrantholder shall be deemed to have irrevocably surrendered his or her Warrants so exercised and appointed such Book Entry Only Participant to act as his or her exclusive settlement agent with respect to the exercise and the receipt of Common Shares in connection with the obligations arising from such exercise.
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(7)
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Any notice which the Depository determines to be incomplete, not in proper form or not duly executed shall for all purposes be void and of no force and effect and the exercise to which it relates shall be considered for all purposes not to have been exercised thereby. A failure by a Book Entry Only Participant to exercise or to give effect to the settlement thereof in accordance with the Warrantholder’s instructions will not give rise to any obligations or liability on the part of the Corporation or Warrant Agent to the Book Entry Only Participant or the Warrantholder.
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(8)
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The Exercise Notice referred to in this Section 3.2 shall be signed by the Registered Warrantholder, or its executors or administrators or other legal representatives or an attorney of the Registered Warrantholder, duly appointed by an instrument in writing satisfactory to the Warrant Agent but such Exercise Notice need not be executed by the Depository.
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(9)
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Any exercise referred to in this Section 3.2 shall require that the entire Exercise Price for Common Shares subscribed must be paid at the time of subscription and such Exercise Price and original Exercise Notice executed by the Registered Warrantholder or the Confirmation from the Depository must be received by the Warrant Agent prior to the Expiry Time.
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(10)
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Warrants may only be exercised pursuant to this Section 3.2 by or on behalf of a Registered Warrantholder, as applicable, who makes the certifications set forth on the Exercise Notice set out in Schedule “B” or as provided herein.
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(11)
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If the form of Exercise Notice set forth in the Warrant Certificate shall have been amended, the Corporation shall cause the amended Exercise Notice to be forwarded to all Registered Warrantholders.
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(12)
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Exercise Notices and Confirmations must be delivered to the Warrant Agent at any time during the Warrant Agent’s actual business hours on any Business Day prior to the Expiry Time. Any Exercise Notice or Confirmations received by the Warrant Agent after business hours on any Business Day other than the Expiry Date will be deemed to have been received by the Warrant Agent on the next following Business Day.
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(13)
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Any Warrant with respect to which a Confirmation or Exercise Notice is not received by the Warrant Agent before the Expiry Time shall be deemed to have expired and become void and all rights with respect to such Warrants shall terminate and be cancelled.
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Section 3.3 Prohibition on Exercise by U.S. Persons; Legended Certificates
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(1)
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Subject to Section 3.3(2) below, (i) Warrants may not be exercised within the United States or by or on behalf of any U.S. Person; and (ii) no Common Shares issued upon exercise of Warrants may be delivered to any address in the United States.
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(2)
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Notwithstanding Section 3.3(1), Warrants which bear the legend set forth in Section 2.8(1) may be exercised in the United States or by or on behalf of a U.S. Person, and Common Shares issued upon exercise of any such Warrants may be delivered to an address in the United States, provided that (a) the Person exercising the Warrants (i) is an original U.S. Purchaser who purchased the Warrants directly from the Corporation (ii) is an institutional “accredited investor” that satisfies one or more of the criteria set forth in Rule 501(a)(1), (2), (3) or (7) of Regulation D or is a “qualified purchaser” as defined in Section 2(a)(51) of the U.S. Investment Company Act and (b) delivers a completed and executed U.S. Purchaser Letter or provides in form and substance satisfactory to the Corporation and Warrant Agent a legal opinion which confirms that issuance of shares is in compliance with the applicable state laws and the U.S. Securities Act; provided however that in the case of a Warrantholder that is the original purchaser of the Warrants and who delivered the U.S. Accredited Investor Certificate attached to the subscription agreement of the Corporation in connection with its purchase of Units pursuant to the private placement under which the Warrants were issued, such Warrantholder will not be required to deliver a U.S. Purchaser Letter or an opinion of counsel in connection with the due exercise of the Warrant at a time when the representations, warranties and covenants made by the Warrantholder in the U.S. Accredited Investor Certificate remain true and correct and the Warrantholder represents to the Corporation as such.
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(3)
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Certificates representing Common Shares issued upon the exercise of Warrants which bear the legend set forth in Section 2.8(1) or which are issued and delivered pursuant to Section 3.3(2) shall bear the following legend:
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“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO FIELD TRIP HEALTH LTD. (THE “CORPORATION”) (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT AND IN COMPLIANCE WITH LOCAL LAWS AND REGULATIONS, (C) WITHIN THE UNITED STATES IN ACCORDANCE WITH (1) RULE 144A UNDER THE U.S. SECURITIES ACT, OR (2) RULE 144 UNDER THE U.S. SECURITIES ACT AND, IN EACH CASE, IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS, OR (D) IN ANOTHER TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, PROVIDED THAT IN THE CASE OF TRANSFERS PURSUANT TO (C)(2) OR (D) ABOVE, A LEGAL OPINION SATISFACTORY TO THE CORPORATION MUST FIRST BE PROVIDED TO COMPUTERSHARE TRUST COMPANY OF CANADA TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE U.S. SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA. PROVIDED THAT THE CORPORATION IS A “FOREIGN ISSUER” WITHIN THE MEANING OF REGULATION S UNDER THE U.S. SECURITIES ACT A THE TIME OF SALE, A NEW CERTIFICATE BEARING NO LEGEND, MAY BE OBTAINED FROM THE CORPORATION’S TRANSFER AGENT UPON DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED DECLARATION, IN A FORM SATISFACTORY TO THE CORPORATION’S TRANSFER AGENT AND THE CORPORATION TO THE EFFECT THAT THE SALE OF THE SECURITIES REPRESENTED HEREBY IS BEING MADE IN COMPLIANCE WITH RULE 904 OF REGULATION S OF THE U.S. SECURITIES ACT. THE CORPORATION’S TRANSFER AGENT MAY REQUIRE AN OPINION OF COUNSEL, OF RECOGNIZED STANDING IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO IT, IN CONNECTION WITH ANY OFFER, SALE OR TRANSFER OF THE SECURITIES BY THE HOLDER HEREOF”
Section 3.4 Transfer Fees and Taxes.
If any of the Common Shares subscribed for are to be issued to a person or persons other than the Registered Warrantholder, the Registered Warrantholder shall execute the form of transfer and will comply with such reasonable requirements as the Warrant Agent may stipulate and will pay to the Corporation or the Warrant Agent on behalf of the Corporation, all applicable transfer or similar taxes and the Corporation will not be required to issue or deliver certificates evidencing Common Shares unless or until such Warrantholder shall have paid to the Corporation or the Warrant Agent on behalf of the Corporation, the amount of such tax or shall have established to the satisfaction of the Corporation and the Warrant Agent that such tax has been paid or that no tax is due.
Section 3.5 Warrant Agency.
To facilitate the exchange, transfer or exercise of Warrants and compliance with such other terms and conditions hereof as may be required, the Corporation has appointed the Warrant Agency, as the agency at which Warrants may be surrendered for exchange or transfer or at which Warrants may be exercised and the Warrant Agent has accepted such appointment. The Corporation may from time to time designate alternate or additional places as the Warrant Agency (subject to the Warrant Agent’s prior approval) and will give notice to the Warrant Agent of any proposed change of the Warrant Agency. Branch registers shall also be kept at such other place or places, if any, as the Corporation, with the approval of the Warrant Agent, may designate. The Warrant Agent will from time to time when requested to do so by the Corporation or any Registered Warrantholder, upon payment of the Warrant Agent’s reasonable charges (and in the case of a Registered Warrantholder the affidavit required by Section 2.9(1)), furnish a list of the names and addresses of Registered Warrantholders showing the number of Warrants held by each such Registered Warrantholder.
Section 3.6 Effect of Exercise of Warrant Certificates.
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(1)
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Upon the exercise of Warrant Certificates pursuant to and in compliance with Section 3.2 and subject to Section 3.3 and Section 3.4, the Warrant Shares to be issued pursuant to the Warrants exercised shall be deemed to have been issued and the person or persons to whom such Common Shares are to be issued shall be deemed to have become the holder or holders of such Common Shares within five Business Days of the Exercise Date unless the register shall be closed on such date, in which case the Common Shares subscribed for shall be deemed to have been issued and such person or persons deemed to have become the holder or holders of record of such Common Shares, on the date on which such register is reopened. It is hereby understood that in order for persons to whom Common Shares are to be issued, to become holders of Common Shares on record on the Exercise Date, beneficial holders must commence the exercise process sufficiently in advance so that the Warrant Agent is in receipt of all items of exercise at least one Business Day prior to such Exercise Date.
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(2)
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Within five Business Days after the Exercise Date with respect to a Warrant, the Warrant Agent shall use commercially reasonable efforts to cause to be delivered or mailed to the person or persons in whose name or names the Warrant is registered or, if so specified in writing by the holder, cause to be delivered to such person or persons at the Warrant Agency where the Warrant Certificate was surrendered, a certificate or certificates for the appropriate number of Common Shares subscribed for, or any other appropriate evidence of the issuance of Common Shares to such person or persons in respect of Common Shares issued under the book entry registration system.
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Section 3.7 Partial Exercise of Warrants; Fractions.
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(1)
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The holder of any Warrants may exercise its right to acquire a number of whole Common Shares less than the aggregate number which the holder is entitled to acquire. In the event of any exercise of a number of Warrants less than the maximum number that the holder is entitled to exercise, the holder of Warrants upon such exercise shall, in addition, be entitled to receive, without charge therefor, a new Warrant Certificate(s), bearing the same legend, if applicable, or other appropriate evidence of Warrants, in respect of the balance of the Warrants held by such holder and which were not then exercised.
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(2)
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Notwithstanding anything herein contained including any adjustment provided for in Article 4, the Corporation shall not be required, upon the exercise of any Warrants, to issue fractions of Common Shares. Warrants may only be exercised in a sufficient number to acquire whole numbers of Common Shares. Any fractional Common Shares shall be rounded down to the nearest whole number and the holder of such Warrants shall not be entitled to any compensation in respect of any fractional Common Shares which is not issued.
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Section 3.8 Acceleration Right.
In the event that the VWAP at any time following the date of closing of the Offering is equal to or greater than $9.00 for a period of ten (10) consecutive Trading Days, the Corporation shall have the right, but not the obligation, to exercise the Acceleration Right. In the event the Corporation elects to exercise the Acceleration Right, the Corporation shall deliver the Acceleration Notice to the Warrant Agent and the Warrant Agent shall deliver the Acceleration Notice to each of the holders pursuant to Section 10.2. Upon delivery of the Acceleration Notice, Warrantholders shall have the right, but not the obligation, to exercise their Warrants pursuant to the terms set forth herein and in the Warrant Certificates. Effective as of a date that is not less than fifteen (15) Trading Days following the delivery of the Acceleration Notice to the holders pursuant to Section 10.2, all unexercised Warrants shall be terminated and of no further force or effect without any action on the part of the Corporation or the holder. The Acceleration Notice shall also be distributed by press release and an exchange bulletin of the CSE (or other applicable exchange).
Section 3.9 Expiration of Warrants.
Immediately after the Expiry Time, all rights under any Warrant in respect of which the right of acquisition provided for herein shall not have been exercised shall cease and terminate and each Warrant shall be void and of no further force or effect.
Section 3.10 Accounting and Recording.
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(1)
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The Warrant Agent shall promptly account to the Corporation with respect to Warrants exercised, and shall promptly forward to the Corporation (or into an account or accounts of the Corporation with the bank or trust company designated by the Corporation for that purpose), all monies received by the Warrant Agent on the subscription of Common Shares through the exercise of Warrants. All such monies and any securities or other instruments, from time to time received by the Warrant Agent, shall be received in trust for, and shall be segregated and kept apart by the Warrant Agent for the benefit of the Warrantholders and the Corporation as their interests may appear.
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(2)
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The Warrant Agent shall record the particulars of Warrants exercised, which particulars shall include the names and addresses of the persons who become holders of Common Shares on exercise and the Exercise Date, in respect thereof. The Warrant Agent shall provide such particulars in writing to the Corporation within five Business Days of any request by the Corporation therefor.
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Section 3.11 Securities Restrictions.
Notwithstanding anything herein contained, no Common Shares will be issued pursuant to the exercise of any Warrant if the issuance of such Common Shares would constitute a violation of Applicable Securities Laws, and, without limiting the generality of the foregoing, the Corporation will legend the certificates representing the Common Shares issuable upon exercise of any Warrant if, in the opinion of counsel to the Corporation, such legend is necessary in order to avoid a violation of Applicable Securities Laws or to comply with the requirements of any stock exchange on which the Common Shares are listed; provided that if, at any time, in the opinion of outside counsel to the Corporation, acting reasonably, such legends are no longer necessary in order to avoid a violation of any such laws, or the holder of any such legended certificate, at his expense, provides the Corporation and the Corporation’s registrar and transfer agent with evidence satisfactory in form and substance to the Corporation and the Corporation’s registrar and transfer agent (which may include an opinion of counsel of recognized standing satisfactory to the Corporation and the Corporation’s registrar and transfer agent) to the effect that such holder is entitled to sell or otherwise transfer such securities in a transaction in which such legends are not required, such legended certificates may thereafter be surrendered to the Corporation in exchange for a certificate that does not bear such legends.
The Warrant Agent shall be entitled to assume that the Common Shares may be issued pursuant to the exercise of any Warrant without violating any Applicable Securities Laws and without legending the certificate representing the Common Shares unless the Warrant Agent has received notice in writing from the Corporation stating otherwise and setting forth the restrictions on the exercise of the Warrants and any legend the certificates representing the Common Shares should bear.
Article 4
ADJUSTMENT OF NUMBER OF Common ShareS
AND EXERCISE PRICE
Section 4.1 Adjustment of Number of Common Shares and Exercise Price.
The subscription rights in effect under the Warrants for Common Shares issuable upon the exercise of the Warrants shall be subject to adjustment from time to time as follows:
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(a)
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if, at any time during the Adjustment Period, the Corporation shall:
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(i)
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subdivide, re-divide or change its outstanding Common Shares into a greater number of Common Shares;
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(ii)
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reduce, combine or consolidate its outstanding Common Shares into a lesser number of Common Shares; or
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(iii)
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issue Common Shares or securities exchangeable for, or convertible into, Common Shares to all or substantially all of the holders of Common Shares by way of stock dividend or other distribution (other than a distribution of Common Shares upon the exercise of Warrants or any outstanding options);
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(any of such events in Section 4.1(a) (i), (ii) or (iii) being called a “Common Share Reorganization”) then the Exercise Price shall be adjusted as of the effective date of such subdivision, re-division, change, reduction, combination, consolidation or on the record date of such distribution, as the case may be, shall in the case of the events referred to in (i) or (iii) above be decreased in proportion to the number of outstanding Common Shares resulting from such subdivision, re-division, change or distribution, or shall, in the case of the events referred to in (ii) above, be increased in proportion to the number of outstanding Common Shares resulting from such reduction, combination or consolidation by multiplying the Exercise Price in effect immediately prior to such effective date or record date by a fraction, the numerator of which shall be the number of Common Shares outstanding on such effective date or record date before giving effect to such Common Share Reorganization and the denominator of which shall be the number of Common Shares outstanding as of the effective date or record date after giving effect to such Common Share Reorganization (including, in the case where securities exchangeable for or convertible into Common Shares are distributed, the number of Common Share that would have been outstanding had such securities been exchanged for or converted into Common Shares on such record date or effective date). Such adjustment shall be made successively whenever any event referred to in this Section 4.1(a) shall occur. Upon any adjustment of the Exercise Price pursuant to this Section 4.1(a), the Exchange Rate shall be contemporaneously adjusted by multiplying the number of Common Shares theretofore obtainable on the exercise thereof by a fraction of which the numerator shall be the Exercise Price in effect immediately prior to such adjustment and the denominator shall be the Exercise Price resulting from such adjustment;
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(b)
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if and whenever at any time during the Adjustment Period, the Corporation shall fix a record date for the issuance of rights, options or warrants to all or substantially all the holders of its outstanding Common Shares entitling them, for a period expiring not more than 45 days after such record date, to subscribe for or purchase Common Shares (or securities convertible or exchangeable into Common Shares) at a price per Common Share (or having a conversion or exchange price per Common Share) less than 95% of the Current Market Price on such record date (a “Rights Offering”), the Exercise Price shall be adjusted immediately after such record date so that it shall equal the amount determined by multiplying the Exercise Price in effect on such record date by a fraction, of which the numerator shall be the total number of Common Shares outstanding on such record date plus a number of Common Shares equal to the number arrived at by dividing the aggregate price of the total number of additional Common Shares offered for subscription or purchase (or the aggregate conversion or exchange price of the convertible or exchangeable securities so offered) by the Current Market Price, and of which the denominator shall be the total number of Common Shares outstanding on such record date plus the total number of additional Common Shares offered for subscription or purchase or into which the convertible or exchangeable securities so offered are convertible or exchangeable; any Common Shares owned by or held for the account of the Corporation shall be deemed not to be outstanding for the purpose of any such computation; such adjustment shall be made successively whenever such a record date is fixed; to the extent that no such rights or warrants are exercised prior to the expiration thereof, the Exercise Price shall be readjusted to the Exercise Price which would then be in effect if such record date had not been fixed or, if any such rights or warrants are exercised, to the Exercise Price which would then be in effect based upon the number of Common Shares (or securities convertible or exchangeable into Common Shares) actually issued upon the exercise of such rights or warrants, as the case may be. Upon any adjustment of the Exercise Price pursuant to this Section 4.1(b), the Exchange Rate will be adjusted immediately after such record date so that it will equal the rate determined by multiplying the Exchange Rate in effect on such record date by a fraction, of which the numerator shall be the Exercise Price in effect immediately prior to such adjustment and the denominator shall be the Exercise Price resulting from such adjustment. Such adjustment will be made successively whenever such a record date is fixed, provided that if two or more such record dates or record dates referred to in this Section 4.1(b) are fixed within a period of 25 Trading Days, such adjustment will be made successively as if each of such record dates occurred on the earliest of such record dates;
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(c)
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if and whenever at any time during the Adjustment Period the Corporation shall fix a record date for the making of a distribution to all or substantially all the holders of its outstanding Common Shares of (i) securities of any class, whether of the Corporation or any other entity (other than Common Shares), (ii) rights, options or warrants to subscribe for or purchase Common Shares (or other securities convertible into or exchangeable for Common Shares), other than pursuant to a Rights Offering; (iii) evidences of its indebtedness or (iv) any property or other assets then, in each such case, the Exercise Price shall be adjusted immediately after such record date so that it shall equal the price determined by multiplying the Exercise Price in effect on such record date by a fraction, of which the numerator shall be the total number of Common Shares outstanding on such record date multiplied by the Current Market Price on such record date, less the excess, if any, of the fair market value on such record date, as determined by the Corporation (whose determination shall be conclusive), of such securities or other assets so issued or distributed over the fair market value of any consideration received therefor by the Corporation from the holders of the Common Shares, and of which the denominator shall be the total number of Common Shares outstanding on such record date multiplied by the Current Market Price; and Common Shares owned by or held for the account of the Corporation shall be deemed not to be outstanding for the purpose of any such computation; such adjustment shall be made successively whenever such a record date is fixed; to the extent that such distribution is not so made, the Exercise Price shall be readjusted to the Exercise Price which would then be in effect if such record date had not been fixed. Upon any adjustment of the Exercise Price pursuant to this Section 4.1(c), the Exchange Rate will be adjusted immediately after such record date so that it will equal the rate determined by multiplying the Exchange Rate in effect on such record date by a fraction, of which the numerator shall be the Exercise Price in effect immediately prior to such adjustment and the denominator shall be the Exercise Price resulting from such adjustment;
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(d)
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if and whenever at any time during the Adjustment Period, there is a reclassification of the Common Shares or a capital reorganization of the Corporation other than as described in Section 4.1(a) or a consolidation, amalgamation, arrangement or merger of the Corporation with or into any other body corporate, trust, partnership or other entity, or a sale or conveyance of the property and assets of the Corporation as an entirety or substantially as an entirety to any other body corporate, trust, partnership or other entity, any Registered Warrantholder who has not exercised its right of acquisition prior to the effective date of such reclassification, capital reorganization, consolidation, amalgamation, arrangement or merger, sale or conveyance, upon the exercise of such right thereafter, shall be entitled to receive upon payment of the Exercise Price and shall accept, in lieu of the number of Common Shares that prior to such effective date the Registered Warrantholder would have been entitled to receive, the number of shares or other securities or property of the Corporation or of the body corporate, trust, partnership or other entity resulting from such merger, amalgamation or consolidation, or to which such sale or conveyance may be made, as the case may be, that such Registered Warrantholder would have been entitled to receive on such reclassification, capital reorganization, consolidation, amalgamation, arrangement or merger, sale or conveyance, if, on the effective date thereof, as the case may be, the Registered Warrantholder had been the registered holder of the number of Common Shares to which prior to such effective date it was entitled to acquire upon the exercise of the Warrants. If determined appropriate by the Warrant Agent, relying on advice of Counsel, to give effect to or to evidence the provisions of this Section 4.1(d), the Corporation, its successor, or such purchasing body corporate, partnership, trust or other entity, as the case may be, shall, prior to or contemporaneously with any such reclassification, capital reorganization, consolidation, amalgamation, arrangement, merger, sale or conveyance, enter into an indenture which shall provide, to the extent possible, for the application of the provisions set forth in this Indenture with respect to the rights and interests thereafter of the Registered Warrantholders to the end that the provisions set forth in this Indenture shall thereafter correspondingly be made applicable, as nearly as may reasonably be, with respect to any shares, other securities or property to which a Registered Warrantholder is entitled on the exercise of its acquisition rights thereafter. Any indenture entered into between the Corporation and the Warrant Agent pursuant to the provisions of this Section 4.1(d) shall be a supplemental indenture entered into pursuant to the provisions of Article 8 hereof. Any indenture entered into between the Corporation, any successor to the Corporation or such purchasing body corporate, partnership, trust or other entity and the Warrant Agent shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided in this Section 4.1 and which shall apply to successive reclassifications, capital reorganizations, amalgamations, consolidations, mergers, sales or conveyances;
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(e)
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in any case in which this Section 4.1 shall require that an adjustment shall become effective immediately after a record date for an event referred to herein, the Corporation may defer, until the occurrence of such event, issuing to the Registered Warrantholder of any Warrant exercised after the record date and prior to completion of such event the additional Common Shares issuable by reason of the adjustment required by such event before giving effect to such adjustment; provided, however, that the Corporation shall deliver to such Registered Warrantholder an appropriate instrument evidencing such Registered Warrantholder’s right to receive such additional Common Shares upon the occurrence of the event requiring such adjustment and the right to receive any distributions made on such additional Common Shares declared in favour of holders of record of Common Shares on and after the relevant date of exercise or such later date as such Registered Warrantholder would, but for the provisions of this Section 4.1(e), have become the holder of record of such additional Common Shares pursuant to Section 4.1;
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(f)
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in any case in which Section 4.1(a)(iii), Section 4.1(b) or Section 4.1(c) require that an adjustment be made to the Exercise Price, no such adjustment shall be made if the Registered Warrantholders of the outstanding Warrants receive, subject to any required stock exchange or regulatory approval, the rights or warrants referred to in Section 4.1(a)(iii), Section 4.1(b) or the shares, rights, options, warrants, evidences of indebtedness or assets referred to in Section 4.1(c), as the case may be, in such kind and number as they would have received if they had been holders of Common Shares on the applicable record date or effective date, as the case may be, by virtue of their outstanding Warrant having then been exercised into Common Shares at the Exercise Price in effect on the applicable record date or effective date, as the case may be;
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(g)
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the adjustments provided for in this Section 4.1 are cumulative, and shall, in the case of adjustments to the Exercise Price be computed to the nearest whole cent and shall apply to successive subdivisions, re-divisions, reductions, combinations, consolidations, distributions, issues or other events resulting in any adjustment under the provisions of this Section 4.1, provided that, notwithstanding any other provision of this Section, no adjustment of the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Exercise Price then in effect; provided, however, that any adjustments which by reason of this Section 4.1(g) are not required to be made shall be carried forward and taken into account in any subsequent adjustment; and
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(h)
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after any adjustment pursuant to this Section 4.1, the term “Common Shares” where used in this Indenture shall be interpreted to mean securities of any class or classes which, as a result of such adjustment and all prior adjustments pursuant to this Section 4.1, the Registered Warrantholder is entitled to receive upon the exercise of his Warrant, and the number of Common Shares indicated by any exercise made pursuant to a Warrant shall be interpreted to mean the number of Common Shares or other property or securities a Registered Warrantholder is entitled to receive, as a result of such adjustment and all prior adjustments pursuant to this Section 4.1, upon the full exercise of a Warrant.
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Section 4.2 Entitlement to Common Shares on Exercise of Warrant.
All Common Shares or shares of any class or other securities, which a Registered Warrantholder is at the time in question entitled to receive on the exercise of its Warrant, whether or not as a result of adjustments made pursuant to this Article 4, shall, for the purposes of the interpretation of this Indenture, be deemed to be Common Shares which such Registered Warrantholder is entitled to acquire pursuant to such Warrant.
Section 4.3 No Adjustment for Certain Transactions.
Notwithstanding anything in this Article 4, no adjustment shall be made in the acquisition rights attached to the Warrants if the issue of Common Shares is being made pursuant to this Indenture or in connection with (a) any share incentive plan or restricted share plan or share purchase plan in force from time to time for directors, officers, employees, consultants or other service providers of the Corporation; or (b) the satisfaction of existing instruments issued at the date hereof.
Section 4.4 Determination by Independent Firm.
In the event of any question arising with respect to the adjustments provided for in this Article 4 such question shall be conclusively determined by an independent firm of chartered public accountants other than the Auditors, who shall have access to all necessary records of the Corporation, and such determination shall be binding upon the Corporation, the Warrant Agent, all holders and all other persons interested therein.
Section 4.5 Proceedings Prior to any Action Requiring Adjustment.
As a condition precedent to the taking of any action which would require an adjustment in any of the acquisition rights pursuant to any of the Warrants, including the number of Common Shares which are to be received upon the exercise thereof, the Corporation shall take any action which may, in the opinion of Counsel, be necessary in order that the Corporation has unissued and reserved in its authorized capital and may validly and legally issue as fully paid and non-assessable all the Common Shares which the holders of such Warrants are entitled to receive on the full exercise thereof in accordance with the provisions hereof.
Section 4.6 Certificate of Adjustment.
The Corporation shall from time to time immediately after the occurrence of any event which requires an adjustment or readjustment as provided in Section 4.1, deliver a certificate of the Corporation to the Warrant Agent specifying the nature of the event requiring the same and the amount of the adjustment or readjustment necessitated thereby and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based, which certificate may be supported by a certificate of the Corporation’s Auditors verifying such calculation if requested by the Warrant Agent at their discretion. The Warrant Agent shall rely, and shall be protected in so doing, upon the certificate of the Corporation or of the Corporation’s Auditor and any other document filed by the Corporation pursuant to this Article 4 for all purposes.
Section 4.7 Notice of Special Matters.
The Corporation covenants with the Warrant Agent that, so long as any Warrant remains outstanding, it will give notice to the Warrant Agent and to the Registered Warrantholders of its intention to fix a record date that is prior to the Expiry Date for any matter for which an adjustment may be required pursuant to Section 4.1 Such notice shall specify the particulars of such event and the record date for such event, provided that the Corporation shall only be required to specify in the notice such particulars of the event as shall have been fixed and determined on the date on which the notice is given. The notice shall be given in each case not less than 14 days prior to such applicable record date. If notice has been given and the adjustment is not then determinable, the Corporation shall promptly, after the adjustment is determinable, file with the Warrant Agent a computation of the adjustment and give notice to the Registered Warrantholders of such adjustment computation.
Section 4.8 No Action after Notice.
The Corporation covenants with the Warrant Agent that it will not close its transfer books or take any other corporate action which might deprive the Registered Warrantholder of the opportunity to exercise its right of acquisition pursuant thereto during the period of 14 days after the giving of the certificate or notices set forth in Section 4.6 and Section Section 4.7.
Section 4.9 Other Action.
If the Corporation, after the date hereof, shall take any action affecting the Common Shares other than action described in Section 4.1, which in the reasonable opinion of the directors of the Corporation would materially affect the rights of Registered Warrantholders, the Exercise Price and/or Exchange Rate, the number of Common Shares which may be acquired upon exercise of the Warrants shall be adjusted in such manner and at such time, by action of the directors, acting reasonably and in good faith, in their sole discretion as they may determine to be equitable to the Registered Warrantholders in the circumstances, provided that no such adjustment will be made unless any requisite prior approval of any stock exchange on which the Common Shares are listed for trading has been obtained.
Section 4.10 Protection of Warrant Agent.
The Warrant Agent shall not:
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(a)
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at any time be under any duty or responsibility to any Registered Warrantholder to determine whether any facts exist which may require any adjustment contemplated by Section 4.1, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed in making the same;
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(b)
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be accountable with respect to the validity or value (or the kind or amount) of any Common Shares or of any other securities or property which may at any time be issued or delivered upon the exercise of the rights attaching to any Warrant;
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(c)
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be responsible for any failure of the Corporation to issue, transfer or deliver Common Shares or certificates for the same upon the surrender of any Warrants for the purpose of the exercise of such rights or to comply with any of the covenants contained in this Article; and
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(d)
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incur any liability or be in any way responsible for the consequences of any breach on the part of the Corporation of any of the representations, warranties or covenants herein contained or of any acts of the directors, officers, employees, agents or servants of the Corporation.
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Section 4.11 Participation by Warrantholder.
No adjustments shall be made pursuant to this Article 4 if the Registered Warrantholders are entitled to participate in any event described in this Article 4 on the same terms, mutatis mutandis, as if the Registered Warrantholders had exercised their Warrants prior to, or on the effective date or record date of, such event and any such participation will be subject to the prior approval of the CSE.
Article 5
RIGHTS OF THE CORPORATION AND COVENANTS
Section 5.1 Optional Purchases by the Corporation.
Subject to compliance with Applicable Securities Laws and approval of applicable Regulatory Authorities,the Corporation may from time to time purchase by private contract or otherwise any of the Warrants. Any such purchase shall be made at the lowest price or prices at which, in the opinion of the directors of the Corporation, such Warrants are then obtainable, plus reasonable costs of purchase, and may be made in such manner, from such persons and on such other terms as the Corporation, in its sole discretion, may determine. In the case of Certificated Warrants, Warrant Certificates representing the Warrants purchased pursuant to this Section 5.1 shall forthwith be delivered to and cancelled by the Warrant Agent and reflected accordingly on the register of Warrants. In the case of Uncertificated Warrants, the Warrants purchased pursuant to this Section 5.1 shall be reflected accordingly on the register of Warrants and in accordance with procedures prescribed by the Depository under the book entry registration system. No Warrants shall be issued in replacement thereof.
Section 5.2 General Representations, Warranties and Covenants.
The Corporation represents, warrants and covenants with the Warrant Agent for the benefit of the Warrant Agent and the Warrantholders that so long as any Warrants remain outstanding:
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(a)
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it will reserve and keep available a sufficient number of Common Shares for the purpose of enabling it to satisfy its obligations to issue Common Shares upon the exercise of the Warrants;
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(b)
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it will cause the Common Shares from time to time acquired pursuant to the exercise of the Warrants to be duly issued and delivered in accordance with the Warrants and the terms hereof;
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(c)
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all Common Shares which shall be issued upon exercise of the right to acquire provided for herein shall be fully paid and non-assessable, free and clear of all encumbrances;
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(d)
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it will use reasonable commercial efforts to maintain its existence and carry on its business in the ordinary course;
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(e)
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it will use reasonable commercial efforts to ensure that all Common Shares outstanding or issuable from time to time (including without limitation the Common Shares issuable on the exercise of the Warrants) continue to be or are listed and posted for trading on the CSE (or such other Canadian stock exchange acceptable to the Corporation), provided that this clause shall not be construed as limiting or restricting the Corporation from completing a consolidation, amalgamation, arrangement, takeover bid or merger that would result in the Common Shares ceasing to be listed and posted for trading on the CSE, so long as the holders of Common Shares receive securities of an entity which is listed on a stock exchange in Canada, or cash, or the holders of the Common shares have approved the transaction in accordance with the requirements of applicable corporate and securities laws and the policies of the CSE;
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(f)
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it will make all requisite filings under applicable Canadian securities legislation including those necessary to remain a reporting issuer not in default in each of the provinces and other Canadian jurisdictions where it is or becomes a reporting issuer;
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(g)
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the issue of the Warrants and the issue of the Common Shares issuable upon exercise thereof does not and will not, so long as any Warrants remain outstanding, result in any breach by the Corporation of, and does not and will not create a state of facts which, after notice or lapse of time or both, will result in a breach by the Corporation of any Applicable Legislation, and does not and will not conflict with any of the terms, conditions or provisions of the articles, by-laws or resolutions of the Corporation or any trust indenture, loan agreement or any other agreement or instrument to which the Corporation is a party or by which it is contractually bound on the date of this Warrant Indenture;
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(h)
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generally, it will well and truly perform and carry out all of the acts or things to be done by it as provided in this Indenture; and
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(i)
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the Corporation will promptly notify the Warrant Agent and the Warrantholders in writing of any default under the terms of this Warrant Indenture which remains unrectified for more than five days following its occurrence.
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Section 5.3 Warrant Agent’s Remuneration and Expenses.
The Corporation covenants that it will pay to the Warrant Agent from time to time reasonable remuneration for its services hereunder and will pay or reimburse the Warrant Agent upon its request for all reasonable expenses, disbursements and advances incurred or made by the Warrant Agent in the administration or execution of its duties hereby created (including the reasonable compensation and the disbursements of its Counsel and all other advisers and assistants not regularly in its employ) both before any default hereunder and thereafter until all duties of the Warrant Agent hereunder shall be finally and fully performed. Any amount owing hereunder and remaining unpaid after 30 days from the invoice date will bear interest at the then current rate charged by the Warrant Agent against unpaid invoices and shall be payable upon demand. This Section shall survive the resignation or removal of the Warrant Agent and/or the termination of this Indenture.
Section 5.4 Performance of Covenants by Warrant Agent.
If the Corporation shall fail to perform any of its covenants contained in this Indenture, the Warrant Agent may notify the Registered Warrantholders of such failure on the part of the Corporation and may itself perform any of the covenants capable of being performed by it but, subject to Section 9.2, shall be under no obligation to perform said covenants or to notify the Registered Warrantholders of such performance by it. All sums expended or advanced by the Warrant Agent in so doing shall be repayable as provided in Section 5.3. No such performance, expenditure or advance by the Warrant Agent shall relieve the Corporation of any default hereunder or of its continuing obligations under the covenants herein contained.
Section 5.5 Enforceability of Warrants.
The Corporation covenants and agrees that it is duly authorized to create and issue the Warrants to be issued hereunder and that the Warrants, when issued and Authenticated as herein provided, will be valid and enforceable against the Corporation in accordance with the provisions hereof and the terms hereof and that, subject to the provisions of this Indenture, the Corporation will cause the Common Shares from time to time acquired upon exercise of Warrants issued under this Indenture to be duly issued and delivered in accordance with the terms of this Indenture.
Article 6
ENFORCEMENT
Section 6.1 Suits by Registered Warrantholders.
All or any of the rights conferred upon any Registered Warrantholder by any of the terms of this Indenture may be enforced by the Registered Warrantholder by appropriate proceedings but without prejudice to the right which is hereby conferred upon the Warrant Agent to proceed in its own name to enforce each and all of the provisions herein contained for the benefit of the Registered Warrantholders.
Section 6.2 Suits by the Corporation.
The Corporation shall have the right to enforce full payment of the Exercise Price of all Common Shares issued by the Warrant Agent to a Registered Warrantholder hereunder and shall be entitled to demand such payment from the Registered Warrantholder or alternatively to instruct the Warrant Agent to cancel the share certificates representing such Common Shares and amend the securities register of the Corporation accordingly.
Section 6.3 Immunity of Shareholders, etc.
The Warrant Agent and the Warrantholders hereby waive and release any right, cause of action or remedy now or hereafter existing in any jurisdiction against any incorporator or any past, present or future shareholder, trustee, employee or agent of the Corporation or any successor entity on any covenant, agreement, representation or warranty by the Corporation herein.
Section 6.4 Waiver of Default.
Upon the happening of any default hereunder:
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(a)
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the Registered Warrantholders of not less than 51% of the Warrants then outstanding shall have power (in addition to the powers exercisable by Extraordinary Resolution) by requisition in writing to instruct the Warrant Agent to waive any default hereunder and the Warrant Agent shall thereupon waive the default upon such terms and conditions as shall be prescribed in such requisition; or
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(b)
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the Warrant Agent shall have power to waive any default hereunder upon such terms and conditions as the Warrant Agent may deem advisable, on the advice of Counsel, if, in the Warrant Agent’s opinion, based on the advice of Counsel, the same shall have been cured or adequate provision made therefor;
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provided that no delay or omission of the Warrant Agent or of the Registered Warrantholders to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or acquiescence therein and provided further that no act or omission either of the Warrant Agent or of the Registered Warrantholders in the premises shall extend to or be taken in any manner whatsoever to affect any subsequent default hereunder of the rights resulting therefrom.
Article 7
MEETINGS OF REGISTERED WARRANTHOLDERS
Section 7.1 Right to Convene Meetings.
The Warrant Agent may at any time and from time to time, and shall on receipt of a written request of the Corporation or of a Warrantholders’ Request and upon being indemnified and funded to its reasonable satisfaction by the Corporation or by the Registered Warrantholders signing such Warrantholders’ Request against the costs which may be incurred in connection with the calling and holding of such meeting, convene a meeting of the Registered Warrantholders. If the Warrant Agent fails to so call a meeting within seven days after receipt of such written request of the Corporation or within 30 days after receipt of such Warrantholders’ Request and the indemnity and funding given as aforesaid, the Corporation or such Registered Warrantholders, as the case may be, may convene such meeting. Every such meeting shall be held in the City of Toronto, Ontario or at such other place as may be approved or determined by the Warrant Agent and the Corporation.
Section 7.2 Notice.
At least 21 days’ prior written notice of any meeting of Registered Warrantholders shall be given to the Registered Warrantholders in the manner provided for in Section 10.2 and a copy of such notice shall be sent by mail to the Warrant Agent (unless the meeting has been called by the Warrant Agent) and to the Corporation (unless the meeting has been called by the Corporation). Such notice shall state the time when and the place where the meeting is to be held, shall state briefly the general nature of the business to be transacted thereat and shall contain such information as is reasonably necessary to enable the Registered Warrantholders to make a reasoned decision on the matter, but it shall not be necessary for any such notice to set out the terms of any resolution to be proposed or any of the provisions of this Section 7.2.
Section 7.3 Chairman.
An individual (who need not be a Registered Warrantholder) designated in writing by the Warrant Agent shall be chairman of the meeting and if no individual is so designated, or if the individual so designated is not present within fifteen minutes from the time fixed for the holding of the meeting, the Registered Warrantholders present in person or by proxy shall choose an individual present to be chairman.
Section 7.4 Quorum.
Subject to the provisions of Section 7.11, at any meeting of the Registered Warrantholders a quorum shall consist of Registered Warrantholder(s) present in person or by proxy and entitled to purchase at least 20% of the aggregate number of Common Shares which may be acquired pursuant to all the then outstanding Warrants. If a quorum of the Registered Warrantholders shall not be present within thirty minutes from the time fixed for holding any meeting, the meeting, if summoned by Registered Warrantholders or on a Warrantholders’ Request, shall be dissolved; but in any other case the meeting shall be adjourned to the same day in the next week (unless such day is not a Business Day, in which case it shall be adjourned to the next following Business Day) at the same time and place and no notice of the adjournment need be given. Any business may be brought before or dealt with at an adjourned meeting which might have been dealt with at the original meeting in accordance with the notice calling the same. No business shall be transacted at any meeting unless a quorum be present at the commencement of business. At the adjourned meeting the Registered Warrantholders present in person or by proxy shall form a quorum and may transact the business for which the meeting was originally convened, notwithstanding that they may not be entitled to acquire at least 20% of the aggregate number of Common Shares which may be acquired pursuant to all then outstanding Warrants.
Section 7.5 Power to Adjourn.
The chairman of any meeting at which a quorum of the Registered Warrantholders is present may, with the consent of the meeting, adjourn any such meeting, and no notice of such adjournment need be given except such notice, if any, as the meeting may prescribe.
Section 7.6 Show of Hands.
Every question submitted to a meeting shall be decided in the first place by a majority of the votes given on a show of hands except that votes on an Extraordinary Resolution shall be given in the manner hereinafter provided. At any such meeting, unless a poll is duly demanded as herein provided, a declaration by the chairman that a resolution has been carried or carried unanimously or by a particular majority or lost or not carried by a particular majority shall be conclusive evidence of the fact.
Section 7.7 Poll and Voting.
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(1)
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On every Extraordinary Resolution, and on any other question submitted to a meeting and after a vote by show of hands when demanded by the chairman or by one or more of the Registered Warrantholders acting in person or by proxy and entitled to acquire in the aggregate at least 5% of the aggregate number of Common Shares which may be acquired pursuant to all the Warrants then outstanding, a poll shall be taken in such manner as the chairman shall direct. Questions other than those required to be determined by Extraordinary Resolution shall be decided by a majority of the votes cast on the poll.
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(2)
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On a show of hands, every person who is present and entitled to vote, whether as a Registered Warrantholder or as proxy for one or more absent Registered Warrantholders, or both, shall have one vote. On a poll, each Registered Warrantholder present in person or represented by a proxy duly appointed by instrument in writing shall be entitled to one vote in respect of each Warrant then held or represented by it. A proxy need not be a Registered Warrantholder. The chairman of any meeting shall be entitled, both on a show of hands and on a poll, to vote in respect of the Warrants, if any, held or represented by the chairman.
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Section 7.8 Regulations.
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(1)
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The Warrant Agent, or the Corporation with the approval of the Warrant Agent, may from time to time make and from time to time vary such regulations as it shall think fit for the setting of the record date for a meeting for the purpose of determining Registered Warrantholders entitled to receive notice of and to vote at the meeting.
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(2)
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Any regulations so made shall be binding and effective and the votes given in accordance therewith shall be valid and shall be counted. Save as such regulations may provide, the only persons who shall be recognized at any meeting as a Registered Warrantholder, or be entitled to vote or be present at the meeting in respect thereof (subject to Section 7.9), shall be Registered Warrantholders or proxies of Registered Warrantholders.
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Section 7.9 Corporation and Warrant Agent May be Represented.
The Corporation and the Warrant Agent, by their respective directors, officers, agents, and employees and the Counsel for the Corporation and for the Warrant Agent may attend any meeting of the Registered Warrantholders.
Section 7.10 Powers Exercisable by Extraordinary Resolution.
In addition to all other powers conferred upon them by any other provisions of this Indenture or by law, the Registered Warrantholders at a meeting shall, subject to the provisions of Section 7.11, have the power exercisable from time to time by Extraordinary Resolution:
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(a)
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to agree to any modification, abrogation, alteration, compromise or arrangement of the rights of Registered Warrantholders or the Warrant Agent in its capacity as warrant agent hereunder (subject to the Warrant Agent’s prior consent, acting reasonably) or on behalf of the Registered Warrantholders against the Corporation whether such rights arise under this Indenture or otherwise;
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(b)
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to amend, alter or repeal any Extraordinary Resolution previously passed or sanctioned by the Registered Warrantholders;
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(c)
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to direct or to authorize the Warrant Agent, subject to Section 9.2(2) hereof, to enforce any of the covenants on the part of the Corporation contained in this Indenture or to enforce any of the rights of the Registered Warrantholders in any manner specified in such Extraordinary Resolution or to refrain from enforcing any such covenant or right;
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(d)
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to waive, and to direct the Warrant Agent to waive, any default on the part of the Corporation in complying with any provisions of this Indenture either unconditionally or upon any conditions specified in such Extraordinary Resolution;
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(e)
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to restrain any Registered Warrantholder from taking or instituting any suit, action or proceeding against the Corporation for the enforcement of any of the covenants on the part of the Corporation in this Indenture or to enforce any of the rights of the Registered Warrantholders;
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(f)
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to direct any Registered Warrantholder who, as such, has brought any suit, action or proceeding to stay or to discontinue or otherwise to deal with the same upon payment of the costs, charges and expenses reasonably and properly incurred by such Registered Warrantholder in connection therewith;
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(g)
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to assent to any change in or omission from the provisions contained in this Indenture or any ancillary or supplemental instrument which may be agreed to by the Corporation, and to authorize the Warrant Agent to concur in and execute any ancillary or supplemental indenture embodying the change or omission;
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(h)
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with the consent of the Corporation, such consent not to be unreasonably withheld, to remove the Warrant Agent or its successor in office and to appoint a new warrant agent or warrant agents to take the place of the Warrant Agent so removed; and
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(i)
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to assent to any compromise or arrangement with any creditor or creditors or any class or classes of creditors, whether secured or otherwise, and with holders of any shares or other securities of the Corporation.
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Section 7.11 Meaning of Extraordinary Resolution.
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(1)
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The expression “Extraordinary Resolution” when used in this Indenture means, subject as hereinafter provided in this Section 7.11 and in Section 7.14, a resolution either: (i) passed at a meeting of the holders of Warrants at which there are holders of Warrants present in person or represented by proxy representing at least 20% of the aggregate number of the then outstanding Warrants (unless such meeting is adjourned to a prescribed later date due to the lack of quorum) and passed by the affirmative vote of not less than 662/3% of the aggregate number of all the then outstanding Warrants represented at the meeting; or (ii) adopted by an instrument in writing signed by the holders of Warrants representing not less than 662/3% of the aggregate number of all the then outstanding Warrants.
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(2)
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If, at the meeting at which an Extraordinary Resolution is to be considered, Registered Warrantholders holding at least 20% of the aggregate number of the then outstanding Warrants are not present in person or by proxy within 30 minutes after the time appointed for the meeting, then the meeting, if convened by Registered Warrantholders or on a Warrantholders’ Request, shall be dissolved; but in any other case it shall stand adjourned to such day, being not less than 15 or more than 60 days later, and to such place and time as may be appointed by the chairman. Not less than 14 days’ prior notice shall be given of the time and place of such adjourned meeting in the manner provided for in Section 10.2. Such notice shall state that at the adjourned meeting the Registered Warrantholders present in person or by proxy shall form a quorum but it shall not be necessary to set forth the purposes for which the meeting was originally called or any other particulars. At the adjourned meeting the Registered Warrantholders present in person or by proxy shall form a quorum and may transact the business for which the meeting was originally convened and a resolution proposed at such adjourned meeting and passed by the requisite vote as provided in Section 7.11(1) shall be an Extraordinary Resolution within the meaning of this Indenture notwithstanding that Registered Warrantholders entitled to acquire at least 20% of the aggregate number of the then outstanding Warrants are not present in person or by proxy at such adjourned meeting.
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(3)
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Subject to Section 7.14, votes on an Extraordinary Resolution shall always be given on a poll and no demand for a poll on an Extraordinary Resolution shall be necessary.
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Section 7.12 Powers Cumulative.
Any one or more of the powers or any combination of the powers in this Indenture stated to be exercisable by the Registered Warrantholders by Extraordinary Resolution or otherwise may be exercised from time to time and the exercise of any one or more of such powers or any combination of powers from time to time shall not be deemed to exhaust the right of the Registered Warrantholders to exercise such power or powers or combination of powers then or thereafter from time to time.
Section 7.13 Minutes.
Minutes of all resolutions and proceedings at every meeting of Registered Warrantholders shall be made and duly recorded in the books and such minutes as aforesaid, if signed by the chairman or the secretary of the meeting at which such resolutions were passed or proceedings had shall be prima facie evidence of the matters therein stated and, until the contrary is proved, every such meeting in respect of the proceedings of which minutes shall have been made shall be deemed to have been duly convened and held, and all resolutions passed thereat or proceedings taken shall be deemed to have been duly passed and taken.
Section 7.14 Instruments in Writing.
All actions which may be taken and all powers that may be exercised by the Registered Warrantholders at a meeting held as provided in this Article 7 may also be taken and exercised by Registered Warrantholders holding at least 66 2/3% of the aggregate number of the then outstanding Warrants by an instrument in writing signed in one or more counterparts by such Registered Warrantholders in person or by attorney duly appointed in writing, and the expression “Extraordinary Resolution” when used in this Indenture shall include an instrument so signed.
Section 7.15 Binding Effect of Resolutions.
Every resolution and every Extraordinary Resolution passed in accordance with the provisions of this Article 7 at a meeting of Registered Warrantholders shall be binding upon all the Warrantholders, whether present at or absent from such meeting, and every instrument in writing signed by Registered Warrantholders in accordance with Section 7.14 shall be binding upon all the Warrantholders, whether signatories thereto or not, and each and every Warrantholder and the Warrant Agent (subject to the provisions for indemnity herein contained) shall be bound to give effect accordingly to every such resolution and instrument in writing.
Section 7.16 Holdings by Corporation Disregarded.
In determining whether Registered Warrantholders holding Warrants evidencing the entitlement to acquire the required number of Common Shares are present at a meeting of Registered Warrantholders for the purpose of determining a quorum or have concurred in any consent, waiver, Extraordinary Resolution, Warrantholders’ Request or other action under this Indenture, Warrants owned legally or beneficially by the Corporation shall be disregarded in accordance with the provisions of Section 10.7.
Article 8
SUPPLEMENTAL INDENTURES
Section 8.1 Provision for Supplemental Indentures for Certain Purposes.
From time to time, the Corporation (when authorized by action of the directors of the Corporation) and the Warrant Agent may, subject to the provisions hereof and subject to the prior approval of the CSE, as need be, and they shall, when so directed in accordance with the provisions hereof, execute and deliver by their proper officers, indentures or instruments supplemental hereto, which thereafter shall form part hereof, for any one or more or all of the following purposes:
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(a)
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setting forth any adjustments resulting from the application of the provisions of Article 4;
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(b)
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adding to the provisions hereof such additional covenants and enforcement provisions as, in the opinion of Counsel, are necessary or advisable in the premises, provided that the same are not in the opinion of the Warrant Agent, relying on the advice of Counsel, prejudicial to the interests of the Registered Warrantholders;
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(c)
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giving effect to any Extraordinary Resolution passed as provided in Section 7.11;
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(d)
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making such provisions not inconsistent with this Indenture as may be necessary or desirable with respect to matters or questions arising hereunder or for the purpose of obtaining a listing or quotation of the Warrants on any stock exchange or quotation system, provided that such provisions are not, in the opinion of the Warrant Agent, relying on the advice of Counsel, prejudicial to the interests of the Registered Warrantholders;
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(e)
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adding to or altering the provisions hereof in respect of the transfer of Warrants, making provision for the exchange of Warrants, and making any modification in the form of the Warrant Certificates which does not affect the substance thereof;
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(f)
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modifying any of the provisions of this Indenture, including relieving the Corporation from any of the obligations, conditions or restrictions herein contained, provided that such modification or relief shall be or become operative or effective only if, in the opinion of the Warrant Agent, relying on the advice of Counsel, such modification or relief in no way prejudices any of the rights of the Registered Warrantholders or of the Warrant Agent, and provided further that the Warrant Agent may in its sole discretion decline to enter into any such supplemental indenture which in its opinion may not afford adequate protection to the Warrant Agent when the same shall become operative;
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(g)
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providing for the issuance of additional Warrants hereunder, including Warrants in excess of the number set out in Section 2.1 and any consequential amendments hereto as may be required by the Warrant Agent relying on the advice of Counsel; and
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(h)
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for any other purpose not inconsistent with the terms of this Indenture, including the correction or rectification of any ambiguities, defective or inconsistent provisions, errors, mistakes or omissions herein, provided that in the opinion of the Warrant Agent, relying on the advice of Counsel, the rights of the Warrant Agent and of the Registered Warrantholders are in no way prejudiced thereby.
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Section 8.2 Successor Entities.
In the case of the consolidation, amalgamation, arrangement, merger or transfer of the undertaking or assets of the Corporation as an entirety or substantially as an entirety to or with another entity (“successor entity”), the successor entity resulting from such consolidation, amalgamation, arrangement, merger or transfer (if not the Corporation) shall expressly assume, by supplemental indenture satisfactory in form to the Warrant Agent and executed and delivered to the Warrant Agent, the due and punctual performance and observance of each and every covenant and condition of this Indenture to be performed and observed by the Corporation.
Article 9
CONCERNING THE WARRANT Agent
Section 9.1 Trust Indenture Legislation.
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(1)
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If and to the extent that any provision of this Indenture limits, qualifies or conflicts with a mandatory requirement of Applicable Legislation, such mandatory requirement shall prevail.
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(2)
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The Corporation and the Warrant Agent agree that each will, at all times in relation to this Indenture and any action to be taken hereunder, observe and comply with and be entitled to the benefits of Applicable Legislation.
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Section 9.2 Rights and Duties of Warrant Agent.
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(1)
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In the exercise of the rights and duties prescribed or conferred by the terms of this Indenture, the Warrant Agent shall exercise that degree of care, diligence and skill that a reasonably prudent warrant agent would exercise in comparable circumstances. No provision of this Indenture shall be construed to relieve the Warrant Agent from liability for its own gross negligence, wilful misconduct, bad faith or fraud under this Indenture.
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(2)
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The obligation of the Warrant Agent to commence or continue any act, action or proceeding for the purpose of enforcing any rights of the Warrant Agent or the Registered Warrantholders hereunder shall be conditional upon the Registered Warrantholders furnishing, when required by notice by the Warrant Agent, sufficient funds to commence or to continue such act, action or proceeding and an indemnity reasonably satisfactory to the Warrant Agent to protect and to hold harmless the Warrant Agent and its officers, directors, employees and agents, against the costs, charges and expenses and liabilities to be incurred thereby and any loss and damage it may suffer by reason thereof. None of the provisions contained in this Indenture shall require the Warrant Agent to expend or to risk its own funds or otherwise to incur financial liability in the performance of any of its duties or in the exercise of any of its rights or powers unless indemnified and funded as aforesaid.
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(3)
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The Warrant Agent may, before commencing or at any time during the continuance of any such act, action or proceeding, require the Registered Warrantholders, at whose instance it is acting to deposit with the Warrant Agent the Warrants Certificates held by them, for which Warrants the Warrant Agent shall issue receipts.
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(4)
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Every provision of this Indenture that by its terms relieves the Warrant Agent of liability or entitles it to rely upon any evidence submitted to it is subject to the provisions of Applicable Legislation.
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Section 9.3 Evidence, Experts and Advisers.
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(1)
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In addition to the reports, certificates, opinions and other evidence required by this Indenture, the Corporation shall furnish to the Warrant Agent such additional evidence of compliance with any provision hereof, and in such form, as may be prescribed by Applicable Legislation or as the Warrant Agent may reasonably require by written notice to the Corporation.
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(2)
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In the exercise of its rights and duties hereunder, the Warrant Agent may, if it is acting in good faith, rely as to the truth of the statements and the accuracy of the opinions expressed in statutory declarations, opinions, reports, written requests, consents, or orders of the Corporation, certificates of the Corporation or other evidence furnished to the Warrant Agent pursuant to a request of the Warrant Agent, provided that such evidence complies with Applicable Legislation and that the Warrant Agent complies with Applicable Legislation and that the Warrant Agent examines the same and determines that such evidence complies with the applicable requirements of this Indenture.
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(3)
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Whenever it is provided in this Indenture or under Applicable Legislation that the Corporation shall deposit with the Warrant Agent resolutions, certificates, reports, opinions, requests, orders or other documents, it is intended that the truth, accuracy and good faith on the effective date thereof and the facts and opinions stated in all such documents so deposited shall, in each and every such case, be conditions precedent to the right of the Corporation to have the Warrant Agent take the action to be based thereon.
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(4)
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The Warrant Agent may employ or retain such Counsel, accountants, appraisers or other experts or advisers as it may reasonably require for the purpose of discharging its duties hereunder and may pay reasonable remuneration for all services so performed by any of them, without taxation of costs of any Counsel, and shall not be responsible for any misconduct or negligence on the part of any such experts or advisers who have been appointed with due care by the Warrant Agent.
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(5)
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The Warrant Agent may act and rely and shall be protected in acting and relying in good faith on the opinion or advice of or information obtained from any Counsel, accountant, appraiser, engineer or other expert or adviser, whether retained or employed by the Corporation or by the Warrant Agent, in relation to any matter arising in the administration of the agency hereof.
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Section 9.4 Documents, Monies, etc. Held by Warrant Agent.
Until released in accordance with this Indenture, any funds received hereunder shall be kept in segregated records of the Warrant Agent and the Warrant Agent shall place the funds in segregated trust accounts of the Warrant Agent at one or more of the Canadian Chartered Banks listed in Schedule 1 of the Bank Act (Canada) (“Approved Bank”). All amounts held by the Warrant Agent pursuant to this Agreement shall be held by the Warrant Agent for the Corporation and the delivery of the funds to the Warrant Agent shall not give rise to a debtor-creditor or other similar relationship. The amounts held by the Warrant Agent pursuant to this Agreement are at the sole risk of the Corporation and, without limiting the generality of the foregoing, the Warrant Agent shall have no responsibility or liability for any diminution of the funds which may result from any deposit made with an Approved Bank pursuant to this section, including any losses resulting from a default by the Approved Bank or other credit losses (whether or not resulting from such a default). The parties hereto acknowledge and agree that the Warrant Agent will have acted prudently in depositing the funds at any Approved Bank, and that the Warrant Agent is not required to make any further inquiries in respect of any such bank. The Warrant Agent may hold cash balances constituting part or all of such monies and need not, invest the same; the Warrant Agent shall not be liable to account for any profit to any parties to this Indenture or to any other person or entity.
Section 9.5 Actions by Warrant Agent to Protect Interest.
The Warrant Agent shall have power to institute and to maintain such actions and proceedings as it may consider necessary or expedient to preserve, protect or enforce its interests and the interests of the Registered Warrantholders.
Section 9.6 Warrant Agent Not Required to Give Security.
The Warrant Agent shall not be required to give any bond or security in respect of the execution of the agency and powers of this Indenture or otherwise in respect of the premises.
Section 9.7 Protection of Warrant Agent.
By way of supplement to the provisions of any law for the time being relating to the Warrant Agent it is expressly declared and agreed as follows:
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(a)
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the Warrant Agent shall not be liable for or by reason of any statements of fact or recitals in this Indenture or in the Warrant Certificates (except the representation contained in Section 9.9 or in the Authentication of the Warrant Agent on the Warrant Certificates) or be required to verify the same, but all such statements or recitals are and shall be deemed to be made by the Corporation;
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(b)
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nothing herein contained shall impose any obligation on the Warrant Agent to see to or to require evidence of the registration or filing (or renewal thereof) of this Indenture or any instrument ancillary or supplemental hereto;
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(c)
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the Warrant Agent shall not be bound to give notice to any person or persons of the execution hereof;
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(d)
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the Warrant Agent shall not incur any liability or responsibility whatever or be in any way responsible for the consequence of any breach on the part of the Corporation of any of its covenants herein contained or of any acts of any directors, officers, employees, agents or servants of the Corporation;
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(e)
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the Corporation hereby indemnifies and agrees to hold harmless the Warrant Agent, its affiliates, their officers, directors, employees, agents, successors and assigns (the “Indemnified Parties”) from and against any and all liabilities whatsoever, losses, damages, penalties, claims, demands, actions, suits, proceedings, costs, charges, assessments, judgments, expenses and disbursements, including reasonable legal fees and disbursements of whatever kind and nature which may at any time be imposed on or incurred by or asserted against the Indemnified Parties, or any of them, whether at law or in equity, in any way caused by or arising, directly or indirectly, in respect of any act, deed, matter or thing whatsoever made, done, acquiesced in or omitted in or about or in relation to the execution of the Indemnified Parties’ duties, or any other services that Warrant Agent may provide in connection with or in any way relating to this Indenture. The Corporation agrees that its liability hereunder shall be absolute and unconditional regardless of the correctness of any representations of any third parties and regardless of any liability of third parties to the Indemnified Parties, and shall accrue and become enforceable without prior demand or any other precedent action or proceeding; provided that the Corporation shall not be required to indemnify the Indemnified Parties in the event of the gross negligence or wilful misconduct of the Warrant Agent, and this provision shall survive the resignation or removal of the Warrant Agent or the termination or discharge of this Indenture; and
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(f)
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notwithstanding the foregoing or any other provision of this Indenture, any liability of the Warrant Agent shall be limited, in the aggregate, to the amount of annual retainer fees paid by the Corporation to the Warrant Agent under this Indenture in the twelve (12) months immediately prior to the Warrant Agent receiving the first notice of the claim. Notwithstanding any other provision of this Indenture, and whether such losses or damages are foreseeable or unforeseeable, the Warrant Agent shall not be liable under any circumstances whatsoever for any (a) breach by any other party of securities law or other rule of any securities Regulatory Authority, (b) lost profits or (c) special, indirect, incidental, consequential, exemplary, aggravated or punitive losses or damages.
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Section 9.8 Replacement of Warrant Agent; Successor by Merger.
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(1)
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The
Warrant Agent may resign its agency and be discharged from all further duties and liabilities hereunder, subject to this
Section 9.8, by giving to the Corporation not less than 60 days’ prior notice in writing or such shorter prior notice
as the Corporation may accept as sufficient. The Registered Warrantholders by Extraordinary Resolution and with the consent
of the Corporation (such consent not to be unreasonably withheld) shall have power at any time to remove the existing Warrant
Agent and to appoint a new warrant agent. In the event of the Warrant Agent resigning or being removed as aforesaid or being
dissolved, becoming bankrupt, going into liquidation or otherwise becoming incapable of acting hereunder, the Corporation
shall forthwith appoint a new warrant agent unless a new warrant agent has already been appointed by the Registered
Warrantholders; failing such appointment by the Corporation, the retiring Warrant Agent or any Registered Warrantholder may
apply to a judge of the Province of Ontario on such notice as such judge may direct, for the appointment of a new
warrant agent; but any new warrant agent so appointed by the Corporation or by the Court shall be subject to removal as
aforesaid by the Registered Warrantholders. Any new warrant agent appointed under any provision of this Section 9.8 shall be
an entity authorized to carry on the business of a trust company in the Province of Ontario and, if required by the
Applicable Legislation for any other provinces, in such other provinces. On any such appointment the new warrant agent shall
be vested with the same powers, rights, duties and responsibilities as if it had been originally named herein as Warrant
Agent hereunder.
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(2)
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Upon the appointment of a successor warrant agent, the Corporation shall promptly notify the Registered Warrantholders thereof in the manner provided for in Section 10.2.
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(3)
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Any Warrant Certificates Authenticated but not delivered by a predecessor warrant agent may be Authenticated by the successor warrant agent in the name of the successor warrant agent.
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(4)
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Any corporation into which the Warrant Agent may be merged or consolidated or amalgamated, or any corporation resulting therefrom to which the Warrant Agent shall be a party, or any corporation succeeding to substantially the corporate trust business of the Warrant Agent shall be the successor to the Warrant Agent hereunder without any further act on its part or any of the parties hereto, provided that such corporation would be eligible for appointment as successor Warrant Agent under Section 9.8(1).
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Section 9.9 Acceptance of Agency
The Warrant Agent hereby accepts the agency in this Indenture declared and provided for and agrees to perform the same upon the terms and conditions herein set forth.
Section 9.10 Warrant Agent Not to be Appointed Receiver.
The Warrant Agent and any person related to the Warrant Agent shall not be appointed a receiver, a receiver and manager or liquidator of all or any part of the assets or undertaking of the Corporation.
Section 9.11 Warrant Agent Not Required to Give Notice of Default.
The Warrant Agent shall not be bound to give any notice or do or take any act, action or proceeding by virtue of the powers conferred on it hereby unless and until it shall have been required so to do under the terms hereof; nor shall the Warrant Agent be required to take notice of any default hereunder, unless and until notified in writing of such default, which notice shall distinctly specify the default desired to be brought to the attention of the Warrant Agent and the Warrant Agent shall promptly provide the Warrantholders with any such notice and in the absence of any such notice the Warrant Agent may for all purposes of this Indenture conclusively assume that no default has been made in the observance or performance of any of the representations, warranties, covenants, agreements or conditions contained herein. Any such notice shall in no way limit any discretion herein given to the Warrant Agent to determine whether or not the Warrant Agent shall take action with respect to any default.
Section 9.12 Anti-Money Laundering.
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(1)
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Each party to this Indenture other than the Warrant Agent hereby represents to the Warrant Agent that any account to be opened by, or interest to be held by the Warrant Agent in connection with this Indenture, for or to the credit of such party, either (i) is not intended to be used by or on behalf of any third party; or (ii) is intended to be used by or on behalf of a third party, in which case such party hereto agrees to complete and execute forthwith a declaration in the Warrant Agent’s prescribed form as to the particulars of such third party.
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(2)
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The Warrant Agent shall retain the right not to act and shall not be liable for refusing to act if, due to a lack of information or for any other reason whatsoever, the Warrant Agent, in its sole judgment, determines that such act might cause it to be in non-compliance with any applicable anti-money laundering, anti-terrorist or economic sanctions legislation, regulation or guideline. Further, should the Warrant Agent, in its sole judgment, determine at any time that its acting under this Indenture has resulted in its being in non-compliance with any applicable anti-money laundering, anti-terrorist or economic sanctions legislation, regulation or guideline, then it shall have the right to resign on ten (10) days written notice to the other parties to this Indenture, provided (i) that the Warrant Agent’s written notice shall describe the circumstances of such non-compliance; and (ii) that if such circumstances are rectified to the Warrant Agent’s satisfaction within such ten (10) day period, then such resignation shall not be effective.
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Section 9.13 Compliance with Privacy Code.
The parties acknowledge that the Warrant Agent may, in the course of providing services hereunder, collect or receive financial and other personal information about such parties and/or their representatives, as individuals, or about other individuals related to the subject matter hereof, and use such information for the following purposes:
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(a)
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to provide the services required under this Indenture and other services that may be requested from time to time;
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(b)
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to help the Warrant Agent manage its servicing relationships with such individuals;
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(c)
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to meet the Warrant Agent’s legal and regulatory requirements; and
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(d)
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if Social Insurance Numbers are collected by the Warrant Agent, to perform tax reporting and to assist in verification of an individual’s identity for security purposes.
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Each party acknowledges
and agrees that the Warrant Agent may receive, collect, use and disclose personal information provided to it or acquired by it
in the course of its acting as agent hereunder for the purposes described above and, generally, in the manner and on the terms
described in its privacy code, which the Warrant Agent shall make available on its website, www.computershare.com, or upon
request, including revisions thereto. The Warrant Agent may transfer personal information to other companies in or outside of
Canada that provide data processing and storage or other support in order to facilitate the services it provides.
Further, each party agrees that it shall not provide or cause to be provided to the Warrant Agent any personal information relating to an individual who is not a party to this Indenture unless that party has assured itself that such individual understands and has consented to the aforementioned uses and disclosures.
Section 9.14 Securities Exchange Commission Certification.
The Corporation confirms that as at the date of execution of this Agreement it does not have a class of securities registered pursuant to Section 12 of the U.S. Exchange Act or have a reporting obligation pursuant to Section 15(d) of the U.S. Exchange Act
The Corporation covenants that in the event that (i) any class of its securities shall become registered pursuant to Section 12 of the U.S. Exchange Act or Corporation shall incur a reporting obligation pursuant to Section 15(d) of the U.S. Exchange Act, or (ii) any such registration or reporting obligation shall be terminated by the Corporation in accordance with the U.S. Exchange Act, the Corporation shall promptly deliver to the Warrant Agent an officers’ certificate (in a form provided by the Warrant Agent notifying the Warrant Agent of such registration or termination and such other information as the Warrant Agent may require at the time. The Corporation acknowledges that the Warrant Agent is relying upon the foregoing representation and covenants in order to meet certain United States Securities and Exchange Commission (“SEC”) obligations with respect to those clients who are filing with the SEC.
Article 10
GENERAL
Section 10.1 Notice to the Corporation and the Warrant Agent.
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(1)
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Unless herein otherwise expressly provided, any notice to be given hereunder to the Corporation or the Warrant Agent shall be deemed to be validly given if delivered, sent by registered letter, postage prepaid or if faxed or emailed:
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(a)
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If to the Corporation:
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Field Trip Health
Ltd.
30 Duncan Street,
Suite 201
Toronto, ON M5V 2C3
Attention: Donna Wong, Chief Financial Officer
Email
Address: [Redacted]
With
a copy to:
Bennett
Jones LLP
3400 One
First Canadian Place
P.O. Box
130
Toronto,
ON M5X 1A 4
Attention:
Aaron Sonshine
Email Address: [Redacted]
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(b)
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If to the Warrant Agent:
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Computershare Trust Company of Canada
800, 324-8th Avenue SW
Calgary, AB T2P 2Z2
Attention:
Manager, Corporate Trust
Email Address:
[Redacted]
and any such notice delivered in accordance with the foregoing shall be deemed to have been received and given on the date of delivery or, if mailed, on the fifth Business Day following the date of mailing such notice or, if faxed or emailed, on the next Business Day following the date of transmission.
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(2)
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The Corporation or the Warrant Agent, as the case may be, may from time to time notify the other in the manner provided in Section 10.1(1) of a change of address which, from the effective date of such notice and until changed by like notice, shall be the address of the Corporation or the Warrant Agent, as the case may be, for all purposes of this Indenture.
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(3)
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If, by reason of a strike, lockout or other work stoppage, actual or threatened, involving postal employees, any notice to be given to the Warrant Agent or to the Corporation hereunder could reasonably be considered unlikely to reach its destination, such notice shall be valid and effective only if it is delivered to the named officer of the party to which it is addressed, as provided in Section 10.1(1), or given by facsimile, email or other means of prepaid, transmitted and recorded communication.
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Section 10.2 Notice to Registered Warrantholders.
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(1)
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Unless otherwise provided herein, notice to the Registered Warrantholders under the provisions of this Indenture shall be valid and effective if delivered or sent by ordinary prepaid post addressed to such holders at their post office addresses appearing on the register hereinbefore mentioned and shall be deemed to have been effectively received and given on the date of delivery or, if mailed, on the third Business Day following the date of mailing such notice. In the event that Warrants are held in the name of the Depository, a copy of such notice shall also be sent by electronic communication to the Depository and shall be deemed received and given on the day it is so sent.
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(2)
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If, by reason of a strike, lockout or other work stoppage, actual or threatened, involving postal employees, any notice to be given to the Registered Warrantholders hereunder could reasonably be considered unlikely to reach its destination, such notice shall be valid and effective only if it is delivered to such Registered Warrantholders to the address for such Registered Warrantholders contained in the register maintained by the Warrant Agent or such notice may be given, at the Corporation’s expense, by means of publication in the Globe and Mail, National Edition, or any other English language daily newspaper or newspapers of general circulation in Canada, in each two successive weeks, the first such notice to be published within 5 Business Days of such event, and any so notice published shall be deemed to have been received and given on the latest date the publication takes place.
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Section 10.3 Ownership of Warrants.
The Corporation and the Warrant Agent may deem and treat the Registered Warrantholders as the absolute owner thereof for all purposes, and the Corporation and the Warrant Agent shall not be affected by any notice or knowledge to the contrary except where the Corporation or the Warrant Agent is required to take notice by statute or by order of a court of competent jurisdiction. The receipt of any such Registered Warrantholder of the Common Shares which may be acquired pursuant thereto shall be a good discharge to the Corporation and the Warrant Agent for the same and neither the Corporation nor the Warrant Agent shall be bound to inquire into the title of any such holder except where the Corporation or the Warrant Agent is required to take notice by statute or by order of a court of competent jurisdiction.
Section 10.4 Counterparts.
This Indenture may be executed in several counterparts, each of which when so executed shall be deemed to be an original and such counterparts together shall constitute one and the same instrument and notwithstanding their date of execution they shall be deemed to be dated as of the date hereof. Delivery of an executed copy of the Indenture by electronic facsimile transmission or other means of electronic communication capable of producing a printed copy will be deemed to be execution and delivery of this Indenture as of the date hereof.
Section 10.5 Satisfaction and Discharge of Indenture.
Upon the earlier of:
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(a)
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the date by which there shall have been delivered to the Warrant Agent for exercise or cancellation all Warrants theretofore Authenticated hereunder, in the case of Certificated Warrants (or such other instructions, in a form satisfactory to the Warrant Agent), in the case of Uncertificated Warrants, or by way of standard processing through the book entry only system in the case of a Depository Global Warrant; and
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and if all certificates or other entry on the register representing Common Shares required to be issued in compliance with the provisions hereof have been issued and delivered hereunder or to the Warrant Agent in accordance with such provisions, this Indenture shall cease to be of further effect and the Warrant Agent, on demand of and at the cost and expense of the Corporation and upon delivery to the Warrant Agent of a certificate of the Corporation stating that all conditions precedent to the satisfaction and discharge of this Indenture have been complied with, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture. Notwithstanding the foregoing, the indemnities provided to the Warrant Agent by the Corporation hereunder shall remain in full force and effect and survive the termination of this Indenture.
Section 10.6 Provisions of Indenture and Warrants for the Sole Benefit of Parties and Registered Warrantholders.
Nothing in this Indenture or in the Warrants, expressed or implied, shall give or be construed to give to any person other than the parties hereto and the Registered Warrantholders, as the case may be, any legal or equitable right, remedy or claim under this Indenture, or under any covenant or provision herein or therein contained, all such covenants and provisions being for the sole benefit of the parties hereto and the Registered Warrantholders.
Section 10.7 Common Shares or Warrants Owned by the Corporation or its Subsidiaries - Certificate to be Provided.
For the purpose of disregarding any Warrants owned legally or beneficially by the Corporation in Section 7.16, the Corporation shall provide to the Warrant Agent, from time to time, a certificate of the Corporation setting forth as at the date of such certificate:
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(a)
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the names (other than the name of the Corporation) of the Registered Warrantholders which, to the knowledge of the Corporation, are owned by or held for the account of the Corporation; and
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(b)
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the number of Warrants owned legally or beneficially by the Corporation;
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and the Warrant Agent, in making the computations shall be entitled to rely on such certificate without any additional evidence.
Section 10.8 Severability
If, in any jurisdiction, any provision of this Indenture or its application to any party or circumstance is restricted, prohibited or unenforceable, such provision will, as to such jurisdiction, be ineffective only to the extent of such restriction, prohibition or unenforceability without invalidating the remaining provisions of this Indenture and without affecting the validity or enforceability of such provision in any other jurisdiction or without affecting its application to other parties or circumstances.
Section 10.9 Force Majeure
No party shall be liable to the other, or held in breach of this Indenture, if prevented, hindered, or delayed in the performance or observance of any provision contained herein by reason of act of God, riots, terrorism, acts of war, epidemics, governmental action or judicial order, earthquakes, or any other similar causes (including, but not limited to, mechanical, electronic or communication interruptions, disruptions or failures). Performance times under this Indenture shall be extended for a period of time equivalent to the time lost because of any delay that is excusable under this Section.
Section 10.10 Assignment, Successors and Assigns
Neither of the parties hereto may assign its rights or interest under this Indenture, except as provided in Section 9.8 in the case of the Warrant Agent, or as provided in Section 8.2 in the case of the Corporation. Subject thereto, this Indenture shall enure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.
Section 10.11 Rights of Rescission and Withdrawal for Holders
Should a holder of Warrants exercise any legal, statutory, contractual or other right of withdrawal or rescission that may be available to it, and the holder’s funds which were paid on exercise have already been released to the Corporation by the Warrant Agent, the Warrant Agent shall not be responsible for ensuring the exercise is cancelled and a refund is paid back to the holder. In such cases, the holder shall seek a refund directly from the Corporation and subsequently, the Corporation, upon surrender to the Corporation or the Warrant Agent of any underlying Common Shares that may have been issued, or such other procedure as agreed to by the parties hereto, shall instruct the Warrant Agent in writing, to cancel the exercise transaction and any such underlying shares on the register, which may have already been issued upon the Warrant exercise. In the event that any payment is received from the Corporation by virtue of the holder being a shareholder for such Warrants that were subsequently rescinded, such payment must be returned to the Corporation by such holder. The Warrant Agent shall not be under any duty or obligation to take any steps to ensure or enforce the return of the funds pursuant to this section, nor shall the Warrant Agent be in any other way responsible in the event that any payment is not delivered or received pursuant to this section. Notwithstanding the foregoing, in the event that the Corporation provides the refund to the Warrant Agent for distribution to the holder, the Warrant Agent shall return such funds to the holder as soon as reasonably practicable, and in so doing, the Warrant Agent shall incur no liability with respect to the delivery or non-delivery of any such funds.
IN WITNESS WHEREOF the parties hereto have executed this Indenture under the hands of their proper officers in that behalf as of the date first written above.
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FIELD TRIP HEALTH LTD.
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By:
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(singed)“Joseph del Moral”
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Name: Joseph del Moral
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Title: Chief Executive Officer
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By:
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(singed)“Donna Wong”
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Name: Donna Wong
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Title: Chief Financial Officer
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COMPUTERSHARE TRUST COMPANY OF CANADA
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By:
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(singed)“Wande Oshile
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Name: Wande Oshile
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Title: Corporate Trust officer
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By:
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(singed)“Angela Fletcher”
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Name: Angela Fletcher
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Title: Corporate Trust officer
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Schedule “A”
Form of Warrant
SUBJECT TO THE CORPORATION’S ACCELERATION RIGHT, THE WARRANTS EVIDENCED HEREBY ARE EXERCISABLE AT OR BEFORE 4:30 P.M. (TORONTO TIME) ON JULY 5, 2022 AFTER WHICH TIME THE WARRANTS EVIDENCED HEREBY SHALL BE DEEMED TO BE VOID AND OF NO FURTHER FORCE OR EFFECT.
For all Warrants sold outside the United States and registered in the name of the Depository, also include the following legend:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF CDS CLEARING AND DEPOSITORY SERVICES INC. (“CDS”) TO FIELD TRIP HEALTH LTD. (THE “ISSUER”) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN RESPECT THEREOF IS REGISTERED IN THE NAME OF CDS & CO., OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CDS (AND ANY PAYMENT IS MADE TO CDS & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CDS), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED HOLDER HEREOF, CDS & CO., HAS A PROPERTY INTEREST IN THE SECURITIES REPRESENTED BY THIS CERTIFICATE HEREIN AND IT IS A VIOLATION OF ITS RIGHTS FOR ANOTHER PERSON TO HOLD, TRANSFER OR DEAL WITH THIS CERTIFICATE.
For Warrants sold or issued in the United States or to U.S. Persons, also include the following legends:
THIS WARRANT AND THE SECURITIES DELIVERABLE UPON EXERCISE HEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR ANY STATE SECURITIES LAWS, AND MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO FIELD TRIP HEALTH LTD. (THE “CORPORATION”) (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT AND IN COMPLIANCE WITH LOCAL LAWS AND REGULATIONS, (C) WITHIN THE UNITED STATES IN ACCORDANCE WITH (1) RULE 144A UNDER THE U.S. SECURITIES ACT, OR (2) RULE 144 UNDER THE U.S. SECURITIES ACT AND, IN EACH CASE, IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS, OR (D) IN ANOTHER TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, PROVIDED THAT IN THE CASE OF TRANSFERS PURSUANT TO (C)(2) OR (D) ABOVE, A LEGAL OPINION SATISFACTORY TO THE CORPORATION MUST FIRST BE PROVIDED TO COMPUTERSHARE TRUST COMPANY OF CANADA TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE U.S. SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.
THE SECURITIES EVIDENCED HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER U.S. SECURITIES ACT OR U.S. STATE SECURITIES LAWS. THESE WARRANTS MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR ON BEHALF OF, OR FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON UNLESS THIS SECURITY AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS SECURITY HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LEGISLATION OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE U.S. SECURITIES ACT.
WARRANT
To acquire Common Shares of
FIELD TRIP HEALTH LTD.
(incorporated pursuant to the laws of Canada)
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Warrant
Certificate No. [•]
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Certificate for
Warrants, each entitling the holder to acquire one (1) Common Share (subject to adjustment as provided
for in the Warrant Indenture (as defined below)
CUSIP 31656R110
ISIN CA31656R1102
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THIS IS TO CERTIFY THAT, for value received,
(the “Warrantholder”) is the registered holder of the number of common share purchase warrants (the “Warrants”) of Field Trip Health Ltd. (the “Corporation”) specified above, and is entitled, on exercise of these Warrants upon and subject to the terms and conditions set forth herein and in the Warrant Indenture (as defined below), to purchase at any time before 4:30 p.m. ( Toronto time) (the “Expiry Time”) on July 5, 2022 (the “Expiry Date”), subject to acceleration as set out in the Warrant Indenture, one fully paid and non-assessable common share without par value in the capital of the Corporation as constituted on the date hereof (a “Common Share”) for each Warrant subject to adjustment in accordance with the terms of the Warrant Indenture.
Any capitalized terms used and not otherwise defined in this Warrant Certificate have the meaning ascribed thereto in the Warrant Indenture.
If, at any time prior to the Expiry Date, the VWAP of the Common Shares on the CSE (or other applicable exchange) equals or exceeds $9.00 per Common Share for a period of at least 10 consecutive Trading Days, the Corporation shall be entitled to deliver a written notice to the Warrantholders and to Computershare Trust Company of Canada (the “Warrant Agent”), supplemented by way of a press release issued by the Corporation, accelerating the Expiry Date of the Warrants to a date that is not less than 15 days following the date of such notice (the “Accelerated Expiry Date”). Any unexercised Warrants shall automatically expire at the end of the Accelerated Expiry Date.
The right to purchase Common Shares may only be exercised by the Warrantholder within the time set forth above by:
(a) duly completing and executing the exercise form (the “Exercise Form”) attached hereto; and
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(b)
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surrendering
this Warrant Certificate, with the Exercise Form to the Warrant Agent at the principal office of the Warrant Agent, in the
cities of Toronto, Ontario and Calgary, Alberta together with a certified cheque, bank draft or money order in the lawful
money of Canada payable to or to the order of the Corporation in an amount equal to the purchase price of the Common
Shares so subscribed for.
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The surrender of this Warrant Certificate, the duly completed Exercise Form and payment as provided above will be deemed to have been effected only on personal delivery thereof to, or if sent by mail or other means of transmission on actual receipt thereof by, the Warrant Agent at its principal office as set out above.
Subject to adjustment thereof in the events and in the manner set forth in the Warrant Indenture hereinafter referred to, the exercise price payable for each Common Share upon the exercise of Warrants shall be $5.60 per Common Share (the “Exercise Price”).
Certificates for the Common Shares subscribed for will be mailed to the persons specified in the Exercise Form at their respective addresses specified therein or, if so specified in the Exercise Form, delivered to such persons at the office where this Warrant Certificate is surrendered. If fewer Common Shares are purchased than the number that can be purchased pursuant to this Warrant Certificate, the holder hereof will be entitled to receive without charge a new Warrant Certificate in respect of the balance of the Common Shares not so purchased. No fractional Common Shares will be issued upon exercise of any Warrant. Any fractional Common Shares shall be rounded down to the nearest whole number and the holder of such Warrants shall not be entitled to any compensation in respect of any fractional Common Share which is not issued.
This Warrant Certificate evidences Warrants of the Corporation issued or issuable under the provisions of a warrant indenture (which indenture together with all other instruments supplemental or ancillary thereto is herein referred to as the “Warrant Indenture”) dated as of January 5, 2021 between the Corporation and Computershare Trust Company of Canada, as Warrant Agent, to which Warrant Indenture reference is hereby made for particulars of the rights of the holders of Warrants, the Corporation and the Warrant Agent in respect thereof and the terms and conditions on which the Warrants are issued and held, all to the same effect as if the provisions of the Warrant Indenture were herein set forth, to all of which the holder, by acceptance hereof, assents. The Corporation will furnish to the holder, on request and without charge, a copy of the Warrant Indenture.
Neither the Warrants nor the Common Shares issuable upon exercise hereof have been or will be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or U.S. state securities laws. The Warrants may not be exercised by or on behalf of a U.S. Person or a person in the United States, unless (i) the Warrants and such Common Shares have been registered under the U.S. Securities Act and the applicable laws of any such state, or (ii) an exemption from such registration requirements is available and the requirements set forth in the Exercise Form have been satisfied. Certificates representing Common Shares issued in the United States or to, or for the account or benefit of, U.S. persons will bear a legend restricting the transfer and exercise of such securities under applicable United States federal and state securities laws. “United States” and “U.S. Person” are as defined in Regulation S under the U.S. Securities Act.
On presentation at the principal office of the Warrant Agent as set out above, subject to the provisions of the Warrant Indenture and on compliance with the reasonable requirements of the Warrant Agent, one or more Warrant Certificates may be exchanged for one or more Warrant Certificates entitling the holder thereof to purchase in the aggregate an equal number of Common Shares as are purchasable under the Warrant Certificate(s) so exchanged.
The Warrant Indenture contains provisions for the adjustment of the Exercise Price payable for each Common Share upon the exercise of Warrants and the number of Common Shares issuable upon the exercise of Warrants in the events and in the manner set forth therein.
The Warrant Indenture also contains provisions making binding on all holders of Warrants outstanding thereunder resolutions passed at meetings of holders of Warrants held in accordance with the provisions of the Warrant Indenture and instruments in writing signed by Warrantholders of Warrants entitled to purchase a specific majority of the Common Shares that can be purchased pursuant to such Warrants.
Nothing contained in this Warrant Certificate, the Warrant Indenture or elsewhere shall be construed as conferring upon the holder hereof any right or interest whatsoever as a holder of Common Shares or any other right or interest except as herein and in the Warrant Indenture expressly provided. In the event of any discrepancy between anything contained in this Warrant Certificate and the terms and conditions of the Warrant Indenture, the terms and conditions of the Warrant Indenture shall govern.
Warrants may only be transferred in compliance with the conditions of the Warrant Indenture on the register to be kept by the Warrant Agent in Calgary, Alberta or such other registrar as the Corporation, with the approval of the Warrant Agent, may appoint at such other place or places, if any, as may be designated, upon surrender of this Warrant Certificate to the Warrant Agent or other registrar accompanied by a written instrument of transfer in form and execution satisfactory to the Warrant Agent or other registrar and upon compliance with the conditions prescribed in the Warrant Indenture and with such reasonable requirements as the Warrant Agent or other registrar may prescribe and upon the transfer being duly noted thereon by the Warrant Agent or other registrar. Time is of the essence hereof.
This Warrant Certificate will not be valid for any purpose until it has been countersigned by or on behalf of the Warrant Agent from time to time under the Warrant Indenture.
The parties hereto have declared that they have required that these presents and all other documents related hereto be in the English language. Les parties aux présentes déclarent qu’elles ont exigé que la présente convention, de même que tous les documents s’y rapportant, soient rédigés en anglais.
[Signature Page Follows]
IN WITNESS WHEREOF the Corporation has caused this Warrant Certificate to be duly executed as of the ____ day of ____________, ______:
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FIELD TRIP HEALTH LTD.
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By:
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Authorized Signatory
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By:
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Authorized Signatory
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Countersigned and Registered by:
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COMPUTERSHARE TRUST COMPANY OF CANADA
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By:
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Authorized Signatory
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FORM OF TRANSFER
To: Computershare Trust Company of Canada
FOR
VALUE RECEIVED the undersigned hereby sells, assigns and transfers to ___________________________________________________________
__________________________________________________________________________________________________________________________ (print name
and address) the Warrants represented by this Warrants Certificate and hereby irrevocably constitutes and appoints
____________________ as its attorney with full power of substitution to transfer the said securities on the appropriate register of
the Warrant Agent.
THE UNDERSIGNED TRANSFEROR HEREBY CERTIFIES AND DECLARES that the Warrants are not being offered, sold or transferred unless the Common Shares underlying the Warrants are registered under the United States Securities Act of 1933, as amended, and any applicable state securities laws or are exempt from such registration requirements.
In the case of a Warrant Certificate that contains a U.S. restrictive legend, the undersigned hereby represents, warrants and certifies that (one (only) of the following must be checked):
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☐
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(A) the transfer is being made only
to the Corporation;
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(B) the transfer is being
made outside the United States in accordance with Rule 904 of Regulation S under the U.S. Securities Act, and in compliance with
any applicable local securities laws and regulations and the holder has provided herewith the Declaration for Removal of Legend
attached as Schedule “C” to the Warrant Indenture;
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☐
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(C) the transfer is being
made pursuant to an exemption from registration under the U.S. Securities Act or any applicable state securities laws and the
undersigned has furnished to the Corporation and the Warrant Agent an opinion of counsel of recognized standing in form and substance
reasonably satisfactory to the Corporation and the Warrant Agent to such effect;
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☐
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(D) in compliance with another
exemption from registration under the U.S. Securities Act or any applicable state securities laws and the undersigned has furnished
to the Corporation and the Warrant Agent an opinion of counsel of recognized standing in form and substance reasonably satisfactory
to the Corporation and the Warrant Agent to such effect; or
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☐
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(E) pursuant to an effective
registration under the U.S. Securities Act.
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In the case of a Warrant Certificate that does not contain a U.S. restrictive legend, if the proposed transfer is to, or for the account or benefit of a U.S. Person or to a person in the United States, the undersigned hereby represents, warrants and certifies that the transfer of the Warrants is being completed pursuant to an exemption from the registration requirements of the U.S. Securities Act and any applicable state securities laws, in which case the undersigned has furnished to the Corporation and the Warrant Agent an opinion of counsel of recognized standing in form and substance reasonably satisfactory to the Corporation and the Warrant Agent to such effect.
☐ If transfer is
to a U.S. Person, check this box.
DATED this ____ day of_________________, 20____.
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SPACE
FOR GUARANTEES OF SIGNATURES (BELOW)
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Signature
of Transferor
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Guarantor’s Signature/Stamp
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Name of Transferor
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REASON FOR TRANSFER – For US Residents only (where the individual(s) or corporation receiving the securities is a US resident). Please select only one (see instructions below).
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☐ Gift
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☐ Estate
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☐ Private Sale
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☐ Other (or no change in ownership)
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Date of Event (Date of gift, death or sale): Value per Warrant on the date of event:
CERTAIN REQUIREMENTS RELATING TO TRANSFERS – READ CAREFULLY
The signature(s) of the transferor(s) must correspond with the name(s) as written upon the face of this certificate(s), in every particular, without alteration or enlargement, or any change whatsoever. All securityholders or a legally authorized representative must sign this form. The signature(s) on this form must be guaranteed in accordance with the transfer agent’s then current guidelines and requirements at the time of transfer. Notarized or witnessed signatures are not acceptable as guaranteed signatures. As at the time of closing, you may choose one of the following methods (although subject to change in accordance with industry practice and standards):
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Canada and the USA: A Medallion Signature Guarantee obtained from a member of an acceptable Medallion Signature Guarantee Program (STAMP, SEMP, NYSE, MSP). Many commercial banks, savings banks, credit unions, and all broker dealers participate in a Medallion Signature Guarantee Program. The Guarantor must affix a stamp bearing the actual words “Medallion Guaranteed”, with the correct prefix covering the face value of the certificate.
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•
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Canada:A Signature Guarantee obtained from an authorized officer of the Royal Bank of Canada, Scotia Bank or TD Canada Trust. The Guarantor must affix a stamp bearing the actual words “Signature Guaranteed”, sign and print their full name and alpha numeric signing number. Signature Guarantees are not accepted from Treasury Branches, Credit Unions or Caisse Populaires unless they are members of a Medallion Signature Guarantee Program. For corporate holders, corporate signing resolutions, including certificate of incumbency, are also required to accompany the transfer, unless there is a “Signature & Authority to Sign Guarantee” Stamp affixed to the transfer (as opposed to a “Signature Guaranteed” Stamp) obtained from an authorized officer of the Royal Bank of Canada, Scotia Bank or TD Canada Trust or a Medallion Signature Guarantee with the correct prefix covering the face value of the certificate.
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Outside North America: For holders located outside North America, present the certificates(s) and/or document(s) that require a guarantee to a local financial institution that has a corresponding Canadian or American affiliate which is a member of an acceptable Medallion Signature Guarantee Program. The corresponding affiliate will arrange for the signature to be over-guaranteed.
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REASON FOR TRANSFER – FOR U.S. RESIDENTS ONLY
Consistent with U.S. IRS regulations, Computershare is required to request cost basis information from U.S. securityholders. Please indicate the reason for requesting the transfer as well as the date of event relating to the reason. The event date is not the day in which the transfer is finalized, but rather the date of the event which led to the transfer request (i.e. date of gift, date of death of the securityholder, or the date the private sale took place).
SCHEDULE “B”
EXERCISE FORM
TO: Field Trip Health Ltd.
AND TO: Computershare Trust Company of Canada
800, 324-8th Avenue SW
Calgary, AB T2P 2Z2
The undersigned holder of the Warrants evidenced by this Warrant Certificate hereby exercises the right to acquire ____________ Common Shares of Field Trip Health Ltd. (the “Corporation”) pursuant to the right of such holder to be issued, and hereby subscribes for, the Common Shares that are issuable pursuant to the exercise of such Warrants on the terms specified in such Warrant Certificate and in the Indenture for an aggregate exercise price of $__________________.
The undersigned hereby exercises the right of such holder to be issued, and hereby subscribes for, Common Shares that are issuable pursuant to the exercise of such Warrants on the terms specified in such Warrant Certificate and in the Warrant Indenture.
The undersigned hereby acknowledges that the undersigned is aware that the Common Shares received on exercise may be subject to restrictions on resale under applicable securities legislation.
Any capitalized term in this Warrant Certificate that is not otherwise defined herein, shall have the meaning ascribed thereto in the Warrant Indenture.
The undersigned represents, warrants and certifies as follows (one (only) of the following must be checked):
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(A) The
undersigned holder at the time of exercise of the Warrants: (a) is not in the United States;(b) is not a U.S. person; (c) is not
exercising the Warrants on behalf of a U.S. person or a person in the United States; (d) did not execute or deliver this Exercise
Form in the United States; and (e) delivery of the underlying Common Shares will not be to an address in the United States;
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(B) The undersigned
holder (a) is the original U.S. purchaser who purchased the Warrants as part of the Units in the U.S. Offering; (b) is exercising
the Warrants solely for its own account or for the benefit of a U.S. Person or a person in the United States for whose account
such holder acquired the Warrants as a part of the Units in the U.S. Offering and for whose account such holders exercises sole
investment discretion; (c) was and is, and any beneficial purchaser for whose account such holder acquired the Warrant and is
exercising the Warrants was and is, a Qualified Institutional Buyer or an Accredited Investor both on the date the Units were
purchased in the U.S. Offering and on the Exercise Date and (d) the representations and warranties made by the holder or any beneficial
purchaser, as the case may be, to the Corporation by such holder in the original U.S. Offering remain true and correct on the
Exercise Date; or
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(D) The
undersigned holder has delivered to the Corporation and the Warrant Agent an opinion of counsel (which will not be sufficient
unless it is from counsel of recognized standing and in form and substance reasonably satisfactory to the Corporation and the
Warrant Agent) or other evidence (in form and substance reasonably satisfactory to the Corporation and the Warrant Agent) to the
effect that an exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws is
available.
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Notes: (1) Certificates will not be registered or delivered to an address in the United States unless Box B or C.
(2) If Box B or C is checked, the certificate representing the Common Shares will bear or be deemed to bear a legend restricting transfer without registration under the U.S. Securities Act and applicable state securities laws unless an exemption from such registration is available.
(3) If Box C above is checked, holders are encouraged to consult with the Corporation in advance to determine that the legal opinion or other evidence tendered in connection with the exercise will be satisfactory in form and substance to the Corporation. Certificates will not be registered or delivered to an address in the United States unless Box B or C above is checked.
“United States” and “U.S. Person” are as defined in Rule 902 of Regulation S under the U.S. Securities Act.
The undersigned hereby irrevocably directs that the said Common Shares be issued, registered and delivered as follows:
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Name(s) in Full and Social
Insurance Number(s)
(if applicable)
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Address(es)
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Number of Common
Shares
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Please print full name in which certificates representing the Common Shares are to be issued. If any Common Shares are to be issued to a person or persons other than the registered holder, the registered holder must pay to the Warrant Agent all eligible transfer taxes or other government charges, if any, and the Form of Transfer must be duly executed.
Once completed and executed, this Exercise Form must be mailed or delivered to Computershare Trust Company of Canada at the address set forth above, c/o Manager, Corporate Trust.
DATED this ____day of _____, 20__.
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)
)
)
)
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)
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Witness
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(Signature of Warrantholder, to be the same
as appears on the face of this Warrant Certificate)
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Name of Registered Warrantholder
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☐ Please
check if the certificates representing the Common Shares are to be delivered at the office where this Warrant Certificate is
surrendered, failing which such certificates will be mailed to the address set out above. Certificates will be delivered or
mailed as soon as practicable after the surrender of this Warrant Certificate to the Warrant Agent.
SCHEDULE “C”
FORM OF DECLARATION FOR REMOVAL OF LEGEND
TO: Computershare Trust Company of Canada
AND TO: Field Trip Health Ltd (the “Corporation”)
as registrar and transfer agent for the Warrants and Common Shares issuable upon exercise of the Warrants of Field Trip Health Ltd.
The undersigned (A) acknowledges that the sale of ___________________ the Corporation represented by certificate number __________________ to which this declaration relates is being made in reliance on Rule 904 of Regulation S under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) and, (B) certifies that (1) the undersigned is not (a) an “affiliate” of the Company (as that term is defined in Rule 405 under the U.S. Securities Act), (b) a “distributor” as defined in Regulation S or (c) an affiliate of a distributor; (2) the offer of such securities was not made to a person in the United States and either (a) at the time the buy order was originated, the buyer was outside the United States, or the seller and any person acting on its behalf reasonably believed that the buyer was outside the United States, or (b) the transaction was executed on or through the facilities of a designated offshore securities market (such as the Canadian Securities Exchange, the TSX Venture Exchange or the Toronto Stock Exchange) and neither the seller nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States or a U.S. person; (3) neither the seller nor any affiliate of the seller nor any person acting on their behalf has engaged or will engage in any directed selling efforts in the United States in connection with the offer and sale of such securities; (4) the sale was bona fide and not for the purpose of “washing off” the resale restrictions imposed because the securities are “restricted securities” (as that term is defined in Rule 144(a)(3) under the U. S. Securities Act); (5) the seller does not intend to replace securities sold in reliance on Rule 904 of Regulation S with fungible unrestricted securities; and (6) the sale was not a transaction, or part of a series of transactions, which, although in technical compliance with Regulation S, is part of a plan or scheme to evade the registration provisions of the U. S. Securities Act. Terms used herein have the meanings given to them by Regulation S under the U.S. Securities Act.
DATED this ____day of _____, 20__.
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(Name of Seller)
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By:
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Name:
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Title:
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Affirmation By Seller’s Broker-Dealer (required for sales in accordance with Section (B)(2)(b) above)
We have read the foregoing representations of our customer, _________________________ (the “Seller”) dated _______________________, with regard to our sale, for such Seller’s account, of the securities of the Company described therein, and on behalf of ourselves we certify and affirm that (A) we have no knowledge that the transaction had been prearranged with a buyer in the United States, (B) the transaction was executed on or through the facilities of designated offshore securities market, (C) neither we, nor any person acting on our behalf, engaged in any directed selling efforts in connection with the offer and sale of such securities, and (D) no selling concession, fee or other remuneration is being paid to us in connection with this offer and sale other than the usual and customary broker’s commission that would be received by a person executing such transaction as agent. Terms used herein have the meanings given to them by Regulation S under the 1933 Act.
Exhibit 99.21
FORM
51-102F3
MATERIAL CHANGE REPORT
UNDER NATIONAL INSTRUMENT 51-102
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Item 1.
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Name and Address of Company
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Field Trip Health Ltd. (the “Company”)
30 Duncan Street, Suite 401
Toronto, Ontario M5V 2C3
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Item 2.
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Date of Material Change
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News release dated January 5, 2021 was disseminated via GlobeNewswire. Copy of the news release have been filed on SEDAR and is available at www.sedar.com.
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Item 4.
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Summary of Material Change
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On January 5, 2021, the Company announced that it closed its previously announced bought deal short form prospectus offering, including the exercise in full of the underwriters’ over-allotment option (the “Offering”). In connection with the Offering, the Company issued 4,448,200 units of the Company (the “Units”) at a price of CAD$4.50 per Unit, for aggregate gross proceeds of $20,016,900. The Offering was conducted by Stifel GMP (the “Lead Underwriter”), as lead underwriter and sole bookrunner with Canaccord Genuity Corp., Bloom Burton Securities Inc. and Eight Capital forming the syndicate of underwriters (together with the Lead Underwriter, the “Underwriters”).
Each Unit is comprised of one common share in the capital of the Company (a “Common Share”) and one-half of one Common Share purchase warrant (each whole Common Share purchase warrant, a “Warrant”). Each Warrant is exercisable to acquire one Common Share (a “Warrant Share”) at an exercise price of $5.60 per Warrant Share until July 5, 2022. In the event that the volume weighted average trading price of the Common Shares exceeds $9.00 for ten (10) consecutive trading days, the Company shall have the right to accelerate the expiry date of the Warrants upon not less than fifteen (15) trading days’ notice. The Warrants will be listed for trading on the facilities of the Canadian Securities Exchange (the “CSE”) under the symbol “FTRP.WT”. The Company has received approval from CSE to list the Warrants and the Warrants are expected to commence trading on the date hereof.
In consideration for their services, the Company paid to the Underwriters a cash commission equal to $763,046.10 and issued to the Underwriters 169,565 compensation warrants (the “Compensation Warrants”). Each Compensation Warrant may be exercised to acquire one Common Share (each, a “Compensation Share”) at an exercise price of $4.50 per Compensation Share until January 5, 2023.
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Item 5.
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Full Description of Material Change
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Joseph del Moral, the Chief Executive Officer of the Company, purchased 55,555 Units in the Offering and, as such, the issuance of the Units to Mr. del Moral is a “related-party transaction” within the meaning of Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions (“MI 61-101”). However, the issuance is exempt from: (i) the valuation requirement of MI 61-101 by virtue of the exemption contained in Section 5.5(a), as the fair market value of the Units does not exceed 25% of the Company’s market capitalization, and (ii) from the minority shareholder approval requirement of MI 61-101 by virtue of the exemption contained in Section 5.7(1)(a) of MI 61- 101, as the fair market value of the Units does not exceed 25% of the Company’s market capitalization. A material change report was not filed by the Company 21 days before the closing of the Offering as the level of insider participation was not known at that time and the Company moved to close the Offering immediately upon satisfaction of all applicable closing conditions. In the view of the Company, this was reasonable in the circumstances because the Company wished to complete the Offering as soon as possible.
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Bennett Jones LLP acted as legal advisors
to the Company and Borden Ladner Gervais LLP acted as legal advisors to the Underwriters on the Offering.
The securities sold in the Offering
have not been, nor will they be, registered under the United States Securities Act of 1933, as amended (the “1933
Act”) and may not be offered or sold in the United States or to, or for the account or benefit of, “U.S. persons”
(as defined in Regulation S under the 1933 Act) absent registration or an applicable exemption from the registration requirements.
The Units were sold in the United States to Qualified Institutional Buyers (as defined in Rule 144A under the 1933 Act) pursuant
to exemptions from the registration requirements under Rule 144A of the 1933 Act and to persons who qualify as Accredited Investors
(as defined in Regulation D under the 1933 Act) pursuant to exemptions from the registration requirements under Rule 506 of Regulation
D of the 1933 Act.
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Item 6.
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Reliance on subsection 7.1(2) of National Instrument 51-102
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Item 7.
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Omitted Information
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Item 8.
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Executive Officer
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For further information, please contact:
Paula Amy Hewitt
Vice President, General Counsel and Corporate Secretary
Telephone: (416) 617-6277
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Exhibit 99.22
Execution Copy
UNDERWRITING AGREEMENT
December 15, 2020
Field Trip Health Ltd.
30 Duncan Street, Suite 401
Toronto, Ontario
M5V 2C3
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Attention:
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Joseph Del Moral, Founder and Chief Executive Officer and Ronan Levy, Founder and Executive Chairman
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Dear Sirs:
Stifel Nicolaus Canada Inc. (“Stifel GMP” or the “Lead Underwriter”), as lead underwriter and sole bookrunner, along with Canaccord Genuity Corp., Bloom Burton Securities Inc. and Eight Capital (collectively, the “Underwriters” and each individually, an “Underwriter”), hereby severally, and not jointly, nor jointly and severally, in their respective percentages set out in Section 18 below, offer to purchase from Field Trip Health Ltd. (the “Corporation”), and the Corporation hereby agrees to issue and sell to the Underwriters, 3,868,000 units (the “Initial Units”) at a price of $4.50 per Initial Unit (the “Offering Price”) for aggregate gross proceeds of $17,406,000. Each Initial Unit will consist of one common share (a “Common Share”) in the capital of the Corporation (each such Common Share issued as part of an Initial Unit, a “Unit Share”) and one-half of one common share purchase warrant (each whole common share purchase warrant, a “Warrant”, and each Warrant underlying the Initial Units, a “Unit Warrant”). Each Warrant will entitle the holder thereof to purchase one Common Share (each, a “Warrant Share”) at an exercise price of $5.60. The Warrants shall have a term of 18 months from the Closing Date (as defined below). In the event that the volume weighted average trading price of the Common Shares on the Exchange (as defined below), or such other recognized stock exchange as the Underwriters may approve on which the Common Shares are then principally traded, for ten consecutive trading days exceeds $9.00, the Corporation shall have the right to accelerate the expiry date of the Warrants upon not less than fifteen trading days’ notice.
The Warrants shall be duly and validly created and issued pursuant to, and governed by, a warrant indenture (the “Warrant Indenture”) in a form acceptable to the Lead Underwriter (acting reasonably) to be dated as of the Closing Date between the Corporation and the Transfer Agent (as defined below), in its capacity as warrant agent. The description of the Warrants herein is a summary only and is subject to the specific attributes and detailed provisions of the Warrants to be set forth in the Warrant Indenture. In case of any inconsistency between the description of the Warrants in this Agreement and the terms of the Warrants set forth in the Warrant Indenture, the provisions of the Warrant Indenture will govern.
The Corporation has granted to the Underwriters an option (the “Over-Allotment Option”), exercisable in whole or in part at any time, and from time to time, until that date which is 30 days following the Closing Date, to offer for sale such number of additional units (the “Over–Allotment Units”), Common Shares (the “Over-Allotment Shares”), and/or Warrants (the “Over-Allotment Warrants” and together with the Over-Allotment Units and Over-Allotment Shares, the “Over-Allotment Securities”) as is equal to 15% of the number of Initial Units issued under the Offering, to cover over-allotments, if any, and for market stabilization purposes. The Over-Allotment Option may be exercised by the Underwriters in respect of: (i) Over-Allotment Units at the Offering Price; (ii) Over-Allotment Shares at a price of $4.29 per Over-Allotment Share; (iii) Over-Allotment Warrants at a price of $0.42 per Over-Allotment Warrant; or (iv) any combination of Over-Allotment Units, Over-Allotment Shares and/or Over-Allotment Warrants, provided that, (A) the number of Over–Allotment Units does not exceed 580,200, (B) the number of Over-Allotment Shares does not exceed 580,200, and (C) the number of Over-Allotment Warrants does not exceed 290,100. The Underwriters shall be under no obligation whatsoever to exercise the Over-Allotment Option in whole or in part.
The Common Shares issuable upon exercise of the Over-Allotment Warrants (including Warrants issuable as part of the Over-Allotment Units) are referred to herein as the “Over-Allotment Warrant Shares”. The Initial Units and the Over-Allotment Securities are collectively referred to in this Agreement as the “Offered Securities” and the offering of the Offered Securities by the Corporation is referred to in this Agreement as the “Offering”.
The Offered Securities shall have the attributes described in and contemplated by the Prospectus (as defined below).
The Underwriters agree that up to 2,000,000 Initial Units may be allocated to certain (i) insiders, shareholders and affiliates of the Corporation, and (ii) persons who are not institutions or otherwise clients of the Underwriters (collectively, the “President’s List Subscribers”), provided that the President’s List Subscribers shall be identified by the Corporation to the Underwriters at least three Business Days (defined below) prior to the Closing Date and that the issuances of Initial Units to such President’s List Subscribers comply with Applicable Securities Laws (as defined below).
In consideration of the services rendered by the Underwriters in connection with the Offering, the Corporation shall pay to the Underwriters at the Closing Time, as set forth in Section 14, a cash commission equal to: (i) 5.5% of the aggregate gross proceeds raised from the sale of Offered Securities, other than in respect of gross proceeds from the sale of Offered Securities to President’s List Subscribers; plus (ii) 1.0% of the aggregate gross proceeds raised from the sale of Offered Securities to President’s List Subscribers (collectively, the “Underwriting Fee”). As additional compensation for the services provided, the Corporation shall issue to the Underwriters at the Closing Time, in aggregate, that number of compensation warrants (the “Broker Warrants”) which is equal to (i) 5.5% of the aggregate number of Offered Securities sold, other than to President’s List Subscribers; plus (ii) 1.0% of the aggregate number of Offered Securities sold to President’s List Subscribers. Each Broker Warrant shall be exercisable to acquire one Common Share (each, a “Broker Warrant Share”) at an exercise price equal to the Offering Price for a period of 24 months following the Closing Date, pursuant to the terms of the certificates representing the Broker Warrants (the “Broker Warrant Certificates”). The Underwriting Fee shall be inclusive of a 5% work fee payable to Stifel GMP and shall be payable as provided for in Section 18.
The Underwriters may arrange for substituted purchasers (the “Substituted Purchasers”) for the Offered Securities, where such Substituted Purchasers are resident in the Selling Jurisdictions (as defined below). Each Substituted Purchaser shall purchase the Offered Securities at the Offering Price, and to the extent that Substituted Purchasers purchase Offered Securities, the obligations of the Underwriters to do so will be reduced by the number of Offered Securities purchased by the Substituted Purchasers from the Corporation.
The Underwriters propose to distribute the Offered Securities in each of the provinces of Canada, other than Quebec, pursuant to the Final Prospectus (as defined below) and may also distribute the Offered Securities in the United States (as defined below) or to, or for the account or benefit of, U.S. Persons (as defined below) in transactions that are exempt from the registration requirements of the U.S. Securities Act (as defined below) pursuant to the U.S. Private Placement Memorandum (as defined below), all in the manner contemplated by this Agreement.
Subject to applicable law, including Applicable Securities Laws (as defined below) and the terms of this Agreement, the Offered Securities may also be distributed outside of Canada and the United States, in each jurisdiction as mutually agreed to in writing by the Corporation and the Underwriters where they may be lawfully sold by the Underwriters without: (i) giving rise to any requirement under the laws of such jurisdiction to prepare and/or file a prospectus or document having similar effect; or (ii) creating any ongoing compliance or continuous disclosure obligations for the Corporation pursuant to the laws of such jurisdiction.
The Underwriters shall be entitled to appoint a selling group consisting of other registered dealers in accordance with Applicable Securities Laws for the purposes of arranging for purchasers of the Offered Securities. Any member of any selling group formed by the Underwriters pursuant to the provisions of this Agreement or with whom any Underwriter has a contractual relationship with respect to the Offering, if any, shall agree with such Underwriter to comply with the covenants and obligations given by the Underwriters herein. The fee payable to any such member of any selling group shall be for the account of the Underwriters.
The Underwriters may offer the Offered Securities at a price less than the Offering Price as described in further detail in Section 18 below, in compliance with Canadian Securities Laws and, specifically, the requirements of NI 44-101 (as defined below) and the disclosure concerning the same contained in the Prospectus, provided that the net proceeds received by the Corporation for the Offered Securities shall not be reduced as a result thereof.
TERMS AND CONDITIONS
The following are additional terms and conditions of this Agreement between the Corporation and the Underwriters:
Section 1 Definitions and Interpretation
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(1)
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Where used in this Agreement or in any amendment hereto, the following terms have the following meanings, respectively:
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“Accredited Investor”
means “accredited investor” as such term is defined in Rule 506 under the U.S. Securities Act;
“Agreement” means this underwriting agreement, as it may be amended from time to time;
“Applicable Laws” means, in relation to any person, the Business or the Offering, all applicable laws, statutes, Authorizations, ordinances, decrees, rules, regulations, by-laws, legally enforceable policies, codes or guidelines, judicial, arbitral, administrative, ministerial, departmental or regulatory judgements, orders, decisions, directives, rulings, subpoenas, or awards, and conditions of any grant or maintenance of any approval, permission, certification, consent, registration, authority or licence, any applicable federal or provincial pricing policies, and any other requirements of any Governmental Authority, by which such person is bound or having application to the Business or the Offering and any amendments or supplements to, or replacements and substitutions of, any of the foregoing;
“Applicable Securities Laws” means collectively, Canadian Securities Laws and all applicable securities laws, rules, regulations, policies and other instruments promulgated by the Securities Regulators in any of the other Selling Jurisdictions;
“associate”, “affiliate” and “insider” have the respective meanings given to them in the Securities Act;
“Authorizations” means any approval, consent, exemption, ruling, authorization, notice, permit, including an import permit or export permit, or acknowledgement that may be required from any Governmental Authority pursuant to Applicable Law, or which is otherwise required under Applicable Law for the parties to perform their obligations under this Agreement or in relation to the Business, including any, ethical review board approval or other authorization for a study, including authorizations related to medical clinics, authorizations necessary to administer ketamine to patients, or other authorizations related to the Business;
“Broker Warrant Certificate” has the meaning ascribed thereto in the seventh paragraph of this Agreement;
“Broker Warrant Shares” has the meaning ascribed thereto in the seventh paragraph of this Agreement;
“Broker Warrants” has the meaning ascribed thereto in the seventh paragraph of this Agreement;
“Business” means the business carried on by the Corporation and the Subsidiaries as described in the Offering Documents, including, for the avoidance of doubt, of delivery of Drug Products, or other drug substances for therapeutic purposes, including the development, formulation and compounding of Drug Products or other drug substances, in the jurisdictions in which the Corporation and the Subsidiaries operate, including in the context of clinical trials, research, development, service delivery or other contexts, and the business of developing, cultivating fungal inputs for, and manufacturing natural health products, and the operation of clinics for physicians engaged in any of the foregoing activities;
“Business Assets” means all tangible and intangible property and assets owned (either directly or indirectly), leased, licensed, loaned, operated or used, including all real property, fixed assets, facilities, equipment, inventories and accounts receivable, by the Corporation and the Subsidiaries in connection with the Business;
“Business Day” means a day, other than a Saturday, a Sunday or statutory or civic holiday in the City of Toronto, Ontario;
“Canadian Securities Laws” means, collectively, all applicable securities laws of each of the Qualifying Jurisdictions and the respective rules and regulations under such laws together with applicable published instruments, notices and orders of the securities regulatory authorities in the Qualifying Jurisdictions, including the rules and policies of the Exchange;
“CBCA” means the Canada Business Corporations Act;
“CDS” means CDS Clearing and Depository Services Inc.;
“CDSA” means the Controlled Drugs and Substances Act (Canada);
“Claims” has the meaning ascribed thereto in Section 13 of this Agreement;
“Closing” means the completion of the sale of the Offered Securities and the purchase by the Underwriters of the Offered Securities pursuant to this Agreement;
“Closing Date” means January 5, 2021 or such earlier or later date as may be agreed to in writing by the Corporation and the Lead Underwriter, each acting reasonably, provided that it is not later than 42 days after the date of the receipt for the Final Prospectus;
“Closing Time” means 8:00 a.m. (Toronto time) on the Closing Date, or such other time on the Closing Date as may be agreed to by the Corporation and the Lead Underwriter;
“Common Shares” has the meaning ascribed thereto in the first paragraph of this Agreement;
“controlled substance” has the meaning ascribed thereto in section 2(1) of the CDSA;
“Corporation” has the meaning ascribed thereto in the first paragraph of this Agreement;
“Corporation’s Auditors” means MNP LLP;
“CPSO” means the College of Physicians and Surgeons of Ontario;
“Criminal Code” means the Criminal Code (Canada);
“Debt Instrument” means any and all loans, bonds, notes, debentures, indentures, promissory notes, mortgages, guarantees or other instruments evidencing indebtedness (demand or otherwise) for borrowed money or other liability to which the Corporation or a Subsidiary are a party or to which their property or assets are otherwise bound;
“distribution” means distribution or distribution to the public, as the case may be, for the purposes of Canadian Securities Laws or any of them;
“Documents Incorporated by Reference” means, without limitation, all financial statements, related management’s discussion and analysis, management information circulars, joint information circulars, annual information forms, material change reports or other documents filed by the Corporation, whether before or after the date of this Agreement, that are required to be incorporated by reference into the Prospectus under Applicable Securities Laws;
“Drug Product” means any drug product regulated for sale or use under supervision of a health care practitioner and that includes an active pharmaceutical ingredient that is ketamine, psilocin, psilocybin, and other restricted drugs or controlled substances in the jurisdictions in which the Corporation operates;
“Employee Plans” has the meaning ascribed thereto in Section 7(jj) of this Agreement;
“Environmental Laws” means all Applicable Laws relating to the environment or environmental issues (including air, surface, water and stratospheric matters), pollution or protection of human health and safety, including without limitation relating to the release, threatened release, manufacture, processing, blending, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials;
“Exchange” means the Canadian Securities Exchange;
“FDA” mean the Food and Drugs Act (Canada);
“FDR-J” means part J of the Food and Drugs Regulations (Canada) of the CDSA;
“Field Trip Psychedelics” means Field Trip Psychedelics Inc.;
“Final Prospectus” means the (final) short form prospectus of the Corporation relating to the Offering, including all of the Documents Incorporated by Reference prepared and to be filed by the Corporation with the Securities Commissions in accordance with the Passport System and NI 44-101 in the Qualifying Jurisdictions in respect of the Offering and for which a Final Receipt has been issued;
“Final Receipt” means the receipt issued by the Principal Regulator, evidencing that a receipt has been, or has been deemed to be, issued for the Final Prospectus in each of the Qualifying Jurisdictions;
“Financial Statements” means (a) audited financial statements of the Corporation for the fiscal year ended December 31, 2019 and 2018, together with the independent auditors’ report thereon and the notes thereto; (b) audited consolidated financial statements of Field Trip Psychedelics for the fiscal period from April 2, 2019 to March 31, 2020, together with the independent auditors’ report thereon and the notes thereto; (c) the unaudited interim financial statements of the Corporation for the nine months ended September 30, 2020 and 2019, together with the notes thereto and (d) the unaudited condensed interim consolidated financial statements of Field Trip Psychedelics for the three and six months ended September 30, 2020 and 2019;
“Former Auditors” means DeVisser Gray LLP;
“Government Official” means (a) any official, officer, employee, or representative of, or any person acting in an official capacity for or on behalf of, any Governmental Authority, (b) any salaried political party official, elected member of political office or candidate for political office, or (c) any company, business, enterprise or other entity owned or controlled by any person described in the foregoing clauses;
“Governmental Authority” means any provincial, territorial or federal, and as applicable in the circumstances, any foreign: (a) government; (b) court, arbitral or other tribunal or governmental or quasi-governmental authority of any nature (including any governmental agency, political subdivision, instrumentality, branch, department, official, or entity); (c) body or other instrumentality exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature pertaining to government, including Health Canada, the New York State Medical Board and/or the California Medical Board; (d) any formulary body with responsibility for determining listability of a Drug Product on any applicable formulary or for determining the pricing of Drug Products for reimbursement, with jurisdiction to review the pricing of and payment for Drug Products under Applicable Law; (e) any provincial, state, territorial or federal government or review board with jurisdiction over pricing of patented products or with jurisdiction over competition aspects of pricing of products; or (f) any other body or entity created under the authority of or otherwise subject to the jurisdiction of any of the foregoing and any stock exchange or self-regulatory authority and, for greater certainty, includes the Securities Commissions, the Exchange and the Investment Industry Regulatory Organization of Canada;
“Hazardous Material” means, collectively, (a) any chemicals or other materials or substances which are defined as or included in the definition of “hazardous recyclables,” “extremely hazardous wastes,” “restricted hazardous wastes,” “toxic substances,” “toxic pollutants,” “contaminants,” “pollutants” or words of similar import under any Environmental Law, and (b) any other chemical, contaminant, pollutant, deleterious substance, dangerous good or other material or substance, which is limited or regulated under any Environmental Law;
“IFRS” means International Financial Reporting Standards as issued by the International Accounting Standards Board;
“including” means including but not limited to;
“Indemnified Party” or “Indemnified Parties” have the meanings ascribed thereto in Section 13 of this Agreement;
“Initial Units” has the meaning ascribed thereto in the first paragraph of this Agreement;
“Intellectual Property Rights” means all industrial and other intellectual property rights comprising or relating to (a) trademarks, trade dress, trade and business names, branding, brand names, logos, design rights, corporate names and domain names and other similar designations of source, sponsorship, association or origin, together with the goodwill symbolized by any of the foregoing; (b) internet domain names registered by any authorized private registrar or Governmental Authority, web addresses, web pages, website and URLs; (c) works of authorship, expressions, designs and industrial design registrations, whether or not copyrightable, including copyrights and copyrightable works, software and firmware, data, data files, and databases and other specifications and documentation; (d) inventions, discoveries, trade secrets, business and technical information, know-how, databases, data collections, patent disclosures and other confidential or proprietary information; (e) plant or fungal varieties, strains or cultivars; and (f) all industrial and other intellectual property rights, and all rights, interests and protections that are associated with, equivalent or similar to, or required for the exercise of, any of the foregoing, however arising, in each case whether registered or unregistered, such registered rights including patent, registered plant breeders’ rights, trademark, industrial design and copyright, and including all registrations and applications for, and renewals or extensions of, such rights or forms of protection under the Applicable Law of any jurisdiction which the Corporation operates;
“ketamine” means 2-(2-chlorophenyl)-2-(methylamino)cyclohexanone;
“knowledge of the Corporation” (or similar phrases or knowledge qualifiers) means, with respect to the Corporation, the actual knowledge of its directors and officers after reasonable inquiry;
“Liens” means any encumbrance or title defect of whatever kind or nature, regardless of form, whether or not registered or registrable and whether or not consensual or arising by law (statutory or otherwise), including any mortgage, lien, charge, pledge or security interest, whether fixed or floating, or any assignment, lease, option, right of pre-emption, privilege, easement, servitude, right of way, restrictive covenant, right of use or any other right or claim of any kind or nature whatever which affects ownership or possession of, or title to, any interest in, or right to use or occupy such property or assets;
“Losses” has the meaning ascribed thereto in Section 13 of this Agreement;
“marketing materials” has the meaning ascribed thereto in NI 41-101;
“Marketing Materials” means the term sheet in respect of the Offering dated December 10, 2020, as agreed to between the Corporation and Stifel GMP;
“Material Adverse Effect” means (a) any event, occurrence, state of facts, effect or change on the Corporation and the Subsidiaries or the Business, taken as a whole and as a going concern, that has had or would reasonably be expected to have a material adverse effect on the results of operations, financial condition, assets, properties, capital, liabilities (contingent or otherwise), cash flow, income, prospects or business operations of the Corporation and its Subsidiaries or the Business, taken as a whole and as a going concern, or (b) any event, occurrence, state of facts, effect or change that would result in any Offering Document containing a misrepresentation;
“Material Agreement” means any and all contracts, commitments, agreements (written or oral), instruments, leases or other documents, including licences, sub-licences, supply agreements, manufacturing agreements, distribution agreements, sales agreements, or any other similar type agreements, to which the Corporation or any Subsidiary is a party or to which their Business Assets are otherwise bound, and which is material to the Corporation and the Subsidiaries on a consolidated basis;
“material change”, “material fact” and “misrepresentation” have the respective meanings ascribed thereto in the Securities Act;
“MI 11-102” means Multilateral Instrument 11-102 – Passport System;
“NI 41-101” means National Instrument 41-101 – General Prospectus Requirements;
“NI 44-101” means National Instrument 44-101 - Short Form Prospectus Distributions;
“NI 51-102” means National Instrument 51-102 – Continuous Disclosure Obligations;
“NP 11-202” means National Policy 11-202 – Process for Prospectus Reviews in Multiple Jurisdictions;
“Offered Securities” has the meaning ascribed thereto in the fourth paragraph of this Agreement;
“Offering” has the meaning ascribed thereto in the fourth paragraph of this Agreement;
“Offering Documents” means the Preliminary Prospectus, the Final Prospectus, any Supplementary Material and, if applicable, the U.S. Private Placement Memorandum;
“Offering Price” has the meaning ascribed thereto in the first paragraph of this Agreement;
“Option Closing Date” means the date, not earlier than the Closing Date or later than 30 days following the Closing Date, for the closing of the Over-Allotment Option set out in the written notice of exercise of the Over-Allotment Option;
“Option Closing Time” means 8:00 a.m. (Toronto time) on the Option Closing Date or such other time on the Closing Date as may be agreed to by the Corporation and the Lead Underwriter;
“Ordinary Course” means, with respect to an action taken by a Person, that such action is consistent in all material respects with past practices of the Person and is taken in the ordinary course of the normal day-to-day operations of the Person, in each case, as is determined as of the relevant date;
“OSC” means the Ontario Securities Commission;
“Over-Allotment Option” has the meaning ascribed thereto in the third paragraph of this Agreement;
“Over-Allotment Securities” has the meaning ascribed thereto in the third paragraph of this Agreement;
“Over-Allotment Shares” has the meaning ascribed thereto in the third paragraph of this Agreement;
“Over-Allotment Units” has the meaning ascribed thereto in the third paragraph of this Agreement;
“Over-Allotment Warrant Shares” has the meaning ascribed thereto in the fourth paragraph of this Agreement;
“Over-Allotment Warrants” has the meaning ascribed thereto in the third paragraph of this Agreement;
“Passport System” means the system for review of prospectus filings set out in MI 11-102 and NP 11-202;
“person” shall be broadly interpreted and shall include any individual, corporation, partnership, joint venture, association, trust or other legal entity;
“Preliminary Prospectus” means the preliminary short form prospectus of the Corporation dated December 15, 2020, including all of the Documents Incorporated by Reference, prepared and filed by the Corporation in accordance with the Passport System and NI 44-101 in the Qualifying Jurisdictions in respect of the Offering;
“Preliminary Receipt” means the receipt issued by the Principal Regulator, evidencing that a receipt has been, or has been deemed to be, issued for the Preliminary Prospectus in each of the Qualifying Jurisdictions;
“President’s List Subscribers” has the meaning ascribed thereto in the sixth paragraph of this Agreement;
“Principal Regulator” means the Ontario Securities Commission;
“Prospectus” means, collectively, the Preliminary Prospectus and the Final Prospectus;
“provide” in the context of sending or making available marketing materials to a potential investor of Offered Securities has the meaning ascribed thereto under Canadian Securities Laws;
“psilocin” means 3–[2–(dimethylamino)ethyl]–4–hydroxyindole and any salt thereof;
“psilocybin” means 3–[2–(dimethylamino)ethyl]–4–phosphoryloxyindole and any salt thereof;
“Purchasers” means, collectively, each of the purchasers of Offered Securities arranged by the Underwriters, including the Substituted Purchasers, in connection with the Offering, including, if applicable, the Underwriters;
“Qualified Institutional Buyers” means “qualified institutional buyers” as such term is defined in Rule 144A;
“Qualifying Jurisdictions” means each of the provinces of Canada, other than Quebec;
“Regulation S” means Regulation S adopted by the SEC under the U.S. Securities Act;
“Repayment Event” means any event or condition which gives the holder of any Debt Instrument (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a material portion of such indebtedness by the Corporation or the Subsidiaries;
“Rule 144A” means Rule 144A under the U.S. Securities Act;
“SEC” means the United States Securities and Exchange Commission;
“Securities Act” means the Securities Act (Ontario);
“Securities Commissions” means the securities regulatory authority in each of the Qualifying Jurisdictions;
“Securities Laws” means collectively, Canadian Securities Laws, U.S. Securities Laws and all applicable securities laws, rules, regulations, policies and other instruments promulgated by the Securities Regulators in any of the other Selling Jurisdictions;
“Securities Regulators” means collectively, the securities regulators or other securities regulatory authorities in the Selling Jurisdictions;
“Selling Jurisdictions” means, collectively, each of the Qualifying Jurisdictions and may also include, the United States and any other jurisdictions outside of Canada and the United States as mutually agreed to by the Corporation and the Underwriters;
“subsidiary” or “subsidiaries” has the meaning ascribed thereto in the Securities Act;
“Subsidiaries” has the meaning ascribed thereto in Section 7(b) of this Agreement;
“Substituted Purchasers” has the meaning ascribed thereto in the eighth paragraph of this Agreement;
“Supplementary Material” means, collectively, any amendment to the Preliminary Prospectus or the Final Prospectus, and any amendment or supplemental prospectus that may be filed by or on behalf of the Corporation under Canadian Securities Laws relating to the distribution of the Offered Securities;
“template version” has the meaning ascribed thereto under NI 41-101 and includes any revised template version of marketing materials as contemplated by NI 41-101;
“Transfer Agent” means Computershare Trust Company of Canada;
“Underwriters” has the meaning ascribed thereto in the first paragraph of this Agreement;
“Underwriting Fee” has the meaning ascribed thereto in the seventh paragraph of this Agreement;
“Unit” means any Initial Unit or Over–Allotment Unit;
“Unit Share” has the meaning ascribed thereto in the first paragraph of this Agreement;
“Unit Warrant” has the meaning ascribed thereto in the first paragraph of this Agreement;
“United States” means the United States of America, its territories and possessions, any state of the United States and the District of Columbia;
“U.S. Affiliates” means the Underwriters’ respective United States registered broker-dealer affiliates;
“U.S. Exchange Act” means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder;
“U.S. Person” means a “U.S. person” as that term is defined in Rule 902(k) of Regulation S;
“U.S. Private Placement Memorandum” means the private placement offering memorandum in the event of an offering of the Offered Securities in the United States, which will include and supplement the Prospectus;
“U.S. Securities Act” means the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder;
“U.S. Securities Laws” means all applicable securities legislation in the United States, including, without limitation, the U.S. Exchange Act and U.S. Securities Act;
“Warrant” has the meaning ascribed thereto in the first paragraph of this Agreement;
“Warrant Indenture” has the meaning ascribed thereto in the second paragraph of this Agreement; and
“Warrant Share” has the meaning ascribed thereto in the first paragraph of this Agreement.
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(2)
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Any reference in this Agreement to a section or subsection shall refer to a section or subsection of this Agreement.
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(3)
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All words and personal pronouns relating thereto shall be read and construed as the number and gender of the party or parties referred to in each case required and the verb shall be construed as agreeing with the required word and/or pronoun.
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(4)
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Any reference in this Agreement to $ or to “dollars” shall refer to the lawful currency of Canada, unless otherwise specified.
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(5)
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The following are the schedules to this Agreement, which schedules are deemed to be a part hereof and are hereby incorporated by reference herein:
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Schedule “A” Subsidiaries
Schedule “B” Compliance with United States Securities Laws (if applicable)
Section
2 Attributes
of the Offered Securities.
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(1)
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The Offered Securities to be sold by the Corporation hereunder shall have the rights, privileges, restrictions and conditions that conform in all material respects to the rights, privileges, restrictions and conditions set forth in the Offering Documents.
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(2)
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The Underwriters severally agree not to offer or sell the Offered Securities in such a manner as to require registration of any of them or the filing of a prospectus or any similar document under the laws of any jurisdiction outside the Qualifying Jurisdictions and to distribute or offer the Offered Securities only in the Qualifying Jurisdictions and in accordance with all Applicable Securities Laws. However, the Corporation and each Underwriter acknowledge that, in the event of any offer, sale or resale of the Offered Securities in the United States or to, or for the account or benefit of, U.S. Persons, the Underwriters acting through their U.S. Affiliates will offer, sell and resell the Offered Securities in the United States or to, or for the account or benefit of, U.S. Persons only to Qualified Institutional Buyers or Accredited Investors, all in accordance with Schedule “B”, which terms and conditions are hereby incorporated by reference in and shall form a part of this Agreement, provided that no such action on the part of the Underwriters or their U.S. Affiliates shall in any way oblige the Corporation to register any Offered Securities under the U.S. Securities Act or the securities laws of any state of the United States. Any agreements between the Underwriters and the members of any selling group will contain restrictions which are substantially the same as those contained in this Section 2.
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(3)
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Notwithstanding the foregoing, an Underwriter will not be liable to the Corporation under this section or Schedule “B” with respect to a violation by another Underwriter or its U.S. Affiliate(s) of the provisions of this section or Schedule “B” if the former Underwriter or its U.S. Affiliate, as applicable, is not itself also in violation.
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Section
3 Filing
of Prospectus.
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(1)
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The Corporation shall:
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(a)
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not
later than 5:00 p.m. (Toronto time) on the date hereof, have filed the Preliminary Prospectus pursuant to the Passport
System with the Securities Commissions and obtain a Preliminary Receipt not later
than 5:00 p.m. (Toronto time) on December 16, 2020;
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(b)
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(i) use commercially reasonable efforts to promptly resolve all comments made and deficiencies raised in respect of the Preliminary Prospectus by the Principal Regulator, and (ii) file the Final Prospectus and obtain a Final Receipt not later than 5:00 p.m. (Toronto time) on December 24, 2020, and otherwise fulfill all legal requirements to qualify the Offered Securities for distribution to the public in the Qualifying Jurisdictions through the Underwriters or any other investment dealer or broker properly registered to transact such business in the applicable Qualifying Jurisdictions contracting with the Underwriters, and to qualify the grant of the Over-Allotment Option; and
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(c)
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until the date on which the distribution of the Offered Securities is completed, promptly take, or cause to be taken, all additional steps and proceedings that may from time to time be required under Canadian Securities Laws to continue to qualify the distribution of the Offered Securities for sale to the public and the grant of the Over-Allotment Option to the Underwriters or, in the event that the Offered Securities or the Over-Allotment Option have, for any reason, ceased to so qualify, to again so qualify the Offered Securities and the Over-Allotment Option.
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(2)
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Prior to the filing of the Offering Documents and thereafter, during the period of distribution of the Offered Securities, the Corporation shall have allowed the Underwriters to participate fully in the preparation of, and to approve the form and content of, such documents and shall have allowed the Underwriters to conduct all due diligence investigations (which shall include the attendance of management of the Corporation, the Corporation’s Auditors and the Former Auditors at one or more due diligence sessions to be held) which they may reasonably require in order to fulfill their obligations as underwriters and in order to enable them to responsibly execute the certificate required to be executed by them at the end of the Prospectus.
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(3)
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It shall be a condition precedent to (i) the Underwriters’ execution of any certificate in any Prospectus, that the Underwriters be satisfied as to the form and substance of the document, and (ii) the delivery of each U.S. Private Placement Memorandum (if applicable) to any purchaser or prospective purchaser in the United States or purchasing for the account or benefit of a U.S. Person, that the Underwriters and their U.S. Affiliates be satisfied as to the form and substance of such document.
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Section 4 Deliveries on Filing and Related Matters.
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(1)
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The Corporation shall deliver to each of the Underwriters:
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(a)
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prior to the time of each filing thereof, a copy of the Preliminary Prospectus and the Final Prospectus each manually signed on behalf of the Corporation, by the persons and in the form signed and certified as required by Canadian Securities Laws;
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(b)
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a copy of the preliminary U.S. Private Placement Memorandum or the final U.S. Private Placement Memorandum, if and as applicable;
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(c)
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prior to the time of filing thereof, a copy of any Supplementary Material, or other document required to be filed with or delivered to, the Securities Commissions by the Corporation under Canadian Securities Laws in connection with the Offering, including any document incorporated by reference in the Final Prospectus (other than documents already filed publicly with a Securities Commission);
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(d)
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concurrently with the filing of the Final Prospectus with the Securities Commissions, a “long-form” comfort letter of the Corporation’s Auditors dated the date of the Final Prospectus (with the requisite procedures to be completed by such auditor within two Business Days of the date of such letter), in form and substance satisfactory to the Underwriters, acting reasonably, addressed to the Underwriters, the Corporation and the board of directors of the Corporation, with respect to the verification of financial and accounting information and other financial information contained in the Final Prospectus (including all Documents Incorporated by Reference) and matters involving changes or developments since the respective dates as of which specific financial information is given therein which letter shall be in addition to the auditor’s consent letter and comfort letter (if any) addressed to the Securities Commissions; and
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(e)
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concurrently with the filing of the Final Prospectus with the Securities Commissions, a “long form” comfort letter of the Former Auditors, dated to the date of the Final Prospectus (with the requisite procedures to be completed by such auditors no later than two Business Days prior to the date of the Final Prospectus) with respect to the financial and accounting information relating to the Corporation addressed to the Underwriters, in form and substance satisfactory to the Underwriters, acting reasonably, containing statements and information of the type ordinarily included in “comfort letters” to underwriters in connection with the Offering.
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Unless otherwise advised in writing, such deliveries shall also constitute the Corporation’s consent to the Underwriters’ use of the Offering Documents in connection with the distribution of the Offered Securities in compliance with this Agreement and Securities Laws.
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(2)
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The Corporation represents and warrants to the Underwriters with respect to the Offering Documents that as at their respective dates of delivery to the Underwriters as set out in Section 4(1) above:
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(a)
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all information and statements in such documents (including information and statements incorporated by reference to the extent they have not been superseded by the information and statements in the Offering Documents) (except information and statements relating solely to the Underwriters and furnished by them specifically for use in a Prospectus) are true and correct, in all material respects, and contain no misrepresentation and constitute full, true and plain disclosure of all material facts relating to the Corporation, the Offering and the Offered Securities, as required by Canadian Securities Laws;
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(b)
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no material fact or information in such documents (including information and statements incorporated by reference) (except information and statements relating solely to the Underwriters and furnished by them specifically for use in a Prospectus) has been omitted therefrom which is required to be stated in such disclosure or is necessary to make the statements or information contained in such disclosure not misleading in light of the circumstances under which they were made; and
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(c)
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the Prospectus and any Supplementary Material comply in all material respects with the requirements of Canadian Securities Laws.
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(3)
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The Corporation shall cause commercial copies of the Preliminary Prospectus, the Final Prospectus and the U.S. Private Placement Memorandum, as the case may be, to be delivered to the Underwriters without charge, in such quantities and in such cities as the Underwriters may reasonably request by written instructions to the printer of such documents as soon as possible after obtaining the Preliminary Receipt or the Final Receipt, as the case may be, but, in any event on or before noon (Toronto time) on the next Business Day (or for delivery locations outside of Toronto, on the second Business Day). Such deliveries shall constitute the consent of the Corporation to the Underwriters’ use of the Preliminary Prospectus, the Final Prospectus and the U.S. Private Placement Memorandum for the distribution of the Offered Securities in the Qualifying Jurisdictions in compliance with the provisions of this Agreement and Canadian Securities Laws; the offer and sale of the Offered Securities in the United States and to, or for the account or benefit of, U.S. Persons in compliance with the provisions of this Agreement (including, without limitation, Schedule “B” hereto) and U.S. Securities Laws; and the offer and sale of the Offered Securities in such other Selling Jurisdictions agreed to between the Corporation and the Lead Underwriter, in compliance with the provisions of this Agreement and Applicable Securities Laws. The Corporation shall similarly cause to be delivered commercial copies of any Supplementary Material and hereby similarly consents to the Underwriters’ use thereof. The Corporation shall cause to be provided to the Underwriters, without cost, such number of copies of any Documents Incorporated by Reference as the Underwriters may reasonably request for use in connection with the distribution of the Offered Securities.
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(4)
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Each of the Corporation and the Underwriters have approved the Marketing Materials, including any template version thereof which the Corporation has filed with the Securities Commissions and which is and will be incorporated by reference into the Prospectus, as the case may be. The Corporation and the Underwriters each covenant and agree that during the distribution of the Offered Securities, it will not provide any potential investor of Offered Securities with any marketing materials except for marketing materials that comply with, and have been approved in accordance with, NI 44-101. If requested by the Underwriter, in addition to the Marketing Materials, the Corporation will cooperate, acting reasonably, with the Underwriter in approving any other marketing materials to be used in connection with the Offering.
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(5)
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Subject to compliance with Securities Laws, during the period commencing on the date hereof and until completion of the distribution of the Offered Securities, the Corporation will promptly provide to the Underwriters drafts of any press releases of the Corporation for review by the Underwriters prior to issuance, and shall obtain the prior approval of the Underwriters as to the content and form of any press release relating to the Offering prior to issuance, such approval not to be unreasonably withheld or delayed. If required by Securities Laws, any press release announcing or otherwise referring to the Offering disseminated in the United States shall comply with the requirements of Rule 135c under the U.S. Securities Act and any press release announcing or otherwise referring to the Offering disseminated outside the United States shall include (i) an appropriate notation on each page as follows: “Not for distribution to the U.S. news wire services, or dissemination in the United States” and (ii) the following (or similar) disclosure:
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“The securities referred to in this news release have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or any state securities laws and may not be offered or sold within the United States or to, or for the account or benefit of, “U.S. persons” (as such term is defined in Regulation S under the U.S. Securities Act) absent such registration or an applicable exemption from the registration requirements of the U.S. Securities Act. This news release does not constitute an offer for sale of securities for sale, nor a solicitation for offers to buy any securities. Any public offering of securities in the United States must be made by means of a prospectus containing detailed information about the company and management, as well as financial statements.”
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(6)
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Notwithstanding any provision hereof, nothing in this Agreement will create any obligation of the Corporation to file a registration statement or otherwise register or qualify the Offered Securities for sale or distribution outside of Canada.
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Section
5 Material
Change.
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(1)
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During the period from the date of this Agreement to the completion of the distribution of the Offered Securities, the Corporation covenants and agrees with the Underwriters that it shall promptly notify the Underwriters in writing with full particulars of:
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(a)
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any material change (actual, anticipated, contemplated or threatened) in respect of the Corporation and the Subsidiaries considered on a consolidated basis or any development involving a prospective material change;
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(b)
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any new or any change in a material fact which has arisen or has been discovered and would have been required to have been stated in any of the Offering Documents had the fact arisen or been discovered on, or prior to, the date of such document; and
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(c)
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any change in any material fact (which for the purposes of this Agreement shall be deemed to include the disclosure of any previously undisclosed material fact) contained in the Offering Documents which fact or change is, or may be, of such a nature as to render any statement in such Offering Document misleading or untrue in any material respect or which would result in a misrepresentation in the Offering Document or which would result in any of the Offering Documents not complying (to the extent that such compliance is required) with Securities Laws.
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The Corporation shall promptly, and in any event within any applicable time limitation, comply, to the satisfaction of the Underwriters, acting reasonably, with all applicable filings and other requirements under Canadian Securities Laws and U.S. Securities Laws as a result of such fact or change; provided that the Corporation shall not file any Supplementary Material or other document without first providing the Underwriters with a copy of such Supplementary Material or other document and consulting with the Underwriters with respect to the form and content thereof. The Corporation shall in good faith discuss with the Underwriters any fact or change in circumstances (actual, anticipated, contemplated or threatened, financial or otherwise) which is of such a nature that there is or could be reasonable doubt whether written notice need be given under this Section 5.
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(2)
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If during the period of distribution of the Offered Securities there shall be any change in Canadian Securities Laws or other laws which results in any requirement to file Supplementary Material, the Corporation will promptly prepare and file such Supplementary Material with the appropriate Securities Commissions where such filing is required, provided that the Corporation shall have allowed the Underwriters and its counsel to participate in the preparation and review of any Supplementary Material.
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(3)
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During the period from the date of this Agreement to the completion of the distribution of the Offered Securities, the Corporation will notify the Underwriters promptly:
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(a)
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when any supplement to any of the Offering Documents or any Supplementary Material shall have been filed;
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(b)
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of any request by any Securities Commission to amend or supplement the Prospectus or for additional information;
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(c)
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of the suspension of the qualification of the Common Shares, Warrants or the Over-Allotment Option for offering, sale, issuance, or grant, as applicable, in any jurisdiction, or of any order suspending or preventing the use of the Offering Documents (or any Supplementary Material) or of the institution or, to the knowledge of the Corporation, threatening of any proceedings for any such purpose; and
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(d)
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of the issuance by any Securities Commission or any stock exchange of any order having the effect of ceasing or suspending the distribution of the Common Shares or Warrants or the trading in any securities of the Corporation, or, to the knowledge of the Corporation, of the institution or threatening of any proceeding for any such purpose. The Corporation will use its reasonable efforts to prevent the issuance of any such stop order or of any order preventing or suspending such use or such order ceasing or suspending the distribution of the Common Shares or Warrants or the trading in the Common Shares and, if any such order is issued, to obtain the lifting thereof at the earliest possible time.
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Section
6 Regulatory
Approvals.
The Corporation will make all necessary filings, obtain all necessary consents and approvals (if any) and pay all filing fees required to be paid in connection with the transactions contemplated by this Agreement. The Corporation will cooperate with the Underwriters in connection with the qualification of the distribution of the Offered Securities for offer and sale in the Qualifying Jurisdictions and the grant of the Over-Allotment Option under Canadian Securities Laws and in maintaining such qualifications in effect for so long as required for the distribution of the Offered Securities.
Section 7 Representations and Warranties of the Corporation.
The Corporation represents and warrants to each of the Underwriters, and acknowledges that each of them is relying upon such representations and warranties in connection with the purchase of the Offered Securities, that:
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(a)
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Good Standing of the Corporation. The Corporation (i) is a corporation existing under the laws of Canada and is and will at the Closing Time be current and up-to-date with all material filings required to be made and in good standing under the CBCA, (ii) has all requisite corporate power and capacity to own, lease and operate its properties and assets, including its Business Assets, and to conduct the Business as now carried on by it, and (iii) has, and at the Closing Time will have, all requisite corporate power and authority to issue and sell the Offered Securities, to create and issue the Broker Warrants and to execute, deliver and perform its obligations under this Agreement and the Broker Warrant Certificates.
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(b)
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Good Standing of Subsidiaries. The Corporation’s only subsidiaries are listed in Schedule “A” (collectively, the “Subsidiaries”), which schedule is true, complete and accurate in all respects. Each Subsidiary is formed, organized and existing under the laws of the jurisdiction set out in Schedule “A”, is current and up-to-date with all material filings required to be made and has all requisite corporate power and capacity to own, lease and operate its properties and assets, including its Business Assets, and to conduct its Business as is now carried on by it, and is duly qualified to transact business and is in good standing in each jurisdiction in which such qualification is required in all material respects. All of the issued and outstanding shares in the capital of the Subsidiaries have been duly authorized and validly issued, are fully paid and, except as set out in Schedule “A”, are directly or indirectly beneficially owned by the Corporation. All of the issued and outstanding shares in the capital of the Subsidiaries owned by the Corporation are owned free and clear of any Liens, and none of the outstanding securities of the Subsidiaries were issued in violation of the pre-emptive or similar rights of any security holder of the Subsidiaries. There exist no options, warrants, purchase rights, or other contracts or commitments that could require the Corporation to sell, transfer or otherwise dispose of any securities of the Subsidiaries.
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(c)
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No Proceedings for Dissolution. No act or proceeding has been taken by or against the Corporation or the Subsidiaries in connection with their liquidation, winding-up or bankruptcy, or, to the knowledge of the Corporation, is pending.
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(d)
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Share Capital of the Corporation. The Corporation has an authorized capital consisting of an unlimited number of Common Shares, and an unlimited number of preferred shares of which (i) 37,954,943 Common Shares, and (ii) no preferred shares are issued and outstanding as of the date hereof. Except as disclosed in the Offering Documents, no securities exchangeable or convertible into Common Shares or preferred shares are issued and outstanding as of the date hereof, other than (A) the Over-Allotment Option, (B) an aggregate of 3,871,729 options to purchase 3,871,729 Common Shares under the Corporation’s stock option plan, and (C) an aggregate of 299,753 warrants to purchase 299,753 Common Shares. The rights, privileges, restrictions, conditions and other terms attaching to the Common Shares and preferred shares, respectively, conform in all material respects to the description thereof contained in the Offering Documents.
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(e)
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Form of Broker Warrant Certificate. At the Closing time, the form of Broker Warrant Certificate respecting the Broker Warrants will have been approved and adopted by the board of directors of the Corporation and will not conflict with any Applicable Law.
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(f)
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Common Shares Validly Issued. The Unit Shares and the Over-Allotment Shares, at or prior to the Closing Time, and the Broker Warrant Shares and the Over-Allotment Warrant Shares, upon the exercise of the Broker Warrants and Over-Allotment Warrants, respectively, shall be duly and validly authorized for issuance and sale pursuant to this Agreement, and when issued and delivered by the Corporation pursuant to this Agreement, against payment of the consideration therefor, will be validly issued as fully paid and non-assessable Common Shares and will not be issued in violation of any pre-emptive rights or contractual rights to purchase securities issued by the Corporation.
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(g)
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Warrants Validly Issued. At the Closing Time, the Unit Warrants and the Over-Allotment Warrants will have been duly authorized for issuance and sale, and the maximum number of Common Shares issuable upon due exercise of the Unit Warrants and the Over-Allotment Warrants will have been duly authorized for issuance upon due exercise of such Warrants in accordance with the terms of the Warrant Indenture and, when so issued, will be validly issued, fully paid and non-assessable. Such Common Shares, upon issuance upon due exercise of any such Warrants, will not be issued in violation of or subject to any pre-emptive rights or contractual rights to purchase securities issued by the Corporation.
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(h)
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Forms of Certificates. At the Closing Time, the forms of the certificates representing the Common Shares and Warrants will have been duly approved and adopted by the Corporation and comply in all respects with the applicable requirements of the CBCA and the Exchange.
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(i)
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Broker Warrants Validly Issued. At the Closing Time, the Broker Warrants will have been duly authorized for issuance pursuant to this Agreement and the maximum number of Broker Warrant Shares issuable upon due exercise of the Broker Warrants will have been duly authorized for issuance upon due exercise of such Broker Warrants and, when so issued, will be validly issued, fully paid and non-assessable. Such Broker Warrant Shares, upon due exercise of any Broker Warrants, will not be issued in violation of any pre-emptive rights or contractual rights to purchase securities issued by the Corporation.
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(j)
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Registrar and Transfer Agent. The Transfer Agent at its principal office in Calgary, Alberta has been duly appointed as transfer agent and registrar for the Common Shares.
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(k)
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Absence of Rights. Except as disclosed in the Offering Documents, no person has any existing right, agreement or option, present or future, contingent or absolute, or any right capable of becoming a right, agreement or option, for the issue or allotment of any unissued shares of the Corporation or any other agreement or option, for the issue or allotment of any unissued shares of the Corporation or any other security convertible into or exchangeable for any such shares, or to require the Corporation to purchase, redeem or otherwise acquire any of the issued and outstanding shares of the Corporation, other than pursuant to outstanding stock options. The Offered Shares, Over-Allotment Shares and Broker Warrant Shares, upon issuance, will not be issued in violation of any pre-emptive rights or contractual rights to purchase securities issued by the Corporation.
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(l)
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Corporate Actions. The Corporation has taken, or will have taken prior to the Closing Time, all necessary corporate action, (i) to authorize the execution, delivery and performance of this Agreement, the Warrant Indenture and the Broker Warrant Certificates, (ii) to authorize the execution and filing, as applicable, of the Offering Documents, (iii) to validly issue and sell the Offered Securities, (iv) to validly reserve for issuance the Warrant Shares, Over-Allotment Warrant Shares and the Broker Warrant Shares, (vi) to validly issue the Broker Warrants and (vii) to validly issue the Warrant Shares, Over-Allotment Warrant Shares and Broker Warrant Shares upon due exercise of the Unit Warrants, Over-Allotment Warrants and Broker Warrants, respectively, as fully paid and non-assessable Common Shares.
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(m)
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Valid and Binding Documents. The Corporation has the power and capacity to enter into and perform its obligations under this Agreement and to carry out the transactions contemplated in the Offering Documents. This Agreement, and at the time of execution of the Warrant Indenture, such documents will have been duly authorized, executed and delivered by the Corporation and will be legal, valid and binding obligations of the Corporation, enforceable against the Corporation in accordance with its terms, subject to exceptions as to applicable bankruptcy, insolvency and similar laws and the availability of equitable remedies and the provisions of the Limitations Act (Ontario).
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(n)
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No Consents, Approvals etc. The execution and delivery of this Agreement, the Warrant Indenture and the Broker Warrant Certificates, as applicable, and the fulfilment of the terms of such documents by the Corporation, including the issuance, sale and delivery of the Offered Securities and the issuance and delivery of the Broker Warrants, do not and will not require any Authorization of, or registration or qualification of or with, any Governmental Authority, stock exchange or other third party (including under the terms of any Material Agreement or Debt Instrument), except: (i) those which may be required and shall be obtained prior to the Closing Time under Applicable Securities Laws, and (ii) such customary post-closing notices or filings required to be submitted within the applicable time frame pursuant to Applicable Securities Laws, as may be required in connection with the Offering.
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(o)
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Financial Statements. The Financial Statements:
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(i)
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present fairly, in all material respects, the financial position of the Corporation on a consolidated basis and the statements of operations, retained earnings, cash flow from operations and changes in financial information of the Corporation on a consolidated basis for the periods specified in such Financial Statements;
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(ii)
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have been prepared in accordance with IFRS, applied on a consistent basis throughout the periods involved; and
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(iii)
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do not contain any misrepresentations with respect to the period covered by the Financial Statements.
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(p)
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Off-Balance Sheet Transactions. There are no off-balance sheet transactions, arrangements, obligations or liabilities of the Corporation or its Subsidiaries, whether direct, indirect, absolute, contingent or otherwise.
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(q)
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Accounting Policies. There has been no change in accounting policies or practices of the Corporation or its Subsidiaries other than as disclosed in the Financial Statements.
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(r)
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Liabilities. Neither the Corporation nor the Subsidiaries have any liabilities, obligations, indebtedness or commitments, whether accrued, absolute, contingent or otherwise, which are not disclosed in the disclosed in the Offering Documents, including the Financial Statements, other than liabilities, obligations, or indebtedness or commitments: (i) incurred in the normal course of business; or (ii) which would not, individually or in the aggregate, have a Material Adverse Effect.
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(s)
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Independent Auditors. The Corporation’s Auditors are, and the Former Auditors were, at the time they were auditors of the Corporation, independent with respect to the Corporation and Field Trip Psychedelics within the meaning of the rules of professional conduct applicable to auditors in Canada and there has never been a “reportable event” (within the meaning of NI 51-102) with such auditors.
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(t)
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Accounting Controls. The Corporation maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with IFRS and to maintain asset accountability, (iii) access to monies and investments is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
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(u)
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Purchases and Sales. Neither the Corporation nor any of the Subsidiaries has approved, has entered into any agreement in respect of, or has any knowledge, as the case may be, of:
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(i)
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the sale, transfer or other disposition of any Business Assets or any interest therein currently owned, directly or indirectly, by the Corporation or any Subsidiary, whether by asset sale, transfer of shares, or otherwise;
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(ii)
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a transaction which would result in the change of control (by sale or transfer of Common Shares or sale of all or substantially all of the Business Assets) of the Corporation or any Subsidiary; or
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(iii)
|
a proposed or planned disposition of Common Shares by any shareholder who owns, directly or indirectly, 10% or more of the outstanding Common Shares.
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(v)
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Title to Business Assets. The Corporation and the Subsidiaries have good, valid and marketable title to, and have all necessary rights in respect of, all of their Business Assets as owned, leased, licensed, loaned, operated or used by them or over which they have rights, free and clear of Liens and, except as set out in the Offering Documents, no other material rights or Business Assets are necessary for the conduct of the Business as currently conducted. The Corporation knows of no claim or basis for any claim that would reasonably be likely to result in a Material Adverse Effect on the rights of the Corporation or the Subsidiaries to use, transfer, lease, licence, operate, sell or otherwise exploit such Business Assets and neither the Corporation nor any Subsidiary has any obligation to pay any commission, licence fee or similar payment to any person in respect thereof and there are no outstanding rights of first refusal or other pre-emptive rights of purchase which entitle any person to acquire any of the rights, title or interests in such Business Assets.
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(w)
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Standard Operating Procedures. All research and development activities, including quality assurance, quality control, testing, and research and analysis activities, conducted or contemplated by the Corporation and the Subsidiaries in connection with the Business are being or will be conducted in compliance, in all material respects, with all industry, laboratory safety, management and training standards in the jurisdiction where such activities take place which are applicable to the Business, and all such processes, procedures and practices required in connection with such activities are or will be in place as necessary at the applicable time, and are or will be being complied with in all material respects.
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(x)
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Business Relationships. All agreements with third parties in connection with the Business have been entered into and are being performed by the Corporation and the Subsidiaries and, to the knowledge of the Corporation, by all other third parties thereto, in compliance with their terms in all material respects. There exists no actual or, to the knowledge of the Corporation, threatened termination, cancellation or limitation of, or any material adverse modification or material change in, the business relationship of the Corporation or the Subsidiaries, with any supplier or customer, or any group of suppliers or customers, whose business with or whose purchases or inventories/components provided to the Business are, individually or in the aggregate, material to the assets, Business, properties, operations or financial condition of the Corporation or the Subsidiaries.
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(y)
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Privacy
Protection. Each of the Corporation and the Subsidiaries have complied, in all material
respects, with all applicable privacy and consumer protection legislation and neither
the Corporation nor the Subsidiaries has collected, received, stored, disclosed, transferred,
used, misused or permitted unauthorized access to any information protected by privacy
laws, whether collected directly or from third parties, in an unlawful manner.
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(z)
|
Intellectual Property. The Corporation and the Subsidiaries, as applicable, own or possess the right to use all material Intellectual Property Rights necessary for the conduct of the Business, and the Corporation is not aware of any bona fide claim to the contrary or any challenge by any other person to the rights of the Corporation and the Subsidiaries with respect to the foregoing. To the knowledge of the Corporation, the Business of the Corporation, including that of the Subsidiaries, as now conducted does not infringe any Intellectual Property Rights of any person. The Corporation has not received notice of any bona fide claim made against the Corporation or the Subsidiaries alleging the infringement by the Corporation or the Subsidiaries of any Intellectual Property Rights of any person, other than as disclosed to the Underwriters in writing.
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(aa)
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Environmental and Workplace Laws. To the Corporation’s knowledge, each of the Corporation and the Subsidiaries is currently in compliance, in all material respects, with all Environmental Laws, and there are no pending or, to the knowledge of the Corporation, any threatened, administrative, regulatory or judicial actions, suits, demands, claims, liens, notices of non-compliance or violation, investigation or proceedings relating to any Environmental Laws. Neither the Corporation nor the Subsidiaries have ever received any notice of any non-compliance in respect of Environmental Laws, there are no events or circumstances that might reasonably be expected to form the basis of an order for clean up or remediation under Environmental Laws or relating to any Hazardous Materials, and there are no permits required under Environmental Laws for the conduct of the Business. The facilities and operations of the Corporation and the Subsidiaries are currently being conducted, and to the knowledge of the Corporation have been conducted, in all material respects in accordance with all applicable workers’ compensation and health and safety and workplace laws, regulations and policies.
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(bb)
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Insurance. The Corporation and the Subsidiaries maintain in good standing insurance, or where insurance has not yet been obtained, shall use commercially reasonable efforts to obtain and maintain insurance, by insurers of recognized financial responsibility, against such losses, risks and damages to their Business Assets in such amounts that are customary for the business in which they are engaged and on a basis consistent with reasonably prudent persons in comparable businesses. Each of the Corporation and the Subsidiaries has complied with the terms of such policies and instruments in all material respects and there are no material claims by the Corporation or the Subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause. The Corporation has no reason to believe that it will not be able to renew such existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue the Business at a cost that would not have a Material Adverse Effect, and neither the Corporation nor the Subsidiaries have failed to promptly give any notice of any material claim thereunder.
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(cc)
|
Material Agreements and Debt Instruments. Each Material Agreement and Debt Instrument has been provided to the Underwriters and is valid, subsisting, in good standing in all material respects and in full force and effect, enforceable in accordance with the terms thereof, subject to bankruptcy, insolvency and other laws affecting the rights of creditors generally, and subject to other standard assumptions and qualifications, including the qualifications that equitable remedies may be granted in the discretion of a court of competent jurisdiction and that enforcement of rights to indemnity, contribution and waiver of contribution set out in such agreements may be limited by Applicable Law. The Corporation and the Subsidiaries have, in all material respects, performed all obligations in a timely manner under, and are in compliance, in all material respects, with all terms and conditions (including any financial covenants) contained in, each Material Agreement and Debt Instrument.
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(dd)
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No Material Changes. Except as disclosed in the Prospectus, since March 31, 2020 (i) there has been no material change in the assets, liabilities, obligations (absolute, accrued, contingent or otherwise) business, condition (financial or otherwise), properties, capital or results of operations of the Corporation and the Subsidiaries considered as one enterprise, and (ii) there have been no transactions entered into by the Corporation or the Subsidiaries, other than those in the ordinary course of business, which are material with respect to the Corporation and the Subsidiaries considered as one enterprise.
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(ee)
|
Absence of Proceedings. There is no action, suit, proceeding, inquiry or investigation before or brought by any Governmental Authority, domestic or foreign, now pending or, to the knowledge of the Corporation, threatened against or affecting the Corporation, any Subsidiary or the Business Assets (including in respect of any product liability claims) which would have a Material Adverse Effect, or would materially and adversely affect the consummation of the transactions contemplated in this Agreement or the performance by the Corporation of its obligations hereunder. The aggregate of all pending legal or governmental proceedings to which the Corporation or the Subsidiaries is a party or of which any of their respective property or assets is subject would not reasonably be expected to result in a Material Adverse Effect.
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(ff)
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Absence of Defaults and Conflicts. Neither the Corporation nor any of the Subsidiaries is in material violation, default or breach of, and the execution, delivery and performance of this Agreement, the Offering Documents and the consummation of the transactions and compliance by the Corporation with its obligations hereunder and thereunder, the sale of the Offered Securities and the issuance of the Broker Warrants, do not and will not, whether with or without the giving of notice or passage of time or both, result in a material violation, default or breach of, or conflict with, or result in a Repayment Event or the creation or imposition of any Lien upon any property or assets of the Corporation, including the Business Assets, or the Subsidiaries, under the terms or provisions of (i) any Material Agreements or Debt Instruments, (ii) the articles or by-laws or other constating documents or resolutions of the directors or shareholders of the Corporation or the Subsidiaries, (iii) to the knowledge of the Corporation, any existing Applicable Law, including Applicable Securities Laws, or (iv) to the knowledge of the Corporation, any judgment, order, writ or decree of any Governmental Authority.
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(gg)
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Labour Matters. No material work stoppage, strike, lock-out, labour disruption, dispute, grievance, arbitration, proceeding or other conflict with the employees of the Corporation or the Subsidiaries currently exists or, to the knowledge of the Corporation, is imminent or pending and the Corporation and the Subsidiaries are in material compliance with all Applicable Law respecting employment and employment practices, terms and conditions of employment and wages and hours.
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(hh)
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Employment Standards. To the knowledge of the Corporation, there are no material complaints against the Corporation or the Subsidiaries before any employment standards branch or tribunal or human rights tribunal, nor any complaints or any occurrence which would reasonably be expected to lead to a complaint under any human rights legislation or employment standards legislation that would be material to the Corporation. There are no outstanding decisions or settlements or pending settlements under applicable employment standards legislation, which place any material obligation upon the Corporation or the Subsidiaries to do or refrain from doing any act. The Corporation and the Subsidiaries are currently in material compliance with all workers’ compensation, occupational health and safety and similar legislation, including payment in full of all amounts owing thereunder, and there are no pending claims or outstanding orders of a material nature against either of them under applicable workers’ compensation legislation, occupational health and safety or similar legislation nor has any event occurred which may give rise to any such material claim.
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(ii)
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Collective Bargaining Agreements. Neither the Corporation nor any Subsidiary is party to any collective bargaining agreements with unionized employees. To the knowledge of the Corporation, no action has been taken or is being threatened to organize or unionize any employees of the Corporation or any Subsidiary that would have a Material Adverse Effect.
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(jj)
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Employee Plans. Each material plan for retirement, bonus, stock purchase, profit sharing, stock option, deferred compensation, severance or termination pay, insurance, medical, hospital, dental, vision care, drug, sick leave, disability, salary continuation, legal benefits, unemployment benefits, vacation, incentive or other benefits contributed to, or required to be contributed to, by the Corporation for the benefit of any current or former director, officer, employee or consultant of the Corporation (the “Employee Plans”) has been maintained in all material respects with its terms and with the requirements prescribed by any and all statutes, orders, rules and regulations that are applicable to such Employee Plans.
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(kk)
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Taxes. All tax returns, reports, elections, remittances and payments of the Corporation and the Subsidiaries required by Applicable Law to have been filed or made in any applicable jurisdiction, have been filed or made (as the case may be) and are true, complete and correct, except where the failure to make such filing, election, or remittance and payment would not constitute a Material Adverse Effect on the Corporation taken as a whole, and all taxes of the Corporation and of the Subsidiaries have been paid or accrued in the Financial Statements (except as any extension may have been requested or granted and in any case in which the failure to file, pay or accrue such taxes would not result in a Material Adverse Effect). To the knowledge of the Corporation, there are no examinations of any tax return of the Corporation or the Subsidiaries currently in progress and there are no disputes outstanding with any Governmental Authority respecting any taxes that have been paid, or may be payable, by the Corporation or the Subsidiaries.
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(ll)
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Anti-Bribery Laws. Neither the Corporation nor any Subsidiary nor, to the knowledge of the Corporation, any director, officer, employee, consultant, representative or agent of the foregoing, has (i) violated any anti-bribery or anti-corruption laws applicable to the Corporation and the Subsidiaries, including Canada’s Corruption of Foreign Public Officials Act, or (ii) offered, paid, promised to pay, or authorized the payment of, any money, or offered, given, promised to give, or authorized the giving of, anything of value, that goes beyond what is reasonable and customary and/or of modest value: (X) to any Government Official, whether directly or through any other person, for the purpose of influencing any act or decision of a Government Official in his or her official capacity; inducing a Government Official to do or omit to do any act in violation of his or her lawful duties; securing any improper advantage; inducing a Government Official to influence or affect any act or decision of any Governmental Authority; or assisting any representative of the Corporation or the Subsidiaries in obtaining or retaining business for or with, or directing business to, any person; or (Y) to any person in a manner which would constitute, or have the purpose or effect of, public or commercial bribery, or the acceptance of or acquiescence in extortion, kickbacks, or other unlawful or improper means of obtaining business or any improper advantage. Neither the Corporation nor the Subsidiaries, nor, to the knowledge of the Corporation, any director, officer, employee, consultant, representative or agent of the foregoing, has (i) conducted or initiated any review, audit or internal investigation that concluded the Corporation, a Subsidiary, or any director, officer, employee, consultant, representative or agent of the foregoing, violated such laws or committed any material wrongdoing, or (ii) made a voluntary, directed, or involuntary disclosure to any Governmental Authority responsible for enforcing anti-bribery or anti-corruption laws, in each case with respect to any alleged act or omission arising under or relating to non-compliance with any such laws, or received any notice, request, or citation from any person alleging non-compliance with any such laws.
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(mm)
|
No Significant Acquisitions. Other than as disclosed in the Offering Documents, no acquisitions or dispositions have been made by the Corporation or any Subsidiary in the most recently completed fiscal year that are “significant acquisitions” or “significant dispositions,” and other than as contemplated in the Offering Documents, neither the Corporation nor any Subsidiary is a party to any contract with respect to any transaction that would constitute a “probable acquisition,” in each case which would require disclosure in the Offering Documents under Canadian Securities Laws.
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(nn)
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Compliance with Applicable Law. The Corporation acknowledges that the Business is subject to restrictions, requirements and prohibitions under Applicable Law in force (including the CDSA, the FDA, the FDR-J, the Criminal Code, and provincial, territorial and municipal laws relating to controlled substances, the Controlled Substances Act, the Racketeering and Influenced and Corrupt Practices Act, the Secure Air Travel Act, the Bank Secrecy Act, the Agricultural Improvement Act of 2018, any applicable state corporate practice of medicine statues or any applicable anti-money laundering statute), which may change from time to time. The Corporation and the Subsidiaries have obtained, are in compliance with, have complied with, will continue to comply with or will have complied with, in all material respects, all Applicable Law, including all Authorizations, prior to the Closing Time in connection with the Offering. All Authorizations issued to date are valid and in full force and effect and neither the Corporation nor any Subsidiary has received any correspondence or notice from the Office of Controlled Substances, other offices of Health Canada, the CPSO, the New York State Medical Board, the California Medical Board or any Governmental Authority alleging or asserting material non-compliance with any Applicable Law or Authorization. Neither the Corporation nor any Subsidiary has received any notice of proceedings or actions relating to the revocation, suspension, limitation or modification of any Authorizations or any notice advising of the refusal to grant any Authorization that has been applied for or is in process of being granted under Applicable Law including the FDA, the FDR-J or the Out of Hospital Premise Program of the CPSO, and has no knowledge or reason to believe that any such Governmental Authority is considering taking or would have reasonable ground to take any such action. Neither the Corporation nor any Subsidiary is aware of any non-compliance with any Applicable Law, including the CDSA, the FDA, the FDR-J, the Criminal Code or any provincial, territorial or municipal legislation that the Corporation or any Subsidiary has reason to believe could result in a Material Adverse Effect.
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(oo)
|
No Loans. Except as disclosed in the Prospectus, neither the Corporation nor any Subsidiary has made any material loans to or guaranteed the material obligations of any person.
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(pp)
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Directors and Officers. To the knowledge of the Corporation, none of the directors or officers of the Corporation are now, or have been, subject to an order or ruling of any securities regulatory authority or stock exchange prohibiting such individual from acting as a director or officer of a public company or of a company listed on a particular stock exchange.
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(qq)
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Minute Books and Records. The minute books and records of the Corporation and the Subsidiaries made available to counsel for the Underwriters in connection with their due diligence investigation of the Corporation for the periods requested to the date hereof are all of the minute books and material records of the Corporation and the Subsidiaries and contain copies of all material proceedings (or certified copies thereof or drafts thereof pending approval) of the shareholders, the directors and all committees of directors of the Corporation and the Subsidiaries, as the case may be, to the date of review of such corporate records and minute books and there have been no other meetings, resolutions or proceedings of the shareholders, directors or any committees of the directors of the Corporation and the Subsidiaries to the date hereof not reflected in such minute books and other records, other than those which have been disclosed to the Underwriters or which are not material in the context of the Corporation and the Subsidiaries.
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(rr)
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No Dividends. During the previous 12 months, the Corporation has not, directly or indirectly, declared or paid any dividend, or declared or made any other distribution on any of its shares or securities of any class, or, directly or indirectly, redeemed, purchased or otherwise acquired any of its Common Shares or other securities, or agreed to do any of the foregoing. There are no restrictions upon the declaration or payment of dividends by the directors of the Corporation or the payment of dividends by the Corporation in the constating documents or in any Material Agreements or Debt Instruments.
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(ss)
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Fees and Commissions. Other than the Underwriters (and their selling group members) pursuant to this Agreement, there is no other person acting at the request of the Corporation, or to the knowledge of the Corporation, purporting to act, who is entitled to any brokerage, agency or other fiscal advisory or similar fee in connection with the Offering or transactions contemplated herein.
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(tt)
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Entitlement to Proceeds. Other than the Corporation, there is no person that is or will be entitled to demand any of the net proceeds of the Offering.
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(uu)
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Related Parties. Except as disclosed in the Prospectus, none of the directors, officers or employees of the Corporation, any known holder of more than 10% of any class of securities of the Corporation or securities of any person exchangeable for more than 10% of any class of securities of the Corporation, or any known associate or affiliate of any of the foregoing persons or companies (as such terms are defined in the Securities Act), has had any material interest, direct or indirect, in any material transaction with the Corporation since the incorporation of the Corporation, or any proposed material transaction which, as the case may be, materially affected or is reasonably expected to materially affect the Corporation and any Subsidiary, on a consolidated basis. Neither the Corporation nor any Subsidiary has any material loans or other indebtedness outstanding which has been made to any of its shareholders, officers, directors or employees, past or present, or any person not dealing at “arm’s length” (within the meaning of the Income Tax Act (Canada)) with them.
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(vv)
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Anti-Money Laundering. The operations of the Corporation and the Subsidiaries (or any related party thereof) are and have been conducted at all times in compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, all applicable financial recordkeeping and reporting requirements, the applicable anti-money laundering statutes of jurisdictions where the Corporation and the Subsidiaries (or any related party thereof) conduct business, the rules and regulations thereunder and any related or similar rules or regulations, issued, administered or enforced by any governmental agency applicable to the Corporation and the Subsidiaries (or any related party thereof) (collectively, the “Anti-Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Corporation and the Subsidiaries (or any related party thereof) with respect to the Anti-Money Laundering Laws is, to the knowledge of the Corporation, pending or threatened.
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(ww)
|
Exchange Compliance. The Corporation is, and will at the Closing Time be, in compliance in all material respects with the by-laws, policies, rules and regulations of the Exchange existing on the date hereof. The outstanding Common Shares will be listed and posted for trading on the Exchange at the Closing Time and neither the Corporation nor the Subsidiaries has taken any action which would reasonably be expected to result in the delisting or suspension of the Common Shares on or from the Exchange.
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(xx)
|
Short-Form Eligibility. The Corporation is qualified under NI 44-101 to file a prospectus in the form of a short form prospectus in each of the Qualifying Jurisdictions and on the date of and upon filing of the Prospectus there will be no documents required to be filed under Canadian Securities Laws in connection with the distribution of the Offered Securities that will not have been filed as required.
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(yy)
|
No Orders. Neither any Securities Commissions, nor any stock exchange or comparable authority has issued any order preventing or suspending the use of the Preliminary Prospectus, or preventing the suspending the offer, sale or distribution of the Offered Securities or other securities of the Corporation in the manner contemplated herein, if any, nor instituted proceedings for that purpose and no such proceedings are, to the knowledge of the Corporation, pending or threatened.
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(zz)
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Prospectus. The information and statements contained in the Prospectus (except information and statements relating solely to the Underwriters and furnished by them in writing specifically for use therein) will, at the time of delivery of the Prospectus: (i) be true and correct in all material respects; (ii) contain no misrepresentation relating to the Corporation and its Subsidiaries or the Offering and will be in compliance with applicable Canadian Securities Laws in all material respects; and (iii) not omit any material fact or information which is necessary to make the statements or information contained therein not misleading in light of the circumstances under which they were made.
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(aaa) Forward-Looking Information. The Corporation has a reasonable basis for disclosing any forward-looking or future-oriented financial information contained in the Offering Documents and is not, as at the date hereof, required to update any such forward-looking information pursuant to NI 51-102.
(bbb) Continuous Disclosure Obligations. Except as provided herein, to its knowledge, the Corporation is in compliance in all material respects with its continuous and timely disclosure obligations under Canadian Securities Laws and the rules and regulations of the Exchange and has filed all documents required to be filed by it with the Securities Commissions under applicable Canadian Securities Laws, and no document has been filed on a confidential basis with the Securities Commissions that remains confidential at the date hereof. None of the documents filed in accordance with applicable Canadian Securities Laws contained, as at the date of filing thereof, a misrepresentation. The Underwriters acknowledge that the Corporation has provided the Underwriters with a copy of a letter dated December 15, 2020 from the OSC with respect to the Corporation in connection with the OSC’s continuous disclosure review program.
Section
8 Covenants
of the Corporation
The Corporation covenants and agrees with the Underwriters, and acknowledges that each of them is relying on such covenants in connection with the purchase of the Offered Securities, as follows:
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(1)
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Prospectus Filing. Promptly after the execution and delivery of this Agreement by the parties hereto, the Corporation shall file under Canadian Securities Laws the Preliminary Prospectus and other documents relating to the proposed distribution of the Offered Securities in the Qualifying Jurisdictions, and the Corporation shall use its commercially reasonable efforts to obtain the Preliminary Receipt from the OSC (as principal regulator) and each of the other Securities Commissions pursuant to the Passport System dated the date hereof.
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(2)
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Final Receipt. The Corporation shall use its commercially reasonable efforts to satisfy all comments with respect to the Preliminary Prospectus as soon as possible after receipt of such comments. The Corporation shall prepare and file under Canadian Securities Laws the Final Prospectus and other documents relating to the proposed distribution of the Offered Securities in the Qualifying Jurisdictions, and the Corporation shall use its commercially reasonable efforts to obtain the Final Receipt from the OSC (as principal regulator) and each of the other Canadian Securities Commissions pursuant to the Passport System dated on or before December 24, 2020.
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(3)
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Notification of Filings. The Corporation will advise the Underwriters, promptly after receiving notice thereof, of the time when the Offering Documents have been filed and receipts, as applicable, therefor have been obtained, and will provide evidence reasonably satisfactory to the Underwriters of each such filing and copies of such receipts.
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(4)
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Qualification of Offered Securities. Until the earlier of the date on which the distribution of the Offered Securities is completed or this Agreement is terminated, the Corporation will promptly take, or cause to be taken, all additional steps and proceedings that may from time to time be required under Canadian Securities Laws to continue to qualify the distribution of the Offered Securities and the Broker Warrants or, in the event that the Offered Securities, Broker Warrants or any of them, have, for any reason, ceased to so qualify, to so qualify again such securities, as applicable, for distribution.
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(5)
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Standstill. The Corporation agrees not to issue any Common Shares or securities or other financial instruments convertible or exercisable into Common Shares (other than to satisfy rights or obligations under: equity incentive plans, including the Corporation’s stock option plan (including pursuant to the grant and/or exercise of securities under such equity incentive plans); securities or other financial instruments existing as of December 9, 2020; or the issuance of securities in connection with any merger, business combination, tender offer, take-over bid, arrangement, asset purchase, joint venture or similar transaction), or announce any intention to do so, from December 9, 2020 through a period of 120 days from the Closing Date without the prior written consent of Stifel GMP (on its own behalf and on behalf of the other Underwriters), which will not be unreasonably withheld or delayed.
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(6)
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Lock-Up Agreements. The Corporation shall cause each of the directors and officers of the Corporation and their respective associates to execute agreements, in favour of the Underwriters, agreeing not to, directly or indirectly, offer, sell, contract to sell, lend, swap, or enter into any other agreement to transfer the economic consequences of, or otherwise dispose of or deal with, or publicly announce any intention to offer, sell, contract to sell, grant or sell any option to purchase, hypothecate, pledge, transfer, assign, purchase any option or contract to sell, lend, swap, or enter into any agreement to transfer the economic consequences of, or otherwise dispose of or deal with, whether through the facilities of a stock exchange, by private placement or otherwise, any Common Shares or other securities of the Corporation held by them, directly or indirectly, for a period ending 120 days from the Closing Date unless (a) they first obtain the prior written consent of Stifel GMP (on its own behalf and on behalf of the other Underwriters), which consent will not be unreasonably withheld or delayed, or (b) there occurs a take-over bid or similar transaction involving a change of control of the Corporation; excluding, for greater clarity, any transfer among a locked-up holder and any of its affiliates for tax or planning purposes, provided that the transferee(s) are bound by these restrictions.
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(7)
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Maintain Existence. The Corporation shall use commercially reasonable efforts to remain a corporation validly subsisting under the laws of its jurisdiction of incorporation, licenced, registered or qualified as an extra-provincial or foreign corporation in all jurisdictions where the character of its properties owned or leased or the nature of the activities conducted by it make such licensing, registration or qualification necessary, and shall carry on its Business in the Ordinary Course and in compliance in all material respects with all Applicable Laws, rules and regulations of each such jurisdiction for a period of 24 months following the Closing Date, provided that the Corporation shall not be required to comply with this Section 8(7) following the completion of a merger, amalgamation, arrangement, business combination or take-over bid pursuant to which the Corporation ceases to be a “distributing corporation” (within the meaning of the CBCA);
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(8)
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Maintain Reporting Issuer Status. The Corporation will use its commercially reasonable efforts to maintain its status as a “reporting issuer” (or the equivalent thereof) not in default of the requirements of Canadian Securities Laws in each of the Qualifying Jurisdictions, and following the filing of the Final Prospectus in each of the Qualifying Jurisdictions, to the date that is at least 24 months following the Closing Date, provided that the foregoing requirement is subject to the obligations of the directors to comply with their fiduciary duties to the Corporation, and further provided that the Corporation shall not be required to comply with this Section 8(7) following the completion of a merger, amalgamation, arrangement, business combination or take-over bid pursuant to which the Corporation ceases to be a “reporting issuer” (within the meaning of Applicable Securities Laws).
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(9)
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Maintain Stock Exchange Listing. The Corporation will use its commercially reasonable efforts to maintain the listing of the Common Shares (including those issuable pursuant to the Offering) on the Exchange, the Toronto Stock Exchange, New York Stock Exchange, the TSX Venture Exchange, the NASDAQ, or such other recognized stock exchange or quotation system as the Underwriters may approve, acting reasonably, with such approval not to be unreasonably delayed, for a period of at least 24 months following the Closing Date, provided that the foregoing requirement is subject to the obligations of the directors to comply with their fiduciary duties to the Corporation, and further provided that the Corporation shall not be required to comply with this Section 8(9) following the completion of a merger, amalgamation, arrangement, business combination or take-over bid pursuant to which the Corporation ceases to be a “reporting issuer” (within the meaning of applicable Securities Laws).
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(10)
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Exchange Listing. The Corporation will use its commercially reasonable efforts to obtain the listing of the Unit Shares and Warrants (including any Over-Allotment Securities) and the Broker Warrant Shares on the Exchange or such other recognized stock exchange or quotation system as the Underwriters may approve, acting reasonably, prior to the Closing Date, subject to the Underwriters satisfying the distribution requirements of the Exchange for the Warrants to be listed thereon.
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(11)
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Validly Issued Shares. The Corporation will, provided it receives payment therefor, ensure that, at the Closing Time, the Unit Shares and Warrant Shares (including any Over-Allotment Shares and Over-Allotment Warrant Shares) have been duly and validly issued as fully paid and non-assessable Common Shares.
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(12)
|
Validly Issued Warrants. The Corporation will ensure that, at the Closing Time, the Warrants and, if applicable, the Over-Allotment Warrants, shall be validly created and issued and shall have attributes corresponding in all material respects to the description set forth in the Warrant Indenture.
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(13)
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Validly Issued Broker Warrants. The Corporation will ensure that, at the Closing Time, the Broker Warrants shall be validly created and issued and shall have attributes corresponding in all material respects to the description set forth in the Broker Warrant Certificates.
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(14)
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Reservation of Shares. The Corporation will ensure that that, at all times following the issue of the Warrants, the Over-Allotment Warrants (if any), and the Broker Warrants, until the expiry date thereof, that a sufficient number of applicable Common Shares are allotted and reserved for issuance upon the due exercise of the Warrants, the Over-Allotment Warrants, and the Broker Warrants.
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(15)
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Warrant Agent. The Corporation will duly appoint the Transfer Agent as the warrant agent under the Warrant Indenture at or prior to the Closing Time.
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(16)
|
Use of Proceeds. The Corporation will use the proceeds of the Offering in the manner specified in the Prospectus under the heading “Use of Proceeds”.
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(17)
|
Consents and Approvals. The Corporation will have made or obtained, as applicable, using commercially reasonable efforts at or prior to the Closing Time, all consents, approvals, permits, authorizations or filings as may be required by the Corporation under Applicable Securities Laws necessary for the consummation of the transactions contemplated herein, other than customary post-closing filings required to be submitted within the applicable time frame pursuant to Applicable Securities Laws and the rules of the Exchange.
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(18)
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Closing Conditions. The Corporation will have, at or prior to the Closing Time, fulfilled or caused to be fulfilled, each of the conditions set out in Section 10 hereof.
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Section 9 Representations, Warranties and Covenants of the Underwriters
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(1)
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Each Underwriter hereby severally, and not jointly, nor jointly and severally, represents and warrants to the Corporation, the following:
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(a)
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Registration. The Underwriters are, and will remain so, until the completion of the Offering, appropriately registered under applicable Canadian Securities Laws so as to permit it to lawfully fulfill its obligations hereunder;
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(b)
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Authority. The Underwriters have good and sufficient right and authority to enter into this Agreement and complete the transactions contemplated under this Agreement on the terms and conditions set forth herein; and
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(c)
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Marketing Materials. Other than the Marketing Materials, the Underwriters have not provided any marketing materials to any potential investors in connection with the Offering.
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(2)
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The Underwriters hereby severally, and not jointly, nor jointly and severally, covenant and agree with the Corporation, the following:
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(a)
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Jurisdictions and Offering Price. During the period of distribution of the Offered Securities by or through the Underwriters, the Underwriters will offer and sell Offered Securities to the public only in the Selling Jurisdictions where they may lawfully be offered for sale by such Underwriters upon the terms and conditions set forth in the Prospectus and this Agreement either directly or through other duly registered investment dealers and brokers. The Underwriters shall be entitled to assume that the Offered Securities are qualified for distribution in any Qualifying Jurisdiction where the Final Receipt shall have been obtained following the filing of the Prospectus.
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(b)
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Compliance with Securities Laws. The Underwriters will comply with applicable Securities Laws in connection with the offer and sale and distribution of the Offered Securities.
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(c)
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U.S. Sales. The Underwriters will not, directly or indirectly, solicit offers to purchase or sell the Offered Securities or deliver any Offering Document to purchasers so as to require registration of the Offered Securities or the filing of a prospectus or registration statement with respect to the Offered Securities under the Laws of any jurisdiction other than the Qualifying Jurisdictions, including without limitation, the United States.
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(d)
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Completion of Distribution. The Underwriters will use their commercially reasonable efforts to complete the distribution of the Offered Securities as promptly as possible after the Closing Time. The Lead Underwriter will notify the Corporation when the Underwriters have ceased the distribution of the Offered Securities, and, within 30 days after the Closing Date, will provide the Corporation, in writing, with a written breakdown of the number of Offered Securities distributed (i) in each of the Qualifying Jurisdictions, and (ii) in any other Selling Jurisdictions.
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(e)
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Liability on Default. No Underwriter shall be liable to the Corporation under this Section with respect to a breach or default under this Agreement by another Underwriter.
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Section
10 Conditions
of Closing
The obligation of the Underwriters under this Agreement to purchase the Offered Securities at the Closing Time and at any Option Closing Time shall be subject to the satisfaction of each of the following conditions (it being understood that the Underwriters may waive in whole or in part, or extend the time for compliance with, any of such terms and conditions without prejudice to their rights in respect of any other of the following terms and conditions or any other or subsequent breach or non-compliance of the Corporation, provided that to be binding on the Underwriters any such waiver or extension must be in writing and signed by each of them):
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(1)
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the Underwriters receiving favourable legal opinions from Bennett Jones LLP, counsel to the Corporation (who may provide the opinions of local counsel acceptable to counsel to the Underwriters as to the qualification of the Offered Securities for sale to the public and as to other matters governed by the laws of jurisdictions in Canada other than the provinces in which they are qualified to practice and may rely, to the extent appropriate in the circumstances, as to matters of fact on certificates of officers, public and exchange officials or of the auditor or Transfer Agent of the Corporation), substantially to the effect set forth below, subject to customary assumptions, qualifications and limitations:
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(a)
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the Corporation is a corporation existing under the CBCA and has not been dissolved under the CBCA;
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(b)
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the Corporation has the corporate power and corporate capacity under the CBCA and the constating documents of the Corporation to (i) carry on its Business and activities and to own, lease and operate its properties and Business Assets, as described in the Prospectus, (ii) execute and deliver this Agreement, the Offering Documents, the Warrant Indenture and the Broker Warrant Certificates, as applicable, and perform its obligations thereunder, (iii) create, offer, issue and sell the Offered Securities, (iv) create, offer, issue and deliver the Broker Warrants, and (iv) grant the Over-Allotment Option to the Underwriters;
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(c)
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as to the authorized share capital of the Corporation and that the Prospectus describes, in all material respects, the attributes of the Common Shares and preferred shares of the Corporation;
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(d)
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all necessary corporate action has been taken by the Corporation to authorize the execution and delivery of this Agreement, the Warrant Indenture and the Broker Warrant Certificates, and the performance by the Corporation of its obligations under this Agreement, the Warrant Indenture and the Broker Warrant Certificates, and this Agreement, the Warrant Indenture and the Broker Warrant Certificates have been duly authorized, executed and delivered by the Corporation and constitute legal, valid and binding obligations of the Corporation, enforceable against it in accordance with their terms, subject to bankruptcy, insolvency and other laws affecting the rights of creditors generally and subject to other standard assumptions and qualifications, including the qualifications that equitable remedies may be granted in the discretion of a court of competent jurisdiction and that enforcement of rights to indemnity, contribution and waiver of contribution set out in this Agreement and the Warrant Indenture may be limited by Applicable Laws;
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(e)
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all necessary corporate action has been taken by the Corporation to authorize the execution and delivery of the Preliminary Prospectus, the Final Prospectus, the U.S. Memorandum and any Supplementary Material and the filing of such documents, as applicable, under Canadian Securities Laws;
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(f)
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the execution and delivery of this Agreement, the Warrant Indenture and the Broker Warrant Certificates and the performance by the Corporation of its obligations thereunder, including the issuance, sale and delivery of the Offered Securities, the issuance and delivery of the Broker Warrants and the grant of the Over-Allotment Option in accordance with this Agreement, the Warrant Indenture and the Broker Warrant Certificates, do not and will not result in a breach of, or constitute a default under, and do not and will not create a state of facts which, after notice or lapse of time or both, will result in a breach of or constitute a default under (i) constating documents of the Corporation, (ii) resolutions of the directors or shareholders of the Corporation, or (iii) the CBCA;
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(g)
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the Unit Shares have been validly issued as fully paid and non-assessable Common Shares;
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(h)
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the Unit Warrants have been validly created and issued as warrants of the Corporation;
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(i)
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the Broker Warrants have been validly created and issued as warrants of the Corporation;
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(j)
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the Over-Allotment Option has been duly and validly authorized and granted by the Corporation, and the Over-Allotment Shares and Over-Allotment Warrants issuable upon the exercise of the Over-Allotment Option have been duly and validly created, allotted and reserved for issuance by the Corporation and, upon the exercise of the Over-Allotment Option, including receipt by the Corporation of payment in full therefor, the Over-Allotment Shares and Over-Allotment Warrants will be duly and validly created, authorized, issued and outstanding and the Over-Allotment Shares will be fully paid and non-assessable shares;
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(k)
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the Warrant Shares, Over-Allotment Warrant Shares and Broker Warrant Shares have been duly and validly authorized, allotted and reserved for issuance, and upon due exercise of the Unit Warrants, the Over-Allotment Warrants and Broker Warrants, as applicable, in accordance with their respective terms, the Warrant Shares, the Over-Allotment Warrant Shares and the Broker Warrant Shares will be validly issued as fully paid and non-assessable shares in the capital of the Corporation;
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(l)
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all necessary documents have been filed, all requisite proceedings have been taken and all necessary authorizations, approvals, permits and consents have been obtained by the Corporation under Applicable Securities Laws in order to qualify the distribution of the Offered Securities and the Broker Warrant Shares in the Qualifying Jurisdictions by or through dealers who are duly and properly registered in the appropriate category under the Securities Laws and who have complied with all relevant provisions of such Securities Laws and the terms of their registration;
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(m)
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the issuance of the Warrant Shares and Over-Allotment Warrant Shares issuable upon exercise of the Warrants and the Over-Allotment Warrants will be exempt from the prospectus requirements of applicable Canadian Securities Laws and no documents are required to be filed, proceedings taken or approvals, permits, consents or authorizations obtained under applicable Canadian Securities Laws to permit such issuance;
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(n)
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the issuance of the Broker Warrant Shares issuable upon exercise of the Broker Warrants will be exempt from the prospectus requirements of applicable Canadian Securities Laws and no documents are required to be filed, proceedings taken or approvals, permits, consents or authorizations obtained under applicable Canadian Securities Laws to permit such issuance;
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(o)
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the Corporation is a “reporting issuer” under Canadian Securities Laws in each of the Qualifying Jurisdictions and it is not listed as in default of applicable Canadian Securities Laws in any of the Qualifying Jurisdictions which maintain such a list;
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(p)
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the Unit Shares, the Warrants, the Warrant Shares and the Broker Warrant Shares have been approved for listing on the Exchange, subject to the Corporation fulfilling all of the requirements of the Exchange, including those set forth in any conditional approval letter of the Exchange;
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(q)
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Computershare Investor Services Inc. has been duly appointed as registrar and transfer agent of the Common Shares and as warrant agent under the Warrant Indenture;
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(r)
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subject to the limitations, qualifications and assumptions set out therein, the statements set forth in the Prospectus under the headings “Eligibility for Investment” and “Certain Canadian Federal Income Tax Considerations”, insofar as they purport to describe the provisions of the laws referred to therein, are fair summaries of the matters discussed therein;
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(s)
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the attributes of the Offered Securities and the Broker Warrants conform in all material respects with the description thereof contained in the Final Prospectus; and
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(t)
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the form of Broker Warrant Certificate has been duly approved and adopted by the board of directors of the Corporation and complies in all material respects with the constating documents of the Corporation,
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in form and substance acceptable to the Underwriters and their counsel, acting reasonably;
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(2)
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the Underwriters receiving legal opinions from counsel to each Subsidiary (who may rely, to the extent appropriate in the circumstances, as to matters of fact on certificates of officers, public and exchange officials related to each Subsidiary), in form and substance acceptable to the Underwriters and their counsel, acting reasonably, substantially to the effect set forth below, subject to customary assumptions, qualifications and limitations:
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(a)
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such Subsidiaries having been incorporated and existing under the Applicable Laws of their respective jurisdictions of incorporation;
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(b)
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such Subsidiaries having the corporate capacity and power to own and lease their properties and Business Assets and to conduct their Business as currently being conducted;
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(c)
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as to the authorized and issued share capital of such Subsidiaries and to the ownership thereof; and
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(d)
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such Subsidiaries being current with all corporate filings required to be made under their respective jurisdictions of incorporation and all other jurisdictions in which they exist or carry on any material business, and having all necessary licences, leases, permits, authorizations and other approvals necessary to permit them to conduct their respective Business as currently conducted;
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(3)
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if any of the Offered Securities are offered or sold in the United States or to, or for the account or benefit of, U.S. Persons, the Underwriters shall have received at the Closing Time a customary and favourable legal opinion dated the Closing Date in form and substance reasonably satisfactory to the Underwriters to the effect that no registration is required under the U.S. Securities Act in connection with the offer, sale and resale of the Offered Securities, provided, in each case, that such offer, sale and resale and delivery of Offered Securities in the United States or to, or for the account or benefit of, U.S. Persons is made in compliance with this Agreement and the terms set out in Schedule “B” hereto and provided further that it is understood that no opinion is expressed as to any subsequent resale of any Offered Securities. In providing the foregoing opinion, such counsel may rely upon the covenants, representation and warranties of the Corporation and the Underwriters set forth in this Agreement and Schedule “B” hereto, and upon the covenants, representation and warranties of any purchasers in the United States;
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(4)
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the Underwriters having received certificates dated the Closing Date and signed by two senior officers of the Corporation as may be acceptable to the Underwriters, acting reasonably, in form and substance satisfactory to the Underwriters, acting reasonably, with respect to:
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(a)
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the constating documents of the Corporation;
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(b)
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the resolutions of the directors of the Corporation relevant to the Offering Documents, the sale of the Offered Securities, the grant of the Over-Allotment Option, the issuance and delivery of the Broker Warrants and the authorization of this Agreement and the Warrant Indenture and the transactions contemplated herein and therein; and
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(c)
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the incumbency and signatures of signing officers for the Corporation;
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(5)
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the Underwriters receiving certificates of status and/or compliance, where issuable under Applicable Laws, for the Corporation and the Subsidiaries, each dated within one Business Day prior to the Closing Date;
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(6)
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the Underwriters receiving an auditors “bring down” comfort letter dated the Closing Date from the Corporation’s Auditors, in form and substance satisfactory to the Underwriters, acting reasonably, bringing forward to a date not more than two Business Days prior to the Closing Date the information contained in the comfort letter referred to in Section 4(1)(d) hereof;
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(7)
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the Underwriters receiving an auditors “bring down” comfort letter dated the Closing Date from the Former Auditors, in form and substance satisfactory to the Underwriters, acting reasonably, bringing forward to a date not more than two Business Days prior to the Closing Date the information contained in the comfort letter referred to in Section 4(1)(e) hereof;
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(8)
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the Underwriters receiving a certificate dated the Closing Date and signed by the Chief Executive Officer and the Chief Financial Officer or such other senior officer(s) of the Corporation as may be acceptable to the Underwriters, certifying for and on behalf of the Corporation and without personal liability, after having made due enquiries, that:
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(a)
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the representations and warranties of the Corporation contained in this Agreement, and in any certificates of the Corporation delivered pursuant to or in connection with this Agreement, are true and correct in all material respects as of the Closing Time as if such representations and warranties were made as at the Closing Time, after giving effect to the transactions contemplated hereby;
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(b)
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the Corporation has complied in all material respects with all the covenants and satisfied in all respects all the terms and conditions of this Agreement on its part to be complied with and satisfied at or prior to the Closing Time;
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(c)
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no order, ruling or determination having the effect of suspending the sale or ceasing the trading or prohibiting the sale of the Offered Securities or any other securities of the Corporation (including the Common Shares) has been issued by any regulatory authority and is continuing in effect and no proceedings for that purpose have been instituted or are pending or, to the knowledge of such officers, contemplated or threatened by any regulatory authority;
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(d)
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since the respective dates as of which information is given in the Final Prospectus (A) there has been no material change (actual, anticipated, contemplated or threatened, whether financial or otherwise) in the business, affairs, operations, assets, liabilities (contingent or otherwise), or capital of the Corporation on a consolidated basis, and (B) no transaction has been entered into by the Corporation or any Subsidiary which is material to the Corporation on a consolidated basis, other than as disclosed in the Final Prospectus or the Supplementary Material, as the case may be;
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(e)
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there has been no change in any material fact (which includes the disclosure of any previously undisclosed material fact) contained in the Final Prospectus which fact or change is, or may be, of such a nature as to render any statement in the Final Prospectus misleading or untrue in any material respect or which would result in a misrepresentation in the Final Prospectus or which would result in the Final Prospectus not complying with applicable Canadian Securities Laws; and
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(f)
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the Prospectus is true and correct in all material respects and contains no misrepresentation, constitutes full, true and plain disclosure of all material facts relating to the Offered Securities and to the Corporation and its Subsidiaries considered as a whole and does not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they were made, not misleading;
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(9)
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the Underwriters receiving the executed lock-up agreements, in favour of the Underwriters, from each director and officer of the Corporation and their respective associates in a form satisfactory to the Underwriters as required pursuant to Section 8(6) of this Agreement;
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(10)
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the Underwriters receiving a certificate from Computershare Trust Company of Canada as to the number of Common Shares issued and outstanding as at the end of business on the Business Day prior to the Closing Date;
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(11)
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no order, ruling or determination having the effect of ceasing or suspending trading in any securities of the Corporation or prohibiting the sale of the Common Shares or any of the Corporation’s issued securities being issued, and no proceeding for such purpose being, to the knowledge of the Corporation, pending or threatened by any securities regulatory authority or the Exchange;
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(12)
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the Corporation having delivered to the Underwriters evidence of the approval (or conditional approval) of the listing and posting for trading of the Unit Shares, Warrant Shares, Over-Allotment Shares, Over-Allotment Warrant Shares, Broker Warrant Shares, Warrants and the Over-Allotment Warrants on the Exchange, subject only to satisfaction by the Corporation of standard listing conditions;
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(13)
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the Corporation complying with all of its covenants and obligations under this Agreement required to be satisfied at or prior to the Closing Time;
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(14)
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the Underwriters receiving a duly executed copy of the Warrant Indenture;
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(15)
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the Underwriters receiving duly executed copies of the Broker Warrant Certificates, in form and substance satisfactory to the Underwriters;
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(16)
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the Underwriters not having exercised any rights of termination set forth herein; and
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(17)
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the Underwriters receiving such further certificates, documents and other information as is customary for transactions of this nature as the Underwriters may have reasonably requested.
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Section 11 Closing
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(1)
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Location of Closing. The Closing will be completed electronically at the Closing Time.
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(2)
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Securities. At the Closing Time, subject to the terms and conditions contained in this Agreement, the Corporation shall deliver to the Underwriters in Toronto, Ontario, the Offered Securities in electronic form, unless otherwise directed by the Lead Underwriter, and physical copies of the Broker Warrant Certificates, immediately following the receipt of payment to the Corporation by the Underwriters of the aggregate Offering Price for the Offered Securities by wire transfer, net of the Underwriting Fee and expenses of the Underwriters payable by the Corporation as set out in this Agreement.
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(3)
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Settlement. Except for issuances to purchasers that are, or are acting for the account or benefit of, a person in the United States or a U.S. Person (except Qualified Institutional Buyers) who shall be issued the Offered Securities in a certificated form, the Corporation shall cause the Transfer Agent to issue electronically and register through the non-certificated inventory process, the Units against payment therefor in the manner as set forth above, such electronic issuance being registered in the name of CDS (or in such other name as Stifel GMP, on behalf of the Underwriters, may direct); and
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(a)
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Stifel GMP will create an instant deposit in CDS’s automated clearing and settlement system in the aggregate amount of the Units to be purchased through the non-certificated inventory process and shall provide the deposit identification number (the “Deposit ID”) to the Transfer Agent prior to the Closing Time to permit the further crediting of the accounts of those participants of CDS acting on behalf of purchasers of such Units;
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(b)
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the Corporation shall provide an executed treasury direction, dated as of the Closing Date, to the Transfer Agent authorizing and directing the Transfer Agent to issue a non-certificated inventory credit to CDS in the amount equal to the aggregate number of Units to be purchased through the non-certificated inventory process; and
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(c)
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the Corporation shall cause the Transfer Agent to electronically confirm the CDS deposit represented by the Deposit ID.
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Section 12 Closing of the Over-Allotment Option
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(1)
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Written Notice of Exercise. The Over-Allotment Option may be exercised for a period of 30 days from and including the Closing Date. Stifel GMP, on behalf of the Underwriters, shall provide written notice to the Corporation of its election to exercise the Over-Allotment Option, which notice will set forth: (i) the aggregate number of Over-Allotment Securities to be purchased; and (ii) the closing date for the Over-Allotment Securities, provided that such closing date shall not be less than two Business Days and no more than seven Business Days following the date of such notice, and in any event not later than the 30th day following the Closing Date.
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(2)
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Closing. The purchase and sale of the Over-Allotment Securities, if required, shall be completed at such time and place as the Underwriters and the Corporation may agree, and in accordance with Section 12(1) above.
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(3)
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Securities. At the closing of the Over-Allotment Option, subject to the terms and conditions contained in this Agreement, the Corporation shall deliver to the Underwriters the Over-Allotment Securities, in electronic or certificated form, registered as directed by the Underwriters, against payment to the Corporation by the Underwriters of the aggregate Offering Price for the Over-Allotment Securities being issued and sold by wire transfer or certified cheque, net of the Underwriting Fee and any expenses of the Underwriters payable by the Corporation as set out in this Agreement.
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(4)
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Deliveries. The applicable terms, conditions and provisions of this Agreement (including the provisions of Section 10 relating to closing deliveries) shall apply mutatis mutandis to the Closing of the issuance of any Over-Allotment Securities pursuant to any exercise of the Over-Allotment Option.
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(5)
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Adjustments. In the event that the Corporation shall subdivide, consolidate, reclassify or otherwise change its Common Shares during the period in which the Over-Allotment Option is exercisable, appropriate adjustments will be made to the Offering Price and to the number of Over-Allotment Securities issuable on exercise thereof such that the Underwriters are entitled to arrange for the sale of the same number and type of securities that the Underwriters would have otherwise arranged for had they exercised such Over-Allotment Option immediately prior to such subdivision, consolidation, reclassification or change.
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Section 13 Indemnification and Contribution
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(1)
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The Corporation shall indemnify and hold the Underwriters and/or any of their respective affiliates (hereinafter referred to collectively as the “Indemnified Parties”) and the shareholders, partners, directors, officers and employees of the Indemnified Parties (hereinafter referred to as the “Personnel”) harmless from and against any and all expenses, losses (other than loss of profits), claims, actions, damages or liabilities, whether joint or several (including the aggregate amount paid in reasonable settlement of any actions, suits, proceedings or claims), and the reasonable and documented fees and expenses of its counsel that may be incurred in advising with respect to and/or defending any claim that may be made against the Indemnified Parties and/or the Personnel by any third party other than the Corporation, to which the Indemnified Parties and/or their Personnel may become subject or otherwise involved in any capacity under any statute or common law or otherwise insofar as such expenses, losses, claims, damages, liabilities or actions arise out of or are based, directly or indirectly, upon the performance of professional services rendered to the Corporation by the Indemnified Parties and/or their Personnel or otherwise in connection with the matters referred to in the letter to which this indemnity is attached, including, without limitation, in any way caused by, or arising directly or indirectly from, or in consequence of:
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(a)
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any information or statement (except information or statements relating solely to and provided in writing by any of the Underwriters expressly for use in the Offering Documents) contained in the Offering Documents, including any Documents Incorporated by Reference therein, which at the time and in light of the circumstances under which it was made contains or is alleged to contain a misrepresentation or an untrue statement of a material fact;
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(b)
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any omission or alleged omission to state in the Offering Documents, including any Documents Incorporated by Reference therein, or in any certificate of the Corporation delivered under or pursuant to this Agreement, any fact or information (whether material or not) (except facts relating solely to and provided in writing by any of the Underwriters expressly for use in the Offering Documents) required to be stated in such document or certificate or necessary to make any statement in such document or certificate not misleading in light of the circumstances under which it was made;
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(c)
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any material inaccuracy of any representation or warranty of the Corporation contained in this Agreement or in any agreement, certificate or other document delivered pursuant hereto;
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(d)
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any material breach by the Corporation of any covenant to be performed by it contained in this Agreement or in any agreement, certificate or other document delivered pursuant hereto or thereto;
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(e)
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the non-compliance or alleged non-compliance by the Corporation with any material requirement of Applicable Securities Laws relating to the sale of the Offered Securities, including the Corporation’s non-compliance with any statutory requirement to make any document available for inspection; or
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(f)
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any order made or any inquiry, investigation or proceeding (formal or informal) instituted, threatened or announced by any court, securities regulatory authority, stock exchange or other competent authority (except any such proceeding or order based solely upon •the activities of any of the Indemnified Parties) or any change of law or the interpretation or administration thereof which operates to prevent or restrict the trading in or the distribution of the Offered Securities, or any securities of the Corporation or any of them in any of the Jurisdictions.
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(2)
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Notwithstanding anything to the contrary contained herein, this indemnity shall not apply to the extent that a court of competent jurisdiction in a final judgment that has become non-appealable shall determine that:
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(a)
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the Indemnified Parties or their Personnel have been grossly negligent or have committed any fraudulent or illegal act or willful misconduct in the course of the performance of professional services rendered to the Corporation by the Indemnified Parties and/or their Personnel or otherwise in connection with the matters referred to in the letter to which this indemnity is attached; and
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(b)
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the expenses, losses, claims, damages or liabilities, as to which indemnification is claimed, were caused by or resulted from the gross negligence, illegality, willful misconduct or fraud referred to in (i). For greater certainty, an Indemnified Party’s failure to discharge its due diligence defence under securities legislation does not disentitle such Indemnified Party from indemnification.
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(3)
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If for any reason (other than the occurrence of any of the events itemized in (i) and (ii) above), the foregoing indemnification is unavailable to the Indemnified Parties and/or the Personnel or insufficient to hold them harmless, then the Corporation shall contribute to the amount paid or payable by the Indemnified Parties and/or the Personnel as a result of such expense, loss, action, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by the Corporation on the one hand and the Indemnified Parties on the other hand from the Offering but also the relative fault of the Corporation on the one hand and the Indemnified Parties on the other hand, as well as any other relevant equitable considerations; provided that the Corporation shall, in any event, contribute to the amount paid or payable by the Indemnified Parties as a result of such expense, loss, action, claim, damage or liability, any excess of such amount over the amount of the Underwriting Fee or any portion thereof actually received by the Indemnified Parties hereunder pursuant to this Agreement to which this indemnity is attached.
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(4)
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The Corporation agrees that in case any legal proceeding shall be brought against the Corporation and/or the Indemnified Parties by any governmental commission or regulatory authority or any stock exchange or other entity having regulatory authority, either domestic or foreign, or if any of the foregoing shall investigate the Corporation and/or the Indemnified Parties and/or any Personnel, if the Indemnified Parties shall be required to testify in connection therewith or shall be required to respond to procedures designed to discover information regarding, in connection with, or by reason of the performance of professional services rendered to the Corporation by the Indemnified Parties, the Indemnified Parties shall have the right to employ their own counsel in connection therewith (with only one counsel being employed on behalf of all the Indemnified Parties), and the reasonable and documented fees and expenses of such counsel as well as the reasonable costs (including an amount to reimburse the Indemnified Parties for time spent by their Personnel in connection therewith) and out-of-pocket expenses incurred by their Personnel in connection therewith shall, subject to the right of indemnity, be paid by the Corporation as they occur.
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(5)
|
Promptly after receipt of notice of the commencement of any legal proceeding against the Indemnified Parties or any of their Personnel or after receipt of notice of the commencement of any investigation, which is based, directly or indirectly, upon any matter in respect of which indemnification may be sought from the Corporation, the Indemnified Parties will notify the Corporation in writing of the commencement thereof and, throughout the course thereof, will provide copies of all relevant documentation to the Corporation, will keep the Corporation advised of the progress thereof and will discuss with the Corporation all significant actions proposed. The omission to so notify the Corporation shall not relieve the Corporation of any liability which the Corporation may have to the Indemnified Parties except only to the extent that any such delay in giving or failure to give notice as herein required materially prejudices the defence of such action, suit, proceeding, claim or investigation or results in any material increase in the liability which the Corporation would otherwise have under this indemnity had the Indemnified Parties not so delayed in giving or failed to give the notice required hereunder.
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(6)
|
The Corporation shall be entitled, at its own expense, to participate in and, to the extent it may wish to do so, assume the defence thereof, provided such defence is conducted by experienced and competent counsel. Upon the Corporation notifying the Indemnified Parties in writing of its election to assume the defence and retaining counsel, the Corporation shall not be liable to the Indemnified Parties for any legal expenses subsequently incurred by the Indemnified Parties in connection with such defence. If such defence is assumed by the Corporation, the Corporation throughout the course thereof will provide copies of all relevant documentation to the Indemnified Parties, will keep the Indemnified Parties advised of the progress thereof and will discuss •with the Indemnified Parties all significant actions proposed.
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(7)
|
Notwithstanding the foregoing paragraph, the Indemnified Parties shall have the right, at the Corporation’s expense, to employ counsel of the Indemnified Parties’ choice, in respect of the defence of any action, suit, proceeding, claim or investigation if: (i) the employment of such counsel has been authorized by the Corporation; or (ii) the Corporation has not assumed the defence and employed counsel therefor within a reasonable time after receiving notice of such action, suit, proceeding, claim or investigation; or (iii) counsel retained by the Corporation or the Indemnified Party(ies) has advised the Indemnified Party(ies) that representation of both parties by the same counsel would be inappropriate because there may be legal defences available to the Indemnified Parties which are different from or in addition to those available to the Corporation (in which event and to that extent, the Corporation shall not have the right to assume or direct the defence on the Indemnified Parties’ behalf) or that there is a conflict of interest between the Corporation and the Indemnified Parties or the subject matter of the action, suit, proceeding, claim or investigation may not fall within the indemnity set forth herein (in either of which events the Corporation shall not have the right to assume or direct the defence on the Indemnified Parties’ behalf). In no event shall the Corporation be required to pay the fees and disbursements of more than one set of counsel in any one jurisdiction for all of the indemnified parties in respect of any particular claim or related set of claims.
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(8)
|
No admission of liability and no settlement of any action, suit, proceeding, claim or investigation shall be made without the consent of the Corporation and the affected Indemnified Parties, such consent not to be unreasonably withheld.
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(9)
|
The indemnity and contribution obligations of the Corporation shall be in addition to any liability which the Corporation may otherwise have, shall extend upon the same terms and conditions to the Personnel of the Indemnified Parties and shall be binding upon and enure to the benefit of any successors, permitted assigns, heirs and personal representatives of the Corporation, the Indemnified Parties and any of the Personnel of the Indemnified Parties. The foregoing provisions shall survive the completion of professional services rendered under the Agreement or any termination of this Agreement.
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Section 14 Compensation of the Underwriters
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(1)
|
At the Closing Time, the Corporation shall:
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|
|
(a)
|
pay to Stifel GMP, on behalf of the Underwriters, the Underwriting Fee. The Underwriting Fee will be netted out of the gross proceeds of the Offering.
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(b)
|
Create and issue to the Underwriters, or as directed by the Underwriters, in the aggregate, a number of Broker Warrants equal to: (i) 5.5% of the aggregate number of Units sold under the Offering other than to President’s List Subscribers; plus (ii) 1.0% of the aggregate number of Units sold to President’s List Subscribers.
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Section 15 Expenses
The Corporation will pay all reasonable expenses and fees (plus HST, if applicable) in connection with the Offering, whether completed or not, including, without limitation: (i) all reasonable expenses of or incidental to the creation, issue, sale or distribution of the Offered Securities and the filing of the Preliminary Prospectus and the Final Prospectus; (ii) the reasonable fees and expenses of the Corporation’s legal counsel; (iii) the reasonable fees and expenses of the Underwriters’ Canadian legal counsel, subject to a maximum of $137,500 (exclusive of applicable taxes and disbursements); and (iv) all reasonable costs incurred in connection with the preparation of documentation relating to the Offering, excluding those out-of-pocket costs incurred by the Underwriters.
Section 16 All Terms to be Conditions
The Corporation agrees that all terms and conditions set out in this Agreement shall be construed as conditions and any breach or failure by the Corporation to comply with any such conditions in favour of the Underwriters in any material respect shall entitle the Underwriters (or any of them) to terminate their obligation to complete the Offering, by written notice to that effect given to the Corporation prior to the Closing Time. The Corporation shall use commercially reasonable efforts to cause all conditions in this Agreement to be satisfied. It is understood that the Underwriters may waive, in whole or in part, or extend the time for compliance with, any of such conditions without prejudice to the rights of the Underwriters in respect of any such conditions or any other or subsequent breach or non-compliance, provided that to be binding on an Underwriter any such waiver or extension must be in writing and signed by such Underwriter.
Section 17 Termination by Underwriters in Certain Events
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(1)
|
Each Underwriter shall also be entitled to terminate its obligation to purchase the Offered Securities by written notice to that effect given to the Corporation at or prior to the Closing Time if:
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|
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(a)
|
Regulatory Out – (i) any order to cease or suspend trading in any securities of the Corporation or prohibiting or restricting in any manner the distribution or trading of the Units or the Common Shares is made or threatened, or proceedings are announced, commenced or threatened for the making of any such order, by any securities commission or similar regulatory authority, the Exchange, other stock exchange or other competent authority, and has not been rescinded, revoked or withdrawn; or (ii) any inquiry, action, investigation or other proceeding (whether formal or informal) in relation to the Corporation or any of the directors or officers of the Corporation is announced, commenced or threatened by any securities commission or similar regulatory authority, the Exchange, or any other competent authority, or any order has been issued under or pursuant to any applicable statute of Canada or of any province of Canada or of any other jurisdiction, or any other Applicable Laws or regulatory authority (unless based on the activities or alleged activities of the Underwriters), if, in the reasonable opinion of the Underwriters or any one of them, acting reasonably, the change, announcement, commencement or threatening thereof would be reasonably expected to materially and adversely affect the market price or value of the Common Shares or the distribution or trading of the Units;
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(b)
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Material Change Out - there should occur or come into effect any material change in the Business, affairs (including any change to executive management of the Corporation, including the departure of the Company the Corporation’s CEO or CFO (or persons in equivalent position), financial condition, prospects, capital or control of the Corporation and the Subsidiaries, taken as a whole, or any change in any material fact, or any new material fact, which, in each case, in the reasonable opinion of the Underwriters, or any one of them, has or could reasonably be expected to have a significant adverse effect on the market price or value or marketability of the Units or Common Shares;
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(c)
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Disaster Out - there should develop, occur or come into effect or existence any event, action, state, or condition or any action, law or regulation, inquiry, including, without limitation, terrorism, accident, pandemic (including any material escalation in the severity of the COVID-19 pandemic from the date hereof), natural disaster, public protest, or major financial, political or economic occurrence of national or international consequence, or any action, government, law, regulation, inquiry or any other occurrence of any nature, which, in the reasonable opinion of the Underwriters (or any one of them), materially adversely affects or involves, or may materially adversely affect or involve, the financial markets in Canada or the U.S. or the Business, operations or affairs of the Corporation and the Subsidiaries taken as a whole, or the marketability of the Offered Securities;
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(d)
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Breach Out - the Underwriters or any one of them, acting reasonably, determines that the Corporation shall be in breach of, default under or non-compliance with any material representation, warranty, covenant, term, or condition of this Agreement; or
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(e)
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Outside Date – the Corporation has not obtained a Final Receipt qualifying the Offered Securities and Broker Warrants for distribution in the Qualifying Jurisdictions by January 8, 2021, or such other date as may be agreed to between the Corporation and the Lead Underwriter, on behalf of the Underwriters, acting reasonably.
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(2)
|
If this Agreement is terminated by any of the Underwriters pursuant to Section 17(1), there shall be no further liability on the part of such Underwriter or of the Corporation to such Underwriter, except in respect of any liability which may have arisen or may thereafter arise under Section 13 and Section 15.
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(3)
|
The right of the Underwriters or any of them to terminate their respective obligations under this Agreement is in addition to such other remedies as they may have in respect of any default, act or failure to act of the Corporation in respect of any of the matters contemplated by this Agreement. A notice of termination given by one Underwriter under this Section 17 shall not be binding upon the other Underwriter.
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(4)
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Notwithstanding the foregoing and for the avoidance of doubt, this Agreement may be terminated at any time at or prior to the Closing Time upon the mutual written agreement of the Corporation and Stifel GMP if the parties hereto decide not to proceed with the Offering.
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Section 18 Obligations of the Underwriters to be Several
|
(1)
|
The obligations of the Underwriters under this Agreement shall be several in all respects and not joint or joint and several. For certainty, the obligations of the Underwriters to purchase the Offered Securities shall be several and not joint or joint and several, and shall be limited to the percentages of the aggregate number of Offered Securities to be purchased set out opposite the names of the Underwriters respectively below. Furthermore, subject to the terms of this Agreement, the parties hereto agree and acknowledge that the Underwriting Fee shall be apportioned as follows: (i) a work fee equal to 5.0% of the Underwriting Fee to Stifel GMP in consideration for the work rendered by the Lead Underwriter in respect of the Offering, and (ii) the Broker Warrants, and the remainder of the Underwriting Fee among the Underwriters as follows::
|
|
Stifel
GMP
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40%
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|
|
|
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Canaccord
Genuity Corp.
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40%
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|
|
|
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Bloom
Burton Securities Inc.
|
10%
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|
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Eight
Capital
|
10%
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|
(2)
|
If an Underwriter shall not complete the purchase and sale of its applicable percentage of the aggregate amount of the Offered Securities at the Closing Time for any reason whatsoever, including by reason of Section 17 hereof, the other Underwriters shall have the right, but shall not be obligated, to purchase the Offered Securities which would otherwise have been purchased by the Underwriter which fails to purchase. If, with respect to the Offered Securities, the non-defaulting Underwriter elects not to exercise such rights to assume the entire obligations of the defaulting Underwriter, then the Corporation shall have the right to either (i) proceed with the sale of the Offered Securities (less the defaulted Offered Securities) to the non-defaulting Underwriter; or (ii) terminate its obligations hereunder without liability except pursuant to the provisions of Section 15 in respect of the non-defaulting Underwriter. If the defaulted Offered Securities do not exceed 10% of the total number of Offered Securities obligated to be purchased under this Agreement, then the non-defaulting Underwriter or Underwriters will be obligated to purchase, on a pro-rata basis (based on the percentages shown above) all, but not less than all of, the defaulted Offered Securities on the terms set out in this Agreement.
|
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(3)
|
Subject to compliance with Canadian Securities Laws, without affecting the firm obligation of the Underwriters to purchase from the Corporation 3,868,000 Initial Units at the Offering Price in accordance with this Agreement, after the Underwriters have made reasonable effort to sell all of the Offered Securities at the Offering Price, the Offering Price may be decreased by the Underwriters and further changed from time to time to an amount not greater than the Offering Price. Such decrease in the Offering Price will not affect the Underwriting Fee to be paid by the Corporation to the Underwriters, and it will not decrease the amount of the net proceeds of the Offering to be paid by the Underwriters to the Corporation, before deducting expenses of the Offering. The Underwriters will inform the Corporation if the Offering Price is decreased.
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Section 19 Notices
Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be delivered,
in the case of the Corporation, to:
Field Trip Health Ltd.
30 Duncan Street, Suite 401
Toronto, Ontario M5V 2C3
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|
Attention:
|
Ronan Levy, Executive Chairman & Director
|
|
|
Email:
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[*****]
|
with a copy to (which copy shall not constitute notice hereunder):
Bennett Jones LLP
100 King St. W., Suite 3400
Toronto, Ontario M5X 1A4
|
|
Attention:
|
Aaron Sonshine
|
|
|
Email:
|
[*****]
|
in the case of the Underwriters, to:
Stifel Nicolaus Canada Inc.
145 King Street West, Suite 300
Toronto, ON M5H 1J8
Attention: Harris Fricker
Email: [*****]
with a copy of any such notice to:
Borden Ladner Gervais LLP
Bay Adelaide Centre
22 Adelaide Street West, Suite 2800
Toronto, ON M5H 4E3
Attention: Andrew Powers / Cameron A. MacDonald
Email: [*****] / [*****]
The Corporation and the Underwriters may change their respective addresses for notices by notice given in the manner aforesaid. Any such notice or other communication shall be in writing, and unless delivered personally to the addressee or to a responsible officer of the addressee, as applicable, shall be given by email and shall be deemed to have been given when: (i) in the case of a notice delivered personally to a responsible officer of the addressee, when so delivered; and (ii) in the case of a notice delivered or given by email, on the day of transmission.
Section 20 Miscellaneous
|
(1)
|
Actions of Underwriters. Except with respect to Section 13, Section 17 and Section 18, all transactions and notices on behalf of the Underwriters hereunder or contemplated hereby may be carried out or given on behalf of the Underwriters by Stifel GMP, and the Underwriters shall in good faith discuss with each other the nature of any such transactions and notices prior to giving effect thereto or the delivery thereof, as the case may be.
|
|
(2)
|
Successors and Assigns. This Agreement shall enure to the benefit of, and shall be binding upon, the Underwriters and the Corporation and their respective successors and legal representatives.
|
|
(3)
|
Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein.
|
|
(4)
|
Time of the Essence. Time shall be of the essence hereof and, following any waiver or indulgence by any party, time shall again be of the essence hereof.
|
|
(5)
|
Interpretation. The words, “hereunder”, “hereof” and similar phrases mean and refer to the Agreement formed as a result of the acceptance by the Corporation of this offer by the Underwriters to purchase the Offered Securities.
|
|
(6)
|
Survival. All representations, warranties, covenants and agreements of the Corporation and/or the Underwriters herein contained or contained in documents submitted pursuant to this Agreement and in connection with the transaction of purchase and sale herein contemplated shall survive for a period ending on the date that is two years following the Closing Date. Notwithstanding the preceding sentence, Section 13 shall survive the purchase and sale of the Offered Securities and the termination of this Agreement and shall continue in full force and effect for the benefit of the Underwriters or the Corporation, as the case may be, regardless of any subsequent disposition of the Offered Securities or any investigation by or on behalf of the Underwriters with respect thereto without limitation other than any limitation requirements of Applicable Laws. The Underwriters and the Corporation shall be entitled to rely on the representations and warranties of the Corporation or the Underwriters, as the case may be, contained herein or delivered pursuant hereto notwithstanding any investigation which the Underwriters or the Corporation may undertake or which may be undertaken on their behalf.
|
|
(7)
|
Severability. If one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be construed as if such invalid, illegal or unenforceable provision or provisions had never been contained herein.
|
|
(8)
|
Several and Joint. In performing their respective obligations under this Agreement, the Underwriters shall be acting severally and not jointly and severally. Nothing in this Agreement is intended to create any relationship in the nature of a partnership, or joint venture between the Underwriters.
|
|
(9)
|
Market Stabilization Activities. In connection with the distribution of the Units, the Underwriters (or any of them) may effect transactions which stabilize or maintain the market price of the Common Shares at levels other than those which might otherwise prevail in the open market, but in each case as permitted by Canadian Securities Laws. Such stabilizing transactions, if any, may be discontinued by the Underwriters at any time.
|
|
(10)
|
No Fiduciary Duty. The Corporation hereby acknowledges that the Underwriters are acting solely as underwriters in connection with the purchase and sale of the Offered Securities. The Corporation further acknowledges that the Underwriters are acting pursuant to a contractual relationship created solely by this Agreement entered into on an arm’s length basis, and in no event do the parties intend that the Underwriters act or be responsible as a fiduciary to the Corporation, its management, shareholders or creditors or any other person in connection with any activity that the Underwriters may undertake or have undertaken in furtherance of such purchase and sale of the Corporation’s securities, either before or after the date hereof. The Underwriters hereby expressly disclaim any fiduciary or similar obligations to the Corporation, either in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions, and the Corporation hereby confirms its understanding and agreement to that effect. The Corporation and the Underwriters agree that they are each responsible for making their own independent judgments with respect to any such transactions and that any opinions or views expressed by the Underwriters to the Corporation regarding such transactions, including any opinions or views with respect to the price or market for the Corporation’s securities, do not constitute advice or recommendations to the Corporation. The Corporation and the Underwriters agree that the Underwriters are acting as principal and not the agent or fiduciary of the Corporation and no Underwriter has assumed, and no Underwriter will assume, any advisory responsibility in favour of the Corporation with respect to the transactions contemplated hereby or the process leading thereto (irrespective of whether any Underwriter has advised or is currently advising the Corporation on other matters). The Corporation hereby waives and releases, to the fullest extent permitted by law, any claims that the Corporation may have against the Underwriters with respect to any breach or alleged breach of any fiduciary, advisory or similar duty to the Corporation in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions.
|
|
(11)
|
Underwriters’ Advice. The Corporation acknowledges and agrees that all written and oral opinions, advice, analyses and materials provided by the Underwriters in connection with this Agreement and their engagement hereunder are intended solely for the Corporation’s benefit and the Corporation’s internal use only with respect to the Offering and the Corporation agrees that no such opinion, advice, analysis or material will be used for any other purpose whatsoever or reproduced, disseminated, quoted from or referred to in whole or in part at any time, in any manner or for any purpose, without the Underwriters’ prior written consent in each specific instance. Any advice or opinions given by any of the Underwriters hereunder will be made subject to, and will be based upon, such assumptions, limitations, qualifications, and reservations as such Underwriter(s), in its/their sole judgment, deems necessary or prudent in the circumstances. The Underwriters expressly disclaim any liability or responsibility by reason of any unauthorized use, publication, distribution of or reference to any oral or written opinions or advice or materials provided by the Underwriters or any unauthorized reference to any of the Underwriters or this Agreement.
|
|
(12)
|
Conflict. The Corporation acknowledges that the Underwriters and their affiliates carry on a range of businesses, including providing stockbroking, investment advisory, research, investment management and custodial services to clients and trading in financial products as agent or principal. It is possible that the Underwriters and other entities in their respective groups that carry on those businesses may hold long or short positions in securities of companies or other entities, which are or may be involved in the transactions contemplated in this Agreement and effect transactions in those securities for their own account or for the account of their respective clients. The Corporation agrees that these divisions and entities may hold such positions and effect such transactions without regard to the Corporation’s interests under this Agreement.
|
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(13)
|
Entire Agreement. This Agreement constitutes the only agreement between the parties with respect to the subject matter hereof and shall supersede any and all prior negotiations and understandings in respect of the Offering, including the engagement letter dated December 9, 2020 as amended on December 10, 2020. This Agreement may be amended or modified in any respect by written instrument only.
|
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(14)
|
Further Assurances. Each of the parties hereto shall do or cause to be done all such acts and things and shall execute or cause to be executed all such documents, agreements and other instruments as may reasonably be necessary or desirable for the purpose of carrying out the provisions and intent of this Agreement.
|
|
(15)
|
Electronic Copies. Each of the parties hereto shall be entitled to rely on delivery of a facsimile or PDF copy of this Agreement and acceptance by each such party of any such facsimile or PDF copy shall be legally effective to create a valid and binding agreement between the parties hereto in accordance with the terms hereof.
|
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(16)
|
Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.
|
[Remainder of page intentionally left blank]
If this Agreement accurately reflects the terms of the transactions which we are to enter into and are agreed to by you, please communicate your acceptance by executing the enclosed copies of this Agreement where indicated and returning them to us.
Yours very truly,
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STIFEL NICOLAUS CANADA INC.
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By:
|
(Signed) “Harris Fricker”
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Harris Fricker
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President
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CANACCORD GENUITY CORP.
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By:
|
(Signed) “Graham Saunders”
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Graham Saunders
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Head of Capital Markets Origination
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BLOOM BURTON SECURITIES INC.
|
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By:
|
(Signed) “Jolyon Burton”
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Jolyon Burton
|
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President and Head of Investment Banking
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EIGHT CAPITAL
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By:
|
(Signed) “Elizabeth Staltari”
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Elizabeth Staltari
|
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|
Managing Director, Investment Banking
|
|
The foregoing is hereby accepted and agreed to by the undersigned as of the date first written above.
|
FIELD TRIP HEALTH LTD.
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By:
|
(Signed) “Joseph del Moral”
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Joseph del Moral
|
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Chief Executive Officer
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SCHEDULE “A”
SUBSIDIARIES
SCHEDULE “B”
COMPLIANCE WITH UNITED STATES SECURITIES LAWS
(In the event of any U.S. sales)
|
1.
|
Capitalized terms used in this Schedule “B” and not defined in this Schedule “B” shall have the meanings given in the Underwriting Agreement to which this Schedule “B” is annexed and the following terms shall have the meanings indicated:
|
“Directed Selling Efforts” means “directed selling efforts” as that term is defined in Regulation S. Without limiting the foregoing, but for greater clarity in this Schedule “B”, it means, subject to the exclusions from the definition of directed selling efforts contained in Regulation S, any activity undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for any of the Offered Securities and shall include, without limitation, the placement of any advertisement in a publication with a general circulation in the United States that refers to the offering of any of such Offered Securities;
“Foreign Issuer” means a “foreign issuer” as that term is defined in Regulation S. Without limiting the foregoing, but for greater clarity in this Schedule “B”, it means any issuer that is (a) the government of any country, or of any political subdivision of a country, other than the United States, or (b) a national of any country other than the United States, or (c) a corporation or other organization incorporated or organized under the laws of any country other than the United States, except an issuer meeting the following conditions as of the last business day of its most recently completed second fiscal quarter: (1) more than 50 percent of the outstanding voting securities of such issuer are directly or indirectly owned of record by residents of the United States, and (2) any of the following: (i) the majority of the executive officers or directors are United States citizens or residents, (ii) more than 50 percent of the assets of the issuer are located in the United States, or (iii) the business of the issuer is administered principally in the United States;
“Offshore Transaction” means “offshore transaction” as defined in Regulation S;
“Selling Firms” means the Underwriters together with other investment dealers and brokers which participate in the offer and sale of the Offered Securities under the terms of this Agreement, including this Schedule “B”;
“Substantial U.S. Market Interest” means “substantial U.S. market interest” as that term is defined in Regulation S; and
“U.S. Purchaser” means any purchaser of the Offered Securities that is, or is acting for the account or benefit of, a person in the United States or a U.S. Person, or any person offered the Offered Securities in the United States.
|
2.
|
The Corporation represents, warrants and covenants to the Underwriters and the U.S. Affiliates that, as of the date of this Agreement, the Closing Time and any Option Closing Time:
|
|
|
(a)
|
the Corporation is a Foreign Issuer, and there is no Substantial U.S. Market Interest with respect to the Offered Securities or any other class of equity securities of the Corporation;
|
|
|
(b)
|
none of the Corporation, its affiliates (as defined in Rule 405 under the U.S. Securities Act) or any person acting on its or their behalf (except for the Underwriters, their respective U.S. Affiliates and any person acting on their behalf, as to whom no representation, warranty or covenant is made) (i) has engaged or will engage in any Directed Selling Efforts, (ii) has taken or will take any action that would cause the exemption afforded by Rule 144A to be unavailable for offers and resales of Offered Securities in the United States or to, or for the account or benefit of, U.S. Persons in accordance with this Schedule “B”, or the exclusion from registration afforded by Rule 903 of Regulation S to be unavailable for offers and sales of the Offered Securities in Offshore Transactions in accordance with the Underwriting Agreement, or (iii) has engaged in or will engage in any conduct involving a public offering within the meaning of Section 4(a)(2) of the U.S. Securities Act or any action which would constitute a violation of Regulation M under the U.S. Exchange Act with respect to offers or sales of the Offered Securities in the United States or to, or for the account or benefit of, U.S. Persons;
|
|
|
(c)
|
the Offered Securities satisfy the requirements set forth in Rule 144A(d)(3) under the U.S. Securities Act;
|
|
|
(d)
|
so long as any Offered Securities which have been sold to, or for the account or benefit of, persons in the United States in reliance upon Rule 144A are outstanding and are “restricted securities” within the meaning of Rule 144(a)(3) under the U.S. Securities Act, and if the Corporation is neither exempt from reporting pursuant to Rule 12g3-2(b) of the U.S. Exchange Act nor subject to and in compliance with Section 13 or 15(d) of the U.S. Exchange Act, the Corporation will furnish to any holder of such Offered Securities and any prospective purchaser of the Offered Securities designated by such holder, upon request of such holder, the information required to be delivered pursuant to Rule 144A(d)(4) under the U.S. Securities Act (so long as such requirement is necessary in order to permit holders of such Offered Securities to effect resales under Rule 144A);
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|
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(e)
|
except with respect to the offer and sale of the Offered Securities offered under this Agreement, the Corporation has not, within six months before the commencement of the offer and sale of the Offered Securities, and will not within six months after the latest of the Closing Date and any Option Closing Date, offer or sell any securities in a manner that would be integrated with the offer and sale of the Offered Securities and would cause the exemptions from registration pursuant to Rule 144A or the exclusion from registration set forth in Rule 903 of Regulation S to become unavailable with respect to the offer and sale of the Offered Securities;
|
|
|
(f)
|
except with respect to offers and resales of Offered Securities to Qualified Institutional Buyers or Accredited Investors, pursuant to the terms of this Agreement, none of the Corporation, any of its affiliates, or any person acting on their behalf has made or will make (i) any offer to sell, or any solicitation of an offer to buy, any Offered Securities in the United States or to, or for the account or benefit of, U.S. Persons, or (ii) any sale of the Offered Securities unless, at the time the buy order was or will have been originated, the purchaser is outside the United States and is not a U.S. Person or the Corporation, its affiliates an any person acting on their behalf reasonably believe that the purchaser is outside the United States and is not a U.S. Person;
|
|
|
(g)
|
the Corporation is not, and after giving effect to the offer and sale of the Offered Securities and the application of the proceeds as described in the Prospectus, will not be, an “investment company” within the meaning of the United States Investment Company Act of 1940, as amended, registered or required to be registered under such Act;
|
|
|
(h)
|
the Offered Securities, the Unit Shares and the Unit Warrants are not and, as of the Closing Date and the Option Closing Date, as applicable, will not be, and no securities of the same class as the Offered Securities, the Unit Shares or the Unit Warrants are or will be:
|
|
|
(i)
|
listed on a national securities exchange registered under Section 6 of the U.S. Exchange Act;
|
|
|
(ii)
|
quoted in a “U.S. automated inter-dealer quotation system”, as such term is used in Rule 144A; or
|
|
|
(iii)
|
convertible or exchangeable at an effective conversion premium or exercise premium (calculated as specified in paragraph (a)(6) and (a)(7) of Rule 144A) of less than 10% for securities so listed or quoted; and
|
|
|
(i)
|
none of the Corporation or any of its predecessors or subsidiaries has had the registration of a class of securities under the U.S. Exchange Act revoked by the SEC pursuant to Section 12(j) of the U.S. Exchange Act and any rules or regulations promulgated under the U.S. Exchange Act.
|
|
3.
|
Each of the Underwriters, severally and not jointly, represents and warrants to the Corporation that, as of the date of this Agreement, the Closing Time and any Option Closing Time:
|
|
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(a)
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it acknowledges that the Offered Securities have not been and will not be registered under the U.S. Securities Act or applicable state securities laws and may not be offered or resold in the United States or to, or for the account or benefit of, U.S. Persons, except pursuant to transactions exempt from or not subject to the registration requirements under the U.S. Securities Act and exemptions from registration under applicable state securities laws. In addition, until 40 days after the commencement of the offering of the Offered Securities, an offer or sale of the Offered Securities within the United States or to, or for the account or benefit of, U.S. Persons by any dealer (whether or not participating in the Offering) may violate the registration requirements of the U.S. Securities Act if such offer or sale is made otherwise than in accordance with an available exemption from such registration requirements. Accordingly, it has offered and resold, and will offer and resell, the Offered Securities forming part of its allotment only (a) in an Offshore Transaction in accordance with Rule 903 of Regulation S or (b) as provided in paragraphs 3(b) through 3(j) below. None of it, its U.S. Affiliate or any person acting on its or their behalf, has made or will make (except as permitted in paragraphs 3(b) through 3(j) below): (i) any offer to sell or any solicitation of an offer to buy, any Offered Securities in the United States or to, or for the account or benefit of, any U.S. Person in the United States; or (ii) any sale of Offered Securities to any purchaser unless, at the time the buy order was or will have been originated, the purchaser was outside the United States and not a U.S. Person, or it, its U.S. Affiliate or persons acting on their behalf reasonably believed that such purchaser was outside the United States and not a U.S. Person. None of it, its U.S. Affiliate, or any persons acting on its or their behalf has engaged or will engaged in any Directed Selling Efforts;
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(b)
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it has not entered and will not enter into any contractual arrangement with respect to the distribution of the Offered Securities, except with its U.S. Affiliate, any U.S. Affiliate of any Selling Firms or with the prior written consent of the Corporation. It shall require each Selling Firm and its U.S. Affiliate to agree, for the benefit of the Corporation, to be bound by and to comply with, and shall use its commercially reasonable efforts to ensure that each Selling Firm and its U.S. Affiliate complies with, the provisions of this Schedule “B” as if such provisions applied to such Selling Firm or affiliate;
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(c)
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all offers and sales of the Offered Securities by it in the United States or to, or for the account or benefit of, U.S. Persons have been and will be effected only by its U.S. Affiliate, and in all such cases in compliance with all applicable United States federal and state laws relating to the registration and conduct of securities brokers and dealers and all applicable state securities laws;
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(d)
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its U.S. Affiliate is, and will be on the date of each offer and sale of Offered Securities in the United States or to, or for the account or benefit of, U.S. Persons, duly registered as a broker-dealer under the U.S. Exchange Act and under all applicable state securities laws (unless exempt therefrom) and a member of, and in good standing with, the Financial Industry Regulatory Authority, Inc.;
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(e)
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immediately prior to soliciting any offerees of Offered Securities in the United States or that are purchasing for the account or benefit of U.S. Persons, the Underwriter, its U.S. Affiliate and any person acting on its or their behalf had reasonable grounds to believe and did believe that each offeree solicited by it was a Qualified Institutional Buyer or Accredited Investor with which it has a pre-existing relationship, and at the time of completion of each sale of Offered Securities in the United States or to, or for the account or benefit of, such U.S. Person, the Underwriter, its U.S. Affiliate, and any person acting on its or their behalf will have reasonable ground to believe and will believe, that each purchaser thereof is a Qualified Institutional Buyer or Accredited Investor;
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(f)
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each offeree of Offered Securities solicited by it that is, or is acting for the account or benefit of, a U.S. Person shall be provided with a copy of the U.S. Private Placement Memorandum and each purchaser of Offered Securities from it that is, or is acting for the account or benefit of, a U.S. Person shall be provided, prior to the time of its purchase of any Offered Securities, with a copy of the final U.S. Private Placement Memorandum and no other written material will be used in connection with the offer and sale of the Offered Securities in the United States or to, or for the account or benefit of, U.S. Persons;
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(g)
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at least one Business Day prior to the time of delivery, the Corporation and its transfer agent will be provided with a list of all purchasers of the Offered Securities in the United States or purchasing for the account or benefit of, U.S. Persons solicited by it;
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(h)
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prior to any sale of Offered Securities to a U.S. Purchaser, it shall cause each such U.S. Purchaser that is (i) a Qualified Institutional Buyer purchasing such Offered Securities pursuant to Rule 144A to execute a Qualified Institutional Buyer Letter in the form attached as Exhibit A to the final U.S. Private Placement Memorandum, or (ii) an Accredited Investor purchasing such Offered Securities to execute an Accredited Investor Letter in the form attached as Exhibit B to the final U.S. Private Placement Memorandum;
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(i)
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at the Closing, each Underwriter (together with its U.S. Affiliate) that participated in the offer of Offered Securities in the United States or to, or for the account or benefit of, U.S. Persons, will provide a certificate, substantially in the form of Appendix I to this Schedule “B”, relating to the manner of the offer and sale of the Offered Securities in the United States or to, or for the account or benefit of, U.S. Persons, or will be deemed to have represented that neither it nor its U.S. Affiliate offered or sold Offered Securities in the United States or to, or for the account or benefit of, U.S. Persons; and
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(j)
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it will inform, and will cause its U.S. Affiliate to inform, all purchasers of the Offered Securities in the United States or purchasing for the account or benefit of, U.S. Persons that by delivery of the U.S. Private Placement Memorandum the Offered Securities have not been and will not be registered under the U.S. Securities Act and are “restricted securities” as defined in Rule 144(a)(3) under the U.S. Securities Act and are being offered and sold to them without registration under the U.S. Securities Act in reliance upon an exemption from such registration pursuant to Rule 144A.
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Appendix I to Schedule “B”
UNDERWRITERS’ CERTIFICATE
In connection with the private placement in the United States or to, or for the account or benefit of, U.S. Persons of Offered Securities of Field Trip Health Ltd. (the “Corporation”) pursuant to the underwriting agreement dated December 15, 2020, between the Corporation and the Underwriters named in the underwriting agreement (the “Underwriting Agreement”), each of the undersigned does hereby certify as follows:
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(a)
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the U.S. Affiliate is a duly registered broker or dealer with the United States Securities and Exchange Commission, and is a member of, and in good standing with, the Financial Industry Regulatory Authority, Inc. on the date of this certificate and on the date of each offer and resale of Offered Securities made by it, and all offers and resales of the Offered Securities in the United States or to, or for the account or benefit of, U.S. Persons have been effected by the U.S. Affiliate in accordance with all applicable U.S. broker-dealer requirements;
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(b)
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each purchaser of Offered Securities that is, or is acting for the account or benefit of, a U.S. Person or a person in the United States solicited by us was, prior to the sale of Offered Securities to such purchaser, provided with a copy of the final U.S. Private Placement Memorandum, and we and our U.S. Affiliates have not used and will not use any written material other than the U.S. Private Placement Memorandum in connection with the offering of the Offered Securities in the United States or to, or for the account or benefit of, U.S. Persons;
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(c)
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immediately prior to our transmitting the U.S. Private Placement Memorandum to offerees of Offered Securities in the United States or to, or for the account or benefit of, U.S. Persons we had reasonable grounds to believe, and did believe, that each offeree was a Qualified Institutional Buyer or Accredited Investor with whom we have a pre-existing relationship, and on the date of this certificate we continue to believe that each purchaser of the Offered Securities purchasing from us through our U.S. Affiliate is a Qualified Institutional Buyer or Accredited Investor;
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(d)
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in connection with each sale of Offered Securities in the United States or to, or for the account or benefit of, U.S. Persons that are Qualified Institutional Buyers or Accredited Investors solicited by us, we caused each such U.S. Purchaser to execute and deliver a Qualified Institutional Buyer Letter in the form of Exhibit A attached to the final U.S. Private Placement Memorandum or an Accredited Investor Buyer Letter in the form of Exhibit B attached to the final U.S. Private Placement Memorandum;
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(e)
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no Directed Selling Efforts were engaged in by us with respect to the offer or sale of the Offered Securities by us; and
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(f)
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the offering of the Offered Securities in the United States or to, or for the account or benefit of, U.S. Persons has been conducted by us in accordance with the Underwriting Agreement, including Schedule “B” to the Underwriting Agreement.
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[remainder of page intentionally left blank]
Capitalized terms used in this certificate and not defined in this certificate have the meanings ascribed thereto in the Underwriting Agreement (including the Schedule “B” to the Underwriting Agreement).
DATED the day of , 2020.
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[UNDERWRITER]
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[U.S. AFFILIATE]
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By:
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By:
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Name:
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Name:
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Title:
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Title:
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Exhibit 99.24
FORM 51-102F3
MATERIAL CHANGE REPORT
UNDER NATIONAL INSTRUMENT 51-102
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Item 1.
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Name and Address of Company
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Field Trip Health Ltd. (formerly, Newton Energy Corporation) (the “Company”)
30 Duncan Street, Suite 401
Toronto, Ontario M5V 2C3
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Item 2.
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Date of Material Change
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December 9, 2020 and December 10, 2020
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News releases dated December 9, 2020 and December 10, 2020 were disseminated via CanadaNewswire. Copies of the news releases have been filed on SEDAR and is available at www.sedar.com.
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Item 4.
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Summary of Material Change
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The Company announced on December 9, 2020 that it has entered into an agreement with Stifel Nicolaus Canada Inc. (“Stifel GMP” or the “Lead Underwriter”) on behalf of a syndicate of underwriters led by Stifel GMP (together with the Lead Underwriter, the “Underwriters”), pursuant to which the Underwriters have agreed to purchase, on a “bought deal” basis 3,333,333 units (the “Units”) of the Company at a price of $4.50 per Unit (the “Issue Price”), for aggregate gross proceeds of $14,999,998.50.
On December 10, 2020, the Company announced to increase the size of its previously announced $14,999,998.50 bought deal offering. Pursuant to the upsized deal terms, the Underwriters have agreed to purchase, on a “bought deal” basis, 3,868,000 Units at a price of $4.50 per Unit, for aggregate gross proceeds of $17,406,000 (the “Offering”).
Each Unit will be comprised of one common share in the capital of the Company (a “Common Share”) and one-half of one Common Share purchase warrant (each whole Common Share purchase warrant, a “Warrant”). Each Warrant will be exercisable to acquire one Common Share (a “Warrant Share”) for a period of 18 months following the closing of the Offering (the “Closing”) at an exercise price of $5.60 per Warrant Share. In the event that the volume weighted average trading price of the Common Shares for ten (10) consecutive trading days exceeds $9.00, the Company shall have the right to accelerate the expiry date of the Warrants upon not less than fifteen (15) trading days’ notice.
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Item 5.
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Full Description of Material Change
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The Company plans to use the net proceeds from the offering for working capital and general corporate requirements.
The Offering is scheduled
to close on or about January 5, 2021 and is subject to certain conditions including, but not limited to, the receipt
of all necessary approvals including the approval of the Canadian Securities Exchange and the securities regulatory authorities.
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The Company has granted the Underwriters an option (the “Over-Allotment Option”), exercisable in whole or in part at any time on or up to 30 days after the closing of the Offering, to purchase, or to find substituted purchasers for, up to an additional number of Units equal to 15% of the number of Units sold pursuant to the Offering at the Issue Price to cover over-allotments, if any, and for market stabilization purposes. The Over-Allotment Option shall be exercisable for Units, Common Shares or Warrants (or any combination thereof In the event that the Over-Allotment Option is exercised in its entirety, the aggregate gross proceeds of the Offering will be $20,016,900.
The Units will be offered by way of a short form prospectus to be filed in each of the Provinces of Canada, other than Quebec, pursuant to National Instrument 44-101 - Short Form Prospectus Distributions and by private placement to eligible purchasers resident in jurisdictions other than Canada that are mutually agreed by the Company and Stifel GMP, provided that no prospectus filing or comparable obligation arises and the Company does not therefore become subject to continuous disclosure obligations in such jurisdiction.
The Units, and the Common Shares and Warrants comprising the Units, have not been, nor will they be, registered under the United States Securities Act of 1933, as amended (the “1933 Act”) and may not be offered or sold in the United States or to, or for the account or benefit of, “U.S. persons” (as defined in Regulation S under the 1933 Act) absent registration or an applicable exemption from the registration requirements. The Units may be offered in the United States to Qualified Institutional Buyers (as defined in Rule 144A under the 1933 Act) pursuant to exemptions from the registration requirements under rule 144A of the 1933 Act. This news release will not constitute an offer to sell or the solicitation of an offer to buy nor will there be any sale of the securities in any State in which such offer, solicitation or sale would be unlawful.
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Item 6.
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Reliance on subsection 7.1(2) of National Instrument 51-102
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Item 7.
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Omitted Information
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Item 8.
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Executive Officer
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For further information, please contact:
Paula Amy Hewitt
Vice President, General Counsel and Corporate Secretary
Telephone: (416) 617-6277
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Exhibit 99.25
FIELD
TRIP PSYCHEDELICS INC.
MANAGEMENT’S
DISCUSSION AND ANALYSIS
FOR
THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2020
AND
THE
PERIOD FROM APRIL 2, 2019 (DATE OF INCORPORATION) TO
SEPTEMBER
30, 2019
(Expressed
in Canadian dollars, unless otherwise noted)
MANAGEMENT’S
DISCUSSION AND ANALYSIS
FOR
THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2020 AND PERIODS ENDED
SEPTEMBER
30, 2019
DATED:
NOVEMBER 30, 2020
This
management’s discussion and analysis (“MD&A”) for the three and six months ended September 30, 2020 and
periods ended September 30, 2019, provides detailed information on the operating activities, performance and financial position
of Field Trip Psychedelics Inc. (the “Group”, the “Company” or “Field Trip”) . This discussion
should be read in conjunction with the Company’s unaudited condensed interim consolidated financial statements and accompanying
notes for the three and six months ended September 30, 2020 and periods ended September 30, 2019 and the audited consolidated
financial statements and accompanying notes for the period from April 2, 2019 (date of incorporation) to March 31, 2020. The financial
statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and are reported
in Canadian dollars, unless otherwise noted.
The
Company’s fiscal year commences April 1st of each year and ends on March 31st of the following year. The Company’s
current fiscal year, which ends on March 31, 2021, is referred to as the “current fiscal year”, “fiscal 2021”,
or using similar words. The Company’s current three months ended September 30, 2020, is referred to as the “current
fiscal quarter, “second quarter of fiscal 2021”, or using similar words.
CAUTIONARY
STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
This
MD&A contains certain “forward-looking statements” and certain “forward-looking information” as defined
under applicable Canadian securities laws. Forward-looking statements in this MD&A include, but are not limited to, statements
with respect to:
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the
impact of the COVID-19 pandemic;
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•
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the
business objectives of the Company and its research and development activities;
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•
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the
acceptance in the medical community of ketamine and other psychedelic substances as effective
treatment for depression, PTSD, addiction and other mental health conditions;
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•
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the
funds available to the Company and the use of such funds;
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•
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the
ability of the Company to operate as a going concern if there are any changes in laws
or regulatory requirements;
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•
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the
healthcare industry in Canada and the United States;
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•
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patient
acceptance and referrals to the Company’s clinics;
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•
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the
approval of regulatory bodies of psychedelic substances other than ketamine, including
MDMA and psilocybin, for the treatment of various health conditions;
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•
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the
ability of the Company to complete and operate the Jamaica Facility;
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•
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the
ability of the Company to complete and operate its clinical expansion plan;
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•
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the
ability of the Company to achieve anticipated revenues from its operations;
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•
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the
ability of the Company to secure qualified employees, contractors and other required
personnel;
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•
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the
ability of the Company to complete and operate the New York Clinic, Santa Monica Clinic,
Chicago Clinic and additional clinics;
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•
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the
ability of new clinics to offer technology-enabled, Ketamine-Enhanced Psychotherapy,
psychedelic-enhanced psychotherapy and psychedelic-integration psychotherapy services;
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•
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the
ability of the Company to develop proper protocols to incorporate the use of additional
psychedelic medicines as they are legalized and approved for use;
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the
development, patentability and viability of FT Discovery molecule FT-104;
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the
ability of FT Discovery to translate and utilize patient data to design new molecules
to improve future patient outcomes;
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•
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the ability of the Company to prepare sufficient new drug application, as required, prior
to initiating any clinical trials for FT-104;
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the
ability of the Company to enroll an increasing number of patients to meet eligibility
requirements in a scenario where FT-104 advances to clinical testing and through to more
complex clinical trials;
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•
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the
ability of the Company to obtain regulatory approvals prior to each clinical trial;
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the
ability of the Company to provide effective management services to physicians owning
physician-owned clinics;
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the
ability of the Company to generate patient member growth;
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compliance
with applicable laws and the ability to obtain any permits or other authorizations that
may be required in the future;
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the
expected adoption of any incentive option plans or other equity incentive plans;
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the
expected entry into any employment contracts;
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controlled
substances laws; and
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•
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reliance
on third parties.
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All
forward-looking statements reflect our beliefs and assumptions based on information available at the time the assumption was made.
These forward-looking statements are not based on historical facts but rather on management’s expectations regarding future
activities, results of operations, performance, future capital and other expenditures (including the amount, nature and sources
of funding thereof), competitive advantages, business prospects and opportunities. By its nature, forward-looking information
involves numerous assumptions, inherent risks and uncertainties, both general and specific, known and unknown, that contribute
to the possibility that the predictions, forecasts, projections or other forward-looking statements will not occur.
In
evaluating forward-looking statements, readers should specifically consider various factors, including the risks outlined under
the heading “Risk Factors” in this MD&A. Some of these risks and assumptions include, among others: the ability
of the Company to secure additional financing for current and future operations and capital projects, as needed; the Company’s
dependence on management and key personnel; general economic, market and business conditions, early-stage industry growth rates,
the risks associated with competition from other companies directly or indirectly engaged in the Company’s industry; foreign currency
exchange rate fluctuations and its effects on the Company’s operations; the risks and costs associated with being a publicly traded
company, the market demand for the Common Shares, and the liquidity and dilution of the Common Shares; the impact of the COVID-19
pandemic; the Company’s limited operating history; the speculative nature of an investment in the Common Shares; risks inherent
in the nature of the health clinic industry; non-compliance with laws; medical personnel operating out of Company’s clinics; unfavourable
publicity or consumer perception; patient acquisitions; development risks; substantial risks of regulatory or political change;
the ability to obtain necessary government permits and licences; ketamine as a pharmaceutical; non-referral of patients; negative
cash flow from operating activities; management of growth; reliance on third parties; intellectual property; competition; litigation;
insurance coverage; the Company being a holding company; a significant number of Common Shares being owned by a limited number
of existing shareholders; the industry being difficult to forecast; market volatility; use of funds; conflicts of interest; enforcement
of legal rights; emerging market risks; agriculture risks; violations of laws and regulations related to drug development; ability
to produce commercial grade pharmaceuticals; clinical testing; regulatory approval process; cyber-attacks; reliance upon insurers
and governments; difficulty in enforcing judgments and effecting service of process on directors and officers; any other risks
described in this MD&A and described from time to time in documents filed by the Company with Canadian securities regulatory
authorities.
Although
the forward-looking statements contained in this MD&A are based upon what our management believes to be reasonable assumptions,
we cannot assure readers that actual results will be consistent with these forward-looking statements. Any forward-looking statements
represent our estimates only as of the date of this MD&A and should not be relied upon as representing our estimates as of
any subsequent date. We undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances
after the date on which such statement is made or to reflect the occurrence of unanticipated events, except as may be required
by securities legislation.
OVERVIEW
Business
of the Company
Field
Trip is the global leader in the development and delivery of psychedelic therapies. We focus on blending operational execution
with strategic investment across all aspects of the psychedelics value chain. With Field Trip Discovery leading the development
of the next generation of psychedelic molecules and conducting advanced research on plant-based psychedelics, Field Trip Health
hubs for psychedelic therapies opening across North America, and Field Trip Digital building the digital and technological tools
to support psychedelic experiences and consciousness expansion, we help people, from those in treatment to those seeking accelerated
personal growth, with a simple, evidence-based way to heal and heighten engagement with the world.
Advanced
Research and Drug Development
FT
Discovery is focused on research and development of psychedelic-inspired regulated medicines. FT Discovery has two independent
activities: (i) developing custom synthetic molecules targeting serotonin 5HT2A receptors, which are, in part, implicated in mood
disorders; and (ii) conducting research and development related to the cultivation, as well as the identification and isolation
of new substances contained in psilocybin mushrooms and other related fungi, in collaboration with the University of West Indies
(“UWI”) at our Jamaica Facility located on the UWI campus. Further, FT Discovery anticipates that insights relating
to the administration of psychedelics and psychedelic-assisted psychotherapy within the Clinics can be integrated in the development
of novel drug products innovated within FT Discovery.
Psilocybin,
along with other synthetic and natural serotoninergic psychedelics, act to stimulate 5HT2A receptors in the brain resulting in
a profound alteration of normal brain signaling and processing, creating what is generally referred to as a “psychedelic
experience” or an “altered state of consciousness.” Under psychedelics, the brain “escapes” from
its usual tightly constrained and predictable patterns of operation, with a global increase in connectivity of brain regions and
brain networks. Often, this can allow patients new introspective insights about their past behavior, memories, actions, feelings
and beliefs. Psychedelic therapy combined with psychotherapy can lead to improvements in conditions relating to depression and
addiction, which are often a result of dysfunctional brain processing.
FT-104
is the first drug candidate in development by FT Discovery. FT-104 is a next generation, synthetic psychedelic molecule whose
design is, in part, based on classical serotonin 2A psychedelics. Patents are pending on FT104’s structure, formulation
and use in treating a variety of central nervous system disorders.
Field
Trip Health Centers
Field
Trip Health is focused on: (i) building out the clinical infrastructure needed to deliver psychedelic therapies at scale; and
(ii) developing digital tools to enhance and optimize the therapeutic experience in our health centers and beyond.
Through
our Field Trip Health subsidiaries, we are seeking to create a global brand of trusted clinics for ketamine-enhanced psychotherapy,
psychedelic-enhanced psychotherapy and psychedelic-integration psychotherapy, enabling patients to more effectively and affordably
address depression, anxiety, addiction and other conditions. Ketamine was the first psychedelic administered to patients in
conjunction with our custom developed psychotherapy protocol. Beyond its antidepressant effects, ketamine’s ability to promote
neural plasticity makes it a powerful tool to pair with Field Trip’s comprehensive psychotherapy program. More specifically,
Field Trip offers or plans to offer the following types of therapy:
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Ketamine-enhanced
psychotherapy (“KEP”) is a clinic-based treatment that combines the administration
of ketamine with psychotherapy sessions to accelerate the process of discovery, understanding
and catharsis. KEP sessions last longer than traditional therapy, are conducted with
medical and psychological support and may include therapy-enhancing tools such as music.
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Psychedelic-enhanced
psychotherapy combines the use of psychedelic medicines with psychotherapy sessions and
other enhancing therapies in a clinical setting. KEP is a type of psychedelic-enhanced
psychotherapy.
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Psychedelic-integration
psychotherapy consists of one or more psychotherapy sessions to support a patient’s
understanding and processing of past psychedelic experiences through reflection and integration
of those experiences. Psychedelic-integration psychotherapy can be combined with psychedelic-enhanced
psychotherapy, including KEP, or may be employed on its own to integrate patient experience
outside of a clinical setting.
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While
the use of ketamine in KEP is considered “off-label”, such use is legal under medical supervision. As such, ketamine
is currently the only legal psychedelic medicine generally available to mental health providers in Canada and the United States.
As existing psychedelic medicines become available for use in a therapeutic setting and novel psychedelic medicines become available,
Field Trip intends to explore the use of other methods of psychedelic-enhanced psychotherapy.
Currently,
Field Trip operates and owns a clinic in Toronto, Ontario, and operates clinics in New York, New York, Santa Monica, California
and Chicago, Illinois through physician practices or professional medical corporations (PCs) which are owned solely by state-licensed
physicians. The PCs’ results are consolidated with Field Trip since we effectively control these entities (see Note 2 Basis
of Presentation in our unaudited condensed interim consolidated financial statements for the three and six months ended September
30, 2020 for a detailed discussion of the basis for consolidation).
Digital
Teletherapy Tools: Trip and Portal
Field
Trip Digital has developed Trip, a mobile application supporting consciousness expansion which is available to users in the Apple
and Android app stores, and Portal, a digital health platform to support clients participating in psychedelic therapies at Field
Trip Health centers. During our early launch of Trip, Field Trip has onboarded over 3,600 active users organically through word
of mouth, with very positive early user feedback. Portal is a next generation telehealth platform that connects our patients and
therapists with individualized patient journeys and content, along with tools such as mood monitoring, journaling, and activity
tracking. The feature-sets of both platforms are expected to grow significantly in the coming fiscal year.
Regulatory
Environment
Advanced
Research and Drug Development
In
order to develop regulated medicines, FT Discovery’s process must be conducted in strict compliance with the regulations
of federal, state, local and regulatory agencies in Canada and the United States, and the equivalent regulatory agencies in the
other jurisdictions in which Field Trip operates, including Jamaica. These regulatory authorities regulate, among other things,
the research, manufacture, promotion and distribution of drugs in specific jurisdictions under applicable laws and regulations.
It is important to note, that unlike in Canada and the United States, psilocybin mushrooms are not an illegal drug under Jamaica’s
Dangerous Drugs Act, 1948, therefore research on psilocybin mushrooms is not in contravention of the laws of Jamaica and does
not require any permit or authorization from the regulatory authorities in Jamaica.
Jamaica
Research
conducted by FTNP at the Jamaica Facility is governed by the Jamaica Ministry of Health (“JMH”), Ethics and Medico-Legal
Affairs Panel and by the JMH Standards and Regulation Division. In addition to GLP and cGMP, research involving human subject
is governed by the JMH Guidelines for the Conduct of Research on Human Subjects. Furthermore, medicines, including natural products,
require registration with the JMH prior to importation, distribution and sale in Jamaica as outlined in the Food and Drugs
Act, 1964.
Canada
The
process required before a prescription drug product candidate may be marketed in Canada generally involves:
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Chemical
and Biological Research - Laboratory tests are carried out on tissue cultures and
with a variety of small animals to determine the effects of the drug. If the results
are promising, the manufacturer will proceed to the next step of development.
|
|
|
•
|
Pre-Clinical
Development – Animals are given the drug in varying amounts over differing
periods of time. If it can be shown that the drug causes no serious or unexpected harm
at the doses required to have an effect, the manufacturer will proceed to clinical trials.
|
|
|
•
|
Clinical
Trials — Phase 1 - The first administration in humans is to test if people
can tolerate the drug. If this testing is to take place in Canada, the manufacturer must
prepare a clinical trial application for the Therapeutic Products Directorate of Health
Canada (the “TPD”). This includes the results of the first two steps and
a proposal for testing in humans. If the information is sufficient, the Health Products
and Food Branch of Health Canada (the “HPFB”) grants permission to start
testing the drug, generally first on healthy volunteers.
|
|
|
•
|
Clinical
Trials — Phase 2 - Phase 2 trials are carried out on people with the target
condition, who are usually otherwise healthy, with no other medical condition. Trials
carried out in Canada must be approved by the TPD. In Phase 2, the objective of the trials
is to continue to gather information on the safety of the drug and begin to determine
its effectiveness.
|
|
|
•
|
Clinical
Trials — Phase 3 - If the results from Phase 2 show promise, the manufacturer provides an updated clinical trial application
to the TPD for Phase 3 trials. The objectives of Phase 3 include determining whether the drug can be shown to be effective, and
have an acceptable side effect profile, in people who better represent the general population. Further information will also be
obtained on how the drug should be used, the optimal dosage regimen and the possible side effects.
|
|
|
•
|
New
Drug Submission - If the results from Phase 3 continue to be favourable, the drug
manufacturer can submit a new drug submission (“NDS”) to the TPD. A drug
manufacturer can submit an NDS regardless of whether the clinical trials were carried
out in Canada. The TPD reviews all the information gathered during the development of
the drug and assesses the risks and benefits of the drug. If it is judged that, for a
specific patient population and specific conditions of use, the benefits of the drug
outweigh the known risks, the HPFB will approve the drug by issuing a notice of compliance.
|
United
States
The
process required before a prescription drug product candidate may be marketed in the United States generally involves:
|
|
•
|
completion
of extensive nonclinical laboratory tests, animal studies and formulation studies, all
performed in accordance with the FDA’s Good Laboratory and Manufacturing Practice
regulations;
|
|
|
•
|
submission
to the FDA of an investigational new drug application, which must become effective before
human clinical trials may begin;
|
|
|
•
|
for
some products, performance of adequate and well-controlled human clinical trials in accordance
with the FDA’s regulations, including good clinical practices, to establish the
safety and efficacy of the product candidate for each proposed indication;
|
|
|
•
|
submission
to the FDA of a new drug application (“NDA”); and
|
|
|
•
|
FDA
review and approval of the NDA prior to any commercial marketing, sale or shipment of
the drug.
|
Given
the early stage of FT Discovery’s product development, we can make no assurance that our research and development programs
will result in regulatory approval or commercially viable products. To achieve profitable operations, the Company, alone or with
others, must successfully develop, gain regulatory approval for, and market our future products. We currently have no products
that have been approved by the FDA, Health Canada or any similar regulatory authority. To obtain regulatory approvals for our
product candidates being developed and to achieve commercial success, clinical trials must demonstrate that the product candidates
are safe for human use and that they demonstrate efficacy. We have not yet completed later stage clinical trials for any of our
product candidates (see Drug Development Risks in the Risks and Uncertainties section of this MD&A for a more detailed discussion
of the risks involved).
Field
Trip Health Centers
The
Canadian psychedelic therapy industry is an emerging market and serves a medical market only. In Ontario, physicians working in
medical clinics are regulated by the College of Physicians and Surgeons of Ontario, via the Regulated Health Professions Act,
1991 (Ontario) and the Medicine Act, 1991 (Ontario).
Ketamine
clinics in the State of New York that are owned solely by New York-licensed physicians are organized as physician practices or
PCs. PCs in the State of New York are overseen by the New York State Education Department, Office of the Professions, State Board
for Medicine (the “NY Medical Board”). Laws that apply specifically to PCs in the State of New York are New York Education
Law §§ 6500 – 6516 and 6520 – 6532 and 8 New York Codes, Rules and Regulations (“NYCRR”) §§
59.1 et. seq. and 8 NYCRR §§ 60.1 et. seq. The New York Clinic is likely to utilize, in addition to physicians, mid-level
practitioners such as physician assistants and nurse practitioners and mental health practitioners such as psychologists and psychotherapists.
Physician assistants are also subject to oversight of the NY Medical Board (and subject to laws codified at New York Education
Law (“NYEL”) §§ 6540 et. seq.) and nurse practitioners are subject to oversight of the New York State Education
Department, Office of the Professions (“NYOP”), State Board for Nursing (and subject to laws codified at NYEL
§§ 6900 et. seq. and additional regulation that apply only to nurses at NYCRR §§ 64.1 et. seq.). Psychologists
are licensed by the NYOP, State Board for Psychology (and subject to additional laws and regulations codified at NYEL §§
7600 et. seq. and 8 NY CRR §§ 72.1 et. seq.), and psychotherapists are licensed by the NYOP, State Board for Mental
Health Practitioners (and subject to additional laws and regulations codified at NYEL §§ 8400 et. seq. and 8 NY CRR
§ 52.35 and 8 NY CRR §§ 79.12 et. seq.).
Similarly,
ketamine clinics in the State of California that are owned solely by California -licensed physicians are organized as California
professional medical corporations or PCs, while unlicensed persons are able to participate in a medical practice via a management
service company. The Medical Board of California (the “CA Medical Board”) regulates physicians and surgeons under
the Business and Professions Code, §2190.5. The CA Medical Board also regulates medical assistants, while nurses, nurse practitioners
and certain psychotherapists are regulated by the Board of Registered Nursing. Psychologists are licensed by the California Board
of Psychology.
In
the State of Illinois, the Illinois Department of Financial and Professional Regulation (“IDFPR”) regulates physicians
and surgeons under the Medical Practice Act (225 ILCS 60/2) and Medical Corporations under the Medical Corporation Act (805 ILCS
15/1). The IDFPR also regulates nurses under the Nurse Practice Act (225 ILCS 65/), psychologists under the Clinical Psychologist
Licensing Act (225 ILCS 15/), and both licensed professional counselors and licensed clinical professional counselors under the
Illinois Professional Counselor and Clinical Professional Counselor Licensing and Practice Act (225 ILCS 107/1).
In
states where ketamine clinics are physician-owned or PCs, Field Trip Health USA Inc. will provide management services to the physician
practice that will own the Clinics located in the United States. The relationship between Field Trip Health USA Inc. and the physician
practice that it manages is subject to various standards of corporate practice and fee-splitting rules.
On
November 3, 2020, Oregon, through Measure 109, became the first state in the United States to decriminalize the possession of
all illegal drugs and also legalize the use of psilocybin—the active ingredient in hallucinogenic mushrooms—for mental-health
treatment. Measure 109 requires the Oregon Health Authority to create a licensing system that will create a regulated program
for the cultivation of psilocybin-producing mushrooms and the provision of supervised psilocybin therapy, effectively creating
the first legal market for psilocybin therapies in North America.
KEY
HIGHLIGHTS AND RECENT DEVELOPMENTS
During
the second fiscal quarter, Field Trip completed brokered and non-brokered private placements of an aggregate of 6,333,656 Class
A shares in the capital of Field Trip, at a price of $2.00 per Field Trip Share, for aggregate gross proceeds of $12,667,312 (the
“Financing”). Funds for these private placements were received in two tranches.
As
at September 30, 2020, Field Trip reported cash and cash equivalents of $14,042,025, which included $11,033,448 gross proceeds
from the first tranche of financing and $1,638,670 in other receivables, which primarily related to the second tranche funds from
the Financing held in escrow and released in October.
On
October 1, 2020, Field Trip completed its previously announced going public transaction via a reverse takeover and began trading
on the Canadian Securities Exchange (the “CSE”) under the stock symbol “FTRP”, as well as the OTCBB under
the symbol FTRPF.
With
its strong cash position and recent listing, Field Trip is well-positioned to execute on its corporate strategy of building an
integrated psychedelics company.
FT-104
Preliminary
results for FT-104 demonstrate that FT-104 is similar in potency to psilocybin, but may provide a significantly shorter duration
of psychedelic experience relative to psilocybin (in the range of two to four hours, which is approximately half the duration
of psilocybin), making it a more convenient and potentially preferable option for psychedelic therapy. FT-104 is concurrently
undergoing optimization and cGMP scale-up, as well as pre-clinical evaluation, both of which are expected to be completed by June
2021. Field Trip anticipates that FT-104 will enter into Phase 1 clinical trials in the second half of calendar year 2021.
Psilocybin-producing
Fungi Research and Cultivation
Since
January 2020, Field Trip has successfully cultivated 24 varieties (from 13 different species) of psilocybin-producing fungi and
truffles at its Jamaica Facility. The purpose of the Jamaica Facility is to optimize the cultivation techniques and operating
procedures for psilocybin-producing fungi and develop the analytical tools and techniques to ensure the safe use of domesticated
species in psychedelic therapy in jurisdictions (states or countries) as markets for psilocybin-producing fungi continue to emerge.
Field Trip anticipates utilizing such techniques and operating procedures at Field Trip Health’s Amsterdam location, as
well as planned operations in the State of Oregon, following the passage of Measure 109, which will effectively create the first
legal market of psilocybin therapies in North America.
In
addition, Field Trip will seek to identify and quantify total tryptamine content, including psilocybin and other tryptamine analogues
that may play a role in the psychedelic experience, and use this knowledge to optimize production of reproducible and well-characterized
psychedelic botanical medicines. Further, any new substances identified during these efforts, may lead to promising new candidates
for drug development.
Field
Trip Health Centers
During
the second fiscal quarter, following the successful opening of its Toronto location in March 2020, Field Trip opened Field Trip
Health centers in the United States with locations in New York and Santa Monica. In October 2020, Field Trip completed construction
at its Chicago location and expects to begin providing therapies to people in December.
Field
Trip also announced that it has entered into a lease to build a Field Trip Health center in Amsterdam, Netherlands, which will
provide programs utilizing truffles containing psilocybin, which are legal in The Netherlands. Field Trip has also entered into
two additional leases in Atlanta and Houston, exceeding its target of six Field Trip Health centers in calendar year 2020.
In
October 2020, Field Trip entered into a strategic partnership with the Heroic Hearts Project (“HHP”), an international
non-profit organization that connects military veterans struggling with mental trauma to psychedelic therapies, entered into a
strategic relationship to increase access to, and awareness of, psychedelic therapies for veterans struggling from mental health
disorders such as PTSD. Under the terms of the relationship, HHP will be conducting active outreach and education programs for
military veterans about the therapeutic potential of ketamine-assisted psychotherapy.
Digital
Teletherapy Tools: Trip and Portal
During
the second fiscal quarter, Field Trip also launched the Trip, a mobile app that provides users with a framework and tools to make
the most of self-directed consciousness-expanding activities such as meditation and breathwork. Trip was released to users on
Apple and Android platforms and has over 3,600 active users. Field Trip also launched Portal, a proprietary digital tool designed
to complement its in-person therapeutic experience. Portal provides users with content, information, meditations and synchronous
and asynchronous communication tools for people in its psychedelic therapies and programs.
Effects
of COVID-19 Pandemic on Operations
Overall,
Field Trip was not significantly affected by the COVID-19 pandemic, despite the temporary closure of the Toronto clinic in March
2020. Although restrictions delayed construction on the New York and Los Angeles Field Trip Health centers, the delays were not
significant and operations in its existing and planned Field Trip Health centers continue in earnest. As the COVID-19 pandemic
has resulted in an estimated 300% increase in the incidence of depression in the US1, Field Trip anticipates that it
will see an increase in expected long-term demand for its depression related psychedelic therapies, particularly as case counts
start to diminish in the future. However, Field Trip anticipates that financial results and operations for the forthcoming fiscal
quarters may be negatively impacted by the COVID-19 pandemic as restrictions limit people’s ability to seek non-essential
health services.
SELECTED
CONSOLIDATED FINANCIAL DATA
|
(unaudited)
|
|
3 months ended
September 30,
2020
|
|
|
3 months ended
September 30,
2019
|
|
|
6 months ended
September 30,
2020
|
|
|
Period from
April 2, 2019
(Date of
Incorporation)
to
September 30,
2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Revenue
|
|
|
94,532
|
|
|
|
-
|
|
|
|
118,131
|
|
|
|
-
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administration
|
|
|
2,182,144
|
|
|
|
411,686
|
|
|
|
3,536,064
|
|
|
|
564,331
|
|
|
Occupancy costs
|
|
|
111,877
|
|
|
|
59,342
|
|
|
|
175,660
|
|
|
|
73,472
|
|
|
Sales and marketing
|
|
|
268,475
|
|
|
|
43,582
|
|
|
|
420,307
|
|
|
|
43,582
|
|
|
Research and development
|
|
|
745,989
|
|
|
|
-
|
|
|
|
1,480,991
|
|
|
|
-
|
|
|
Depreciation and amortization
|
|
|
269,578
|
|
|
|
33
|
|
|
|
479,338
|
|
|
|
33
|
|
|
Patient services
|
|
|
232,114
|
|
|
|
-
|
|
|
|
289,089
|
|
|
|
-
|
|
|
|
|
|
3,810,177
|
|
|
|
514,643
|
|
|
|
6,381,449
|
|
|
|
681,418
|
|
|
Other Income (Expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance expense
|
|
|
(58,373
|
)
|
|
|
-
|
|
|
|
(93,357
|
)
|
|
|
-
|
|
|
Other expense
|
|
|
(158,426
|
)
|
|
|
-
|
|
|
|
(534,673
|
)
|
|
|
-
|
|
|
Net Loss
|
|
|
(3,932,444
|
)
|
|
|
(514,643
|
)
|
|
|
(6,891,348
|
)
|
|
|
(681,418
|
)
|
|
Net Loss per Share - Basic and Diluted
|
|
|
(0.16
|
)
|
|
|
(0.08
|
)
|
|
|
(0.28
|
)
|
|
|
(0.11
|
)
|
|
Cash (including Restricted Cash)
|
|
|
14,042,025
|
|
|
|
1,057,334
|
|
|
|
|
|
|
|
|
|
|
Other Receivables
|
|
|
1,984,044
|
|
|
|
7,297
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
22,468,694
|
|
|
|
1,175,561
|
|
|
|
|
|
|
|
|
|
|
Total Non-Current Financial Liabilities
|
|
|
2,976,316
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Distributions
|
|
|
-
|
|
|
|
13,596
|
|
|
|
|
|
|
|
|
|
1Ettman
CK, Abdalla SM, Cohen GH, Sampson L, Vivier PM, Galea S. Prevalence of Depression Symptoms in US Adults Before and During
the COVID-19 Pandemic. JAMA Network Open. 2020;3(9):e2019686. doi:10.1001/jamanetworkopen.2020.19686
RESULTS
OF OPERATIONS
For
the Second Quarter of Fiscal 2021
Overview
Since
inception, we have incurred losses while opening our North American clinics, advancing the research and development of our products
and developing digital tools such as Tripp App and our patient portal to complement in-clinic therapies.
For
the three months ended September 30, 2020, we earned patient services revenues of $94,532 from our Toronto and New York clinics.
Net loss for the current fiscal quarter of $3,932,444 was primarily due to general and administration expenses of $2,182,144,
research and development expenses of $745,989, sales & marketing expenses of $268,475, patient services expenses of $232,114,
occupancy costs of $111,877 and realized foreign exchange loss of $196,288. Net loss for the second fiscal quarter of 2020 of
$514,643 was primarily due to general and administration expenses of $411,686, occupancy costs of $59,342 and sales and marketing
expenses of $43,582.
For
the six months ended September 30, 2020, we earned patient services revenues of $118,131 from our Toronto and New York clinics.
Net loss of $6,891,348 was primarily due to general and administration expenses of $3,536,064, research and development expenses
of $1,480,991, sales & marketing expenses of $420,307, patient services expenses of $289,089, occupancy costs of $175,660
and realized foreign exchange loss of $591,010. Net loss for the period ended September 30, 2019 of $681,418 was primarily due
to general and administration expenses of $564,331, occupancy costs of $73,472 and sales and marketing expenses of $43,582.
General
and Administration
Components
of general and administrative expenses for the three and six months ended September 30, 2020 and periods ending September 30,
2019 were as follows:
|
|
|
3 months
ended
September 30,
2020
|
|
|
3 months
ended
September 30,
2019
|
|
|
6 months
ended
September 30,
2020
|
|
|
Period from
April 2, 2019
(Date of
Incorporation)
to
September 30,
2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Personnel costs
|
|
|
957,336
|
|
|
|
67,082
|
|
|
|
1,707,175
|
|
|
|
78,766
|
|
|
External services
|
|
|
671,234
|
|
|
|
219,189
|
|
|
|
1,104,126
|
|
|
|
291,666
|
|
|
Share-based payments
|
|
|
347,375
|
|
|
|
66,751
|
|
|
|
451,045
|
|
|
|
131,484
|
|
|
Travel and entertainment
|
|
|
39,613
|
|
|
|
51,002
|
|
|
|
48,653
|
|
|
|
54,583
|
|
|
IT and technology
|
|
|
128,231
|
|
|
|
795
|
|
|
|
182,679
|
|
|
|
795
|
|
|
Office and general
|
|
|
38,355
|
|
|
|
6,867
|
|
|
|
42,386
|
|
|
|
7,037
|
|
|
Total general and administration
|
|
|
2,182,144
|
|
|
|
411,686
|
|
|
|
3,536,064
|
|
|
|
564,331
|
|
During
the current fiscal quarter, we launched a beta testing version of Trip App. An updated version of the app was made available in
both the iOS and Android app stores in October 2020.
Occupancy
costs
Components
of occupancy costs for the three and six months ended September 30, 2020 and periods ended September 30, 2019 were as follows:
|
|
|
3 months
ended
September 30,
2020
|
|
|
3 months
ended
September 30,
2019
|
|
|
6 months
ended
September 30,
2020
|
|
|
Period from
April 2, 2019
(Date of
Incorporation)
to
September 30,
2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Operating rent expense (recovery)
|
|
|
(23,099
|
)
|
|
|
45,702
|
|
|
|
10,370
|
|
|
|
59,832
|
|
|
Taxes, maintenance, insurance
|
|
|
10,592
|
|
|
|
10,250
|
|
|
|
17,602
|
|
|
|
10,250
|
|
|
Minor furniture and fixtures
|
|
|
103,139
|
|
|
|
-
|
|
|
|
104,422
|
|
|
|
-
|
|
|
Utilities and services
|
|
|
21,245
|
|
|
|
3,390
|
|
|
|
43,266
|
|
|
|
3,390
|
|
|
Total occupancy costs
|
|
|
111,877
|
|
|
|
59,342
|
|
|
|
175,660
|
|
|
|
73,472
|
|
Occupancy
costs relate to our Toronto headquarters, Toronto, New York, Santa Monica and Chicago clinics. As we continue our rollout of clinics
across North America, we anticipate we will open up to 6 additional clinics by the end of March 2021. Operating rent recovery
of $23,099 for the 3 months ended September 30, 2020 relate to the application of prepaid rent deposits.
Sales
and Marketing
Components
of sales and marketing for the three and six months ended September 30, 2020 and periods ended September 30, 2019 were as follows:
|
|
|
3 months
ended
September 30,
2020
|
|
|
3 months
ended
September 30,
2019
|
|
|
6 months
ended
September 30,
2020
|
|
|
Period from
April 2, 2019
(Date of
Incorporation)
to
September 30,
2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Brand and public relations
|
|
|
138,257
|
|
|
|
36,782
|
|
|
|
200,720
|
|
|
|
36,782
|
|
|
Conference fees
|
|
|
11,659
|
|
|
|
6,800
|
|
|
|
32,051
|
|
|
|
6,800
|
|
|
Personnel costs
|
|
|
53,847
|
|
|
|
-
|
|
|
|
85,164
|
|
|
|
-
|
|
|
External marketing services
|
|
|
64,712
|
|
|
|
-
|
|
|
|
102,372
|
|
|
|
-
|
|
|
Total sales and marketing
|
|
|
268,475
|
|
|
|
43,582
|
|
|
|
420,307
|
|
|
|
43,582
|
|
During
the current fiscal quarter, we continued to build on organic and paid digital acquisition channels across all Field Trip locations,
resulting in consistent growth in client enquiries week over week.
Research
and Development
Components
of research and development for the three and six months ended September 30, 2020 and periods ended September 30, 2019 were as
follows:
|
|
|
3 months
ended
September 30,
2020
|
|
|
3 months
ended
September 30,
2019
|
|
|
6 months
ended
September 30,
2020
|
|
|
Period from
April 2, 2019
(Date of
Incorporation)
to
September 30,
2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
External services
|
|
|
469,130
|
|
|
|
-
|
|
|
|
1,059,644
|
|
|
|
-
|
|
|
Personnel costs
|
|
|
152,364
|
|
|
|
-
|
|
|
|
294,786
|
|
|
|
-
|
|
|
Supplies and services
|
|
|
124,495
|
|
|
|
-
|
|
|
|
126,561
|
|
|
|
-
|
|
|
Total research and development
|
|
|
745,989
|
|
|
|
-
|
|
|
|
1,480,991
|
|
|
|
-
|
|
External
services relate primarily to fees paid by FTNP to Darwin Inc., a third party, to manage the construction and project management
of the Jamaica Facility, oversee the operations of the Jamaica Facility, provide legal advice and manage government relations.
The Jamaica Facility became fully operational in October 2020.
We
also continued development of FT-104. Preliminary results of our FT-104 molecule experiments demonstrate that: (i) FT-104 is a
near equipotent 5HT2A receptor agonist to psilocybin that can be delivered with high bioavailability; and (ii) FT-104 will likely
produce a reliably short-duration of psychedelic experience in the range of two to four hours, which is approximately half the
duration of psilocybin. Currently, FT-104 is in the pre-clinical development stage and optimization of a GLP synthesis of FT-104
is underway with completion expected before fiscal Q4 2020. This will support ongoing pre-clinical efforts which are in turn expected
to be completed by fiscal Q3 2021.
Patient
Services Expenses
Components
of patient services expenses for the three and six months ended September 30, 2020 and periods ended September 30, 2019 were as
follows:
|
|
|
3 months
ended
September 30,
2020
|
|
|
3 months
ended
September 30,
2019
|
|
|
6 months
ended
September 30,
2020
|
|
|
Period from
April 2, 2019
(Date of
Incorporation)
to
September 30,
2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Personnel costs
|
|
|
199,835
|
|
|
|
-
|
|
|
|
253,123
|
|
|
|
-
|
|
|
Supplies and services
|
|
|
30,821
|
|
|
|
-
|
|
|
|
34,314
|
|
|
|
-
|
|
|
Payment provider fees
|
|
|
1,458
|
|
|
|
-
|
|
|
|
1,652
|
|
|
|
-
|
|
|
Total patient services expense
|
|
|
232,114
|
|
|
|
-
|
|
|
|
289,089
|
|
|
|
-
|
|
Finance
Expense
Components
of finance expense for the three and six months ended September 30, 2020 and periods ended September 30, 2019 were as follows:
|
|
|
3 months
ended
September 30,
2020
|
|
|
3 months
ended
September 30,
2019
|
|
|
6 months
ended
September 30,
2020
|
|
|
Period from
April 2, 2019
(Date of
Incorporation)
to
September 30,
2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Interest expense on leases
|
|
|
(60,829
|
)
|
|
|
-
|
|
|
|
(98,062
|
)
|
|
|
-
|
|
|
Interest income on shareholders’ loan
|
|
|
628
|
|
|
|
-
|
|
|
|
1,249
|
|
|
|
-
|
|
|
Interest income on refundable lease deposit
|
|
|
1,916
|
|
|
|
-
|
|
|
|
3,562
|
|
|
|
-
|
|
|
Interest expense on loan
|
|
|
(133
|
)
|
|
|
-
|
|
|
|
(133
|
)
|
|
|
-
|
|
|
Interest income on bank balances
|
|
|
45
|
|
|
|
-
|
|
|
|
27
|
|
|
|
-
|
|
|
Total finance expense
|
|
|
(58,373
|
)
|
|
|
-
|
|
|
|
(93,357
|
)
|
|
|
-
|
|
Other
Income (Expense)
Components
of other income (expense) for the three and six months ended September 30, 2020 and periods ended September 30, 2019 were as follows:
|
|
|
3 Months
ended
September 30,
2020
|
|
|
3 months
ended
September 30,
2019
|
|
|
6 months
ended
September 30,
2020
|
|
|
Period from
April 2, 2019
(Date of
Incorporation)
to September 30,
2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Unrealized foreign exchange loss
|
|
|
(1,147
|
)
|
|
|
-
|
|
|
|
(672
|
)
|
|
|
-
|
|
|
Realized foreign exchange loss
|
|
|
(196,288
|
)
|
|
|
-
|
|
|
|
(591,010
|
)
|
|
|
-
|
|
|
Government assistance
|
|
|
39,009
|
|
|
|
-
|
|
|
|
57,009
|
|
|
|
-
|
|
|
Total other income (expense)
|
|
|
(158,426
|
)
|
|
|
-
|
|
|
|
(534,673
|
)
|
|
|
-
|
|
During
the current fiscal quarter and six months ended September 30, 2020, we recorded a realized foreign exchange loss of $196,288 and
$591,010, which reflected a strengthening of the U.S. dollar against the Canadian dollar on our U.S.-denominated bank balances.
We
also applied for, and received, governmental assistance related to the COVID-19 pandemic:
|
|
(i)
|
The
Canada Emergency Business Account (CEBA) program provides an interest-free loan of $40,000,
of which and if required conditions are met, only 75% or $ 30,000 of the loan amount
is repayable by December 31, 2022. Government assistance is comprised of the fair value
of the loan amount forgiven using an 15% effective interest rate (see Note 11 Loan Payable
of our unaudited condensed interim consolidated financial statements for the three and
six month periods ended September 30, 2020 and periods ended September 30, 2019).
|
|
|
(ii)
|
The
10%Temporary Wage Subsidy for Employers (TWS) program provides a subsidy of 10% of wages
from March 18, to June 19, 2020 up to $1,375 for each eligible employee. The maximum
total is $25,000 for each eligible employer. For the 3 and 6 months ended September 30,
2020 the Company received wage subsidies of $0 and $18,000 respectively.
|
|
|
(iii)
|
The
Innovation Assistance Program (IAP) provides assistance to early stage, small to medium-sized
enterprises unable to access COVID-19 support. The Company received $20,328 to cover
salary expenses for the period from April 1 to June 24, 2020.
|
SELECTED
FINANCIAL INFORMATION – SUMMARY OF QUARTERLY RESULTS
The
following table sets out selected quarterly information for all completed fiscal quarters of the Company up to September 30, 2020:
|
|
|
3 Months
ended
September 30,
2020
|
|
|
3 Months
ended
June 30,
2020
|
|
|
3 Months
ended
March 31,
2020
|
|
|
3 Months
ended
December 31,
2019
|
|
|
3 Months
ended
September 30,
2019
|
|
|
Period from
April 2,
2019 (Date of
Incorporation)
to
June 30,
2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Revenue
|
|
|
94,532
|
|
|
|
23,599
|
|
|
|
1,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Net Loss
|
|
|
(3,932,444
|
)
|
|
|
(2,958,904
|
)
|
|
|
(891,240
|
)
|
|
|
(1,055,666
|
)
|
|
|
(514,643
|
)
|
|
|
(166,775
|
)
|
|
Loss per share - basic and diluted
|
|
|
(0.16
|
)
|
|
|
(0.21
|
)
|
|
|
(0.05
|
)
|
|
|
(0.10
|
)
|
|
|
(0.08
|
)
|
|
|
(0.03
|
)
|
Historically,
the Company’s operating results have fluctuated on a quarterly basis and we expect that quarterly financial results will
continue to fluctuate. If anticipated patient services revenues in any quarter do not occur when we expect due to unexpected delays
in our North American clinic rollout and the economic impact of COVID-19 outbreak, our operating results for that quarter and
future quarters may be adversely affected. Furthermore, historical patterns of expenditures cannot be taken as an indication of
future expenditures. The amount and timing of expenditures and therefore liquidity and capital resources vary substantially from
period to period depending on the number of clinics opened, the number of research and development programs being undertaken at
any one time, the stage of the development programs, the timing of significant expenditures for pre-clinical studies and clinical
trials and the availability of funding from investors. Because of the historical variations in our operating results, our limited
operating history and the rapidly evolving nature of our business, we believe that period-to-period comparisons of our revenue
and operating results are not necessarily meaningful and should not be relied upon as indications of our future performance.
LIQUIDITY
AND CAPITAL RESOURCES
Since
inception, we have financed our operations primarily from the issuance of equity. Our primary capital needs are funds to support
the rollout of our North American clinics, to further advance our pioneering work with our next generation psychedelic molecule,
FT-104 and our advanced research and development on psilocybin producing mushrooms in partnership with the UWI.
On
April 2, 2019, the Company issued 6,300,630 Class A shares at a price of $0.055 per share yielding gross proceeds of $350,000.
On
October 3, 2019, directors of the Company exercised options to purchase 2,700,270 Class A shares at a price of $0.00001 for gross
proceeds of $27.
On
October 19, 2019, the Company issued 2,510,000 Class A shares at a price of $0.50 per share yielding gross proceeds of $1,255,000.
As part of the issuance, shareholder loans of $50,000 and $10,000 for the purchase of 100,000 and 20,000 shares respectively were
entered into with advisors of the Company, payable 5 years from the loan date and bearing zero interest.
On
January 29, 2020, the Company issued 9,431,023 Class B shares at a price of $0.90 USD per share, yielding gross proceeds of $8,487,962
USD or $11,195,540 CAD.
Total
finance costs incurred for the issuance of share capital during the period ended March 31, 2020 was $19,297 CAD of which $7,299
CAD was settled via the issuance of 6,666 units of Class B shares at a price of $0.90 USD or $1.1884 CAD per share.
On
May 20, 2020, the Company issued 76,240 Class B shares at a price of $0.90 USD per share, yielding gross proceeds of $68,616 USD
or $95,617 CAD. The share issuance costs of $17,829 were settled via the issuance of 14,216 Class B shares at a price of $0.90
USD or $1.2542 CAD per share.
On
August 11, 2020, directors of the Company exercised options to purchase 9,000,900 Class A shares at a price of $0.00001 for gross
proceeds of $90.
On
August 14, 2020, the Company completed brokered and non-brokered private placements of an aggregate of 5,516,724 class A shares
in the capital of Field Trip, at a price of $2.00 per Field Trip Share, for aggregate gross proceeds of $11,033,448. Canaccord
Genuity Corp. and Stifel Nicolaus Canada Inc. jointly acted as lead agents in connection with the brokered portion of the Private
Placement, for which they were paid a cash commission of $391,082, and were issued 55,167 class A shares and 299,753 compensation
warrants, with each warrant exercisable into one class A share of Field Trip at a price of $2.00 per share until August 14, 2022.
On
September 21, 2020, Field Trip completed a non-brokered private placement of an aggregate of 816,932 Field Trip Shares at a price
of $2.00 per Field Trip Share for gross proceeds of $1,633,864.
On
September 25, 2020, 600,000 common shares were issued as payment of milestone shares under the Jamaican SPA.
Upon
closing of these transactions, all of the Class B Series 1 Shares were automatically converted into Class A Shares.
On
September 17, 2020, the Group received a $40,000 interest-free loan under the federal Canadian Emergency Business Account (CEBA)
program, and if required conditions are met, only 75% or $ 30,000 of the loan amount will need to be repaid by December 31,2022.
We
periodically evaluate the opportunity to raise additional funds through either the public or private placement of equity capital
to strengthen our financial position and to provide sufficient cash reserves for growth and development of the business; however,
there can be no assurance that we will be successful in continuing to finance our operations.
The
table below sets out our cash, restricted cash and working capital as at September 30 and March 31, 2020:
|
|
|
As at
September 30, 2020
|
|
|
As at
March 31, 2020
|
|
|
|
|
$
|
|
|
$
|
|
|
Cash
|
|
|
13,823,577
|
|
|
|
9,590,758
|
|
|
Restricted cash
|
|
|
218,448
|
|
|
|
100,000
|
|
|
Working capital
|
|
|
14,030,978
|
|
|
|
8,985,037
|
|
As
at September 30, 2020, we had $100,000 of restricted cash held as collateral against Field Trip Psychedelics Inc. credit card
limit. We also had $118,448 of restricted cash held at the PCs which, under the terms of the MSA, must be used to pay PC personnel
and expenses before satisfying prior and current management fees.
Working
capital represents the excess of current assets over current liabilities. The increase in our cash and working capital was primarily
due to cash provided by financing activities of $11,315,732, partially offset by cash used in operating activities of $5,789,269
and cash used in investing activities of $1,221,488.
The
following table shows our cash flows from operating, investing and financing activities for the periods indicated:
|
|
|
6 Months ended
September 30,
2020
|
|
|
Period from
April 2, 2019
(Date of
Incorporation)
to
September 30,
2019
|
|
|
|
|
$
|
|
|
$
|
|
|
Cash used in operating activities
|
|
|
(5,789,269
|
)
|
|
|
(545,153
|
)
|
|
Cash used in investing activities
|
|
|
(1,221,488
|
)
|
|
|
(2,768
|
)
|
|
Cash provided by financing activities
|
|
|
11,315,732
|
|
|
|
1,605,000
|
|
Cash
used in operating activities
During
the six months ended September 30, 2020, cash used in operating activities of $5,789,269 was the primary driver for the net loss
of $6,891,348.
During
the period from Apr 2 (date of incorporation) to September 30, 2019, cash used in operating activities of $545,153 was the primary
driver of the net loss of $681,418.
Cash
used in investing activities
During
the six months ended September 30, 2020, cash used in investing activities consisted primarily of acquisition of property, plant
and equipment for our New York, Santa Monica and Chicago clinics of $966,901 and acquisition of intangible assets of $200,075
relating to our digital patient portal (“Patient Portal”) and Trip App. Our Chicago clinic became operational in October
2020. We expect our Amsterdam clinic to become operational in March 2021.
During
the period from April 2 (date of incorporation) to September 30, 2019, cash used in investing activities of $2,768 related to
the acquisition of property, plant and equipment for our Toronto corporate office.
Cash
provided by financing activities
During
the six months ended September 30, 2020, cash provided by financing activities of $11,315,732 was primarily due to net proceeds
of $11,706,367 upon closing of the Class A and Class B equity financing, repayment of lease obligation of $460,635 and CEBA loan
proceeds of $30,000.
During
the period from Apr 2 (date of incorporation) to September 30, 2019, cash provided by financing activities of $1,605,000 was due
to net proceeds.
OFF-BALANCE
SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS
We
do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our
financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are
material to investors.
The
Company leases real property for its clinical and office locations. Additional (non-lease) rent payments for these locations are
variable, and therefore have not been included in the right-of-use asset or lease obligations. In addition, the Company has committed
purchase orders related to capital asset expansion all of which are expected to be paid within the next year. The Company is committed
for estimated additional variable (non-lease) rent and capital asset payments obligations as follows:
|
|
|
Expiry
|
|
|
Total
|
|
|
1 year
|
|
|
2-3 years
|
|
|
4-5 years
|
|
|
More than
5 years
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Lease obligations
|
|
October 31, 2023
to June 30, 2030
|
|
|
|
917,066
|
|
|
|
176,037
|
|
|
|
305,604
|
|
|
|
129,015
|
|
|
|
306,410
|
|
|
Jamaica Facility
|
|
April 6, 2023
|
|
|
|
1,105,828
|
|
|
|
671,073
|
|
|
|
390,291
|
|
|
|
44,463
|
|
|
|
-
|
|
|
Capital commitments
|
|
N/A
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
2,022,894
|
|
|
|
847,111
|
|
|
|
695,895
|
|
|
|
173,478
|
|
|
|
306,410
|
|
On
April 6, 2020, FTNP entered into a partnership with UWI to provide advanced research and development on psilocybin producing mushrooms.
FTNP agreed to lease property from UWI on which to construct the Jamaica Facility, contribute up to US$1,000,000 of initial capital
for the Jamaica Facility and psilocybin research and a total of US$100,000 to fund student development initiatives at UWI over
a 36-month period. To-date, we have incurred $228,074 in capital costs related to the Jamaica Facility.
CONTINGENCIES
Litigation
During
the prior year, we terminated a lease contract with a lessor due to circumstances which we believe constituted a breach of contract
by the lessor. Should we become involved in litigation due to the termination of this contract we believe we have prepared valid
legal defenses and that no material exposure exists on the eventual settlement of such litigation. This lease was treated as a
short-term lease under IFRS 16 and all payments including security deposit paid were fully expensed during the period ended March
31, 2020.
OUTSTANDING
SHARE DATA
The
Company has an unlimited number of Class A, Class B Series 1 and Class C common shares authorized for issuance, of which the following
common shares are issued and outstanding as at September 30, 2020:
|
|
|
As at
|
|
|
As at
|
|
|
|
|
September 30, 2020
|
|
|
March 31, 2020
|
|
|
Class of Shares
|
|
$
|
|
|
$
|
|
|
A
|
|
|
37,007,886
|
|
|
|
11,510,900
|
|
|
B
|
|
|
-
|
|
|
|
9,431,023
|
|
|
Total shares issued and outstanding
|
|
|
37,007,886
|
|
|
|
20,941,923
|
|
For
additional information on share data please refer to notes 3, 12 and 13 of the unaudited condensed interim consolidated financial
statements for the three and six months ended September 30, 2020 and 2019 and notes 3, 10 and 11 of the audited consolidated financial
statements for the period from April 2, 2019 (date of incorporation) to March 31, 2020.
TRANSACTIONS
WITH RELATED PARTIES
The
Company’s related parties include certain investors and shareholders, key management personnel, and entities owned by key
management personnel.
Shareholders
Field
Trip entered into shareholder loan agreements with two of its advisors for a total of $60,000 in July 2019. The notes are non-interest
bearing and are due on demand or five years from the date of note issuance.
KEY
MANAGEMENT PERSONNEL
Key
management personnel are those persons having authority and responsibility for planning, directing and controlling the activities
of the Company, including directors. Key management personnel at September 30, 2020 included ten directors and executive officers
of the corporation.
Compensation
for key management personnel for the three- and six-month period ended September 30, 2020 consisted of salaries, short-term benefits
and other compensation of $459,815 and $639,089 respectively. Directors and officers of the Company control 53% or 19,893,465
outstanding voting shares of the Company.
CRITICAL
ACCOUNTING ESTIMATES
The
preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported amounts of assets and liabilities, revenue and expenses and
the related disclosures of contingent assets and liabilities and the determination of our ability to continue as a going concern.
We regularly evaluate our estimates and assumptions related to share-based transaction expense, property plant and equipment,
intangible assets and shareholder loans. We base our estimates and assumption on current facts, historical experience and various
other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities and the recording of costs and expenses that are not readily apparent
from other sources. Actual results could differ materially from these estimates and assumptions. We review our estimates and underlying
assumptions on an ongoing basis. Revisions are recognized in the period in which the estimates are revised and may impact future
periods.
The
areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial
statements, have been set out in note 2 of our unaudited condensed interim consolidated financial statements for the three and
six months ended September 30, 2020 and the period from April 2, 2019 and (date of incorporation) to September 30, 2019 are more
fully described in note 3 of our audited consolidated financial statements for the period from April 2, 2019 (date of incorporation)
to March 31, 2020.
There
have been no material changes in any of critical accounting policies and estimates during the three months ended September 30,
2020.
ACCOUNTING
CHANGES AND IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Accounting
standards or amendments to existing accounting standards that have been issued, but have future effective dates, are either not
applicable or are not expected to have a significant impact on our financial statements.
FINANCIAL
INSTRUMENTS AND RISK MANAGEMENT
Fair
Value
IFRS
13 – Fair Value Measurements provides a hierarchy of valuation techniques based on whether the inputs to those valuation
techniques are observable or unobservable. Observable inputs are those that reflect market data obtained from independent sources,
while unobservable inputs reflect the Company’s assumptions with respect to how market participants would price an asset
or liability. These two inputs to measure fair value fall into the following three different levels of the fair value hierarchy:
Level
1 – Quoted prices in active markets for identical instruments that are observable
Level
2 – Quoted prices in active markets for similar instruments; inputs other than quoted prices that are
observable and derived from or corroborated by observable market data
Level
3 – Valuations derived from valuation techniques in which one or more significant inputs are unobservable.
The
hierarchy requires the use of observable market data when available.
Cash,
restricted cash, accounts receivable, and accounts payable and accrued liabilities are all short-term in nature and, as such,
their carrying values approximate fair values.
Risks
The
Company is exposed to credit risk, liquidity risk, interest rate risk and currency risk. The Company’s Board of Directors
has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Audit Committee
of the board of directors is responsible for review the Company’s financial risk management policies.
Credit
Risk
Credit
risk is the risk of an unexpected loss if a counterparty to a financial instrument fails to meet its contractual obligations.
The Company is exposed to credit risk on its cash and accounts receivable. The carrying amount of these financial assets represents
the maximum credit exposure. The Company’s cash is held on deposit with major banks in Canada, the United States, and Jamaica
which we believe lessens the degree of credit risk.
Liquidity
Risk
Liquidity
risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its
liquidity risk by reviewing on an ongoing basis its capital requirements. As at September 30, 2020, the Company had $13,823,577
of cash and cash equivalents.
The
Company is obligated to pay accounts payable and accrued liabilities with total carrying amounts and contractual cash flows amounting
to $2,095,670 due in the next 12 months. The carrying values of cash, trade receivable, accounts payable and accrued liabilities
approximate their fair values due to their short term to maturity.
Interest
Rate Risk
Financial
instruments that potentially subject the Company to cash flow interest rate risk are those assets and liabilities with a variable
interest rate. Currently, the Company has no assets or liabilities with a variable interest rate. Financial assets and financial
liabilities that bear interest at fixed rates are subject to fair value interest rate risk. The Company’s lease obligations
are at fixed rates of interest.
Currency
Risk
The
Company is exposed to currency risk related to the fluctuation of foreign exchange rates and the degree of volatility of those
rates. Currency risk is limited to the portion of the Company’s business transactions denominated in currencies other than
the Canadian dollar, which are primarily expenses in United States dollars. As at September 30, 2020, the Company held USD dollar
denominated cash of $3,277,324 USD and had USD dollar denominated accounts payable and accrued liabilities in the amounts of $139,768
USD. Therefore, a 1% change in the foreign exchange rate would have a net impact as at September 30, 2020 of $41,852. USD dollar
expenses for the three months ended September 30, 2020 were $1,791,442 USD. Varying the foreign exchange rate for the three months
ended September 30, 2020 to reflect a 1% strengthening of the U.S. dollar would have increased the net loss by approximately $23,871
assuming that all other variables remained constant.
SUBSEQUENT
EVENTS
Reverse
Takeover of Newton Energy Corporation
On
October 1, 2020 Field Trip completed its previously announced going public transaction (the “Transaction”) with
Newton Energy Corporation and Newton’s wholly-owned subsidiary Newton Energy Subco Limited. The Transaction constituted
a Reverse Takeover under applicable securities law and was structured as a three-cornered amalgamation, which resulted in
Field Trip becoming a wholly-owned subsidiary of Newton by amalgamating with Newton Subco, and the security holders of Field
Trip becoming security holders of Newton. In connection with the completion of the Transaction, Newton common shares listed
on the NEX board of the TSXV were delisted on September 30, 2020. Newton changed its name to “Field Trip Health
Ltd.” (the “Resulting Issuer”) and commenced trading on the Canadian Stock Exchange (“CSE”) on
October 6, 2020, under the stock symbol FTRP.
Amended
Stock Option Plan
In
conjunction with the closing of the Transaction, Field Trip amended its Stock Option Plan on October 6, 2020. The maximum number
of common shares reserved for issuance under the Stock Option Plan pursuant to options not intended as Incentive Stock Options
(“ISOs”) shall be 15% of the issued and outstanding Common Shares from time to time, on a non-diluted basis. The maximum
number of Common shares reserved for issuance under the Stock Option Plan pursuant to ISOs is 7,500,000. For the avoidance of
doubt, Long Term Incentive Options are excluded from the Stock Option Plan maximum. Common Shares in respect of Options that have
been exercised, cancelled, surrendered, or terminated or that expire without being exercised shall again be available for issuance
under the Plan.
Option
Grants
On
October 1, 2020, the Group issued 253,423 options at an issue price of $2.00 per Field Trip Share.
On
November 2, 2020, the Group issued 65,000 options at an issue price of $2.68 per Field Trip Share.
Clinic
Openings
Chicago
On
July 21, 2020, the Group executed a lease agreement to build its Chicago clinic, commencing on October 1, 2020 and ending 132
months from the first day of the first full month of the term. Total commitments under the lease are approximately $2,115,479.
Field Trip Health USA Inc. is a guarantor on the lease.
Atlanta
On
October 7, 2020, the Group executed a lease agreement to build its Atlanta clinic, commencing on October 1, 2020 and ending 121
months from the first day of the first full month of the term. Total commitments under the lease are approximately $1,842,876.
Amsterdam
On
October 7, 2020, the Group executed a lease agreement to build its Amsterdam clinic, commencing on November 1, 2020 and ending
72 months from the first day of the first full month of the term. Total commitments under the lease are approximately $1,967,114.
Houston
On
October 28, 2020, the Group executed a lease agreement to build its Houston clinic, estimated to commence on January 1, 2021 and
ending 63 months from the first day of the first full month of the term. Total commitments under the lease are approximately $1,237,388.
Field Trip Health USA Inc. is a guarantor on the lease.
RISKS
AND UNCERTAINTIES
The
following information sets forth material risks and uncertainties that may affect our business, including our future financing
and operating results and could cause our actual results to differ materially from those contained in forward-looking statements
we have made in this MD&A. The risks and uncertainties below are not the only ones we face. Additional risks and uncertainties
not presently known to us or that we believe to be immaterial may also adversely affect our business. Further, if we fail to meet
the future expectations of the public market in any given period now that the Company’s shares are listed, the market price
of our Common Shares could decline. We operate in a highly competitive environment that involves significant risks and uncertainties,
some of which are outside of our control.
Risks
Related to Our Financial Position and Need for Additional Capital
Liquidity
and Future Financing Risk
We
will likely operate at a loss until our business becomes established and we may require additional financing in order to fund
future operations and expansion plans. Our ability to secure any required financing to sustain operations and expansion plans
will depend in part upon prevailing capital market conditions and business success. There can be no assurance that we will be
successful in our efforts to secure any additional financing or additional financing on terms satisfactory to management. Moreover,
future activities may require us to alter our capitalization significantly and, if additional financing is raised by issuance
of additional shares of Field Trip from treasury, control may change, and shareholders may suffer dilution. Our inability to access
sufficient capital for its operations could have a material adverse effect on our financial condition and results of operations.
Impact
of the COVID-19 Pandemic
COVID-19
is an infectious disease caused by severe acute respiratory syndrome coronavirus 2. Since December 31, 2019, the outbreak of COVID-19
has resulted in governments worldwide, including Canada and the United States, enacting emergency measures to combat the spread
of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing,
have caused material disruption to businesses globally, resulting in an economic slowdown. Such events may result in a period
of business disruption, and in reduced operations, any of which could have a material adverse impact on our profitability, results
of operations, financial condition and the trading price of our securities. Governments and central banks have reacted to the
COVID-19 pandemic with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and
impact of the COVID-19 pandemic is unknown at this time, as is the efficacy of the government and central bank interventions.
It is not possible to reliably estimate the length and severity of these developments and the impact on our financial results
and condition. To date, a number of businesses have suspended or scaled back their operations and development as cases of COVID-19
have been confirmed, for precautionary purposes or as governments have declared a state of emergency or taken other actions. If
the operation or development of one or more of our clinics is suspended or scaled back, or if its supply chains are disrupted,
it may have a material adverse impact on our profitability, results of operations, financial condition and the trading price of
our securities. To the extent that management or other personnel are unavailable to work due to the COVID-19 pandemic, whether
due to illness, government action or otherwise, it may have a material adverse impact on our profitability, results of operations,
financial condition and the trading price of our securities. The breadth of the impact of the COVID-19 pandemic on investors,
businesses, the global economy and financial and commodity markets may also have a material adverse impact on our profitability,
results of operations, financial conditions and the trading price of our securities.
Limited
Operating History
We
have not yet generated material revenue. Field Trip was incorporated in April 2019 and thus has a limited operating history. We
are therefore subject to many of the risks common to early-stage enterprises, including under-capitalization, cash shortages,
limitations with respect to personnel, financial, and other resources and lack of revenues. There is no assurance that we will
be successful in achieving a return on shareholders’ investment and the likelihood of success must be considered in light
of the early stage of operations.
Speculative
Nature of Investment Risk
An
investment in the securities of Field Trip carries a high degree of risk and should be considered as a speculative investment.
We have no history of earnings, limited cash reserves, limited operating history, have not paid dividends, and are unlikely to
pay dividends in the immediate or near future.
Risks
Related to Our Business and Operations
Risks
Inherent in the Nature of the Health Clinic Industry
Changes
in operating costs (including costs for maintenance, insurance), inability to obtain permits required to conduct our business,
changes in health care laws and governmental regulations, and various other factors may significantly impact our ability to generate
revenues. Certain significant expenditures, including legal fees, borrowing costs, maintenance costs, insurance costs and related
charges, must be made to operate the Clinics, regardless of whether we are generating revenue.
Non-Compliance
with Laws
Non-compliance
with federal, provincial, or state laws and regulations, or the expansion of current, or the enactment of new, laws or regulations,
could adversely affect our business. The activities of the clinics and the medical personnel operating the clinics are subject
to regulation by governmental authorities, and our business objectives are contingent, in part, upon personnel’s compliance
with regulatory requirements enacted by these governmental authorities, and obtaining all regulatory approvals, where necessary,
for the carrying on of business at the clinics. Any delays in obtaining, failure to obtain, or violations of regulatory approvals
and requirements would significantly delay the development of markets and products and could have a material adverse effect on
our business, results of operations and financial condition.
Risks
related to Prescribing Medication
Provincial
and state medical boards or other regulatory bodies could take disciplinary action against our physicians for excessive psychedelic
prescriptions. Physician prescription patterns may be tracked and may be used to impose disciplinary action on physicians who
prescribe psychedelics at a high rate. If any of our physicians are deemed to be prescribing psychedelics excessively, such physicians
could face disciplinary action, including, revocation of the physician’s license. Any disciplinary action or license revocation
of physicians who work at a clinic could result in such clinic not having sufficient physicians to address patient needs and could
adversely affect our business.
Unfavourable
Publicity or Consumer Perception
The
success of the psychedelic therapy industry may be significantly influenced by the public’s perception of psychedelic medicinal
applications. Psychedelic therapy is a controversial topic, and there is no guarantee that future scientific research, publicity,
regulations, medical opinion, and public opinion relating to psychedelic therapy will be favourable. The psychedelic therapy industry
is an early-stage business that is constantly evolving, with no guarantee of viability. The market for psychedelic therapy is
uncertain, and any adverse or negative publicity, scientific research, limiting regulations, medical opinion and public opinion
relating to the consumption of psychedelic therapy may have a material adverse effect on our operational results, consumer base
and financial results.
Social
Media
There
has been a recent marked increase in the use of social media platforms and similar channels that provide individuals with access
to a broad audience of consumers and other interested persons. The availability and impact of information on social media platforms
is virtually immediate and many social media platforms publish user-generated content without filters or independent verification
as to the accuracy of the content posted. Information posted about Field Trip may be adverse to our interests or may be inaccurate,
each of which may harm our business, financial condition and results of operations.
Patient
Acquisitions
Our
success will depend, in part, on our ability to attract and retain patients. There are many factors which could impact our ability
to attract and retain patients, including the successful implementation of our patient-acquisition plans and the continued growth
in the aggregate number of patients selecting psychedelic therapy as a treatment option. Our failure to acquire and retain patients
as clients would have a material adverse effect on our business, operating results and financial condition.
Development
Risks
Future
development of our business may not yield expected returns and may strain management resources. Development of our revenue streams
is subject to a number of risks, including construction delays, cost overruns, financing risks, cancellation of key service contracts,
and changes in government regulations. Overall costs may significantly exceed the costs that were estimated when the project was
originally undertaken, which could result in reduced returns, or even losses, from such investments.
Substantial
Risk of Regulatory or Political Change.
The
success of our business strategy depends on the legality of the use of psychedelics for the treatment of mental health conditions
and the acceptance of such use in the medical community. The political environment surrounding the psychedelics industry in general
can be volatile. As of the date of this MD&A, Canada and the United States permit the use of ketamine or a derivative thereof
as a treatment for certain mental health conditions; however, the risk remains that a shift in the regulatory or political realm
could occur and have a drastic impact on the use of psychedelics as a whole, adversely impacting our ability to successfully operate
or grow our business.
Government
Regulations, Permits and Licenses
Our
operations may be subject to governmental laws or regulations promulgated by various legislatures or governmental agencies from
time to time. A breach of such legislation may result in the imposition of fines and penalties. The cost of compliance with changes
in governmental regulations has the potential to reduce the profitability of operations. We intend to fully comply with all governmental
laws and regulations. The physicians that recommend psychedelic therapy to our patients will be subject to various federal, provincial
and municipal laws in Canada. While there are currently no indications that we will require approval by a governmental or regulatory
authority in Canada, the United States or Jamaica, such approvals may ultimately be required. If any permits are required for
our operations and activities in the future, there can be no assurance that such permits will be obtainable on reasonable terms
or on a timely basis, or that applicable laws and regulations will not have an adverse effect on our business.
For
instance, psilocybin is currently a controlled substance with no approved use in Canada or the United States. We selected Jamaica
for Psilocybin research and development because Jamaica is one of the few jurisdictions in the world with a legal environment
that would permit such activities with no regulatory requirements. If a medical use for psilocybin is not developed or, if developed,
is not approved for use in Canada, the United States and other jurisdictions, the commercial opportunity that we are pursuing
may be highly limited.
Our
current and future operations are and will be governed by laws and regulations governing the health care industry, labour standards,
occupational health and safety, land use, environmental protection, and other matters. Amendments to current laws, regulations
and permits governing operations and activities of health clinics, or more stringent implementation thereof, could have a material
adverse impact on our operations and cause increases in capital expenditures or costs, or reduction in levels of our medical services.
Ketamine
as a Pharmaceutical
We
are currently administering oral ketamine lozenges to patients at the Toronto Clinic, which is not subject to OHPIP (as such term
is defined below) oversight. We have received correspondence from the College of Physicians and Surgeons of Ontario (“CPSO”)
advising that, while the administration of lozenges does not currently fall within the scope of the Out-of-Hospital Inspection
Program (“OHPIP”), the OHPIP may be expanded in the future to include lozenges. To the extent that ketamine
is administered by a member of the CPSO, we may have to cease administration of ketamine by physicians. In such an event and if
required to continue operations, we intend to seek OHPIP certification for the Toronto Clinic, There is no guarantee that such
certification will be obtained or obtained in a timely manner; therefore we have developed plans that we believe will enable us
to continue operating the Toronto Clinic without seeking OHPIP certification. These plans include using medical professionals
not subject to CPSO oversight. For instance, we have received legal advice that OHPIP does not apply to the prescribing or administration
of oral ketamine lozenges by nurse practitioners. In either case, such result could have a material impact on our business and
results of operations.
US
law does not regulate the mode of administration of ketamine. Provided the physician is licensed, the method of administration
is left to the discretion of the physician.
Non-Referrals
Physicians
may not refer patients to the clinics. In addition, as the market grows, and general practitioners become more comfortable and
knowledgeable about the psychedelic therapy industry and products available, they may choose to write prescriptions directly for
their own patients rather than refer them to an outside clinic.
Corporate
Practice of Medicine and Fee Splitting in the United States
Our
clinic operations in the United States are subject to Corporate practice of medicine and fee-splitting prohibitions which vary
widely from state to state. The corporate practice of medicine prohibition exists in some form, by statute, regulation, board
of medicine or attorney general guidance, or case law, in various states that we operate. These laws generally prohibit the practice
of medicine by lay persons or entities and are intended to prevent unlicensed persons or entities from interfering with or inappropriately
influencing providers’ professional judgment. Due to the prevalence of the corporate practice of medicine doctrine, we contract
with Professional Corporations, who in turn employ or retain physicians and other medical providers to deliver professional clinical
services in our New York and Los Angeles clinics. The PC Clinics are wholly owned by providers licensed in their respective states,
including Dr. Ben Medrano, and Dr. Randy Scharlach, who are members of the Professional Corporation (PC) Advisory Committee.
Under
our MSA’s, when our PC Clinics provide professional clinical services to patients, we, as administrator, perform billing
and collection services on behalf of the PC Clinics, and the PC Clinics receive the fees for the services provided. In return
for these professional clinical, management, operational and administrative services, we receive fees from the PC Clinics that
represent fair value. As a result, our ability to receive cash fees from the PC Clinics is limited to the fair market value of
the services provided under the MSA’s. To the extent our ability to receive cash fees from the PC Clinics is limited, our
ability to use that cash for growth, debt service or other uses at PC Clinics may be impaired and, as a result, our results of
operations and financial condition may be adversely affected.
Our
ability to perform medical and digital health services in a particular U.S. state is directly dependent upon the applicable laws
governing the practice of medicine, healthcare delivery and fee splitting in such locations, which are subject to changing political,
regulatory and other influences. The extent to which a U.S. state considers particular actions or relationships to constitute
the practice of medicine is subject to change and to evolving interpretations by medical boards and state attorneys general, among
others, each of which has broad discretion. There is a risk that U.S. state authorities in some jurisdictions may find that our
contractual relationships with the PC Clinics, which govern the provision of medical and digital health services and the payment
of administrative and operations support fees, violate laws prohibiting the corporate practice of medicine and fee splitting.
The extent to which each state may consider particular actions or contractual relationships to constitute improper influence of
professional judgment varies across the states and is subject to change and to evolving interpretations by state boards of medicine
and state attorneys general, among others. Accordingly, we must monitor our compliance with laws in every jurisdiction in which
we operate on an ongoing basis, and we cannot provide assurance that our activities and arrangements, if challenged, will be found
to be in compliance with the law. Additionally, it is possible that the laws and rules governing the practice of medicine, including
the provision of digital health services, and fee splitting in one or more jurisdictions may change in a manner adverse to our
business. While the MSA’s prohibit us from controlling, influencing or otherwise interfering with the practice of medicine
at each PC Clinic, and provide that physicians retain exclusive control and responsibility for all aspects of the practice of
medicine and the delivery of medical services, there can be no assurance that our contractual arrangements and activities with
the PC Clinics will be free from scrutiny from U.S. state authorities, and we cannot guarantee that subsequent interpretation
of the corporate practice of medicine and fee splitting laws will not circumscribe our business operations. State corporate practice
of medicine doctrines also often impose penalties on physicians themselves for aiding the corporate practice of medicine, which
could discourage providers from participating in our network of physicians. If a successful legal challenge or an adverse change
in relevant laws were to occur, and we were unable to adapt our business model accordingly, our operations in affected jurisdictions
would be disrupted, which could harm our business.
While
we expect that our relationships with the PC Clinics will continue, a material change in our relationship with these entities,
or among the PC Clinics, whether resulting from a dispute among the entities, a challenge from a governmental regulator, a change
in government regulation, or the loss of these relationships or contracts with the PC Clinics, could impair our ability to provide
services to our patients and could harm our business.
Dilution
The
financial risk of our future activities will be borne to a significant degree by purchasers of our Common Shares. If we issue
Common Shares from our treasury for financing purposes, control of Field Trip may change, and purchasers may suffer additional
dilution.
Additional
Requirements for Capital
Substantial
additional financing may be required for us to successfully develop our business. No assurances can be given that we will be able
to raise the additional capital that we may require for our anticipated future development. Any additional equity financing may
be dilutive to investors and debt financing, if available, may involve restrictions on financing and operating activities. There
is no assurance that additional financing will be available on terms acceptable to us, if at all. If we are unable to obtain additional
financing as needed, we may be required to reduce the scope of our operations or anticipated expansion.
Negative
Cash Flow from Operating Activities
We
have had negative cash flow from operating activities since inception and may never be profitable. Significant capital investment
will be required to achieve our existing plans. There is no assurance that our business will generate earnings, operate profitably,
or provide a return on investment in the near future. Accordingly, we may be required to obtain additional financing in order
to meet our future cash commitments
Management
of Growth
We
may be subject to growth-related risks, including pressure on our internal systems and controls. Our ability to manage growth
effectively will require us to continue to implement and improve our operational and financial systems and to expand, train and
manage our employee base. Our inability to deal with this growth could have a material adverse impact on our business, operations
and prospects. While we believe that we will have made the necessary investments in infrastructure to process anticipated volume
increases in the short term, we may experience growth in the number of our employees and the scope of our operating and financial
systems, resulting in increased responsibilities for our personnel, the hiring of additional personnel and, in general, higher
levels of operating expenses. In order to manage our current operations and any future growth effectively, we will also need to
continue to implement and improve our operational, financial and management information systems and to hire, train, motivate,
manage and retain employees. There can be no assurance that we will be able to manage such growth effectively, that management,
personnel or systems will be adequate to support the our operations or that we will be able to achieve the increased levels of
revenue commensurate with the increased levels of operating expenses associated with this growth.
Dependence
on Management Team
We
depend on certain key senior managers who have developed strong relationships in the industry to oversee our core marketing, business
development, operational and fund-raising activities. Their loss or departure in the short-term would have an adverse effect on
our future performance.
Reliance
on Third Parties
We
rely on outside sources to manufacture the psychedelics used in the clinics and further rely on outside sources to stock and distribute,
via a prescription by a licensed physician, the psychedelics used in the clinics. The failure of such third parties to deliver
either components or finished goods on a timely basis could have a material adverse effect on our business. As these are third
parties over which we will have little or no control, the failure of such third parties to provide components or finished goods
on a timely basis could have a material adverse effect on our business, financial condition and operating results.
Intellectual
Property
We
currently do not have any registered trademarks. Failure to obtain or register trademarks for “field trip” could require
us to rebrand, resulting in a material adverse impact on its business. If we are unable to register or, if registered, maintain
effective patent rights for its product candidates, we may not be able to effectively compete in the market. If we are not able
to protect our proprietary information and know-how, such proprietary information may be used by others to compete against us.
We may not be able to identify infringements of our patents (if and when granted), and, accordingly, the enforcement of our intellectual
property rights may be difficult. Once such infringements are identified, enforcement could be costly and time consuming. Third
party claims of intellectual property infringement, whether or not reasonable, may prevent or delay our development and commercialization
efforts.
Our
success will depend in part upon our ability to protect our intellectual property and proprietary technologies and upon the nature
and scope of the intellectual property protection we receive. The ability to compete effectively and to achieve partnerships will
depend on our ability to develop and maintain proprietary aspects of our technology and to operate without infringing on the proprietary
rights of others. The presence of such proprietary rights of others could severely limit our ability to develop and commercialize
our products and to conduct existing research, and could require financial resources to defend litigation, which may be in excess
of our ability to raise such funds. There is no assurance that our patent applications submitted or those that we intend to acquire
will be approved in a form that will be sufficient to protect our proprietary technology and gain or keep any competitive advantage
that we may have or, once approved, will be upheld in any post-grant proceedings brought by any third parties.
The
patent positions of pharmaceutical companies can be highly uncertain and involve complex legal, scientific and factual questions
for which important legal principles remain unresolved. Patents issued to us may be challenged, invalidated or circumvented. To
the extent our intellectual property offers inadequate protection, or is found to be invalid or unenforceable, we will be exposed
to a greater risk of direct competition. If our intellectual property does not provide adequate protection against our competitors,
our competitive position could be adversely affected, as could our business, financial condition and results of operations. Both
the patent application process and the process of managing patent disputes can be time consuming and expensive, and the laws of
some foreign countries may not protect our intellectual property rights to the same extent as do the laws of Canada and the United
States. We will be able to protect our intellectual property from unauthorized use by third parties only to the extent that our
proprietary technologies, key products, and any future products are covered by valid and enforceable intellectual property rights,
including patents, or are effectively maintained as trade secrets, and provided we have the funds to enforce its rights, if necessary.
Competition
The
psychedelic therapy industry is intensely competitive, and we compete with other companies that may have greater financial resources
and technical facilities. Numerous other businesses are expected to compete in the clinic space and provide additional patient
servicing. It is possible that physicians or other third parties could also establish their own psychedelic therapy clinics that
are similar to ours, as there are no significant barriers to entry. An increase in competition for psychedelic therapy may decrease
prices and result in lower profits. This increases the risk that we will not be able to access financing when needed, or at all.
In
relation to FT Discovery, the biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant
technological change. Our competitors include large, well-established pharmaceutical companies, biotechnology companies, and academic
and research institutions developing therapeutics for the same indications we are targeting and competitors with existing marketed
therapies. Many other companies are developing or commercializing therapies to treat the same diseases or indications for which
FT-104 or our other product candidates may be useful. Many of our competitors have substantially greater financial, technical
and human resources than we do and have significantly greater experience than we in conducting preclinical testing and human clinical
trials of product candidates, scaling up manufacturing operations and obtaining regulatory approvals of products. Accordingly,
our competitors may succeed in obtaining regulatory approval for products more rapidly than us.
Litigation
We
may become party to litigation from time to time in the ordinary course of business, including a medical malpractice claim, or
a claim based in related legal theories of negligence or vicarious liability among others if a physician at one of our clinics
causes injury, which could adversely affect our business. Should any litigation in which we become involved be determined against
us, such a decision could adversely affect our ability to continue operating and the market price for our Common Shares. Even
if we are involved in litigation and win, litigation can redirect significant resources. Litigation may also create a negative
perception of our business.
Insurance
Coverage
We
believe our insurance coverage addresses all material risks to which we are exposed and is adequate and customary in our current
state of operations, however such insurance is subject to coverage limits and exclusions and may not be available for the risks
and hazards to which we are exposed. Moreover, there can be no guarantee that we will be able to obtain adequate insurance coverage
in the future or obtain or maintain liability insurance on acceptable terms or with adequate coverage against all potential liabilities.
Holding
Company
Field
Trip Health Ltd. is a holding company and essentially all of its assets are the shares of its material subsidiary, Field Trip
Psychedelics Inc., and, in turn, all of this subsidiary’s material assets are the shares of its material subsidiaries, Field
Trip Health Inc., Field Trip USA and FTNP. As a result, investors in the holding company are subject to the risks attributable
to its subsidiaries. As a holding company, we conduct substantially all of our business through our subsidiaries, which generate
substantially all of our revenues. Consequently, our cash flows and ability to complete current or desirable future enhancement
opportunities are dependent on the earnings of our subsidiaries and the distribution of those earnings to us. The ability of these
entities to pay dividends and other distributions will depend on their operating results and will be subject to applicable laws
and regulations which require that solvency and capital standards be maintained by such companies and contractual restrictions
contained in the instruments governing their debt, as applicable. In the event of a bankruptcy, liquidation or reorganization
of any of our material subsidiaries, holders of any indebtedness and trade creditors may be entitled to payment of their claims
from the assets of those subsidiaries or clinics before the holding company.
Smaller
Companies
Market
perception of junior companies may change, potentially affecting the value of investors’ holdings and our ability to raise
further funds through the issue of further Common Shares or otherwise. The share price of publicly traded smaller companies can
be highly volatile. The value of our Common Shares may rise or fall and, in particular, the share price may be subject to sudden
and large falls in value given the restricted marketability of our Common Shares.
A
Significant Number of Our Common Shares are owned by a Limited Number of Existing Shareholders
Field
Trip’s management, directors and employees own a substantial number of our outstanding Common Shares (on a non-diluted and
partially-diluted basis). As such, management, directors and employees, as a group, are in a position to exercise influence over
matters requiring shareholder approval, including the election of directors and the determination of corporate actions. As well,
these shareholders could delay or prevent a change in control of the Company that could otherwise be beneficial to our shareholders.
Difficult
to Forecast
We
must rely largely on our own market research to forecast the utilization of our services, as detailed forecasts are not generally
obtainable from other sources at this early stage of the psychedelics industry in Canada and the U.S. A failure in the demand
for our services to materialize as a result of competition, technological change, market acceptance or other factors could have
a material adverse effect on our business, results of operations and financial condition.
From
time to time, studies or clinical trials on various aspects of biopharmaceutical products are conducted by academic researchers,
competitors or others. The results of these studies or trials, when published, may have a significant effect on the market for
the biopharmaceutical product that is the subject of the study. The publication of negative results of studies or clinical trials
or adverse safety events related to the FT Discovery, or the clinics, could adversely affect our ability to finance future developments
or the price of our Common Shares, and our business and financial results could be materially and adversely affected.
Current
Market Volatility
The
securities markets in the United States and Canada have recently experienced a high level of price and volume volatility, and
the market prices of securities of many companies have experienced wide fluctuations in price which have not necessarily been
related to the operating performance, underlying asset values or prospects of such companies. There can be no assurance that continual
fluctuations in price will not occur. It may be anticipated that any market our Common Shares will be subject to market trends
generally, notwithstanding any potential success of Field Trip. The value of our Common Shares will be affected by such volatility.
Conflicts
of Interest
Some
of Field Trip’s directors and officers may act as directors and/or officers of other health and wellness companies. As such,
such directors and officers may be faced with conflicts of interests when evaluating alternative health and wellness opportunities.
In addition, our directors and officers may prioritize the business affairs of another company over the affairs of the Company.
To mitigate this risk, we have implemented a conflict of interest policy for all directors, officers, employees and contractors
of the Company.
Personnel
We
have a small management team, and the loss of any key individual could affect our business. Additionally, we will be required
to secure other personnel to facilitate our marketing and development initiatives. Any inability to secure and/or retain appropriate
personnel may have a materially adverse impact on our business and operations.
Currency
Exchange Rates
Exchange
rate fluctuations may adversely affect our financial position and results. It is anticipated that a significant portion of our
business will be conducted in the United States using U.S. dollars. Our financial results will be reported in Canadian dollars
and costs will be incurred primarily in U.S. dollars. The depreciation of the Canadian dollar against the U.S. dollar could increase
the actual capital and operating costs of our U.S. operations and materially adversely affect the results presented in our financial
statements. Currency exchange fluctuations may also materially adversely affect our future cash flow from operations, our results
of operations, financial condition and prospects.
Volatility
of Field Trip Common Share Price
Investors
should be aware that the value of our Common Shares may be volatile. Investors may, on disposing of their Common Shares, realise
less than their original investment, or may lose their entire investment. Our Common Shares, therefore, may not be suitable as
an investment.
The
market price of our Common Shares may not reflect the underlying value of our net assets. The price at which our Common Shares
trade, and the price at which investors may purchase and sell their Common Shares, is influenced by a large number of factors,
some specific to us and our proposed operations, and some which may affect the sectors in which we operate. Such factors could
include the performance of our operations, large purchases or sales of our Common Shares, liquidity or the absence of liquidity
in our Common Shares, legislative or regulatory changes relating to the business of Field Trip, and general market and economic
conditions.
Substantial
Number of Authorized but Unissued Shares
We
have an unlimited number of Field Trip Common Shares that may be issued by the Board without further action or approval of our
shareholders. While the Board is required to fulfill its fiduciary obligations in connection with the issuance of such shares,
the shares may be issued in transactions with which not all shareholders agree, and the issuance of such shares will cause dilution
to the ownership interests of the our shareholders.
Enforcement
of Legal Rights
In
the event of a dispute arising from our foreign operations, we may be subject to the exclusive jurisdiction of foreign courts
or may not be successful in subjecting foreign persons to the jurisdictions of courts in Canada. Similarly, to the extent that
our assets are located outside of Canada, investors may have difficulty collecting from us any judgments obtained in the Canadian
courts and predicated on the civil liability provisions of securities laws. We may also be hindered or prevented from enforcing
our rights with respect to a governmental entity or instrumentality because of the doctrine of sovereign immunity.
Emerging
Market Risks
We
have operations in Jamaica, an emerging market country, and may have operations in additional countries in the future. Such operations
expose us to the socio-economic conditions as well as the laws governing our activities in Jamaica and any other jurisdiction
where we may have operations in the future. Inherent risks with conducting foreign operations include, but are not limited to:
high rates of inflation; extreme fluctuations in currency exchange rates, military repression; war or civil war; social and labour
unrest; organized crime; hostage taking; terrorism; violent crime; expropriation and nationalization; renegotiation or nullification
of existing licenses, approvals, permits and contracts; changes in taxation policies; restrictions on foreign exchange and repatriation;
and changing political norms, banking and currency controls and governmental regulations that favour or require us to award contracts
in, employ citizens of, or purchase supplies from, the jurisdiction.
The
Jamaican government, or other governments in emerging markets where we may have operations in the future, may intervene in its
economies, sometimes frequently, and occasionally make significant changes in policies and regulations. Changes, if any, in the
research, cultivation and development of psilocybin mushroom and other botanicals policies or shifts in political attitude in
Jamaica or other countries where we may have operations in the future may adversely affect our operations or profitability. Operations
may be affected in varying degrees by government regulations with respect to, but not limited to, restrictions on production,
price controls, export controls, currency remittance, importation of product and supplies, income and other taxes, royalties,
the repatriation of profits, expropriation of property, foreign investment, maintenance of licenses, approvals and permits, environmental
matters, land use, land claims of local people, water use and workplace safety. Failure to comply strictly with applicable laws,
regulations and local practices could materially impact our operations in Jamaica or other countries where we may have operations
in the future. We continue to monitor developments and policies in Jamaica to assess the impact thereof to our operations or future
operations; however, such developments cannot be predicted and could have an adverse effect on our operations in Jamaica.
Jamaica
has a history of economic instability (such as inflation or recession). In 2013, Jamaica launched an ambitious reform program
to stabilize the economy, reduce debt, and fuel growth, gaining national and international support. While there is no current
political instability, and historically there has been no change in laws and regulations, this is subject to change in the future
and could adversely affect our business, financial condition and results of operations. Jamaica is vulnerable to natural disasters
such as hurricanes and flooding and the effects of climate change. It is an upper middle-income economy that is nevertheless struggling
due to low growth, high public debt, and exposure to external shocks.
Global
economic crises could negatively affect investor confidence in emerging markets or the economies of emerging markets, including
Jamaica. Such events could materially and adversely affect our business, financial condition and results of operations.
Financial
and securities markets in Jamaica are influenced by the economic and market conditions in other countries, including other emerging
market countries and other global markets. Although economic conditions in these countries may differ significantly from economic
conditions in Jamaica, investors’ reactions to developments in these other countries, such as the recent developments in
the global financial markets, may substantially affect the capital flows into Jamaica and the market value of the securities of
Field Trip.
The
legal and regulatory requirements and local business culture and practices in Jamaica and the foreign countries in which we may
expand are different from those in which we currently operate. The officers and directors of the Company will rely, to a great
extent, on our local legal counsel and local consultants and advisors in respect of legal, banking, labour, financing and tax
matters in order to ensure compliance with material legal, regulatory and governmental developments as they pertain to and affect
our operations, particularly with respect to psilocybin or related operations. Increased compliance costs may be incurred by us.
Further, there can be no assurance that we will develop a marketable product or service in Jamaica or any other foreign country.
These factors may have a material adverse effect on our research and development business and the results of its research and
development operations.
In
the event of a dispute arising in connection with our operations in Jamaica or another a foreign jurisdiction where we may conduct
business, we may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons
to the jurisdictions of the courts of Canada or enforcing Canadian judgments in such other jurisdictions. We may also be hindered
or prevented from enforcing our rights with respect to a governmental instrumentality because of the doctrine of sovereign immunity.
Accordingly, our activities in foreign jurisdictions could be substantially affected by factors beyond our control.
Other
risks include the potential for fraud and corruption by suppliers or personnel or government officials which may implicate the
Company, compliance with applicable anti-corruption laws, including the Corruption of Foreign Public Officials Act (Canada)
by virtue of our operating in jurisdictions that may be vulnerable to the possibility of bribery, collusion, kickbacks, theft,
improper commissions, facilitation payments, conflicts of interest and related party transactions and our possible failure to
identify, manage and mitigate instances of fraud, corruption, or violations applicable regulatory requirements.
Agriculture
FT
Discovery’s business involves the growing of an agricultural product and is subject to the risks inherent in the agricultural
business, such as insects, plant diseases, and invasive species. Although we expect that any such growing will be completed indoors
under climate-controlled conditions, there can be no assurance that natural elements will not have a material adverse effect on
any future production.
Violations
of Laws and Regulations Related to Drug Development
In
Canada and the United States, certain psychedelic drugs, are classified as Schedule I drugs under the Controlled Drugs and
Substances Act (Canada) and the Controlled Substances Act (United States) and as such, certain medical and recreational
use is illegal under the Canada and U.S. federal laws. FT Discovery’s programs involving psilocybin are limited to Jamaica
and conducted in strict compliance with the laws and regulations of Jamaica. As such, all facilities engaged with such substances
by or on our behalf do so in compliance with appropriate governmental agencies. While we focus on programs using psychedelic inspired
compounds, we do not have any direct or indirect involvement with the illegal selling, production or distribution of any substances
in the jurisdictions in which we operate and do not intend to have any such involvement. However, a violation of any Canadian,
United States or Jamaican laws and regulations, could result in significant fines, penalties, administrative sanctions, convictions
or settlements arising from civil proceedings initiated by either government entities in the jurisdictions in which we operates,
or private citizens or criminal charges which could have an adverse effect on our operations.
Drug
Development
Given
the early stage of FT Discovery’s product development, we can make no assurance that our research and development programs
will result in regulatory approval or commercially viable products. To achieve profitable operations, the Company, alone or with
others, must successfully develop, gain regulatory approval for, and market our future products. We currently have no products
that have been approved by the FDA, Health Canada or any similar regulatory authority. To obtain regulatory approvals for its
product candidates being developed and to achieve commercial success, clinical trials must demonstrate that the product candidates
are safe for human use and that they demonstrate efficacy. We have not yet completed later stage clinical trials for any of our
product candidates.
Many
product candidates never reach the stage of clinical testing and even those that do have only a small chance of successfully completing
clinical development and gaining regulatory approval. Product candidates may fail for a number of reasons, including being unsafe
for human use or due to the failure to provide therapeutic benefits equal to or better than the standard of treatment at the time
of testing. Unsatisfactory results obtained from a particular study relating to a research and development program may cause the
Company or our collaborators to abandon commitments to that program. Positive results of early pre-clinical research may not be
indicative of the results that will be obtained in later stages of preclinical or clinical research. Similarly, positive results
from early-stage clinical trials may not be indicative of favourable outcomes in later-stage clinical trials, and we can make
no assurance that any future studies, if undertaken, will yield favourable results.
The
early stage of FT Discovery’s product development makes it particularly uncertain whether any of our product development
efforts will prove to be successful and meet applicable regulatory requirements, and whether any of our product candidates will
receive the requisite regulatory approvals, be capable of being manufactured at a reasonable cost or be successfully marketed.
If we are successful in developing our current and future product candidates into approved products, we will still experience
many potential obstacles, which would affect our ability to successfully market and commercialize such approved products, such
as the need to develop or obtain manufacturing, marketing and distribution capabilities, price pressures from third-party payors,
or proposed changes in health care systems. If we are unable to successfully market and commercialize any of our products, our
financial condition and results of operations may be materially and adversely affected.
We
can make no assurance that any future studies, if undertaken, will yield favorable results. Many companies in the pharmaceutical
and biotechnology industries have suffered significant setbacks in later-stage clinical trials after achieving positive results
in early-stage development, and we cannot be certain that we will not face similar setbacks. These setbacks have been caused by,
among other things, pre-clinical findings made while clinical trials were underway or safety or efficacy observations made in
clinical trials, including previously unreported adverse events. Moreover, preclinical and clinical data are often susceptible
to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in
preclinical studies and clinical trials nonetheless failed to obtain FDA approval. If we fail to produce positive results in our
future clinical trials of FT-104, the development timeline and regulatory approval and commercialization prospects for FT-104,
would be materially adversely affected which may in turn materially adversely impact our business.
Reliance
on Third-Parties – Drug Development
We
rely on third parties to conduct a significant portion of our pre-clinical and clinical development activities. Pre-clinical activities
include in vivo studies providing access to specific disease models, pharmacology and toxicology studies, and assay development.
Clinical development activities include trial design, regulatory submissions, clinical patient recruitment, clinical trial monitoring,
clinical data management and analysis, safety monitoring and project management. If there is any dispute or disruption in our
relationship with third parties, or if they are unable to provide quality services in a timely manner and at a feasible cost,
our active development programs will face delays. Further, if any of these third parties fails to perform as we expect or if their
work fails to meet regulatory requirements, our testing could be delayed, cancelled or rendered ineffective.
Pre-clinical
and clinical development activities must be carried out in accordance with Good Laboratory Practices (“GLP”).
GLP was originally established by the Organization for Economic Co-operation and Development (“OECD”) to promote
the quality and validity of test data and to establish a basis for mutual acceptance of data among member states at the international
level. GLP was adopted by both Health Canada and the Standards Council of Canada, which has monitoring authority for GLP compliance
of test facilities within Canada, and by the FDA as (Good Laboratory Practice regulations, 21 CFR 58). Labs must adopt these GLP
practices to ensure they are producing valuable test results, and each lab has its own set of approaches to staying compliant.
If any of these third parties or service providers fails to meet GLP requirements, our pre-clinical and clinical development activities
could be delayed, cancelled or rendered ineffective.
We
have no manufacturing experience and will rely on contract manufacturing organizations (“CMOs”) to manufacture
our product candidates for pre-clinical studies and clinical trials. We will rely on CMOs for manufacturing, filling, packaging,
storing and shipping of drug product in compliance with current Good Manufacturing Practices (“cGMP”) regulations
applicable to its products. The FDA and Health Canada ensure the quality of drug products by carefully monitoring drug manufacturers’
compliance with cGMP regulations. The cGMP regulations for drugs contain minimum requirements for the methods, facilities and
controls used in manufacturing, processing and packing of a drug product.
There
can be no assurances that CMOs will be able to meet our timetable and requirements. We have not contracted with suppliers for
FT-104 drug substance production but in the event that the selected provider is unable to scale up production, or if it otherwise
experiences any other significant problems and we are unable to arrange for alternative third-party manufacturing sources on commercially
reasonable terms or in a timely manner, we may be delayed in the development of FT-104, or other product candidates. Further,
CMOs must operate in compliance with cGMP and failure to do so could result in, among other things, the disruption of product
supplies. Our dependence upon third parties for the manufacture of our products may adversely affect our profit margins and our
ability to develop and deliver products on a timely and competitive basis.
Commercial
Grade Development
To
date, FT-104 has been manufactured in small quantities for pre-clinical studies. In order to commercialize our product, we need
to manufacture commercial quality drug supply for use in registration clinical trials. Most, if not all, of the clinical material
used in phase 3/pivotal/registration studies must be derived from the defined commercial process, including scale, manufacturing
site, process controls and batch size. If we have not scaled up and validated the commercial production of our product prior to
the commencement of pivotal clinical trials, we may have to employ a bridging strategy during the trial to demonstrate equivalency
of early stage material to commercial drug product, or potentially delay the initiation or completion of the trial until drug
supply is available. The manufacturing of commercial quality drug product has long lead times, is very expensive and requires
significant efforts, including scale-up of production to anticipated commercial scale, process characterization and validation,
analytical method validation, identification of critical process parameters and product quality attributes, and multiple process
performance and validation runs. If we do not have commercial drug supply available when needed for pivotal clinical trials, our
regulatory and commercial progress may be delayed, and we may incur increased product development costs. This may have a material
adverse effect on our business, financial condition and prospects, and may delay marketing of our product.
Clinical
Testing
Before
obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct pre-clinical
studies in animals and extensive clinical trials in humans to demonstrate the safety and efficacy of the product candidates. Clinical
testing is expensive and difficult to design and implement, can take many years to complete and has uncertain outcomes. The outcome
of pre-clinical studies and early clinical trials may not predict the success of later clinical trials, and interim results of
a clinical trial do not necessarily predict final results. A number of companies in the pharmaceutical and biotechnology industries
have suffered significant setbacks in advanced clinical trials due to lack of efficacy or unacceptable safety profiles, notwithstanding
promising results in earlier trials. We do not know whether the clinical trials we may conduct will demonstrate adequate efficacy
and safety to result in regulatory approval to market any of our product candidates in any jurisdiction. A product candidate may
fail for safety or efficacy reasons at any stage of the testing process. A major risk we face is the possibility that none of
our product candidates under development will successfully gain market approval from the FDA or other regulatory authorities,
resulting in the Company being unable to derive any commercial revenue from this business segment after investing significant
amounts of capital in its development.
We
cannot predict whether any clinical trials will begin as planned, will need to be restructured, or will be completed on schedule,
or at all. Our product development costs will increase if we experience delays in clinical testing. Significant clinical trial
delays could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow
our competitors to bring products to market before us, which would impair our ability to successfully commercialize our product
candidates and may harm our financial condition, results of operations and prospects. Our product development costs will increase
if we experience delays in testing or approval or if we need to perform more or larger clinical trials than planned. Additionally,
changes in regulatory requirements and policies may occur, and we may need to amend study protocols to reflect these changes.
Amendments may require us to resubmit our study protocols for re-examination, which may impact the cost, timing or successful
completion of that trial. Delays or increased product development costs may have a material adverse effect on our business, financial
condition and prospects.
Prior
to commencing clinical trials in Canada, the United States or other jurisdictions, including Jamaica, for FT-104 or any other
product candidates if developed by us, we may be required to have an allowed investigational new drug application (“IND”)
(or equivalent) for each product candidate and to file additional INDs prior to initiating any additional clinical trials for
FT-104. We believe that the data from our studies will support the filing of additional INDs to enable us to undertake additional
clinical studies as we have planned. However, submission of an IND (or equivalent) may not result in the FDA (or equivalent authorities)
allowing further clinical trials to begin and, once begun, issues may arise that will require us to suspend or terminate such
clinical trials. Additionally, even if relevant regulatory authorities agree with the design and implementation of the clinical
trials set forth in an IND, these regulatory authorities may change their requirements in the future. Failure to submit or have
effective INDs (or equivalent) and commence or continue clinical programs will significantly limit our opportunity to generate
revenue.
Patients
for Clinical Trials
If
FT-104 advances from pre-clinical testing to clinical testing, and then through progressively larger and more complex clinical
trials, we will need to enroll an increasing number of patients that meet our eligibility criteria. There is significant competition
for recruiting patients in clinical trials, and we may be unable to enroll the patients we need to complete clinical trials on
a timely basis or at all.
Regulatory
Approval Process
Our
development and commercialization activities related to FT-104 or other product candidates are significantly regulated by a number
of governmental entities, including the FDA, HC, and comparable authorities in other countries, including Jamaica. Regulatory
approvals are required prior to each clinical trial and we may fail to obtain the necessary approvals to commence or continue
clinical testing. We must comply with regulations concerning the manufacture, testing, safety, effectiveness, labeling, documentation,
advertising, and sale of products and product candidates and ultimately must obtain regulatory approval before we can commercialize
a product candidate. The time required to obtain approval by such regulatory authorities is unpredictable but typically takes
many years following the commencement of preclinical studies and clinical trials. Any analysis of data from clinical activities
we perform is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory
approval. Even if we believe results from our clinical trials are favourable to support the marketing of our product candidates,
the FDA or other regulatory authorities may disagree. In addition, approval policies, regulations, or the type and amount of clinical
data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary
among jurisdictions. We have not obtained regulatory approval for any product candidate and it is possible that none of our existing
product candidates or any future product candidates will ever obtain regulatory approval.
A
regulatory authority may require more information, including additional preclinical or clinical data to support approval, which
may delay or prevent approval and our commercialization plans, or we may decide to abandon the development program. If we were
to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited indications than
we request, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product
candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of
that product candidate. Moreover, depending on any safety issues associated with our product candidates that garner approval,
the FDA may impose a risk evaluation and mitigation strategy, thereby imposing certain restrictions on the sale and marketability
of such products.
Cyber-Attacks
Our
operations depend, in part, on how well we protect our information technology systems, networks, equipment and software from damages
from a number of threats. Events such as cable cuts, power loss, hacking, computer viruses and theft could result in information
system failures, delays and/or increase in capital expenses for the Company. While we implement protective measures to reduce
the risk of and detect cyber incidents, cyber-attacks are becoming more sophisticated and frequent, and the techniques used in
such attacks change rapidly.
Reliance
upon Insurers and Governments
Even
if we are able to commercialize pharmaceutical product candidates, the products may not receive adequate reimbursement from government
or private pay insurers. Additionally, fluctuations in drug prices caused by governments and insurers could affect our business.
Difficulty
in Enforcing Judgments and Effecting Service of Process on Directors and Officers
Certain
directors and officers of Field Trip reside outside of Canada. Some or all of the assets of such persons may be located outside
of Canada. Therefore, it may not be possible for investors to collect or to enforce judgments obtained in Canadian courts predicated
upon the civil liability provisions of applicable Canadian securities laws against such persons. Moreover, it may not be possible
for investors to effect service of process within Canada upon such persons.
Exhibit 99.26
Field
Trip Psychedelics Inc.
UNAUDITED
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2020
AND
THE
PERIOD FROM APRIL 2, 2019 (DATE OF INCORPORATION) TO
SEPTEMBER
30, 2019
(Expressed
in Canadian Dollars, unless otherwise noted)
FIELD TRIP PSYCHEDELICS INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION
(unaudited)
|
|
|
|
|
|
As at
September 30, 2020
|
|
|
As at
March 31, 2020
|
|
|
(Expressed in Canadian Dollars)
|
|
Notes
|
|
|
$
|
|
|
$
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
13,823,577
|
|
|
|
9,590,758
|
|
|
Restricted cash
|
|
4
|
|
|
|
218,448
|
|
|
|
100,000
|
|
|
Accounts receivable
|
|
5
|
|
|
|
1,984,044
|
|
|
|
203,112
|
|
|
Other assets
|
|
6
|
|
|
|
744,947
|
|
|
|
133,916
|
|
|
TOTAL CURRENT ASSETS
|
|
|
|
|
|
16,771,016
|
|
|
|
10,027,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
7
|
|
|
|
1,465,715
|
|
|
|
575,446
|
|
|
Intangible assets
|
|
8
|
|
|
|
305,119
|
|
|
|
124,980
|
|
|
Right-of-use assets
|
|
9
|
|
|
|
3,683,898
|
|
|
|
1,632,661
|
|
|
Other non-current assets
|
|
6
|
|
|
|
242,946
|
|
|
|
180,222
|
|
|
TOTAL NON-CURRENT ASSETS
|
|
|
|
|
|
5,697,678
|
|
|
|
2,513,309
|
|
|
TOTAL ASSETS
|
|
|
|
|
|
22,468,694
|
|
|
|
12,541,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
11
|
|
|
|
2,095,670
|
|
|
|
577,878
|
|
|
Deferred revenue
|
|
|
|
|
|
22,838
|
|
|
|
2,000
|
|
|
Current portion of lease obligations
|
|
10
|
|
|
|
621,530
|
|
|
|
462,871
|
|
|
TOTAL CURRENT LIABILITIES
|
|
|
|
|
|
2,740,038
|
|
|
|
1,042,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan payable
|
|
12
|
|
|
|
21,452
|
|
|
|
1,078,334
|
|
|
Lease obligations
|
|
10
|
|
|
|
2,954,864
|
|
|
|
-
|
|
|
TOTAL LIABILITIES
|
|
|
|
|
|
5,716,354
|
|
|
|
2,121,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
13
|
|
|
|
25,031,688
|
|
|
|
12,781,270
|
|
|
Share-based payments reserve
|
|
14
|
|
|
|
1,229,697
|
|
|
|
330,703
|
|
|
Accumulated other comprehensive loss
|
|
|
|
|
|
16,373
|
|
|
|
(49,521
|
)
|
|
Retained deficit
|
|
|
|
|
|
(9,525,418
|
)
|
|
|
(2,634,096
|
)
|
|
Non-controlling interest
|
|
23
|
|
|
|
-
|
|
|
|
(8,344
|
)
|
|
TOTAL EQUITY
|
|
|
|
|
|
16,752,340
|
|
|
|
10,420,012
|
|
|
TOTAL LIABILITIES AND EQUITY
|
|
|
|
|
|
22,468,694
|
|
|
|
12,541,095
|
|
Contingencies (Note 29) and Commitments (Note 25)
Subsequent events (Note 30)
The accompanying notes are an integral part of these Condensed
Interim Consolidated Financial Statements.
Approved on behalf of the Board of Directors:
|
/s/ Joseph Del Moral
|
|
/s/ Helen Boudreau
|
|
|
|
|
|
|
|
|
|
Director
|
|
Director
|
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 2
|
FIELD TRIP PSYCHEDELICS INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND
COMPREHENSIVE LOSS
(unaudited)
|
|
|
|
|
|
3 months
ended
September 30,
2020
|
|
|
3 months
ended
September 30,
2019
|
|
|
6 months
ended
September 30,
2020
|
|
|
Period from
April 2, 2019
(Date of
Incorporation)
to September 30,
2019
|
|
|
(Expressed in Canadian Dollars)
|
|
Notes
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
REVENUE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patient services
|
|
|
|
|
|
94,532
|
|
|
|
-
|
|
|
|
117,891
|
|
|
|
-
|
|
|
Other revenue
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
240
|
|
|
|
-
|
|
|
Total revenue
|
|
|
|
|
|
94,532
|
|
|
|
-
|
|
|
|
118,131
|
|
|
|
-
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administration
|
|
16
|
|
|
|
2,182,144
|
|
|
|
411,686
|
|
|
|
3,536,064
|
|
|
|
564,331
|
|
|
Occupancy costs
|
|
17
|
|
|
|
111,877
|
|
|
|
59,342
|
|
|
|
175,660
|
|
|
|
73,472
|
|
|
Sales and marketing
|
|
18
|
|
|
|
268,475
|
|
|
|
43,582
|
|
|
|
420,307
|
|
|
|
43,582
|
|
|
Research and development
|
|
19
|
|
|
|
745,989
|
|
|
|
-
|
|
|
|
1,480,991
|
|
|
|
-
|
|
|
Depreciation and amortization
|
|
|
|
|
|
269,578
|
|
|
|
33
|
|
|
|
479,338
|
|
|
|
33
|
|
|
Patient services
|
|
20
|
|
|
|
232,114
|
|
|
|
-
|
|
|
|
289,089
|
|
|
|
-
|
|
|
Total operating expenses
|
|
|
|
|
|
3,810,177
|
|
|
|
514,643
|
|
|
|
6,381,449
|
|
|
|
681,418
|
|
|
OTHER INCOME(EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance expense
|
|
21
|
|
|
|
(58,373
|
)
|
|
|
-
|
|
|
|
(93,357
|
)
|
|
|
-
|
|
|
Other expense
|
|
22
|
|
|
|
(158,426
|
)
|
|
|
-
|
|
|
|
(534,673
|
)
|
|
|
-
|
|
|
Net loss before income taxes
|
|
|
|
|
|
(3,932,444
|
)
|
|
|
(514,643
|
)
|
|
|
(6,891,348
|
)
|
|
|
(681,418
|
)
|
|
Income taxes
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Net loss
|
|
|
|
|
|
(3,932,444
|
)
|
|
|
(514,643
|
)
|
|
|
(6,891,348
|
)
|
|
|
(681,418
|
)
|
|
OTHER COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange gain from translation of foreign subsidiaries
|
|
|
|
|
|
30,067
|
|
|
|
200
|
|
|
|
65,861
|
|
|
|
200
|
|
|
NET LOSS AND COMPREHENSIVE LOSS
|
|
|
|
|
|
(3,902,377
|
)
|
|
|
(514,443
|
)
|
|
|
(6,825,487
|
)
|
|
|
(681,218
|
)
|
|
TOTAL COMPREHENSIVE LOSS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATTRIBUTABLE TO:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders of Field Trip Psychedelics Inc.
|
|
|
|
|
|
(3,902,377
|
)
|
|
|
(514,443
|
)
|
|
|
(6,823,584
|
)
|
|
|
(681,218
|
)
|
|
Non-controlling interest
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,903
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
(3,902,377
|
)
|
|
|
(514,443
|
)
|
|
|
(6,825,487
|
)
|
|
|
(681,218
|
)
|
|
NET LOSS PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
15
|
|
|
|
(0.16
|
)
|
|
|
(0.08
|
)
|
|
|
(0.28
|
)
|
|
|
(0.11
|
)
|
The accompanying notes are an integral part of these Condensed
Interim Consolidated Financial Statements.
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 3
|
FIELD
TRIP PSYCHEDELICS INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES
IN EQUITY
(unaudited)
|
|
|
|
|
|
Share
Capital
|
|
|
Contributed
Surplus
|
|
|
Accumulated
Other
Comprehensive
(Loss) Income
|
|
|
Retained
Deficit
|
|
|
Non-
controlling
Interest
|
|
|
Shareholders’
Equity
|
|
|
|
|
Notes
|
|
|
#
Shares
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Balance,
April 1, 2020
|
|
|
|
|
|
20,941,923
|
|
|
|
12,781,270
|
|
|
|
330,703
|
|
|
|
(50,041
|
)
|
|
|
(2,641,920
|
)
|
|
|
8,344
|
|
|
|
10,428,356
|
|
|
Share issuance
|
|
13
|
|
|
|
7,065,063
|
|
|
|
12,762,929
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,762,929
|
|
|
Share issuance cost
|
|
|
|
|
|
-
|
|
|
|
(1,016,651
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,016,651
|
)
|
|
Share-based
payments
|
|
14
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,403,044
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,403,044
|
|
|
Stock
options exercised
|
|
14
|
|
|
|
9,000,900
|
|
|
|
504,140
|
|
|
|
(504,050
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
90
|
|
|
Exchange gain from translation
of foreign subsidiaries
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
65,861
|
|
|
|
-
|
|
|
|
59
|
|
|
|
65,920
|
|
|
Purchase of non-controlling
interest
|
|
23
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
553
|
|
|
|
9,785
|
|
|
|
(10,338
|
)
|
|
|
-
|
|
|
Net
loss
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,893,283
|
)
|
|
|
1,935
|
|
|
|
(6,891,348
|
)
|
|
Balance,
September 30, 2020
|
|
|
|
|
|
37,007,886
|
|
|
|
25,031,688
|
|
|
|
1,229,697
|
|
|
|
16,373
|
|
|
|
(9,525,418
|
)
|
|
|
-
|
|
|
|
16,752,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
April 2, 2019
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Share
issuance - Class A
|
|
13
|
|
|
|
6,300,630
|
|
|
|
350,000
|
|
|
|
1,255,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,605,000
|
|
|
Share-based
payments
|
|
14
|
|
|
|
-
|
|
|
|
-
|
|
|
|
131,484
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
131,484
|
|
|
Exchange gain from translation
of foreign subsidiaries
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
200
|
|
|
|
-
|
|
|
|
-
|
|
|
|
200
|
|
|
Shareholder
distributions from issuance of below-market loans
|
|
28
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,596
|
)
|
|
|
-
|
|
|
|
(13,596
|
)
|
|
Net
loss
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(681,418
|
)
|
|
|
-
|
|
|
|
(681,418
|
)
|
|
Balance,
September 30, 2019
|
|
|
|
|
|
6,300,630
|
|
|
|
350,000
|
|
|
|
1,386,484
|
|
|
|
200
|
|
|
|
(695,014
|
)
|
|
|
-
|
|
|
|
1,041,670
|
|
The accompanying notes are an integral part of these Condensed
Interim Consolidated Financial Statements.
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 4
|
FIELD TRIP PSYCHEDELICS INC.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
|
|
|
|
6 months ended
September 30, 2020
|
|
|
Period from
April
2, 2019 (Date of
Incorporation) to
September 30, 2019
|
|
|
(Canadian dollars in thousands)
|
|
Notes
|
|
|
$
|
|
|
$
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
(6,891,348
|
)
|
|
|
(681,418
|
)
|
|
Items not involving current cash flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
479,338
|
|
|
|
33
|
|
|
Share-based payments
|
|
|
14
|
|
|
|
1,403,044
|
|
|
|
131,484
|
|
|
Fair value of government assistance
|
|
|
|
|
|
|
(8,548
|
)
|
|
|
-
|
|
|
Interest expense on lease commitments
|
|
|
21
|
|
|
|
98,063
|
|
|
|
-
|
|
|
Interest income on shareholders' loan
|
|
|
21
|
|
|
|
(1,249
|
)
|
|
|
-
|
|
|
Interest income on refundable lease deposits
|
|
|
21
|
|
|
|
(3,562
|
)
|
|
|
-
|
|
|
Net change in non-cash working capital
|
|
|
24
|
|
|
|
(865,007
|
)
|
|
|
4,748
|
|
|
CASH USED IN OPERATING ACTIVITIES
|
|
|
|
|
|
|
(5,789,269
|
)
|
|
|
(545,153
|
)
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of property, plant and equipment
|
|
|
7
|
|
|
|
(966,901
|
)
|
|
|
(2,768
|
)
|
|
Acquisition of intangible assets
|
|
|
8
|
|
|
|
(200,075
|
)
|
|
|
-
|
|
|
Refundable security deposit paid for right-of-use assets
|
|
|
|
|
|
|
(54,512
|
)
|
|
|
-
|
|
|
CASH USED IN INVESTING ACTIVITIES
|
|
|
|
|
|
|
(1,221,488
|
)
|
|
|
(2,768
|
)
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds on issuance of common shares
|
|
|
|
|
|
|
12,763,019
|
|
|
|
1,605,000
|
|
|
Share issuance cost paid
|
|
|
13
|
|
|
|
(1,016,652
|
)
|
|
|
-
|
|
|
Repayment of lease obligation
|
|
|
10
|
|
|
|
(460,635
|
)
|
|
|
-
|
|
|
Loan received
|
|
|
12
|
|
|
|
30,000
|
|
|
|
-
|
|
|
CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
|
|
|
|
11,315,732
|
|
|
|
1,605,000
|
|
|
Net change in cash during the period
|
|
|
|
|
|
|
4,304,975
|
|
|
|
1,057,079
|
|
|
Effect of exchange rate on changes in cash
|
|
|
|
|
|
|
46,292
|
|
|
|
255
|
|
|
Cash, beginning of the period
|
|
|
|
|
|
|
9,690,758
|
|
|
|
-
|
|
|
CASH, END OF PERIOD
|
|
|
|
|
|
|
14,042,025
|
|
|
|
1,057,334
|
|
|
Represented by:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
13,823,577
|
|
|
|
1,057,334
|
|
|
Restricted cash
|
|
|
|
|
|
|
218,448
|
|
|
|
-
|
|
|
CASH, END OF PERIOD
|
|
|
|
|
|
|
14,042,025
|
|
|
|
1,057,334
|
|
The accompanying notes are an integral part of these Condensed
Interim Consolidated Financial Statements.
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 5
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Condensed Interim Consolidated Financial Statements
For the three & six months ended September 30, 2020 and periods ended September 30, 2019
(unaudited)
1. NATURE OF OPERATIONS
Field Trip Psychedelics Inc. (the “Group”,
the “Company” or “Field Trip”) is an international organization focused on blending operational execution
with strategic investment across all aspects of the psychedelics value chain. Through its wholly owned subsidiary Field Trip Natural
Products Ltd. and Field Trip Psychedelics research division, “Field Trip Discovery” performs research on botanical
psychedelics and psychedelic-based molecules for future therapeutic application of select mental health indications. Through its
wholly owned subsidiaries Field Trip Health Inc., Field Trip Health USA Inc. (formerly Field Trip Ventures USA Inc.) and Field
Trip Health B.V., "Field Trip Health” is building a network of world class clinics focused on psychedelics-assisted
therapies. Field Trip Digital LLC, a wholly owned subsidiary of Field Trip Health USA Inc., has designed a mobile software application
that will be available in October 2020 for both iOS and Android devices (the “Trip App”). The Trip App is designed
to provide users with a framework and tools for self-directed consciousness-expanding activities and features mood tracking, personalized
music, trip record keeping, guided journaling, voice recording, and mindfulness content.
Field Trip Psychedelics Inc. was incorporated
under the laws of the province of Ontario, Canada as Field Trip Ventures Inc. on April 2, 2019. On October 10, 2019, the Company
amended its name to Field Trip Psychedelics Inc. The Company’s registered office is located at 30 Duncan Street, Unit 401,
Toronto, Ontario, Canada, M5V 2C3.
2. BASIS OF PREPARATION
Going Concern Assumption
At September 30, 2020, the Group had not
yet achieved profitable operations, has a retained deficit of $9,525,418 since its inception, and expects to incur further losses
in the development of its business, all of which creates a material uncertainty that may cast significant doubt about the Group’s
ability to continue as a going concern. The Group’s ability to continue as a going concern is dependent upon its ability
to generate future profitable operations and/or to obtain the necessary financing to conduct its planned business, meet its on-going
levels of corporate overhead and discharge its liabilities as they come due. These financial statements have been prepared on a
going concern basis which assumes that the Group will be able to realize its assets and discharge liabilities in the normal course
of business. Accordingly, these financial statements do not give effect to adjustments, if any that would be necessary should the
Company be unable to continue as a going concern and, therefore, be required to realize its assets and liquidate its liabilities
in other than the normal course of business and at amounts which may differ from those shown in these financial statements.
Statement of Compliance
The condensed interim consolidated financial
statements have been prepared in accordance with International Financial Reporting Standards (“IFRS) and with IAS 34, Interim
Financial Reporting, as issued by the International Accounting Standards Board (“IASB”) and interpreted by the IFRS
Interpretations Committee (“IFRIC”). These condensed interim consolidated financial statements do not include all of
the information required for full annual financial statements and should be read
in conjunction with the most recent audited annual consolidated financial statements of the Company, including the notes thereto,
for the year ended March 31, 2020.
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 6
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Condensed Interim Consolidated Financial Statements
For the three & six months ended September 30, 2020 and periods ended September 30, 2019
(unaudited)
These consolidated financial statements were approved for issue
by the Board of Directors on November 30, 2020.
Basis of Presentation
These consolidated financial statements
have been prepared on a going concern basis, under the historical cost convention, except for certain financial instruments that
are measured at fair value, as detailed in the Group’s accounting policies below.
Functional Currency
The Group’s functional currency is
the Canadian dollar. Transactions undertaken in foreign currencies are translated into Canadian dollars at daily exchange rates
prevailing when the transactions occur. Monetary assets and liabilities denominated in foreign currencies are translated at period-end
exchange rates and non-monetary items are translated at historical exchange rates. Realized and unrealized exchange gains and losses
are recognized in the consolidated statements of loss and comprehensive loss.
The assets and liabilities of foreign operations
are translated into Canadian dollars using the period-end exchange rates. Income, expenses, and cash flows of foreign operations
are translated into Canadian dollars using average exchange rates. Exchange differences resulting from the translation of foreign
operations into Canadian dollars are recognized in other comprehensive (loss) income and accumulated in equity.
Basis of Consolidation
These condensed interim consolidated financial
statements include the accounts of the Group, its subsidiaries and ketamine clinics in the United States that are owned solely
by state-licensed physicians and organized as physician practices or professional medical corporations (“PCs”).
Subsidiaries
|
Subsidiary
|
|
Jurisdiction
|
|
Functional Currency
|
|
% Ownership
|
|
|
Field Trip Health Inc.
|
|
Ontario, Canada
|
|
Canadian Dollars
|
|
100
|
%
|
|
Field Trip Health USA Inc.
|
|
Delaware, USA
|
|
United States Dollars
|
|
100
|
%
|
|
Field Trip Health B.V.
|
|
Netherlands
|
|
Euros
|
|
100
|
%
|
|
Field Trip Digital LLC(i)
|
|
Delaware, USA
|
|
United States Dollars
|
|
100
|
%
|
|
Field Trip Natural Products Limited (ii)
|
|
Kingston, Jamaica
|
|
United States Dollars
|
|
100
|
%
|
|
(i)
|
Field Trip Digital LLC is a wholly owned subsidiary of Field Trip Health USA Inc.
|
|
(ii)
|
On June 3, 2020, Field Trip Psychedelics Inc., Darwin Inc., a third party, and Field Trip Natural
Products Limited entered into a Share Purchase Agreement whereby Field Trip Psychedelics Inc. purchased 120 shares of Field Trip
Natural Products Limited from Darwin Inc. for a nominal amount of $120 USD. As a result of the share transfer, the Group owns 100%
of the authorized capital of Field Trip Natural Products Limited. The Company as part of this arrangement entered into a share-based
compensation agreement with Darwin Inc. as detailed in Note 14 Share-based Payments.
|
Subsidiaries are entities controlled by
the Company. Control exists when the Company has the power, directly and indirectly, to govern the financial and operating policies
of an entity and be exposed to the variable returns from its activities. The financial statements of subsidiaries are included
in the consolidated financial statements from the date that control commences until the date the control ceases. All significant
intercompany balances and transactions have been eliminated upon consolidation.
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 7
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Condensed Interim Consolidated Financial Statements
For the three & six months ended September 30, 2020 and periods ended September 30, 2019
(unaudited)
Professional Medical Corporations (PCs)
Field Trip’s agreements with the
PCs generally consist of Management Services Agreements (“MSAs”), which provide for various administrative and management
services to be provided by the Company to the PC, and Succession Agreements, which provide for transition of ownership of the PCs
under certain conditions.
The MSAs typically provide that the term
of the arrangements is twenty years with automatic renewal for successive five-year terms, subject to termination by Field Trip
or the PC in certain specified circumstances. The Company has the right to receive income as an ongoing administrative fee in an
amount that represents fair value of services rendered and has provided all financial support through loans to the PCs. Field Trip
is the sole and exclusive provider of all non-medical business management, information management, marketing, support and personnel,
equipment and supplies as are reasonably necessary for the day-to-day administration, operation and non-medical management of the
PCs. The Company directs and trains PC staff in the use of its proprietary psychotherapy protocols and establishes the guidelines
for the employment and compensation of the physicians and other employees of the PCs. The PC’s are branded as Field Trip
clinics using its marketing collaterals and logo. In addition, Field Trip holds a security interest in all PC revenue and proceeds
as collateral.
Under the terms of the Succession Agreement,
Field Trip has the right to designate a successor shareholder in the event of a succession event. The outstanding voting equity
instruments of the PCs are owned by successor shareholders appointed by Field Trip or other shareholders who are also subject to
the terms of the Succession Agreements.
Based upon the provisions of these agreements,
Field Trip determined that the PCs are controlled by the Company. The contractual arrangement to provide management services allows
Field Trip to direct the economic activities that most significantly affect the PC. Accordingly, the Company is the primary beneficiary
of the PCs and consolidates the PCs in accordance with IFRS 10 Consolidated Financial Statements. Furthermore, as a direct result
of nominal initial equity contributions by the physicians, the financial support Field Trip provides to the PCs (e.g. loans) and
the provisions of the successor shareholder succession arrangements described above, the interests held by noncontrolling interest
holders lack economic substance and do not provide them with the ability to participate in the residual profits or losses generated
by the PCs. Therefore, all income and expenses recognized by the PCs are allocated to Field Trip shareholders. The aggregate carrying
value of the current assets and liabilities included in the condensed consolidated balance sheets for the PCs after elimination
of intercompany transactions and balances were $121,223 and $10,858, respectively, as of September 30, 2020 and $nil and $nil,
respectively, as of March 31, 2020. The PCs did not have noncurrent assets or liabilities.
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies and use of estimates
and judgments described in the Company’s annual consolidated financial statements have been applied consistently to all periods
presented in these condensed interim consolidated statements unless otherwise indicated. The accounting policies have been applied
consistently by all subsidiaries.
Accounts Receivable
Accounts receivable are non-interest bearing,
unsecured obligations due from patients and third-party payors. The Group makes an implicit allowance for potentially uncollectible
amounts to arrive at net receivables through its revenue recognition policy. In accordance with IFRS 9 Financial Instruments (“IFRS
9”), the Group evaluates the credit risk on accounts receivable and measures a loss allowance at an amount equal to the expected
credit losses for the subsequent 12-month period. Estimates of expected credit losses take into account the Group’s collection
history, deterioration of collection rates during the average credit period, as well as observable changes in and forecasts of
future economic conditions that affect default risk. Where applicable, the carrying amount of a trade receivable is reduced for
any expected credit losses through the use of an allowance for doubtful accounts (“AFDA”) provision. Changes in the
AFDA provision are recognized in the statement of loss and comprehensive loss. When the Group determines that no recovery of the
amount owing is possible, the amount is deemed irrecoverable and the financial asset is written off.
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 8
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Condensed Interim Consolidated Financial Statements
For the three & six months ended September 30, 2020 and periods ended September 30, 2019
(unaudited)
The methodology to arrive at net receivables
is reviewed by management periodically. The balance of accounts receivable represents management’s estimate of the net realizable
value of receivables after discounts and contractual adjustments. The Group performs an estimation and review process periodically
to identify instances on a timely basis where such estimates need to be revised to accurately assess the amount of expected revenues.
Revenue Recognition
The Group generates revenue primarily from the provision of
psychotherapy services. The Group uses the following five-step contract-based analysis of transactions to determine if, when and
how much revenue can be recognized:
|
1.
|
Identify the contract with a customer;
|
|
2.
|
Identify the performance obligation(s) in the contract;
|
|
3.
|
Determine the transaction price;
|
|
4.
|
Allocate the transaction price to the performance obligation(s) in the contract; and
|
|
5.
|
Recognize revenue when or as the Group satisfies the performance obligation(s).
|
Patient service revenues are recognized
over a period of time as performance obligations are completed. Payment of the transaction price for patient counselling is typically
due prior to the services being rendered and therefore, the transaction price is recognized as a contract liability, or deferred
revenue, when payment is received. Contract liabilities are subsequently recognized as revenue when the Group fulfills its performance
obligations. Patient service revenues are measured at the net patient service revenues received or receivable, which includes contractual
allowances and discounts. In circumstances where the net patient service revenues have not yet been received, the amount of revenue
recognized is estimated based on an expected value approach where management considers such variables as the average of previous
net service revenues received by the applicable payor and fees received by other patients for similar services and management’s
best estimate leveraging industry knowledge and expectations of third-party payors’ fee schedules. Third-party payors include
federal and state agencies (under the Medicare programs), managed care health plans and commercial insurance companies.
Use of Estimates and Judgments
The preparation of financial statements
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure
of contingent assets and liabilities at the date of these Consolidated Financial Statements and the reported amounts of revenue
and expenses during the reporting periods. Actual results could differ from these estimates and such differences could be material.
Key areas of judgment and estimation or use of managerial assumptions
are as follows:
Share-based payments
The fair value of share-based compensation
expenses are estimated using the Black-Scholes option pricing model and rely on a number of estimates, such as the expected life
of the option, the volatility of the underlying share price, the risk free rate of return, and the estimated rate of forfeiture
of options granted. The Group measures equity settled share-based payments based on their fair value at the grant date and recognizes
compensation expense over the vesting period based on the Group’s estimate of equity instruments that will eventually vest.
Expected forfeitures are estimated at the date of grant and subsequently adjusted if further non-market based information indicates
actual forfeitures may vary from the original estimate. Any revisions are recognized in the consolidated statements of loss and
comprehensive loss such that the cumulative expense reflects the revised estimate.
Estimated useful lives and impairment considerations of property,
plant and equipment and intangible assets
Depreciation of property, plant and equipment
and amortization of intangible assets are dependent upon estimates of useful lives, which are determined through the exercise of
judgment. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that take into account
factors such as economic and market conditions and the useful lives of assets. The impairment is amount by which the carrying amount
of the asset or Cash Generating Unit (CGU) exceeds its recoverable amount. The recoverable amount is the higher of the fair value less costs of disposal and its value in use. Management
exercises judgement in the determination of the Company’s CGUs.
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 9
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Condensed Interim Consolidated Financial Statements
For the three & six months ended September 30, 2020 and periods ended September 30, 2019
(unaudited)
3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Deferred taxes
Significant estimates are required in determining
the Company’s income tax provision. Some estimates are based on interpretations of existing tax laws or regulations. Various
internal and external factors may have favourable or unfavourable effects on the Company’s future effective tax rate. These
include, but are not limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing tax laws or
regulations, and results of tax audits by tax authorities.
Impact of Coronavirus
While the precise impact of the recent
novel coronavirus (“COVID-19”) outbreak remains unknown, it has introduced uncertainty and volatility in Canadian and
global economies. The Group is monitoring developments and preparing for any impacts related to COVID-19. The Group has a comprehensive
business continuity plan that ensures its readiness to appropriately address and mitigate regulatory and business risks as they
arise including, but not limited to, impacts on patients, practitioners and employees.
4. RESTRICTED CASH
|
|
|
As at
September 30, 2020
|
|
|
As at
March 31, 2020
|
|
|
|
|
$
|
|
|
$
|
|
|
Funds held as collateral
|
|
|
100,000
|
|
|
|
100,000
|
|
|
Funds held at PCs
|
|
|
118,448
|
|
|
|
-
|
|
|
|
|
|
218,448
|
|
|
|
100,000
|
|
As at September 30, 2020, the Group had
$100,000 of restricted cash held as collateral against Field Trip Psychedelics Inc. credit card limit. The funds are invested in
two cashable GIC accounts. $35,000 matures on November 2, 2020, and $65,000 matures on January 20, 2021 respectively. The Group
also had $118,448 of restricted cash held at the PCs which, under the terms of the MSA, must be used to pay PC personnel and expenses
before satisfying prior and current management fees.
As at March 31, 2020 the Group had $100,000 of restricted cash.
5. ACCOUNTS RECEIVABLE
|
|
|
As at
September 30, 2020
|
|
|
As at
March 31, 2020
|
|
|
|
|
$
|
|
|
$
|
|
|
Other receivables
|
|
|
2,219
|
|
|
|
11,940
|
|
|
Funds in escrow
|
|
|
1,636,451
|
|
|
|
-
|
|
|
Sales tax receivable
|
|
|
345,374
|
|
|
|
191,172
|
|
|
|
|
|
1,984,044
|
|
|
|
203,112
|
|
$1,636,451 of funds held in escrow were
from the Class A Series B financing which were released subsequent to the fiscal quarter. Other receivables of $2,216 relates to
amounts receivable from patients for treatments completed at the clinics.
During the 3 and 6 months ended September
30, 2020 and periods ended March 31, 2020, no expected credit loss allowance was recorded for accounts receivable & no receivables
were written off.
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 10
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Condensed Interim Consolidated Financial Statements
For the three & six months ended September 30, 2020 and periods ended September 30, 2019
(unaudited)
6. OTHER ASSETS
|
|
|
As at
September 30, 2020
|
|
|
As at
March 31, 2020
|
|
|
|
|
$
|
|
|
$
|
|
|
Prepaid expenses
|
|
|
744,947
|
|
|
|
133,915
|
|
|
Lease security deposits
|
|
|
164,044
|
|
|
|
95,451
|
|
|
Prepaid additional (non-lease) rent
|
|
|
29,662
|
|
|
|
36,781
|
|
|
Shareholder loans receivable (Note 28)
|
|
|
49,240
|
|
|
|
47,991
|
|
|
|
|
|
987,893
|
|
|
|
314,138
|
|
|
Less amounts due within one year
|
|
|
(744,947
|
)
|
|
|
(133,916
|
)
|
|
Non-current balance
|
|
|
242,946
|
|
|
|
180,222
|
|
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
|
|
|
Leasehold
Improvements
|
|
|
Furniture &
Fixtures
|
|
|
Computer
Equipment &
Software
|
|
|
Medical &
Laboratory
Equipment
|
|
|
Construction
in Progress
|
|
|
Total
|
|
|
Cost
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Balance, April 1, 2020
|
|
|
342,590
|
|
|
|
56,187
|
|
|
|
78,770
|
|
|
|
5,533
|
|
|
|
106,402
|
|
|
|
589,482
|
|
|
Additions
|
|
|
609,599
|
|
|
|
144,914
|
|
|
|
126,931
|
|
|
|
21,416
|
|
|
|
427,200
|
|
|
|
1,330,060
|
|
|
Transfers
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(341,168
|
)
|
|
|
(341,168
|
)
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
(365
|
)
|
|
|
(331
|
)
|
|
|
(13,001
|
)
|
|
|
(13,697
|
)
|
|
Balance, September 30, 2020
|
|
|
952,189
|
|
|
|
201,101
|
|
|
|
205,336
|
|
|
|
26,618
|
|
|
|
179,433
|
|
|
|
1,564,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 1, 2020
|
|
|
(8,645
|
)
|
|
|
(1,041
|
)
|
|
|
(4,111
|
)
|
|
|
(239
|
)
|
|
|
-
|
|
|
|
(14,036
|
)
|
|
Depreciation expense
|
|
|
(53,535
|
)
|
|
|
(8,578
|
)
|
|
|
(21,884
|
)
|
|
|
(968
|
)
|
|
|
-
|
|
|
|
(84,965
|
)
|
|
Foreign currency translation adjustment
|
|
|
(7
|
)
|
|
|
(4
|
)
|
|
|
26
|
|
|
|
24
|
|
|
|
-
|
|
|
|
39
|
|
|
Balance, September 30, 2020
|
|
|
(62,187
|
)
|
|
|
(9,623
|
)
|
|
|
(25,969
|
)
|
|
|
(1,183
|
)
|
|
|
-
|
|
|
|
(98,962
|
)
|
|
Net book value as at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
|
890,002
|
|
|
|
191,478
|
|
|
|
179,367
|
|
|
|
25,435
|
|
|
|
179,433
|
|
|
|
1,465,715
|
|
|
March 31, 2020
|
|
|
333,945
|
|
|
|
55,146
|
|
|
|
74,659
|
|
|
|
5,294
|
|
|
|
106,402
|
|
|
|
575,446
|
|
8. INTANGIBLE ASSETS
Intangible assets consist of the following:
|
|
|
Software in
Progress
|
|
|
Field Trip
Health Website
|
|
|
Total
|
|
|
Cost
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Balance, April 1, 2020
|
|
|
-
|
|
|
|
126,974
|
|
|
|
126,974
|
|
|
Additions
|
|
|
159,028
|
|
|
|
41,048
|
|
|
|
200,076
|
|
|
Balance, September 30, 2020
|
|
|
159,028
|
|
|
|
168,022
|
|
|
|
327,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 1, 2020
|
|
|
-
|
|
|
|
(1,994
|
)
|
|
|
(1,994
|
)
|
|
Amortization expense
|
|
|
-
|
|
|
|
(19,937
|
)
|
|
|
(19,937
|
)
|
|
Balance, September 30, 2020
|
|
|
-
|
|
|
|
(21,931
|
)
|
|
|
(21,931
|
)
|
|
Net book value as at September 30, 2020
|
|
|
159,028
|
|
|
|
146,091
|
|
|
|
305,119
|
|
|
Net book value as at March 31, 2020
|
|
|
-
|
|
|
|
124,980
|
|
|
|
124,980
|
|
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 11
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Condensed Interim Consolidated Financial Statements
For the three & six months ended September 30, 2020 and periods ended September 30, 2019
(unaudited)
9. Right-of-Use Assets
|
Right-of-use assets (“ROU”) consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Cost
|
|
$
|
|
|
Balance, April 1, 2020
|
|
|
1,762,951
|
|
|
Additions
|
|
|
2,524,725
|
|
|
Foreign currency translation adjustment
|
|
|
(102,917
|
)
|
|
Balance, September 30, 2020
|
|
|
4,184,759
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
|
|
|
Balance, April 1, 2020
|
|
|
(130,290
|
)
|
|
Depreciation expense
|
|
|
(374,435
|
)
|
|
Foreign currency translation adjustment
|
|
|
3,864
|
|
|
Balance, September 30, 2020
|
|
|
(500,861
|
)
|
|
Net book value as at
|
|
|
|
|
|
September 30, 2020
|
|
|
3,683,898
|
|
|
March 31, 2020
|
|
|
1,632,661
|
|
10. LEASE OBLIGATIONS
The Group leases real property for its
clinical and office locations in Toronto, New York City and Santa Monica as well as its research facility in Jamaica. Lease obligations
consist of the following as at September 30, 2020:
|
|
|
$
|
|
|
As at April 1, 2020
|
|
|
1,541,205
|
|
|
Additions during the period
|
|
|
2,412,154
|
|
|
Foreign currency translation adjustment
|
|
|
(14,393
|
)
|
|
Payments during the period
|
|
|
(460,635
|
)
|
|
Interest expense during the period
|
|
|
98,063
|
|
|
|
|
|
3,576,394
|
|
|
Less amounts due within one year
|
|
|
(621,530
|
)
|
|
Long-term balance
|
|
|
2,954,864
|
|
The Group expenses payments for short-term
leases and low-value leases as incurred. These payments for short-term leases and low-value leases were $(23,099) for the 3 months
ended September 30, 2020 (September 30, 2019 - $45,702) and $10,370 for the 6 months ended September 30, 2020 (September 30, 2019
- $59,832).
The Group’s future cash outflows
may change due to variable lease payments, renewal options, termination options, residual value guarantees and leases not yet commenced
to which the Group is committed that are not reflected in the lease obligations. The following is a maturity analysis for undiscounted
lease payments that are reflected in the lease obligations as at September 30, 2020:
|
|
|
$
|
|
|
Less than 1 year
|
|
|
934,859
|
|
|
1 to 2 years
|
|
|
925,952
|
|
|
2 to 3 years
|
|
|
457,365
|
|
|
3 to 4 years
|
|
|
322,721
|
|
|
4 to 5 years
|
|
|
332,403
|
|
|
Beyond 5 years
|
|
|
1,686,723
|
|
|
|
|
|
4,660,023
|
|
See Note 25, Commitments
for additional information on estimated additional rent payment obligations related to the Group’s leases on its clinical
and office locations.
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 12
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Condensed Interim Consolidated Financial Statements
For the three & six months ended September 30, 2020 and periods ended September 30, 2019
(unaudited)
11. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
|
|
|
As at
September 30, 2020
|
|
|
As at
March 31, 2020
|
|
|
|
|
$
|
|
|
$
|
|
|
Trade payables
|
|
|
666,322
|
|
|
|
270,235
|
|
|
Accrued liabilities
|
|
|
1,429,348
|
|
|
|
307,643
|
|
|
|
|
|
2,095,670
|
|
|
|
577,878
|
|
$775,847 of accrued liabilities
relates to transactions costs incurred for the Class A Series B financing and the reverse takeover of Newton Energy Corporation
on October 1, 2020 (see Note 30 Subsequent Events). The remaining balance of $653,501 relates to amounts accrued for payroll
liabilities.
12. LOAN PAYABLE
The Group applied for and received
on September 17, 2020, the $40,000 Canada Emergency Business Account (“CEBA”), which is an interest-free loan to cover
operating costs which was offered in the context of the Covid-19 pandemic outbreak. Repaying the balance of the loan on or before
December 31, 2022 will result in a loan forgiveness of $10,000. On December 31, 2022, the Corporation has the option to extend
for 3 years the loan and it will bear a 5% interest rate. To estimate the fair value at initial recognition, the debt component
was estimated first at $21,319, considering the forgiveness and interest free aspects. A 15% effective rate was used which corresponds
to a market rate that the Corporation would have obtained for a similar loan. The $18,681 residual value was attributed to government
assistance that is presented as other income in the statement of loss and other comprehensive loss.
13. SHARE CAPITAL
Share Capital Authorized
The authorized share capital of the Group consists of the following:
Class A shares – unlimited
Class B shares – unlimited
Class C shares – unlimited
Share Capital Issued as at September 30, 2020
|
|
|
Number of
|
|
|
Amount
|
|
|
Class of Shares
|
|
Shares Issued
|
|
|
$
|
|
|
A (i – iv)
|
|
|
37,007,886
|
|
|
|
25,031,688
|
|
|
|
|
|
37,007,886
|
|
|
|
25,031,688
|
|
Share Capital Issued as at March 31, 2020
|
|
|
Number of
|
|
|
Amount
|
|
|
Class of Shares
|
|
Shares Issued
|
|
|
$
|
|
|
A
|
|
|
11,510,900
|
|
|
|
1,605,027
|
|
|
B
|
|
|
9,431,023
|
|
|
|
11,176,243
|
|
|
|
|
|
20,941,923
|
|
|
|
12,781,270
|
|
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 13
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Condensed Interim Consolidated Financial Statements
For the three & six months ended September 30, 2020 and
periods ended September 30, 2019
(unaudited)
|
(i)
|
On May 20, 2020, the Group issued 76,240 Class B shares at a price of $0.90 USD per share, yielding
gross proceeds of $68,616 USD or $95,617 CAD. The share issuance costs of $17,829 were settled via the issuance of 14,216 Class
B shares at a price of $0.90 USD or $1.2542 CAD per share.
|
|
(ii)
|
On August 14, 2020, the Group completed brokered and non-brokered private placements of an aggregate
of 5,516,724 Class A shares in the capital of Field Trip, at a price of $2.00 per share, for aggregate gross proceeds of $11,033,448.
Canaccord Genuity Corp. and Stifel Nicolaus Canada Inc. jointly acted as lead agents in connection with the brokered portion of
the Private Placement, for which they were paid a cash commission of $391,082, and were issued 55,167 Class A shares and 299,753
compensation warrants, with each warrant exercisable into one Class A share of Field Trip at a price of $2.00 per share until August
14, 2022. The Series B Financing is a Qualified Financing (as defined below), therefore all of the Class B Series 1 Shares were
automatically converted into Class A Shares upon closing of this transaction.
|
|
(iii)
|
On September 21, 2020, Field Trip completed a non-brokered private placement of an aggregate of
816,932 Class A Field Trip Shares at a price of $2.00 per share for gross proceeds of $1,633,864.
|
|
(iv)
|
On September 25, 2020, 600,000 Class A Field Trip Shares were issued as payment of milestone shares
under the Jamaican SPA.
|
Voting Rights
Each holder of Class A shares is entitled
to receive notice of and to attend all meetings of shareholders of the Corporation and at all such meetings shall be entitled to
one (1) vote in respect of each such share held by such holder. The foregoing, however, shall not apply to separate meetings of
the holders of other classes or series of shares in accordance with the Shareholders Agreement. On any matter presented to the
shareholders of the Corporation for their action or consideration at any meeting of shareholders of the Corporation (or by written
consent of shareholders in lieu of meeting), each holder of outstanding Class B Series Shares is entitled to cast the number of
votes equal to the number of Class B Series Shares held by the holder. Except as provided by law or by the other provisions of
the Articles, holders of Class B Series Shares shall vote together with the holders of Class A Shares as a single class.
Class B Shares Automatic Conversion
Upon the completion of a private placement
of Class A Shares from treasury for gross proceeds of at least USD $2,500,000 in one or multiple closings (the "Qualified
Financing"), then all of the Class B Series 1 Shares will automatically and concurrently be converted into Class A Shares
(the “Automatic Conversion”) as follows:
|
(a)
|
If the price paid per Class A Share in the Qualified Financing is equal to or greater than USD
$1.125, then each Class B Series 1 Share will convert into one Class A Share; or
|
|
(b)
|
If the price paid per Class A Share in the Qualified Financing is less than
USD $1.125, then the Class B Series 1 Shares held by each holder will be converted into a number of Class A Shares determined by
dividing (x) the Subscription Amount by (y) an amount equal to the product of (A) the price paid per Class A Share in the Qualified
Financing multiplied by (B) 0.80. For the purposes of this calculation, “Subscription Amount” means the number of Class
B Series 1 Shares held by the holder multiplied by USD $ 0.90.
|
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 14
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Condensed Interim Consolidated Financial Statements
For the three & six months ended September 30, 2020 and periods ended September 30, 2019
(unaudited)
14. SHARE-BASED PAYMENTS
The Group has two share-based compensation
plans: the “Stock Option Plan” and the “Long Term Incentive Option Plan”.
Long Term Incentive Option Plan
On April 2, 2019, the directors of the
Group authorized option agreements with each of the five founding executives of the Group. Under the terms of the agreement, each
option holder received 1,800,180 options to purchase Class A shares at an exercise price of $0.00001. The options vest over a period
of four years and expire on the fifth anniversary of the grant date.
On August 11, 2020, the Group accelerated
the vesting of all 9,000,900 outstanding long term incentive options which were immediately exercised.
Stock Option Plan
On August 1, 2019, the directors of the
Group authorized the establishment of the “Stock Option Plan”. The maximum number of common shares that will be reserved
for issuance under the Stock Option Plan shall be 15% of the issued and outstanding Common Shares from time to time, on a non-diluted
basis. For the avoidance of doubt, Long Term Incentive Options are excluded from the Stock Option Plan maximum. Common Shares in
respect of Options that have been exercised, cancelled, surrendered, or terminated or that expire without being exercised shall
again be available for issuance under the Plan.
As at September 30, 2020, the number of
common shares available for issuance under the Share Option Plan was 5,551,183.
Under the Stock Option Plan, the Group
may grant options to purchase common shares to officers, directors, employees or consultants of the Group or its affiliates. Options
issued under the Stock Option Plan are granted for a term not exceeding ten years from the date of grant. All options issued to-date
have a life of ten years or less. In general, options have vested either immediately upon grant or over a period of four to ten
years or upon the achievement of certain performance-related measures or milestones.
The following is a schedule of the options outstanding as at:
|
|
|
Options
|
|
|
Range of
Exercise Price
|
|
|
Weighted Average
Exercise Price
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Balance, March 31, 2020
|
|
|
11,377,706
|
|
|
|
0.00001-0.50
|
|
|
|
0.10
|
|
|
Stock Option Plan - Granted
|
|
|
1,244,000
|
|
|
|
0.50-2.00
|
|
|
|
1.19
|
|
|
LTOI - Exercised
|
|
|
(9,000,900
|
)
|
|
|
0.00001
|
|
|
|
0.00001
|
|
|
Balance, September 30, 2020
|
|
|
3,620,806
|
|
|
|
0.50-2.00
|
|
|
|
0.74
|
|
The fair value of each tranche is measured at the date of grant
using the Black-Scholes option pricing model.
Options model inputs for options granted during the 6 months
ended September 30, 2020 were as follows:
Options
#
|
|
Grant Date
|
|
Share
Price
$
|
|
Exercise
Price
$
|
|
Risk-free
Interest
Rate
%
|
|
Expected
Life
(years)
|
|
Volatility
Factor
%
|
|
Fair Value
per Option
$
|
|
|
|
April 1, 2020-
|
|
0.28(i)
|
|
|
|
|
|
|
|
|
|
|
|
1,244,000
|
|
September 30, 2020
|
|
– 2.00
|
|
0.50 - 2.00
|
|
0.70
|
|
10
|
|
75
|
|
0.19-1.55
|
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 15
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Condensed Interim Consolidated Financial Statements
For the three & six months ended September 30, 2020 and periods ended September 30, 2019
(unaudited)
|
(i)
|
On January 29, 2020, the Group issued 9,431,023 Class B shares at a price of $0.90 USD per share.
The Group derived the valuation of the Class A shares on the issuance date based on the Class B issuance price on January 29, 2020,
adjusted for share specific attributes resulting in an estimated fair value of Class A shares of $0.21 USD or $0.28 CAD.
|
|
(ii)
|
On August 7, 2020, the Group issued 670,000 options at an issue price of $0.50 per Field Trip Share.
|
|
(iii)
|
On September 2, 2020, the Group issued 410,000 options at an issue price of $2.00 per Field Trip
Share.
|
|
(iv)
|
On September 30, 2020, the Group issued 164,000 options at an issue price of $2.00 per Field Trip
Share.
|
The following table summarizes the unvested
outstanding and exercisable options held by directors, officers, employees and consultants as at September 30, 2020:
|
|
|
|
|
Outstanding
|
|
|
|
Exercisable
|
|
Exercise
|
|
|
|
Remaining
|
|
Weighted Average
|
|
Vested
|
|
Weighted Average
|
|
Price Range
|
|
Options
|
|
Contractual Life
|
|
Exercise Price
|
|
Options
|
|
Exercise Price
|
|
$
|
|
#
|
|
years
|
|
$
|
|
#
|
|
$
|
|
0.50-2.00
|
|
3,508,716
|
|
10
|
|
0.74
|
|
112,090
|
|
0.50
|
The following table summarizes the outstanding
and exercisable options held by directors, officers, employees and consultants as at March 31, 2020:
|
|
|
|
|
Outstanding
|
|
|
|
Exercisable
|
|
Exercise
|
|
|
|
Remaining
|
|
Weighted Average
|
|
Vested
|
|
Weighted Average
|
|
Price Range
|
|
Options
|
|
Contractual Life
|
|
Exercise Price
|
|
Options
|
|
Exercise Price
|
|
$
|
|
#
|
|
years
|
|
$
|
|
#
|
|
$
|
|
.00001 - 0.50
|
|
11,362,706
|
|
5 - 10
|
|
0.10
|
|
15,000
|
|
0.50
|
Jamaica Facility Shares
Field Trip Psychedelics Inc. will issue
1,200,000 fully paid up Common Shares to Darwin Inc. (the “Jamaica Facility Shares”); 600,000 upon commencement of
research in the newly renovated research facility, 150,000 one year from the initial closing date (“Cliff”), and 450,000
on a prorated basis quarterly, commencing on the first calendar quarter following the Cliff and ending on the date that is 36 months
following the Cliff. On September 25, 2020 Field Trip issued the first installment of the Jamaica Facility shares, being a total
of 600,000 common shares at a deemed price per Field Trip Common Share of $2.00.
The fair value of the Jamaica Facility Shares is measured at
the date of grant using the Black-Scholes pricing model.
Black-Scholes model inputs for the Jamaican
Facility Shares for the 6 months ended September 30, 2020 were as follows:
Shares to be
Issued
#
|
|
Grant Date
|
|
Share
Price
$
|
|
Risk-free
Interest Rate
%
|
|
Expected
Life
(years)
|
|
Volatility
Factor
%
|
|
Fair Value per
Share
$
|
|
1,200,000
|
|
June 3, 2020
|
|
2.00 (i)
|
|
0.62
|
|
4
|
|
75
|
|
2.00
|
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 16
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Condensed Interim Consolidated Financial Statements
For the three & six months ended September 30, 2020 and periods ended September 30, 2019
(unaudited)
Warrants
The following is a schedule of the warrants outstanding as at:
|
|
|
Warrants
|
|
Range of
Exercise Price
$
|
|
Weighted Average
Exercise Price
$
|
|
|
Balance, April 1, 2020
|
|
-
|
|
-
|
|
-
|
|
|
Issued – August 14, 2020
|
|
299,753
|
|
2.00
|
|
2.00
|
|
|
Balance, September 30, 2020
|
|
299,753
|
|
2.00
|
|
2.00
|
|
The weighted average life for warrants outstanding as at September
30, 2020 was 1.9 years.
Summary of Stock-based Compensation
|
|
|
3 months
ended
September 30,
2020
$
|
|
|
3 months
ended
September 30,
2019
$
|
|
|
6 months
ended
September 30,
2020
$
|
|
|
Period from
April 2,
2019
(Date of
Incorporation)
to September 30,
2019
$
|
|
|
Stock option compensation expense - Stock Option Plan
|
|
|
139,885
|
|
|
|
-
|
|
|
|
209,520
|
|
|
|
-
|
|
|
Stock option compensation expense - Long Term Incentive Options
|
|
|
207,489
|
|
|
|
66,751
|
|
|
|
241,524
|
|
|
|
131,484
|
|
|
Stock-based compensation expense – Jamaica Facility Shares
|
|
|
364,098
|
|
|
|
-
|
|
|
|
952,000
|
|
|
|
-
|
|
|
Stock-based compensation expense
|
|
|
711,472
|
|
|
|
66,751
|
|
|
|
1,403,044
|
|
|
|
131,484
|
|
15. NET LOSS PER SHARE
For the three and six months ended September
30, 2020 and periods ended September 30, 2019, basic loss per share and diluted loss per share were the same as the Group recorded
a net loss for both periods and the exercise of any potentially dilutive instruments would be anti-dilutive.
|
|
|
3 months
ended
September 30,
2020
|
|
|
3 months
ended
September 30,
2019
|
|
|
6 months
ended
September 30,
2020
|
|
|
Period from
April 2,
2019
(Date of
Incorporation)
to September 30,
2019
|
|
|
Loss attributable to common shares ($)
|
|
|
(3,932,444
|
)
|
|
|
(514,643
|
)
|
|
|
(6,891,348
|
)
|
|
|
(681,418
|
)
|
|
Dilutive effect on income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Weighted average number of shares outstanding – basic (#)
|
|
|
24,896,227
|
|
|
|
6,300,630
|
|
|
|
24,958,644
|
|
|
|
6,300,630
|
|
|
Weighted average number of shares outstanding – diluted (#)
|
|
|
24,896,227
|
|
|
|
6,300,630
|
|
|
|
24,958,644
|
|
|
|
6,300,630
|
|
|
Loss per common share, basic ($)
|
|
|
(0.16
|
)
|
|
|
(0.08
|
)
|
|
|
(0.28
|
)
|
|
|
(0.11
|
)
|
|
Loss per common share, diluted ($)
|
|
|
(0.16
|
)
|
|
|
(0.08
|
)
|
|
|
(0.28
|
)
|
|
|
(0.11
|
)
|
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 17
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Condensed Interim Consolidated Financial Statements
For the three & six months ended September 30, 2020 and periods ended September 30, 2019
(unaudited)
16. GENERAL AND ADMINISTRATION
|
|
|
3 months
ended
September 30,
2020
$
|
|
|
3 months
ended
September 30,
2019
$
|
|
|
6 months
ended
September 30,
2020
$
|
|
|
Period from
April 2,
2019
(Date of
Incorporation)
to September 30,
2019
$
|
|
|
Personnel costs
|
|
|
957,336
|
|
|
|
67,082
|
|
|
|
1,707,175
|
|
|
|
78,766
|
|
|
External services
|
|
|
671,234
|
|
|
|
219,189
|
|
|
|
1,104,126
|
|
|
|
291,666
|
|
|
Share-based payments (Note 14)
|
|
|
347,375
|
|
|
|
66,751
|
|
|
|
451,045
|
|
|
|
131,484
|
|
|
Travel and entertainment
|
|
|
39,613
|
|
|
|
51,002
|
|
|
|
48,653
|
|
|
|
54,583
|
|
|
IT and technology
|
|
|
128,231
|
|
|
|
795
|
|
|
|
182,679
|
|
|
|
795
|
|
|
Office and general
|
|
|
38,355
|
|
|
|
6,867
|
|
|
|
42,386
|
|
|
|
7,037
|
|
|
Total general and administration
|
|
|
2,182,144
|
|
|
|
411,686
|
|
|
|
3,536,064
|
|
|
|
564,331
|
|
17. OCCUPANCY COSTS
|
|
|
3 months
ended
September 30,
2020
$
|
|
|
3 months
ended
September 30,
2019
$
|
|
|
6 months
ended
September 30,
2020
$
|
|
|
Period from
April 2,
2019
(Date of
Incorporation)
to September 30,
2019
$
|
|
|
Operating rent expense
|
|
|
(23,099
|
)
|
|
|
45,702
|
|
|
|
10,370
|
|
|
|
59,832
|
|
|
Taxes, maintenance, insurance
|
|
|
10,592
|
|
|
|
10,250
|
|
|
|
17,602
|
|
|
|
10,250
|
|
|
Minor furniture and fixtures
|
|
|
103,139
|
|
|
|
-
|
|
|
|
104,422
|
|
|
|
-
|
|
|
Utilities and services
|
|
|
21,245
|
|
|
|
3,390
|
|
|
|
43,266
|
|
|
|
3,390
|
|
|
Total occupancy costs
|
|
|
111,877
|
|
|
|
59,342
|
|
|
|
175,660
|
|
|
|
73,472
|
|
18. SALES AND MARKETING
|
|
|
3 months
ended
September 30,
2020
$
|
|
|
3 months
ended
September 30,
2019
$
|
|
|
6 months
ended
September 30,
2020
$
|
|
|
Period from
April 2,
2019
(Date of
Incorporation)
to September 30,
2019
$
|
|
|
Brand and public relations
|
|
|
138,257
|
|
|
|
36,782
|
|
|
|
200,720
|
|
|
|
36,782
|
|
|
Conference fees
|
|
|
11,659
|
|
|
|
6,800
|
|
|
|
32,051
|
|
|
|
6,800
|
|
|
Personnel costs
|
|
|
53,847
|
|
|
|
-
|
|
|
|
85,164
|
|
|
|
-
|
|
|
External marketing services
|
|
|
64,712
|
|
|
|
-
|
|
|
|
102,372
|
|
|
|
-
|
|
|
Total sales and marketing
|
|
|
268,475
|
|
|
|
43,582
|
|
|
|
420,307
|
|
|
|
43,582
|
|
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 18
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Condensed Interim Consolidated Financial Statements
For the three & six months ended September 30, 2020 and periods ended September 30, 2019
(unaudited)
19. RESEARCH AND DEVELOPMENT
|
|
|
3 months
ended
September 30,
2020
$
|
|
|
3 months
ended
September 30,
2019
$
|
|
|
6 months
ended
September 30,
2020
$
|
|
|
Period from
April 2,
2019
(Date of
Incorporation)
to September 30,
2019
$
|
|
|
External services
|
|
|
469,130
|
|
|
|
-
|
|
|
|
1,059,644
|
|
|
|
-
|
|
|
Personnel costs
|
|
|
152,364
|
|
|
|
-
|
|
|
|
294,786
|
|
|
|
-
|
|
|
Supplies and services
|
|
|
124,495
|
|
|
|
-
|
|
|
|
126,561
|
|
|
|
-
|
|
|
Total research and development
|
|
|
745,989
|
|
|
|
-
|
|
|
|
1,480,991
|
|
|
|
-
|
|
The expenditures above relate to research
and development activities which do not qualify for capitalization based on the Group’s accounting policies for capitalization
of development costs. They have therefore been recognised as an expense during the 3 and 6 months ended September 30, 2020.
20. PATIENT SERVICES EXPENSE
|
|
|
3 months
ended
September 30,
2020
$
|
|
|
3 months
ended
September 30,
2019
$
|
|
|
6 months
ended
September 30,
2020
$
|
|
|
Period from
April 2,
2019
(Date of
Incorporation)
to September 30,
2019
$
|
|
|
Personnel costs
|
|
|
199,835
|
|
|
|
-
|
|
|
|
253,123
|
|
|
|
-
|
|
|
Supplies and services
|
|
|
30,821
|
|
|
|
-
|
|
|
|
34,314
|
|
|
|
-
|
|
|
Payment provider fees
|
|
|
1,458
|
|
|
|
-
|
|
|
|
1,652
|
|
|
|
-
|
|
|
Total patient services expense
|
|
|
232,114
|
|
|
|
-
|
|
|
|
289,089
|
|
|
|
-
|
|
Patient services expense are comprised of direct costs
incurred by the clinics to generate patient services revenue.
21. FINANCE EXPENSE
|
|
|
3 months
ended
September 30,
2020
$
|
|
|
3 months
ended
September 30,
2019
$
|
|
|
6 months
ended
September 30,
2020
$
|
|
|
Period from
April 2,
2019
(Date of
Incorporation)
to September 30,
2019
$
|
|
|
Interest expense on leases
|
|
|
(60,829
|
)
|
|
|
-
|
|
|
|
(98,062
|
)
|
|
|
-
|
|
|
Interest income on shareholders' loan (Note 28)
|
|
|
628
|
|
|
|
-
|
|
|
|
1,249
|
|
|
|
-
|
|
|
Interest income on refundable lease deposit
|
|
|
1,916
|
|
|
|
-
|
|
|
|
3,562
|
|
|
|
-
|
|
|
Interest expense on loan
|
|
|
(133
|
)
|
|
|
-
|
|
|
|
(133
|
)
|
|
|
-
|
|
|
Interest income on bank balances
|
|
|
45
|
|
|
|
-
|
|
|
|
27
|
|
|
|
-
|
|
|
Total finance expense
|
|
|
(58,373
|
)
|
|
|
-
|
|
|
|
(93,357
|
)
|
|
|
-
|
|
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 19
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Condensed Interim Consolidated Financial Statements
For the three & six months ended September 30, 2020
and periods ended September 30, 2019
(unaudited)
22. OTHER INCOME (EXPENSE)
|
|
|
3 Months
ended
September 30,
2020
$
|
|
|
3 months
ended
September 30,
2019
$
|
|
|
6 months
ended
September 30,
2020
$
|
|
|
Period from
April 2,
2019
(Date of
Incorporation)
to September 30,
2019
$
|
|
|
Unrealized foreign exchange loss
|
|
|
(1,147
|
)
|
|
|
-
|
|
|
|
(672
|
)
|
|
|
-
|
|
|
Realized foreign exchange loss
|
|
|
(196,288
|
)
|
|
|
-
|
|
|
|
(591,010
|
)
|
|
|
-
|
|
|
Government assistance
|
|
|
39,009
|
|
|
|
-
|
|
|
|
57,009
|
|
|
|
-
|
|
|
Total other income (expense)
|
|
|
(158,426
|
)
|
|
|
-
|
|
|
|
(534,673
|
)
|
|
|
-
|
|
We also applied for, and received, governmental assistance related
to the COVID-19 pandemic:
|
|
(i)
|
The Canada Emergency Business Account (CEBA) program provides an interest-free loan of $40,000,
of which and if required conditions are met, only 75% or $ 30,000 of the loan amount is repayable by December 31, 2022. Government
assistance is comprised of the fair value of the loan amount forgiven using an 15% effective interest rate (see Note 12 Loan
Payable of our unaudited condensed interim consolidated financial statements for the three and six month periods ended September
30, 2020 and periods ended September 30, 2019).
|
|
|
(ii)
|
The 10%Temporary Wage Subsidy for Employers (TWS) program provides a subsidy of 10% of wages from
March 18, to June 19, 2020 up to $1,375 for each eligible employee. The maximum total is $25,000 for each eligible employer. For
the 3 and 6 months ended September 30, 2020 the Company received wage subsidies of $0 and $18,000 respectively.
|
|
|
(iii)
|
The Innovation Assistance Program (IAP) provides assistance to early stage, small to medium-sized
enterprises unable to access COVID-19 support. The Company received $20,328 to cover salary expenses for the period from April
1 to June 24, 2020.
|
|
23.
|
NON-CONTROLLING INTEREST
|
The following table summarizes the information relating to
the Group’s subsidiary Field Trip Natural Products Limited before intercompany eliminations:
|
|
|
As at
September 30, 2020
$
|
|
|
As at
March 31, 2020
$
|
|
|
Current assets
|
|
|
200,737
|
|
|
|
30,300
|
|
|
Non-current assets
|
|
|
263,470
|
|
|
|
5,294
|
|
|
Current liabilities
|
|
|
(193,147
|
)
|
|
|
(48,941
|
)
|
|
Non-current liabilities
|
|
|
(394,548
|
)
|
|
|
(28,374
|
)
|
|
Total equity
|
|
|
(123,488
|
)
|
|
|
(41,721
|
)
|
|
Non-controlling interest (%) (i)
|
|
|
0
|
%
|
|
|
20
|
%
|
|
Equity attributable to Field Trip
|
|
|
(123,488
|
)
|
|
|
(33,377
|
)
|
|
Equity attributable to NCI
|
|
|
-
|
|
|
|
(8,344
|
)
|
|
(i)
|
See Note 2 Basis of Presentation for changes to the ownership structure of the Group’s
subsidiary Field Trip Natural Products during the 6 months ended September 30, 2020.
|
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 20
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Condensed Interim Consolidated Financial Statements
For the three & six months ended September 30, 2020 and periods ended September 30, 2019
(unaudited)
24. CHANGE IN NON-CASH WORKING CAPITAL
|
|
|
6 months ended
September 30, 2020
$
|
|
|
Period from April 2,
2019 (Date of
Incorporation) to
September 30, 2019
$
|
|
|
Accounts receivable
|
|
|
(1,780,933
|
)
|
|
|
(7,297
|
)
|
|
Other current assets
|
|
|
(601,893
|
)
|
|
|
-
|
|
|
Other non-current assets
|
|
|
(55,769
|
)
|
|
|
(121,791
|
)
|
|
Accounts payable and accrued liabilities
|
|
|
1,552,750
|
|
|
|
133,836
|
|
|
Deferred revenue
|
|
|
20,838
|
|
|
|
-
|
|
|
Total non-cash working capital
|
|
|
(865,007
|
)
|
|
|
4,748
|
|
25. COMMITMENTS
The Group leases real property for its
clinical and office locations in Canada. The Group is committed for estimated additional variable (non-lease) rent payment obligations
as follows:
|
|
|
Expiry
|
|
|
Additional
Rent
Payments
|
|
|
1 year
|
|
|
2-3 years
|
|
|
4-5 years
|
|
|
More than 5
years
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Toronto corporate office and clinic
|
|
|
2023-10-31
|
|
|
|
288,119
|
|
|
|
111,530
|
|
|
|
176,589
|
|
|
|
-
|
|
|
|
-
|
|
|
Santa Monica clinic
|
|
|
2030-06-30
|
|
|
|
628,947
|
|
|
|
64,507
|
|
|
|
129,015
|
|
|
|
129,015
|
|
|
|
306,410
|
|
|
|
|
|
|
|
|
|
917,066
|
|
|
|
176,037
|
|
|
|
305,604
|
|
|
|
129,015
|
|
|
|
306,410
|
|
These additional (non-lease) rent payments
are variable, and therefore have not been included in the right-of-use asset or lease obligations.
26. SEGMENT REPORTING
Information reported to the Chief Operating
Decision Maker (“CODM”) for the purpose of resource allocation and assessment of segment performance focuses on the
nature of the operations. The Group operates in three segments:
|
|
•
|
Clinical Operations which encompasses the Group’s psychedelic assisted psychotherapy
clinics across North America.
|
|
|
•
|
Research which consists of the research of fungi at the Group’s facility in Jamaica
and research focused employees of Field Trip Psychedelics, and
|
|
|
•
|
Corporate which encompasses the operations of Field Trip headquarters.
|
Factors considered in determining the operating
segments include the Group’s business activities, the management structure directly accountable to the CODM, availability
of discrete financial information and strategic priorities within the organizational structure.
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 21
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Condensed Interim Consolidated Financial Statements
For the three & six months ended September 30, 2020 and periods ended September 30, 2019
(unaudited)
|
|
|
Clinical Operations
|
|
|
Research
|
|
|
Corporate
|
|
|
Total
|
|
|
Segment Information
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
3 months ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
94,532
|
|
|
|
-
|
|
|
|
-
|
|
|
|
94,532
|
|
|
Net loss
|
|
|
(1,214,464
|
)
|
|
|
(742,275
|
)
|
|
|
(1,975,705
|
)
|
|
|
(3,932,444
|
)
|
|
Property, plant, and equipment
|
|
|
1,145,882
|
|
|
|
226,806
|
|
|
|
93,027
|
|
|
|
1,465,715
|
|
|
Intangible assets
|
|
|
305,119
|
|
|
|
-
|
|
|
|
-
|
|
|
|
305,119
|
|
|
3 months ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Net loss
|
|
|
(57,327
|
)
|
|
|
-
|
|
|
|
(457,316
|
)
|
|
|
(514,643
|
)
|
|
Property, plant, and equipment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Intangible assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
6 months ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
118,131
|
|
|
|
-
|
|
|
|
-
|
|
|
|
118,131
|
|
|
Net loss
|
|
|
(2,066,569
|
)
|
|
|
(1,469,161
|
)
|
|
|
(3,355,618
|
)
|
|
|
(6,891,348
|
)
|
|
Property, plant, and equipment
|
|
|
1,145,882
|
|
|
|
226,806
|
|
|
|
93,027
|
|
|
|
1,465,715
|
|
|
Intangible assets
|
|
|
305,119
|
|
|
|
-
|
|
|
|
-
|
|
|
|
305,119
|
|
|
Period from April 2, 2019 (Date of Incorporation) to September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Net loss
|
|
|
(57,327
|
)
|
|
|
-
|
|
|
|
(624,091
|
)
|
|
|
(681,418
|
)
|
|
Property, plant, and equipment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Intangible assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
Canada
|
|
|
United States
|
|
|
Jamaica
|
|
|
Total
|
|
|
Geographic Information
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
3 months ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
78,249
|
|
|
|
16,283
|
|
|
|
-
|
|
|
|
94,532
|
|
|
Net loss
|
|
|
(2,810,959
|
)
|
|
|
(1,069,167
|
)
|
|
|
(52,318
|
)
|
|
|
(3,932,444
|
)
|
|
Property, plant, and equipment
|
|
|
428,306
|
|
|
|
810,603
|
|
|
|
226,606
|
|
|
|
1,465,715
|
|
|
Intangible assets
|
|
|
305,119
|
|
|
|
-
|
|
|
|
-
|
|
|
|
305,119
|
|
|
3 months ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Net loss
|
|
|
(457,316
|
)
|
|
|
(57,327
|
)
|
|
|
-
|
|
|
|
(514,643
|
)
|
|
Property, plant, and equipment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Intangible assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
6 months ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
101,848
|
|
|
|
16,283
|
|
|
|
-
|
|
|
|
118,131
|
|
|
Net loss
|
|
|
(5,033,348
|
)
|
|
|
(1,772,541
|
)
|
|
|
(85,459
|
)
|
|
|
(6,891,348
|
)
|
|
Property, plant, and equipment
|
|
|
428,306
|
|
|
|
810,603
|
|
|
|
226,606
|
|
|
|
1,465,715
|
|
|
Intangible assets
|
|
|
305,119
|
|
|
|
-
|
|
|
|
-
|
|
|
|
305,119
|
|
|
Period from April 2, 2019 (Date of Incorporation) to September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Net loss
|
|
|
(624,091
|
)
|
|
|
(57,327
|
)
|
|
|
-
|
|
|
|
(681,418
|
)
|
|
Property, plant, and equipment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Intangible assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 22
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Condensed Interim Consolidated Financial Statements
For the three & six months ended September 30, 2020 and periods ended September 30, 2019
(unaudited)
27. FINANCIAL INSTRUMENTS
Classification of Financial Instruments
Financial assets and financial
liabilities are measured on an ongoing basis at fair value or amortized cost. The classification of the financial instruments,
as well as their carrying values, are shown in the table below:
|
|
|
As at
September 30, 2020
|
|
|
As at
March 31, 2020
|
|
|
|
|
|
|
|
$
|
|
|
Financial assets at fair value through profit and loss
|
|
|
|
|
|
|
|
|
|
Cash (Level 1)
|
|
|
13,823,577
|
|
|
|
9,590,758
|
|
|
Restricted cash (Level 1)
|
|
|
218,448
|
|
|
|
100,000
|
|
|
Financial assets at amortized cost
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
1,984,044
|
|
|
|
203,112
|
|
|
Shareholders’ loan receivable
|
|
|
49,240
|
|
|
|
47,991
|
|
|
Total financial assets
|
|
|
16,075,309
|
|
|
|
9,941,861
|
|
|
Financial liabilities at amortized cost
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
2,095,670
|
|
|
|
577,854
|
|
|
CEBA loan
|
|
|
21,452
|
|
|
|
-
|
|
|
Total financial liabilities
|
|
|
2,117,122
|
|
|
|
577,854
|
|
Fair Value
IFRS 13 - Fair Value Measurements
requires disclosure of a three-level hierarchy that reflects the significance of the inputs used in making fair value measurements.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the
fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as
a whole:
Level 1 - Unadjusted quoted prices at the measurement date for
identical assets or liabilities in active markets
Level 2 - Observable inputs other
than quoted prices in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical
or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by
observable market data
Level 3 - Significant unobservable inputs that are supported
by little or no market activity
Cash, restricted cash, accounts receivable,
and accounts payable and accrued liabilities are all short-term in nature and, as such, their carrying values approximate fair
values.
Credit Risk
The Group, in the normal course of business,
is exposed to credit risk from its customers. Credit risk is the risk of an unexpected loss if a counterparty to a financial instrument
fails to meet its contractual obligations. The Group is exposed to credit risk on its cash and accounts receivable. The Group’s
objective with regard to credit risk in its operating activities is to reduce its exposure to losses. As the Group does not utilize
credit derivatives or similar instruments, the maximum exposure to credit risk is the full amount of the carrying value of its
cash and accounts receivable.
The Group’s cash is held with four
financial institutions in various bank accounts. These financial institutions are major banks in Canada, the United States, and
Jamaica which the Group believes lessens the degree of credit risk.
Liquidity Risk
Liquidity risk is the risk that the Company
will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by reviewing on an
ongoing basis its capital requirements. As at September 30, 2020, the Company had $13,823,577 of cash and cash equivalents.
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 23
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Condensed Interim Consolidated Financial Statements
For the three & six months ended September 30, 2020 and periods ended September 30, 2019
(unaudited)
The Company is obligated to pay accounts
payable and accrued liabilities with total carrying amounts and contractual cash flows amounting to $2,095,670 due in the next
12 months. The carrying values of cash, trade receivable, accounts payable and accrued liabilities approximate their fair values
due to their short term to maturity.
Interest Rate Risk
Financial instruments that potentially
subject the Group to cash flow interest rate risk are those assets and liabilities with a variable interest rate. Currently, the
Group has no assets or liabilities with a variable interest rate. Financial assets and financial liabilities that bear interest
at fixed rates are subject to fair value interest rate risk. The Group’s lease obligations are at fixed rates of interest.
Currency Risk
The Group is exposed to currency risk related
to the fluctuation of foreign exchange rates and the degree of volatility of those rates. Currency risk is limited to the portion
of the Group’s business transactions denominated in currencies other than the Canadian dollar, which are primarily expenses
in United States dollars. As at September 30, 2020, the Group held USD dollar denominated cash of $3,277,324 USD and had USD dollar
denominated accounts payable and accrued liabilities in the amounts of $139,768 USD. Therefore, a 1% change in the foreign exchange
rate would have a net impact as at September 30, 2020 of $41,852. USD dollar expenses for the period September 30, 2020 were $1,791,442
USD. Varying the foreign exchange rate for the period ended September 30, 2020 to reflect a 1% strengthening of the U.S. dollar
would have increased the net loss by approximately $23,871 assuming that all other variables remained constant.
28. RELATED PARTY TRANSACTIONS
The Group’s related parties
include certain investors and shareholders, key management personnel, and entities owned by key management personnel.
Shareholders
Field Trip entered into shareholder loan
agreements with two of its advisors for a total of $60,000 in July 2019. The notes are non-interest bearing (i.e. not on commercial
terms) and are due on demand or five years from the date of note issuance. These loans are expected to be repaid in full at maturity.
The Group measured the loans at fair value at initial recognition using an appropriate market interest rate. The below-market element
of the loans was determined at initial recognition as the difference between the loan principal amount and fair value. This difference
was recognized in equity as distribution to these shareholders. Total distribution arising from the initial fair value measurement
of shareholders’ loan was $13,596. The fair values at initial recognition were accounted for as amortized cost financial
assets in accordance with IFRS 9. The amortized cost of the loans as at September 30, 2020 was $49,240 (see Note 6) and total interest
income accrued at market rate in profit or loss for the 3 months then ended was $628 (see Note 21).
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 24
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Condensed Interim Consolidated Financial Statements
For the three & six months ended September 30, 2020 and periods ended September 30, 2019
(unaudited)
Key Management Personnel
Key management personnel are those persons
having authority and responsibility for planning, directing and controlling the activities of the Group, including directors. Key
management at September 30, 2020 includes ten directors and executive officers of the corporation. Key management personnel compensation
for the 3 and 6 months ended September 30, 2020 was comprised of:
|
|
|
3 months
ended
September 30,
2020
$
|
|
|
3 months
ended
September 30,
2019
$
|
|
|
6 months
ended
September 30,
2020
$
|
|
|
Period from
April 2,
2019
(Date of
Incorporation)
to September 30,
2019
$
|
|
|
Salaries
|
|
|
229,082
|
|
|
|
-
|
|
|
|
371,234
|
|
|
|
-
|
|
|
Share-based compensation
|
|
|
230,733
|
|
|
|
66,751
|
|
|
|
268,089
|
|
|
|
131,484
|
|
|
|
|
|
459,815
|
|
|
|
66,751
|
|
|
|
639,323
|
|
|
|
131,484
|
|
Directors and officers of the Group control 53% or 19,893,465
of the outstanding voting shares of the Group.
29. CONTINGENCIES
Litigation
During the prior year, the Group terminated
a lease contract with a lessor due to circumstances which it believes constituted a breach of contract by the lessor. Should the
Group become involved in litigation due to the termination of this contract, the Group believes it has prepared valid legal defenses
and that no material exposure exists on the eventual settlement of such litigation. This lease was treated as a short-term lease
under IFRS 16 and all payments including security deposit paid were fully expensed during the period ended March 31, 2020.
30. SUBSEQUENT EVENTS
Reverse Takeover of Newton Energy Corporation
On October 1, 2020, Field Trip
completed its previously announced going public transaction (the “Transaction”) with Newton Energy Corporation
and Newton’s wholly-owned subsidiary Newton Energy Subco Limited. The Transaction constituted a Reverse Takeover under
applicable securities law and was structured as a three-cornered amalgamation, which resulted in Field Trip becoming a
wholly-owned subsidiary of Newton by amalgamating with Newton Subco, and the security holders of Field Trip becoming security
holders of Newton. In connection with the completion of the Transaction, Newton common shares listed on the NEX board of the
TSXV were delisted on September 30, 2020. Newton changed its name to “Field Trip Health Ltd.” (the
“Resulting Issuer”) and commenced trading on the Canadian Stock Exchange (“CSE”) on October 6, 2020,
under the stock symbol FTRP.
Amended Stock Option Plan
In conjunction with the closing of the
Transaction, Field Trip amended its Stock Option Plan on October 6, 2020. The maximum number of common shares reserved for issuance
under the Stock Option Plan pursuant to options not intended as Incentive Stock Options (“ISOs”) shall be 15% of the
issued and outstanding Common Shares from time to time, on a non-diluted basis. The maximum number of Common shares reserved for
issuance under the Stock Option Plan pursuant to ISOs is 7,500,000. For the avoidance of doubt, Long Term Incentive Options are
excluded from the Stock Option Plan maximum. Common Shares in respect of Options that have been exercised, cancelled, surrendered,
or terminated or that expire without being exercised shall again be available for issuance under the Plan.
Option Grants
On October 1, 2020, the Group issued 253,423 options at an issue
price of $2.00 per Field Trip Share.
On November 2, 2020, the Group issued 65,000 options at an issue
price of $2.68 per Field Trip Share.
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 25
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Condensed Interim Consolidated Financial Statements
For the three & six months ended September 30, 2020 and periods ended September 30, 2019
(unaudited)
Clinic Openings
Chicago
On July 21, 2020, the Group executed a
lease agreement to build its Chicago clinic, commencing on October 1, 2020 and ending 132 months from the first day of the first
full month of the term. Total commitments under the lease are approximately $2,115,479. Field Trip Health USA Inc. is a guarantor
on the lease.
Atlanta
On October 7, 2020, the Group executed
a lease agreement to build its Atlanta clinic, commencing on October 1, 2020 and ending 121 months from the first day of the first
full month of the term. Total commitments under the lease are approximately $1,842,876.
Amsterdam
On October 7, 2020, the Group executed
a lease agreement to build its Amsterdam clinic, commencing on November 1, 2020 and ending 72 months from the first day of the
first full month of the term. Total commitments under the lease are approximately $1,967,114.
Houston
On October 28, 2020, the Group
executed a lease agreement to build its Houston clinic, estimated to commence on January 1, 2021 and ending 63 months from the
first day of the first full month of the term. Total commitments under the lease are approximately $1,237,388. Field Trip Health
USA Inc. is a guarantor on the lease.
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 26
|
Exhibit
99.27
FIELD
TRIP HEALTH LTD.
(formerly
Newton Energy Corporation)
Management’s
Discussion and Analysis
For
the nine-month period ended
September
30, 2020
MANAGEMENT’S DISCUSSION AND
ANALYSIS
The following management’s
discussion and analysis (“MD&A”) reviews Field Trip Health Ltd.’s (formerly Newton Energy Corporation) (“Field
Trip” or the “Corporation”) activities and results for the nine-month period ended September 30, 2020. It should be
read in conjunction with the unaudited Condensed Interim Financial Statements for the nine-month period ended September 30, 2020, together
with the accompanying notes, included in that report. The Financial Statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).
In the MD&A,
unless otherwise indicated, all dollar amounts are expressed in Canadian dollars. Additional information relating to the Corporation’s
activities can be found on SEDAR at www.sedar.com.
Date of Report
This MD&A is dated November 30,
2020 and presents material information up to this date.
Forward-Looking Information
This discussion
offers management’s analysis of the financial and operating results of the Corporation and contains certain forward-looking statements.
Forward-looking information typically contains statements with words such as “anticipate”, “estimate”, “expect”,
“potential”, “could”, or similar words suggesting future outcomes. The Corporation cautions readers and prospective
investors in the Corporation’s securities to not place undue reliance on forward-looking information as by its nature, it is based
on current expectations regarding future events that involve a number of assumptions, inherent risks and uncertainties, which could cause
actual results to differ materially from those anticipated by the Corporation.
Forward looking
information is based on management’s current expectations and assumptions regarding, among other things, future capital and other
expenditures (including the amount, nature and sources of funding thereof), future economic conditions, future currency and exchange
rates. Although the Corporation believes the expectations and assumptions reflected in such forward-looking information are reasonable,
they may prove to be incorrect. Forward-looking information involves significant known and unknown risks and uncertainties.
See the Risk Factors
section of this MD&A for a further description of these risks. The forward-looking information included in this report is expressly
qualified in its entirety by this cautionary statement. The Corporation assumes no obligation to update or revise any forward-looking
information to reflect new events or circumstances, except as required by law. For additional information relating to the risks and uncertainties
facing the Corporation, see “Risk Factors”.
Completion of Reverse Take-Over Transaction
with Field Trip Psychedelics Inc.
On October 1, 2020
Field Trip completed its reverse take-over transaction with Field Trip Psychedelics Inc. (“FTP”), a global leader in the
development and delivery of technology-enabled therapies. Through its Field Trip Health centres opening across North America that provide
best-in-class psychedelic-therapies, and drug development and advanced research on plant-based psychedelics through Field Trip Discovery,
FTP’s goal is to help those in treatment and those seeking accelerated personal growth with a simple, evidence-based way to heal
and heighten engagement with the world.
Prior to the closing
and effective September 30, 2020, the Corporation changed its name from Newton Energy Corporation to Field Trip Health Ltd. and consolidated
the outstanding common shares of the Corporation on the basis of one post-consolidation share for every eight pre-consolidation share.
Pursuant to the
transaction, FTP was amalgamated with a wholly-owned subsidiary of the Corporation and all Class A shares and convertible securities
of FTP were exchanged for post-consolidation shares on a one-to-one basis.
The pre-consolidated
shares were delisted from the NEX board of the TSX Venture Exchange effective September 30, 2020 and were listed on the Canadian Securities
Exchange on October 6, 2020. Effective October 1, 2020, the Corporation was continued under the Canada Business Corporations Act and
changed its year-end to March 31.
In connection with the closing, all
the directors and officers of the Corporation resigned and were replaced by the following directors and officers of FTP:
Joseph del Moral, Director
& Chief Executive Officer
Ronan Levy, Director &
Executive Chairman
Hannan Fleiman, Director
& President
Mujeeb Jafferi, Director
& Chief Operating Officer
Dr. Ryan Yermus, Director
& Chief Clinical Officer
Helen M. Boudreau, Director
Dieter Weinand, Director
Donna Wong, Chief Financial
Officer
Paula Amy Hewitt, Vice President,
General Counsel and Corporate Secretary
Dr. Nathan Bryson, Chief
Science Officer
Amardeep Manhas, Chief Technology
Officer
Tyler Dyck, Treasurer &
Director of Finance
Prior to the closing,
FTP completed an upsizing of its previously completed Series B financing, from $11 million to $12.6 million, a portion of which was completed
by way of a brokered private placement. The proceeds from the financing will be used to continue the rollout across North America of
the Field Trip Health clinical hubs for psychedelic therapies, and to further advance its pioneering work with its next generation psychedelic
molecule, FT-104, and its advanced research and development on psilocybin producing mushrooms in partnership with the University of West
Indies.
Financial Highlights
As at September
30, 2020, Field Trip had $126,104 in cash (September 30, 2019 - $576,084). Field Trip had a total comprehensive loss of $367,788 for
the nine months ended September 30, 2020 (September 30, 2019 - $174,771) and $308,156 for the three months ended September 30, 2020 (September
30, 2019 - $33,567). This loss is comprised of operating costs and expenses and transaction costs.
Selected Financial Information
The following table summarizes key financial
information on a quarterly basis for the previous two years:
|
|
|
September
30
|
|
|
June 30
|
|
|
March 31
|
|
|
December
31
|
|
|
|
|
2020
|
|
|
2020
|
|
|
2020
|
|
|
2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Total revenue
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Net income
|
|
|
(308,156
|
)
|
|
|
(33,875
|
)
|
|
|
(25,758
|
)
|
|
|
(64,202
|
)
|
|
Basic and diluted loss per share
|
|
|
(0.39
|
)
|
|
|
(0.04
|
)
|
|
|
(0.03
|
)
|
|
|
(0.08
|
)
|
|
Total assets
|
|
|
157,918
|
|
|
|
479,261
|
|
|
|
509,065
|
|
|
|
542,317
|
|
|
Total liabilities
|
|
|
8,488
|
|
|
|
21,676
|
|
|
|
17,605
|
|
|
|
25,101
|
|
|
|
|
September
30
|
|
|
June 30
|
|
|
March 31
|
|
|
December
31
|
|
|
|
|
2019
|
|
|
2019
|
|
|
2019
|
|
|
2018
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Total revenue
|
|
|
1,750
|
|
|
|
4
|
|
|
|
-
|
|
|
|
3,559
|
|
|
Net income
|
|
|
(33,567
|
)
|
|
|
(117,428
|
)
|
|
|
(23,776
|
)
|
|
|
(79,841
|
)
|
|
Basic and diluted loss per share
|
|
|
(0.04
|
)
|
|
|
(0.15
|
)
|
|
|
(0.03
|
)
|
|
|
(0.10
|
)
|
|
Total assets
|
|
|
582,160
|
|
|
|
624,127
|
|
|
|
656,696
|
|
|
|
700,331
|
|
|
Total liabilities
|
|
|
6,904
|
|
|
|
15,304
|
|
|
|
10,605
|
|
|
|
30,464
|
|
For the nine-month
period ended September 30, 2020, the Corporation reported no discontinued operations and did not declare any cash dividends. The Corporation’s
revenue is comprised entirely of interest earned on cash and cash equivalent balances. Office and administration expenses represent the
Corporation’s costs associated with its activities for the respective periods.
Operating Costs and Expenses
For the nine-month
period ended September 30, 2020 operating cost and expenses increased to $367,806 compared to $176,525 for the same period in 2019. For
the three months ended September 30, 2020, operating costs and expenses increased to $308,174 compared to $35,317 for the same period
in 2019. No expenses were capitalized during the nine-month periods ended in 2020 and 2019.
Breakdown of Operating Costs and
Expenses
|
|
|
For the three
|
|
|
For the three
|
|
|
For the nine
|
|
|
For the nine
|
|
|
|
|
months ended
|
|
|
months ended
|
|
|
months ended
|
|
|
months ended
|
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Accounting and legal
|
|
|
35,808
|
|
|
|
11,253
|
|
|
|
49,527
|
|
|
|
19,933
|
|
|
Advertising and promotion
|
|
|
-
|
|
|
|
425
|
|
|
|
-
|
|
|
|
2,280
|
|
|
Consulting and directors’
fees
|
|
|
13,000
|
|
|
|
13,000
|
|
|
|
39,000
|
|
|
|
31,500
|
|
|
Insurance
|
|
|
2,041
|
|
|
|
1,850
|
|
|
|
5,987
|
|
|
|
5,422
|
|
|
Office and miscellaneous
|
|
|
1,936
|
|
|
|
4,330
|
|
|
|
10,229
|
|
|
|
8,376
|
|
|
Share-based payments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
80,160
|
|
|
Travel and business development
|
|
|
27
|
|
|
|
2,698
|
|
|
|
27
|
|
|
|
18,843
|
|
|
Transactions costs
|
|
|
249,319
|
|
|
|
-
|
|
|
|
249,319
|
|
|
|
-
|
|
|
Regulatory and filing fees
|
|
|
6,043
|
|
|
|
1,761
|
|
|
|
13,717
|
|
|
|
9,991
|
|
Accounting and
legal were $49,527 for the nine-month period and $35,808 for the three-month period ended September 30, 2020 compared to $19,933 for
the nine-month period and $11,253 for the three-month period ended September 30, 2019.
Advertising and
promotion were $nil for the nine-month period and for the three-month period ended September 30, 2020 compared to $2,280 for the nine-month
period and $425 for the three-month period ended September 30, 2019.
Consulting and
directors’ fees were $39,000 for the nine-month period and $13,000 for the three-month period ended September 30, 2020 compared
to $31,500 for the nine-month period and $13,000 for the three-month period ended September 30, 2019.
Insurance was $5,987
for the nine-month period and $2,041 for the three-month period ended September 30, 2020 compared to $5,422 for the nine-month period
and $1,850 for the three-month period ended September 30, 2019.
Office and miscellaneous
were $10,229 for the nine-month period and $1,936 for the three-month period ended September 30, 2020 compared to $8,376 for the nine-month
period and $4,330 for the three-month period ended September 30, 2019.
Travel and business
development were $27 for the nine-month period and $27 for the three-month period ended September 30, 2020 compared to $18,843 for the
nine-month period and $2,698 for the three-month period ended September 30, 2019.
Transaction costs
were $249,319 for the nine-month period and $249,319 for the three-month period ended September 30, 2020 compared to $nil for the nine-month
period and for the three-month period ended September 30, 2019.
Regulatory and
filling fees were $13,717 for the nine-month period and $6,043 for the three-month period ended September 30, 2020 compared to $9,991
for the nine-month period and $1,761 for the three-month period ended September 30, 2019.
Operating costs
and expenses increased for the nine-month period in 2020 over the same period in 2019 as a result of the initiation and completion of
the reverse take-over transaction with Field Trip Psychedelics Inc.
Field Trip’s
revenue is comprised entirely of interest earned on cash and cash equivalents, short-term investment balances. There was no interest
income for the nine-month period ended September 30, 2020 compared to $1,754 for the nine-month period ended September 30, 2019.
For the nine-month
period ended September 30, 2020, share-based payments expense was $nil compared to $80,160 for the nine-month period ended September
30, 2019 because no stock options were granted during the nine-month period ended September 30, 2020.
Liquidity and Capital Resources
Field Trip currently
has no operational cash flow. Field Trip’s revenue is comprised entirely of interest earned on its investments. Field Trip has
no outstanding bank debt or other interest-bearing indebtedness as at September 30, 2020.
|
|
a)
|
Field Trip
had $126,104 in cash and working capital of $149,430 as at September 30, 2020. These balances
will be used to fund operating costs and expenses and working capital requirements.
|
|
|
b)
|
Field Trip
assesses its financing requirements and its ability to access debt or equity markets on an
ongoing basis. Given the current conditions in the financial markets, Field Trip will seek
to maintain financial flexibility and will monitor and assess its financing requirements.
Field Trip’s ability to access the equity or debt markets in the future may be affected
by prolonged market instability. The inability to access the equity or debt markets for sufficient
capital, at acceptable terms, and within required timeframes, could have a material adverse
effect on Field Trip’s financial condition, results of operations and prospects. Further
discussion on these risks can be found in the “Risk Factors” section of the MD&A.
|
Investor Relations
The Corporation has no investor relations’
agreements.
Changes in Internal Controls over
Financial Reporting
There have been
no changes in the Corporation’s internal control over financial reporting during the nine-month period ended September 30, 2020
that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
Financing
The
Corporation does not currently have any operations generating cash to fund any projects or ventures and associated overhead costs. The
Corporation is therefore dependent upon debt and equity financing to carry out business plans. There can be no assurance that such financing
will be available to the Corporation.
Significant
Accounting Judgments, Estimates and Assumptions
A
detailed summary of all the Corporation’s significant accounting policies is included in Note 3 of the Corporation’s September
30, 2020 financial statements.
Related
Party Transactions
A
detailed summary of all the Corporation’s related party transactions is included in Note 5 of the Corporation’s September
30, 2020 financial statements.
Off
Balance Sheet Arrangements
The
Corporation has no off-balance sheet arrangements.
Outstanding
Share Data, Stock Options and Warrants
The
Corporation is authorized to issue an unlimited number of common shares and an unlimited number of preferred shares. As at November 30,
2020, there were 37,802,992 common shares and nil preferred shares issued and outstanding.
As
a result of the Corporation’s reverse take-over transaction with FTP, the Corporation adopted FTP’s stock option plan. As
at November 30, 2020, there were 3,963,682 stock options outstanding.
As
a result of the Corporation’s reverse take-over transaction with FTP, FTP’s compensation warrants from a brokered private
placement were exchanged for Field Trip’s share purchase warrants on a one-to-one basis. As at November 30, 2020, the Corporation
has 299,753 share purchase warrants outstanding.
Risk
Factors
Investment
in the Corporation must be considered highly speculative due to the nature of the Corporation’s business, its formative stage of
development, its current financial position and its lack of earnings record. The following is a summary of the risk factors to be considered:
Market
for Common Shares
There
can be no assurance that an active and liquid market for the Corporation’s common shares will develop and an investor may find
it difficult to resell the common shares.
Price Volatility of Publicly Traded
Securities
In recent years,
the securities markets in Canada and the United States have experienced a high level of price and volume volatility, and the market price
of securities of many companies, particularly those considered to be development stage companies, have experienced wide fluctuations
in price which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies.
Management of Growth
Field Trip may
be subject to growth-related risks, including capacity constraints and pressure on its internal systems and controls. The ability of
Field Trip to manage growth effectively will require it to continue to implement and improve its operational and financial systems and
to expand, train and manage its employee base. The inability of Field Trip to deal with this growth could have a material adverse impact
on its business, operations and prospects.
Reliance on Key Personnel
Field Trip’s
success depends in large measure on certain key personnel. The loss of the services of such key personnel could have a material adverse
effect on Field Trip. The contributions of the existing management team to the immediate and near-term operations of Field Trip are likely
to be of central importance. In addition, the competition for qualified personnel in various industries can be intense and there can
be no assurance that Field Trip will be able to continue to attract and retain all personnel necessary for the development and operation
of its business. Investors must rely upon the ability, expertise, judgment, discretion, integrity and good faith of the management of
Field Trip.
Substantial Capital Requirements
Field Trip may
be required to make substantial capital expenditures for the development of its projects. Field Trip’s ability to access the equity
or debt markets in the future may be affected by any prolonged market instability. There can be no assurance that debt or equity financing,
or future cash (if any) generated by operations, would be available or sufficient to meet these requirements or for other corporate purposes
or, if debt or equity financing is available, that it will be on terms acceptable to Field Trip. These funding arrangements are not yet
in place. There is no assurance that the initiatives undertaken by management will be successful. The inability of Field Trip to access
sufficient capital for its operations could have a material adverse effect on Field Trip ’s financial condition, results of operations
and prospects.
Dilution
Field Trip may
make future acquisitions or enter into financings or other transactions involving the issuance of securities of Field Trip, which may
be substantially dilutive to existing shareholders and which may also result in a change of control of the Corporation.
Issuance of Debt
Field Trip may
enter into transactions to acquire assets or the shares of other organizations. These transactions may be financed in whole or in part
with debt, which may increase Field Trip’s debt levels above industry standards for companies of similar size. Depending on future
plans, Field Trip may require additional equity and/or debt financing that may not be available or, if available, may not be available
on favourable terms. Neither Field Trip s articles nor its by-laws limit the amount of indebtedness Field Trip may incur. The level of
Field Trip’s indebtedness from time to time could impair Field Trip’s ability to obtain additional financing on a timely
basis to take advantage of business opportunities that may arise.
Dividends
To date, Field
Trip has not declared or paid any dividends on the outstanding Field Trip shares. Any decision to pay dividends on the Field Trip shares
will be made by the board of directors of Field Trip on the basis of Field Trip ’s earnings, financial requirements and other conditions
existing at such future time. At present, Field Trip does not anticipate declaring and paying any dividends in the foreseeable future.
Conflicts of Interest
Certain directors
of Field Trip are also directors of other companies and as such may, in certain circumstances, have a conflict of interest requiring
them to abstain from certain decisions. Conflicts, if any, will be subject to the procedures and remedies of the Canada Business Corporations
Act.
Financial Instruments
The Corporation considers its risks
in relation to financial instruments in the following categories:
Credit Risk
Credit risk is
the risk that counterparty to a financial instrument will not discharge its obligations, resulting in a financial loss to the Corporation.
The Corporation has policies and procedures in place that govern the credit risk it will assume. The Corporation evaluates credit risks
on an ongoing basis including an evaluation of counterparty credit rating and counterparty concentrations measured by amount and percentage.
The Corporation’s objective is to have no credit losses. The primary sources of credit risk for the Corporation arise from the
following financial assets: (1) cash and cash equivalents and (2) accounts receivable. The Corporation has not had any credit losses
in the past and the risk of financial loss is considered to be low. As at September 30, 2020, the Corporation has no financial assets
that are past due or impaired due to credit risk related defaults.
Liquidity Risk
Liquidity risk
is the risk that the Corporation will not be able to meet obligations associated with financial liabilities. The Corporation’s
financial liabilities are comprised of accounts payable and accrued liabilities. The Corporation frequently assesses its liquidity position
and obligations under its financial liabilities by preparing regular financial forecasts. The Corporation mitigates liquidity risk by
maintaining a sufficient cash balance as well as maintaining sufficient current and projected liquidity to meet expected future payments.
Market Risk
Market risk is
the risk that the fair value (for assets or liabilities considered to be held for trading and available for sale) or future cash flows
(for assets or liabilities considered to be held-to-maturity, other financial liabilities, and loans and receivables) of a financial
instrument will fluctuate because of changes in market prices. The Corporation evaluates market risk on an ongoing basis. At September
30, 2020, all of the Corporation’s financial instruments were assessed to have little or no market risk.
Exhibit 99.28
FIELD TRIP HEALTH LTD.
(formerly Newton Energy Corporation)
INTERIM FINANCIAL STATEMENTS
For the Nine Months Ended September
30, 2020 and 2019
(Unaudited – Expressed in Canadian Dollars)
Notice of No Auditor Review
These unaudited interim financial statements of Field Trip Health Ltd. (formerly Newton Energy Corporation) have not been reviewed by the auditors of the Corporation. This notice is being provided in accordance with Section 4.3(3)(a) of National Instrument 51-102 - Continuous Disclosure Obligations.
FIELD TRIP HEALTH LTD. (formerly
Newton Energy Corporation)
Interim Statements of Financial Position
As at
September 30, 2020
(Unaudited – Expressed in Canadian Dollars)
|
|
|
September
30, 2020
|
|
|
December
31, 2019
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
126,104
|
|
|
|
533,576
|
|
|
GST receivable
|
|
|
14,284
|
|
|
|
2,260
|
|
|
Prepaid
expenses
|
|
|
17,530
|
|
|
|
6,483
|
|
|
Total
Assets
|
|
|
157,918
|
|
|
|
542,319
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
|
8,488
|
|
|
|
25,101
|
|
|
Total
Liabilities
|
|
|
8,488
|
|
|
|
25,101
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
6,414,127
|
|
|
|
6,414,127
|
|
|
Reserves
|
|
|
989,124
|
|
|
|
989,124
|
|
|
Deficit
|
|
|
(7,253,821
|
)
|
|
|
(6,886,033
|
)
|
|
Total
Equity
|
|
|
149,430
|
|
|
|
517,218
|
|
|
Total
Liabilities and Equity
|
|
|
157,918
|
|
|
|
542,319
|
|
See accompanying notes to the financial statements.
Nature and Continuance of Operations (Note 1)
Basis of Preparation (Note 2)
Subsequent Events (Note 8)
Approved by the Board of Directors and authorized for issue on November 30, 2020.
|
“Joseph del Moral”
|
|
“Ronan Levy”
|
|
Joseph del Moral, Director
|
|
Ronan Levy, Director
|
FIELD TRIP HEALTH
LTD. (formerly Newton Energy Corporation)
Interim Statements
of Loss and Comprehensive Loss
For the nine-month periods ended September 30, 2020 and 2019
(Unaudited – Expressed in Canadian Dollars)
|
|
|
For the three
months ended
September 30,
2020
|
|
|
For the three
months ended
September 30,
2019
|
|
|
For the nine
months ended
September 30,
2020
|
|
|
For the nine
months ended
September 30,
2019
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounting and legal
|
|
|
35,808
|
|
|
|
11,253
|
|
|
|
49,527
|
|
|
|
19,933
|
|
|
Advertising and promotion
|
|
|
-
|
|
|
|
425
|
|
|
|
-
|
|
|
|
2,280
|
|
|
Consulting and directors’ fees
|
|
|
13,000
|
|
|
|
13,000
|
|
|
|
39,000
|
|
|
|
31,500
|
|
|
Insurance
|
|
|
2,041
|
|
|
|
1,850
|
|
|
|
5,987
|
|
|
|
5,442
|
|
|
Office and miscellaneous
|
|
|
1,936
|
|
|
|
4,330
|
|
|
|
10,229
|
|
|
|
8,376
|
|
|
Share-based payments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
80,160
|
|
|
Travel and business development
|
|
|
27
|
|
|
|
2,698
|
|
|
|
27
|
|
|
|
18,843
|
|
|
Transaction costs
|
|
|
249,319
|
|
|
|
-
|
|
|
|
249,319
|
|
|
|
-
|
|
|
Regulatory and filing fees
|
|
|
6,043
|
|
|
|
1,761
|
|
|
|
13,717
|
|
|
|
9,991
|
|
|
Loss before other items
|
|
|
(308,174
|
)
|
|
|
(35,317
|
)
|
|
|
(367,806
|
)
|
|
|
(176,525
|
)
|
|
Foreign exchange gain
|
|
|
18
|
|
|
|
-
|
|
|
|
18
|
|
|
|
-
|
|
|
Interest income
|
|
|
-
|
|
|
|
1,750
|
|
|
|
-
|
|
|
|
1,754
|
|
|
Net and comprehensive loss for the period
|
|
|
(308,156
|
)
|
|
|
(33,567
|
)
|
|
|
(367,788
|
)
|
|
|
(174,771
|
)
|
|
Weighted average of common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average of common shares outstanding
|
|
|
795,106
|
|
|
|
795,106
|
|
|
|
795,106
|
|
|
|
795,106
|
|
|
Basic and diluted loss per share
|
|
|
(0.39
|
)
|
|
|
(0.04
|
)
|
|
|
(0.46
|
)
|
|
|
(0.03
|
)
|
See accompanying notes to the financial statements.
FIELD TRIP HEALTH
LTD. (formerly Newton Energy Corporation)
Interim Statements of Changes in Equity
(Unaudited – Expressed in Canadian Dollars)
|
|
|
Number of
Shares
|
|
|
Share
Capital
|
|
|
Reserves
|
|
|
Deficit
|
|
|
Total
Equity
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Balance at January 1, 2019
|
|
|
795,106
|
|
|
|
6,414,127
|
|
|
|
902,030
|
|
|
|
(6,646,290
|
)
|
|
|
669,867
|
|
|
Net loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(174,771
|
)
|
|
|
(174,771
|
)
|
|
Share-based payments
|
|
|
-
|
|
|
|
-
|
|
|
|
80,160
|
|
|
|
-
|
|
|
|
80,160
|
|
|
Balance at September 30, 2019
|
|
|
795,106
|
|
|
|
6,414,127
|
|
|
|
982,190
|
|
|
|
(6,821,061
|
)
|
|
|
575,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2020
|
|
|
795,106
|
|
|
|
6,414,127
|
|
|
|
989,124
|
|
|
|
(6,886,033
|
)
|
|
|
517,218
|
|
|
Net loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(367,788
|
)
|
|
|
(367,788
|
)
|
|
Balance at September 30, 2020
|
|
|
795,106
|
|
|
|
6,414,127
|
|
|
|
989,124
|
|
|
|
(7,253,821
|
)
|
|
|
149,430
|
|
*The Company completed an 8:1 consolidation of its share capital effective September 30, 2020. These interim financial statements are presented on a post-consolidation basis.
See accompanying notes to the financial statements.
FIELD TRIP HEALTH
LTD. (formerly Newton Energy Corporation)
Interim Statements of Cash Flows
(Unaudited – Expressed in Canadian Dollars)
|
|
|
For the nine
months ended
September 30,
2020
|
|
|
For the nine
months ended
September 30,
2019
|
|
|
Cash provided by (used for)
|
|
|
$
|
|
|
|
$
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
|
(367,788
|
)
|
|
|
(174,771
|
)
|
|
Items not involving the use of cash:
|
|
|
|
|
|
|
|
|
|
Share-based payments
|
|
|
-
|
|
|
|
80,160
|
|
|
|
|
|
(367,788
|
)
|
|
|
(94,611
|
)
|
|
Change in non-cash working capital:
|
|
|
|
|
|
|
|
|
|
GST receivable
|
|
|
(12,024
|
)
|
|
|
2,355
|
|
|
Prepaid expenses and deposits
|
|
|
(11,047
|
)
|
|
|
(958
|
)
|
|
Accounts payable and accrued liabilities
|
|
|
(16,613
|
)
|
|
|
(23,560
|
)
|
|
Net cash used in operating activities
|
|
|
(407,472
|
)
|
|
|
(116,774
|
)
|
|
Decrease in cash
|
|
|
(407,472
|
)
|
|
|
(116,774
|
)
|
|
Cash, beginning of the period
|
|
|
533,576
|
|
|
|
692,858
|
|
|
Cash, end of the period
|
|
|
126,104
|
|
|
|
576,084
|
|
|
Supplementary cash flow information
|
|
|
|
|
|
|
|
|
|
Interest received
|
|
|
-
|
|
|
|
1,754
|
|
See accompanying notes to financial statements.
FIELD TRIP HEALTH LTD. (formerly Newton Energy Corporation)
Notes to the Interim Financial Statements
As at and for the nine months ended September 30, 2020 and 2019
(Unaudited – Expressed in Canadian Dollars)
1. NATURE AND CONTINUANCE OF OPERATIONS
Field Trip Health Ltd. (formerly Newton Energy Corporation) (“Field Trip”, the “Corporation” or the “Company”) is domiciled and incorporated in Canada. The address of the Corporation’s registered office is 30 Duncan Street, Suite 401, Toronto, Ontario M5V 2C3. Effective September 30, 2020, the Company changed its name from Newton Energy Corporation to Field Trip Health Ltd., consolidated its outstanding common shares on the basis of one (1) post-consolidation share to eight (8) pre-consolidation shares, and delisted its shares from the NEX board of the TSX Venture Exchange.
As of September 30, 2020, the Corporation was in the process of a reverse take-over transaction. Please see Note 8 “Subsequent Events”.
These interim financial statements were approved and authorized for issuance by the Board of Directors on November 30, 2020.
2. BASIS OF PREPARATION
These interim financial statements have been prepared
in accordance with International Financial Reporting Standards (“IFRS”) applicable to the preparation of interim
financial statements, including International Accounting Standards (“IAS”) 34, Interim Financial Reporting. These
interim financial statements do not include all of the information required for full annual financial statements and should be
read in conjunction with the Corporation’s audited annual financial statements for the year ended December 31, 2019, which
have been prepared in accordance with IFRS.
These interim financial statements were prepared on the basis that the Corporation will continue to meet its commitments, continue operations and realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Corporation has no operating revenues, working capital of $149,430 as at September 30, 2020, a net loss of $367,788 and negative cash flow from operating activities of $407,472 for the nine-month period ended September 30, 2020.
The Corporation’s continuing operations as intended is dependent upon its ability to raise sufficient funds in order to finance any acquisition and administrative expenses. The Corporation has no assurance that such financing will be available or be available on favorable terms. Factors that could affect the availability of financing include the Corporation’s performance (as measured by numerous factors including the progress and results of its projects), the state of international debt and equity markets, investor perceptions and expectations and the global financial markets. If successful, the Corporation would obtain additional financing through, but not limited to, the issuance of additional equity.
3. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies that have been used in the preparation of these interim financial statements are summarized in the audited financial statements of the Corporation for the year ended December 31, 2019. These interim financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2019.
FIELD TRIP HEALTH LTD. (formerly Newton Energy
Corporation)
Notes to the Interim Financial Statements
As at and for the nine months ended September 30, 2020 and 2019
(Unaudited – Expressed in Canadian Dollars)
3. SIGNIFICANT ACCOUNTING POLICIES, continued
a) Significant accounting judgments, estimates and assumptions
The preparation of the Corporation’s 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 and contingent liabilities at the date of the interim financial statements and reported amounts of revenues and expenses during the reporting periods. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. The most significant judgement applying to the Corporation’s financial statements is the assessment of the Corporation’s ability to continue as a going concern and whether there are events or conditions that may give rise to significant uncertainty.
b) New accounting standards and recent pronouncements
The Corporation does not expect that the changes to IFRS that are effective as of January 1, 2020 will have a significant impact on the Corporation’s results of operations or financial positions.
4. SHARE CAPITAL
Unlimited number of common voting shares.
Unlimited number of preferred shares issuable in series.
Effective September 30, 2020, the Company consolidated its share capital on the basis of eight (8) pre-consolidation common shares to one (1) post-consolidation common share.
|
|
b)
|
Issued and outstanding Common Shares
|
|
|
|
Number of
Shares
|
|
|
Amount
|
|
|
Issued and outstanding as at December 31, 2019
|
|
|
795,106
|
|
|
$
|
6,414,127
|
|
|
Issued and outstanding as at September 30, 2020
|
|
|
795,106
|
|
|
$
|
6,414,127
|
|
c) Share-based Compensation
|
Reserves
|
|
$
|
|
|
Balance at December 31, 2019
|
|
|
982,190
|
|
|
Options granted to directors, officers and consultants during the period
|
|
|
-
|
|
|
Balance at September 30, 2020
|
|
|
982,190
|
|
FIELD TRIP HEALTH LTD. (formerly Newton Energy
Corporation)
Notes to the Interim Financial Statements
As at and for the nine months ended September 30, 2020 and 2019
(Unaudited – Expressed in Canadian Dollars)
4. SHARE CAPITAL, continued
The Corporation’s stock option plan provides for issuance of stock options to directors, officers, employees and consultants. The options can be granted for a maximum length of five years and vesting terms are at the discretion of the Board of Directors.
The continuity of stock options is as follows:
|
|
|
2020
|
|
|
2019
|
|
|
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
Balance, beginning of the year
|
|
|
79,139
|
|
|
|
2.24
|
|
|
|
29,139
|
|
|
|
2.96
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000
|
|
|
|
1.76
|
|
|
Expired
|
|
|
4,688
|
|
|
|
8.00
|
|
|
|
|
|
|
|
|
|
|
Balance, end of the year
|
|
|
74,451
|
|
|
|
1.84
|
|
|
|
79,139
|
|
|
|
2.24
|
|
The following stock options were outstanding and exercisable as at September 30, 2020:
|
Issue Date
|
|
Number of
Options
|
|
|
Exercise
Price
|
|
|
Remaining
Contractual
Life (Years)
|
|
January 4, 2018
|
|
|
24,451
|
|
|
$
|
2.00
|
|
|
January 4, 2023
|
|
May 10, 2019
|
|
|
50,000
|
|
|
$
|
1.76
|
|
|
May 10, 2024
|
|
Total
|
|
|
74,451
|
|
|
|
|
|
|
|
|
Weighted average years to expiry
|
|
|
|
|
|
|
|
|
|
3.17
|
For the nine months ended September 30, 2020, the Corporation recorded $nil (2019 - $80,160) in share-based payment expense to operations. The fair value of the options granted during the fiscal 2019 year was determined using the Black-Scholes option pricing method with the following weighted average assumptions:
|
|
|
2019
|
|
Risk-free interest rate
|
|
1.61
|
|
Expected life of options
|
|
5 years
|
|
Expected volatility
|
|
228.24%
|
|
Dividend rate
|
|
Nil
|
FIELD TRIP HEALTH LTD. (formerly Newton Energy
Corporation)
Notes to the Interim Financial Statements
As at and for the nine months ended September 30, 2020 and 2019
(Unaudited – Expressed in Canadian Dollars)
|
|
5.
|
RELATED PARTY TRANSACTIONS
|
Remuneration of key management (includes the Corporation’s directors and executive team):
|
Expense by nature
|
|
September 30,
2020
|
|
|
September 30,
2019
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
Directors’ fees
|
|
|
1,000
|
|
|
|
3,500
|
|
|
Legal fees
|
|
|
44,602
|
|
|
|
15,933
|
|
|
Consulting fees
|
|
|
38,000
|
|
|
|
28,000
|
|
|
Transactions costs
|
|
|
16,000
|
|
|
|
-
|
|
|
Total
|
|
|
99,602
|
|
|
|
47,433
|
|
All transactions with related parties have occurred in the normal course of operations and are measured at their fair value as determined by management. Other than as described above, the Corporation has not acquired any assets or services or provided any assets or services in any transaction with any non-arm’s length party within the nine-month periods ended September 30, 2020 and 2019.
6. FINANCIAL INSTRUMENTS
Financial instruments consist of recorded amounts of cash and accounts payable and accrued liabilities which will result in future cash outlays. In management’s opinion, carrying amounts approximate fair values due to the short-term maturities of these items.
The Corporation classifies the fair value of these financial instruments accordingly to the following hierarchy based on the amount of observable inputs used to value the instrument.
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Cash is classified under Level 1.
Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1. Prices in Level 2 are either directly (i.e. as prices) or indirectly (i.e. derived from prices) as of the reporting date. The Corporation does not have any financial instruments classified under Level 2.
Level 3 – Valuations in the level are those with inputs for the asset or liability that are not based on observable market data. The Corporation does not have any financial instruments under Level 3.
The Corporation has exposure to the following risks:
Management believes that the Corporation is not exposed to any significant credit risk on its financial assets. Cash includes money market accounts for which management believes the risk of loss to be remote. As at September 30, 2020 and December 31, 2019, the Corporation had no financial assets that were either past due or impaired.
FIELD TRIP HEALTH LTD. (formerly Newton Energy
Corporation)
Notes to the Interim Financial Statements
As at and for the nine months ended September 30, 2020 and 2019
(Unaudited – Expressed in Canadian Dollars)
|
|
6.
|
FINANCIAL INSTRUMENTS, continued
|
The Corporation manages the risk of not meeting its financial obligations as they come due through management of its capital, annual budgeting of its expenditures and cash flows, and cash flow forecasting.
The Corporation has cash balances and non-interest bearing obligations. The Corporation manages its exposure to interest rate risk through fixed rate investments with no early withdrawal penalties. It is the Corporation’s policy to invest its cash reserves in low risk investments in either short term deposits in primary Canadian banking institutions or overnight money market accounts. The Corporation monitors interest rate markets to ensure that appropriate steps can be taken considering interest rate volatility.
|
|
ii)
|
Foreign currency risk
|
The Corporation’s functional and reporting currency is the Canadian dollar as expenditures and costs are made in Canada. The Corporation does not hedge foreign currency transactions.
The Corporation manages its capital structure and makes adjustments to it, based on the funds available to the Corporation in order to support any acquisition or merger with potential candidates and to maintain the Corporation in good standing with the various regulatory authorities. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Corporation’s management to sustain future development of the Corporation. The Corporation has no debt and is not subject to externally imposed capital requirements. There were no changes in the Corporation’s management of capital during the period ended September 30, 2020.
The Corporation may make adjustments to its capital structure in light of changes in economic and market conditions which may include adjusting capital spending to manage projected financial resources, issuing new shares through public offering or private placement, and/or completing a business combination.
As at September 30, 2020, the Corporation has total capital of $149,430 (December 31, 2019, $517,218).
FIELD TRIP HEALTH LTD. (formerly Newton Energy
Corporation)
Notes to the Interim Financial Statements
As at and for the nine months ended September 30, 2020 and 2019
(Unaudited – Expressed in Canadian Dollars)
|
|
8.
|
SUBSEQUENT EVENTS - COMPLETION OF TRANSACTION WITH FIELD TRIP PSYCHEDELICS INC.
|
On October 1, 2020, the Corporation completed its reverse take-over of Field Trip Psychedelics Inc. (“FTP”), a global leader in the development and delivery of technology-enabled psychedelic therapies. Pursuant to the transaction, FTP was amalgamated with a wholly-owned subsidiary of the Corporation and all Class A shares and convertible securities of FTP were exchanged for post-consolidation shares on a one-for-one basis. The pre-consolidated shares of the Corporation were delisted from the NEX board of the TSX Venture Exchange effective September 30, 2020 and were listed on the Canadian Securities Exchange on October 6, 2020. Effective October 1, 2020, the Corporation was continued under the Canada Business Corporations Act and changed its year-end to March 31.
Exhibit
99.29
FORM 51-102F3
MATERIAL CHANGE REPORT
UNDER NATIONAL INSTRUMENT 51-102
|
Item 1.
|
Name and Address of Company
|
|
|
Field Trip Health Ltd. (formerly, Newton Energy Corporation) (the “Company”)
30 Duncan Street, Suite 401
Toronto, Ontario M5V 2C3
|
|
Item 2.
|
Date of Material Change
|
|
|
November 17, 2020
|
|
Item 3.
|
News Release
|
|
|
A news release dated November 17, 2020 was disseminated via Globenewswire. A copy of the news release has been filed on SEDAR and is available at www.sedar.com.
|
|
Item 4.
|
Summary of Material Change
|
|
|
The Company announced that it has entered into a lease and plans to open a Field Trip Health Center in Amsterdam, Netherlands. Located at Piet Heinkade 55 overlooking the IJhaven River, the 665 sqm (7158 sqft) Amsterdam location will be the first Field Trip Health center focused on therapeutic use of psychedelics using legal truffles.
|
|
Item 5.
|
Full Description of Material Change
|
|
|
The Field Trip Health Netherlands location will offer a variety of therapeutic programs using truffles containing psilocybin. Based on the desired experience, the center will offer several program options for individuals as well as couples. Field Trip expects to begin accepting people interested in participating in its truffle programs in December 2020, and the Netherlands location of Field Trip Health is expected to open in March 2021.
|
|
Item 6.
|
Reliance on subsection 7.1(2) of National Instrument 51-102
|
|
|
Not applicable.
|
|
Item 7.
|
Omitted Information
|
|
|
Not applicable.
|
|
Item 8.
|
Executive Officer
|
|
|
For further information, please contact:
Paula Amy Hewitt
Vice President, General Counsel and Corporate Secretary
Telephone: (416) 617-6277
|
|
Item 9.
|
Date of Report
|
|
|
November 18, 2020.
|
Exhibit
99.30
FIELD
TRIP HEALTH LTD.
Annual
Information Form
For the Year Ended March 31, 2020
Dated:
October 23, 2020
TABLE
OF CONTENTS
|
GENERAL
|
4
|
|
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
|
4
|
|
MARKET
AND INDUSTRY DATA
|
7
|
|
GLOSSARY
OF TERMS
|
8
|
|
CORPORATE
STRUCTURE
|
13
|
|
Name,
Address and Incorporation
|
13
|
|
Intercorporate
Relationships
|
14
|
|
GENERAL
DEVELOPMENT OF THE BUSINESS
|
14
|
|
History
of the Company
|
15
|
|
Events
Since Completion of Qualifying Transaction
|
17
|
|
DESCRIPTION
OF THE BUSINESS
|
18
|
|
Annual
Financial Information of Newton
|
25
|
|
Annual
Financial Information of Field Trip
|
26
|
|
The
Company’s Pro Forma Financial Information
|
26
|
|
Business
Objectives of the Company
|
26
|
|
Significant
Events or Milestones of the Company
|
27
|
|
Principal
Products and Services
|
28
|
|
Psychedelic
Therapy Market
|
28
|
|
Marketing
Plans and Strategies
|
29
|
|
Business
Model
|
30
|
|
Intellectual
Property
|
30
|
|
Cyclical
or Seasonal Impacts
|
31
|
|
Environmental
Protections
|
31
|
|
Number
of Employees
|
32
|
|
Reorganizations
|
32
|
|
RISK
FACTORS
|
32
|
|
DIVIDENDS
AND DISTRIBUTIONS
|
48
|
|
DESCRIPTION
OF CAPITAL STRUCTURE
|
48
|
|
MARKET
FOR SECURITIES
|
49
|
|
Trading
Price and Volume
|
49
|
|
Prior
Sales
|
50
|
|
ESCROWED
SECURITIES AND SECURITIES SUBJECT TO CONTRACTUAL RESTRICTION ON TRANSFER
|
51
|
|
DIRECTORS
AND EXECUTIVE OFFICERS
|
51
|
|
Name,
Occupation and Security Holding
|
51
|
|
Cease
Trade Orders, Bankruptcies, Penalties or Sanctions
|
57
|
|
Conflicts
of Interest
|
57
|
|
PROMOTERS
|
58
|
|
LEGAL
PROCEEDINGS AND REGULATORY ACTIONS
|
58
|
|
INTEREST
OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
|
58
|
|
AUDITOR,
TRANSFER AGENT AND REGISTRAR
|
58
|
|
MATERIAL
CONTRACTS
|
58
|
|
AUDIIT
COMMITTEE INFORMATION
|
59
|
|
INTERESTS
OF EXPERTS
|
59
|
|
ADDITIONAL
INFORMATION
|
59
|
GENERAL
In
this Annual Information Form (this “AIF”), unless otherwise noted or the context indicates otherwise, references
to “Field Trip”, the “Company”, “we”, “us” and “our”
refer to Field Trip Health Ltd. and its direct and indirect subsidiaries.
All
financial information in this AIF is prepared in Canadian dollars and using International Financial Reporting Standards as issued
by the International Accounting Standards Board. Unless otherwise noted herein, this AIF applies to the business activities and
operations of the Company for the year ended March 31, 2020, as updated to October 23, 2020, unless otherwise indicated.
All
dollar amounts in this AIF are expressed in Canadian dollars, except as otherwise indicated. References to US$ or “U.S.
dollars” are to United States dollars.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
The
information provided in this AIF, including information incorporated by reference, may contain “forward-looking statements”
about the Company. All statements, other than statements of historical fact, made by the Company that address activities, events
or developments that the Company expects or anticipates will or may occur in the future are forward-looking statements, including
statements preceded by, followed by or that include words such as “may”, “will”, “would”,
“could”, “should”, “believes”, “estimates”, “projects”, “potential”,
“expects”, “plans”, “intends”, “anticipates”, “targeted”, “continues”,
“forecasts”, “designed”, “goal”, or the negative of those words or other similar or comparable
words.
Forward-looking
statements may relate to future financial conditions, results of operations, plans, objectives, performance or business developments.
These statements speak only as at the date they are made and are based on information currently available and on management’s
current expectations and assumptions concerning the Company’s future events, financial conditions, results of operations,
plans, objectives, performance, business developments, objectives or milestones. Forward-looking statements in this AIF include
statements related to:
|
|
•
|
the
impact of the COVID-19 pandemic;
|
|
|
•
|
the
business objectives of the Company and its research and development activities;
|
|
|
•
|
the
acceptance in the medical community of ketamine and other psychedelic substances as effective
treatment for depression, PTSD, addiction and other mental health conditions;
|
|
|
•
|
the
funds available to the Company and the use of such funds;
|
|
|
•
|
the
ability of the Company to operate as a going concern if there are any changes in laws
or regulatory requirements;
|
|
|
•
|
the
healthcare industry in Canada and the United States;
|
|
|
•
|
patient
acceptance and referrals to the Company’s clinics;
|
|
|
•
|
the
approval of regulatory bodies of psychedelic substances other than ketamine, including
MDMA and psilocybin, for the treatment of various health conditions;
|
|
|
•
|
the
ability of the Company to complete and operate the Jamaica Facility;
|
|
|
•
|
the
ability of the Company to complete and operate its clinical expansion plan;
|
|
|
•
|
the
ability of the Company to achieve anticipated revenues from its operations;
|
|
|
•
|
the
ability of the Company to secure qualified employees, contractors and other required
personnel;
|
|
|
•
|
the
ability of the Company to complete and operate the New York Clinic, California Clinic,
Chicago Clinic and additional clinics;
|
|
|
•
|
the
ability of new clinics to offer technology-enabled, Ketamine-Enhanced Psychotherapy,
psychedelic-enhanced psychotherapy and psychedelic-integration psychotherapy services;
|
|
|
•
|
the
ability of the Company to develop proper protocols to incorporate the use of additional
psychedelic medicines as they are legalized and approved for use;
|
|
|
•
|
the
development, patentability and viability of FT Discovery molecule FT-104;
|
|
|
•
|
the
ability of FT Discovery to translate and utilize patient data to design new molecules
to improve future patient outcomes;
|
|
|
•
|
the
ability of the Company to prepare sufficient new drug application, as required, prior
to initiating any additional clinical trials for FT-104;
|
|
|
•
|
the
ability of the Company to enroll an increasing number of patients to meet eligibility
requirements in a scenario where FT-104 advances to clinical testing and through to more
complex clinical trials;
|
|
|
•
|
the
ability of the Company to obtain regulatory approvals prior to each clinical trial;
|
|
|
•
|
the
development and launch of the Trip App;
|
|
|
•
|
the
ability to develop and launch the Patient Portal;
|
|
|
•
|
the
ability of the Company to provide effective management services to physicians owning
physician-owned clinics;
|
|
|
•
|
the
ability of the Company to generate patient member growth;
|
|
|
•
|
compliance
with applicable laws and the ability to obtain any permits or other authorizations that
may be required in the future;
|
|
|
•
|
the
expected adoption of any incentive option plans or other equity incentive plans;
|
|
|
•
|
the
expected entry into any employment contracts;
|
|
|
•
|
controlled
substances laws; and
|
|
|
•
|
reliance
on third parties.
|
The
forward-looking statements contained herein are based on certain key management expectations and assumptions, including with respect
to expectations and assumptions concerning: (i) receipt of required shareholder and regulatory approvals in a timely manner or
at all; (ii) receipt and/or maintenance of required licenses and third party consents in a timely manner or at all; and (iii)
the success of the operations of the Company.
Forward-looking
statements are subject to a number of known and unknown risks, uncertainties and other factors that may cause actual results,
performance or achievements to be materially different from that which are expressed or implied by such forward-looking statements.
These risks and uncertainties include those related to: the ability of the Company to secure additional financing for current
and future operations and capital projects, as needed; the Company’s dependence on management and key personnel; general
economic, market and business conditions, early-stage industry growth rates, the risks associated with competition from other
companies directly or indirectly engaged in the Company’s industry; foreign currency exchange rate fluctuations and its
effects on the Company’s operations; the risks and costs associated with being a publicly traded company, the market demand
for the Common Shares, and the liquidity and dilution of the Common Shares; the impact of the COVID-19 pandemic; the Company’s
limited operating history; the speculative nature of an investment in the Common Shares; risks inherent in the nature of the health
clinic industry; non-compliance with laws; medical personnel operating out of Company’s clinics; unfavourable publicity
or consumer perception; patient acquisitions; development risks; substantial risks of regulatory or political change; the ability
to obtain necessary government permits and licences; ketamine as a pharmaceutical; non-referral of patients; negative cash flow
from operating activities; management of growth; dependence on management team; reliance on third parties; intellectual property;
competition; litigation; insurance coverage; the Company being a holding company; a significant number of Common Shares being
owned by a limited number of existing shareholders; the industry being difficult to forecast; market volatility; use of funds;
conflicts of interest; enforcement of legal rights; emerging market risks; agriculture risks; violations of laws and regulations
related to drug development; reliance on third parties for drug development; ability to produce commercial grade pharmaceuticals;
clinical testing; regulatory approval process; cyber-attacks; reliance upon insurers and governments; difficulty in enforcing
judgments and effecting service of process on directors and officers; any other risks described in this AIF and described from
time to time in documents filed by the Company with Canadian securities regulatory authorities; and other factors beyond the Company’s
control.
Such
risks and uncertainties are further described under the heading “Risk Factors” in this AIF. Although the Company
believes that the expectations and assumptions on which such forward-looking statements are based are reasonable, undue reliance
should not be placed on the forward-looking statements, because no assurance can be given that they will prove to be correct.
Consequently, all forward-looking statements made in this AIF and other documents of the Company are expressly qualified by such
cautionary statements and there can be no assurance that the anticipated results or developments will actually be realized or,
even if realized, that they will have the expected consequences to or effects on the Company. The forward-looking statements in
this AIF are made as at the date hereof, and the Company does not undertake any obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise, other than as required under applicable Canadian
securities laws.
Foreign
Currency Information
The
Company’s expenses are denominated in Canadian dollars and some of its operations are in the U.S. and Jamaica. The Company’s
current exposure to exchange rate fluctuations is minimal since, to date, its primary activities have not resulted in material
exposure to foreign currency risk.
MARKET
AND INDUSTRY DATA
This
AIF includes market and industry data that has been obtained from third-party sources, including industry publications. The Company
believes that the industry data is accurate and that its estimates and assumptions are reasonable, but there is no assurance as
to the accuracy or completeness of this data. Third-party sources generally state that the information contained therein has been
obtained from sources believed to be reliable, but there is no assurance as to the accuracy or completeness of included information.
Although the data is believed to be reliable, the Company has not independently verified any of the data from third-party sources
referred to in this AIF or ascertained the underlying economic assumptions relied upon by such sources. The Company does not intend,
and undertakes no obligation, to update or revise any such information or data, whether as a result of new information, future
events or otherwise, except as, and to the extent required by, applicable Canadian securities laws.
GLOSSARY
OF TERMS
In
addition to terms defined elsewhere in this AIF, the following terms, when used in this AIF, will have the following meanings
(unless otherwise indicated):
“ABCA”
means the Business Corporations Act (Alberta), as from time to time amended or re-enacted, and includes any regulations
made pursuant thereto.
“Agency
Agreement” has the meaning set out in General Development of the Business – History of the Company.
“Agents”
has the meaning set out in General Development of the Business – History of the Company.
“Agents’
Shares” has the meaning set out in General Development of the Business – History of the Company.
“Agents’
Warrants” has the meaning set out in General Development of the Business – History of the Company.
“Amalgamation
Agreement” means the amalgamation agreement dated August 21, 2020 between Newton, Field Trip and Subco.
“Associate”
has the meaning set out in Section 1(1) of the Securities Act (Ontario), RSO 1990, c. S.5.
“Board”
means the board of directors of Newton prior to the Transaction and the board of directors of the Company following the Transaction.
“CA
Medical Board” has the meaning set out in Description of the Business – Principal Products and Services
– Psychedelic Therapy Market.
“California
Clinic” has the meaning set out in General Development of the Business – History of the Company.
“CBCA”
means the Canada Business Corporations Act, as from time to time amended or re-enacted, and includes any regulations made
pursuant thereto.
“CDSA”
means the Controlled Drugs and Substances Act, as from time to time amended or re-enacted, and includes any regulations
made pursuant thereto.
“cGMP”
has the meaning set out in Risk Factors – Reliance on Third-Parties – Drug Development.
“Chicago
Clinic” has the meaning set out in General Development of the Business – History of the Company.
“CIPO”
means Canadian Intellectual Property Office.
“Clinics”
means collectively, the Toronto Clinic, the New York Clinic, the Chicago Clinic, and the California Clinic and, as the context
requires, any other clinics of the Company established in the future.
“CMO”
has the meaning set out in Risk Factors – Reliance on Third-Parties – Drug Development.
“Common
Shares” means common shares in the capital of the Company.
“Company”
means Field Trip Health Ltd., a company existing under the CBCA, being Newton after the completion of the Transaction, on a consolidated
basis which carries on the business and operations of Field Trip, following the Transaction.
“Company
Option” means the option to purchase Common Shares granted pursuant to the Company Option Plan.
“Company
Option Plan” means Field Trip’s stock option plan, as adopted by the Company.
“Company
Preferred Shares” means preferred shares in the capital of the Company.
“Company
Warrants” means warrants to purchase Common Shares.
“Continuance”
has the meaning set out in Corporate Structure – Name, Address and Incorporation.
“CPSO”
has the meaning set out in Risk Factors – Ketamine as a Pharmaceutical.
“CSE”
means the Canadian Securities Exchange.
“EPO”
means the European Patent Office.
“Escrow
Agreement” has the meaning set out in Escrowed Securities and Securities Subject to Contractual Restriction on Transfer.
“Escrowed
Securities” has the meaning set out in Escrowed Securities and Securities Subject to Contractual Restriction on Transfer.
“FDA”
has the meaning set out in Description of the Business.
“Field
Trip” means Field Trip Psychedelics Inc., prior to giving effect to the Transaction, a company existing under the CBCA
via articles of incorporation dated April 2, 2019 as amended on October 10, 2019, January 17, 2020 and January 28, 2020, and,
where applicable, each subsidiary thereof.
“Field
Trip Class B Shares” means Class B shares in the capital of Field Trip.
“Field
Trip Common Shares” means Class A shares in the capital of Field Trip.
“Field
Trip Options” means the issued and outstanding options of Field Trip exercisable for Field Trip Common Shares.
“Field
Trip USA” means Field Trip Health USA Inc., a company existing under the laws of Delaware, incorporated via articles
of incorporation on July 22, 2019 as amended on August 19, 2020, a wholly owned subsidiary of Field Trip prior to the Transaction
and an indirect wholly-owned subsidiary of the Company following the Transaction.
“FT
Discovery” has the meaning set out in General Development of the Business –History of the Company.
“FT
Private Placement” has the meaning set out in General Development of the Business –History of the Company.
“FT-104”
has the meaning set out in General Development of the Business –History of the Company.
“FTNP”
means Field Trip Natural Products Limited, a company existing under the laws of Jamaica, as incorporated on August 7, 2019, a
wholly-owned subsidiary of Field Trip prior to the Transaction and an indirect wholly-owned subsidiary of the Company following
the Transaction.
“GLP”
has the meaning set out in Risk Factors – Reliance on Third-Parties – Drug Development.
“HC”
means Health Canada.
“HHP”
means the Heroic Hearts Project, an international non-profit organization that connects military veterans struggling with mental
trauma to psychedelic therapies.
“HPFB”
has the meaning set out in Description of the Business – Research and Development – Canada.
“IAPP”
has the meaning set out in Directors and Executive Officers.
“IDFPR”
has the meaning set out in Description of the Business – Principal Products and Services – Psychedelic Therapy
Market.
“IND”
has the meaning set out in Risk Factors – Clinical Testing.
“Insider”
when used in relation to an Company, means: (a) a directors or senior officer of the Company, (b) a director or senior officer
of a company that is an Insider or subsidiary of the Company, (c) a person that beneficially owns or controls, directly or indirectly,
voting shares carrying more than 10% of the voting rights attached to all outstanding voting securities of the Company, and (d)
the Company itself if it holds any of its own securities.
“ISO”
has the meaning set out in General Development of the Business –History of the Company.
“Jamaica
Facility” has the meaning set out in General Development of the Business –History of the Company.
“JMH”
means the Jamaica Ministry of Health.
“Ketamine-Enhanced
Psychotherapy” or “KEP” means a clinic-based treatment that combines the administration of ketamine
with psychotherapy sessions. These sessions are conducted with medical and psychological support and may include therapy-enhancing
tools such as music.
“Listing
Date” means the date of listing of the Common Shares on the CSE.
“Listing
Statement” means the CSE Form 2A Listing Statement dated October 1, 2020, as filed on SEDAR October 5, 2020, which has
been filed as required in accordance with the policies of the CSE.
“Milestone
Shares” has the meaning set out in General Development of the Business – History of the Company.
“NDA”
has the meaning set out in Description of the Business – Research and Development – United States.
“NDS”
has the meaning set out in Description of the Business – Research and Development – Canada.
“mg/kg”
A milligram per kilogram of the body weight of the subject person.
“New
York Clinic” has the meaning set out in General Development of the Business – History of the Company.
“Newton”
means Newton Energy Corporation, as a company existing, prior to the Transaction, under the ABCA via articles of amalgamation
dated September 30, 2008, as amended on September 30, 2020 in connection with the Transaction.
“Newton
Common Shares” means common shares in the capital of Newton prior to the Transaction.
“NY
Medical Board” has the meaning set out in Description of the Business - Psychedelic Therapy Market.
“NYCRR”
has the meaning set out in Description of the Business - Psychedelic Therapy Market.
“NYEL”
has the meaning set out in Description of the Business - Psychedelic Therapy Market.
“NYOP”
has the meaning set out in Description of the Business - Psychedelic Therapy Market.
“OHIP”
has the meaning set out in Description of the Business.
“OHPIP”
has the meaning set out in Risk Factors – Ketamine as a Pharmaceutical.
“Patient
Portal” has the meaning set out in Description of the Business – Principal Products and Services.
“PC
Clinics” has the meaning set out in General Development of the Business – History of the Company.
“PC
Committee” has the meaning set out in General Development of the Business – History of the Company.
“PCT”
has the meaning set out in Description of the Business - Research and Development - Patent Cooperation Treaty.
“person”
means a company, a partnership, a trust or individual.
“Psilocybin
Research” has the meaning set out in General Development of the Business – History of the Company.
“PTSD”
means post-traumatic stress disorder, as defined in Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition.
“Research
Agreement” has the meaning set out in General Development of the Business – History of the Company.
“Reverse
Takeover” has the meaning set out in National Instrument 51-102 – Continuous Disclosure Obligations of the Canadian
Securities Administrators.
“Subco”
means Newton Energy Subco Limited, a company existing under the CBCA, as incorporated on July 24, 2020 solely for the purpose
of completing the Transaction, and is a wholly-owned subsidiary of Newton prior to the Transaction.
“Toronto
Clinic” has the meaning set out in General Development of the Business – History of the Company.
“Transaction”
means the three-cornered amalgamation among Newton, Field Trip and Subco pursuant to the terms of the Amalgamation Agreement,
which constituted a Reverse Takeover of Newton by Field Trip.
“Trip
App” has the meaning set out in General Development of the Business – History of the Company.
“TPD”
has the meaning set out in Description of the Business – Research and Development - Canada.
“TSXV”
means the TSX Venture Exchange Inc.
“USPTO”
means the United States Patent and Trademark Office.
“UWI”
has the meaning set out in General Development of the Business – History of the Company.
“WIPO”
means the World Intellectual Property Organization.
CORPORATE
STRUCTURE
Name,
Address and Incorporation
Field
Trip Health Ltd. (the “Company”) was formed on September 30, 2008, pursuant to an amalgamation under the ABCA
and adopted the name “Newton Energy Corporation”.
On
September 30, 2020, in connection with the Transaction, Newton: (i) consolidated its outstanding Newton Common Shares on an eight
(8) old for one (1) new basis; and (ii) filed an articles of amendment under the ABCA to change its name from Newton to “Field
Trip Health Ltd.”
Upon
closing of the Transaction, on October 1, 2020: (i) the Company (then Newton) and Field Trip Psychedelics Inc. (“Field
Trip”) completed a series of transactions resulting in a reorganization of Field Trip and the Company and pursuant to
which the Company became the direct parent and sole shareholder of Field Trip; (ii) the Company changed its year end from December
31 to March 31; and (iii) the Company was continued under the CBCA by Certificate and Articles of Continuance (the “Continuance”).
In
connection with the Continuance, the Company adopted new by-laws which included an advance notice provision, which stipulates
the requirement to provide advance notice to the Company in circumstances where nominations of persons for election to the Board
are made by the Company shareholders other than pursuant to: (i) a requisition of a meeting made pursuant to the provisions of
the CBCA; or (ii) a shareholder proposal made pursuant to the provisions of the CBCA. Company shareholders approved and ratified
the advance notice provision on September 23, 2020.
The
Transaction constituted a Reverse Takeover of the Company by Field Trip under applicable securities laws.
The
Newton Common Shares were listed on the NEX board of the TSXV until September 30, 2020, when they were delisted from the TSXV
in connection with the completion of the Transaction. The Company’s Common Shares commenced trading on the CSE on October
6, 2020, under the symbol “FTRP”.
The
Company’s registered office and head office is located at 30 Duncan Street, Suite 401, Toronto, ON M5V 2C3.
Intercorporate
Relationships
The
following table describes the subsidiaries of the Company, their place of incorporation, continuance or formation, and the percentage
of the outstanding voting securities of each subsidiary that are beneficially owned, controlled or directed by the Company:
GENERAL
DEVELOPMENT OF THE BUSINESS
Prior
to the closing of the Transaction, and in the three most recently completed financial years, Newton had no active business, did
not generate revenue from operations and had no source of revenue.
In
connection with the completion of the Transaction on October 1, 2020:
|
|
•
|
the
Company acquired all of the shares of Field Trip from the holders thereof in exchange
for the issuance of Common Shares on a one-for-one basis, and all existing convertible
securities of FTP became convertible or exercisable into Common Shares rather than into
shares of Field Trip;
|
|
|
•
|
the
existing directors and officers of the Company resigned and were replaced with nominees
of Field Trip;
|
|
|
•
|
the
financial year end of the Company became March 31, being the financial year end of Field
Trip;
|
|
|
•
|
MNP
LLP, being the auditor of Field Trip, was appointed as the auditor of the Company; and
|
|
|
•
|
Field
Trip became a wholly-owned subsidiary of the Company and the business of Field Trip became
the business of the Company.
|
Additional
details regarding the Transaction and the business of the Company can be found in the Company’s Listing Statement as filed
on SEDAR on October 5, 2020.
History
of the Company
On
August 20, 2019, Field Trip entered into a letter of intent with the University of West Indies at Mona, Jamaica (“UWI”),
to establish and operate a clinical laboratory and research facility (the “Jamaica Facility”) within the UWI
premises in order to conduct research and cultivation of psilocybin mushrooms, botanicals and other related fungi (the “Psilocybin
Research”). The Psilocybin Research is not in contravention of local laws in Jamaica and the Company has received a
legal opinion from local counsel confirming the same with respect to the Psilocybin Research. In addition, the Minister of Health
& Wellness of Jamaica has delivered a letter to the Company stating his support for the Company’s operations in Jamaica.
We reiterate that the Company’s activity in relation to the research and cultivation of psilocybin mushrooms, botanicals
and other related fungi is limited to the jurisdiction of Jamaica and the Company does not deal with psychedelic substances except
within laboratory and clinical trial settings conducted within approved regulatory frameworks in order to identify and develop
treatments for medical conditions and does not have any direct or indirect involvement with illegal selling, production or distribution
of any substances in jurisdictions in which it operates. Psilocybin is currently a Schedule III drug under the CDSA and it is
a criminal offence to possess substances under the CDSA without a prescription. Health Canada has not approved psilocybin as a
drug for any indication.
On
October 3, 2019, Field Trip filed a provisional patent with the USPTO (Appl 62,909,931; October 3, 2019) relating to certain hallucinogenic
compositions. No further scientific data has been generated to support the invention. Field Trip has decided that the examples
and content are likely insufficient to gain patent approval, but the nature of the invention warrants further investigation. Field
Trip has decided to allow the current filing to lapse and may choose to refile at some time in the future when additional information
and data support is available.
On
November 28, 2019, Field Trip entered into a lease agreement for its first Ketamine-Enhanced Psychotherapy, psychedelic-enhanced
psychotherapy, and psychedelic-integration psychotherapy clinic in Toronto, Ontario (the “Toronto Clinic”).
Construction of the Toronto Clinic began in December 2019. On March 4, 2020, Field Trip opened the Toronto Clinic and began conducting
initial consultations with patients who were interested in ketamine as a treatment for depression symptoms.
On
February 14, 2020 Field Trip entered into a lease agreement for its Ketamine-Enhanced Psychotherapy, psychedelic-enhanced psychotherapy,
and psychedelic-integration psychotherapy clinic in New York, New York (the “New York Clinic”). Construction
of the New York Clinic began in February 2020. In August 2020, Field Trip opened the New York Clinic and began conducting initial
consultations with patients who were interested in ketamine as a treatment for depression symptoms.
On
April 6, 2020, Field Trip entered into the definitive research agreement with UWI (the “Research Agreement”),
whereby Field Trip agreed to lease property from UWI on which to construct the Jamaica Facility, where it will carry out the Psilocybin
Research, and engaged UWI to assist Field Trip in the Psilocybin Research. Under the Research Agreement, Field Trip agreed to
contribute up to US$1,000,000 for initial capital for the Jamaica Facility and Psilocybin Research and a total of US$100,000 to
fund student development initiatives at UWI over a 36-month period. UWI has agreed to provide personnel selected by Field Trip
to assist it in the Psilocybin Research and Field Trip shall be responsible for the costs of labour, laboratory supplies, technical
assistance and other charges directly related to the Psilocybin Research provided by UWI, plus 15%. All equipment, machinery,
data and other property purchased by FTNP, and all intellectual property and discoveries developed through the Psilocybin Research,
remain the sole and exclusive property of FTNP. In the event that Field Trip develops and commercializes the intellectual property
developed at the Jamaica Facility, UWI shall receive a royalty of 2% of the net sales from any products developed utilizing such
intellectual property. In connection with entering into the Research Agreement, Field Trip launched a new research and drug development
business segment, entitled Field Trip Discovery (“FT Discovery”). FT Discovery is an umbrella term used by
the Company to divide its personnel between those involved with the clinical operations of the Company’s business and those
involved in the research and development operations of the Company’s business. The term “Field Trip Discovery”
will also be used as a marketing and branding tool to support the Company’s research and development operations and the
Company has applied for a trademark in Canada for the term “Field Trip Discovery”.
FTNP’s
current research site at UWI is a dedicated area within UWI’s Natural Products Institute. Initial work has been carried
out at this temporary location, focused primarily on the creation of a genetic library and cultivation of various psychoactive
species of fungi for research purposes. This space has also been used to train local personnel who are anticipated to become full
time employees at Field Trip upon completion of their doctoral degrees by the end of 2020.
It
is anticipated that the Jamaica Facility, a larger, 2,072 square foot standalone research laboratory, which is nearing completion,
will open in October 2020 on the UWI campus with renovation costs amounting to a total of approximately US$300,000, most of which
has already been advanced by the Company. The Jamaica Facility will be dedicated to the study of psychoactive fungi., specifically
the cultivation, extraction and analysis of the psychoactive molecules contained within the mycelia and fruiting bodies of these
complex organisms with a view to identifying and quantifying psilocybin and other tryptamine analogues that may play a role in
the psychedelic experience and serve as promising candidates for drug development. It is anticipated that the research at the
Jamaica Facility will be conducted by on-site employees with the support of the Company.
FT
Discovery is also developing a molecule called FT-104 (“FT-104”). Field Trip believes that FT-104 is unique
and patentable in Canada and the United States and has received advice from counsel in Canada confirming such belief. Field Trip
filed a provisional patent with the USPTO (Appl 63,045,901; June 30, 2020) with claims that include FT-104 structures and uses.
Experimental evidence has been achieved and continues to be a focus of efforts in order to further support the concepts within
the invention. The Company intends to file a utility patent with the USPTO and under the PCT prior to the lapse of this provisional
patent on June 12, 2021. FT-104 is in the pre-clinical development stage, optimization of a GLP synthesis of FT-104 is underway
with completion expected before Q4 2020. This will support ongoing pre-clinical efforts which are in turn expected to be completed
by Q3 2021. No assurances can be given that Field Trip will be able to meet this timeline or that FT-104 will be a viable molecule.
Field
Trip has designed a mobile software application that will be available in for both iOS and Android devices (the “Trip
App”). The Trip App is designed to provide users with a framework and tools for self-directed consciousness-expanding
activities. The Trip App features mood tracking, personalized music, trip record keeping, guided journaling, voice recording,
and mindfulness content. The Trip App is functional and operational and the Company is currently in the process of obtaining feedback
from a select set of users before a larger public launch. The Company anticipates making the Trip App available to the general
public by the end of October.
On
June 2, 2020, Field Trip entered into a share purchase agreement with Darwin, Inc. and FTNP (the “Jamaica SPA”),
whereby Field Trip agreed to acquire the remaining 22.22% interest in FTNP that it did not already own in exchange for the issuance
of 1,200,000 Common Shares, issuable on the achievement by FTNP of certain milestones (the “Milestone Shares”).
Upon execution of the Jamaica SPA, Field Trip acquired 100% ownership of FTNP. The Milestone Shares are issuable as follows: (i)
600,000 Milestone Shares upon FTNP commencing research under the Research Agreement at the Jamaica Facility, which occurred on
September 21, 2020; (ii) 150,000 Milestone Shares on June 3, 2021; and (iii) 450,000 Milestone Shares issuable on a prorated quarterly
basis over 36 months, commencing on the first calendar quarter following June 3, 2021; provided in each case that the lease for
the Jamaica Facility and the Research Agreement have not been terminated.
On
June 5, 2020 Field Trip entered into a lease agreement for its Ketamine-Enhanced Psychotherapy, psychedelic-enhanced psychotherapy,
and psychedelic-integration psychotherapy clinic in Santa Monica, California (the “California Clinic”). Construction
of the California Clinic began in June 2020. In September 2020, Field Trip opened the California Clinic and began conducting initial
consultations with patients who were interested in ketamine as a treatment for depression symptoms.
On
July 21, 2020 Field Trip entered into lease agreement for an additional clinic to be developed in Chicago, Illinois (the “Chicago
Clinic”). Field Trip expects that the Chicago Clinic will be operational in November 2020 and will offer Ketamine-Enhanced
Psychotherapy, psychedelic-enhanced psychotherapy, and psychedelic-integration psychotherapy. The estimated cost of the renovations
and furnishings of the Chicago Clinic is US$200,000.
The
table below sets forth material terms of the lease agreements for each Clinic.
|
Location
|
|
Size
(Sq Foot)
|
|
|
Gross Monthly Rent(1)
|
|
|
Expiry
|
|
Status
|
|
Toronto, Ontario
|
|
|
8,231
|
(1)
|
|
|
|
|
|
$
|
20,577
|
|
|
Oct 2023
|
|
Operational
|
|
New York, NY
|
|
|
4,500
|
|
|
|
US$
|
|
|
|
26,000
|
|
|
July 2022
|
|
Operational
|
|
Santa Monica, CA
|
|
|
5,200
|
|
|
|
US$
|
|
|
|
20,000
|
|
|
June 2030
|
|
Operational
|
|
Chicago, IL
|
|
|
4,145
|
|
|
|
US$
|
|
|
|
9,000
|
(2)
|
|
June 2031
|
|
Operational
|
|
Notes:
|
|
|
|
|
|
(1)
Includes approximately 4,100 square feet for Field Trip’s headquarters.
(2)
Gross monthly rent will be $15,500 from October 1, 2021.
|
On
August 14, 2020, Field Trip completed a brokered private placement offering of 5,516,724 Field Trip Common Shares at a price per
Field Trip Common Share of $2.00 for aggregate gross proceeds of $11,033,448 (the “FT Private Placement”).
The FT Private Placement was completed pursuant to an agency agreement (the “Agency Agreement”) among Field
Trip, and the agents in the FT Private Placement (the “Agents”). The net proceeds of the FT Private Placement
will be used for funding of the FT Discovery drug discovery & development program, to develop the Company’s clinics
& marketing, to fund research & development at the Jamaica Facility, for technology & innovation, and for general
working capital purposes. In connection with the closing of the FT Private Placement the compensation payable to the Agents included
the issuance of: (i) an aggregate of 299,753 warrants (the “Agents’ Warrants”), each of which is exercisable
into one Field Trip Common Share at an exercise price of $2.00 per Field Trip Common Share until August 14, 2022; and (ii) an
aggregate of 55,167 Field Trip Common Shares (the “Agents’ Shares”) at a deemed price of $2.00 per Field
Trip Common Share.
On
September 21, 2020, Field Trip completed a follow on financing on the same terms as the FT Private Placement (the “September
Offering”). In connection with the September Offering, Field Trip issued an aggregate of 816,932 Field Trip Common Shares
a price per Field Trip Common Share of $2.00 for aggregate gross proceeds of $1,633,864.
Events
Since Completion of Qualifying Transaction
In
conjunction with the closing of the Transaction, the Company amended its stock option plan on October 6, 2020. The maximum number
of common shares reserved for issuance under the Company Option Plan pursuant to options not intended as incentive stock options
(“ISOs”) shall be 15% of the issued and outstanding Common Shares from time to time, on a non-diluted basis.
The maximum number of Common Shares reserved for issuance under the Company Option Plan pursuant to ISOs is 7,500,000. For the
avoidance of doubt, long-term incentive options are excluded from the Company Option Plan maximum. Common Shares in respect of
Company Options that have been exercised, cancelled, surrendered, or terminated or that expire without being exercised shall again
be available for issuance under the Company Option Plan.
On
October 8, 2020, the Company added Andrew Weil, M.D., to its medical advisory board. Dr. Weil will provide the Company with medical
advice and expertise on healing-oriented approaches to healthcare, as well as guidance on extending the influence and reach of
psychedelic therapies.
On
October 14, 2020, the Company and the Heroic Hearts Project (“HHP”), an international non-profit organization
that connects military veterans struggling with mental trauma to psychedelic therapies, entered into a strategic relationship
to increase access to, and awareness of, psychedelic therapies for veteran’s struggling from mental health disorders such
as PTSD. Under the terms of the relationship, HHP will be conducting active outreach and education programs for military veterans
about the therapeutic potential of ketamine-assisted psychotherapy.
On
October 15, 2020, the Company established a Professional Corporation (PC) Advisory Committee (the “PC Committee”).
The primary mandate of the PC Committee is to (a) provide strategic advice with respect to the structure of clinics as professional
corporations (“PC Clinics”) and the protocols for operations of the PC Clinics established by the Company,
(b) initiate, monitor and report on implementation of the Company’s policies within the PC Clinics, and (c) periodic review
and advice concerning performance of their respective PC Clinics. The PC Committee must be comprised of a minimum of three physicians,
psychologists or psychotherapists of who own a professional corporation or other corporate vehicle which operates a Field Trip
branded clinic. The PC Committee members include Ryan Yermus, Dr. Ben Medrano and Dr. Randy Scharlach.
On
October 22, 2020, Field Trip opened the Chicago Clinic and will begin conducting initial consultations with patients who were
interested in ketamine as a treatment for depression symptoms.
DESCRIPTION
OF THE BUSINESS
The
Company’s business is premised on a growing body of research that psychedelics can be a new way to treat a myriad of mental
health conditions, including depression and addiction. Through the Company’s existing Clinics and its contemplated expansion
of physical clinic locations in other jurisdictions, the Company seeks to create a North American brand of trusted clinics for
Ketamine-Enhanced Psychotherapy, psychedelic-enhanced psychotherapy and psychedelic-integration psychotherapy, enabling patients
to more effectively and affordably address depression, anxiety, addiction and other conditions. The Company also intends to seek
merger and acquisition opportunities where possible, in order to accelerate its business expansion plans and drive value.
Details
of the Clinics are as follows:
|
Location
|
|
Size
(Sq Foot)
|
|
|
Number of Treatment Rooms
|
|
|
Monthly Patient Capacity(1)
|
|
|
Toronto, Ontario
|
|
|
4,000
|
|
|
|
6
|
|
|
|
60
|
|
|
New York, NY
|
|
|
4,500
|
|
|
|
7
|
|
|
|
75
|
|
|
Santa Monica, CA
|
|
|
5,200
|
|
|
|
6
|
|
|
|
60
|
|
|
Chicago, IL
|
|
|
4,145
|
|
|
|
6
|
|
|
|
60
|
|
Notes:
|
|
(1)
|
A
Field Trip treatment center with 6 treatment rooms has a current monthly capacity of
approximately 60 new patients completing an entire standard KEP protocol each month,
or approximately 1,300 treatment hours.
|
Depression
is the leading cause of disability worldwide.1 According to Statistics Canada’s 2012 Canadian Community Health
Survey on Mental Health, 4.7% of the Canadian population aged 15 years and over reported experiencing major depression over
the previous 12 months. In the United States, recent estimates show 16 million adults had an episode of major depression in the
course of a year.2
1
World Health Organization, Depression – Fact Sheet, January 30, 2020 (available at https://www.who.int/news-room/fact-sheets/detail/depression).
2
National Institute of Mental Health, Mental Health Information > Statistics >Major Depression Last Updated: February 2019
(available at https://www.nimh.nih.gov/health/statistics/major-depression.shtml).
Ketamine
is a dissociative psychedelic that has unique effects on the body and mind. It has a high safety profile and has been legally
used as an anesthetic since the 1970s. A series of studies in the early 2000s showed ketamine’s effectiveness as an antidepressant,
and it is now used in Canada as a doctor-prescribed, off-label treatment for mental health conditions. While the use of sublingual
lozenges of ketamine to treat depression and other mental health concerns is considered “off-label”, the use of ketamine
is legal under medical supervision. In March 2020, the United States Food and Drug Administration (the “FDA”)
approved a ketamine-based treatment for depression.3 Ketamine-based treatment is a new approach for treating depression,
a condition the World Health Organization has labeled the leading cause of disability worldwide4, and represents the
first approval for a genuinely new type of psychiatric drug for any condition to be brought to market in more than 30 years.5
In
2000, researchers found that ketamine had strong, fast-acting and lasting effects on depression. In a randomized, placebo-controlled,
crossover design study, patients with depression received 0.5 mg/kg of ketamine or saline on the first day of testing. Treatments
were switched one week later. Researchers found that the antidepressant effects of ketamine began within 4 hours, peaked at 72
hours, and lasted for 1 to 2 weeks thereafter. In a 2006 study, this finding was replicated in an independent group of 18 patients
with major depressive disorder who were resistant to other treatments. Compared with participants who received a placebo, those
who received ketamine showed significant improvement in symptoms within 110 minutes, with 35% maintaining significant response
for at least 1 week.6 In subsequent years, results from a number of placebo-controlled studies revealed that ketamine
is largely effective in treatment of bipolar disorder and treatment-resistant major depressive disorder, and produces antisuicidal
and anti-anhedonic effects in mood disorders.7 See also, Research and Development below.
Ketamine-Enhanced
Psychotherapy is conducted at lower doses of ketamine than what is used in anaesthesia and in a safe setting alongside psychotherapy.
The
Company, currently operates the Toronto Clinic, the New York Clinic and the California Clinic, and is in the process of renovating
the Chicago Clinic. The Chicago Clinic is expected to be operational in November 2020. The estimated costs for the renovations
and furnishings of the Chicago Clinic are US$200,000, of which $nil has already been advanced.
The
Company is also exploring opportunities to establish and develop additional clinics in Canada and the United States and establish
clinics in Europe. It is intended that all clinics, where permissible, will offer technology-enabled, Ketamine-Enhanced Psychotherapy,
psychedelic-enhanced psychotherapy and psychedelic-integration psychotherapy utilizing the Company’s custom protocol while
under the supervision of medical professionals. The Company believes that some corporations may reduce their space requirements
as a consequence of permitting employees to work-from-home and, as such, the Company may be able to lease and build clinical space
at favourable rates. Further, as an alternative to building new clinics, the Company may acquire or enter into service relationships
with existing clinics that deliver mental health services. The establishment of additional clinics or the establishment of service
relationships will be funded by either available funds or debt or equity financings, based on the capital needs and requirements
of the Company at the time of the acquisition. Details regarding the current expansion plans of the Company are discussed in Significant
Events or Milestones below.
3
FDA News Release: FDA approves new nasal spray medication for treatment-resistant depression; available only at a certified doctor’s
office or clinic, March 5, 2019 (available at https://www.fda.gov/news-events/press-announcements/fda-approves-new-nasal-spray-medication-treatment-resistant-depression-available-only-certified).
4
Depression – Fact Sheet, supra note 1.
5
Makin, Simon. Behind the Buzz: How Ketamine Changes the Depressed Patient’s Brain. Scientific American, April 12, 2019,
(available at www.scientificamerican.com/article/behind-the-buzz-how-ketamine-changes-the-depressed-patients-brain/.
6
Zarate CA Jr, Singh JB, Carlson PJ, et al. A randomized trial of an N-methyl-D-aspartate antagonist in treatment-resistant major depression.
Arch Gen Psychiatry.2006;63(8):856-64
7
Ketamine and Future Depression Treatments. Psychiatry Advisor, October 16, 2019, (available at www.psychiatryadvisor.com/home/depression-advisor/ketamine-and-future-depression-treatments/.
The
Company’s protocol involves a six-step process. In the Toronto Clinic, to qualify for Ketamine-Enhanced Psychotherapy sessions,
a patient must first receive a written referral for Ketamine-Enhanced Psychotherapy from a licensed medical doctor in Canada.
Upon receiving a referral, medical professionals at the Toronto Clinic review the patient’s medical history to ensure that
there are no immediate contraindications. The patient is then scheduled for a consultation with a psychiatrist at the Toronto
Clinic to assess whether Ketamine-Enhanced Psychotherapy is a suitable treatment option. Following approval by a psychiatrist,
the Company will then provide a second screening to ensure the patient’s physical health is suitable for Ketamine-Enhanced
Psychotherapy, and a treatment plan is developed. Upon approval of the treatment plan, the patient will meet with a psychotherapist
to prepare for the treatment ahead. Patients are then scheduled to participate in their first dosing session. Immediately following
the dosing session, a licensed psychotherapist operating out of the Toronto Clinic will provide exploratory therapy to help the
patient reintegrate into their bodies and understand their experience. Dosing sessions are typically scheduled two to three days
apart. An integration therapy session is provided to each patient after the second ketamine session. During this session, the
psychotherapist will help the patient integrate the experiences using different clinical psychology techniques to help drive habit
change and outlook/mindset improvements. A course of treatment is typically six dosing sessions with three integration sessions.
Field Trip is also in the process of developing the Patient Portal for ongoing support and education to help sustain the effects
of Ketamine-Enhanced Psychotherapy.
The
Company notes that operations at the Toronto Clinic have been subject to reduced capacity due to COVID-19 precautions. It is the
view of management that lifting of COVID-19 restrictions in the jurisdictions where the Clinics are located and the public financing
will help accelerate the growth of the North American clinic expansion strategy. See Significant Events or Milestones below,
for additional details on the Company’s expansion strategy.
Currently,
the there are four (4) psychiatrists working at the Toronto Clinic on a part-time basis. The psychiatrists work on contract and
receive remuneration via their billings for patient visits from the Ontario Health Insurance Plan (“OHIP”).
Field Trip receives 100% of the private pay services offered at the Toronto Clinic, which include exploratory therapy, Ketamine-Enhanced
Psychotherapy and integration therapy. It is anticipated that the practitioners working at the Clinics in the United States and
Europe (when and if such clinics are established) will receive remuneration via salary. The out-of-pocket patient spend varies
in the United States depending on insurance and subsidy programs available to them. Qualifications of the lead physicians at the
Clinics are as follows:
Dr.
Michael Verbora, MD
Dr.
Michael Verbora earned an MBA from the Odette School of Business in 2009 and an M.D. from the Schulich School of Medicine at Western
University in 2013, before entering family practice residency at the University of Toronto. He has worked as a leading physician
in several clinics and is passionate about furthering knowledge on inner healing intelligence.
Dr.
Ben Medrano, MD
Dr.
Ben Medrano is a board-certified psychiatrist who completed his undergraduate education at Naropa University and the University
of Colorado at Denver, graduating in 2010. He attended medical school at the University of Colorado School of Medicine graduating
in 2014, followed by a residency at Mount Sinai Beth Israel in New York City, completed in 2018. His clinical practice is influenced
by a lifelong interest in eastern psychology and complementary alternative medicine. These interests are further enhanced by his
current fellowship at the Integrative Psychiatry Institute sponsored by the University of Colorado School of Medicine. Dr. Medrano
is currently a clinical professor and adjunct professor at New York Medical College (since July, 2018) and Mount Sinai Beth Israel
(since December, 2019), respectively and also practices at the Metropolitan Hospital Center, New York, New York.
Dr.
Randall Scharlach, MD
Dr.
Randall Scharlach earned his medical degree from the University of California, Los Angeles and completed his residency at Yale
University. Dr. Scharlach has been practicing for over 24 years and is currently a radiation oncologist in California and a recognized
expert in cancer related pain management. Dr Scharlach is one of the few medical doctors in the United States that has completed
academic certification in clinical use and research using Schedule 1 psychedelic medicines. Dr Scharlach is certified by the Center
for Psychedelic Therapy and Research at the California Institute of Integral Studies, and he is currently an advisor and a board
member of these two Los Angeles-based neuroscience institutes.
The
only psychedelic substance presently used at the Toronto Clinic is ketamine. When a patient receives a prescription for ketamine,
the Company works with the patient to source a compounding pharmacy that can prepare the prescription in lozenge form. The medication
is then used under the supervision of the Toronto Clinic’s medical staff. At Clinics in the United States, where medically
appropriate, ketamine is prescribed to patients and administered via intramuscular injection under the supervision of medical
staff. The ketamine is sourced from a licensed medical supplier.
At
this time, and until regulations permit otherwise, ketamine is the only psychedelic substance that will be prescribed at the Clinics.
Efforts
to legalize psychedelic substances for medical use are underway in both Canada and the United States. Clinical trials are underway
evaluating psilocybin, MDMA and other psychedelic substances for the treatment of a myriad of conditions such as obsessive-compulsive
disorder, post-traumatic stress disorder, opioid addiction, alcoholism, eating disorders, depression, anxiety and obesity. Once
completed, it is anticipated that federal regulatory bodies such as Health Canada and the FDA in the United States will be asked
to approve these substances. Furthermore, Canada’s House of Commons is set to hear the first official call to decriminalize
psychedelics in fall of 2020 and in August 2020, Canada’s Minister of Health granted four individuals the right to use psilocybin
therapy to treat end-of-life distress pursuant to a compassionate ruling.8 Additionally, grassroots efforts in the
US are underway seeking to either decriminalize the possession of psychedelic molecules, or to create legal, regulated market
for psychedelics and related therapies. The cities of Denver, Colorado, Oakland, California and Santa Cruz, California have decriminalized
possession of psilocybin, and many other cities are currently considering similar measures, including the District of Columbia,
which will include a decriminalization measure in the 2020 US election. Residents of the State of Oregon will also be voting on
a ballot initiative entitled Initiative 34: The Oregon Psilocybin Services Initiative, which would create a program and screening
process for providing psilocybin to individuals 21 years of age or older. Consumption would be supervised by licensed ‘facilitators,’
and the program would exist under the purview of the Oregon Health Authority, as well as an advisory board of 14-16 individuals
appointed by the Governor. The measure requires a two-year development period for the Oregon Health Authority to lay out regulations
for the program.
8
See https://mcmillan.ca/mobile/Exemption-for-Four-Patients-Opens-Door-Further-for-Therapeutic-Use-of-Psilocybin
As
additional psychedelic medicines are legalized or approved for use in Canada and the United States, the Company will evaluate
them for use in the Clinics and, where appropriate, develop protocols to incorporate them into the Clinics’ therapeutic
offering. Furthermore, research into novel molecules like FT-104 and into the cultivation, extraction, and composition of psychedelic
fungi at the Jamaica Facility may result in novel drugs or analogues that, if legalized or approved, would be used in the Company’s
clinics in jurisdictions where such approval is obtained or otherwise permitted.
Regulatory
Oversight
Each
province and territory of Canada and each state in the United States mandates the requirements for the Clinics and the conduct
of medical professionals therein.
In
Canada, oversight of healthcare is divided between the federal and provincial governments. The federal government is responsible
for regulating, among other things, the approval, import, sale, and marketing of drugs such as ketamine and other psychedelic
substances, whether natural or novel. The provincial/territorial level of government has authority over the delivery of health
care services, including regulating health facilities, administering health insurance plans such as OHIP, distributing prescription
drugs within the province, and regulating health professionals such as doctors, psychologists, psychotherapists and nurse practitioners.
Regulation is generally overseen by various colleges formed for that purpose, such as the College of Physicians and Surgeons of
Ontario.
In
the United States, the laws applicable to the Clinic and the conduct of medical professionals therein are also at the State level
and vary by jurisdiction. Additionally, in the United States, the Clinics or doctors, as applicable, are also required to have
a Drug Enforcement Agency license to obtain ketamine.
Please
see Description of the Business – Principal Products and Services – Psychedelic Therapy Market for additional
information concerning the regulation applicable to the Psychedelic Therapy Market.
Research
and Development
FT
Discovery is focused on research and development of psychedelic-inspired regulated medicines. FT Discovery has two independent
activities: (i) developing custom synthetic molecules targeting serotonin 5HT2A receptors, which are, in part, implicated in mood
disorders; and (ii) conducting research and development related to the cultivation, as well as the identification and isolation
of new substances contained in psilocybin mushrooms and other related fungi, in collaboration with UWI and at the Jamaica Facility
on the UWI campus. Further, FT Discovery anticipates that insights relating to the administration of psychedelics and psychedelic-assisted
psychotherapy within the Clinics can be integrated in the development of novel drug products innovated within FT Discovery.
Psilocybin,
along with other synthetic and natural serotoninergic psychedelics, act to stimulate 5HT2A receptors in the brain resulting in
a profound alteration of normal brain signaling and processing, creating what is generally referred to as a “psychedelic
experience” or an “altered state of consciousness.” Under psychedelics, the brain “escapes” from
its usual tightly constrained and predictable patterns of operation, with a global increase in connectivity of brain regions and
brain networks. Often, this can allow patients new introspective insights about their past behaviour, memories, actions, feelings
and beliefs. Psychedelic therapy combined with psychotherapy can lead to improvements in conditions relating to depression, PTSD
and addiction, which are often a result of dysfunctional brain processing.9
9
Nutt D, Erritzoe D, Carhart-Harris R. Psychedelic Psychiatry’s Brave New World. Cell. 2020;181:24-8 (available at https://www.cell.com/cell/pdf/S0092-8674(20)30282-8.pdf)
FT
Discovery is led by Dr. Nathan Bryson, the Company’s Chief Science Officer. Dr. Bryson, who holds a PhD in Chemistry and
a Postdoctoral Associate Degree from the Massachusetts Institute of Technology, has three decades of hands-on research and development
experience in the biotechnology and pharmaceutical industries, where he has overseen innovation, clinical development, regulatory,
quality, global supply chain and medical affairs.
FT-104
is the first molecule in development by FT Discovery. A provisional patent relating to FT-104 composition and use has been filed
with the USPTO (63,045,901; June 30, 2020). The Company has received favourable legal advice with respect to the patentability
and freedom to operate, specifically in Canada and the United States, regarding the composition of FT-104 and its use. The Company
believes that FT-104 is patentable and the manufacture, sale or use of FT-104 in Canada and the United States would not infringe
any existing patents . Routes to the synthesis of FT-104 have been tested and partially optimized. Initial quantities of FT-104
have been achieved and used in preliminary pre-clinical assessment. Optimization of a GLP synthesis of FT-104 is underway with
completion expected before Q4 2020. This will support ongoing pre-clinical efforts which are in turn expected to be completed
by Q3 2021.
In
addition to the clinical work with FT-104 and other drug development efforts, in partnership with UWI, FT Discovery will be conducting
research, development and cultivation of psilocybin mushrooms and other related fungi at the Jamaica Facility. The Company’s
activity in relation to the research and cultivation of psilocybin mushrooms, botanicals and other related fungi is limited to
the jurisdiction of Jamaica and the Company does not deal with psychedelic substances except within laboratory and clinical trial
settings conducted within approved regulatory frameworks in order to identify and develop treatments for medical conditions and
does not have any direct or indirect involvement with illegal selling, production or distribution of any substances in jurisdictions
in which it operates. The Company’s Jamaica team is comprised of a senior researcher and professor at the University of
West Indies, Dr. Rupi Delgoda, as well as business consultants, legal counsel and local post-doctoral research students. As well,
the Company has employees who are expected to travel to the Jamaica Facility frequently (which has since been restricted due to
COVID-19).
In
order to develop regulated medicines, FT Discovery’s process must be conducted in strict compliance with the regulations
of federal, state, local and regulatory agencies in Canada and the United States, and the equivalent regulatory agencies in the
other jurisdictions in which Field Trip operates, including Jamaica. These regulatory authorities regulate, among other things,
the research, manufacture, promotion and distribution of drugs in specific jurisdictions under applicable laws and regulations.
It is important to note, that unlike in Canada and the United States, psilocybin mushrooms are not an illegal drug under Jamaica’s
Dangerous Drugs Act, 1948, therefore research on psilocybin mushrooms is not in contravention of the laws of Jamaica and
does not require any permit or authorization from the regulatory authorities in Jamaica.
Canada
The
process required before a prescription drug product candidate may be marketed in Canada generally involves:
|
|
•
|
Chemical
and Biological Research - Laboratory tests are carried out on tissue cultures and
with a variety of small animals to determine the effects of the drug. If the results
are promising, the manufacturer will proceed to the next step of development.
|
|
|
•
|
Pre-Clinical
Development – Animals are given the drug in varying amounts over differing
periods of time. If it can be shown that the drug causes no serious or unexpected harm
at the doses required to have an effect, the manufacturer will proceed to clinical trials.
|
|
|
•
|
Clinical
Trials — Phase 1 - The first administration in humans is to test if people
can tolerate the drug. If this testing is to take place in Canada, the manufacturer must
prepare a clinical trial application for the Therapeutic Products Directorate of Health
Canada (the “TPD”). This includes the results of the first two steps
and a proposal for testing in humans. If the information is sufficient, the Health Products
and Food Branch of Health Canada (the “HPFB”) grants permission to
start testing the drug, generally first on healthy volunteers.
|
|
|
•
|
Clinical
Trials — Phase 2 - Phase 2 trials are carried out on people with the target
condition, who are usually otherwise healthy, with no other medical condition. Trials
carried out in Canada must be approved by the TPD. In Phase 2, the objective of the trials
is to continue to gather information on the safety of the drug and begin to determine
its effectiveness.
|
|
|
•
|
Clinical
Trials — Phase 3 - If the results from Phase 2 show promise, the manufacturer
provides an updated clinical trial application to the TPD for Phase 3 trials. The objectives
of Phase 3 include determining whether the drug can be shown to be effective, and have
an acceptable side effect profile, in people who better represent the general population.
Further information will also be obtained on how the drug should be used, the optimal
dosage regimen and the possible side effects.
|
|
|
•
|
New
Drug Submission - If the results from Phase 3 continue to be favourable, the drug
manufacturer can submit a new drug submission (“NDS”) to the TPD.
A drug manufacturer can submit an NDS regardless of whether the clinical trials were
carried out in Canada. The TPD reviews all the information gathered during the development
of the drug and assesses the risks and benefits of the drug. If it is judged that, for
a specific patient population and specific conditions of use, the benefits of the drug
outweigh the known risks, the HPFB will approve the drug by issuing a notice of compliance.
|
United
States
The
process required before a prescription drug product candidate may be marketed in the United States generally involves:
|
|
•
|
completion
of extensive nonclinical laboratory tests, animal studies and formulation studies, all
performed in accordance with the FDA’s Good Laboratory and Manufacturing Practice
regulations;
|
|
|
•
|
submission
to the FDA of an investigational new drug application, which must become effective before
human clinical trials may begin;
|
|
|
•
|
for
some products, performance of adequate and well-controlled human clinical trials in accordance
with the FDA’s regulations, including good clinical practices, to establish the
safety and efficacy of the product candidate for each proposed indication;
|
|
|
•
|
submission
to the FDA of a new drug application (“NDA”); and
|
|
|
•
|
FDA
review and approval of the NDA prior to any commercial marketing, sale or shipment of
the drug.
|
Patent
Cooperation Treaty
The
Patent Cooperation Treaty (the “PCT”) facilitates filing for patent recognition in multiple jurisdictions simultaneously
using a single uniform patent application. Canada and the United States have ratified the PCT.
Ultimately,
patents are still granted in each country individually. As such, the PCT procedure consists of two phases: filing of an international
application, and evaluation under the patent laws in force in each country where a patent is sought.
Within
12 months of the provisional filing date, the Company will file for a formal utility patent in the United States and simultaneously
file under the PCT with WIPO for recognition in other jurisdictions globally, including CIPO in Canada and the EPO in Europe,
in each case on the basis of the provisional patent.
While
FT Discovery is focused on programs using psychedelic-inspired compounds, the Company does not have any direct or indirect involvement
with the illegal selling, production or distribution of any substances in the jurisdictions in which it operates. The Company
is a clinic-based enterprise, which is exploring drug development within approved laboratory clinical trial settings conducted
within approved regulatory frameworks. Though highly speculative, should any prescription drug product be developed by the Company
(which, if it does occur, would not be for several years), such drug product will not be commercialized prior to receipt of applicable
regulatory approval, which will only be granted if clinical evidence of safety and efficacy for the intended use(s) is successfully
developed. The Company may also employ non-prescription drugs, where appropriate.
Annual
Financial Information of Newton
The
following table provides a brief summary of Newton’s financial information for each of its three most recently completed
financial years. The selected financial information has been derived from, and should be read in conjunction with, Newton’s
audited financial statements for the years ended December 31, 2019, 2018 and 2017.
|
|
|
As at and for the
year ended
December 31, 2019
(audited)
($)
|
|
As at and for the
year ended
December 31, 2018
(audited)
($)
|
|
As at and for the
year ended
December 31, 2017
(audited)
($)
|
|
Statement of operations
|
|
Total Revenue
|
|
-
|
|
-
|
|
-
|
|
Net and comprehensive loss from operations
|
|
239,743
|
|
251,097
|
|
468,463
|
|
Net loss per share (basic and diluted)
|
|
0.04
|
|
0.05
|
|
0.29
|
|
|
|
Statement of financial position
|
|
Total assets
|
|
542,319
|
|
700,331
|
|
413,045
|
|
Total liabilities
|
|
25,101
|
|
30,464
|
|
32,553
|
|
Cash dividends declared per share
|
|
-
|
|
-
|
|
-
|
Annual
Financial Information of Field Trip
The
following table provides a brief summary of Field Trip’s financial information for the period from incorporation (April
2, 2019) to March 31, 2020. The selected financial information has been derived from, and should be read in conjunction with,
Field Trip’s audited financial statements for the period from incorporation until March 31, 2020
|
|
|
As at and for the year ended March 31, 2020
(audited)
($)
|
|
Statement of operations
|
|
Total Revenue
|
|
1,000
|
|
Net and comprehensive loss from operations
|
|
2,678,365
|
|
Net loss per share (basic and diluted)
|
|
0.26
|
|
|
|
Statement of financial position
|
|
Total assets
|
|
12,541,095
|
|
Total liabilities
|
|
2,121,083
|
|
Cash dividends declared per share
|
|
Nil
|
The
Company’s Pro Forma Financial Information
The
following table provides a brief summary of the Company’s consolidated financial position as at June 30, 2020 on a pro forma
basis following the completion of the Transaction. The selected financial information has been derived from, and should be read
in conjunction with, the Company’s pro forma consolidated financial statements as at June 30, 2020.
|
|
|
Newton as of June 30, 2020
(unaudited)
($)
|
|
Field Trip as of
June 30, 2020
(unaudited)
($)
|
|
Company Pro Forma as of June 30, 2020
(unaudited)
($)
|
|
Statement of financial; position
|
|
Total assets
|
|
479,261
|
|
13,019,504
|
|
25,155,085
|
|
Total liabilities
|
|
21,676
|
|
4,744,900
|
|
5,599,910
|
|
Cash dividends declared per share
|
|
Nil.
|
|
Nil.
|
|
Nil.
|
Business
Objectives of the Company
Key
elements of the Company’s growth strategy include: (i) the development of additional clinics; (ii) expanding its network
and consumer database via partnerships and strategic arrangements with other existing health clinics that do not currently offer
psychedelic therapy services, which will require educating physicians on the benefits and medical developments of psychedelic
therapy; (iii) adding additional health care practitioners to increase its clinic growth levels; and (iv) supplementary educational
programs to help other health care practitioners book more appointments.
The
Company’s short-term objectives for the next 12 months (October 2020 through September 2021) are:
|
|
1.
|
Launch
of the Trip App;
|
|
|
2.
|
Launch
of the Patient Portal;
|
|
|
3.
|
Complete
preclinical studies of FT-104;
|
|
|
4.
|
Obtain
utility patent & make PCT filings for FT-104; and
|
|
|
5.
|
Expand
our network of clinics by 6 clinics.
|
The
Company’s medium & long-term objectives for the following 12 months (October 2021 through September 2022) are:
|
|
1.
|
Expand
our network of clinics by 25 clinics; and
|
|
|
2.
|
Phase
1 pre-clinical studies of FT-104.
|
Significant
Events or Milestones of the Company
To
achieve the broad business objectives set out above, the Company has established the following milestones:
|
Objective
|
Milestone
Description
|
Timeframe
for Completion(1)
|
|
30
Operational Clinics
|
New
York City clinic operational
|
Q3
2020
|
|
Santa
Monica clinic operational
|
Q3
2020
|
|
Chicago
Clinic operational
|
Q4
2020
|
|
10th
clinic operational (i.e. 6 additional clinics)
|
Q2
2021
|
|
15th
clinic operational
|
Q3
2021
|
|
20th
clinic operational
|
Q4
2021
|
|
30th
clinic operational
|
Q2
2022
|
|
Company
Technology Platforms
|
Trip
App available in app store
|
Q3
2020
|
|
Patient
Portal launched
|
Q4
2020
|
|
Field
Trip Natural Products Research
|
New
research facility renovations completed
|
Q4
2020
|
|
FT-104
Development and Patenting and Phase 1 Completed
|
US
utility and PCT patent filings
|
Q2
2021
|
|
CMC
development and pre-clinical studies completed
|
Q2
2021
|
|
Phase
1 studies completed
|
Q1
2022
|
Notes:
(1) Based on a calendar year-end.
Other
than as described in this AIF, to the knowledge of management, there are no other particular significant events or milestones
that must occur for the Company’s initial business objectives to be accomplished. However, there is no guarantee that the
Company will meet its business objectives or milestones described above within the specific time periods, within the estimated
costs or at all. The Company may, for sound business reasons, reallocate its time or capital resources, or both, differently than
as described above. See Risk Factors.
Principal
Products and Services
The
Company plans to capitalize on psychedelic therapy opportunities through the Clinics and by providing education services for patients
and medical professionals. The model developed at the Toronto Clinic is intended to be replicated across all of the Company’s
future clinics.
Generally,
a patient’s primary physician or psychiatrist will refer a patient to the Company for possible treatment. When a referral
is received, the Company’s medical team will review the patient’s medical history to ensure there are no immediate
contraindications. A patient will then consult with one of the psychiatrists operating out of the Clinic to assess whether Ketamine-Enhanced
Psychotherapy might be a suitable treatment option. Once approved, the patient will undergo a second screening to ensure their
physical health is suitable for Ketamine-Enhanced Psychotherapy and a treatment plan will be developed. Treatment will vary by
individual, however a standard Ketamine-Enhanced Psychotherapy program involves three sequential blocks, each consisting of two
ketamine exploratory therapy sessions followed by one integration session. During and after the exploratory sessions, licensed
psychotherapists guide the patient through the experience, and provide exploratory therapy to help the patient reintegrate into
their body and understand their experience. During the integration sessions, psychotherapists help the patient integrate their
experiences using clinical psychology techniques to help drive habit change as well as outlook and mindset improvements.
After
the completion of these sessions, the Company also provides a digital patient portal (the “Patient Portal”)
for on-going support and education to help sustain the effects of Ketamine-Enhanced Psychotherapy. The Patient Portal provides
patients with mood monitoring and mindfulness tools, patient-therapist communication, and personalized protocols and content.
The Patient Portal is currently in development and it is anticipated that the Patient Portal will be available to the Company’s
patients in December 2020.
Psychedelic
Therapy Market
The
Canadian psychedelic therapy industry is an emerging market and serves a medical market only. In Ontario, physicians working in
medical clinics are regulated by the College of Physicians and Surgeons of Ontario, via the Regulated Health Professions Act,
1991 (Ontario) and the Medicine Act, 1991 (Ontario).
Ketamine
clinics in the State of New York that are owned solely by New York-licensed physicians are organized as physician practices. Physician
practices in the State of New York are overseen by the New York State Education Department, Office of the Professions, State Board
for Medicine (the “NY Medical Board”). Laws that apply specifically to physician practices in the State of
New York are New York Education Law §§ 6500 – 6516 and 6520 – 6532 and 8 New York Codes, Rules and Regulations
(“NYCRR”) §§ 59.1 et. seq. and 8 NYCRR §§ 60.1 et. seq. The New York Clinic is likely to
utilize, in addition to physicians, mid-level practitioners such as physician assistants and nurse practitioners and mental health
practitioners such as psychologists and psychotherapists. Physician assistants are also subject to oversight of the NY Medical
Board (and subject to laws codified at New York Education Law (“NYEL”) §§ 6540 et. seq.) and nurse
practitioners are subject to oversight of the New York State Education Department, Office of the Professions (“NYOP”),
State Board for Nursing (and subject to laws codified at NYEL §§ 6900 et. seq. and additional regulation that apply
only to nurses at NYCRR §§ 64.1 et. seq.). Psychologists are licensed by the NYOP, State Board for Psychology (and subject
to additional laws and regulations codified at NYEL §§ 7600 et. seq. and 8 NY CRR §§ 72.1 et. seq.), and psychotherapists
are licensed by the NYOP, State Board for Mental Health Practitioners (and subject to additional laws and regulations codified
at NYEL §§ 8400 et. seq. and 8 NY CRR § 52.35 and 8 NY CRR §§ 79.12 et. seq.).
Similarly,
ketamine clinics in the State of California that are owned solely by California-licensed physicians are organized as California
professional medical corporations while unlicensed persons are able to participate in a medical practice via a management service
company. The Medical Board of California (the “CA Medical Board”) regulates physicians and surgeons under the
Business and Professions Code, §2190.5. The CA Medical Board also regulates medical assistants, while nurses, nurse practitioners
and certain psychotherapists are regulated by the Board of Registered Nursing. Psychologists are licensed by the California Board
of Psychology.
In
the State of Illinois, the Illinois Department of Financial and Professional Regulation (“IDFPR”) regulates
physicians and surgeons under the Medical Practice Act (225 ILCS 60/2) and Medical Corporations under the Medical Corporation
Act (805 ILCS 15/1). The IDFPR also regulates nurses under the Nurse Practice Act (225 ILCS 65/), psychologists under the Clinical
Psychologist Licensing Act (225 ILCS 15/), and both licensed professional counselors and licensed
clinical professional counselors under the Illinois Professional Counselor and Clinical Professional Counselor Licensing and Practice
Act (225 ILCS 107/1).
In
the United States where ketamine clinics are physician-owned, Field Trip USA will provide management services to the physician
practice that will own the clinics located in the United States. The relationship between Field Trip USA and the physician practice
that it manages is subject to various standards of corporate practice and fee-splitting rules.
In
Jamaica, psilocybin is not prohibited by the Jamaica Dangerous Drugs Act, 1948. Research conducted by Field Trip at the
Jamaica Facility is governed by the Jamaica Ministry of Health (“JMH”), Ethics and Medico-Legal Affairs Panel
and by the JMH Standards and Regulation Division. In addition to GLP and cGMP, research involving human subject is governed by
the JMH Guidelines for the Conduct of Research on Human Subjects. Furthermore, medicines, including natural products, require
registration with the JMH prior to importation, distribution and sale in Jamaica as outlined in the Food and Drugs Act, 1964.
Marketing
Plans and Strategies
Patient
Acquisition
The
Company’s planned expansion is contingent upon its patient member growth. Thus, its patient acquisition strategy is a critical
component of its future success.
The
Company plans to focus on a push-pull marketing strategy to generate patient leads. The marketing strategy will blend different
marketing strategies to reach prospective patients (including through public relations campaigns, social media, digital marketing
efforts through paid search and social media advertising, as well as potentially more traditional advertising channels such as
television, radio and billboard advertising) as well as strategies to reach and educate the medical and therapy communities in
jurisdictions that it plans to enter, including through medical education events.
The
Company also markets and promotes itself to community physicians, as they are the individuals who most frequently provide the
patient referrals. It focuses on the education of physicians via its website, podcast and through marketing materials.
Building
Brand and Community
The
Trip App will extend the reach and awareness of the Company’s brand to a broader audience of users, and open new potential
revenue and marketing channels for the Company by providing tools to interested people through digital media tools.
In
addition to traditional public relations activities, the Company has a number of marketing plans and strategies designed to build
brand awareness and community around psychedelic therapy opportunities, including education and outreach programs such as the
Field Tripping Podcast and webinars, and a comprehensive social media strategy which comprises both paid and organic components.
Regulatory
Restrictions on Branding
Colleges
in Canada and Medical Boards in the United States impose certain restrictions on their members’ ability to conduct marketing
and advertising activities.
Regulation
of Advertising
Regulated
professions in Canada and the United States, including physicians, psychotherapists, psychologists, and nurses, are subject to
certain restrictions and requirements concerning advertising or soliciting patients. The restrictions vary by jurisdiction and
profession. The Company will develop a compliance program to ensure adherence to these requirements.
Business
Model
The
Company’s business is three-fold: treatment of patients in its clinics as described above under Description of the Business
– Principal Products and Services, research and development focussing on discovering novel psychedelic molecules for
treatment, and developing non-clinical tools designed to raise awareness of, and monetize, psychedelic-enhanced therapies such
as the Trip App. A detailed description of the Company’s business model is set forth above under Description of the Business.
Intellectual
Property
The
Company has developed proprietary processes, including its clinical techniques. While exploring the patentability of these techniques
and processes, the Company relies on non-disclosure and confidentiality arrangements and trade secret protection.
The
Company has invested significant resources towards developing a recognizable and unique brand and is in the process of seeking
registration of trademarks with the Canadian Intellectual Property Office. The Company owns the website domains www.fieldtriphealth.com,
www.meetfieldtrip.com and www.fieldtripping.fm and maintains a variety of social media accounts. The Company also
has a podcast available located at www.fieldtripping.fm and is also available through other channels including Spotify,
Apple Podcasts, iHeart Radio, Google Podcasts, and Simplecast.
The
Company maintains strict standards and operating procedures regarding its intellectual property, including the standard use of
non-disclosure, confidentiality, and intellectual property assignment agreements.
Trademarks
The
Company has registered the following name and design for trademark protection in Canada and intends to do so in the United States,
within the next 6 months. For additional details on the risks associated with the lack of trademark protection, please see Risk
Factors – Intellectual Property:
The
text and stylized logo for “field trip”, produced here:
The
Company has applied for the following names for trademark protection in Canada and intends to do so in the United States. For
additional details on the risks associated with the lack of trademark protection, please see Risk Factors – Intellectual
Property:
The
text “Field Trip Health”, “Field Trip Psychedelics”, “Field Tripping”,
“Field Trip Discovery”, “Field Trip Basecamp” and “Field Trip Natural Products”.
In
addition, the Company has a provisional patent relating to FT-104 composition and use that has been filed with the USPTO (63,045,901;
June 30, 2020). See Description of the Business - Research and Development.
Cyclical
or Seasonal Impacts
The
business of psychedelic therapy and patient services is neither cyclical nor seasonal. Patient demand is based on medical need
and this need is not a factor of season or markets. However, the business is subject to physician availability and the acceptance
in the medical community of ketamine and other psychedelic substances as effective treatments for depression, PTSD, addiction,
and other mental health conditions.
Environmental
Protections
The
Company’s business does not materially impact environmental conditions. The Company does not expect that there will be any
financial or operational effects as a result of environmental protection requirements on its capital expenditures, profit or loss,
or its competitive position in the current fiscal year or in future years.
Number
of Employees
As
of October 21, 2020, the Company has 43 employees, including contractors and part-time employees of affiliates (the Clinics, where
company-owned), distributed among the following departments:
|
Department
|
|
Number of
Employees(1)
|
|
|
Administrative
|
|
|
2
|
|
|
Executive
|
|
|
8
|
|
|
Finance
|
|
|
3
|
|
|
Clinical
|
|
|
14
|
|
|
Research and development
|
|
|
2
|
|
|
Marketing
|
|
|
3
|
|
|
Operations
|
|
|
7
|
|
|
Sales
|
|
|
4
|
|
|
Total
|
|
|
43
|
|
|
Notes:
|
|
|
|
|
|
(1) Where Clinics are set up as professional medical corporations, employees are excluded from the chart above.
|
|
Reorganizations
Other
than the Transaction, described in “General Development of the Business” above, there are no other applicable
material reorganizations of your company or any of its subsidiaries. Additional details regarding the Transaction can be found
in the Company’s Listing Statement as filed on SEDAR on October 5, 2020.
RISK
FACTORS
There
are various risk factors that could cause the Company’s future results to differ materially from those described in this
AIF. The risks and uncertainties described below are those we currently believe to be material, but they are not the only ones
we face. If any of the following risks, or any other risks and uncertainties that we have not yet identified or that we currently
consider not to be material, actually occur or become material risks, our business, financial condition, results of operations
and cash flows, and consequently the price of the Shares, could be materially and adversely affected. The risks discussed below
also include forward-looking statements and our actual results may differ substantially from those discussed in these forward-looking
statements. See “Note Regarding Forward-Looking Statements” in this AIF.
Liquidity
and Future Financing Risk
The
Company will likely operate at a loss until its business becomes established and it may require additional financing in order
to fund future operations and expansion plans. The Company’s ability to secure any required financing to sustain operations
and expansion plans will depend in part upon prevailing capital market conditions and business success. There can be no assurance
that the Company will be successful in its efforts to secure any additional financing or additional financing on terms satisfactory
to management. Moreover, future activities may require the Company to alter its capitalization significantly and, if additional
financing is raised by issuance of additional shares of the Company from treasury, control may change and shareholders may suffer
dilution. The inability of the Company to access sufficient capital for its operations could have a material adverse effect on
the Company’s financial condition and results of operations.
Impact
of the COVID-19 Pandemic
COVID-19
is an infectious disease caused by severe acute respiratory syndrome coronavirus 2. Since December 31, 2019, the outbreak of COVID-19
has resulted in governments worldwide, including Canada and the United States, enacting emergency measures to combat the spread
of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing,
have caused material disruption to businesses globally, resulting in an economic slowdown. Such events may result in a period
of business disruption, and in reduced operations, any of which could have a material adverse impact on the Company’s profitability,
results of operations, financial condition and the trading price of the Company’s securities. Governments and central banks
have reacted to the COVID-19 pandemic with significant monetary and fiscal interventions designed to stabilize economic conditions.
The duration and impact of the COVID-19 pandemic is unknown at this time, as is the efficacy of the government and central bank
interventions. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial
results and condition of the Company. To date, a number of businesses have suspended or scaled back their operations and development
as cases of COVID-19 have been confirmed, for precautionary purposes or as governments have declared a state of emergency or taken
other actions. If the operation or development of one or more of the Company’s clinics is suspended or scaled back, or if
its supply chains are disrupted, it may have a material adverse impact on the Company’s profitability, results of operations,
financial condition and the trading price of the Company’s securities. To the extent that the Company’s management
or other personnel are unavailable to work due to the COVID-19 pandemic, whether due to illness, government action or otherwise,
it may have a material adverse impact on the Company’s profitability, results of operations, financial condition and the
trading price of the Company’s securities. The breadth of the impact of the COVID-19 pandemic on investors, businesses,
the global economy and financial and commodity markets may also have a material adverse impact on the Company’s profitability,
results of operations, financial conditions and the trading price of the Company’s securities.
Limited
Operating History
The
Company has not yet generated material revenue. Field Trip was incorporated in April 2019 and thus has a limited operating history.
The Company is therefore subject to many of the risks common to early-stage enterprises, including under-capitalization, cash
shortages, limitations with respect to personnel, financial, and other resources and lack of revenues. There is no assurance that
the Company will be successful in achieving a return on shareholders’ investment and the likelihood of success must be considered
in light of the early stage of operations.
Speculative
Nature of Investment Risk
An
investment in the securities of the Company carries a high degree of risk and should be considered as a speculative investment.
The Company has no history of earnings, limited cash reserves, limited operating history, has not paid dividends, and is unlikely
to pay dividends in the immediate or near future.
Risks
Inherent in the Nature of the Health Clinic Industry
Changes
in operating costs (including costs for maintenance, insurance), inability to obtain permits required to conduct the Company’s
business, changes in health care laws and governmental regulations, and various other factors may significantly impact the ability
of the Company to generate revenues. Certain significant expenditures, including legal fees, borrowing costs, maintenance costs,
insurance costs and related charges, must be made to operate the Clinics, regardless of whether the Company is generating revenue.
Non-Compliance
with Laws
Non-compliance
with federal, provincial, or state laws and regulations, or the expansion of current, or the enactment of new, laws or regulations,
could adversely affect the Company’s business. The activities of the Clinics and the medical personnel operating the Clinics
are subject to regulation by governmental authorities, and the Company’s business objectives are contingent, in part, upon
its and its personnel’s compliance with regulatory requirements enacted by these governmental authorities, and obtaining
all regulatory approvals, where necessary, for the carrying on of business at the Clinics. Any delays in obtaining, failure to
obtain, or violations of regulatory approvals and requirements would significantly delay the development of markets and products
and could have a material adverse effect on the business, results of operations and financial condition of the Company.
Risks
related to Prescribing Medication
Provincial
and state medical boards or other regulatory bodies could take disciplinary action against the Company’s physicians for
excessive psychedelic prescriptions. Physician prescription patterns may be tracked and may be used to impose disciplinary action
on physicians who prescribe psychedelics at a high rate. If any of the Company’s physicians are deemed to be prescribing
psychedelics excessively, such physicians could face disciplinary action, including, revocation of the physician’s license.
Any disciplinary action or license revocation of physicians who work at a Clinic could result in such Clinic not having sufficient
physicians to address patient needs and could adversely affect the Company’s business.
Unfavourable
Publicity or Consumer Perception
The
success of the psychedelic therapy industry may be significantly influenced by the public’s perception of psychedelic medicinal
applications. Psychedelic therapy is a controversial topic, and there is no guarantee that future scientific research, publicity,
regulations, medical opinion, and public opinion relating to psychedelic therapy will be favourable. The psychedelic therapy industry
is an early-stage business that is constantly evolving, with no guarantee of viability. The market for psychedelic therapy is
uncertain, and any adverse or negative publicity, scientific research, limiting regulations, medical opinion and public opinion
relating to the consumption of psychedelic therapy may have a material adverse effect on the Company’s operational results,
consumer base and financial results.
Social
Media
There
has been a recent marked increase in the use of social media platforms and similar channels that provide individuals with access
to a broad audience of consumers and other interested persons. The availability and impact of information on social media platforms
is virtually immediate and many social media platforms publish user-generated content without filters or independent verification
as to the accuracy of the content posted. Information posted about the Company may be adverse to the Company’s interests
or may be inaccurate, each of which may harm the Company’s business, financial condition and results of operations.
Patient
Acquisitions
The
Company’s success will depend, in part, on its ability to attract and retain patients. There are many factors which could
impact the Company’s ability to attract and retain patients, including the successful implementation of the Company’s
patient-acquisition plans and the continued growth in the aggregate number of patients selecting psychedelic therapy as a treatment
option. The Company’s failure to acquire and retain patients as clients would have a material adverse effect on the Company’s
business, operating results and financial condition.
Development
Risks
Future
development of the Company’s business may not yield expected returns and may strain management resources. Development of
the Company’s revenue streams is subject to a number of risks, including construction delays, cost overruns, financing risks,
cancellation of key service contracts, and changes in government regulations. Overall costs may significantly exceed the costs
that were estimated when the project was originally undertaken, which could result in reduced returns, or even losses, from such
investments.
Substantial
Risk of Regulatory or Political Change.
The
success of the business strategy of the Company depends on the legality of the use of psychedelics for the treatment of mental
health conditions and the acceptance of such use in the medical community. The political environment surrounding the psychedelics
industry in general can be volatile. As of the date of this AIF, Canada and the United States permit the use of ketamine or a
derivative thereof as a treatment for certain mental health conditions; however, the risk remains that a shift in the regulatory
or political realm could occur and have a drastic impact on the use of psychedelics as a whole, adversely impacting the Company’s
ability to successfully operate or grown its business.
Government
Regulations, Permits and Licenses
The
Company’s operations may be subject to governmental laws or regulations promulgated by various legislatures or governmental
agencies from time to time. A breach of such legislation may result in the imposition of fines and penalties. The cost of compliance
with changes in governmental regulations has the potential to reduce the profitability of operations. The Company intends to fully
comply with all governmental laws and regulations. The physicians that recommend psychedelic therapy to the Company’s patients
will be subject to various federal, provincial and municipal laws in Canada. While there are currently no indications that the
Company will require approval by a governmental or regulatory authority in Canada, the United States or Jamaica, such approvals
may ultimately be required. If any permits are required for the Company’s operations and activities in the future, there
can be no assurance that such permits will be obtainable on reasonable terms or on a timely basis, or that applicable laws and
regulations will not have an adverse effect on the Company’s business.
The
results of pre-clinical testing of FT-104 are uncertain and it may fail as a product candidate in the pre-clinical phase or at
any other stage of clinical development. For instance, psilocybin is currently a controlled substance with no approved use in
Canada or the United States, and the Company selected Jamaica for Psilocybin Research and development because Jamaica is one of
the few jurisdictions in the world with a legal environment that would permit such activities with no regulatory requirements.
If a medical use for psilocybin is not developed or, if developed, is not approved for use in Canada, the United States and other
jurisdictions, the commercial opportunity that the Company is pursuing may be highly limited.
The
current and future operations of the Company are and will be governed by laws and regulations governing the health care industry,
labour standards, occupational health and safety, land use, environmental protection, and other matters. Amendments to current
laws, regulations and permits governing operations and activities of health clinics, or more stringent implementation thereof,
could have a material adverse impact on the Company and cause increases in capital expenditures or costs, or reduction in levels
of its medical services.
Ketamine
as a Pharmaceutical
The
Company is currently administering oral ketamine lozenges to patients at the Toronto Clinic, which is not subject to OHPIP (as
such term is defined below) oversight. The Company has received correspondence from the College of Physicians and Surgeons of
Ontario (“CPSO”) advising that, while the administration of lozenges does not currently fall within the scope
of the Out-of-Hospital Inspection Program (“OHPIP”), the OHPIP may be expanded in the future to include lozenges.
To the extent that ketamine is administered by a member of the CPSO, the Company may have to cease administration of ketamine
by physicians. In such an event and if required to continue operations, the Company intends to seek OHPIP certification for the
Toronto Clinic, but as there is no guarantee that such certificate will be obtained or obtained in a timely manner, the Company
has developed plans that it believes will enable it to continue operating the Toronto Clinic without seeking OHPIP certification
such as using medical professionals not subject to CPSO oversight.. For instance, the Company has received a legal opinion that
OHPIP does not apply to the prescribing or administration of oral ketamine lozenges by nurse practitioners. In either case, such
result could have a material impact on the Company’s business and results of operations.
US
law does not regulate the mode of administration of ketamine. Provided the physician is licensed, the method of administration
is left to the discretion of the physician.
Non-Referrals
Physicians
may not refer patients to the Clinics. In addition, as the market grows, and general practitioners become more comfortable and
knowledgeable about the psychedelic therapy industry and products available, they may choose to write prescriptions directly for
their own patients rather than refer them to an outside clinic.
Negative
Cash Flow from Operating Activities
The
Company has had negative cash flow from operating activities since inception and may never be profitable. Significant capital
investment will be required to achieve the Company’s existing plans. There is no assurance that the Company’s business
will generate earnings, operate profitably, or provide a return on investment in the near future. Accordingly, the Company may
be required to obtain additional financing in order to meet its future cash commitments
Management
of Growth
The
Company may be subject to growth-related risks, including pressure on its internal systems and controls. The Company’s ability
to manage its growth effectively will require it to continue to implement and improve its operational and financial systems and
to expand, train and manage its employee base. The inability of the Company to deal with this growth could have a material adverse
impact on its business, operations and prospects. While management believes that it will have made the necessary investments in
infrastructure to process anticipated volume increases in the short term, the Company may experience growth in the number of its
employees and the scope of its operating and financial systems, resulting in increased responsibilities for the Company’s
personnel, the hiring of additional personnel and, in general, higher levels of operating expenses. In order to manage its current
operations and any future growth effectively, the Company will also need to continue to implement and improve its operational,
financial and management information systems and to hire, train, motivate, manage and retain its employees. There can be no assurance
that the Company will be able to manage such growth effectively, that its management, personnel or systems will be adequate to
support the Company’s operations or that the Company will be able to achieve the increased levels of revenue commensurate
with the increased levels of operating expenses associated with this growth.
Dependence
on Management Team
The
Company will depend on certain key senior managers who have developed strong relationships in the industry to oversee the Company’s
core marketing, business development, operational and fund-raising activities. Their loss or departure in the short-term would
have an adverse effect on the Company’s future performance.
Reliance
on Third Parties
The
Company relies on outside sources to manufacture the psychedelics used in the Clinics and further relies on outside sources to
stock and distribute, via a prescription by a licensed physician, the psychedelics used in the Clinics. The Company has little
to no control over these third parties. The failure of such third parties to deliver either components or finished goods and otherwise
perform their obligations on a timely basis could have a material adverse effect on the business..
Competitive
Conditions
The
psychedelic therapy business in Canada is an emerging industry with high levels of competition. The Company’s current business
plan is the establishment of a North American chain of Ketamine-Enhanced Psychotherapy, psychedelic-enhanced psychotherapy and
psychedelic-integration psychotherapy clinics. The Company expects that, due to the urgent need for new and innovative treatments
for mental health conditions and the evidence-based studies showing the impact of psychedelics as a treatment for mental health
conditions, psychedelics as a treatment for these conditions will become more accepted in the medical community. As such, the
Company expects to compete with other similar businesses as well as with individual medical professionals who undertake the prescribing
and supervising of psychedelics to their patients. While the Company was an early entrant to the psychedelic-enhanced psychotherapy
market in Canada, other market participants have emerged. The Company expects to face intense competition from new or existing
market participants, some of which may have greater financial resources. Increased competition by larger and better financed competitors
could materially and adversely affect the business, financial condition and results of operations of the Company.
Risks
Regarding Foreign Operations
The
Toronto Clinic and the Company’s current principal business operations are located in Canada. The Company also has additional
clinics in New York and California. The Company has plans in the near-term to expand its clinic operations to other states in
the United States and Europe. Currently, the Company is conducting research and development, and constructing a research and development
centre, at the Jamaica Facility. As a result, there is a risk that regulatory changes as well as economic or political uncertainty
could require that the Company re-evaluate its business prospects and could negatively impact upon its ability to conduct its
research initiatives. The Company is not dependent on any current or future foreign operations, as they are not core to the business
of the Company. The Company does not have any other risks and/or dependencies on foreign operations.
Intellectual
Property
Failure
to obtain or register trademarks used or proposed to be used in our business could require the Company to rebrand, resulting in
a material adverse impact on its business. If the Company is unable to register or, if registered, maintain effective patent rights
for its product candidates, the Company may not be able to effectively compete in the market. If the Company is not able to protect
its proprietary information and know-how, such proprietary information may be used by others to compete against the Company. The
Company may not be able to identify infringements of its patents (if and when granted), and, accordingly, the enforcement of its
intellectual property rights may be difficult. Once such infringements are identified, enforcement could be costly and time consuming.
Third party claims of intellectual property infringement, whether or not reasonable, may prevent or delay the Company’s
development and commercialization efforts.
The
Company’s success will depend in part upon its ability to protect its intellectual property and proprietary technologies
and upon the nature and scope of the intellectual property protection the Company receives. The ability to compete effectively
and to achieve partnerships will depend on its ability to develop and maintain proprietary aspects of the Company’s technology
and to operate without infringing on the proprietary rights of others. The presence of such proprietary rights of others could
severely limit its ability to develop and commercialize its products and to conduct its existing research, and could require financial
resources to defend litigation, which may be in excess of the Company’s ability to raise such funds. There is no assurance
that the Company’s patent applications submitted or those that it intends to acquire will be approved in a form that will
be sufficient to protect its proprietary technology and gain or keep any competitive advantage that the Company may have or, once
approved, will be upheld in any post-grant proceedings brought by any third parties.
The
patent positions of pharmaceutical companies can be highly uncertain and involve complex legal, scientific and factual questions
for which important legal principles remain unresolved. Patents issued to the Company may be challenged, invalidated or circumvented.
To the extent the Company’s intellectual property offers inadequate protection, or is found to be invalid or unenforceable,
the Company will be exposed to a greater risk of direct competition. If its intellectual property does not provide adequate protection
against the Company’s competitors, its competitive position could be adversely affected, as could the Company’s business,
financial condition and results of operations. Both the patent application process and the process of managing patent disputes
can be time consuming and expensive, and the laws of some foreign countries may not protect the Company’s intellectual property
rights to the same extent as do the laws of Canada and the United States. The Company will be able to protect its intellectual
property from unauthorized use by third parties only to the extent that its proprietary technologies, key products, and any future
products are covered by valid and enforceable intellectual property rights, including patents, or are effectively maintained as
trade secrets, and provided the Company has the funds to enforce its rights, if necessary.
Competition
The
psychedelic therapy industry is intensely competitive, and the Company competes with other companies that may have greater financial
resources and technical facilities. Numerous other businesses are expected to compete in the clinic space and provide additional
patient servicing. It is possible that physicians or other third parties could also establish their own psychedelic therapy clinics
that are similar to the Company’s, as there are no significant barriers to entry. An increase in competition for psychedelic
therapy may decrease prices and result in lower revenues or profits. This increases the risk that the Company will not be able
to access financing when needed, or at all.
In
relation to FT Discovery, the biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant
technological change. The Company’s competitors include large, well-established pharmaceutical companies, biotechnology
companies, and academic and research institutions developing therapeutics for the same indications the Company is targeting and
competitors with existing marketed therapies. Many other companies are developing or commercializing therapies to treat the same
diseases or indications for which FT-104 or the Company’s other product candidates may be useful. Many of the Company’s
competitors have substantially greater financial, technical and human resources than the Company does and have significantly greater
experience than the Company in conducting preclinical testing and human clinical trials of product candidates, scaling up manufacturing
operations and obtaining regulatory approvals of products. Accordingly, the Company’s competitors may succeed in obtaining
regulatory approval for products more rapidly than the Company.
Litigation
The
Company may become party to litigation from time to time in the ordinary course of business, including a medical malpractice claim,
or a claim based in related legal theories of negligence or vicarious liability among others if a physician at one of the Clinics
causes injury, which could adversely affect the Company’s business. Should any litigation in which the Company becomes involved
be determined against the Company, such a decision could adversely affect the Company’s ability to continue operating and
the market price for the Common Shares. Even if the Company is involved in litigation and wins, litigation can redirect significant
resources. Litigation may also create a negative perception of the Company’s business.
Insurance
Coverage
The
Company believes its insurance coverage addresses all material risks to which it is exposed and is adequate and customary in its
current state of operations, however such insurance is subject to coverage limits and exclusions and may not be available for
the risks and hazards to which the Company is exposed. Moreover, there can be no guarantee that the Company will be able to obtain
adequate insurance coverage in the future or obtain or maintain liability insurance on acceptable terms or with adequate coverage
against all potential liabilities.
Holding
Company
The
Company is a holding company and essentially all of its assets are the shares of its material subsidiary, Field Trip Psychedelics
Inc., and, in turn, all of this subsidiary’s material assets are the shares of its material subsidiaries, Field Trip Health
Inc., Field Trip USA and FTNP. As a result, investors in the Company are subject to the risks attributable to its subsidiaries.
As a holding company, the Company will conduct substantially all of its business through its subsidiaries, which generate substantially
all of its revenues. Consequently, the Company’s cash flows and ability to complete current or desirable future enhancement
opportunities are dependent on the earnings of its subsidiaries and the distribution of those earnings to the Company. The ability
of these entities to pay dividends and other distributions will depend on their operating results and will be subject to applicable
laws and regulations which require that solvency and capital standards be maintained by such companies and contractual restrictions
contained in the instruments governing their debt, as applicable. In the event of a bankruptcy, liquidation or reorganization
of any of the Company’s material subsidiaries, holders of any indebtedness and trade creditors may be entitled to payment
of their claims from the assets of those subsidiaries or clinics before the Company.
Smaller
Companies
Market
perception of junior companies may change, potentially affecting the value of investors’ holdings and the ability of the
Company to raise further funds through the issue of further Common Shares or otherwise. The share price of publicly traded smaller
companies can be highly volatile. The value of the Common Shares may rise or fall and, in particular, the share price may be subject
to sudden and large falls in value given the restricted marketability of the Common Shares.
A
Significant Number of Common Shares are owned by a Limited Number of Existing Shareholders
The
Company’s management, directors and employees own a substantial number of the outstanding Common Shares (on a non-diluted
and partially-diluted basis). As such, the Company’s management, directors and employees, as a group, are in a position
to exercise influence over matters requiring shareholder approval, including the election of directors and the determination of
corporate actions. As well, these shareholders could delay or prevent a change in control of the Company that could otherwise
be beneficial to the Company’s shareholders.
Difficult
to Forecast
The
Company must rely largely on its own market research to forecast the utilization of its services, as detailed forecasts are not
generally obtainable from other sources at this early stage of the psychedelics industry in Canada and the U.S. A failure in the
demand for its services to materialize as a result of competition, technological change, market acceptance or other factors could
have a material adverse effect on the business, results of operations and financial condition of the Company.
From
time to time, studies or clinical trials on various aspects of biopharmaceutical products are conducted by academic researchers,
competitors or others. The results of these studies or trials, when published, may have a significant effect on the market for
the biopharmaceutical product that is the subject of the study. The publication of negative results of studies or clinical trials
or adverse safety events related to the FT Discovery, or the Clinics, could adversely affect the Company’s ability to finance
future developments or the price of the Common Shares, and the Company’s business and financial results could be materially
and adversely affected.
Current
Market Volatility
The
securities markets in the United States and Canada have recently experienced a high level of price and volume volatility, and
the market prices of securities of many companies have experienced wide fluctuations in price which have not necessarily been
related to the operating performance, underlying asset values or prospects of such companies. There can be no assurance that continual
fluctuations in price will not occur. It may be anticipated that any market for the Common Shares will be subject to market trends
generally, notwithstanding any potential success of the Company. The value of the Common Shares will be affected by such volatility.
Use
of Funds
This
AIF includes the Company’s estimate of its use of available funds over the next 12 months. As the Company further expands
its business, it is possible that results and circumstances may dictate a departure from the current expected uses. Further, the
Company may, from time to time, as opportunities arise, utilise its financial resources to participate in additional opportunities
that arise and fit within the Company’s broader objectives, as a means of advancing shareholder value.
Conflicts
of Interest
Some
of the Company’s directors and officers may act as directors and/or officers of other health and wellness companies. As
such, such directors and officers may be faced with conflicts of interests when evaluating alternative health and wellness opportunities.
In addition, the Company’s directors and officers may prioritize the business affairs of another company over the affairs
of the Company.
Personnel
The
Company has a small management team and the loss of any key individual could affect the Company’s business. Any inability
to secure and/or retain appropriate personnel may have a materially adverse impact on the business and operations of the Company.
Tax
Issues
Income
tax consequences in relation to the purchase and sale of Common Shares will vary according to the circumstances of each purchaser.
Prospective purchasers should seek independent advice from their own tax and legal advisers prior to purchasing any Common Shares.
Currency
Exchange Rates
Exchange
rate fluctuations may adversely affect the Company’s financial position and results. It is anticipated that a significant
portion of the Company’s business will be conducted in the United States using U.S. dollars. The Company’s financial
results will be reported in Canadian dollars and costs will be incurred primarily in U.S. dollars. The Company has also historically
raised capital in Canadian dollars. The depreciation of the Canadian dollar against the U.S. dollar could increase the actual
capital and operating costs of the Company’s U.S. operations and materially adversely affect the results presented in the
Company’s financial statements. Currency exchange fluctuations may also materially adversely affect the Company’s
future cash flow from operations, its results of operations, financial condition and prospects.
Liquidity
of the Common Shares
The
listing of the Common Shares on the CSE should not be taken as implying that there will be a liquid market for the Common Shares.
Investors should be aware that the value of the Common Shares may be volatile. Investors may, on disposing of their Common Shares,
realise less than their original investment, or may lose their entire investment. The Common Shares, therefore, may not be suitable
as an investment.
The
market price of the Common Shares may not reflect the underlying value of the Company’s net assets. The price at which the
Common Shares will be traded, and the price at which investors may purchase and sell their Common Shares, will be influenced by
a large number of factors, some specific to the Company and its proposed operations, and some which may affect the sectors in
which the Company operates. Such factors could include the performance of the Company’s operations, large purchases or sales
of the Common Shares, liquidity or the absence of liquidity in the Common Shares, legislative or regulatory changes relating to
the business of the Company, and general market and economic conditions.
Substantial
Number of Authorized but Unissued Shares
The
Company has an unlimited number of Common Shares that may be issued by the Board without further action or approval of the Company’s
shareholders. While the Board is required to fulfill its fiduciary obligations in connection with the issuance of such shares,
the shares may be issued in transactions with which not all shareholders agree, and the issuance of such shares will cause dilution
to the ownership interests of the Company’s shareholders.
Enforcement
of Legal Rights
In
the event of a dispute arising from the Company’s foreign operations, the Company may be subject to the exclusive jurisdiction
of foreign courts or may not be successful in subjecting foreign persons to the jurisdictions of courts in Canada. Similarly,
to the extent that the Company’s assets are located outside of Canada, investors may have difficulty collecting from the
Company any judgments obtained in the Canadian courts and predicated on the civil liability provisions of securities laws. The
Company may also be hindered or prevented from enforcing its rights with respect to a governmental entity or instrumentality because
of the doctrine of sovereign immunity.
Emerging
Market Risks
The
Company has operations in Jamaica, an emerging market country, and may have operations in additional emerging markets in the future.
Such operations expose the Company to the socio-economic conditions as well as the laws governing the activities of the Company
in Jamaica and any other jurisdiction where the Company may have operations in the future. Inherent risks with conducting foreign
operations include, but are not limited to: high rates of inflation; extreme fluctuations in currency exchange rates, military
repression; war or civil war; social and labour unrest; organized crime; hostage taking; terrorism; violent crime; expropriation
and nationalization; renegotiation or nullification of existing licenses, approvals, permits and contracts; changes in taxation
policies; restrictions on foreign exchange and repatriation; and changing political norms, banking and currency controls and governmental
regulations that favour or require the Company to award contracts in, employ citizens of, or purchase supplies from, the jurisdiction.
The
Jamaican government, or other governments in emerging markets where the Company may have operations in the future, may intervene
in its economies, sometimes frequently, and occasionally make significant changes in policies and regulations. Changes, if any,
in the research, cultivation and development of psilocybin mushroom and other botanicals policies or shifts in political attitude
in Jamaica or other countries where the Company may have operations in the future may adversely affect its operations or profitability.
Operations may be affected in varying degrees by government regulations with respect to, but not limited to, restrictions on production,
price controls, export controls, currency remittance, importation of product and supplies, income and other taxes, royalties,
the repatriation of profits, expropriation of property, foreign investment, maintenance of licenses, approvals and permits, environmental
matters, land use, land claims of local people, water use and workplace safety. Failure to comply strictly with applicable laws,
regulations and local practices could materially impact the Company’s operations in Jamaica or other countries where the
Company may have operations in the future. The Company continues to monitor developments and policies in Jamaica to assess the
impact thereof to its operations or future operations; however, such developments cannot be predicted and could have an adverse
effect on the Company’s operations in Jamaica.
Jamaica
has a history of economic instability (such as inflation or recession). In 2013, Jamaica launched an ambitious reform program
to stabilize the economy, reduce debt, and fuel growth, gaining national and international support. While there is no current
political instability, and historically there has been no change in laws and regulations, this is subject to change in the future
and could adversely affect the Company’s business, financial condition and results of operations. Jamaica is vulnerable
to natural disasters such as hurricanes and flooding and the effects of climate change. It is an upper middle-income economy that
is nevertheless struggling due to low growth, high public debt, and exposure to external shocks.
Global
economic crises could negatively affect investor confidence in emerging markets or the economies of emerging markets, including
Jamaica. Such events could materially and adversely affect the Company’s business, financial condition and results of operations.
Financial
and securities markets in Jamaica are influenced by the economic and market conditions in other countries, including other emerging
market countries and other global markets. Although economic conditions in these countries may differ significantly from economic
conditions in Jamaica, investors’ reactions to developments in these other countries, such as the recent developments in
the global financial markets, may substantially affect the capital flows into Jamaica and the market value of the securities of
the Company.
The
legal and regulatory requirements and local business culture and practices in Jamaica and the foreign countries in which the Company
may expand are different from those in which it currently operates. The officers and directors of the Company will rely, to a
great extent, on the Company’s local legal counsel and local consultants and advisors in respect of legal, banking, labour,
financing and tax matters in order to ensure compliance with material legal, regulatory and governmental developments as they
pertain to and affect the Company’s operations, particularly with respect to psilocybin or related operations. Increased
compliance costs may be incurred by the Company. Further, there can be no assurance that the Company will develop a marketable
product or service in Jamaica or any other foreign country. These factors may have a material adverse effect on the Company’s
research and development business and the results of its research and development operations.
In
the event of a dispute arising in connection with the Company’s operations in Jamaica or another a foreign jurisdiction
where the Company may conduct business, the Company may be subject to the exclusive jurisdiction of foreign courts or may not
be successful in subjecting foreign persons to the jurisdictions of the courts of Canada or enforcing Canadian judgments in such
other jurisdictions. The Company may also be hindered or prevented from enforcing its rights with respect to a governmental instrumentality
because of the doctrine of sovereign immunity. Accordingly, the Company’s activities in foreign jurisdictions could be substantially
affected by factors beyond the Company’s control.
Other
risks include the potential for fraud and corruption by suppliers or personnel or government officials which may implicate the
Company, compliance with applicable anti-corruption laws, including the Corruption of Foreign Public Officials Act (Canada)
by virtue of the Company’s operating in jurisdictions that may be vulnerable to the possibility of bribery, collusion, kickbacks,
theft, improper commissions, facilitation payments, conflicts of interest and related party transactions and the Company’s
possible failure to identify, manage and mitigate instances of fraud, corruption, or violations applicable regulatory requirements.
Agriculture
FT
Discovery’s business involves the growing of an agricultural product and is subject to the risks inherent in the agricultural
business, such as insects, plant diseases, and invasive species. Although the Company expects that any such growing will be completed
indoors under climate-controlled conditions, there can be no assurance that natural elements will not have a material adverse
effect on any future production.
Violations
of Laws and Regulations Related to Drug Development
In
Canada and the United States, certain psychedelic drugs, are classified as Schedule I drugs under the Controlled Drugs and
Substances Act (Canada) and the Controlled Substances Act (United States) and as such, certain medical and recreational
use is illegal under the Canada and U.S. federal laws. FT Discovery’s programs involving psilocybin are limited to Jamaica
and conducted in strict compliance with the laws and regulations of Jamaica. As such, all facilities engaged with such substances
by or on behalf of the Company do so in compliance with appropriate governmental agencies. While the Company is focused on programs
using psychedelic inspired compounds, the Company does not have any direct or indirect involvement with the illegal selling, production
or distribution of any substances in the jurisdictions in which it operates and does not intend to have any such involvement.
However, a violation of any Canadian, United States or Jamaican laws and regulations, could result in significant fines, penalties,
administrative sanctions, convictions or settlements arising from civil proceedings initiated by either government entities in
the jurisdictions in which the Company operates, or private citizens or criminal charges which could have an adverse effect on
the Company’s operations.
Drug
Development
Given
the early stage of FT Discovery’s product development, the Company can make no assurance that its research and development
programs will result in regulatory approval or commercially viable products. To achieve profitable operations, the Company, alone
or with others, must successfully develop, gain regulatory approval for, and market its future products. The Company currently
has no products that have been approved by the FDA, Health Canada or any similar regulatory authority. To obtain regulatory approvals
for its product candidates being developed and to achieve commercial success, clinical trials must demonstrate that the product
candidates are safe for human use and that they demonstrate efficacy. The Company has not yet completed later stage clinical trials
for any of its product candidates.
Many
product candidates never reach the stage of clinical testing and even those that do have only a small chance of successfully completing
clinical development and gaining regulatory approval. Product candidates may fail for a number of reasons, including being unsafe
for human use or due to the failure to provide therapeutic benefits equal to or better than the standard of treatment at the time
of testing. Unsatisfactory results obtained from a particular study relating to a research and development program may cause the
Company or its collaborators to abandon commitments to that program. Positive results of early pre-clinical research may not be
indicative of the results that will be obtained in later stages of preclinical or clinical research. Similarly, positive results
from early-stage clinical trials may not be indicative of favourable outcomes in later-stage clinical trials, and the Company
can make no assurance that any future studies, if undertaken, will yield favourable results.
The
early stage of FT Discovery’s product development makes it particularly uncertain whether any of its product development
efforts will prove to be successful and meet applicable regulatory requirements, and whether any of its product candidates will
receive the requisite regulatory approvals, be capable of being manufactured at a reasonable cost or be successfully marketed.
If the Company is successful in developing its current and future product candidates into approved products, the Company will
still experience many potential obstacles, which would affect the Company’s ability to successfully market and commercialize
such approved products, such as the need to develop or obtain manufacturing, marketing and distribution capabilities, price pressures
from third-party payors, or proposed changes in health care systems. If the Company is unable to successfully market and commercialize
any of its products, its financial condition and results of operations may be materially and adversely affected.
The
Company can make no assurance that any future studies, if undertaken, will yield favorable results. Many companies in the pharmaceutical
and biotechnology industries have suffered significant setbacks in later-stage clinical trials after achieving positive results
in early-stage development, and the Company cannot be certain that it will not face similar setbacks. These setbacks have been
caused by, among other things, pre-clinical findings made while clinical trials were underway or safety or efficacy observations
made in clinical trials, including previously unreported adverse events. Moreover, preclinical and clinical data are often susceptible
to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in
preclinical studies and clinical trials nonetheless failed to obtain FDA approval. If the Company fails to produce positive results
in its future clinical trials of FT-104, the development timeline and regulatory approval and commercialization prospects for
FT-104, would be materially adversely affected which may have materially adversely impact on the Company’s business.
Reliance
on Third-Parties – Drug Development
The
Company relies and will continue to rely on third parties to conduct a significant portion of its pre-clinical and clinical development
activities. Pre-clinical activities include in vivo studies providing access to specific disease models, pharmacology and toxicology
studies, and assay development. Clinical development activities include trial design, regulatory submissions, clinical patient
recruitment, clinical trial monitoring, clinical data management and analysis, safety monitoring and project management. If there
is any dispute or disruption in its relationship with third parties, or if it is unable to provide quality services in a timely
manner and at a feasible cost, the Company’s active development programs will face delays. Further, if any of these third
parties fails to perform as the Company expects or if their work fails to meet regulatory requirements, the Company’s testing
could be delayed, cancelled or rendered ineffective.
Pre-clinical
and clinical development activities must be carried out in accordance with Good Laboratory Practices (“GLP”).
GLP was originally established by the Organisation for Economic Co-operation and Development to promote the quality and validity
of test data and to establish a basis for mutual acceptance of data among member states at the international level. GLP was adopted
by both Health Canada and the Standards Council of Canada, which has monitoring authority for GLP compliance of test facilities
within Canada, and by the FDA as (Good Laboratory Practice regulations, 21 CFR 58). Labs must adopt these GLP practices to ensure
they are producing valuable test results, and each lab has its own set of approaches to staying compliant. If any of these third
partner or service provider fails to GLP requirements, the Company’s pre-clinical and clinical development activities could
be delayed, cancelled or rendered ineffective.
The
Company has no manufacturing experience and will rely on contract manufacturing organizations (“CMOs”) to manufacture
its product candidates for pre-clinical studies and clinical trials. The Company will rely on CMOs for manufacturing, filling,
packaging, storing and shipping of drug product in compliance with current Good Manufacturing Practices (“cGMP”)
regulations applicable to its products. The FDA and Health Canada ensure the quality of drug products by carefully monitoring
drug manufacturers’ compliance with cGMP regulations. The cGMP regulations for drugs contain minimum requirements for the
methods, facilities and controls used in manufacturing, processing and packing of a drug product.
There
can be no assurances that CMOs will be able to meet the Company’s timetable and requirements. The Company has not contracted
with suppliers for FT-104 drug substance production but in the event that the selected provider is unable to scale up production,
or if it otherwise experiences any other significant problems and the Company is unable to arrange for alternative third-party
manufacturing sources on commercially reasonable terms or in a timely manner, the Company may be delayed in the development of
FT-104, or other product candidates. Further, CMOs must operate in compliance with cGMP and failure to do so could result in,
among other things, the disruption of product supplies. The Company’s dependence upon third parties for the manufacture
of its products may adversely affect its profit margins and its ability to develop and deliver products on a timely and competitive
basis.
Commercial
Grade Development
To
date, FT-104 has been manufactured in small quantities for pre-clinical studies In order to commercialize its product, the Company
needs to manufacture commercial quality drug supply for use in registration clinical trials. Most, if not all, of the clinical
material used in phase 3/pivotal/registration studies must be derived from the defined commercial process, including scale, manufacturing
site, process controls and batch size. If the Company has not scaled up and validated the commercial production of its product
prior to the commencement of pivotal clinical trials, it may have to employ a bridging strategy during the trial to demonstrate
equivalency of early stage material to commercial drug product, or potentially delay the initiation or completion of the trial
until drug supply is available. The manufacturing of commercial quality drug product has long lead times, is very expensive and
requires significant efforts, including scale-up of production to anticipated commercial scale, process characterization and validation,
analytical method validation, identification of critical process parameters and product quality attributes, and multiple process
performance and validation runs. If the Company does not have commercial drug supply available when needed for pivotal clinical
trials, the Company’s regulatory and commercial progress may be delayed, and it may incur increased product development
costs. This may have a material adverse effect on the Company’s business, financial condition and prospects, and may delay
marketing of its product.
Clinical
Testing
Before
obtaining marketing approval from regulatory authorities for the sale of the Company’s product candidates, it must conduct
pre-clinical studies in animals and extensive clinical trials in humans to demonstrate the safety and efficacy of the product
candidates. Clinical testing is expensive and difficult to design and implement, can take many years to complete and has uncertain
outcomes. The outcome of pre-clinical studies and early clinical trials may not predict the success of later clinical trials,
and interim results of a clinical trial do not necessarily predict final results. A number of companies in the pharmaceutical
and biotechnology industries have suffered significant setbacks in advanced clinical trials due to lack of efficacy or unacceptable
safety profiles, notwithstanding promising results in earlier trials. The Company does not know whether the clinical trials it
may conduct will demonstrate adequate efficacy and safety to result in regulatory approval to market any of its product candidates
in any jurisdiction. A product candidate may fail for safety or efficacy reasons at any stage of the testing process. A major
risk the Company faces is the possibility that none of its product candidates under development will successfully gain market
approval from the FDA or other regulatory authorities, resulting in the Company being unable to derive any commercial revenue
from this business segment after investing significant amounts of capital in its development.
The
Company cannot predict whether any clinical trials will begin as planned, will need to be restructured, or will be completed on
schedule, or at all. The Company’s product development costs will increase if it experiences delays in clinical testing.
Significant clinical trial delays could shorten any periods during which the Company may have the exclusive right to commercialize
its product candidates or allow its competitors to bring products to market before the Company, which would impair the Company’s
ability to successfully commercialize its product candidates and may harm its financial condition, results of operations and prospects.
The Company’s product development costs will increase if it experiences delays in testing or approval or if the Company
needs to perform more or larger clinical trials than planned. Additionally, changes in regulatory requirements and policies may
occur, and the Company may need to amend study protocols to reflect these changes. Amendments may require the Company to resubmit
its study protocols for re-examination, which may impact the cost, timing or successful completion of that trial. Delays or increased
product development costs may have a material adverse effect on the Company’s business, financial condition and prospects.
Prior
to commencing clinical trials in Canada, the United States or other jurisdictions, including Jamaica, for FT-104 or any other
product candidates if developed by the Company, it may be required to have an allowed investigational new drug application (“IND”)
(or equivalent) for each product candidate and to file additional INDs prior to initiating any additional clinical trials for
FT-104. The Company believes that the data from its studies will support the filing of additional INDs to enable the Company to
undertake additional clinical studies as it has planned. However, submission of an IND (or equivalent) may not result in the FDA
(or equivalent authorities) allowing further clinical trials to begin and, once begun, issues may arise that will require the
Company to suspend or terminate such clinical trials. Additionally, even if relevant regulatory authorities agree with the design
and implementation of the clinical trials set forth in an IND, these regulatory authorities may change their requirements in the
future. Failure to submit or have effective INDs (or equivalent) and commence or continue clinical programs will significantly
limit its opportunity to generate revenue.
Patients
for Clinical Trials
If
the FT-104 advances from pre-clinical testing to clinical testing, and then through progressively larger and more complex clinical
trials, the Company will need to enroll an increasing number of patients that meet its eligibility criteria. There is significant
competition for recruiting patients in clinical trials, and the Company may be unable to enroll the patients it needs to complete
clinical trials on a timely basis or at all.
Regulatory
Approval Process
The
Company’s development and commercialization activities related to FT-104 or other product candidates are significantly regulated
by a number of governmental entities, including the FDA, HC, and comparable authorities in other countries, including Jamaica.
Regulatory approvals are required prior to each clinical trial and the Company may fail to obtain the necessary approvals to commence
or continue clinical testing. The Company must comply with regulations concerning the manufacture, testing, safety, effectiveness,
labeling, documentation, advertising, and sale of products and product candidates and ultimately must obtain regulatory approval
before it can commercialize a product candidate. The time required to obtain approval by such regulatory authorities is unpredictable
but typically takes many years following the commencement of preclinical studies and clinical trials. Any analysis of data from
clinical activities the Company performs is subject to confirmation and interpretation by regulatory authorities, which could
delay, limit or prevent regulatory approval. Even if the Company believes results from its clinical trials are favorable to support
the marketing of its product candidates, the FDA or other regulatory authorities may disagree. In addition, approval policies,
regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s
clinical development and may vary among jurisdictions. The Company has not obtained regulatory approval for any product candidate
and it is possible that none of its existing product candidates or any future product candidates will ever obtain regulatory approval.
A
regulatory authority may require more information, including additional preclinical or clinical data to support approval, which
may delay or prevent approval and the Company’s commercialization plans, or we may decide to abandon the development program.
If the Company were to obtain approval, regulatory authorities may approve any of its product candidates for fewer or more limited
indications than the Company requests, may grant approval contingent on the performance of costly post-marketing clinical trials,
or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful
commercialization of that product candidate. Moreover, depending on any safety issues associated with the Company’s product
candidates that garner approval, the FDA may impose a risk evaluation and mitigation strategy, thereby imposing certain restrictions
on the sale and marketability of such products.
Cyber-Attacks
The
Company’s operations depend, in part, on how well it protects its information technology systems, networks, equipment and
software from damages from a number of threats. Events such as cable cuts, power loss, hacking, computer viruses and theft could
result in information system failures, delays and/or increase in capital expenses for the Company. While the Company implements
protective measures to reduce the risk of and detect cyber incidents, cyber-attacks are becoming more sophisticated and frequent,
and the techniques used in such attacks change rapidly; the development of the Company’s business and operating results
may be hindered by applicable restrictions on sales and marketing activities imposed by regulatory bodies.
Reliance
upon Insurers and Governments
Even
if the Company is able to commercialize pharmaceutical product candidates, the products may not receive adequate reimbursement
from government or private pay insurers. Additionally, fluctuations in drug prices caused by governments and insurers could affect
the Company’s business.
Difficulty
in Enforcing Judgments and Effecting Service of Process on Directors and Officers
Certain
directors and officers of the Company reside outside of Canada. Some or all of the assets of such persons may be located outside
of Canada. Therefore, it may not be possible for investors to collect or to enforce judgments obtained in Canadian courts predicated
upon the civil liability provisions of applicable Canadian securities laws against such persons. Moreover, it may not be possible
for investors to effect service of process within Canada upon such persons.
General
Although
management believes that the above risks fairly and comprehensibly illustrate all material risks facing the Company, the risks
noted above do not necessarily comprise all those potentially faced by the Company as it is impossible to foresee all possible
risks.
Although
the Board will seek to minimise the impact of the risk factors, an investment in the Company should only be made by investors
able to sustain a total loss of their investment. Investors are strongly recommended to consult a person who specialises in investments
of this nature before making any decision to invest.
DIVIDENDS
AND DISTRIBUTIONS
The
Company does not currently intend to declare any dividends payable to the holders of the Common Shares. The Company has no restrictions
on paying dividends, but if the Company generates earnings in the foreseeable future, it expects that they will be retained to
finance growth. The Board will determine if and when dividends should be declared and paid in the future based upon the Company’s
financial position at the relevant time.
DESCRIPTION
OF CAPITAL STRUCTURE
The
authorized capital of the Company consists of an unlimited number of Common Shares and an unlimited number of Company Preferred
Shares. As at the date of this AIF, 37,802,992 Common Shares are issued and outstanding and nil Company Preferred Shares are issued
and outstanding.
Holders
of Common Shares are entitled to one vote for each Common Share held at all meetings of shareholders of the Company, to receive
dividends if, as and when declared by the Board, and to participate ratably in any distribution of property or assets upon the
liquidation, winding-up or other dissolution of the Company. The Shares carry no pre-emptive rights, conversion or exchange rights,
or redemption, retraction, repurchase, sinking fund or purchase fund provisions. There are no provisions requiring a holder of
Shares to contribute additional capital, and no restrictions on the issuance of additional securities by the Company. There are
no restrictions on the repurchase or redemption of Shares by the Company except to the extent that any such repurchase or redemption
would render the Company insolvent. The Company Preferred Shares may, if issued, be made convertible into Common Shares at such
rate and upon such basis as the Board, in its discretion, may determine.
The
Company Option Plan is to attract and retain employees, directors and consultants, and to ensure that interests of key persons
are aligned with the success of the Company and its affiliates. The maximum number of options to purchase Common Shares reserved
for issuance under the Company Option Plan is the greater of: (i) 3,100,000 Common Shares; or (ii) 15% of the issued and outstanding
Common Shares (subject to adjustment in accordance with the Company Option Plan) from time to time, on a non-diluted basis. Company
Options that have been exercised, cancelled, surrendered or terminated, or that expire without being exercised, shall again be
available for issuance under the Company Option Plan. Notwithstanding the foregoing, the maximum number of Common Shares that
may be issued under the Company Option Plan pursuant to the exercise or surrender of Company Options is 7,500,000, but in all
events subject to the limitations in (i) and (ii).
MARKET
FOR SECURITIES
Trading
Price and Volume
The
Shares are listed on the CSE under the symbol “FTRP”. Prior to listing on the CSE, the Newton Common Shares were listed
under the symbol “NTN” on the NEX board of the TSXV. The following table sets forth the high and low sale prices and
trading volumes of the Common Shares and the Newton Common Shares for each of the periods indicated:
Common
Shares
The
issued and outstanding Common Shares are listed and posted for trading on the CSE under the symbol “FTRP”. The following
table sets forth the reported intraday high and low prices and monthly trading volumes of the Common Shares from October 6, 2020
(the date of their initial trading on the CSE upon completion of the Transaction) up to October 22, 2020 (source: CSE).
|
Month
|
|
|
High
|
|
|
Low
|
|
|
Volume Traded
|
|
|
October 6 to 22, 2020
|
|
|
$
|
3.50
|
|
|
$
|
2.25
|
|
|
|
1,312,295
|
|
Newton
Common Shares
Newton
Common Shares were listed under the symbol “NTN” on the NEX board of the TSXV. The following table sets forth the
reported intraday high and low prices and monthly trading volumes of the Newton Common Shares on the TSXV from Newton’s
most recently completed financial year December 31, 2019 as well as periods up to June 18, 2020 (Source: TMX Data)(1).
|
Month
|
|
High
|
|
|
Low
|
|
|
Volume Traded
|
|
|
June 1, 2020 – June 18, 2020(1)
|
|
$
|
0.195
|
|
|
$
|
0.175
|
|
|
|
15,013
|
|
|
May 2020
|
|
$
|
0.170
|
|
|
$
|
0.170
|
|
|
|
5,000
|
|
|
April 2020
|
|
$
|
0.150
|
|
|
$
|
0.100
|
|
|
|
5,000
|
|
|
January, 2020 – March, 2020
|
|
|
Nil.
|
|
|
|
Nil.
|
|
|
|
Nil.
|
|
|
December, 2019
|
|
$
|
0.140
|
|
|
$
|
0.140
|
|
|
|
500
|
|
|
November, 2019
|
|
$
|
0.165
|
|
|
$
|
0.150
|
|
|
|
9,513
|
|
|
May, 2019 – October, 2019
|
|
|
Nil.
|
|
|
|
Nil.
|
|
|
|
Nil.
|
|
|
April, 2019
|
|
$
|
0.275
|
|
|
$
|
0.220
|
|
|
|
2,215
|
|
|
March, 2019
|
|
$
|
0.270
|
|
|
$
|
0.270
|
|
|
|
500
|
|
|
Month
|
|
|
High
|
|
|
Low
|
|
|
Volume Traded
|
|
|
February, 2019
|
|
|
$
|
0.265
|
|
|
$
|
0.215
|
|
|
|
26,500
|
|
|
January, 2019
|
|
|
$
|
0.265
|
|
|
$
|
0.200
|
|
|
|
2,000
|
|
|
|
(1)
|
Trading
in the Newton Common Shares on the NEX board of the TSXV was halted on June 18, 2020
in connection with the announcement of the Transaction and the Newton Common Shares were
de-listed from the TSXV on September 30, 2020.
|
Prior
Sales
The
following tables set forth details of the issuances of Field Trip Common Shares which where exchanged for Common Shares in connection
with the Transaction and securities issued by Field Trip exercisable into Common Shares, following the Transaction during the
financial year ended March 31, 2019 through to September 30, 2020.
|
Date of Issue
|
|
Description
|
|
Number of Securities Sold
|
|
Price Per Share/Exercise Price
|
|
Description of Consideration
|
|
April 2, 2019
|
|
Common Shares
|
|
6,300,630
|
|
$0.055
|
|
Cash
|
|
October 3, 2019
|
|
Exercise of Field Trip Options
|
|
2,700,270
|
|
$0.00001
|
|
Cash
|
|
October 19, 2019
|
|
Field Trip Common Shares
|
|
2,510,000
|
|
$0.50
|
|
Cash
|
October, 2019 to
September, 2020
|
|
Field Trip Options
|
|
3,840,806
|
|
$0.50 to $2.00
|
|
Cash
|
|
February 6, 2020 to May 20, 2020
|
|
Field Trip B Shares(1)
|
|
9,507,263
|
|
US$0.90
|
|
Cash and 20,882 Field Trip Class B Shares were issued in satisfaction of financing costs
|
|
August 11, 2020
|
|
Exercise of Field Trip Options
|
|
9,000,900
|
|
$0.00001
|
|
Cash
|
|
August 14, 2020
|
|
FT Private Placement
|
|
5,516,724
|
|
$2.00
|
|
Cash
|
|
August 14, 2020
|
|
Agents’ Shares(2)
|
|
55,167
|
|
$2.00
|
|
Fee in connection with the FT Private Placement
|
|
August 14, 2020
|
|
Agents’ Warrants(2)(3)
|
|
299,753
|
|
$2.00
|
|
Fee in connection with the FT Private Placement
|
|
September 21, 2020
|
|
September Offering
|
|
816,932
|
|
$2.00
|
|
Cash
|
|
September 25, 2020
|
|
Field Trip Common Shares
|
|
600,000
|
|
$2.00
|
|
Payment of Milestone Shares under the Jamaica SPA
|
Notes:
|
|
(1)
|
The
Field Trip Class B Shares converted into Field Trip Common Shares following the closing
of the FT Private Placement on a one-for-one basis.
|
|
|
(2)
|
Issued
to the Agents as compensation in connection with the FT Private Placement.
|
|
|
(3)
|
Exchanged
for Company Warrants on completion of the Transaction.
|
ESCROWED
SECURITIES AND SECURITIES SUBJECT TO CONTRACTUAL RESTRICTION ON TRANSFER
The
following table details the number of Common Shares that were, to the Company’s knowledge, held in escrow on transfer, as
at October 6, 2020 (the “Escrowed Securities”):
|
Designation of Class
|
|
|
Number of Securities held in Escrow
|
|
|
Percentage of Class
|
|
|
Common Shares
|
|
|
|
19,893,465
|
(1)
|
|
|
52.62
|
%(2)
|
|
|
(1)
|
The
Company is classified as an “established Company” by the CSE as defined in
NP 46-201, and therefore these Escrowed Securities are be subject to an eighteen month
escrow under NP 46-201 pursuant to an escrow agreement among the Company, the holders
of the Escrowed Securities and Odyssey Trust Company (the “Escrow Agreement”).
|
|
|
(2)
|
Calculated
based on 37,802,992 Common Shares issued and outstanding as at the date hereof, on an
undiluted basis.
|
The
Escrowed Securities will be released from escrow on the following schedule:
|
Release
Date
|
Amount
of Escrowed Securities Released
|
|
Listing
Date
|
1/4
of the Escrowed Securities
|
|
6
months after the Listing Date
|
1/3
of remaining Escrowed Securities
|
|
12
months after the Listing Date
|
1/2
of remaining Escrowed Securities
|
|
18
months after the Listing Date
|
The
remaining Escrowed Securities
|
In
addition to the foregoing escrow arrangements: (i) the holders of the Escrowed Securities have agreed to lock-up restriction with
respect to the Escrowed Securities, which provides for a staggered release from such restrictions on the 6, 12, 18 and 24 month
anniversary of the issue date; and (ii) certain shareholders holding approximately 10,500,000 Common Shares have agreed to a voluntary
lock-up restriction with respect to Common Shares, which provides for a staggered release from such restrictions on each 2, 4,
8 and 10 month anniversary of the issue date.
DIRECTORS
AND EXECUTIVE OFFICERS
Name,
Occupation and Security Holding
The
following table sets out certain information regarding the directors and executive officers of the Company as at the date of this
AIF. Each of the directors is elected to hold office until the next annual meeting of the shareholders of the Company or until
a successor is duly elected or appointed.
Name,
Municipality
of Residence and
Position Held(7)
|
Principal
Occupation for Past Five Years
|
Appointed
as of
|
Number
and
Percentage
of Securities
Beneficially
Owned or
Controlled
|
|
Joseph
del Moral
Toronto, Ontario
Director,
Chief Executive Officer
|
CEO
of Field Trip
CEO
of Trait Biosciences Inc.
CEO
of CanvasRx Holdings Inc.
|
April
2019
|
5,517,026
(14.59%)
|
Name,
Municipality
of Residence and
Position Held(7)
|
Principal
Occupation for Past Five Years
|
Appointed
as of
|
Number
and
Percentage
of Securities
Beneficially
Owned or
Controlled
|
|
Ronan
Levy
Toronto, Ontario
Director,
Executive Chairman
|
Executive
Chairman of Field Trip
Chief
Strategy Officer of Trait Biosciences Inc.
SVP
Business & Corporate Affairs, of Aurora Cannabis Inc.
Chief
Corporate Officer & General Counsel of CanvasRx Holdings Inc.
Principal,
TDF Debt Advisory Law Professional Corporation
President
of Toronto Gold
|
April
2019
|
3,517,027
(9.30%)
|
|
Hannan
Fleiman
Toronto, Ontario
Director,
President
|
President
of Field Trip
President
of Trait Biosciences Inc
Chief
Operating Officer of CanvasRx Holdings Inc.
|
April
2019
|
3,580,915
(9.47%)
|
|
Mujeeb
Jafferi(1)(2)
Toronto, Ontario
Director,
Chief Operating Officer
|
Chief
Operating Officer of Field Trip
President
of Just Energy Solar
Vice
President, Sales Strategy & Transformation, of Just Energy Corp.
Partner
at Lightwing Partners;
|
Officer
Appointment:
May 2019
Director
Appointment:
January 2020
|
3,622,582
(9.58%)
|
|
Dr.
Ryan Yermus
Toronto, Ontario
Director,
Chief Clinical Officer
|
Chief
Clinical Officer of Field Trip
Physician,
Ontario Addiction Treatment Centres
|
Officer
Appointment:
April 2019
Director
Appointment:
January 2020
|
3,655,915
(9.67%)
|
|
Tyler
Dyck
Toronto, Ontario
Treasurer
and Head of Finance
|
Treasurer
and Head of Finance of Field Trip
Director
of Finance at Chefs Plate
Director
of Finance at Hello Fresh
Senior
Accountant, KPMG
|
November
2019
|
Nil(3)
|
|
Donna
Wong
Toronto, Ontario
Chief
Financial Officer
|
Chief
Financial Officer of Field Trip
Managing
Director of On Point Advisors Inc.;
Senior Manager, Financial Reporting of Fairfax Africa
VP,
Finance of ViXS Systems Inc.
|
September
2020
|
Nil
|
Name,
Municipality
of Residence and
Position Held(7)
|
Principal
Occupation for Past Five Years
|
Appointed
as of
|
Number
and
Percentage
of Securities
Beneficially
Owned or
Controlled
|
|
Paula
Amy Hewitt
Toronto, Ontario
Vice
President, General Counsel and Corporate Secretary
|
Vice
President, General Counsel and Corporate Secretary to Field Trip
Senior
Vice President, General Counsel, Chief Compliance Officer & Chief Privacy Officer at Raymond James Ltd.
Senior
Vice President, Chief Compliance Officer (Canada) at Macquarie Group
Vice
President, Legal & Compliance at Dundee Securities Ltd.
|
July
2020
|
Nil(4)
|
|
Helen
Boudreau(1)(2)
Lexington, Massachusetts
Director
|
Member
of the board of Premier, Inc.
COO
of the Bill & Melinda Gates Medical Research Institute
Chief
Financial Officer, Protesostasis Therapeutics, Inc.
Board
Member, Proteostasis Therapeutics, Inc.
Chief
Financial Officer, FORMA Therapeutics, Inc.
|
April
2020
|
Nil(4)
|
|
Dieter
Weinand(1)(2)
Pompano Beach, Florida
Director
|
Chairman
of the Board of Directors of Replimune Group Inc.
Executive
Vice President of Primary Care and member of the Executive Committee at Sanofi
CEO
and Chairman of the Board of Management of Bayer Pharma AG
Member
of the Management Board at Bayer AG
|
April
2020
|
Nil(4)
|
|
Dr.
Nathan Bryson
Toronto, Ontario
Chief
Science Officer
|
Chief
Science Officer of Acerus Pharmaceuticals Corporation
|
April
2020
|
Nil(5)
|
|
Amardeep
Manhas
Toronto, Ontario
Chief
Technology Officer
|
Chief
Technology Officer of Field Trip
Vice
President Solar Operations, Crius Energy Management LLC
Senior
Partner, Business Operations, SunEdison LLC
Vice
President of Operations, LightWing Inc.
|
October
2019
|
55,555(6)
(0.15%)
|
Notes:
|
|
(1)
|
Member
of the audit committee.
|
|
|
(2)
|
Member
of the compensation committee.
|
|
|
(3)
|
Excludes
120,000 Company Options to acquire 120,000 Common Shares
|
|
|
(4)
|
Excludes
100,000 Company Options to acquire 100,000 Common Shares
|
|
|
(5)
|
Excludes
300,000 Company Options to acquire 300,000 Common Shares
|
|
|
(6)
|
Excludes
215,000 Company Options to acquire 215,000 Common Shares
|
The
following are brief biographical descriptions of the officers and directors of the Company:
Joseph
del Moral, Director & Chief Executive Officer, Age 42
Mr.
del Moral is an experienced entrepreneur and a founder of Field Trip. In 2014, he was the founder and CEO of CanvasRx Inc. and
Canadian Cannabis Clinics, which grew to be the largest cannabis clinic company in Canada. In 2016, CanvasRx was acquired by Aurora
Cannabis Inc. (NYSE: ACB) (“Aurora”) and he joined Aurora’s board of directors. During his time at Aurora,
Mr. del Moral ensured that CanvasRx continued to grow and achieve its milestones as well as assisted in corporate development,
M&A and strategy. After leaving Aurora in 2018, Mr. del Moral assumed the role of CEO of Trait Biosciences Inc., a leading
biotech company in the hemp and cannabis industries. Prior to his time in the cannabis industry, Mr. del Moral co-founded Newten
Home Comfort, a fast growing home services company acquired by Just Energy Inc. in 2009. Mr. del Moral is also on the board of
directors of Felix Health, an innovative direct to consumer healthcare company that is changing how Canadians access prescription
drugs. Mr. del Moral was conferred a Bachelor of Commerce Degree (Finance and Entrepreneurship) from McGill University in June
2001.
Ronan
Levy, Director & Executive Chairman, Age 41
Mr.
Levy is an entrepreneur and is a co-founder and Executive Chairman of Field Trip. He is also a partner at Grassfed Ventures, a
venture capital and advisory firm focused on the cannabis and biotech industries, and a member of the board of directors of Trait
Biosciences Inc., a leading biotech company in the hemp and cannabis industries. Prior to his current roles, Mr. Levy co-founded
Canadian Cannabis Clinics and CanvasRx Inc., which was acquired by Aurora in 2016, after which he served as Senior Vice President,
Business and Corporate Affairs, for Aurora. A lawyer by training, Mr. Levy started his career as a corporate lawyer at Blake,
Cassels and Graydon LLP and as legal counsel at CTVglobemedia Inc. (now Bell Media Inc.). Mr. Levy earned a Juris Doctor in June
2004 and a Bachelor of Commerce degree in June 2001, both from the University of Toronto.
Hannan
Fleiman, Director & President, Age 40
Mr.
Fleiman is a serial entrepreneur and has co-founded and operated several companies, including Field Trip.,
CanvasRx Inc., Canadian Cannabis Clinic and Dominion Home Insulation. Prior to founding these companies, Mr. Fleiman managed the
hospital department, animal health and OTC divisions at Teva Canada. Mr. Fleiman is a board member of MedicNL, a contract research
organization, and was a board member of Abacus Health, where he headed the audit and compensation committees before the successful
sale to Charlotte’s Web Holdings, Inc. (CSE: CWEB). Mr. Fleiman earned his MBA from McMaster University in June 2006 and
his BSc from University of Guelph in June 2003.
Mujeeb
Jafferi, Director & Chief Operating Officer, Age 37
Mr.
Jafferi is an experienced management executive and a founder of Field Trip. Prior to joining Field Trip, Mr. Jafferi spent over
a decade in the retail and renewable energy sectors in a variety of leadership roles. Between 2016 and 2019, Mr. Jafferi served
as the Vice President of Sales Operations and Strategy at Just Energy Inc. (TSX: JE) and the President of Just Energy Solar. In
2015, Mr. Jafferi served as a Partner at a renewable energy technology startup, LightWing Partners, leading its business development
efforts across the US market. LightWing Partners was subsequently acquired by SunEdison. Between 2009 and 2015, Mr. Jafferi held
several progressive and diverse leadership roles at Just Energy, including Director of Corporate Planning and Financial Analysis,
and Assistant. Regional General Manager for US Northeast Region. He
holds a BA in Information Technology, conferred in 2004, from York University and a Global Professional Master of Laws, conferred
in 2014, from University of Toronto.
Dr.
Ryan Yermus, Director & Chief Clinical Officer, Age 39
Dr.
Yermus is a physician who completed his medical training at the University of Ottawa in 2007 and his residency at the University
of Toronto in 2009. As a pioneer in the Canadian medical cannabis industry, he was responsible for the development of a clinical
protocol that led to the treatment of thousands of medical cannabis patients. In 2014, Dr. Yermus founded Medical Marijuana Clinics
of Canada (MMCC), the first fully compliant cannabis clinic in Ontario. MMCC went on to be acquired by Canadian Cannabis Clinics,
which grew to become the nation’s largest cannabis clinic network and was acquired by Aurora Cannabis Inc. in 2016. For
the past decade, Dr. Yermus has also worked as a clinician at the Ontario Addiction Treatment Centres helping patients suffering
from addictions.
Tyler
Dyck, Treasurer and Head of Finance, Age 30
Mr.
Dyck is a dynamic CPA, CA comfortable working across all functions of an organization in high-growth environments. Most recently,
Mr. Dyck was finance employee #1 at HelloFresh Canada, where starting from a 100% outsourced model, he grew the finance and accounting
function to a team of 8 over 30 months. While at HelloFresh he also led the due diligence, financial analysis, and business planning
relating to the acquisition of Chefs Plate. Mr. Dyck started his career in KPMG’s audit practice after obtaining an Honours
BBA from Wilfrid Laurier University in May 2013.
Donna
Wong, Chief Financial Officer, Age 54
Ms.
Wong is a financial growth expert with over 20 years of experience within private start-ups and public multi-national organizations,
primarily in the technology sector. She has a proven track record in establishing the necessary corporate infrastructure to scale
through change management, IT, and cross-functional collaboration among multi-location businesses. Prior to her current role,
as VP, Finance of ViXS Systems, Ms. Wong guided the company from pre-revenue to $100 million in revenues and eventual listing
on the TSX. Ms. Wong is a CPA, CA, CMA and earned a Master of Accounting in 1992 and Honours Bachelor of Arts degrees in 1990,
both from the University of Waterloo.
Paula
Amy Hewitt, Vice President, General Counsel and Corporate Secretary, Age 48
Ms.
Hewitt brings 16 years of broad legal experience gained through a career in private practice and in executive roles within Canadian
and Multinational financial services companies. Between 2009 and 2019, Ms. Hewitt held various executive positions with investment
dealer companies, including Vice President, Legal & Compliance, Head of Legal, Chief Compliance Officer, Chief Anti-Money
Laundering Officer, Chief Privacy Officer and General Counsel. Prior to 2009, Ms. Hewitt worked as an associate lawyer at Bay
Street law firms, practicing securities and mining law. Ms. Hewitt sits on the board of directors of Caldwell Investment Management,
a portfolio manager and investment fund manager. Paula has served on the Ontario District Council of Investment Industry Regulatory
Organization of Canada andon the Canadian Advisory Board of the International Association of Privacy Professionals (“IAPP”).
In addition to earning a Juris Doctor from Osgoode Hall Law School in 2001, Paula earned a BA in Psychology from McGill University
in June 1994, a Graduate Certificate in Risk Management from the University of Toronto in March 2015 and the CIPP/C, CIPM and
CIPT designations from the IAPP.
Helen
M. Boudreau, Director, Age 54
Ms.
Boudreau is a retired senior executive with 30 years experience across biotech, pharmaceuticals, consulting, and banking industries.
She was most recently COO of the Bill & Melinda Gates Medical Research Institute, a non-profit biotech focused on diseases
that cause mortality, poverty, and inequality in low and middle-income countries from 2018 to 2019. Previously, she
served as CFO for public and private biotechs, Proteostasis Therapeutics (2017-2018) and FORMA Therapeutics (2014-2017). Helen
worked at Novartis (2008-2014) and Pfizer (1999-2008), serving in strategy and senior finance roles, including global CFO Oncology
business unit, CFO US Corporate, VP Investor Relations, VP Finance, Customer Business Unit and Commercial Operations, and VP Finance
Global R&D. Helen started her career in banking at Bank of America (1987-1991), was an engagement manager at McKinsey
& Company (1993-1996), a strategic consulting firm, and a Director of Strategic Planning at YUM! Brands/PepsiCo (1996-1999).
Helen is currently a member of the board of Premier, Inc. (NASDAQ: PINC), a healthcare improvement company, and is also on the
boards of three private biotech companies. Helen earned a BA in Economics, summa cum laude, from the University
of Maryland in 1987, and an MBA from the Darden Graduate School of Business at the University of Virginia in 1993.
Dieter
Weinand, Director, Age 59
Mr.
Weinand is an experienced executive with over 30 years of experience in the pharmaceuticals and biotech industries. Mr. Weinand
presently serves as the chairman of the board of directors of Replimune Group Inc. (NASDAQ: REPL). Previously, Mr. Weinand served
as the Executive Vice President of Primary Care and was a member of the Executive Committee at Sanofi from November 2018 to February
2020. Before moving to Sanofi, Mr. Weinand was CEO and Chairman of the Board of Management of Bayer Pharma AG and member of the
Management Board at Bayer AG. Prior to his work at Sanofi and Bayer, Mr. Weinand has held various positions in commercial, operational,
and strategic areas of the pharmaceutical industry. These included responsibilities spanning various therapeutic areas and geographies
for companies such as Pfizer, Bristol Myers Squibb, and Otsuka. Mr. Weinand earned an MS in Pharmacology and Toxicology from Long
Island University, New York, and a BA in Biology from Concordia College, New York. Mr. Weinand is a former board member of the
Pharmaceutical Research and Manufacturers of America (PhRMA), the European Federation of Pharmaceutical Industries & Associations
(EFPIA), and the International Federation of Pharmaceutical Manufacturers (IFPMA), and served as a member of the Board of Directors
of HealthPrize Technologies.
Dr.
Nathan Bryson, Ph.D, Chief Science Officer, Age 57
Dr.
Bryson has 30 years of experience in pharmaceutical drug development. After receiving his Ph.D. in radiopharmaceutical chemistry
(MIT, 1988) and successive post-doctoral studies in catalysis and polymers at the University Louis Pasteur (Strasbourg, France)
and MIT, Dr. Bryson joined Flamel Technologies (now Avadel Pharma) as a founding scientist in 1990, eventually developing and
leading teams in R&D, process development and commercialization. After expanding roles, as Vice President R&D at Bionisis
(FR) and Matregen (Canada), Dr. Bryson transitioned to CSO roles at Cynapsus in 2005 (formerly, Cannasat) and to Acerus Pharmaceuticals
Corporation in 2014. At Cynapsus, he led Chemistry-Manufacturing-Controls and early-stage development of Kinmobil (now approved
in Canada and US), while at Acerus, he headed research, clinical development, medical and regulatory affairs, as well as production.
Prior to his doctorate, Nathan received a B.Sc. (chemistry), conferred in 1984, from Auburn University.
Amardeep
Manhas, Chief Technology Officer, Age 37
Mr.
Manhas is a seasoned business technology and operations executive with over 15 years of diverse experience in both public and
startup companies. In 2014, Mr. Manhas joined cleantech startup LightWing Inc as VP Operations, where he oversaw the buildout
of the operational organization and a proprietary technology platform for consumers and affiliate partners. LightWing was fully
acquired by SunEdison LLC in 2015, and Mr. Manhas stayed on with SunEdison to oversee business operations and technology for its
residential partner division. In 2016, Mr. Manhas joined Crius Energy as VP Operations, where he built a back-office technology
and support organization to scale multi-channel growth for the solar business. Prior to 2014, Mr. Manhas worked at Just Energy
Group Inc in a variety of operational and technology leadership roles. Mr. Manhas holds a Bachelor of Applied Science in Engineering
Physics, conferred in 2004, from Queen’s University.
Cease
Trade Orders, Bankruptcies, Penalties or Sanctions
Corporate
Cease Trade Orders
To
the best of management’s knowledge, no director or executive officer of the Company is, or within the ten years before the
date of this AIF has been, a director, chief executive officer or chief financial officer of any company that:
|
|
(a)
|
was
subject to a cease trade order, an order similar to a cease trade order, or an order
that denied the relevant company access to any exemption under securities legislation,
that was in effect for a period of more than 30 consecutive days that was issued while
the director or executive officer was acting in the capacity as director, chief executive
officer or chief financial officer; or
|
|
|
(b)
|
was
subject to a cease trade order, an order similar to a cease trade order, or an order
that denied the relevant company access to any exemption under securities legislation,
that was in effect for a period of more than 30 consecutive days that was issued after
the director or executive officer ceased to be a director, chief executive officer or
chief financial officer and which resulted from an event that occurred while that person
was acting in the capacity as director, chief executive officer or chief financial officer.
|
Bankruptcies
To
the best of management’s knowledge, no director or executive officer of the Company has: (i) within ten years before the
date of this AIF, been a director or officer of any company that, while that person was acting in that capacity, or within a year
of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy
or insolvency, or was subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver
manager or trustee appointed to hold its assets; or (ii) within ten years before the date of this AIF, become bankrupt, made a
proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement
or compromise with creditors, or had a receiver manager or trustee appointed to hold the assets of the director or executive officer.
Penalties
and Sanctions
To
the best of management’s knowledge, no director or executive officer of the Company has been subject to: (a) any penalties
or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into
a settlement agreement with securities regulatory authority; or (b) any other penalties or sanctions imposed by a court or regulatory
body that would likely be considered important to a reasonable security holder in deciding whether to vote for a director or executive
officer.
Conflicts
of Interest
The
Company may from time to time become involved in transactions which conflict with the interests of the directors and the officers
of the Company or the interest of these persons could conflict with those of the Company. Conflicts of interest, if any, will
be subject to the procedures and remedies provided under applicable laws. In particular, in the event that such a conflict of
interest arises at a meeting of the directors of the Company, a director who has such a conflict will abstain from voting for
or against the approval of such participation or such terms. In accordance with applicable laws, the directors of the Company
are required to act honestly, in good faith and in the best interest of the Company.
PROMOTERS
No
person or company has been within the two years immediately preceding the date of this AIF, a promoter of the Company.
LEGAL
PROCEEDINGS AND REGULATORY ACTIONS
To
the Company’s knowledge, there are no legal proceedings or regulatory actions material to the Company to which it is a party,
or has been a party to, or of which any of its property is or was the subject matter,, and no such proceedings or actions are
known by the Company to be contemplated.
There
have been no penalties or sanctions imposed against the Company by a court or regulatory authority, and the Company has not entered
into any settlement agreements before any court relating to provincial or territorial securities legislation or with any securities
regulatory authority, in the three years prior to the date of this AIF.
INTEREST
OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
Other
than as disclosed below and elsewhere in this AIF no director, executive officer or unitholder or shareholder that beneficially
owns, or controls or directs, directly or indirectly, more than 10% of the voting securities of the Company, or any of their respective
Associates or affiliates, has any material interest, direct or indirect, in any transaction within the three years before the
date of this AIF which has materially affected or is reasonably expected to materially affect the Company or a subsidiary of the
Company.
AUDITOR,
TRANSFER AGENT AND REGISTRAR
Computershare
Trust Company of Canada, at its Calgary, Alberta office acts as the Company’s transfer agent and registrar and MNP LLP,
at its Waterloo, Ontario office acts as the Company’s auditor.
MATERIAL
CONTRACTS
Material
contracts of the Company, other than contracts entered into in the ordinary course of business, that were entered into within
the two years before the date of this AIF are:
|
|
(a)
|
Amalgamation
Agreement;
|
|
|
(c)
|
Escrow
Agreement; and
|
The
Company’s material contracts described above are filed under the Company’s profile on SEDAR at www.sedar.com.
AUDIIT
COMMITTEE INFORMATION
The
Company is a “venture issuer” as defined in NI 52-110 and is relying upon the exemption in section 6.1 of NI 52-110
in respect of the composition of its Audit Committee and in respect of its reporting obligations under NI 52-110.
INTERESTS
OF EXPERTS
No
person or corporation whose profession or business gives authority to a statement made by the person or corporation and who is
named as having prepared or certified a part of this AIF or as having prepared or certified a report or valuation described or
included in this AIF holds any beneficial interest, direct or indirect, in any securities or property of the Company or of an
Associate or affiliate of the Company and no such person is expected to be elected, appointed or employed as a director, senior
officer or employee of the Company or of an Associate or affiliate of the Company and no such person is a promoter of the Company
or an Associate or affiliate of the Company. MNP LLP is independent of the Company in accordance with the rules of professional
conduct of the Institute of Chartered Professional Accountants of Ontario.
ADDITIONAL
INFORMATION
Additional
information relating to the Company can be found under the Company’s profile on SEDAR at www.sedar.com.
Additional
information, including directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s
securities and securities authorized for issuance under equity compensation plans is contained in the Company’s Listing
Statement, as filed on SEDAR October 5, 2020.
Additional
financial information of the Company is provided in the Company’s financial statements and MD&A for the most recently
completed financial year.
Exhibit 99.31
AMENDED NOTICE
NATIONAL INSTRUMENT 51-102
CHANGE IN CORPORATE STRUCTURE
This amended notice is provided pursuant to the requirements of Section 4.9 of National Instrument 51-102 – Continuous Disclosure Obligations (“NI 51-102”).
|
Item 1:
|
Names of the Parties to the Transaction
|
|
|
Field Trip Health Ltd. (formerly, Newton Energy Corporation) (the “Company”), Field Trip Psychedelics Inc. (“FTP”) and Newton Energy Subco Limited (“Subco”).
|
|
Item 2:
|
Description of the Transaction
|
|
|
On October 1 2020, the Company completed its previously announced reverse take-over of FTP by way of a three-cornered amalgamation (the “Transaction”). FTP amalgamated with Subco, a wholly owned subsidiary of the Company. Prior to the closing of the Transaction, the Company changed its name to “Field Trip Health Ltd.” and consolidated the outstanding common shares of the Company (each, a “Share”) on the basis of one post-consolidation Share for every eight pre-consolidation Shares. Pursuant to the Transaction, all securities of FTP were exchanged for equivalent securities of the Company.
The pre-consolidation Shares were delisted from the NEX board of the TSX Venture Exchange effective September 30, 2020. The Shares commenced trading on the Canadian Securities Exchange on October 6, 2020 under the symbol “FTRP”.
|
|
Item 3.
|
Effective Date of the Transaction
|
|
Item 4.
|
Names of Each Party That Ceased to be a Reporting Issuer Subsequent to the Transaction and of Each Continuing Entity
|
|
|
No party ceased to be a reporting issuer following completion of the Amalgamation. As a result of the Amalgamation, the Company continues to be a reporting issuer in British Columbia and Alberta. For accounting purposes, FTP was the reverse takeover acquirer.
|
|
Item 5.
|
Date of the Reporting Issuer’s First Financial Year-End Subsequent to the Transaction
|
|
|
Pursuant to the Transaction, the fiscal year-end of the Company has changed to March 31st, the financial-year of FTP.
|
|
Item 6.
|
Periods, Including the Comparative Periods, if any, of the Interim and Annual Financial Statements Required to be Filed For The Reporting Issuer’s First Financial Year Subsequent To The Transaction
|
|
|
The following financial statements will be filed for the Company’s first financial year after the Transaction:
|
|
|
a)
|
unaudited interim condensed consolidated financial statements for FTP for the three and six months ended September 30, 2020 as compared to the period ended September 30, 2019;
|
|
|
b)
|
unaudited interim condensed financial statements of Newton Energy Corporation for the three and nine months ended September 30, 2020 as compared to the period ended September 30, 2019;
|
|
|
c)
|
unaudited interim condensed consolidated financial statements of the Company for the three and nine months ending December 31, 2020 as compared to the period ended December 31, 2019;
|
|
|
d)
|
audited annual consolidated financial statements of the Company for the year ended March 31, 2021 as compared to the period ended March 31, 2020;
|
|
|
e)
|
unaudited interim condensed consolidated financial statements of the Company for the three months ended June 30, 2021 as compared to the period ended June 30, 2020; and
|
|
|
f)
|
unaudited interim condensed consolidated financial statements for the three and six months ended September 30, 2021 as compared to the period ended September 30, 2020.
|
|
Item 7.
|
Documents Which Were Filed Under National Instrument 51-102 that Describe the Transaction and Where Those Documents Can Be Found In Electronic Format
|
|
|
Details with respect to the Transaction are disclosed in the Company’s filing statement dated October 1, 2020, the Company’s news release dated October 1, 2020, and the Company’s news release dated August 21, 2020, all of which are available on SEDAR.
|
|
Item 8.
|
Date of Amended Report
|
Exhibit 99.32
NOTICE
NATIONAL INSTRUMENT 51-102
CHANGE IN CORPORATE STRUCTURE
This notice is provided pursuant to the requirements of Section 4.9 of National Instrument 51-102 – Continuous Disclosure Obligations (“NI 51-102”).
|
Item 1:
|
Names of the Parties to the Transaction
|
|
|
Field Trip Health Ltd. (formerly, Newton Energy Corporation) (the “Company”) Field Trip Psychedelics Inc. (“FTP”) and Newton Energy Subco Limited (“Subco”).
|
|
Item 2:
|
Description of the Transaction
|
|
|
On October 1 2020, the Company completed its previously announced reverse take-over of FTP by way of a three-cornered amalgamation (the “Transaction”). FTP amalgamated with Subco, a wholly owned subsidiary of the Company. Prior to the closing of the Transaction, the Company changed its name to “Field Trip Health Ltd.” and consolidated the outstanding common shares of the Company (each, a “Share”), on the basis of one post-consolidation Share for every eight pre-consolidation Shares. Pursuant to the Transaction, all securities of FTP were exchanged for equivalent securities of the Company.
The Company pre-consolidation Shares were delisted from the NEX Board of the TSX Venture Exchange effective September 30, 2020. The Company Common Shares commenced trading on the Canadian Stock Exchange on October 6, 2020 under the symbol “FTRP”.
|
|
Item 3.
|
Effective Date of the Transaction
|
|
Item 4.
|
Names of Each Party That Ceased to be a Reporting Issuer Subsequent to the Transaction and of Each Continuing Entity
|
|
|
No party ceased to be a reporting issuer following completion of the Amalgamation. As a result of the Amalgamation, the Company continues to be a reporting issuer in British Columbia and Alberta. For accounting purposes, FTP was the reverse takeover acquirer.
|
|
Item 5.
|
Date of the Reporting Issuer’s First Financial Year-End Subsequent to the Transaction
|
|
|
Pursuant to the Transaction, the fiscal year-end of the Company has changed to March 31st, the previous financial-year of FTP.
|
|
Item 6.
|
Periods, Including the Comparative Periods, if any, of the Interim and Annual Financial Statements Required to be Filed For The Reporting Issuer’s First Financial Year Subsequent To The Transaction
|
|
Item 7.
|
Documents Which Were Filed Under National Instrument 51-102 that Describe the Transaction and Where Those Documents Can Be Found In Electronic Format
|
|
|
Details with respect to the Transaction are disclosed in the Company’s filing statement dated October 1, 2020, the Company’s news release dated October 1, 2020, and the Company’s news release dated August 21, 2020, all of which are available on SEDAR.
|
Exhibit 99.33
FORM
51-102F3
Material Change Report
UNDER
NATIONAL INSTRUMENT 51-102
|
Item
1.
|
Name
and Address of Company
|
|
|
Field
Trip Health Ltd. (formerly, Newton Energy Corporation) (the “Company”)
30
Duncan Street, Suite 401
Toronto, Ontario
M5V 2C3
|
|
Item
2.
|
Date
of Material Change
|
|
|
A
news release dated October 1, 2020 was disseminated via Newswire. A copy of the news release
has been filed on SEDAR and is available at www.sedar.com.
|
|
Item
4.
|
Summary
of Material Change
|
|
|
The
Company announced that it has completed its previously announced reverse take-over of Field
Trip Psychedelics Inc. (“FTP”) by way of a three-cornered amalgamation (the “Transaction”).
FTP amalgamated with Newton Energy Subco Limited (“Subco”), a wholly owned subsidiary
of the Company. Prior to the closing of the Transaction, the Company changed its name to
“Field Trip Health Ltd.” and consolidated the outstanding common shares of the
Company (each, a “Share”), on the basis of one post-consolidation Share
for every eight pre-consolidation Shares. Pursuant to the Transaction, all securities of
FTP were exchanged for equivalent securities of the Company.
|
|
Item
5.
|
Full
Description of Material Change
|
|
|
The
Company announced that it has completed its previously announced business combination with
FTP by way of a three-cornered amalgamation. FTP amalgamated with Subco, a wholly owned subsidiary
of the Company, and the securities of FTP were exchanged for securities of the Company. The
Transaction was completed pursuant to the terms and conditions of an amalgamation agreement
dated August 21, 2020 between the Company, FTP and the Subco.
Pursuant
to the Transaction, the Class A Shares of FTP were exchanged for post-consolidation Shares of the Company (“Common Shares”).
All convertible securities of FTP were also exchanged for convertible securities of the Company.
Prior
to the closing of the Transaction, the Company changed its name to “Field Trip Health Ltd.” The Company is not headquartered
in Toronto, Ontario.
Additional
information concerning the Transaction, including the recent equity raises completed by FTP prior to the Transaction, can be found
in the Company’s listing statement which is available by accessing the Company’s profile on SEDAR, at www.sedar.com.
The
Company pre-consolidation Shares were delisted from the NEX Board of the TSX Venture Exchange effective September 30, 2020. The
Company Common Shares commenced trading on the Canadian Stock Exchange on October 6, 2020 under the symbol “FTRP”.
|
|
|
Effective
October 1, 2020, all directors and officers of the Company resigned and the following directors
were appointed to hold office until the next annual general meeting of the shareholders of the
Company: Joseph del Moral, Ronan Levy, Hannan Fleiman, Mujeeb Jafferi, Ryan Yermus, Helen Boudreau
and Dieter Weinand, all of which were nominees of FTP.
Effective
October 1, 2020, Joseph del Moral has been appointed Chief Executive Officer and Donna Wong has been appointed as Chief Financial
Officer. In addition, Ronan Levy has been appointed as Executive Chairman, Hannan Fleiman has been appointed as President, Mujeeb
Jafferi has been appointed as Chief Operating Officer, Dr. Ryan Yermus has been appointed as Chief Clinical Officer, Paula Amy
Hewitt has been appointed as Vice President, General Counsel and Corporate Secretary, Dr. Nathan Bryson has been appointed as
Chief Science Officers, Amardeep Manhas has been appointed as Chief Technology Officer and Tyler Dyck has been appointed as Treasurer
and Director of Finance.
Immediately
prior to the Transaction, DeVisser Gray LLP, of Vancouver, British Columbia served as auditor of the Company. As contemplated
in the Company’s management information circular dated August 21, 2020, which is available from the Company’s profile
on SEDAR, at www.sedar.com, MNP LLP, being the auditor of FTP, will be appointed as the auditor of the Company for the Company’s
current fiscal year.
Pursuant to the Transaction,
the fiscal year-end of the Company has changed to March 31st.
|
|
|
|
|
Item
6.
|
Reliance
on subsection 7.1(2) of National Instrument 51-102
|
|
Item
7.
|
Omitted
Information
|
|
Item
8.
|
Executive
Officer
|
|
|
For
further information, please contact:
Paula Amy Hewitt
Vice President, General Counsel and Corporate Secretary
Telephone:
(416) 617-6277
|
Exhibit
99.34
Research
Agreement
This
Research Services Agreement is made effective as of April 6, 2020 (the “Effective
Date”) by and between Field Trip Natural Products Limited, a company incorporated in Jamaica with offices at 48 Constant
Spring Road, Kingston 10 (“FTNP”), and The University of the West Indies, having a business address at Mona Campus,
Kingston 7, Jamaica (“UWI”), the Parties.
WHEREAS
FTNP has agreed to lease from UWl property (the “Lease”) on which to construct or retrofit a research facility (the
“Facility”) for conducting research and cultivation of all species of plants and fungi; and
WHEREAS FTNP wishes to
engage UWl to assist it in carrying out research at the facility and UWI wishes to provide such services to FTNP.
NOW,
THEREFORE, in consideration of the foregoing and the mutual promises set forth below, the Parties agree as follows:
SECTION
1—DEFINITIONS
|
|
1.01
|
Where
used in this Agreement:
|
|
|
(a)
|
“Applicable
Law”
|
means all applicable
international, national, regional and local laws, rules, regulations, and guidance applicable to the Research Services and
the activities contemplated hereunder, and all generally accepted standards of good laboratory practice and good clinical
practice;
|
|
|
(b)
|
“Commercial
Intellectual Property”
|
means
patents for inventions, trademarks, copyright, computer software, literary, artistic,
musical or visual works, industrial designs and plant breeders rights originating from
the Research Services which may be the subject of an application for registration for
exclusive rights, in accordance with applicable legislation, excluding know how and trade
secrets;
|
|
|
(d)
|
“Intellectual
Property”
|
means intangible (non-physical)
property which includes scientific or scholarly discoveries, copyright, computer software, moral rights related to copyrighted
materials, trademarks, official marks, domain names, patents, industrial designs, literary, artistic, musical or visual works,
trade secrets and know-how;
|
|
|
|
|
|
|
|
(e)
|
“Material”
|
means all findings,
data, reports, documents, records and material, (both printed and electronic), whether complete or otherwise, that have been
produced, received, compiled or acquired by UWI, or Research Faculty (as defined below), or provided by or on behalf of FTNP
to, UWI or Research Faculty, as a direct result of this Agreement, but does not include property owned by UWI prior to this
Agreement;
|
|
|
|
|
|
|
|
(f)
|
“Net Sales”
|
means the sum of gross
sales minus returns, allowances, and discounts arising from commercialization of any Commercial Intellectual Property.
|
|
|
(g)
|
“Research
Services”
|
means
such scientific and research activities as may be requested by FTNP, from time to time.
|
|
|
|
|
|
|
|
(h)
|
“Term”
|
means
the five (5) year period commencing on the Effective Date, unless terminated earlier
pursuant to the terms hereof; and
|
|
|
|
|
|
|
|
(i)
|
“UWI
Costs”
|
means
costs of labour, laboratory supplies, technical assistance, and other charges directly
related to the Research Services, which costs have received written approval in advance
from FTNP.
|
SECTION
2—FTNP OBLIGATIONS
|
|
(a)
|
fund
the construction of the Facility and the Research Services up to the amount of the Financial
Commitment;
|
|
|
(b)
|
operate
the Facility in accordance with all Applicable Laws;
|
|
|
(c)
|
reimburse
UWI for the UWI Costs, upon receipt of an invoice and supporting documentation evidencing
that the UWI Costs have been incurred in the preceding month;
|
|
|
(e)
|
pay
invoices within 60 days of the date of receipt thereof, provided that if any amount included
in the invoice is disputed, FTNP shall not be required to pay the disputed amount until
the dispute is resolved in accordance with this Agreement;
|
|
|
(f)
|
deduct
or withhold from the amounts payable any taxes that it is required by Applicable Laws
to deduct or withhold. UWI will be responsible for remitting all such taxes with respect
to payments under this Agreement;
|
|
|
(g)
|
allow
Research Faculty access to the Facility, from time to time, for research other than the
Research Services, in FTNP’s sole discretion, not to be unreasonably withheld;
|
|
|
(h)
|
co-operate
with UWI in making public announcements regarding the Research Services and the details
of this Agreement;
|
|
|
(k)
|
pay
to UWI compensation for time release and salary given to Research Faculty to work for
FTNP, pursuant to 3.01(a) and 3.01(b) such payments to be made in keeping with the provisions
in the attached Schedule.
|
|
|
(I)
|
comply
with all Applicable Laws
|
SECTION
3—UWI’S OBLIGATIONS
|
|
(a)
|
permit
faculty members selected by FTNP, including but not limited to Professor [*****] Natural
Products Institute (collectively, the “Research Faculty”), to carry out Research
Services in accordance with the terms of this Agreement;
|
|
|
(b)
|
permit
each Research Faculty to provide such time and work to FTNP, as may be required by FTNP
for purposes of the Research Services, and as mutually agreed upon between Research
Faculty and FTNP, up to [*****] of work per week FTNP and Research Faculty may agree
on higher amounts of such time and work with UWI’s consent;
|
|
|
(c)
|
maintain,
and comply with all contractual, regulatory, notifications and authorizations and obligations
required to permit the Research Faculty to conduct the Research Services in accordance
with this Agreement and will provide evidence of the same to FTNP on request;
|
|
|
(d)
|
ensure
that Materials are not transferred, distributed or released to any person or entity other
than FTNP or an entity designated in writing by FTNP;
|
|
|
(e)
|
invoice
FTNP monthly for any UWI Costs;
|
|
|
(f)
|
establish
and maintain books of account, invoices, receipts and vouchers for all UWI Costs, and,
upon request by FTNP, provide FTNP with documents supporting all UWI Costs;
|
|
|
(g)
|
provide
ail requested immigration information and reasonable support to FTNP staff and researchers
assisting with the Research Services with immigration-related matters;
|
|
|
(h)
|
comply
with all Applicable Laws;
|
|
|
(i)
|
co-operate
with FTNP in making such public announcements regarding the Research Services and the
details of this Agreement as FTNP requests; and
|
|
|
(j)
|
subject
to obtaining the prior written approval of FTNP concerning form, content and location,
UWI may acknowledge FTNP’s participation in the Research Services.
|
SECTION
4—REPRESENTATIONS AND WARRANTIES
|
|
4.01
|
Each
Party represents and warrants to the other with the intent that it will rely thereon
in entering into this Agreement that to the best of its knowledge:
|
|
|
(a)
|
all
Material, information, statements, documents and reports furnished or submitted by it
to the other in connection with this Agreement are true and correct;
|
|
|
(b)
|
it
has no knowledge of any fact that materially adversely affects, or so far as it can foresee,
might materially adversely affect, its properties, assets, condition (financial or otherwise),
business or operations or its ability to fulfill its obligations under this Agreement;
|
|
|
(c)
|
it
is not in breach of, or in default under, any law, statute or regulation applicable to
or binding on it or its operations.
|
|
|
4.02
|
All
statements contained in any certificate, application, proposal or other document delivered
by or on behalf of one to the other under this Agreement or in connection with any of
the transactions contemplated hereby will be deemed to be representations and warranties
by the delivering Party under this Agreement.
|
|
|
4.03
|
All
representations, warranties, covenants and agreements made herein and all certificates,
applications or other documents delivered by or on behalf of one Party are material and
will have been relied upon by the other Party and will continue in full force and effect
during the continuation of this Agreement.
|
SECTION
5—RELATIONSHIP AND NON-COMPETITION
|
|
5.01
|
No
partnership, joint venture, agency or other legal entity will be created by or will be
deemed to be created by this Agreement or any actions of the parties pursuant to this
Agreement.
|
|
|
5.02
|
Each
party will be an independent contractor and not the servant, employee or agent of the
other party.
|
|
|
5.03
|
UWI
will not in any manner whatsoever commit or purport to commit FTNP to the payment of
money to any person, firm or corporation.
|
|
5.04
|
UWI
agrees with FTNP that, from the Effective Date and until the expiry of [*****] from any
subsequent termination of this Agreement (the “Binding Period”) UWI will not,
directly or indirectly, either alone or in partnership or in conjunction with any person
or persons as principal, agent, shareholder or in any other manner whatsoever:
|
|
5.05
|
FTNP
agrees with UWI that, from the Effective Dale and until the expiry of [*****] from any
subsequent termination of this Agreement (the “Binding Period”) FTNP will not,
directly or indirectly, either alone or in partnership or in conjunction with any person
or persons as principal, agent, shareholder or in any other manner whatsoever, do any
act or thing which results in the relationship between UWI or its affiliates and any
supplier, employee of UWI being diminished or impaired.
|
SECTION
6—CONFIDENTIALITY
|
6.01
|
Each
Party (the “Receiving Party”) will treat as confidential all information or
material disclosed (“Confidential Information”) by the other Party (the “Disclosing
Party”) and supplied to or obtained by the Receiving Party, or any subcontractor,
under this Agreement and will not, without the prior written consent of the Disclosing
Party, except as required by Applicable Law, permit its disclosure except to the extent
that such disclosure is necessary to enable the Receiving Party to fulfill its obligations
under this Agreement. Confidential Information may also include (i) the Materials, and
(ii) information furnished during discussions or oral presentations if it is conspicuously
identified as proprietary at the time and then transcribed or confirmed in writing within
thirty (30) days, specifically describing what portions of such information is considered
to be proprietary or confidential. However, the Receiving Party is under no obligation
to maintain the confidentiality of Confidential Information which the Receiving Party
can show:
|
|
|
(a)
|
is
or subsequently becomes generally available to the public through no act or fault of
the Receiving Party;
|
|
|
(b)
|
was
in the possession of the Receiving Party prior to its disclosure by the Disclosing Party
to the Receiving Party;
|
|
|
(c)
|
was
lawfully acquired by the Receiving Party from a third party who was not under an obligation
of confidentiality to the Disclosing Party; or
|
|
|
(d)
|
is
required by an order of a legal process to disclose, provided that the Receiving Party
gives the Disclosing Party prompt and reasonable notification of such requirement prior
to disclosure; or
|
|
|
(e)
|
was
independently developed by employees, agents or consultants of the Receiving Party who
had no knowledge of or access to the Disclosing Party’s information as evidenced
by the Receiving Party’s records.
|
|
6.02
|
UWI
will ensure that the Research Faculty acknowledge the confidentiality provisions in this
Agreement.
|
SECTION
7—DEFAULT
|
7.01
|
Any
of the following events will constitute an Event of Default, namely:
|
|
|
(a)
|
either
party fails to comply with any material provision of this Agreement;
|
|
|
(b)
|
any
representation or warranty made by UWI or FTNP in accepting this Agreement is untrue
or incorrect; or
|
|
|
(c)
|
any
information, statement, certificate, report or other document furnished or submitted
by or on behalf of UWI or FTNP pursuant to or as a result of this Agreement is untrue
or incorrect.
|
|
|
(d)
|
if
FTNP fails to construct or retrofit a Facility that is suitable to perform the Research
Services under this Agreement.
|
SECTION
8—TERM AND TERMINATION
|
8.01
|
This
Agreement remains in force for the Term unless otherwise terminated under par. 8.02 or
par. 8.03.
|
|
8.02
|
FTNP
may terminate this Agreement for any reason by giving at least six (6) months prior written
notice to UWI.
|
|
8.03
|
Upon
the occurrence of any Event of Default, the non-breaching party shall notify the breaching
party in writing specifying in reasonable detail the basis for the claimed breach, and
the breaching party shall have thirty (30) days within which to cure such breach (“Cure
Period”). No breach of the Agreement shall be actionable if the breaching party
is able to cure the breach within the Cure Period. In the event the breach is not cured
within the Cure Period, at any time thereafter the non-breaching party may, notwithstanding
any other provision of this Agreement, at its option, elect to do any one or more of
the following:
|
|
|
(a)
|
terminate
this Agreement, in which case the obligations of UWI other than those that expressly
or by their nature survive termination of this Agreement, will be discharged, and the
payment of undisputed amounts due under Subsection 2.0l(k) or arising from invoices
rendered under Subsection 3.01(e) of this Agreement will discharge FTNP of all the obligations
of FTNP other than those that expressly or by their nature survive termination of this
Agreement;
|
|
|
(b)
|
suspend
any amount that is due to UWI while the Event of Default continues;
|
|
|
(c)
|
waive
the Event of Default; and
|
|
|
(d)
|
pursue
any other remedy available at law or in equity.
|
|
8.04
|
This
Agreement may be renewed or extended by mutual consent of FTNP and UWI.
|
SECTION
9—DISPUTE RESOLUTION
|
9.01
|
The
Parties irrevocably agree that the courts of Jamaica shall have exclusive jurisdiction
to settle any dispute or claim that arises out of or in connection with this Agreement
or its subject matter (including non-contractual disputes or claims). However, the parties
may agree to seek a mutually acceptable independent third-party adjudicator to resolve
any disputes or claims arising out of or in connection with this Agreement before approaching
the courts of Jamaica for the same.
|
SECTION
10—INDEMNITY
|
10.01
|
FTNP
will indemnify and save harmless UWI, its Board of Governors, directors, officers, employees,
faculty, students and agents from and against any and all losses, claims, damages, actions,
causes of action, costs and expenses that UWI, its Board of Governors, directors, officers,
employees, students and agents may sustain, incur, suffer or put to at any time either
before or after the expiration or termination of this Agreement, where the same or any
of them are based upon, arise out of or occur, directly or indirectly, by reason of breach
of this agreement or any negligent act or omission or willful misconduct of FTNP, or
of any agent, employee, officer or director of FTNP pursuant to this Agreement.
|
|
10.02
|
UWI
will indemnify and save harmless FTNP, its officers, directors, employees and agents
from and against any and all losses, claims, damages, actions, causes of action, costs
and expenses that FTNP may sustain, incur, suffer, or be put to at any time, either before
or after the expiration or termination of this Agreement, where the same are based upon,
arise out of or occur, directly or indirectly, by reason of breaching of this agreement
or any negligent act or omission or willful misconduct of UWI or its Board of Governors,
directors, officers, employees, faculty, contractors, students or agents pursuant to
this Agreement.
|
|
10.03
|
If
any third party makes a claim, or notifies an intention to make a claim, against a Party
which may reasonably be considered likely to give rise to a liability under this Section
(a “Claim”), such Party shall:
|
|
|
(a)
|
as
soon as reasonably practicable, give written notice of the Claim to the other Parties
who may have liability for the Claim, specifying the nature of the Claim in reasonable
detail;
|
|
|
(b)
|
not
make any admission of liability, agreement or compromise in relation to the Claim without
the prior written consent of the Parties that may have liability for the Claim, such
consent not to be unreasonably withheld; and
|
|
|
(c)
|
take
such action as the Parties that may have liability for the Claim may reasonably request
to avoid, dispute, compromise or defend the Claim (including granting such Parties full
conduct and control of the claim).
|
|
10.04
|
FTNP
and UWI shall ensure that adequate provision is made by way of insurance sufficient to
meet their obligations and liabilities under this Agreement and Applicable Laws.
|
|
10.05
|
NEITHER
PARTY SHALL BE LIABLE TO THE OTHER FOR ANY LOSS OF USE, INTERRUPTION OF BUSINESS, LOST
PROFITS, OR ANY INDIRECT, SPECIAL INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND REGARDLESS
OF THE FORM OF ACTION WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT PRODUCT
LIABILITY, OR OTHERWISE, EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSS
OR DAMAGES. IN NO EVENT SHALL EITHER PARTY’S AGGREGATE LIABILITY EXCEED THE TOTAL
AMOUNT TO BE PAID BY FTNP TO UWI IN THE TWELVE (12) MONTHS IMMEDIATELY PRECEDING THE
EVENT GIVING RISE TO THE LIABILITY.
|
SECTION
11—ASSIGNMENT AND SUBCONTRACTING
|
11.01
|
UWI
will not, without the prior, written consent of FTNP:
|
|
|
(a)
|
assign,
either directly or indirectly, this Agreement or any right of UWI under this Agreement;
or
|
|
|
(b)
|
subcontract
any obligation of UWI under this Agreement.
|
|
11.02
|
No
subcontract entered into by UWI will relieve UWI from any of its obligations under this
Agreement or impose upon FTNP any obligation or liability arising from any such subcontract.
|
|
11.03
|
This
Agreement will be binding upon FTNP and its assigns and UWI, UWI’s successors and
permitted assigns.
|
|
11.04
|
FTNP
will not, without the prior, written consent of UWI:
|
|
|
(a)
|
assign,
either directly or indirectly, this Agreement or any light of FTNP under this Agreement;
or
|
|
|
(b)
|
subcontract
any obligation of FTNP under this Agreement;
|
(c) provided that nothing herein shall prohibit or restrict FTNP’s ability to assign and subcontract this Agreement to an affiliate or subsidiary of FTNP, or to an acquirer of all or substantially all of FTNP’s assets or business.
SECTION
12—OWNERSHIP AND PUBLICATION OF RESULTS AND INTELLECTUAL PROPERTY
|
12.01
|
Any
equipment, machinery, data or other property, provided by FTNP to UWI for the conduct
of the Research Services under this Agreement will:
|
|
|
(a)
|
be
the exclusive property of FTNP; and
|
|
|
(b)
|
forthwith
be delivered by UWI to FTNP on written notice to UWI requesting delivery of the same
at FTNP’s costs, whether such a notice is given before, upon, or after the expiration
or sooner termination of this Agreement.
|
|
12.02
|
UWI
will retain title to any equipment purchased with funds provided by UWI under this Agreement
and FTNP acknowledges that UWTs insurance is applicable only to such equipment owned
by UWI.
|
|
12.03
|
UWI
acknowledges and agrees that FTNP owns all right, title and interest in the Material
produced under this Agreement and Intellectual Property arising from the Research Services
under this Agreement.
|
|
12.04
|
To
the extent capable of prospective assignment, UWI hereby assigns, and shall cause the
Research Faculty to assign, to FTNP or its designee, all their right, title, and interest
in and to all Materials, including Intellectual Property arising from the Research Services.
To the extent that any such Materials cannot prospectively be assigned, UWI shall assign,
and shall cause the Research Faculty to assign (in such form as may be required by FTNP),
such Materials to FTNP or its designee on creation. UWI shall require each member of
the Research Faculty to waive, all of their respective rights, howsoever arising, in
any Materials in favour of FTNP. UWI shall assist FTNP, at FTNP’s expense and as
FTNP may request, in any proceeding or litigation involving the Intellectual Property.
|
|
12.05
|
In
the event that any Research Faculty are involved with any discoveries or developments
or other Material resulting from the Research Services for which such Research Faculty
wish to publish or otherwise present academic, non-commercial reports, such Research
Faculty shall advise FTNP of the desire to so publish, and agree
that they shall not present, publish or otherwise disclose any results from the
Research Services until the earlier of: [*****]
|
|
|
(a)
|
UWI
and/or the Research Faculty shall provide FTNP with copies or a detailed outline of any
materials that either it intends to present or publish, [*****] advance of submission
or presentation; and
|
|
|
(b)
|
At
the request of FTNP, UWI and/or the Research Faculty shall not include in or shall remove
from any proposed publication any Confidential Information.
|
|
12.06
|
Acknowledgement.
UWI shall include the following acknowledgement in all publications and presentations
relating to the Research Services: “This research was conducted with support from
Field Trip Natural Products Limited” or such other such acknowledgement as FTNP
shall request in writing. A copy of any publications and presentations shall be provided
to FTNP on publication or presentation, and UWI shall provide FTNP all reasonable assistance
in the acquisition of such rights or licenses as may be required to enable it to make
copies of and distribute the publication or presentation as it considers necessary.
|
|
12.09
|
Subject
to 12.01, upon termination of the Agreement, the parties agree to negotiate in good faith
for the transfer of any physical property (excluding Intellectual Property) provided by
FTNP to UWI, in which UWI has expressed an interest.
|
|
12.10
|
UWI
will be permitted to use the Material for teaching, research and non-commercial purposes,
subject to approval from FTNP, which approval shall not be unreasonably withheld.
|
SECTION
13—NOTICES
|
13.01
|
Any
written communication from UWI to FTNP must be mailed, personally delivered, faxed, or
electronically transmitted to the following address:
|
[*****]
48
Constant Spring Road
Kingston
10
Jamaica
Phone:
[*****]
Fax:
[*****]
Email:
[*****]
With
a copy to Field Trip Natural Products Limited
Attention:
Mujeeb Jafferi
30
Duncan St. Suite 401
Toronto,
Ontario, M5V 2C3
Phone
1-855-230-6700
Email:
[*****]
|
13.02
|
Any
written communication from FTNP to UWI must be mailed, personally delivered, faxed or
electronically transmitted to the following address:
|
[*****]
The
University of West Indies, Mona Campus
Kingston 7, Jamaica
Phone:
[*****]
email:
[*****]
(Specify
name and mailing address including fax number and/or other electronic means for UWI, and name ancl title of contact.)
|
13.03
|
Any
written communication from either party will be deemed to have been received by the other
party on the fifth business day after mailing; on the date of personal delivery if personally
delivered or on the date of transmission if faxed (or
sent by email if applicable).
|
|
13.04
|
Either
party may, from time to time, notify the other party in writing of a change of name and/or
address and, following the receipt of such notice, the new address will, for the purposes
of paragraph 13.01 or 13.02 of this Agreement, be deemed to be the mailing address of
the party giving notice.
|
SECTION
14—NON-WAIVER
|
14.01
|
No
term or condition of this Agreement and no breach by one Party of any such term or condition
will be deemed to have been waived unless such waiver is in writing signed by both Parties.
|
|
14.02
|
The
written waiver by one Party or any breach by the other Party of any term or condition
of this Agreement will not be deemed to be a waiver of any other provision or of any
subsequent breach of the same or any other provision of this Agreement.
|
SECTION
15- ENTIRE AGREEMENT
|
15.01
|
This
Agreement constitutes the entire agreement between the parties with respect to the subject
matter of this Agreement.
|
SECTION
16—SURVIVAL OF PROVISIONS
|
16.01
|
All
of the provisions of this Agreement in favour of FTNP including, without limitation,
paragraphs 3.01(f), Sections 5, 6, 9, 10 and 12, and all of the rights and remedies of
the parties, either at law or in equity, will survive any expiration or sooner termination
of this Agreement.
|
|
16.02
|
All
of the provisions of this Agreement in favour of UWI including, without limitations,
Sections 2, 5, 6, 9, 10, 12, and all of the rights and remedies of the parties, either
at law or in equity, will survive any expiration or sooner termination of this Agreement.
|
SECTION
17—MISCELLANEOUS
|
17.01
|
This
Agreement will be governed by and construed in accordance with the laws of Jamaica
|
|
17.02
|
No
amendment or modification to this Agreement will be effective unless it is in writing
and duly executed by the parties.
|
|
17.03
|
If
any provision of this Agreement or the application to any person or circumstance is invalid
or unenforceable to any extent, the remainder of this Agreement and the application of
such provision to any other person or circumstance will not be affected or impaired thereby
and will be enforceable to the extent permitted by law.
|
|
17.04
|
This
Agreement may be executed by the parties in separate counterparts each of which when
so executed and delivered shall be an original, and all such counterparts may be delivered
by facsimile or email transmission and such transmission shall be considered an original.
|
|
17.05
|
Time
is of the essence of this Agreement.
|
|
17.06
|
For
the purpose of paragraphs 17.07 and 17.08, an “Event of Force Majeure” includes,
but is not limited to, acts of God, changes in the laws of Canada or Jamaica, governmental
restrictions or control on imports, exports or foreign exchange, wars (declared or undeclared),
fires, floods, storms, strikes (including illegal work stoppages or slowdowns),
lockouts, labour shortages, freight embargoes and power failures or other cause
beyond the reasonable control of a party, provided always that lack of money, financing
or credit will not be and will not be deemed to be an “Event of Force Majeure”.
|
|
17.07
|
Neither
party will be liable to the other for any delay, interruption or failure in the performance
of their respective obligations if caused by an Event of Force Majeure, in which case
the time period for the performance or completion of any such obligation will be automatically
extended for the duration of the Event of Force Majeure.
|
|
17.08
|
If
an Event of Force Majeure occurs or is likely to occur, then the party directly affected
will notify the other party forthwith, and will use its reasonable efforts to remove,
curtail or contain the cause of the delay, interruption or failure and to resume with
the least possible delay compliance with its obligations under this Agreement.
|
The parties hereto have executed this Agreement the day and year as set out above.
|
SIGNED
AND DELIVERED on behalf of
|
)
|
SIGNED
AND DELIVERED on behalf of
|
|
The
University of the West Indies
|
)
|
Field
Trip Natural Products Limited
|
|
by
an Authorized Representative of The UWI
|
)
|
by
an Authorized Representative of FTNP
|
|
|
)
|
|
|
|
)
|
|
|
|
)
|
|
|
Dale
Webber
|
)
|
Mujeeb
Jafferi
|
|
Print
Name of University Authorized Representative
|
)
|
Print
Name of Authorized Representative
|
|
|
)
|
|
|
|
)
|
|
|
|
)
|
|
|
|
)
|
|
|
(signed)
“Dale Webber”
|
)
|
(signed)
“Mujeeb Jafferi”
|
|
(Signature)
|
)
|
(Signature)
|
|
|
|
|
|
Ondrae
Kennedy (signed) “Ondrae Kennedy”
|
|
Ronan
Levy (signed) “Ronan Levy”
|
|
WITNESS
|
|
WITNESS
|
SCHEDULE
[*****]
[*****]
[*****]
Exhibit 99.35
CSE
LISTING STATEMENT - FORM 2A
IN
CONNECTION WITH THE LISTING OF
FIELD
TRIP HEALTH LTD.
October
1, 2020
|
NOTICE
TO READER
Psilocybin
is currently a Schedule III drug under the Controlled Drugs and Substances Act (Canada) and it is a criminal offence to
possess substances under the Controlled Drugs and Substances Act (Canada) without a prescription.
Health
Canada has not approved psilocybin as a drug for any indication.
Field
Trip Health Ltd. does not deal with psychedelic substances except within laboratory and clinical trial settings conducted within
approved regulatory frameworks in order to identify and develop treatments for medical conditions and does not have any direct
or indirect involvement with illegal selling, production or distribution of any substances in jurisdictions in which it operates.
While
Field Trip Health Ltd. believes psychedelic substances can be used to treat certain medical conditions, it does not advocate for
the legalization of psychedelics substances for recreational use.
|
TABLE
OF CONTENTS
|
1.
|
ABOUT THIS LISTING STATEMENT
|
6
|
|
2.
|
CORPORATE STRUCTURE
|
8
|
|
3.
|
GENERAL DEVELOPMENT OF THE BUSINESS
|
11
|
|
4.
|
NARRATIVE DESCRIPTION OF THE BUSINESS
|
16
|
|
5.
|
SELECTED CONSOLIDATED FINANCIAL INFORMATION
|
29
|
|
6.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
31
|
|
7.
|
MARKET FOR SECURITIES
|
32
|
|
8.
|
CONSOLIDATED CAPITALIZATION
|
32
|
|
9.
|
OPTIONS TO PURCHASE SECURITIES
|
32
|
|
10.
|
DESCRIPTION OF THE SECURITIES
|
33
|
|
11.
|
ESCROWED SECURITIES
|
35
|
|
12.
|
PRINCIPAL SHAREHOLDERS
|
36
|
|
13.
|
DIRECTORS AND OFFICERS
|
37
|
|
14.
|
CAPITALIZATION
|
47
|
|
15.
|
EXECUTIVE COMPENSATION
|
49
|
|
16.
|
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
|
50
|
|
17.
|
RISK FACTORS
|
50
|
|
18.
|
PROMOTERS
|
63
|
|
19.
|
LEGAL PROCEEDINGS
|
64
|
|
20.
|
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL
TRANSACTIONS
|
64
|
|
21.
|
AUDITORS, TRANSFER AGENTS AND REGISTRARS
|
64
|
|
22.
|
MATERIAL CONTRACTS
|
64
|
|
23.
|
INTEREST OF EXPERTS
|
65
|
|
24.
|
OTHER MATERIAL FACTS
|
65
|
|
25.
|
FINANCIAL STATEMENTS
|
65
|
|
SCHEDULE “A”
|
FINANCIAL STATEMENTS OF NEWTON
|
|
SCHEDULE “B”
|
FINANCIAL STATEMENTS OF FIELD TRIP
|
|
SCHEDULE “C”
|
CONSOLIDATED PROFORMA OF THE ISSUER
|
|
SCHEDULE “D”
|
MD&A OF NEWTON
|
|
SCHEDULE “E”
|
MD&A OF FIELD TRIP
|
GLOSSARY
OF TERMS
The
following is a glossary of certain general terms used in this Listing Statement, including in the summary hereof. Terms and abbreviations
used in the financial statements appended to this Listing Statement are defined separately and the terms and abbreviations defined
below are not used therein, except where otherwise indicated.
“ABCA”
means the Business Corporations Act (Alberta), as from time to time amended or re-enacted, and includes any regulations
made pursuant thereto.
“Agency
Agreement” has the meaning set out in Section 3.1 – General Development of the Business – Three-Year
History of Field Trip and its Subsidiaries
“Agents”
has the meaning set out in Section 3.1 – General Development of the Business – Three-Year History of Field Trip
and its Subsidiaries.
“Agents’
Commission” has the meaning set out in Section 3.1 – General Development of the Business – Three-Year
History of Field Trip and its Subsidiaries.
“Agents’
Shares” has the meaning set out in Section 3.1 – General Development of the Business – Three-Year History
of Field Trip and its Subsidiaries.
“Agents’
Warrants” has the meaning set out in Section 3.1 – General Development of the Business – Three-Year History
of Field Trip and its Subsidiaries.
“Amalgamation”
means the amalgamation of Field Trip and Subco pursuant to Section 181 of the CBCA.
“Amalgamation
Agreement” means the amalgamation agreement dated August 21, 2020 between Newton, Field Trip and Subco.
“Associate”
has the meaning set out in Section 1(1) of the Securities Act (Ontario), RSO 1990, c. S.5.
“Board”
means the board of directors of Newton prior to the Transaction and the board of directors of the Issuer following the Transaction.
“CA
Medical Board” has the meaning set out in Section 4.1.1 Principal Products and Services - Psychedelic Therapy
Market.
“California
Clinic” has the meaning set out in Section 3.1 – General Development of the Business – Three-Year History
of Field Trip and its Subsidiaries.
“CBCA”
means the Canada Business Corporations Act, as from time to time amended or re-enacted, and includes any regulations made
pursuant thereto.
“CDSA”
means the Controlled Drugs and Substances Act, as from time to time amended or re-enacted, and includes any regulations
made pursuant thereto.
“cGMP”
has the meaning set out in Section 17.1 Risk Factors – Risk Factors Related to Issuer – Risks Related to the Issuer’s
Business and Operations – Reliance on Third-Parties – Drug Development.
“Chicago
Clinic” has the meaning set out in Section 3.1 – General Development of the Business – Three-Year History
of Field Trip and its Subsidiaries.
“CIM”
has the meaning set out in Section 13.8 – Conflicts of Interest.
“CIPO”
means Canadian Intellectual Property Office.
“Clinics”
means collectively, the Toronto Clinic, the New York Clinic, the Chicago Clinic, and the California Clinic and, as the context
requires, any other clinics of the Issuer established in the future.
“CMO”
has the meaning set out in Section 17.1 Risk Factors – Risk Factors Related to Issuer – Risks Related to the Issuer’s
Business and Operations – Reliance on Third-Parties – Drug Development.
“Consolidation”
means the consolidation of the Newton Common Shares that was completed on October 1, 2020, pursuant to which eight pre-Consolidation
Newton Common Shares were issued for each post-Consolidation Newton Common Share.
“Continuance”
has the meaning set out in Section 2.2 – Jurisdiction of Incorporation – Issuer.
“CPSO
” has the meaning set out in Section 17 – Risk Factors – Risk Factors Related to Issuer – Risks
Related to the Issuer’s Business and Operations – Ketamine as a Pharmaceutical.
“CSE”
means the Canadian Securities Exchange.
“EPO”
means the European Patent Office.
“Escrow
Agreement” has the meaning set out in under Section 11 – Escrowed Securities.
“Escrowed
Securities” has the meaning set out in under Section 11 – Escrowed Securities.
“FDA”
has the meaning set out in Section 4.1 – Narrative Description of the Business.
“Field
Trip” means Field Trip Psychedelics Inc., prior to giving effect to the Transaction, a company existing under the CBCA
via articles of incorporation dated April 2, 2019 as amended on October 10, 2019, January 17, 2020 and January 28, 2020, and,
where applicable, each subsidiary thereof.
“Field
Trip Class B Shares” means Class B shares in the capital of Field Trip.
“Field
Trip Class C Shares” means Class C shares in the capital of Field Trip.
“Field
Trip Common Shares” means Class A shares in the capital of Field Trip.
“Field
Trip Options” means the issued and outstanding options of Field Trip exercisable for Field Trip Common Shares.
“Field
Trip USA” means Field Trip Health USA Inc., a company existing under the laws of Delaware, incorporated via articles
of incorporation on July 22, 2019 as amended on August 19, 2020, a wholly owned subsidiary of Field Trip prior to the Transaction
and an indirect wholly-owned subsidiary of the Issuer following the Transaction.
“Founders”
means Joseph del Moral, Ronan Levy, Hannan Fleiman, Mujeeb Jaferri and Ryan Yermus.
“FT
Discovery” has the meaning set out in Section 3.1 – General Development of the Business – Three-Year
History of Field Trip and its Subsidiaries.
“FT
Private Placement” has the meaning set out in Section 3.1 – General Development of the Business – Three-Year
History of Field Trip and its Subsidiaries
“FT-104”
has the meaning set out in Section 3.1 – General Development of the Business – Three-Year History of Field Trip
and its Subsidiaries.
“FTNP”
means Field Trip Natural Products Limited, a company existing under the laws of Jamaica, as incorporated on August 7, 2019, a
wholly-owned subsidiary of Field Trip prior to the Transaction and an indirect wholly-owned subsidiary of the Issuer following
the Transaction.
“FTNP
SPA” has the meaning set out in Section 3.1 – General Development of the Business – Three-Year History
of Field Trip and its Subsidiaries.
“GLP”
has the meaning set out in Section 17 Risk Factors relating to the Issuer - Risks Related to the Issuer’s Business
and Operations - Reliance on Third-Parties – Drug Development.
“HC”
means Health Canada.
“HPFB”
has the meaning set out in Section 4.1 – Narrative Description of the Business – Research and Development
– Canada.
“IAPP”
has the meaning set out in Section 13.1 Directors and Officers.
“IDFPR”
has the meaning set out in Section 4.1.1 Principal Products and Services - Psychedelic Therapy Market.
“IFRS”
means the International Financial Reporting Standards as issued by the International Accounting Standards Board and interpretations
by the International Financial Reporting Interpretations Committee.
“IND”
has the meaning set out in Section 17 Risk Factors – Risk Factors Related to Issuer – Risks Related to the Issuer’s
Business and Operations – Clinical Testing.
“Insider”
when used in relation to an issuer, means: (a) a directors or senior officer of the issuer, (b) a director or senior officer of
a company that is an Insider or subsidiary of the issuer, (c) a person that beneficially owns or controls, directly or indirectly,
voting shares carrying more than 10% of the voting rights attached to all outstanding voting securities of the issuer, and (d)
the issuer itself if it holds any of its own securities.
“Issuer”
means Field Trip Health Ltd., a company existing under the CBCA, being Newton after the completion of the Transaction, on a consolidated
basis which carries on the business and operations of Field Trip, following the Transaction.
“Issuer
Common Shares” means common shares in the capital of the Issuer.
“Issuer
Option Plan” has the meaning set out in Section 9 – Options to Purchase Securities.
“Issuer
Option” means the option to purchase an Issuer Common Shares granted pursuant to the Issuer Option Plan.
“Issuer
Preferred Shares” means preferred shares in the capital of the Issuer.
“Issuer
Warrants” means warrants to purchase an Issuer Common Shares.
“Jamaica
Facility” has the meaning set out in Section 3.1 – General Development of the Business – Three-Year History
of Field Trip and its Subsidiaries.
“JMH”
means the Jamaica Ministry of Health.
“Ketamine-enhanced
psychotherapy” or “KEP” has the meaning set out in Section 3.1 - General Development of the Business
- General Development of the Business of Field Trip.
“Listing
Statement” means this CSE Form 2A Listing Statement, which is being filed as required in accordance with the policies
of the CSE.
“Listing
Date” means the date of listing of the Issuer Common Shares on the CSE.
“Milestone
Shares” has the meaning set out in Section 3.1 – General Development of the Business – Three-Year History
of Field Trip and its Subsidiaries.
“NDA”
has the meaning set out in Section 4.1 – Narrative Description of the Business – Research and Development
– United States.
“NDS”
has the meaning set out in Section 4.1 – Narrative Description of the Business – Research and Development
– Canada.
“mg/kg”
A milligram per kilogram of the body weight of the subject person.
“NEO”
has the meaning set out in Section 15 – Executive Compensation – Termination and Change of Control Benefits.
“New
York Clinic” has the meaning set out in Section 3.1 – General Development of the Business – Three-Year
History of Field Trip and its Subsidiaries.
“Newton”
means Newton Energy Corporation, as a company existing, prior to the Transaction, under the ABCA via articles of amalgamation
dated September 30, 2008, as amended on September 30, 2020 in connection with the Transaction.
“Newton
Common Shares” means common shares in the capital of Newton.
“Newton
Options” means the issued and outstanding options of Newton exercisable for Newton Common Shares.
“Newton
UK” has the meaning set out in Section 3.1– General Development of the Business – General Development
of the Business of Newton.
“NI
52-110” has the meaning set out in Section 13.4 – Board Committees.
“NP
46-201” has the meaning set out in Section 11 – Escrowed Securities.
“NY
Medical Board” has the meaning set out in Section 4.1.1 Principal Products and Services - Psychedelic Therapy
Market.
“NYCRR”
has the meaning set out in Section 4.1.1 Principal Products and Services - Psychedelic Therapy Market.
“NYEL”
has the meaning set out in Section 4.1.1 Principal Products and Services - Psychedelic Therapy Market.
“NYOP”
has the meaning set out in Section 4.1.1 Principal Products and Services - Psychedelic Therapy Market.
“OECD”
has the meaning set out in Section 17 Risk Factors relating to the Issuer - Risks Related to the Issuer’s Business
and Operations - Reliance on Third-Parties – Drug Development.
“OHIP”
has the meaning set out in Section 4.1 – Narrative Description of the Business.
“OHPIP”
has the meaning set out in Section 17 – Risk Factors – Risk Factors Related to Issuer – Risks Related to
the Issuer’s Business and Operations – Ketamine as a Pharmaceutical.
“Patient
Portal” has the meaning set out in Section 4.1.1 - Principal Products and Services - Principal Products and
Services.
“PCT”
has the meaning set out in the Section 4.1 Narrative Description of the Business - Narrative Description of the Business
- Research and Development - Patent Cooperation Treaty.
“person”
means a company, a partnership, a trust or individual.
“Promoter”
means (a) a person or company who, acting alone or in conjunction with one or more other persons, companies or a combination thereof,
directly or indirectly, takes the initiative in founding, organizing or substantially reorganizing the business of an issuer;
or (b) a person or company who, in connection with the founding, organizing or substantial reorganizing of the business of an
issuer, directly or indirectly, receives in consideration of services or property, or both services and property, ten percent
(10%) or more of any class of securities of the issuer or ten percent (10%) or more of the proceeds from the sale of any class
of securities of a particular issue, but a person or company who receives such securities or proceeds either solely as underwriting
commissions or solely in consideration of property shall not be deemed a promoter within the meaning of this definition if such
person or company does not otherwise take part in founding, organizing, or substantially reorganizing the business.
“Psilocybin
Research” has the meaning set out in Section 3.1 – General Development of the Business – Three-Year History
of Field Trip and its Subsidiaries.
“Psychedelic-enhanced
psychotherapy” has the meaning scribed hereto under Section 3.1- General Development of the Business - General
Development of the Business of Field Trip.
“Psychedelic-integration
psychotherapy” has the meaning scribed hereto under Section 3.1 - General Development of the Business - General
Development of the Business of Field Trip.
“PTSD”
means post-traumatic stress disorder, as defined in Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition.
“Related
Persons” has the meaning set out in Section 11 – Escrowed Securities.
“Replacement
Options” means the issued and outstanding options of Issuer held by the former holders of Newton Options prior to the
Transaction exercisable for Issuer Common Shares.
“Research
Agreement” has the meaning set out in Section 3.1 – General Development of the Business – Three-Year
History of Field Trip and its Subsidiaries.
“Reverse
Takeover” has the meaning set out in National Instrument 51-102 – Continuous Disclosure Obligations of the Canadian
Securities Administrators.
“Subco”
means Newton Energy Subco Limited, a company existing under the CBCA, as incorporated on July 24, 2020 solely for the purpose
of completing the Transaction, and is a wholly-owned subsidiary of Newton prior to the Transaction.
“Toronto
Clinic” has the meaning set out in Section 3.1 – General Development of the Business – Three-Year History
of Field Trip and its Subsidiaries.
“Transaction”
means the three-cornered amalgamation among Newton, Field Trip and Subco pursuant to the terms of the Amalgamation Agreement,
which constituted a Reverse Takeover of Newton by Field Trip.
“Trip
App” has the meaning scribed hereto under Section 3.1General Development of the Business - Three-Year History
of Field Trip and its Subsidiaries.
“TPD”
has the meaning set out in Section 4.1 – Narrative Description of the Business – Research and Development
- Canada.
“TSXV”
means the TSX Venture Exchange Inc.
“USPTO”
means the United States Patent and Trademark Office.
“UWI”
has the meaning set out in Section 3.1 – General Development of the Business – Three-Year History of Field Trip
and its Subsidiaries.
“WIPO”
means the World Intellectual Property Organization.
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1.
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ABOUT
THIS LISTING STATEMENT
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In
this Listing Statement, unless otherwise indicated:
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(a)
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words
importing the singular, where the context requires, include the plural and vice versa,
and words importing any gender include all genders;
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(b)
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references
to “including” should be read as meaning “including without limitation”,
“including, but not limited to” and similar permutations thereof;
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(c)
|
references
to “$” or “C$” refer to Canadian dollars and references to “US$”
refer to United States dollars; and
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(d)
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all
information is stated as at October 1, 2020, unless otherwise indicated.
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1.2
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Cautionary
Note Regarding Forward-Looking Statements
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The
information provided in this Listing Statement, including information incorporated by reference, may contain “forward-looking
statements” about the Issuer. All statements, other than statements of historical fact, made by the Issuer that address
activities, events or developments that the Issuer expects or anticipates will or may occur in the future are forward-looking
statements, including statements preceded by, followed by or that include words such as “may”, “will”,
“would”, “could”, “should”, “believes”, “estimates”, “projects”,
“potential”, “expects”, “plans”, “intends”, “anticipates”, “targeted”,
“continues”, “forecasts”, “designed”, “goal”, or the negative of those words or
other similar or comparable words.
Forward-looking
statements may relate to future financial conditions, results of operations, plans, objectives, performance or business developments.
These statements speak only as at the date they are made and are based on information currently available and on management’s
current expectations and assumptions concerning the Issuer’s future events, financial conditions, results of operations,
plans, objectives, performance, business developments, objectives or milestones. Forward-looking statements in this Listing Statement
include statements related to:
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•
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the
impact of the COVID-19 pandemic;
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•
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the
business objectives of the Issuer and its research and development activities;
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•
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the
acceptance in the medical community of ketamine and other psychedelic substances as effective
treatment for depression, PTSD, addiction and other mental health conditions;
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•
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the
funds available to the Issuer and the use of such funds;
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•
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the
ability of the Issuer to operate as a going concern if there are any changes in laws
or regulatory requirements;
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•
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the
healthcare industry in Canada and the United States;
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•
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patient
acceptance and referrals to the Issuer’s clinics;
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•
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the
approval of regulatory bodies of psychedelic substances other than ketamine, including
MDMA and psilocybin, for the treatment of various health conditions;
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•
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the
ability of the Issuer to complete and operate the Jamaica Facility;
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•
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the
ability of the Issuer to complete and operate its clinical expansion plan;
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•
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the
ability of the Issuer to achieve anticipated revenues from its operations;
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•
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the
ability of the Issuer to secure qualified employees, contractors and other required personnel;
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•
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the
ability of the Issuer to complete and operate the New York Clinic, California Clinic,
Chicago Clinic and additional clinics;
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•
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the
ability of new clinics to offer technology-enabled, ketamine-enhanced psychotherapy,
psychedelic-enhanced psychotherapy and psychedelic-integration psychotherapy services;
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•
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the
ability of the Issuer to develop proper protocols to incorporate the use of additional
psychedelic medicines as they are legalized and approved for use;
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•
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the
development, patentability and viability of FT Discovery molecule FT-104;
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•
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the
ability of FT Discovery to translate and utilize patient data to design new molecules
to improve future patient outcomes;
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•
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the
ability of the Issuer to prepare sufficient new drug application, as required, prior
to initiating any additional clinical trials for FT-104;
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•
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the
ability of the Issuer to enroll an increasing number of patients to meet eligibility
requirements in a scenario where FT-104 advances to clinical testing and through to more
complex clinical trials;
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•
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the
ability of the Issuer to obtain regulatory approvals prior to each clinical trial;
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•
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the
development and launch of the Trip App;
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•
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the
ability to develop and launch the Patient Portal;
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•
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the
ability of the Issuer to provide effective management services to physicians owning physician-owned
clinics;
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•
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the
ability of the Issuer to generate patient member growth;
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•
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compliance
with applicable laws and the ability to obtain any permits or other authorizations that
may be required in the future;
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•
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the
expected adoption of any incentive option plans or other equity incentive plans;
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•
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the
expected entry into any employment contracts;
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•
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controlled
substances laws; and
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•
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reliance
on third parties.
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The
forward-looking statements contained herein are based on certain key management expectations and assumptions, including with respect
to expectations and assumptions concerning: (i) receipt of required shareholder and regulatory approvals in a timely manner or
at all; (ii) receipt and/or maintenance of required licenses and third party consents in a timely manner or at all; and (iii)
the success of the operations of the Issuer.
Forward-looking
statements are subject to a number of known and unknown risks, uncertainties and other factors that may cause actual results,
performance or achievements to be materially different from that which are expressed or implied by such forward-looking statements.
These risks and uncertainties include those related to: the ability of the Issuer to secure additional financing for current and
future operations and capital projects, as needed; the Issuer’s dependence on management and key personnel; general economic,
market and business conditions, early-stage industry growth rates, the risks associated with competition from other companies
directly or indirectly engaged in the Issuer’s industry; foreign currency exchange rate fluctuations and its effects on
the Issuer’s operations; the risks and costs associated with being a publicly traded company, the market demand for the
Issuer Common Shares, and the liquidity and dilution of the Issuer Common Shares; the impact of the COVID-19 pandemic; the Issuer’s
limited operating history; the speculative nature of an investment in the Issuer Common Shares; risks inherent in the nature of
the health clinic industry; non-compliance with laws; medical personnel operating out of Issuer’s clinics; unfavourable
publicity or consumer perception; patient acquisitions; development risks; substantial risks of regulatory or political change;
the ability to obtain necessary government permits and licences; ketamine as a pharmaceutical; non-referral of patients; negative
cash flow from operating activities; management of growth; dependence on management team; reliance on third parties; intellectual
property; competition; litigation; insurance coverage; the Issuer being a holding company; a significant number of Issuer Common
Shares being owned by a limited number of existing shareholders; the industry being difficult to forecast; market volatility;
use of funds; conflicts of interest; enforcement of legal rights; emerging market risks; agriculture risks; violations of laws
and regulations related to drug development; reliance on third parties for drug development; ability to produce commercial grade
pharmaceuticals; clinical testing; regulatory approval process; cyber-attacks; reliance upon insurers and governments; difficulty
in enforcing judgments and effecting service of process on directors and officers; any other risks described in this Listing Statement
and described from time to time in documents filed by the Issuer with Canadian securities regulatory authorities; and other factors
beyond the Issuer’s control.
Such
risks and uncertainties are further described under the heading “Risk Factors” in this Listing Statement. Although
the Issuer believes that the expectations and assumptions on which such forward -looking statements are based are reasonable,
undue reliance should not be placed on the forward-looking statements, because no assurance can be given that they will prove
to be correct. Consequently, all forward-looking statements made in this Listing Statement and other documents of the Issuer are
expressly qualified by such cautionary statements and there can be no assurance that the anticipated results or developments will
actually be realized or, even if realized, that they will have the expected consequences to or effects on the Issuer. The forward-looking
statements in this Listing Statement are made as at the date hereof, and the Issuer does not undertake any obligation to update
or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than as required
under applicable Canadian securities laws.
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1.3
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Market
and Industry Data
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This
Listing Statement includes market and industry data that has been obtained from third-party sources, including industry publications.
The Issuer believes that the industry data is accurate and that its estimates and assumptions are reasonable, but there is no
assurance as to the accuracy or completeness of this data. Third-party sources generally state that the information contained
therein has been obtained from sources believed to be reliable, but there is no assurance as to the accuracy or completeness of
included information. Although the data is believed to be reliable, the Issuer has not independently verified any of the data
from third- party sources referred to in this Listing Statement or ascertained the underlying economic assumptions relied upon
by such sources. The Issuer does not intend, and undertakes no obligation, to update or revise any such information or data, whether
as a result of new information, future events or otherwise, except as, and to the extent required by, applicable Canadian securities
laws.
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2.1
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Corporate
Name and Head and Registered Office
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This
Listing Statement has been prepared in connection with the Transaction and the proposed listing on the CSE of the Issuer Common
Shares.
The
corporate name of the Issuer is “Field Trip Health Ltd.”.
The
head and registered office of the Issuer is located at 30 Duncan Street, Suite 401, Toronto, ON M5V 2C3.
Prior
to the completion of the Transaction, the registered and head office of Newton was located at 1600, 333 7th Avenue SW, Calgary,
AB T2P 2Z1, and the registered and head office of Field Trip was located at 30 Duncan Street, Suite 401, Toronto, ON M5V 2C3.
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2.2
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Jurisdiction
of Incorporation
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Newton
Prior to the Transaction
Newton
was formed on September 30, 2008, pursuant to an amalgamation under the ABCA. Newton was authorized to issue an unlimited number
of Newton Common Shares and an unlimited number of preferred shares.
On
September 30, 2020, Newton amended its articles to consolidate the Newton Common Shares, pursuant to which every eight pre-Consolidation
Newton Common Shares were exchanged for each post -consolidation Newton Common Share, and, the number and exercise prices of the
outstanding Newton Options were proportionately adjusted.
On
November 15, 2013, the Board approved an alteration of the by-laws of Newton to include an advance notice provision, which stipulates
the requirement to provide advance notice to Newton in circumstances where nominations of persons for election to the Board are
made by Newton shareholders other than pursuant to: (i) a requisition of a meeting made pursuant to the provisions of the ABCA;
or (ii) a shareholder proposal made pursuant to the provisions of the ABCA. Newton shareholders approved and ratified the advance
notice provision on December 12, 2013.
The
Newton Common Shares were listed on the NEX board of the TSXV until September 30, 2020, when they were delisted from the TSXV
in connection with the completion of the Transaction.
Field
Trip Prior to the Transaction
Field
Trip was incorporated under the CBCA on April 2, 2019 as “Field Trip Ventures Inc.” and subsequently changed its name
to “Field Trip Psychedelics Inc.” on October 10, 2019. On incorporation, Field Trip was authorized to issue an unlimited
number of Field Trip Common Shares and an unlimited number of Field Trip Class B Shares, issuable in series.
On
January 17, 2020, Field Trip amended its articles to create an unlimited number of Field Trip Class C Shares, issuable in series,
and amended the rights, privileges and conditions attaching to the Field Trip Common Shares and the Field Trip Class B Shares.
On
January 28, 2020, Field Trip amended its articles to create the first series of Field Trip Class B Shares, designated as Series
1. After giving effect to the foregoing, and prior to the completion of the Transaction, Field Trip was authorized to issue an
unlimited number of Field Trip Common Shares, an unlimited number of Field Trip Class B Shares and an unlimited number of Field
Trip Class C Shares.
Issuer
Following the Transaction
In
connection with the Transaction, the Issuer changed its name from Newton Energy Corporation to Field Trip Health Ltd. on September
30, 2020 and was continued under the CBCA on October 1, 2020 (the “Continuance”). In connection with the Continuance,
the Issuer adopted new by-laws which included an advance notice provision, which stipulates the requirement to provide advance
notice to the Issuer in circumstances where nominations of persons for election to the Board are made by the Issuer shareholders
other than pursuant to: (i) a requisition of a meeting made pursuant to the provisions of the CBCA; or (ii) a shareholder proposal
made pursuant to the provisions of the CBCA. Issuer shareholders approved and ratified the advance notice provision on September
23, 2020.
The
Issuer is a reporting issuer in the provinces of British Columbia and Alberta.
The
Issuer is authorized to issue an unlimited number of Issuer Common Shares and an unlimited number of preferred shares, issuable
in series.
On
September 25, 2020, the Issuer obtained the conditional approval to list the Issuer Common Shares on the CSE.
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2.3
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Intercorporate
Relationships
|
At
the time of the Transaction, Subco, which was incorporated under the CBCA on July 24, 2020 solely for the purpose of completing
the Transaction, was Newton’s only subsidiary, and Field Trip had four wholly-owned subsidiaries and one indirect wholly-owned
subsidiary. The following chart illustrates the intercorporate relationships that existed among Field Trip and its subsidiaries
prior to the completion of the Transaction:
The
organization chart of the Issuer and its subsidiaries following the Transaction is set forth below.
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2.5
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Issuers
Incorporated Outside of Canada
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As
the Issuer is incorporated under the CBCA, this section is not applicable.
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3.
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GENERAL
DEVELOPMENT OF THE BUSINESS
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|
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3.1
|
General
Development of the Business
|
General
Development of the Business of Newton Prior to the Transaction
On
September 30, 2008, “Newton Energy Corporation” amalgamated with “Newton Energy Inc.” pursuant to the
ABCA. The amalgamated company carried on business as “Newton Energy Corporation” and the Newton Common Shares were
listed on the TSXV on September 30, 2008. Newton Energy Inc. had one subsidiary, Newton Energy UK Ltd. (“Newton UK”),
which became an indirect subsidiary of Newton after the amalgamation.
On
November 14, 2014, Newton announced that it had completed the sale of all of the securities of Newton UK to Hutton Energy PLC.
The sale of Newton UK constituted the sale of substantially all of Newton’s assets, and, upon closing of the transaction,
Newton did not meet the continued listing requirements for a TSXV Tier 2 company. Therefore, effective November 17, 2014, the
listing of the Newton Common Shares transferred to the NEX board of the TSXV.
After
exiting the oil and gas sector, Newton embarked on a new direction and began exploring new projects and ventures. In particular,
Newton considered material transactions with: (i) Kicker Power Corp.; (ii) Verano Holdings, LLC; and (iii) Franchise Cannabis
Corp., none of which were completed.
In
the three most recently completed financial years, Newton had no active business, did not generate revenue from operations, and
had no source of revenue.
General
Development of the Business of Field Trip Prior to the Transaction
The
Issuer has a limited operating history. The Issuer’s principal business is providing patient-focused treatments via the operation
of medical clinics, which guide patients through ketamine-enhanced psychotherapy. The Issuer also plans to offer psychedelic-enhanced
psychotherapy and psychedelic-integration psychotherapy, when permissible. The Issuer’s business was founded in response to the
urgent need to combat the spiraling mental health crisis facing Canada and the world, which is partly a result of the limited
effectiveness of current pharmacologic treatments. Evidence shows that ketamine, which is approved by Health Canada and the FDA
as an anaesthetic, can be effective for treating depression symptoms when used off-label for that purpose.1 Ketamine
also creates dissociative effects which cause it to often be categorized among psychedelic drugs. It was the first psychedelic
administered to patients in conjunction with the Issuer’s custom developed psychotherapy protocol (as discussed below). Some of
the programs that the Issuer offers or plans to offer include the following:
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•
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Ketamine-enhanced
psychotherapy (“KEP”) is a clinic-based treatment that combines the administration of ketamine with psychotherapy
sessions. These sessions are conducted with medical and psychological support and may include therapy-enhancing tools such as
music.
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•
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Psychedelic-enhanced
psychotherapy combines the use of psychedelic medicines with psychotherapy sessions and
other enhancing therapies in a clinical setting. KEP is a type of psychedelic-enhanced
psychotherapy.
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•
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Psychedelic-integration
psychotherapy consists of one or more psychotherapy sessions to support a patient’s
understanding and processing of past psychedelic experiences through reflection and integration
of those experiences. Psychedelic-integration psychotherapy can be combined with psychedelic-enhanced
psychotherapy, including KEP, or may be employed on its own to integrate patient experience
outside of a clinical setting.
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1
Intravenous Ketamine for the Treatment of Mental Health Disorders: A Review of Clinical Effectiveness and Guidelines. Canadian
Agency for Drugs and Technologies in Health. 20 August 2014. (https://www.cadth.ca/intravenous-ketamine-treatment-mental-health-disorders-review-clinical-effectiveness-and-guidelines);
See also, Nutt D, Erritzoe D, Carhart-Harris R. Psychedelic Psychiatry’s Brave New World. Cell. 2020;181:24-8 (available
at https://www.cell.com/cell/pdf/S0092-8674(20)30282-8.pdf)
Ketamine
is currently the only legal psychedelic medicine generally available to be prescribed by health care practitioners in Canada and
the United States. As existing psychedelic medicines become available for use in a therapeutic setting and novel psychedelic medicines
become available, the Issuer intends to explore the use of other methods of psychedelic-enhanced psychotherapy via research, trials
and obtaining the advice of experts in the relevant areas either through consulting or employment arrangements provided that,
such medicines are shown to be beneficial to the Issuer’s then current or targeted patient population. KEP may be prescribed for
depression, PTSD, and such other treatment applications as the clinician treating a patient may, in his or her professional judgement,
deem advisable and supported by scientific evidence.
The
Issuer’s custom developed psychotherapy protocol involves a six-step process. In the Toronto Clinic, to qualify for ketamine-enhanced
psychotherapy sessions, a patient must first receive a written referral for ketamine-enhanced psychotherapy from a licensed medical
doctor in Canada. Upon receiving a referral, medical professionals at the Toronto Clinic review the patient’s medical history
to ensure that there are no immediate contraindications. The patient is then scheduled for a consultation with a psychiatrist
at the Toronto Clinic to assess whether ketamine -enhanced psychotherapy is a suitable treatment option. Following approval by
a psychiatrist, Field Trip will then provide a second screening to ensure the patient’s physical health is suitable for
ketamine- enhanced psychotherapy, and a treatment plan is developed. Upon approval of the treatment plan, the patient will meet
with a psychotherapist to prepare for the treatment ahead. Patients are then scheduled to participate in their first dosing session.
Immediately following the dosing session, a licensed psychotherapist operating out of the Toronto Clinic will provide exploratory
therapy to help the patient reintegrate into their bodies and understand their experience. Dosing sessions are typically scheduled
two to three days apart. An integration therapy session is provided to each patient after the second ketamine session. During
this session, the psychotherapist will help the patient integrate the experiences using different clinical psychology techniques
to help drive habit change and outlook/mindset improvements. A course of treatment is typically six dosing sessions with three
integration sessions. Field Trip is also in the process of developing the Patient Portal for ongoing support and education to
help sustain the effects of ketamine-enhanced psychotherapy.
Three-Year
History of Field Trip and its Subsidiaries
On
April 2, 2019, the Founders purchased an aggregate of 6,300,630 Field Trip Common Shares at a price of $0.056 per Field Trip Common
Share for aggregate gross proceeds of $352,835.28.
On
August 20, 2019, FTNP entered into a letter of intent with the University of West Indies at Mona, Jamaica (“UWI”),
to establish and operate a clinical laboratory and research facility (the “Jamaica Facility”) within the UWI
premises in order to conduct research and cultivation of psilocybin mushrooms, botanicals and other related fungi (the “Psilocybin
Research”) . The Psilocybin Research is not in contravention of local laws in Jamaica and the Issuer has received a
legal opinion from local counsel confirming the same with respect to the Psilocybin Research. In addition, the Minister of Health
& Wellness of Jamaica has delivered a letter to the Issuer stating his support for the Issuer’s operations in Jamaica. We
reiterate that the Issuers activity in relation to the research and cultivation of psilocybin mushrooms, botanicals and other
related fungi is limited to the jurisdiction of Jamaica and the Issuer does not deal with psychedelic substances except within
laboratory and clinical trial settings conducted within approved regulatory frameworks in order to identify and develop treatments
for medical conditions and does not have any direct or indirect involvement with illegal selling, production or distribution of
any substances in jurisdictions in which it operates. Psilocybin is currently a Schedule III drug under the CDSA and it is a criminal
offence to possess substances under the CDSA without a prescription. Health Canada has not approved psilocybin as a drug for any
indication.
On
October 3, 2019, two Founders exercised options for an aggregate of 2,700,270 Field Trip Common Shares at an exercise price of
$0.00001 per Field Trip Common Share.
On
October 3, 2019, Field Trip filed a provisional patent with the USPTO (Appl 62,909,931; October 3, 2019) relating to certain hallucinogenic
compositions. No further scientific data has been generated to support the invention. Field Trip has decided that the examples
and content are likely insufficient to gain patent approval, but the nature of the invention warrants further investigation. Field
Trip has decided to allow the current filing to lapse and may choose to refile at some time in the future when additional information
and data support is available.
On
October 19, 2019, Field Trip closed a non-brokered private placement for aggregate gross proceeds of $1,255,000 through the issuance
of an aggregate of 2,510,000 Field Trip Common Shares at a price of $0.50 per Field Trip Common Share.
On
November 28, 2019, Field Trip entered into a lease agreement for its first ketamine -enhanced psychotherapy, psychedelic-enhanced
psychotherapy, and psychedelic-integration psychotherapy clinic in Toronto, Ontario (the “Toronto Clinic”).
Construction of the Toronto Clinic began in December 2019. On March 4, 2020, Field Trip opened the Toronto Clinic and began conducting
initial consultations with patients who were interested in ketamine as a treatment for depression symptoms.
Between
February 6, 2020 and May 20, 2020, Field Trip closed non-brokered private placement tranche offering for aggregate gross proceeds
of US$8,550,537.30 through the issuance of an aggregate of 9,507,263 Field Trip Class B Shares at a price of US$0.90 per Field
Trip Class B Share. The Field Trip Class B Shares were convertible on a 1 to 1 basis into Field Trip Common Shares upon the closing
of the FT Private Placement. 20,882 of the Field Trip Class B Shares were issued in satisfaction of certain fees of Field Trip
in connection with the offering.
On
February 14, 2020 Field Trip entered into a lease agreement for its ketamine-enhanced psychotherapy, psychedelic-enhanced psychotherapy,
and psychedelic-integration psychotherapy clinic in New York, New York (the “New York Clinic”). Construction
of the New York Clinic began in February 2020. In August 2020, Field Trip opened the New York Clinic and began conducting initial
consultations with patients who were interested in ketamine as a treatment for depression symptoms.
On
April 6, 2020, FTNP entered into the definitive research agreement with UWI (the “Research Agreement”), whereby
FTNP agreed to lease property from UWI on which to construct the Jamaica Facility, where it will carry out the Psilocybin Research,
and engaged UWI to assist FTNP in the Psilocybin Research. Under the Research Agreement, FTNP agreed to contribute up to US$1,000,000
for initial capital for the Jamaica Facility and Psilocybin Research and a total of US$100,000 to fund student development initiatives
at UWI over a 36-month period. UWI has agreed to provide personnel selected by FTNP to assist it in the Psilocybin Research and
FTNP shall be responsible for the costs of labour, laboratory supplies, technical assistance and other charges directly related
to the Psilocybin Research provided by UWI, plus 15%. All equipment, machinery, data and other property purchased by FTNP, and
all intellectual property and discoveries developed through the Psilocybin Research, remain the sole and exclusive property of
FTNP. In the event that FTNP develops and commercializes the intellectual property developed at the Jamaica Facility, UWI shall
receive a royalty of 2% of the net sales from any products developed utilizing such intellectual property. In connection with
entering into the Research Agreement, Field Trip launched a new research and drug development business segment, entitled Field
Trip Discovery (“FT Discovery”). FT Discovery is an umbrella term used by the Issuer to divide its personnel
between those involved with the clinical operations of the Issuer’s business and those involved in the research and development
operations of the Issuer’s business. The term “Field Trip Discovery” will also be used as a marketing and branding tool
to support the Issuer’s research and development operations and the Issuer has applied for a trademark in Canada for the term
“Field Trip Discovery”.
FTNP’s
current research site at UWI is a dedicated area within UWI’s Natural Products Institute. Initial work has been carried out at
this temporary location, focused primarily on the creation of a genetic library and cultivation of various psychoactive species
of fungi for research purposes. This space has also been used to train local personnel who are anticipated to become full time
employees at FTNP upon completion of their doctoral degrees by the end of 2020.
It
is anticipated that the Jamaica Facility, a larger, a 2,072 square foot standalone research laboratory, which is nearing completion,
will open in October 2020 on the UWI campus with renovation costs amounting to a total of approximately US$300,000, most of which
has already been advanced by the Issuer. The Jamaica Facility will be dedicated to the study of psychoactive fungi., specifically
the cultivation, extraction and analysis of the psychoactive molecules contained within the mycelia and fruiting bodies of these
complex organisms with a view to identifying and quantifying psilocybin and other tryptamine analogues that may play a role in
the psychedelic experience and serve as promising candidates for drug development. It is anticipated that the research at the
Jamaica Facility will be conducted by on-site employees with the support of the Issuer.
FT
Discovery is also developing a molecule called FT-104. Field Trip believes that FT-104 is unique and patentable in Canada and
the United States and has received advice from counsel in Canada confirming such belief. Field Trip filed a provisional patent
with the USPTO (Appl 63,045,901; June 30, 2020) with claims that include FT-104 structures and uses. Experimental evidence has
been achieved and continues to be a focus of efforts in order to further support the concepts within the invention. The Issuer
intends to file a utility patent with the USPTO and under the PCT prior to the lapse of this provisional patent on June 12, 2021.
FT-104 is in the pre- clinical development stage, optimization of a GLP synthesis of FT-104 is underway with completion expected
before Q4 2020. This will support ongoing pre-clinical efforts which are in turn expected to be completed by Q3 2021. No assurances
can be given that Field Trip will be able to meet this timeline or that FT-104 will be a viable molecule.
Field
Trip has designed a mobile software application that will be available in for both iOS and Android devices (the “Trip
App”). The Trip App is designed to provide users with a framework and tools for self-directed consciousness-expanding
activities. The Trip App features mood tracking, personalized music, trip record keeping, guided journaling, voice recording,
and mindfulness content. The Trip App is functional and operational and the Issuer is currently in the process of obtaining feedback
from a select set of users before a larger public launch. The Issuer anticipates making the Trip App available to the general
public by the end of October.
On
June 2, 2020, Field Trip entered into a share purchase agreement with Darwin, Inc. and FTNP (the “FTNP SPA”),
whereby Field Trip agreed to acquire the remaining 22.22% interest in FTNP that it did not already own in exchange for the issuance
of 1,200,000 Field Trip Common Shares, issuable on the achievement by FTNP of certain milestones (the “Milestone Shares”).
Upon execution of the FTNP SPA, Field Trip acquired 100% ownership of FTNP. The Milestone Shares are issuable as follows: (i)
600,000 Milestone Shares upon FTNP commencing research under the Research Agreement at the Jamaica Facility, which occurred on
September 21, 2020; (ii) 150,000 Milestone Shares on June 3, 2021; and (iii) 450,000 Milestone Shares issuable on a prorated quarterly
basis over 36 months, commencing on the first calendar quarter following June 3, 2021; provided in each case that the lease for
the Jamaica Facility and the Research Agreement have not been terminated.
On
June 5, 2020 Field Trip entered into a lease agreement for its ketamine-enhanced psychotherapy, psychedelic-enhanced psychotherapy,
and psychedelic-integration psychotherapy clinic in Santa Monica, California (the “California Clinic”) . Construction
of the California Clinic began in June 2020. In September 2020, Field Trip opened the California Clinic and began conducting initial
consultations with patients who were interested in ketamine as a treatment for depression symptoms.
On
July 21, 2020 Field Trip entered into lease agreement for an additional clinic to be developed in Chicago, Illinois (the “Chicago
Clinic”). Field Trip expects that the Chicago Clinic will be operational in November 2020 and will offer ketamine-enhanced
psychotherapy, psychedelic-enhanced psychotherapy, and psychedelic-integration psychotherapy. The estimated cost of the renovations
and furnishings of the Chicago Clinic is US$200,000.
The
table below sets forth material terms of the lease agreements for each Clinic.
|
|
|
Size
|
|
|
Gross
Monthly
|
|
|
|
|
|
|
|
Location
|
|
(Sq
Foot)
|
|
|
Rent(1)
|
|
|
|
Expiry
|
|
|
Status
|
|
Toronto,
Ontario
|
|
|
8,231
|
(2)
|
|
$
|
20,577
|
|
|
|
Oct
2023
|
|
|
Operational
|
|
New York, NY
|
|
|
4,500
|
|
|
$
|
26,000
|
|
|
|
July
2022
|
|
|
Operational
|
|
Santa Monica, CA
|
|
|
5,200
|
|
|
$
|
20,000
|
|
|
|
June
2030
|
|
|
Operational
|
|
Chicago, IL
|
|
|
4,145
|
|
|
$
|
9,000
|
(3)
|
|
|
June
2031
|
|
|
Renovation underway
|
Notes:
|
|
(1)
|
Leases
for properties located in Canada are expressed in Canadian Dollars and leases for properties
located in in the United States are expressed in US Dollars.
|
|
|
(2)
|
Includes
approximately 4,100 square feet for Field Trip’s headquarters.
|
|
|
(3)
|
Gross
monthly rent will be $15,500 from October 1, 2021.
|
On
August 14, 2020, Field Trip completed a brokered private placement offering of 5,516,724 Field Trip Common Shares at a price per
Field Trip Common Share of $2.00 for aggregate gross proceeds of $11,033,448 (the “FT Private Placement”). The FT
Private Placement was completed pursuant to an agency agreement (the “Agency Agreement”) among Field Trip,
and the agents in the FT Private Placement (the “Agents”). The net proceeds of the FT Private Placement will
be used for funding of the FT Discovery drug discovery & development program, to develop the Issuer’s clinics &
marketing, to fund research & development at the Jamaica Facility, for technology & innovation, and for general working
capital purposes. In connection with the closing of the FT Private Placement the compensation payable to the Agents included the
issuance of: (i) an aggregate of 299,753 warrants (the “Agents’ Warrants”), each of which is exercisable
into one Field Trip Common Share at an exercise price of $2.00 per Field Common Trip Share until August 14, 2022; and (ii) an
aggregate of 55,167 Field Trip Common Shares (the “Agents’ Shares”) at a deemed price of $2.00 per Field
Trip Common Share.
Upon
the closing of the FT Private Placement, each Field Trip Class B Share was converted into one Field Trip Common Share, in accordance
with the terms thereof, without payment of additional consideration or further action on the part of the holders thereof.
On
September 21, 2020, Field Trip completed a follow on financing on the same terms as the FT Private Placement (the “September
Offering”) . In connection with the September Offering, Field Trip issued an aggregate of 816,932 Field Trip Common Shares
a price per Field Trip Common Share of $2.00 for aggregate gross proceeds of $1,633,864.
On
September 25, 2020, Field Trip issued the first instalment of Milestone Shares under the FTNP SPA, being a total of 600,000 Field
Trip Common Shares at a deemed price per Field Trip Common Share of $2.00.
The
Transaction
On
August 21, 2020, Newton, Subco and Field Trip entered into the Amalgamation Agreement, and the Transaction closed on October 1,
2020. In connection with the Transaction:
|
|
•
|
an
aggregate of 37,007,886 Issuer Common Shares were issued to the former holders of Field
Trip Common Shares, at a deemed price of $2.00 per Issuer Common Share, on a one-for-one
basis;
|
|
|
•
|
all
outstanding Field Trip Options and Agents’ Warrants became Issuer Options and Issuer
Warrants, exercisable into Issuer Common Shares, with all exercise prices and expiry
dates remaining the same;
|
|
|
•
|
the
Issuer amended its articles to change its name to “Field Trip Health Ltd.”;
|
|
|
•
|
the
Issuer completed the Continuance;
|
|
|
•
|
all
of the directors of Newton resigned, and Joseph del Moral, Ronan Levy, Hannan Fleiman,
Mujeeb Jaferri, Ryan Yermus, Helen Boudreau and Dieter Weinand, all of whom were nominees
of Field Trip, were appointed as directors of the Issuer;
|
|
|
•
|
all
of the officers of Newton resigned and the following were appointed as officers of the
Issuer:
|
|
Name
|
|
|
|
Position
|
|
|
|
|
|
|
|
Joseph del Moral
|
|
-
|
|
Chief Executive Officer
|
|
|
|
|
|
|
|
Donna Wong
|
|
-
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
Ronan Levy
|
|
-
|
|
Executive Chairman
|
|
|
|
|
|
|
|
Hannan Fleiman
|
|
-
|
|
President
|
|
|
|
|
|
|
|
Mujeeb Jafferi
|
|
-
|
|
Chief Operating Officer
|
|
|
|
|
|
|
|
Dr. Ryan Yermus
|
|
-
|
|
Chief Clinical Officer
|
|
|
|
|
|
|
|
Paula Amy Hewitt
|
|
-
|
|
Vice President, General Counsel and Corporate
Secretary
|
|
|
|
|
|
|
|
Dr. Nathan Bryson
|
|
-
|
|
Chief Science Officer
|
|
|
|
|
|
|
|
Amardeep Manhas
|
|
-
|
|
Chief Technology Officer
|
|
|
|
|
|
|
|
Tyler Dyck
|
|
-
|
|
Treasurer & Director of Finance
|
|
|
•
|
the
financial year end of the Issuer became March 31, being the financial year end of Field
Trip;
|
|
|
•
|
MNP
LLP, being the auditor of Field Trip, was appointed as the auditor of the Issuer; and
|
|
|
•
|
Field
Trip became a wholly-owned subsidiary of the Issuer and the business of Field Trip became
the business of the Issuer.
|
The
Transaction represented a Reverse Takeover of Newton by Field Trip as, following the Transaction, the former securityholders of
Field Trip hold a significant majority of the outstanding Issuer Common Shares.
3.2 Significant
Acquisitions and Dispositions of Newton and Field Corp
On
October 1, 2020, Newton and Field Trip completed the Transaction. See Section 3.1 – General Development of the Business
– The Transaction. Aside from the Transaction, no other significant acquisition or disposition has been completed in
the most recently completed financial year or the current financial year.
3.3 Trends,
Commitments, Events or Uncertainties
The
most significant trends and uncertainties that management expects could impact the Issuer’s business and financial condition
are listed under Section 17 - Risk Factors.
4. NARRATIVE
DESCRIPTION OF THE BUSINESS
4.1 Narrative
Description of the Business
Narrative
Description of the Business
The
Issuer’s business is premised on a growing body of research that psychedelics can be a new way to treat a myriad of mental
health conditions, including depression and addiction. Through the Issuer’s existing Clinics and its contemplated expansion of
physical clinic locations in other jurisdictions, the Issuer seeks to create a North American brand of trusted clinics for ketamine
-enhanced psychotherapy, psychedelic-enhanced psychotherapy and psychedelic-integration psychotherapy, enabling patients to more
effectively and affordably address depression, anxiety, addiction and other conditions. The Issuer also intends to seek merger
and acquisition opportunities where possible, in order to accelerate its business expansion plans and drive value.
Details
of the Clinics are as follows:
|
Location
|
|
Size
(Sq
Foot)
|
|
|
Number
of
Treatment
Rooms
|
|
|
Monthly
Patient
Capacity(1)
|
|
|
Toronto,
Ontario
|
|
|
4,000
|
|
|
|
6
|
|
|
|
90
|
|
|
New
York, NY
|
|
|
4,500
|
|
|
|
7
|
|
|
|
105
|
|
|
Santa
Monica, CA
|
|
|
5,200
|
|
|
|
6
|
|
|
|
90
|
|
|
Chicago,
IL
|
|
|
4,145
|
|
|
|
6
|
|
|
|
90
|
|
Notes:
|
|
(1)
|
A
Field Trip treatment center with 6 treatment rooms has a current monthly capacity of
approximately 90 patients; 60 new patients completing their entire protocol, and 30 returning
patients completing follow up appointments. Capacity calculation assumes 100% of patient
appointments are on-site and does not consider the utilization of virtual therapy appointments
where appropriate.
|
Depression
is the leading cause of disability worldwide.2 According to Statistics Canada’s 2012 Canadian Community Health
Survey on Mental Health, 4.7% of the Canadian population aged 15 years and over reported experiencing major depression over
the previous 12 months. In the United States, recent estimates show 16 million adults had an episode of major depression in the
course of a year.3
2
World Health Organization, Depression – Fact Sheet, January 30, 2020 (available at https://www.who.int/news-room/fact-sheets/detail/depression).
3
National Institute of Mental Health, Mental Health Information > Statistics >Major Depression Last Updated:
February 2019 (available at https://www.nimh.nih.gov/health/statistics/major-depression.shtml).
Ketamine
is a dissociative psychedelic that has unique effects on the body and mind. It has a high safety profile and has been legally
used as an anesthetic since the 1970s. A series of studies in the early 2000s showed ketamine’s effectiveness as an antidepressant,
and it is now used in Canada as a doctor-prescribed, off-label treatment for mental health conditions. While the use of sublingual
lozenges of ketamine to treat depression and other mental health concerns is considered “off-label”, the use of ketamine
is legal under medical supervision. In March 2020, the United States Food and Drug Administration (the “FDA”)
approved a ketamine-based treatment for depression.4 Ketamine-based treatment is a new approach for treating depression,
a condition the World Health Organization has labeled the leading cause of disability worldwide.5, and represents the first approval
for a genuinely new type of psychiatric drug for any condition to be brought to market in more than 30 years.6
In
2000, researchers found that ketamine had strong, fast-acting and lasting effects on depression. In a randomized, placebo-controlled,
crossover design study, patients with depression received 0.5 mg/kg of ketamine or saline on the first day of testing. Treatments
were switched one week later. Researchers found that the antidepressant effects of ketamine began within 4 hours, peaked at 72
hours, and lasted for 1 to 2 weeks thereafter. In a 2006 study, this finding was replicated in an independent group of 18 patients
with major depressive disorder who were resistant to other treatments. Compared with participants who received a placebo, those
who received ketamine showed significant improvement in symptoms within 110 minutes, with 35% maintaining significant response
for at least 1 week.7 In subsequent years, results from a number of placebo-controlled studies revealed that ketamine
is largely effective in treatment of bipolar disorder and treatment-resistant major depressive disorder, and produces antisuicidal
and anti-anhedonic effects in mood disorders.8 See also, Research and Development below.
Ketamine-enhanced
psychotherapy is conducted at lower doses of ketamine than what is used in anaesthesia and in a safe setting alongside psychotherapy.
The
Issuer, currently operates the Toronto Clinic, the New York Clinic and the California Clinic, and is in the process of renovating
the Chicago Clinic. The Chicago Clinic is expected to be operational in November 2020. The estimated costs for the renovations
and furnishings of the Chicago Clinic are US$200,000, of which $nil has already been advanced.
The
Issuer is also exploring opportunities to establish and develop additional clinics in Canada and the United States and establish
clinics in Europe. It is intended that all clinics, where permissible, will offer technology-enabled, ketamine-enhanced psychotherapy,
psychedelic-enhanced psychotherapy and psychedelic-integration psychotherapy utilizing the Issuer’s custom protocol while
under the supervision of medical professionals. The Issuer believes that some corporations may reduce their space requirements
as a consequence of permitting employees to work-from-home and, as such, the Issuer may be able to lease and build clinical space
at favourable rates. Further, as an alternative to building new clinics, the Issuer may acquire or enter into service relationships
with existing clinics that deliver mental health services. The establishment of additional clinics or the establishment of service
relationships will be funded by either available funds or debt or equity financings, based on the capital needs and requirements
of the Issuer at the time of the acquisition. Details regarding the current expansion plans of the Issuer and the use of available
proceeds of the Issuer are discussed in Section 4.1 - Significant Events or Milestones below.
The
Issuer’s protocol involves a six -step process. In the Toronto Clinic, to qualify for ketamine-enhanced psychotherapy sessions,
a patient must first receive a written referral for ketamine-enhanced psychotherapy from a licensed medical doctor in Canada.
Upon receiving a referral, medical professionals at the Toronto Clinic review the patient’s medical history to ensure that
there are no immediate contraindications. The patient is then scheduled for a consultation with a psychiatrist at the Toronto
Clinic to assess whether ketamine-enhanced psychotherapy is a suitable treatment option. Following approval by a psychiatrist,
the Issuer will then provide a second screening to ensure the patient’s physical health is suitable for ketamine-enhanced
psychotherapy, and a treatment plan is developed. Upon approval of the treatment plan, the patient will meet with a psychotherapist
to prepare for the treatment ahead. Patients are then scheduled to participate in their first dosing session. Immediately following
the dosing session, a licensed psychotherapist operating out of the Toronto Clinic will provide exploratory therapy to help the
patient reintegrate into their bodies and understand their experience. Dosing sessions are typically scheduled two to three days
apart. An integration therapy session is provided to each patient after the second ketamine session. During this session, the
psychotherapist will help the patient integrate the experiences using different clinical psychology techniques to help drive habit
change and outlook/mindset improvements. A course of treatment is typically six dosing sessions with three integration sessions.
Field Trip is also in the process of developing the Patient Portal for ongoing support and education to help sustain the effects
of ketamine-enhanced psychotherapy.
4
FDA News Release: FDA approves new nasal spray medication for treatment-resistant depression; available only at a certified
doctor’s office or clinic, March 5, 2019 (available at https://www.fda.gov/news-events/press-announcements/fda-approves-new-nasal-spray-medication-treatment-resistant-depression-available-only-certified).
5
Depression – Fact Sheet, supra note 1.
6
Makin, Simon. Behind the Buzz: How Ketamine Changes the Depressed Patient’s Brain. Scientific American, April
12, 2019, (available at www.scientificamerican.com/article/behind-the-buzz-how-ketamine-changes-the-depressed-patients-brain/.
7
Zarate CA Jr, Singh JB, Carlson PJ, et al. A randomized trial of an N-methyl-D-aspartate antagonist in treatment-resistant
major depression. Arch Gen Psychiatry.2006;63(8):856-64
8
Ketamine and Future Depression Treatments. Psychiatry Advisor, October 16, 2019, (available at www.psychiatryadvisor.com/home/depression-advisor/ketamine-and-future-depression-treatments/.
The
Issuer notes that operations at the Toronto Clinic have been subject to reduced capacity due to COVID-19 precautions. It is the
view of management that lifting of COVID-19 restrictions in the jurisdictions where the Clinics are located and the public financing
will help accelerate the growth of the North American clinic expansion strategy. See Section 4.1 - Significant Events or Milestones
for additional details on the Issuer’s expansion strategy.
Currently,
the there are four (4) psychiatrists working at the Toronto Clinic on a part-time basis. The psychiatrists work on contract and
receive remuneration via their billings for patient visits from the Ontario Health Insurance Plan (“OHIP”).
Field Trip receives 100% of the private pay services offered at the Toronto Clinic, which include exploratory therapy, ketamine-enhanced
psychotherapy and integration therapy. It is anticipated that the practitioners working at the Clinics in the United States and
Europe (when and if such clinics are established) will receive remuneration via salary. The out-of-pocket patient spend varies
in the United States depending on insurance and subsidy programs available to them. Qualifications of the lead physicians at the
Clinics are as follows:
Dr.
Michael Verbora, MD
Dr.
Michael Verbora earned an MBA from the Odette School of Business in 2009 and an M.D. from the Schulich School of Medicine at Western
University in 2013, before entering family practice residency at the University of Toronto. He has worked as a leading physician
in several clinics and is passionate about furthering knowledge on inner healing intelligence.
Dr.
Ben Medrano, MD
Dr.
Ben Medrano is a board-certified psychiatrist who completed his undergraduate education at Naropa University and the University
of Colorado at Denver, graduating in 2010. He attended medical school at the University of Colorado School of Medicine graduating
in 2014, followed by a residency at Mount Sinai Beth Israel in New York City, completed in 2018. His clinical practice is influenced
by a lifelong interest in eastern psychology and complementary alternative medicine. These interests are further enhanced by his
current fellowship at the Integrative Psychiatry Institute sponsored by the University of Colorado School of Medicine. Dr. Medrano
is currently a clinical professor and adjunct professor at New York Medical College (since July, 2018) and Mount Sinai Beth Israel
(since December, 2019), respectively and also practices at the Metropolitan Hospital Center, New York, New York.
Dr.
Randall Scharlach, MD
Dr.
Randall Scharlach earned his medical degree from the University of California, Los Angeles and completed his residency at Yale
University. Dr. Scharlach has been practicing for over 24 years and is currently a radiation oncologist in California and a recognized
expert in cancer related pain management. Dr Scharlach is one of the few medical doctors in the United States that has completed
academic certification in clinical use and research using Schedule 1 psychedelic medicines. Dr Scharlach is certified by the Center
for Psychedelic Therapy and Research at the California Institute of Integral Studies, and he is currently an advisor and a board
member of these two Los Angeles-based neuroscience institutes.
The
only psychedelic substance presently used at the Toronto Clinic is ketamine. When a patient receives a prescription for ketamine,
the Issuer works with the patient to source a compounding pharmacy that can prepare the prescription in lozenge form. The medication
is then used under the supervision of the Toronto Clinic’s medical staff. At
Clinics in the United States, where medically appropriate, ketamine is prescribed to patients and administered via intramuscular
injection under the supervision of medical staff. The ketamine is sourced from a licensed medical supplier.
At
this time, and until regulations permit otherwise, ketamine is the only psychedelic substance that will be prescribed at the Clinics.
Efforts
to legalize psychedelic substances for medical use are underway in both Canada and the United States. Clinical trials are underway
evaluating psilocybin, MDMA and other psychedelic substances for the treatment of a myriad of conditions such as obsessive-compulsive
disorder, post-traumatic stress disorder, opioid addiction, alcoholism, eating disorders, depression, anxiety and obesity. Once
completed, it is anticipated that federal regulatory bodies such as Health Canada and the FDA in the United States will be asked
to approve these substances. Furthermore, Canada’s House of Commons is set to hear the first official call to decriminalize
psychedelics in fall of 2020 and in August 2020, Canada’s Minister of Health granted four individuals the right to use psilocybin
therapy to treat end-of-life distress pursuant to a compassionate ruling.9 Additionally, grassroots efforts in the
US are underway seeking to either decriminalize the possession of psychedelic molecules, or to create legal, regulated market
for psychedelics and related therapies. The cities of Denver, Colorado, Oakland, California and Santa Cruz, California have decriminalized
possession of psilocybin, and many other cities are currently considering similar measures, including the District of Columbia,
which will include a decriminalization measure in the 2020 US election. Residents of the State of Oregon will also be voting on
a ballot initiative entitled Initiative 34: The Oregon Psilocybin Services Initiative, which would create a program and screening
process for providing psilocybin to individuals 21 years of age or older. Consumption would be supervised by licensed ‘facilitators,’
and the program would exist under the purview of the Oregon Health Authority, as well as an advisory board of 14-16 individuals
appointed by the Governor. The measure requires a two-year development period for the Oregon Health Authority to lay out regulations
for the program.
As
additional psychedelic medicines are legalized or approved for use in Canada and the United States, the Issuer will evaluate them
for use in the Clinics and, where appropriate, develop protocols to incorporate them into the Clinics’ therapeutic offering.
Furthermore, research into novel molecules like FT-104 and into the cultivation, extraction, and composition of psychedelic fungi
at the Jamaica Facility may result in novel drugs or analogues that, if legalized or approved, would be used in the Issuer’s
clinics in jurisdictions where such approval is obtained or otherwise permitted.
Regulatory
Oversight
Each
province and territory of Canada and each state in the United States mandates the requirements for the Clinics and the conduct
of medical professionals therein.
In
Canada, oversight of healthcare is divided between the federal and provincial governments. The federal government is responsible
for regulating, among other things, the approval, import, sale, and marketing of drugs such as ketamine and other psychedelic
substances, whether natural or novel. The provincial/territorial level of government has authority over the delivery of health
care services, including regulating health facilities, administering health insurance plans such as OHIP, distributing prescription
drugs within the province, and regulating health professionals such as doctors, psychologists, psychotherapists and nurse practitioners.
Regulation is generally overseen by various colleges formed for that purpose, such as the College of Physicians and Surgeons of
Ontario.
In
the United States, the laws applicable to the Clinic and the conduct of medical professionals therein are also at the State level
and vary by jurisdiction. Additionally, in the United States, the Clinics or doctors, as applicable, are also required to have
a Drug Enforcement Agency license to obtain ketamine.
Please
see 4.1.1 Principal Products and Services - Psychedelic Therapy Market for additional information concerning the
regulation applicable to the Psychedelic Therapy Market.
9
See https://mcmillan.ca/mobile/Exemption-for-Four-Patients-Opens-Door-Further-for-Therapeutic-Use-of-Psilocybin
Research
and Development
FT
Discovery is focused on research and development of psychedelic-inspired regulated medicines. FT Discovery has two independent
activities: (i) developing custom synthetic molecules targeting serotonin 5HT2A receptors, which are, in part, implicated in mood
disorders; and (ii) conducting research and development related to the cultivation, as well as the identification and isolation
of new substances contained in psilocybin mushrooms and other related fungi, in collaboration with UWI and at the Jamaica Facility
on the UWI campus. Further, FT Discovery anticipates that insights relating to the administration of psychedelics and psychedelic-assisted
psychotherapy within the Clinics can be integrated in the development of novel drug products innovated within FT Discovery.
Psilocybin,
along with other synthetic and natural serotoninergic psychedelics, act to stimulate 5HT2A receptors in the brain resulting in
a profound alteration of normal brain signaling and processing, creating what is generally referred to as a “psychedelic
experience” or an “altered state of consciousness.” Under psychedelics, the brain “escapes” from
its usual tightly constrained and predictable patterns of operation, with a global increase in connectivity brain regions and
brain networks. Often, this can allow patients new introspective insights about their past behaviour, memories, actions, feelings
and beliefs. Psychedelic therapy combined with psychotherapy can lead to improvements in conditions relating to depression, PTSD
and addiction, which are often a result of dysfunctional brain processing.10
FT
Discovery is led by Dr. Nathan Bryson, the Issuer’s Chief Science Officer. Dr. Bryson, who holds a PhD in Chemistry and
a Postdoctoral Associate Degree from the Massachusetts Institute of Technology, has three decades of hands-on research and development
experience in the biotechnology and pharmaceutical industries, where he has overseen innovation, clinical development, regulatory,
quality, global supply chain and medical affairs.
FT-104
is the first molecule in development by FT Discovery. A provisional patent relating to FT-104 composition and use has been filed
with the USPTO (63,045,901; June 30, 2020). The Issuer has received positive legal advice with respect to the patentability and
freedom to operate, specifically in Canada and the United States, regarding the composition of FT-104 and its use. This means
that FT-104 is patentable and the manufacture, sale or use of FT-104 in Canada and the United States would not infringe any patents
existing at the time the advice was received. Routes to the synthesis of FT-104 have been tested and partially optimized. Initial
quantities of FT-104 have been achieved and used in preliminary pre-clinical assessment. Optimization of a GLP synthesis of FT-104
is underway with completion expected before Q4 2020. This will support ongoing pre-clinical efforts which are in turn expected
to be completed by Q3 2021.
In
addition to the clinical work with FT-104 and other drug development efforts, in partnership with UWI, FT Discovery will be conducting
research, development and cultivation of psilocybin mushrooms and other related fungi at the Jamaica Facility. the Issuer’s activity
in relation to the research and cultivation of psilocybin mushrooms, botanicals and other related fungi is limited to the jurisdiction
of Jamaica and the Issuer does not deal with psychedelic substances except within laboratory and clinical trial settings conducted
within approved regulatory frameworks in order to identify and develop treatments for medical conditions and does not have any
direct or indirect involvement with illegal selling, production or distribution of any substances in jurisdictions in which it
operates. The Issuer’s Jamaica team is comprised of a senior researcher and professor at the University of West Indies, Dr. Rupi
Delgoda, as well as business consultants, legal counsel and local post-doctoral research students. As well, the Issuer has employees
who are expected to travel to the Jamaica Facility monthly (which has since been restricted due to COVID-19).
In
order to develop regulated medicines, FT Discovery’s process must be conducted in strict compliance with the regulations
of federal, state, local and regulatory agencies in Canada and the United States, and the equivalent regulatory agencies in the
other jurisdictions in which Field Trip operates, including Jamaica. These regulatory authorities regulate, among other things,
the research, manufacture, promotion and distribution of drugs in specific jurisdictions under applicable laws and regulations.
It is important to note, that unlike in Canada and the United States, psilocybin mushrooms are not an illegal drug under Jamaica’s
Dangerous Drugs Act, 1948 , therefore research on psilocybin mushrooms is not in contravention of the laws of Jamaica and
does not require any permit or authorization from the regulatory authorities in Jamaica.
10
Nutt D, Erritzoe D, Carhart-Harris R. Psychedelic Psychiatry’s Brave New World. Cell. 2020;181:24-8 (available
at https://www.cell.com/cell/pdf/S0092-8674(20)30282-8.pdf)
Canada
The
process required before a prescription drug product candidate may be marketed in Canada generally involves:
|
|
•
|
Chemical
and Biological Research - Laboratory tests are carried out on tissue cultures and
with a variety of small animals to determine the effects of the drug. If the results
are promising, the manufacturer will proceed to the next step of development.
|
|
|
•
|
Pre-Clinical
Development – Animals are given the drug in varying amounts over differing
periods of time. If it can be shown that the drug causes no serious or unexpected harm
at the doses required to have an effect, the manufacturer will proceed to clinical trials.
|
|
|
•
|
Clinical
Trials — Phase 1 - The first administration in humans is to test if people
can tolerate the drug. If this testing is to take place in Canada, the manufacturer must
prepare a clinical trial application for the Therapeutic Products Directorate of Health
Canada (the “TPD”). This includes the results of the first two steps
and a proposal for testing in humans. If the information is sufficient, the Health Products
and Food Branch of Health Canada (the “HPFB”) grants permission to
start testing the drug, generally first on healthy volunteers.
|
|
|
•
|
Clinical
Trials — Phase 2 - Phase 2 trials are carried out on people with the target
condition, who are usually otherwise healthy, with no other medical condition. Trials
carried out in Canada must be approved by the TPD. In Phase 2, the objective of the trials
is to continue to gather information on the safety of the drug and begin to determine
its effectiveness.
|
|
|
•
|
Clinical
Trials — Phase 3 - If the results from Phase 2 show promise, the manufacturer
provides an updated clinical trial application to the TPD for Phase 3 trials. The objectives
of Phase 3 include determining whether the drug can be shown to be effective, and have
an acceptable side effect profile, in people who better represent the general population.
Further information will also be obtained on how the drug should be used, the optimal
dosage regimen and the possible side effects.
|
|
|
•
|
New
Drug Submission - If the results from Phase 3 continue to be favourable, the drug
manufacturer can submit a new drug submission (“NDS”) to the TPD.
A drug manufacturer can submit an NDS regardless of whether the clinical trials were
carried out in Canada. The TPD reviews all the information gathered during the development
of the drug and assesses the risks and benefits of the drug. If it is judged that, for
a specific patient population and specific conditions of use, the benefits of the drug
outweigh the known risks, the HPFB will approve the drug by issuing a notice of compliance.
|
United
States
The
process required before a prescription drug product candidate may be marketed in the United States generally involves:
|
|
•
|
completion
of extensive nonclinical laboratory tests, animal studies and formulation studies, all
performed in accordance with the FDA’s Good Laboratory and Manufacturing Practice
regulations;
|
|
|
•
|
submission
to the FDA of an investigational new drug application, which must become effective before
human clinical trials may begin;
|
|
|
•
|
for
some products, performance of adequate and well-controlled human clinical trials in accordance
with the FDA’s regulations, including good clinical practices, to establish the
safety and efficacy of the product candidate for each proposed indication;
|
|
|
•
|
submission
to the FDA of a new drug application (“NDA”); and
|
|
|
•
|
FDA
review and approval of the NDA prior to any commercial marketing, sale or shipment of
the drug.
|
Patent
Cooperation Treaty
On
an international front, the Patent Cooperation Treaty (the “PCT”) facilitates filing for patent recognition
in multiple jurisdictions simultaneously using a single uniform patent application. Canada and the United States have ratified
the PCT.
Ultimately,
patents are still granted in each country individually. As such, the PCT procedure consists of two phases: filing of an international
application, and evaluation under the patent laws in force in each country where a patent is sought.
Within
12 months of the provisional filing date, the Issuer will file for a formal utility patent in the United States and simultaneously
file under the PCT with WIPO for recognition in other jurisdictions globally, including CIPO in Canada and the EPO in Europe,
in each case on the basis of the provisional patent.
While
FT Discovery is focused on programs using psychedelic-inspired compounds, the Issuer does not have any direct or indirect involvement
with the illegal selling, production or distribution of any substances in the jurisdictions in which it operates. The Issuer is
a clinic-based enterprise, which is exploring drug development within approved laboratory clinical trial settings conducted within
approved regulatory frameworks. Though highly speculative, should any prescription drug product be developed by the Issuer (which,
if it does occur, would not be for several years), such drug product will not be commercialized prior to receipt of applicable
regulatory approval, which will only be granted if clinical evidence of safety and efficacy for the intended use(s) is successfully
developed. The Issuer may also employ non-prescription drugs, where appropriate.
Business
Objectives of the Issuer
Key
elements of the Issuer’s growth strategy include: (i) the development of additional clinics; (ii) expanding its network and consumer
database via partnerships and strategic arrangements with other existing health clinics that do not currently offer psychedelic
therapy services, which will require educating physicians on the benefits and medical developments of psychedelic therapy; (iii)
adding additional health care practitioners to increase its clinic growth levels; and (iv) supplementary educational programs
to help other health care practitioners book more appointments.
The
Issuer’s short-term objectives for the next 12 months (October 2020 through September 2021) are:
|
|
1.
|
Launch
of the Trip App
|
|
|
2.
|
Launch
of the Patient Portal
|
|
|
3.
|
Complete
preclinical studies of FT-104
|
|
|
4.
|
Obtain
utility patent & make PCT filings for FT-104
|
|
|
5.
|
Expand
our network of clinics by 5 clinics
|
The
Issuer’s medium & long-term objectives for the following 12 months (October 2021 through September 2022) are:
|
|
1.
|
Expand
our network of clinics by 25 clinics
|
|
|
2.
|
Phase
1 pre-clinical studies of FT-104
|
Significant
Events or Milestones
To
achieve the business objectives set out above, the following milestones must be met by the Issuer:
|
Objective
|
|
Milestone
Description
|
|
Estimated
Cost ($)
|
|
Timeframe
for
Completion(2)
|
|
30
Operational
Clinics(1)
|
|
New
York City clinic operational
|
|
250,000
|
|
Q3
2020
|
|
Santa
Monica clinic operational
|
420,000
|
Q3
2020
|
|
Chicago
Clinic operational
|
400,000
|
Q4
2020
|
|
10th
clinic operational (i.e. 6 additional clinics)
|
2,400,000
|
Q2
2021
|
|
15th
clinic operational
|
2,000,000
|
Q3
2021
|
|
20th
operational clinic
|
2,000,000
|
Q4
2021
|
|
30th
operational clinic
|
4,000,000
|
Q2
2022
|
|
Issuer
Technology
Platforms
|
|
Trip
App available in app store
|
|
200,000
|
|
Q3
2020
|
|
Patient
Portal launched
|
200,000
|
Q4
2020
|
|
Field
Trip Natural
Products
Research
|
|
New
research facility renovations completed
|
|
400,000
|
|
Q4
2020
|
|
FT=104
Development
Patenting
and Phase
1
completed
|
|
US
utility and PCT patent filings
|
|
100,000
|
|
Q2
2021
|
|
CMC
development and pre-clinical studies completed
|
2,440,000
|
Q2
2021
|
|
Phase
1 studies completed
|
2,025,000
|
Q1
2022
|
|
TOTAL:
|
|
|
|
16,835,000
|
|
|
Notes:
|
|
(1)
|
Based
on an estimated cost of $200,000 - $400,000 per clinic, depending on clinic size and
specifications.
|
|
|
(2)
|
Based
on a calendar year-end.
|
Other
than as described in this Listing Statement, to the knowledge of management, there are no other particular significant events
or milestones that must occur for the Issuer’s initial business objectives to be accomplished. However, there is no guarantee
that the Issuer will meet its business objectives or milestones described above within the specific time periods, within the estimated
costs or at all. The Issuer may, for sound business reasons, reallocate its time or capital resources, or both, differently than
as described above.
Total
Funds Available
Upon
completion of the Transaction, the Issuer anticipates it will have an estimated $18,335,916 in funds available, comprised of:
|
Description
|
|
Amount
($)
|
|
|
Estimated working capital of Field Trip as at June 30, 2020
|
|
|
6,222,011
|
|
|
Estimated working capital of Newton as at June 30, 2020
|
|
|
457,585
|
|
|
Net Proceeds of FT Private Placement(1) and the September Offering(2)
|
|
|
12,216,230
|
|
|
Transaction costs
|
|
|
(559,910
|
)
|
|
TOTAL:
|
|
|
18,335,916
|
|
Notes:
|
|
(1)
|
On
August 14, 2020, Field Trip completed a private placement offering of 5,516,724 Field
Trip Common Shares at a price per Field Trip Common Share of $2.00 for aggregate gross
proceeds of $11,033,448
|
|
|
(2)
|
On
September 21, 2020, Field Trip completed a private placement offering of 816,932 Field
Trip Common Shares at a price per Field Trip Common Share of $2.00 for aggregate gross
proceeds of $1,633,864.
|
12
Month Use of Funds
The
Issuer expects to use its available funds over the next 12 months as follows:
|
Use of Available Funds
|
|
Amount ($)
|
|
|
Clinic network buildout to June 2021
|
|
|
3,000,000
|
|
|
Facility and office costs
|
|
|
2,930,000
|
|
|
Drug development (includes patenting, preclinical studies, and phase 1 milestones)
|
|
|
2,720,000
|
|
|
Personnel costs (general and administrative)
|
|
|
2,190,000
|
|
|
Marketing expenditures
|
|
|
1,410,000
|
|
|
Natural products research & development (includes research facility renovation costs)
|
|
|
800,000
|
|
|
Transaction costs (legal fees, audit fees, CSE listing fees and other expenses)
|
|
|
560,000
|
|
|
Travel and entertainment
|
|
|
440,000
|
|
|
Professional services (excluding transaction costs)
|
|
|
440,000
|
|
|
Technology platforms (launch and maintenance of Trip App and Patient Portal)
|
|
|
440,000
|
|
|
IT costs
|
|
|
260,000
|
|
|
Office and general
|
|
|
160,000
|
|
|
Total use of funds
|
|
|
15,350,000
|
|
|
Unallocated working capital
|
|
|
2,985,916
|
|
|
TOTAL:
|
|
|
18,335,916
|
|
The
Issuer estimates that its current cash and cash equivalents will be sufficient to meet its cash requirements set out above for
the next 12 months. The Issuer may require additional financing to fund its administrative expenses and any proposed acquisitions,
if applicable. The Issuer has historically satisfied its capital needs by issuing equity securities. The 12 Month Use of Funds
table above does not take into account any revenue that may be earned by the Issuer from its clinical operations over the next
12 months. Any revenue derived from such operations will be allocated proportionately to the categories outlined above.
Notwithstanding
the proposed uses of available funds discussed above, there may be circumstances where, for sound business reasons, a reallocation
of funds may be necessary. It is difficult, at this time, to definitively project the total funds necessary to effect the planned
activities of the Issuer. For these reasons, management of the Issuer considers it to be in the best interests of the Issuer and
its shareholders to afford management a reasonable degree of flexibility as to how the funds are deployed among the uses identified
above, or for other purposes, as the need arises. If, as a result of changes in the Issuer’s business, assets, operations
or circumstances, the Board and management of the Issuer should determine that the available funds should be deployed other than
as set forth above, the funds shall be allocated to such other business activities and assets as the Board and management reasonably
determine. Further, the above uses of available funds should be considered estimates. See Section 17 - Risk Factors.
4.1.1 Principal
Products and Services
Principal
Products and Services
The
Issuer plans to capitalize on psychedelic therapy opportunities through the Clinics and by providing education services for patients
and medical professionals. The model developed at the Toronto Clinic is intended to be replicated across all of the Issuer’s
future clinics.
Generally,
a patient’s primary physician or psychiatrist will refer a patient to the Issuer for possible treatment. When a referral
is received, the Issuer’s medical team will review the patient’s medical history to ensure there are no immediate
contraindications. A patient will then consult with one of the psychiatrists operating out of the Clinic to assess whether
ketamine-enhanced psychotherapy might be a suitable treatment option. Once approved, the patient will undergo a second screening
to ensure their physical health is suitable for ketamine-enhanced psychotherapy and a treatment plan will be developed. Treatment
will vary by individual, however a standard ketamine-enhanced psychotherapy program involves three sequential blocks, each consisting
of two ketamine exploratory therapy sessions followed by one integration session. During and after the exploratory sessions, licensed
psychotherapists guide the patient through the experience, and provide exploratory therapy to help the patient reintegrate into
their body and understand their experience. During the integration sessions, psychotherapists help the patient integrate their
experiences using clinical psychology techniques to help drive habit change as well as outlook and mindset improvements.
After
the completion of these sessions, the Issuer also provides a digital patient portal (the “Patient Portal”)
for on-going support and education to help sustain the effects of ketamine-enhanced psychotherapy. The Patient Portal provides
patients with mood monitoring and mindfulness tools, patient-therapist communication, and personalized protocols and content.
The Patient Portal is currently in development and it is anticipated that the Patient Portal will be available to the Issuer’s
patients in December 2020.
Research
and Development
FT
Discovery is the Issuer’s business unit that is focused on drug discovery and development. One goal of FT Discovery is to
translate and utilize the patient data obtained from the Clinics to design new molecules that will improve future patient outcomes.
FT-104
is the first molecule in development by FT Discovery. Routes to the synthesis of FT-104 have been tested and partially optimized.
Initial quantities of FT-104 have been achieved and used in preliminary pre-clinical assessment. Optimization of a GLP synthesis
of FT-104 is underway with completion expected before Q4 2020. This will support ongoing pre-clinical efforts which are in turn
expected to be completed by Q3 2021.
In
addition, at the Jamaica Facility, the Issuer will be studying psychoactive fungi, specifically the cultivation, extraction and
analysis of the psychoactive molecules contained within the mycelia and fruiting bodies of these complex organisms with a view
to identifying and quantifying psilocybin and other tryptamine analogues that may play an essential role in the psychedelic experience
and serve as promising candidates for drug development. The Issuer’s Jamaica team is comprised of a senior researcher and professor
at the University of West Indies, Dr. Rupi Delgoda; a very well-connected lawyer and local businessman, PJ Asher; and, a local
businessman with background in operations and construction, Mark ho-Tai. These individuals do not receive a salary or any form
of financial compensation. As well, the Issuer has employees who are expected to travel to the Jamaica Facility monthly (which
has since been restricted due to COVID-19).
Psychedelic
Therapy Market
The
Canadian psychedelic therapy industry is an emerging market and serves a medical market only. In Ontario, physicians working
in medical clinics are regulated by the College of Physicians and Surgeons of Ontario, via the Regulated Health
Professions Act, 1991 (Ontario) and the Medicine Act, 1991 (Ontario).
Ketamine
clinics in the State of New York that are owned solely by New York-licensed physicians are organized as physician practices.
Physician practices in the State of New York are overseen by the New York State Education Department, Office of the
Professions, State Board for Medicine (the “NY Medical Board”). Laws that apply specifically to physician
practices in the State of New York are New York Education Law §§ 6500 – 6516 and 6520 – 6532 and 8 New
York Codes, Rules and Regulations (“NYCRR”) §§ 59.1 et. seq. and 8 NYCRR §§ 60.1 et.
seq. The New York Clinic is likely to utilize, in addition to physicians, mid-level practitioners such as physician
assistants and nurse practitioners and mental health practitioners such as psychologists and psychotherapists. Physician
assistants are also subject to oversight of the NY Medical Board (and subject to laws codified at New York Education Law
(“NYEL”) §§ 6540 et. seq.) and nurse practitioners are subject to oversight of the New York
State Education Department, Office of the Professions (“NYOP”), State Board for Nursing (and subject to
laws codified at NYEL §§ 6900 et. seq. and additional regulation that apply only to nurses at NYCRR §§
64.1 et. seq.). Psychologists are licensed by the NYOP, State Board for Psychology (and subject to additional laws and
regulations codified at NYEL §§ 7600 et. seq. and 8 NY CRR §§ 72.1 et. seq.), and psychotherapists are
licensed by the NYOP, State Board for Mental Health Practitioners (and subject to additional laws and
regulations codified at NYEL §§ 8400 et. seq. and 8 NY CRR § 52.35 and 8 NY CRR §§ 79.12 et.
seq.).
Similarly,
ketamine clinics in the State of California that are owned solely by California-licensed physicians are organized as California
professional medical corporations while unlicensed persons are able to participate in a medical practice via a management service
company. The Medical Board of California (the “CA Medical Board”) regulates physicians and surgeons under the
Business and Professions Code, §2190.5. The CA Medical Board also regulates medical assistants, while nurses, nurse practitioners
and certain psychotherapists are regulated by the Board of Registered Nursing. Psychologists are licensed by the California Board
of Psychology.
In
the State of Illinois, the Illinois Department of Financial and Professional Regulation (“IDFPR”) regulates
physicians and surgeons under the Medical Practice Act (225 ILCS 60/2) and Medical Corporations under the Medical Corporation
Act (805 ILCS 15/1). The IDFPR also regulates nurses under the Nurse Practice Act (225 ILCS 65/), psychologists under the Clinical
Psychologist Licensing Act (225 ILCS 15/), and both licensed professional counselors and licensed
clinical professional counselors under the Illinois Professional Counselor and Clinical Professional Counselor Licensing and Practice
Act (225 ILCS 107/1).
In
the United States where ketamine clinics are physician-owned, Field Trip USA will provide management services to the physician
practice that will own the clinics located in the United States. The relationship between Field Trip USA and the physician practice
that it manages is subject to various standards of corporate practice and fee-splitting rules.
In
Jamaica, psilocybin is not prohibited by the Jamaica Dangerous Drugs Act, 1948. Research conducted by FTNP at the Jamaica
Facility is governed by the Jamaica Ministry of Health (“JMH”), Ethics and Medico-Legal Affairs Panel and by
the JMH Standards and Regulation Division. In addition to GLP and cGMP, research involving human subject is governed by the JMH
Guidelines for the Conduct of Research on Human Subjects. Furthermore, medicines, including natural products, require registration
with the JMH prior to importation, distribution and sale in Jamaica as outlined in the Food and Drugs Act, 1964.
Marketing
Plans and Strategies
Patient
Acquisition
The
Issuer’s planned expansion is contingent upon its patient member growth. Thus, its patient acquisition strategy is a critical
component of its future success.
The
Issuer plans to focus on a push-pull marketing strategy to generate patient leads. The marketing strategy will blend different
marketing strategies to reach prospective patients (including through public relations campaigns, social media, digital marketing
efforts through paid search and social media advertising, as well as potentially more traditional advertising channels such as
television, radio and billboard advertising) as well as strategies to reach and educate the medical and therapy communities in
jurisdictions that it plans to enter, including through medical education events.
The
Issuer also markets and promotes itself to community physicians, as they are the individuals who most frequently provide the patient
referrals. It focuses on the education of physicians via its website, podcast and through marketing materials.
Building
Brand and Community
The
Trip App will extend the reach and awareness of the Issuer’s brand to a broader audience of users, and open new potential revenue
and marketing channels for the Issuer by providing tools to interested people through digital media tools.
In
addition to traditional public relations activities, the Issuer has a number of marketing plans and strategies designed to build
brand awareness and community around psychedelic therapy opportunities, including education and outreach programs such
as the Field Tripping Podcast and webinars, and a comprehensive social media strategy which comprises both paid and organic components.
Regulatory
Restrictions on Branding
Colleges
in Canada and Medical Boards in the United States impose certain restrictions on their members’ ability to conduct marketing and
advertising activities.
Over
the next 12 months, the Issuer has budgeted approximately $1,410,000 for marketing and advertising, which is anticipated to be
utilized primarily for the opening of, and advertisement for, the new, to be opened, clinics as well as increasing brand awareness.
It is anticipated that these funds will be allocated as follows:
|
Use of Available Funds
|
|
Amount ($)
|
|
|
Online marketing
|
|
|
440,000
|
|
|
Veterans program development
|
|
|
370,000
|
|
|
Personnel costs
|
|
|
310,000
|
|
|
Public relations & brand marketing
|
|
|
290,000
|
|
|
TOTAL:
|
|
|
1,410,000
|
|
Regulation
of Advertising
Regulated
professions in Canada and the United States, including physicians, psychotherapists, psychologists, and nurses, are subject to
certain restrictions and requirements concerning advertising or soliciting patients. The restrictions vary by jurisdiction and
profession. The Issuer will develop a compliance program to ensure adherence to these requirements.
Business
Model
The
Issuer’s business is three-fold: treatment of patients in its clinics as described above under Section 4.1.1 - Principal Products
and Services, research and development focussing on discovering novel psychedelic molecules for treatment, and developing
non-clinical tools designed to raise awareness of, and monetize, Psychedelic-enhanced therapies such as the App. A detailed description
of the Issuer’s business model is set forth under Section 4.1 - Narrative Description of the Business.
Intellectual
Property
The
Issuer has developed proprietary processes, including its clinical techniques. While exploring the patentability of these techniques
and processes, the Issuer relies on non-disclosure and confidentiality arrangements and trade secret protection.
The
Issuer has invested significant resources towards developing a recognizable and unique brand and is in the process of seeking
registration of trademarks with the Canadian Intellectual Property Office. The Issuer owns the website domains www.fieldtriphealth.com,
www.meetfieldtrip.com and www.fieldtripping.fm and social media accounts on Instagram11, Facebook12,
LinkedIn13 and Twitter14. The Issuer also has a podcast available located at www.fieldtripping.fm and
is also available through other channels including Spotify, Apple Podcasts, iHeart Radio, Google Podcasts, and Simplecast. As
of June 30, 2020, the Issuer has invested $235,000 towards developing its brand. The Issuer
maintains strict standards and operating procedures regarding its intellectual property, including the standard use of non-disclosure,
confidentiality, and intellectual property assignment agreements.
|
|
11
|
https://www.instagram.com/fieldtriphealth
|
|
|
12
|
https://www.facebook.com/fieldtriphealth
|
|
|
13
|
https://www.linkedin.com/company/fieldtriphealth
|
|
|
14
|
https://twitter.com/fieldtriphealth
|
Trademarks
The
Issuer has registered the following name and design for trademark protection in Canada and intends to do so in the United States,
within the next 6 months. For additional details on the risks associated with the lack of trademark protection, please see Section
17 - Risk Factors – Intellectual Property:
The
text and stylized logo for “field trip”, produced here:
The
Issuer has applied for the following names for trademark protection in Canada and intends to do so in the United States. For additional
details on the risks associated with the lack of trademark protection, please see Section 17 - Risk Factors – Intellectual
Property:
The
text “Field Trip Health”, “Field Trip Psychedelics”, “Field Tripping”,
“Field Trip Discovery”, “Field Trip Basecamp” and “Field Trip Natural Products”.
In
addition, the Issuer has a provisional patent relating to FT-104 composition and use that has been filed with the USPTO (63,045,901;
June 30, 2020). See Section 4.1 - Narrative Description of the Business - Research and Development.
4.1.2 Production
and Sales
Cyclical
or Seasonal Impacts
The
business of psychedelic therapy and patient services is neither cyclical nor seasonal. Patient demand is based on medical need
and this need is not a factor of season or markets. However, the business is subject to physician availability and the acceptance
in the medical community of ketamine and other psychedelic substances as effective treatments for depression, PTSD, addiction,
and other mental health conditions.
Environmental
Protections
The
Issuer’s business does not materially impact environmental conditions. The Issuer does not expect that there will be any
financial or operational effects as a result of environmental protection requirements on its capital expenditures, profit or loss,
or its competitive position in the current fiscal year or in future years.
Number
of Employees
As
of August 1, 2020, the Issuer has 33 employees, including contractors and part-time employees of affiliates (the Clinics, where
company-owned), distributed among the following departments:
|
Department
|
|
Number
of
Employees(1)
|
|
Administrative
|
|
2
|
|
Executive
|
|
7
|
|
Finance
|
|
2
|
|
Clinical
|
|
9
|
|
Research
and development
|
|
2
|
|
Marketing
|
|
2
|
|
Operations
|
|
6
|
|
Sales
|
|
3
|
|
Total
|
|
33
|
|
Notes:
|
|
(1) Where Clinics are set up as professional medical corporations, employees are excluded from the chart above.
|
Risks
Regarding Foreign Operations
The
Toronto Clinic and the Issuer’s current principal business operations are located in Canada. The Issuer also has additional
clinics in New York and California. The Issuer has plans in the near-term to expand its clinic operations to other states in the
United States and Europe. Currently, the Issuer is conducting research and development, and constructing a research and development
centre, at the Jamaica Facility. As a result, there is a risk that regulatory changes as well as economic or political uncertainty
could require that the Issuer re-evaluate its business prospects and could negatively impact upon its ability to conduct its research
initiatives. The Issuer does not have any other risks and/or dependencies on foreign operations.
4.1.3 Competitive
Conditions
The
psychedelic therapy business in Canada is an emerging industry with high levels of competition. The Issuer’s current business
plan is the establishment of a North American chain of ketamine-enhanced psychotherapy, psychedelic-enhanced psychotherapy and
psychedelic- integration psychotherapy clinics. The Issuer expects that, due to the urgent need for new and innovative treatments
for mental health conditions and the evidence-based studies showing the impact of psychedelics as a treatment for mental health
conditions, psychedelics as a treatment for these conditions will become more accepted in the medical community. As such, the
Issuer expects to compete with other similar businesses as well as with individual medical professionals who undertake the prescribing
and supervising of psychedelics to their patients. While the Issuer was an early entrant to the psychedelic-enhanced psychotherapy
market in Canada, other market participants have emerged. The Issuer expects to face intense competition from new or existing
market participants, some of which may have greater financial resources. Increased competition by larger and better financed competitors
could materially and adversely affect the business, financial condition and results of operations of the Issuer.
5. SELECTED
CONSOLIDATED FINANCIAL INFORMATION
5.1 Consolidated
Financial Information – Annual Information
Newton’s
Annual Information
The
following table provides a brief summary of Newton’s financial information for each of its three most recently completed
financial years. The selected financial information has been derived from, and should be read in conjunction with, Newton’s
audited financial statements for the years ended December 31, 2019, 2018 and 2017, which are attached to this Listing Statement
as Schedule “A”.
|
|
|
As
at and for the
year
ended
December
31, 2019
(audited)
($)
|
|
As
at and for the
year
ended
December
31, 2018
(audited)
($)
|
|
As
at and for the
year
ended
December
31, 2017
(audited)
($)
|
|
Statement
of operations
|
|
|
|
|
|
|
|
Total
revenue
|
|
-
|
|
-
|
|
-
|
|
Net
and comprehensive loss from operations
|
|
239,743
|
|
251,097
|
|
468,463
|
|
Net
loss per share (basic and diluted)
|
|
0.04
|
|
0.05
|
|
0.29
|
|
|
|
|
|
|
|
|
|
Statement
of financial position
|
|
|
|
|
|
|
|
Total
assets
|
|
542,319
|
|
700,331
|
|
413,045
|
|
Total
liabilities
|
|
25,101
|
|
30,464
|
|
32,553
|
|
Cash dividends
declared per share
|
|
-
|
|
-
|
|
-
|
Field
Trip’s Annual Information
The
following table provides a brief summary of Field Trip’s financial information for the period from incorporation (April
2, 2019) to March 31, 2020. The selected financial information has been derived from, and should be read in conjunction with,
Field Trip’s audited financial statements for the period from incorporation until March 31, 2020, which are attached to
this Listing Statement as Schedule “B”.
|
|
|
As
at and for the
year ended
March 31, 2020
(audited)
(C$)
|
|
Statement
of operations
|
|
|
|
Total
revenue
|
|
1,000
|
|
Net
and comprehensive loss from operations
|
|
2,678,365
|
|
Net
loss per share (basic and diluted)
|
|
0.26
|
|
|
|
|
|
Statement
of financial position
|
|
|
|
Total
assets
|
|
12,541,095
|
|
Total
liabilities
|
|
2,121,083
|
|
Cash dividends
declared per share
|
|
Nil.
|
Issuer’s
Pro Forma Financial Information
The
following table provides a brief summary of the Issuer’s consolidated financial position as at June 30, 2020 on a pro forma
basis following the completion of the Transaction. The selected financial information has been derived from, and should be read
in conjunction, with the Issuer’s pro forma consolidated financial statements attached to this Listing Statement as Schedule
“C”.
|
|
|
Newton
as of
June
30, 2020
(unaudited)
($)
|
|
Field
Trip as of
June
30, 2020
(unaudited)
($)
|
|
Issuer
Pro Forma as of
June
30, 2020
(unaudited)
($)
|
|
Statement
of financial position
|
|
|
|
|
|
|
|
Total
assets
|
|
479,261
|
|
13,019,504
|
|
25,155,085
|
|
Total
liabilities
|
|
21,676
|
|
4,744,900
|
|
5,599,910
|
|
Cash dividends
declared per share
|
|
Nil.
|
|
Nil.
|
|
Nil.
|
|
|
5.2
|
Quarterly
Financial Information
|
Newton’s
Interim Financial Information
The
following table provides certain selected quarterly financial information for Newton for the eight fiscal quarters ended December
31, 2019, being Newton’s most recently completed financial year end:
|
|
|
|
|
|
Total Income
|
|
|
Income from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales or
|
|
|
from
|
|
|
Continuing Operations,
|
|
|
|
|
|
Net Income (Loss), Per
|
|
|
|
|
Total
|
|
|
Continuing
|
|
|
Per Share ($)
|
|
|
|
|
|
Share
|
|
|
|
|
Revenues
|
|
|
Operations
|
|
|
Fully-
|
|
|
Non-
|
|
|
Net Income/
|
|
|
Fully-
|
|
|
Non-
|
|
|
Period
|
|
($)
|
|
|
($)
|
|
|
Diluted
|
|
|
Diluted
|
|
|
(Loss)
|
|
|
Diluted
|
|
|
Diluted
|
|
|
Q1 2020
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(25,758
|
)
|
|
|
0.00
|
|
|
|
0.00
|
|
|
Q4 2019
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(239,743
|
)
|
|
|
(0.04
|
)
|
|
|
(0.04
|
)
|
|
Q3 2019
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(176,525
|
)
|
|
|
(0.03
|
)
|
|
|
(0.03
|
)
|
|
Q2 2019
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(141,204
|
)
|
|
|
(0.02
|
)
|
|
|
(0.02
|
)
|
|
Q1 2019
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(23,776
|
)
|
|
|
--
|
|
|
|
--
|
|
|
Q4 2018
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(251,097
|
)
|
|
|
(0.05
|
)
|
|
|
(0.05
|
)
|
|
Q3 2018
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(171,256
|
)
|
|
|
(0.04
|
)
|
|
|
(0.04
|
)
|
|
Q2 2018
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(100,963
|
)
|
|
|
(0.03
|
)
|
|
|
(0.03
|
)
|
Field
Trip’s Interim Financial Information
The
following table provides certain selected quarterly financial information for Field Trip for the period from incorporation on
April 2, 2019 until March 31, 2020, being Field Trip’s most recently completed financial year end:
|
|
|
|
|
|
|
|
|
Income from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
Total Income from
|
|
|
Continuing Operations,
|
|
|
|
|
|
Net Income (Loss),
|
|
|
|
|
or Total
|
|
|
Continuing
|
|
|
Per Share (CAD$)
|
|
|
|
|
|
Per Share
|
|
|
|
|
Revenues
|
|
|
Operations
|
|
|
Fully-
|
|
|
Non-
|
|
|
|
|
|
Fully-
|
|
|
Non-
|
|
|
Period
|
|
($)
|
|
|
($)
|
|
|
Diluted
|
|
|
Diluted
|
|
|
Net Income / (Loss)
|
|
|
Diluted
|
|
|
Diluted
|
|
|
Q1 2021
|
|
|
23,599
|
|
|
|
(2,923,110
|
)
|
|
|
(0.21
|
)
|
|
|
(0.21
|
)
|
|
|
(2,923,110
|
)
|
|
|
(0.21
|
)
|
|
|
(0.21
|
)
|
The
Issuer does not intend, and is not required, to pay any dividends on the Issuer Common Shares. The Issuer currently intends to
reinvest all future earnings to finance the development and growth of its business. As a result, the Issuer does not intend to
pay dividends on the Issuer Common Shares in the foreseeable future. Any future determination to pay distributions will be at
the discretion of the Board and will depend on the Issuer’s financial condition, earnings, financial requirements, business
environment, operating results, capital requirements, contractual restrictions on the payment of distributions, and any other
factors that the Board deems relevant.
The
financial statements included in this Listing Statement have been, and the future financial statements of the Issuer shall be,
prepared in accordance with IFRS.
|
|
6.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS
|
Please
refer to Schedule “D” for Newton’s management’s discussion and analysis for the year ended December 31,
2019 and for the six months ended June 30, 2020.
Please
refer to Schedule “E” for Field Trip’s management’s discussion and analysis for the period from incorporation
on April 2, 2019 to March 31, 2020 and for the three months ended June 30, 2020 .
Prior
to the Transaction, the Newton Common Shares were listed on the NEX board of the TSXV under the symbol “NTN.H” effective
November 17, 2014, and none of Field Trip’s shares were listed or posted for trading on any stock exchange or quotation
system.
The
Issuer Common Shares have been conditionally approved for listing on the CSE under the symbol “FTRP”.
|
|
8.
|
CONSOLIDATED
CAPITALIZATION
|
The
following table summarizes the consolidated capitalization of the share and loan capital of the Issuer as of the date hereof,
both before and after giving effect to the Transaction as though it had occurred on the date hereof. The table should be read
in conjunction with the financial statements of Newton and Field Trip, including the notes thereto, included as schedules to this
Listing Statement:
Designation of
Security
|
|
Amount
Authorized or to
be Authorized
|
|
Newton Common
Shares
(Post-Consolidation)
Prior to the
Transaction
(A)
|
|
Field Trip Common
Shares
Prior to the
Transaction
(B)
|
|
Issuer
After Giving Effect to the
Transaction
(A) + (B)
|
|
Common Shares
|
|
Unlimited
|
|
795,106
|
|
37,007,886
|
|
37,802,992
|
|
Options
|
|
15% of the issued and outstanding Issuer Common Shares
|
|
74,453
|
|
3,840,806
|
|
3,915,259
|
|
Warrants
|
|
-
|
|
-
|
|
299,753
|
|
299,753
|
|
|
9.
|
OPTIONS
TO PURCHASE SECURITIES
|
In
connection with the Transaction, the Issuer Board adopted Field Trip’s stock option plan, as established by Field Trip (the
“Issuer Option Plan”), as the Issuer’s stock option plan. The following is a summary of the material
terms of the Issuer Option Plan.
Purpose
The
purpose of the Issuer Option Plan is to attract and retain employees, directors and consultants, and to ensure that interests
of key persons are aligned with the success of the Issuer and its affiliates.
Number
of Options
The
maximum number of options to purchase Issuer Common Shares reserved for issuance under the Issuer Option Plan is the greater of:
(i) 3,100,000 Issuer Common Shares; or (ii) 15% of the issued and outstanding Issuer Common Shares (subject to adjustment in accordance
with the Issuer Option Plan) from time to time, on a non-diluted basis. Issuer Options that have been exercised, cancelled, surrendered
or terminated, or that expire without being exercised, shall again be available for issuance under the Issuer Option Plan. Notwithstanding
the foregoing, the maximum number of Issuer Common Shares that may be issued under the Issuer Option Plan pursuant to the exercise
or surrender of Issuer Options is 7,500,000, but in all events subject to the limitations in (i) and (ii).
Options
to Purchase Securities
As
of the date of this Listing Statement, the Issuer has 3,840,806 Issuer Options outstanding under the Issuer Option Plan (which
for greater certainty, excludes the 74,453 Replacement Options held by former Newton Option holders). Pursuant to the Issuer Option
Plan, options may be granted to directors, employees and consultants of the Issuer or its affiliates, subject to the rules and
regulations of applicable regulatory authorities and the CSE.
|
Category of Optionee(1)
|
|
Aggregate
Number of
Persons
|
|
Number of
Options
|
|
Exercise Price per
Share
(Range)
|
|
Date of Grant
(Range)
|
|
All officers and directors of the Issuer
|
|
6
|
|
935,000
|
|
$0.50 - $2.00
|
|
03/2020 to 04/2020
|
|
All other employees of the Issuer(2)
|
|
26
|
|
1,479,000
|
|
$0.50 - $2.00
|
|
03/2020 to 09/2020
|
|
All consultants of the Issuer(3)
|
|
31
|
|
1,426,806
|
|
$0.50 – $2.00
|
|
03/2020 to 09/2020
|
Notes:
|
|
(1)
|
The
outstanding Issuer Options have a 4 year term and, generally, 25% of such Issuer Options vest on the first anniversary of
the date of grant and the balance vest in equal monthly instalments after the first anniversary.
|
|
|
(2)
|
Includes
employees of the Issuer’s affiliates.
|
|
|
(3)
|
Includes
the principal of the Issuer’s physician owned clinics (either directly or via professional corporations) in the United States,
being Dr. Ben Medrano.
|
|
10.
|
DESCRIPTION
OF THE SECURITIES
|
|
|
10.1
|
Description
of Issuer’s Securities
|
All
outstanding Field Trip Common Shares were exchanged for Issuer Common Shares in connection with the Transaction. The Issuer is
authorized to issue an unlimited number of Issuer Common Shares and an unlimited number of Issuer Preferred Shares. There were
37,802,992 Issuer Common Shares and no Issuer Preferred Shares issued and outstanding immediately following the Transaction.
The
maximum number of options to purchase Issuer Common Shares reserved for issuance under the Issuer Option Plan is the greater of:
(i) 3,100,000 Issuer Common Shares; or (ii) 15% of the issued and outstanding Issuer Common Shares (subject to adjustment in accordance
with the Issuer Option Plan) from time to time, on a non-diluted basis. Issuer Options that have been exercised, cancelled, surrendered
or terminated, or that expire without being exercised, shall again be available for issuance under the Issuer Option Plan. Notwithstanding
the foregoing, the maximum number of Issuer Common Shares that may be issued under the Issuer Option Plan pursuant to the exercise
or surrender of Issuer Options is 7,500,000, but in all events subject to the limitations in (i) and (ii).
Issuer
Common Shares Share Terms
Voting
Rights
The
holders of Issuer Common Shares are entitled to receive notice of, and to attend and vote at, all meetings of the shareholders
of the Issuer. Each Issuer Common Share confers the right to one vote at all meetings of the shareholders, except meetings at
which only holders of a specified class of shares are entitled to vote.
Dividend
Rights
Subject
to the prior rights and privileges attached to any other class of shares of the Issuer, the holders of the Issuer Common Shares
are entitled to receive any dividend declared by the Issuer.
Rights
Upon Dissolution or Winding-Up
In
the event of the liquidation, dissolution or winding-up of the Issuer, whether voluntary or involuntary, subject to the prior
rights and privileges attached to any other class of shares of the Issuer, the holders of the Issuer Common Shares are entitled
to receive the remaining property and assets of the Issuer.
Pre-Emptive
Rights
This
section is not applicable to the Issuer.
Conversion
or Exchange Rights
The
Issuer Preferred Shares may, if issued, be made convertible into Issuer Common Shares at such rate and upon such basis as the
Board, in its discretion, may determine.
Newton
Immediately
prior to the Transaction, and following the completion of the Consolidation, there were 795,106 Newton Common Shares issued and
outstanding.
Field
Trip
Immediately
prior to the Transaction, and following completion of the FT Private Placement, the September Offering and the conversion of Field
Trip Class B Shares into Field Trip Common Shares, there were 37,007,886 Field Trip Common Shares issued and outstanding.
The
following tables set forth details of the issuances of Field Trip Common Shares and securities exercisable into Field Trip Common
Shares within the last 12 months before the date of this Listing Statement:
|
Date of Issue
|
|
Description
|
|
Number of
Securities Sold
|
|
Price Per
Share/Exercise
Price
|
|
Description of
Consideration
|
|
October 3, 2019
|
|
Exercise of Field Trip Options
|
|
2,700,270
|
|
$0.00001
|
|
Cash
|
|
October 19, 2019
|
|
Field Trip Common Shares
|
|
2,510,000
|
|
$0.50
|
|
Cash
|
|
October, 2019 to September, 2020
|
|
Field Trip Options
|
|
3,840,806
|
|
$0.50 to $2.00
|
|
Cash
|
|
February 6, 2020 to May 20, 2020
|
|
Field Trip B Shares(1)
|
|
9,507,263
|
|
US$0.90
|
|
Cash and 20,882 Field Trip B Shares were issued in satisfaction of financing costs
|
|
August 11, 2020
|
|
Exercise of Field Trip Options
|
|
9,000,900
|
|
$0.00001
|
|
Cash
|
|
August 14, 2020
|
|
FT Private Placement
|
|
5,516,724
|
|
$2.00
|
|
Cash
|
|
August 14, 2020
|
|
Agents’ Shares(2)
|
|
55,167
|
|
$2.00
|
|
Fee in connection with the FT Private Placement
|
|
August 14, 2020
|
|
Agents’ Warrants(2)(3)
|
|
299,753
|
|
$2.00
|
|
Fee in connection with the FT Private Placement
|
|
September 21, 2020
|
|
September Offering
|
|
816,932
|
|
$2.00
|
|
Cash
|
|
September 25, 2020
|
|
Field Trip Common Shares
|
|
600,000
|
|
$2.00
|
|
Payment of Milestone Shares under the FTNP SPA
|
Notes:
|
(1)
|
The
Field Trip Class B Shares converted into Field Trip Common Shares following the closing of the FT Private Placement on a one-for-one
basis.
|
|
(2)
|
Issued
to the Agents as compensation in connection with the FT Private Placement.
|
|
(3)
|
Exchanged
for Issuer Warrants on completion of the Transaction.
|
|
|
10.3
|
Stock
Exchange Price
|
Prior
to listing on the CSE, the Newton Common Shares were listed under the symbol “NTN” on the NEX board of the TSXV and
the Field Trip Common Shares were not listed or posted for trading on any stock exchange or quotation system. The following table
sets forth the high and low sale prices and trading volumes of the Newton Common Shares for each of the periods indicated:
|
|
|
Open
|
|
High
|
|
Low
|
|
Close
|
|
|
|
Date
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
Volume
|
|
June 1, 2020 – June 18, 2020(1)
|
|
0.195
|
|
0.195
|
|
0.175
|
|
0.175
|
|
15,000
|
|
May 2020
|
|
0.170
|
|
0.170
|
|
0.150
|
|
0.170
|
|
5,000
|
|
April 2020
|
|
0.100
|
|
0.150
|
|
0.100
|
|
0.150
|
|
4,875
|
|
Quarter ended March 31, 2020
|
|
0.140
|
|
0.140
|
|
0.140
|
|
0.140
|
|
-
|
|
Quarter ended December 31, 2019
|
|
0.150
|
|
0.220
|
|
0.140
|
|
0.140
|
|
10,013
|
|
Quarter ended September 30, 2019
|
|
0.220
|
|
0.220
|
|
0.220
|
|
0.220
|
|
-
|
|
Quarter ended June 30, 2019
|
|
0.275
|
|
0.275
|
|
0.220
|
|
0.220
|
|
2,150
|
|
Quarter ended March 31, 2019
|
|
0.200
|
|
0.270
|
|
0.200
|
|
0.270
|
|
28,650
|
|
Quarter ended December 31, 2018
|
|
0.400
|
|
0.400
|
|
0.215
|
|
0.235
|
|
3,950
|
|
Quarter ended September 30, 2018
|
|
0.200
|
|
0.540
|
|
0.200
|
|
0.400
|
|
108,577
|
|
Quarter ended June 30, 2018
|
|
0.200
|
|
0.425
|
|
0.165
|
|
0.215
|
|
34,569
|
|
Quarter ended March 31, 2018
|
|
0.390
|
|
0.500
|
|
0.390
|
|
0.420
|
|
84,700
|
Notes:
|
|
(1)
|
Trading
in the Newton Common Shares on the NEX board of the TSXV was halted on June 18, 2020 in connection with the announcement of
the Transaction and the Newton Common Shares were de-listed from the TSXV on September 30, 2020. The Issuer has applied to
list the Issuer Common Shares on the CSE.
|
The
Issuer has no securities currently held in escrow.
In
connection with the listing of the Issuer Common Shares on the CSE, all securities held by “Related Persons” of the
Issuer are required to be deposited into escrow under the terms of an escrow agreement among the Issuer, Odyssey Trust Company
and the Related Persons (the “Escrow Agreement”), pursuant to National Policy 46-201 – Escrow for
Initial Public Offerings (“NP 46-201”).
For
the purposes of this section, “Related Persons” means, with respect to the Issuer:
|
|
a)
|
the
partners, directors and senior officers of the Issuer or any of its material operating subsidiaries;
|
|
|
b)
|
Promoters
of the Issuer during the two years preceding this Listing Statement;
|
|
|
c)
|
those
who own or control more than 10% of the Issuer’s voting securities; and
|
|
|
d)
|
Associates
and affiliates of any of the above.
|
Under
NP 46-201, securities held by Related Persons are required to be held in escrow in accordance with the national escrow regime
applicable to initial public distributions.
A
total of 19,893,465 Issuer Common Shares representing 52.62% of the issued and outstanding Issuer Common Shares will be deposited
into escrow pursuant to the Escrow Agreement (the “Escrowed Securities”).
The
particulars of the holders of the Escrowed Securities pursuant to the Escrow Agreement is as outlined in the table below:
|
Designation of Class Held in Escrow
|
|
Number of Securities Held in Escrow
|
|
|
Percentage of Class
|
|
|
Issuer Common Shares
|
|
|
19,893,465
|
|
|
|
52.62
|
%
|
|
Name of Escrowed Securityholder
|
|
Number of Securities Held in Escrow
|
|
|
Percentage of Class
|
|
|
2360203 Ontario Limited(1)
|
|
|
5,517,026
|
|
|
|
14.59
|
%
|
|
Iron and Fuzz Holdings Inc.(2)
|
|
|
3,517,027
|
|
|
|
9.30
|
%
|
|
CRS Energy Inc.(3)
|
|
|
3,580,915
|
|
|
|
9.47
|
%
|
|
Mujeeb Jafferi
|
|
|
3,622,582
|
|
|
|
9.58
|
%
|
|
2423450 Ontario Limited(4)
|
|
|
3,655,915
|
|
|
|
9.67
|
%
|
Notes:
|
|
(1)
|
Beneficially
owned and controlled by Joseph del Moral, a director and officer of the Issuer.
|
|
|
(2)
|
Beneficially
owned and controlled by Ronan Levy, a director and officer of the Issuer.
|
|
|
(3)
|
Beneficially
owned and controlled by Hannan Fleiman, a director and officer of the Issuer.
|
|
|
(4)
|
Beneficially
owned and controlled by Dr. Ryan Yermus, a director and officer of the Issuer.
|
The
Issuer is currently classified as an “established issuer” by the CSE as defined in NP 46-201, and therefore the Escrowed
Securities will be subject to an eighteen month escrow. Pursuant to the Escrow Agreement, the Related Persons will agree to deposit
into escrow the Escrowed Securities into escrow with the Issuer’s transfer agent, and the Escrowed Securities will be released
from escrow on the following schedule:
|
Release
Date
|
Amount
of Escrowed Securities Released
|
|
Listing
Date
|
1/4
of the Escrowed Securities
|
|
6
months after the Listing Date
|
1/3
of remaining Escrowed Securities
|
|
12
months after the Listing Date
|
1/2
of remaining Escrowed Securities
|
|
18
months after the Listing Date
|
The
remaining Escrowed Securities
|
In
addition to the foregoing escrow arrangements: (i) the Founders have agreed to lock-up restriction with respect to the Escrowed
Securities, which provides for a staggered release from such restrictions on the 6, 12, 18 and 24 month anniversary of the issue
date; and (ii) certain shareholders holding approximately 10,500,000 Field Trip Common Shares have agreed to a voluntary lock-up
restriction with respect to Field Trip Common Shares, which provides for a staggered release from such restrictions on each 2,
4, 8 and 10 month anniversary of the issue date.
|
|
12.
|
PRINCIPAL
SHAREHOLDERS
|
|
|
12.1
|
Principal
Shareholders
|
Following
the Transaction, the following persons beneficially own, directly or indirectly, or exercise control or direction over, voting
securities of the Issuer (being solely the Issuer Common Shares) carrying more than 10% of the voting rights attached to any class
of voting securities of the Issuer:
|
Name and Jurisdiction of Residence
|
|
Number of Issuer Common Shares
|
|
|
Percentage of Issuer Common Shares
|
|
|
2360203 Ontario Limited(1)
|
|
|
5,517,026
|
|
|
|
14.59
|
%
|
Notes:
|
|
(1)
|
Beneficially
owned and controlled by Joseph del Moral, a director and officer of the Issuer.
|
|
|
13.
|
DIRECTORS
AND OFFICERS
|
|
|
13.1
|
Directors
and Officers
|
The
articles of the Issuer provide that the number of directors should be a minimum of three and a maximum of 15 directors. Each director
shall hold office until the close of the next annual general meeting of the shareholders of the Issuer, or until his or her successor
is duly elected or appointed, unless his or her office is earlier vacated. The Board currently consists of seven directors, of
whom two can be defined as an “unrelated director” or a director who is independent of management and is free from
any interests and any business or other relationship which could, or could reasonably be perceived to, materially interfere with
the director’s ability to act with a view to the best interests of the Issuer, other than interests and relationships arising
solely from being shareholders of the Issuer.
The
following table sets forth the names of all directors and officers of the Issuer, their municipalities of residence, their current
positions with the Issuer, their principal occupations during the past five years and the number and percentage of Issuer Common
Shares beneficially owned, directly or indirectly, or over which control or direction is exercised by them as at the date hereof.
Additional biographical information is included below the following table. Each person was appointed, as a nominee of Field Trip,
to the position(s) indicated below in connection with the Transaction.
|
Name,
Municipality
of
Residence and
Position
Held(7)
|
Principal
Occupation for Past Five
Years
|
Appointed
as of
|
Number
and
Percentage
of
Common
Shares
Beneficially
Owned
or
Controlled
Prior
to the
Transaction
|
Number
and
Percentage
of
Issuer
Common
Shares
Beneficially
Owned
or
Controlled
After
the
Transaction
|
|
Joseph
del Moral
Toronto,
Ontario
Director,
Chief
Executive
Officer
|
CEO
of Field Trip;
CEO
of Trait Biosciences Inc.
(July
2018 to January 2019); and
CEO
of CanvasRx Holdings Inc.
(January
2014 to August 2016)
|
April
2019
|
5,517,026
(14.91%)
|
5,517,026
(14.59%)
|
|
Ronan
Levy
Toronto,
Ontario
Director,
Executive
Chairman
|
Executive
Chairman of Field Trip;
Chief
Strategy Officer of Trait
Biosciences
Inc.
(July
2018 to January 2019);
SVP
Business & Corporate Affairs, of
Aurora
Cannabis Inc.
(November
2017 to June 2018);
Chief
Corporate Officer & General
Counsel
of CanvasRx Holdings Inc.
(April
2014 to June 2018);
Principal,
TDF Debt Advisory Law
Professional
Corporation
(Since
June 2015); and
President
of Toronto Gold
(Since
March 2011)
|
April
2019
|
3,517,027
(9.50%)
|
3,517,027
(9.30%)
|
|
Name,
Municipality
of
Residence and
Position
Held(7)
|
Principal
Occupation for Past Five
Years
|
Appointed
as of
|
Number
and
Percentage
of
Common
Shares
Beneficially
Owned
or
Controlled
Prior
to the
Transaction
|
Number
and
Percentage
of
Issuer
Common
Shares
Beneficially
Owned
or
Controlled
After
the
Transaction
|
|
Hannan
Fleiman
Toronto,
Ontario
Director,
President
|
President
of Field Trip;
President
of Trait Biosciences Inc.
(July
2018 to January 2019); and
Chief
Operating Officer of CanvasRx
Holdings
Inc.
(January
2014 to June 2018)
|
April
2019
|
3,580,915
(9.68%)
|
3,580,915
(9.47%)
|
|
Mujeeb
Jafferi(1)(2)
Toronto,
Ontario
Director,
Chief
Operating
Officer
|
Chief
Operating Officer of Field Trip;
President
of Just Energy Solar
(May
2016 to April 2019);
Vice
President, Sales Strategy &
Transformation,
of Just Energy Corp.
(February
2016 to April 2019); and
Partner
at Lightwing Partners
(June
2015 to February 2016);
|
Officer
Appointment:
May
2019
Director
Appointment:
January
2020
|
3,622,582
(9.79%)
|
3,622,582
(9.58%)
|
|
Dr.
Ryan Yermus
Toronto,
Ontario
Director,
Chief
Clinical Officer
|
Chief
Clinical Officer of Field Trip;
and
Physician, Ontario Addiction
Treatment
Centres
(Since
2010)
|
Officer
Appointment:
April
2019
Director
Appointment:
January
2020
|
3,655,915
(9.88%)
|
3,655,915
(9.67%)
|
|
Tyler
Dyck
Toronto,
Ontario
Treasurer
and Head of
Finance
|
Treasurer
and Head of Finance of Field
Trip;
Director
of Finance at Chefs Plate
(November
2017 to October 2019);
Director
of Finance at Hello Fresh
(May
2017 to October 2019); and
Senior
Accountant, KPMG
(September
2013 to September 2017)
|
November
2019
|
Nil(3)
|
Nil(3)
|
|
Donna
Wong
Toronto,
Ontario
Chief
Financial Officer
|
Chief
Financial Officer of Field Trip;
Managing
Director of On Point
Advisors
Inc.
(Since
August 2019);
Senior
Manager, Financial Reporting of
Fairfax
Africa
(January
2018 to July 2019); and
VP,
Finance of ViXS Systems Inc.
(July
2018 to December 2017)
|
September
2020
|
Nil
|
Nil
|
|
Name,
Municipality
of
Residence and
Position
Held(7)
|
Principal
Occupation for Past Five
Years
|
Appointed
as of
|
Number
and
Percentage
of
Common
Shares
Beneficially
Owned
or
Controlled
Prior
to the
Transaction
|
Number
and
Percentage
of
Issuer
Common
Shares
Beneficially
Owned
or
Controlled
After
the
Transaction
|
|
Paula
Amy Hewitt
Toronto,
Ontario
Vice
President,
General
Counsel and
Corporate
Secretary
|
Vice
President, General Counsel and
Corporate
Secretary to Field Trip;
Senior
Vice President, General
Counsel,
Chief Compliance Officer &
Chief
Privacy Officer at Raymond
James
Ltd.;
(August
2018 to October 2019)
Senior
Vice President, Chief
Compliance
Officer (Canada) at
Macquarie
Group
(December
2016 to August 2018)
Vice
President, Legal & Compliance at
Dundee
Securities Ltd.
(May
2009 to December 2016)
|
July
2020
|
Nil(4)
|
Nil(4)
|
|
Helen
Boudreau(1)(2)(8)
Lexington,
Massachusetts
Director
|
Member
of the board of Premier, Inc.
(Since
June 2020);
COO
of the Bill & Melinda Gates
Medical
Research Institute
(June
2018 to June 2019)
Chief
Financial Officer, Protesostasis
Therapeutics,
Inc.
(July
2017 to June 2018);
Board
Member, Proteostasis
Therapeutics,
Inc. and
Chief
Financial Officer, FORMA
Therapeutics,
Inc.
(October
2014 to June 20174)
|
April
2020
|
Nil(4)
|
Nil(4)
|
|
Dieter
Weinand(1)(2) (8)
Pompano
Beach,
Florida
Director
|
Chairman
of the Board of Directors of
Replimune
Group Inc.
(Since
April 2019 and Director since
June
2018);
Executive
Vice President of Primary
Care
and member of the Executive
Committee
at Sanofi
(November
2018 to March 2020); and
CEO
and Chairman of the Board of
Management
of Bayer Pharma AG; and
Member
of the Management Board at
Bayer
AG
(July
2014 to November 2018)
|
April
2020
|
Nil(4)
|
Nil(4)
|
|
Name,
Municipality
of
Residence and
Position
Held(7)
|
Principal
Occupation for Past Five
Years
|
Appointed
as of
|
Number
and
Percentage
of
Common
Shares
Beneficially
Owned
or
Controlled
Prior
to the
Transaction
|
Number
and
Percentage
of
Issuer
Common
Shares
Beneficially
Owned
or
Controlled
After
the
Transaction
|
|
Dr.
Nathan Bryson
Toronto,
Ontario
Chief
Science Officer
|
Chief
Science Officer of Acerus
Pharmaceuticals
Corporation
(February
2014 to February 2020)
|
April
2020
|
Nil(5)
|
Nil(5)
|
|
Amardeep
Manhas
Toronto,
Ontario
Chief
Technology
Officer
|
Chief
Technology Officer of Field Trip;
Vice
President Solar Operations, Crius
Energy
Management LLC
(September
2016 to November 2018);
Senior
Partner, Business Operations,
SunEdison
LLC
(April
2015 to September 2016); and
Vice
President of Operations,
LightWing
Inc.
(July
2014 to April 2015)
|
October
2019
|
55,555(6)
(0.15%)
|
55,555(6)
(0.15%)
|
Notes:
|
(1)
|
Member
of the audit committee.
|
|
(2)
|
Member
of the compensation committee.
|
|
(3)
|
Excludes
120,000 Issuer Options to acquire 120,000 Issuer Common Shares
|
|
(4)
|
Excludes
100,000 Issuer Options to acquire 100,000 Issuer Common Shares
|
|
(5)
|
Excludes
300,000 Issuer Options to acquire 300,000 Issuer Common Shares
|
|
(6)
|
Excludes
215,000 Issuer Options to acquire 215,000 Issuer Common Shares
|
|
(7)
|
Ms.
Wong will devote 40% of her time to the Issuer and Dr. Yermus devotes 95% of his time to the Issuer. All other officers devote
100% of their time to the Issuer.
|
|
(8)
|
Independent
Directors are expected to devote a sufficient amount of time to adequately discharge their duties to the Issuer.
|
All
of the directors of the Issuer will be appointed to hold office until the next annual general meeting of shareholders or until
their successors are duly elected or appointed, unless their office is earlier vacated.
Upon
completion of the Transaction, all Promoters, directors, officers, and Insiders of the Issuer, as a group, will beneficially own,
directly or indirectly, an aggregate of 19,893,465 Issuer Common Shares (excluding convertible securities).
The
following are brief biographical descriptions of the officers and directors of the Issuer:
Joseph
del Moral, Director & Chief Executive Officer, Age 42
Mr.
del Moral is an experienced entrepreneur and a founder of Field Trip. In 2014, he was the founder and CEO of CanvasRx Inc.
and Canadian Cannabis Clinics, which grew to be the largest cannabis clinic company in Canada. In 2016, CanvasRx was acquired
by Aurora Cannabis Inc. (NYSE: ACB) (“Aurora”) and he joined Aurora’s board of directors. During his
time at Aurora, Mr. del Moral ensured that CanvasRx continued to grow and achieve its milestones as well as assisted in
corporate development, M&A and strategy. After leaving Aurora in 2018, Mr. del Moral assumed the role of CEO of Trait
Biosciences Inc., a leading biotech company in the hemp and cannabis industries. Prior to his time in the cannabis industry,
Mr. del Moral co-founded Newten Home Comfort, a fast growing home services company acquired by Just Energy Inc. in 2009. Mr.
del Moral is also on the board of directors of Felix Health, an innovative direct to consumer healthcare company that is
changing how Canadians access prescription drugs. Mr. del Moral was conferred a Bachelor of Commerce Degree (Finance and
Entrepreneurship) from McGill University in June 2001.
Ronan
Levy, Director & Executive Chairman, Age 41
Mr.
Levy is an entrepreneur and is a co-founder and Executive Chairman of Field Trip. He is also a partner at Grassfed Ventures, a
venture capital and advisory firm focused on the cannabis and biotech industries, and a member of the board of directors of Trait
Biosciences Inc., a leading biotech company in the hemp and cannabis industries. Prior to his current roles, Mr. Levy co-founded
Canadian Cannabis Clinics and CanvasRx Inc., which was acquired by Aurora in 2016, after which he served as Senior Vice President,
Business and Corporate Affairs, for Aurora. A lawyer by training, Mr. Levy started his career as a corporate lawyer at Blake,
Cassels and Graydon LLP and as legal counsel at CTVglobemedia Inc. (now Bell Media Inc.). Mr. Levy earned a Juris Doctor in June
2004 and a Bachelor of Commerce degree in June 2001, both from the University of Toronto.
Hannan
Fleiman, Director & President, Age 40
Mr.
Fleiman is a serial entrepreneur and has co-founded and operated several companies, including Field Trip.,
CanvasRx Inc., Canadian Cannabis Clinic and Dominion Home Insulation. Prior to founding these companies, Mr. Fleiman managed the
hospital department, animal health and OTC divisions at Teva Canada. Mr. Fleiman is a board member of MedicNL, a contract research
organization, and was a board member of Abacus Health, where he headed the audit and compensation committees before the successful
sale to Charlotte’s Web Holdings, Inc. (CSE: CWEB). Mr. Fleiman earned his MBA from McMaster University in June 2006 and
his BSc from University of Guelph in June 2003.
Mujeeb
Jafferi, Director & Chief Operating Officer, Age 37
Mr.
Jafferi is an experienced management executive and a founder of Field Trip. Prior to joining Field Trip, Mr. Jafferi spent over
a decade in the retail and renewable energy sectors in a variety of leadership roles. Between 2016 and 2019, Mr. Jafferi served
as the Vice President of Sales Operations and Strategy at Just Energy Inc. (TSX: JE) and the President of Just Energy Solar. In
2015, Mr. Jafferi served as a Partner at a renewable energy technology startup, LightWing Partners, leading its business development
efforts across the US market. LightWing Partners was subsequently acquired by SunEdison. Between 2009 and 2015, Mr. Jafferi held
several progressive and diverse leadership roles at Just Energy, including Director of Corporate Planning and Financial Analysis,
and Assistant. Regional General Manager for US Northeast Region. He holds a BA in Information Technology, conferred in 2004, from
York University and a Global Professional Master of Laws, conferred in 2014, from University of Toronto.
Dr.
Ryan Yermus, Director & Chief Clinical Officer, Age 39
Dr.
Yermus is a physician who completed his medical training at the University of Ottawa in 2007 and his residency at the University
of Toronto in 2009. As a pioneer in the Canadian medical cannabis industry, he was responsible for the development of a clinical
protocol that led to the treatment of thousands of medical cannabis patients. In 2014, Dr. Yermus founded Medical Marijuana Clinics
of Canada (MMCC), the first fully compliant cannabis clinic in Ontario. MMCC went on to be acquired by Canadian Cannabis Clinics,
which grew to become the nation’s largest cannabis clinic network and was acquired by Aurora Cannabis Inc. in 2016. For
the past decade, Dr. Yermus has also worked as a clinician at the Ontario Addiction Treatment Centres helping patients suffering
from addictions.
Tyler
Dyck, Treasurer and Head of Finance, Age 30
Mr.
Dyck is a dynamic CPA, CA comfortable working across all functions of an organization in high -growth environments. Most
recently, Mr. Dyck was finance employee #1 at HelloFresh Canada, where starting from a 100% outsourced model, he grew the
finance and accounting function to a team of 8 over 30 months. While at HelloFresh he also led the due diligence, financial
analysis, and business planning relating to the acquisition of Chefs Plate. Mr. Dyck started his career in KPMG’s audit
practice after obtaining an Honours BBA from Wilfrid Laurier University in May 2013.
Donna
Wong, Chief Financial Officer, Age 54
Ms.
Wong is a financial growth expert with over 20 years of experience within private start-ups and public multi-national organizations,
primarily in the technology sector. She has a proven track record in establishing the necessary corporate infrastructure to scale
through change management, IT, and cross-functional collaboration among multi-location businesses. Prior to her current role,
as VP, Finance of ViXS Systems, Ms. Wong guided the company from pre-revenue to $100 million in revenues and eventual listing
on the TSX. Ms. Wong is a CPA, CA, CMA and earned a Master of Accounting in 1992 and Honours Bachelor of Arts degrees in 1990,
both from the University of Waterloo.
Paula
Amy Hewitt, Vice President, General Counsel and Corporate Secretary, Age 48
Ms.
Hewitt brings 16 years of broad legal experience gained through a career in private practice and in executive roles within Canadian
and Multinational financial services companies. Between 2009 and 2019, Ms. Hewitt held various executive positions with investment
dealer companies, including Vice President, Legal & Compliance, Head of Legal, Chief Compliance Officer, Chief Anti-Money
Laundering Officer, Chief Privacy Officer and General Counsel. Prior to 2009, Ms. Hewitt worked as an associate lawyer at Bay
Street law firms, practicing securities and mining law. Ms. Hewitt sits on the board of directors of Caldwell Investment Management,
a portfolio manager and investment fund manager. Paula has served on the Ontario District Council of Investment Industry Regulatory
Organization of Canada andon the Canadian Advisory Board of the International Association of Privacy Professionals (“IAPP”).
In addition to earning a Juris Doctor from Osgoode Hall Law School in 2001, Paula earned a BA in Psychology from McGill University
in June 1994, a Graduate Certificate in Risk Management from the University of Toronto in March 2015 and the CIPP/C, CIPM and
CIPT designations from the IAPP.
Helen
M. Boudreau, Director, Age 54
Ms.
Boudreau is a retired senior executive with 30 years experience across biotech, pharmaceuticals, consulting, and banking industries.
She was most recently COO of the Bill & Melinda Gates Medical Research Institute, a non-profit biotech focused on diseases
that cause mortality, poverty, and inequality in low and middle-income countries from 2018 to 2019. Previously, she served as
CFO for public and private biotechs, Proteostasis Therapeutics (2017-2018) and FORMA Therapeutics (2014-2017). Helen worked at
Novartis (2008-2014) and Pfizer (1999-2008), serving in strategy and senior finance roles, including global CFO Oncology business
unit, CFO US Corporate, VP Investor Relations, VP Finance, Customer Business Unit and Commercial Operations, and VP Finance Global
R&D. Helen started her career in banking at Bank of America (1987-1991), was an engagement manager at McKinsey & Company
(1993-1996), a strategic consulting firm, and a Director of Strategic Planning at YUM! Brands/PepsiCo (1996-1999). Helen is currently
a member of the board of Premier, Inc. (NASDAQ: PINC), a healthcare improvement company, and is also on the boards of three private
biotech companies. Helen earned a BA in Economics, summa cum laude, from the University of Maryland in 1987, and an MBA
from the Darden Graduate School of Business at the University of Virginia in 1993.
Dieter
Weinand, Director, Age 59
Mr.
Weinand is an experienced executive with over 30 years of experience in the pharmaceuticals and biotech industries. Mr.
Weinand presently serves as the chairman of the board of directors of Replimune Group Inc. (NASDAQ: REPL). Previously, Mr.
Weinand served as the Executive Vice President of Primary Care and was a member of the Executive Committee at Sanofi from
November 2018 to February 2020. Before moving to Sanofi, Mr. Weinand was CEO and Chairman of the Board of Management of Bayer
Pharma AG and member of the Management Board at Bayer AG. Prior to his work at Sanofi and Bayer, Mr. Weinand has held various
positions in commercial, operational, and strategic areas of the pharmaceutical industry. These included responsibilities
spanning various therapeutic areas and geographies for companies such as Pfizer, Bristol Myers Squibb, and Otsuka. Mr.
Weinand earned an MS in Pharmacology and Toxicology from Long Island University, New York, and a BA in Biology from Concordia
College, New York. Mr. Weinand is a former board member of the Pharmaceutical Research and Manufacturers of America (PhRMA),
the European Federation of Pharmaceutical Industries & Associations (EFPIA), and the International Federation of
Pharmaceutical Manufacturers (IFPMA), and served as a member of the Board of Directors of HealthPrize
Technologies.
Dr.
Nathan Bryson, Ph.D, Chief Science Officer, Age 57
Dr.
Bryson has 30 years of experience in pharmaceutical drug development. After receiving his Ph.D. in radiopharmaceutical chemistry
(MIT, 1988) and successive post-doctoral studies in catalysis and polymers at the University Louis Pasteur (Strasbourg, France)
and MIT, Dr. Bryson joined Flamel Technologies (now Avadel Pharma) as a founding scientist in 1990, eventually developing and
leading teams in R&D, process development and commercialization. After expanding roles, as Vice President R&D at Bionisis
(FR) and Matregen (Canada), Dr. Bryson transitioned to CSO roles at Cynapsus in 2005 (formerly, Cannasat) and to Acerus Pharmaceuticals
Corporation in 2014. At Cynapsus, he led Chemistry-Manufacturing-Controls and early-stage development of Kinmobil (now approved
in Canada and US), while at Acerus, he headed research, clinical development, medical and regulatory affairs, as well as production.
Prior to his doctorate, Nathan received a B.Sc. (chemistry), conferred in 1984, from Auburn University.
Amardeep
Manhas, Chief Technology Officer, Age 37
Mr.
Manhas is a seasoned business technology and operations executive with over 15 years of diverse experience in both public and
startup companies. In 2014, Mr. Manhas joined cleantech startup LightWing Inc as VP Operations, where he oversaw the buildout
of the operational organization and a proprietary technology platform for consumers and affiliate partners. LightWing was fully
acquired by SunEdison LLC in 2015, and Mr. Manhas stayed on with SunEdison to oversee business operations and technology for its
residential partner division. In 2016, Mr. Manhas joined Crius Energy as VP Operations, where he built a back -office technology
and support organization to scale multi-channel growth for the solar business. Prior to 2014, Mr. Manhas worked at Just Energy
Group Inc in a variety of operational and technology leadership roles. Mr. Manhas holds a Bachelor of Applied Science in Engineering
Physics, conferred in 2004, from Queen’s University.
|
13.2
|
Periods
of Directorships
|
See
brief biographical descriptions under Section 13.1.
|
13.3
|
Securities
Ownership
|
See
table under Section 13.1.
The
Issuer currently has an audit committee and a compensation committee. A brief description of each committee is set out below.
The Board may establish such other committees of the Board as determined to be appropriate, in addition to the audit committee
and compensation committee, from time to time in its discretion.
Audit
Committee
The
Issuer will have an Audit Committee consisting of the following members: Dieter Weinand, Helen Boudreau, Mujeeb Jafferi. The audit
committee assists the Board in fulfilling its responsibilities for oversight of financial and accounting matters, including the
Issuer’s external auditors, financial reporting and continuous disclosure, financial risk management, the Issuer’s whistle- blower
and fraud function, and compliance with tax and securities laws. The audit committee reviews the financial reports and other financial
information provided by the Issuer to regulatory authorities and its shareholders and reviews the Issuer’s system of internal
controls regarding finance and accounting, including auditing, accounting and financial reporting processes. The audit committee
will report, at least annually, to the Board.
The Issuer’s Board will adopt a written charter setting forth the responsibilities, powers and operations of the Audit
Committee consistent with NI 52-110. The principal duties and responsibilities of the Issuer’s Audit Committee will
be to assist the Issuer’s Board in discharging the oversight of:
|
|
•
|
the integrity of the Issuer’s consolidated financial statements and accounting and financial
processes and the audits of our consolidated financial statements;
|
|
|
•
|
the Issuer’s compliance with legal and regulatory requirements;
|
|
|
•
|
the Issuer’s external auditors’ qualifications and independence;
|
|
|
•
|
the work and performance of the Issuer’s financial management and its external auditors;
and
|
|
|
•
|
the Issuer’s system of disclosure controls and procedures and system of internal controls
regarding finance, accounting, legal compliance, and risk management established by management and the Issuer’s Board.
|
It is anticipated that the Audit Committee
will have access to all books, records, facilities, and personnel and may request any information about the Issuer as it may deem
appropriate. It will also have the authority to retain and compensate special legal, accounting, financial and other consultants,
or advisors to advise the Audit Committee. The Audit Committee is also expected to review and approve all related-party transactions
and prepare reports for the Issuer’s Board on such related-party transactions as well as be responsible for the pre-approval
of all non-audit services to be provided by our auditors.
The following table sets out the members
of the audit committee and indicates whether they are “independent” and “financially literate” within the
meaning of National Instrument 52-110 – Audit Committees (“NI 52-110”).
|
Name of Member
|
|
Independent(1)
|
|
Financially Literate(2)
|
|
Dieter Weinand
|
|
Independent
|
|
Financially Literate
|
|
Helen M. Boudreau
|
|
Independent
|
|
Financially Literate
|
|
Mujeeb Jafferi
|
|
Not Independent
|
|
Financially Literate
|
Notes:
|
|
(1)
|
A member of the audit committee is independent if he or she has no direct or indirect ‘material
relationship’ with the Issuer. A material relationship is a relationship which could, in the view of the Board, reasonably
interfere with the exercise of a member’s independent judgment. An executive officer of the Issuer, such as the President
or Secretary, is deemed to have a material relationship with the Issuer.
|
|
|
(2)
|
A member of the audit committee is financially literate if he or she has the ability to read and
understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally
comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Issuer’s financial
statements.
|
The Issuer is a “venture issuer”
as defined in NI 52-110 and is relying upon the exemption in section 6.1 of NI 52-110 in respect of the composition of its Audit
Committee and in respect of its reporting obligations under NI 52-110.
Compensation Committee
The primary responsibility of the compensation
committee is oversight of the Issuer’s compensation of the directors and executive officers of the Issuer with respect to compensation
guidelines and the criteria by which bonuses and stock-based compensation awards are determined; compensation plans adopted by
the Board and changes in the number of shares reserved for issuance thereunder; reporting and continuous disclosure related to
compensation; the Issuer’s ethics program; and compliance with tax and securities laws. The compensation committee will report,
at least annually, to the Board regarding the compensation committee’s examinations and recommendations.
The compensation committee is currently comprised of Dieter
Weinand, Helen M. Boudreau and Mujeeb Jafferi.
13.5 Principal
Occupation or Employment of a Director or Officer
See the table under Section 13.1.
|
|
13.6
|
Corporate Cease Trade Orders or Bankruptcies; Penalties or Sanctions; Personal Bankruptcies
|
No director or officer of the Issuer, nor,
to the Issuer’s knowledge, any shareholder holding a sufficient number of securities of the Issuer to affect materially the
control of the Issuer, is, or within 10 years before the date of this Listing Statement has been, a director or officer of any
other company that, while the person was acting in that capacity:
|
|
(a)
|
was the subject of a cease trade or similar order, or an order that denied the other company access
to any exemptions under Ontario securities law, for a period of more than 30 consecutive days;
|
|
|
(b)
|
was the subject of an event that resulted, after the director or executive officer ceased to be
a director or executive officer, in the company being the subject of a cease trade or similar order or an order that denied the
relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days;
|
|
|
(c)
|
became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, was
subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee
appointed to hold its assets; or
|
|
|
(d)
|
within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal
under any legislation relating to bankruptcy or insolvency, was subject to or instituted any proceedings, arrangement or compromise
with creditors, or had a receiver, receiver manager or trustee appointed to hold its assets.
|
|
|
13.7
|
Penalties or Sanctions
|
No director or officer of the Issuer, nor,
to the Issuer’s knowledge, any shareholder holding sufficient securities of the Issuer to affect materially the control of
the Issuer, has been subject to: (i) any penalties or sanctions imposed by a court relating to securities legislation or by a securities
regulatory authority, or entered into a settlement agreement with a securities regulatory authority; or (ii) any other penalties
or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor making an
investment decision.
13.8 Conflicts
of Interest
Conflicts of interest may arise as a result
of the directors, officers and Promoters of the Issuer also holding positions as directors or officers of other companies. Some
of the individuals who will be directors and officers of the Issuer have been, and will continue to be, engaged in the identification
and evaluation of assets, businesses and companies on their own behalf and on behalf of other companies, and situations may arise
where the directors and officers of the Issuer will be in direct competition with the Issuer. Directors of the Issuer will be
bound by the provisions of the ABCA to act honestly and in good faith with a view to the best interests of the Issuer and to disclose
any interests, which they may have in any project or opportunity the Issuer may have. If a conflict of interest arises at a meeting
of the Board, any director in a conflict will disclose his or her interest and abstain from voting on such matter. To the best
of the knowledge of the Issuer, and other than disclosed herein, there are no known existing or potential conflicts of interest
among the Promoters, directors and officers of the Issuer or other members of management or of any proposed Promoter, director,
officer or other member of management of the Issuer as a result of their outside business interests, except that certain of the
directors and officers serve as directors and officers of other companies, and therefore it is possible that a conflict may arise
between their duties to the Issuer and their duties as a director and/or officer of such other companies.
Other Reporting Issuer Experience
The following table sets out the directors and officers of the
Issuer who are, or have been within the last five years, directors or officers of reporting issuers other than the Issuer:
Name of Director or
Officer
|
Name of Reporting Issuer
|
Name of Trading
Market
|
Position
|
Period
(From/To)
|
|
Joseph del Moral
|
Cherry Street Capital Inc.
|
TSXV
|
Director
|
June 2017 –
Present
|
|
Aurora Cannabis Inc.
|
TSX
|
Director
|
October 2016 –
March 2018
|
|
Hannan Fleiman
|
Abacus Health Products,
Inc.
|
CSE
|
Director
|
July 31 2019 to
June 11 2020
|
|
Helen M. Boudreau
|
Premier, Inc.
|
NASDAQ
|
Director
|
June 2020 –
Present
|
Proteostasis Therapeutics,
Inc.
|
NASDAQ
|
Director
|
February 2016 –
July 2017
|
|
Dieter Weinand
|
Sanofi SA
|
NASDAQ
|
Executive
Committee
Member
|
November 2018 –
March, 2020
|
|
Bayer AG
|
OTC US
|
Management
Board Member
|
July 2014 –
October 2018
|
|
Replimune Group Inc.
|
NASDAQ
|
Chairmen of the
Board of
Directors
|
April 2020 –
Present
|
|
Director
|
June 2018 –
Present
|
|
Paula Amy Hewitt
|
Caldwell Investment
Management Ltd. (1)
|
TSX
|
Director
|
December 2019 –
Present
|
|
Donna Wong
|
ViXS Systems Inc.
|
TSX
|
VP, Finance
|
July 2013 –
December 2017
|
Notes:
|
|
(1)
|
Caldwell Investment Management Ltd. (“CIM”) is a private company as well as
a portfolio manager and investment fund manager in the Province of Alberta, British Columbia, Manitoba, Ontario, Québec,
Saskatchewan and an investment fund manager in Newfoundland and Labrador. CIM manages public mutual funds, an exchange traded fund
and an investment company which trades on the Toronto Stock Exchange and, as such, directors are required to be registered with
the Ontario Securities Commission and file a Personal Information Form with the Toronto Stock Exchange.
|
The following table sets out the number of the shares in all
classes available in the Issuer’s public float and freely-tradeable float on a diluted and non-diluted basis.
|
|
|
Number of
Securities
(non-diluted)
|
|
|
Number of
Securities
(fully-diluted)(1)
|
|
|
% of Issued
(non-diluted)
|
|
|
% of Issued (fully
diluted)
|
|
|
Public Float
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total outstanding (A)
|
|
|
37,802,992
|
|
|
|
42,018,004
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Held by Related Persons or employees of the Issuer or Related Person of the Issuer, or by persons or companies who beneficially own or control, directly or indirectly, more than a 5% voting position in the Issuer (or who would beneficially own or control, directly or indirectly, more than a 5% voting position in the Issuer upon exercise or conversion of other securities held) (B)
|
|
|
19,970,276
|
|
|
|
22,409,276
|
|
|
|
52.83
|
%
|
|
|
53.33
|
%
|
|
Total Public Float (A-B)
|
|
|
17,832,716
|
|
|
|
19,608,728
|
|
|
|
47.17
|
%
|
|
|
46.67
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freely-Tradeable Float
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of outstanding securities subject to resale restrictions, including restrictions imposed by pooling or other arrangements or in a shareholder agreement and securities held by control block holders (C)
|
|
|
19,893,465
|
|
|
|
19,893,465
|
|
|
|
52.62
|
%
|
|
|
47.35
|
%
|
|
Total Tradeable Float (A-C)
|
|
|
17,909,527
|
|
|
|
22,124,539
|
|
|
|
47.38
|
%
|
|
|
52.65
|
%
|
Note:
|
|
(1)
|
Excluding the 600,000 Issuer Common Shares, issuable
under the FTNP SPA.
|
Public Securityholders (Registered)
Class of Security
|
Size of Holding
|
|
Number of holders
|
|
|
Total number of securities
|
|
|
1 - 99 securities
|
|
|
23
|
|
|
|
520
|
|
|
100 – 499 securities
|
|
|
6
|
|
|
|
1,394
|
|
|
500 – 999 securities
|
|
|
9
|
|
|
|
6,314
|
|
|
1,000 – 1,999 securities
|
|
|
5
|
|
|
|
5,974
|
|
|
2,000 – 2,999 securities
|
|
|
2
|
|
|
|
5,000
|
|
|
3,000 – 3,999 securities
|
|
|
2
|
|
|
|
7,154
|
|
|
4,000 – 4,999 securities
|
|
|
-
|
|
|
|
-
|
|
|
5,000 or more securities
|
|
|
182
|
|
|
|
13,477,084
|
|
|
Total
|
|
|
229
|
|
|
|
13,503,440
|
|
Public Securityholders (Beneficial)
Class of Security
|
Size of Holding
|
|
Number of holders
|
|
|
Total number of securities
|
|
|
1 - 99 securities
|
|
|
146
|
|
|
|
1,684
|
|
|
100 – 499 securities
|
|
|
50
|
|
|
|
11,945
|
|
|
500 – 999 securities
|
|
|
17
|
|
|
|
12,608
|
|
|
1,000 – 1,999 securities
|
|
|
11
|
|
|
|
9,558
|
|
|
2,000 – 2,999 securities
|
|
|
22
|
|
|
|
42,195
|
|
|
3,000 – 3,999 securities
|
|
|
5
|
|
|
|
21,835
|
|
|
4,000 – 4,999 securities
|
|
|
9
|
|
|
|
39,303
|
|
|
5,000 or more securities
|
|
|
79
|
|
|
|
4,266,959
|
|
|
Unable to determine
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
339
|
|
|
|
4,406,087
|
|
Non-Public Securityholders (Registered)
Class of Security
|
Size of Holding
|
|
Number of holders
|
|
|
Total number of securities
|
|
|
1 - 99 securities
|
|
|
-
|
|
|
|
-
|
|
|
100 – 499 securities
|
|
|
-
|
|
|
|
-
|
|
|
500 – 999 securities
|
|
|
-
|
|
|
|
-
|
|
|
1,000 – 1,999 securities
|
|
|
-
|
|
|
|
-
|
|
|
2,000 – 2,999 securities
|
|
|
-
|
|
|
|
-
|
|
|
3,000 – 3,999 securities
|
|
|
-
|
|
|
|
-
|
|
|
4,000 – 4,999 securities
|
|
|
-
|
|
|
|
-
|
|
|
5,000 or more securities
|
|
|
7
|
|
|
|
19,893,465
|
|
|
Total
|
|
|
7
|
|
|
|
19,893,465
|
|
|
|
14.2
|
Convertible/Exchange Securities
|
The following table set forth convertible
securities of the Issuer issued and outstanding immediately following the Transaction:
|
Description of Security
|
|
Number of convertible /
exchangeable
securities outstanding
|
|
|
Number of listed
securities issuable
upon conversion /
exercise
|
|
|
Issuer Options
|
|
|
3,840,806
|
|
|
|
3,840,806
|
|
|
Issuer Warrants
|
|
|
299,753
|
|
|
|
299,753
|
|
|
Replacement Options
|
|
|
74,453
|
|
|
|
74,453
|
|
|
|
15.
|
EXECUTIVE COMPENSATION
|
Below is the Statement of Executive Compensation, which has
been prepared in accordance with Form 51-102F6V.
Named Executive Officers
The following table sets forth the anticipated compensation
to be paid or awarded to the directors and the NEOs of the Issuer for the period noted:
|
Table of Compensation Excluding Compensation Securities
|
Name &
position
|
|
Year
|
|
|
Salary, Consulting
Fee, Retainer or
Commission
($)
|
|
|
Bonus(3)
($)
|
|
|
Committee
or meeting
fees ($)
|
|
Value of
Perquisites
($)
|
|
|
Value of all other
compensation(4)
($)
|
|
|
Total
compensation
($)
|
|
Joseph
del Moral
Chief Executive
Officer
Director
|
|
|
2020
|
|
|
$
|
100,000
|
|
|
$
|
30,000
|
|
|
Nil
|
|
Nil
|
|
|
$
|
8,900
|
|
|
$
|
138,900
|
|
Donna
Wong
Chief Financial
Officer
|
|
|
2020
|
|
|
$
|
168,000
|
(1)
|
|
|
Nil
|
|
|
Nil
|
|
Nil
|
|
|
$
|
5,000
|
|
|
$
|
173,000
|
|
Dr. Nathan
Bryson(2)
Chief Science
Officer
|
|
|
2020
|
|
|
$
|
300,000
|
|
|
$
|
105,000
|
|
|
Nil
|
|
Nil
|
|
|
$
|
8,900
|
|
|
$
|
413,900
|
|
Ronan
Levy
Executive
Chairman
Director
|
|
|
2020
|
|
|
$
|
100,000
|
|
|
$
|
30,000
|
|
|
Nil
|
|
Nil
|
|
|
$
|
11,235
|
|
|
$
|
141,235
|
|
Hannan Fleiman
President
Director
|
|
|
2020
|
|
|
$
|
100,000
|
|
|
$
|
30,000
|
|
|
Nil
|
|
Nil
|
|
|
$
|
8,900
|
|
|
$
|
138,900
|
|
Mujeeb
Jafferi
Chief Operating
Officer
Director
|
|
|
2020
|
|
|
$
|
100,000
|
|
|
$
|
30,000
|
|
|
Nil
|
|
Nil
|
|
|
$
|
8,900
|
|
|
$
|
138,900
|
|
Dr. Ryan
Yermus
Chief Clinical
Officer
Director
|
|
|
2020
|
|
|
$
|
100,000
|
|
|
$
|
30,000
|
|
|
Nil
|
|
Nil
|
|
|
$
|
8,900
|
|
|
$
|
138,900
|
|
Helen Boudreau
Director
|
|
|
2020
|
|
|
$
|
100,000
|
|
|
|
Nil
|
|
|
Nil
|
|
Nil
|
|
|
$
|
5,000
|
|
|
$
|
105,000
|
|
Dieter Weinand
Director
|
|
|
2020
|
|
|
$
|
100,000
|
|
|
|
Nil
|
|
|
Nil
|
|
Nil
|
|
|
$
|
5,000
|
|
|
$
|
105,000
|
|
Notes
|
|
(1)
|
Ms. Wong is a part-time employee paid based on her time spent assisting the Issuer. The figure
displayed shows the upper limit of her compensation.
|
|
|
(2)
|
While Dr. Bryson is not an executive officer, he was the most highly compensated individual at
the end of the most recently completed financial year, as determined in accordance with subsection 1.3(5) of Form 51-102F6V.
|
|
|
(3)
|
Represents estimated bonuses based on targets.
|
|
|
(4)
|
Other compensation comprises the company-paid portion of health & dental insurance, personal
life insurance, directors & officers insurance premiums allocated on a per capita basis, and membership fees to professional
associations.
|
Termination and Change of Control Benefits
Other than as disclosed herein, the Issuer
will not have any contracts, agreements, plans or arrangements that provide for payments to a Named Executive Officer (“NEO”)
at, following or in connection with any termination (whether voluntary, involuntary or constructive), resignation, retirement,
a change in control of the Issuer or a change in an NEO’s responsibilities.
If the employment of any of Joseph del
Moral, Ronan Levy, Hannan Fleiman, Ryan Yermus or Mujeeb Jafferi is terminated for any reason within 12 months of a change of control,
such NEOs will be given an additional 6 months’ notice of termination (or payment of such NEO’s base salary and bonus
in lieu of notice during such 6 month period), relative to the notice required as if such NEO’s employment were terminated
for convenience other than in the context of a change of control.
Oversight and Description of Director and Named Executive
Officer Compensation
The Board will review the compensation
of its executives from time to time and make such changes as it deems appropriate.
|
|
16.
|
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
|
|
|
16.1
|
Aggregate Indebtedness
|
Upon completion of the Transaction, and
as of the date hereof, no directors or executive officers are indebted to the Issuer.
|
|
16.2
|
Indebtedness of Directors and Executive Officers
|
Upon completion of the Transaction, none
of the directors or officers of the Issuer, nor any of their Associates, will be indebted to the Issuer, and neither will any indebtedness
of any of these individuals or Associates to another entity be the subject of a guarantee, support agreement, letter of credit
or other similar arrangement or understanding provided by the Issuer.
|
|
17.1
|
Risk Factors relating to the Issuer
|
The Issuer’s securities should be
considered highly speculative due to the nature of the Issuer’s business. An investor should carefully consider the risk
factors set out below. In addition, investors should carefully review and consider all other information contained in this Listing
Statement (including all schedules hereto) before making an investment decision. An investment in securities of the Issuer should
only be made by persons who can afford a significant or total loss of their investment.
Liquidity and Future Financing Risk
The Issuer will likely operate at a loss
until its business becomes established and it may require additional financing in order to fund future operations and expansion
plans. The Issuer’s ability to secure any required financing to sustain operations and expansion plans will depend in part
upon prevailing capital market conditions and business success. There can be no assurance that the Issuer will be successful in
its efforts to secure any additional financing or additional financing on terms satisfactory to management. Moreover, future activities
may require the Issuer to alter its capitalization significantly and, if additional financing is raised by issuance of additional
shares of the Issuer from treasury, control may change and shareholders may suffer dilution. The inability of the Issuer to access
sufficient capital for its operations could have a material adverse effect on the Issuer’s financial condition and results
of operations.
Impact of the COVID-19 Pandemic
COVID-19 is an infectious disease caused
by severe acute respiratory syndrome coronavirus 2. Since December 31, 2019, the outbreak of COVID -19 has resulted in governments
worldwide, including Canada and the United States, enacting emergency measures to combat the spread of the virus. These measures,
which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused material disruption
to businesses globally, resulting in an economic slowdown. Such events may result in a period of business disruption, and in reduced
operations, any of which could have a material adverse impact on the Issuer’s profitability, results of operations, financial
condition and the trading price of the Issuer’s securities. Governments and central banks have reacted to the COVID-19 pandemic
with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19
pandemic is unknown at this time, as is the efficacy of the government and central bank interventions. It is not possible to reliably
estimate the length and severity of these developments and the impact on the financial results and condition of the Issuer. To
date, a number of businesses have suspended or scaled back their operations and development as cases of COVID-19 have been confirmed,
for precautionary purposes or as governments have declared a state of emergency or taken other actions. If the operation or development
of one or more of the Issuer’s clinics is suspended or scaled back, or if its supply chains are disrupted, it may have a
material adverse impact on the Issuer’s profitability, results of operations, financial condition and the trading price of
the Issuer’s securities. To the extent that the Issuer’s management or other personnel are unavailable to work due
to the COVID-19 pandemic, whether due to illness, government action or otherwise, it may have a material adverse impact on the
Issuer’s profitability, results of operations, financial condition and the trading price of the Issuer’s securities.
The breadth of the impact of the COVID-19 pandemic on investors, businesses, the global economy and financial and commodity markets
may also have a material adverse impact on the Issuer’s profitability, results of operations, financial conditions and the
trading price of the Issuer’s securities.
Limited Operating History
The Issuer has not yet generated material
revenue. Field Trip was incorporated in April 2019 and thus has a limited operating history. The Issuer is therefore subject to
many of the risks common to early- stage enterprises, including under-capitalization, cash shortages, limitations with respect
to personnel, financial, and other resources and lack of revenues. There is no assurance that the Issuer will be successful in
achieving a return on shareholders’ investment and the likelihood of success must be considered in light of the early stage
of operations.
Speculative Nature of Investment Risk
An investment in the securities of the
Issuer carries a high degree of risk and should be considered as a speculative investment. The Issuer has no history of earnings,
limited cash reserves, limited operating history, has not paid dividends, and is unlikely to pay dividends in the immediate or
near future.
Risks Related to the Issuer’s Business and Operations
Risks Inherent in the Nature of the Health Clinic Industry
Changes in operating costs (including costs
for maintenance, insurance), inability to obtain permits required to conduct the Issuer’s business, changes in health care
laws and governmental regulations, and various other factors may significantly impact the ability of the Issuer to generate revenues.
Certain significant expenditures, including legal fees, borrowing costs, maintenance costs, insurance costs and related charges,
must be made to operate the Clinics, regardless of whether the Issuer is generating revenue.
Non-Compliance with Laws
Non-compliance with federal, provincial,
or state laws and regulations, or the expansion of current, or the enactment of new, laws or regulations, could adversely affect
the Issuer’s business. The activities of the Clinics and the medical personnel operating the Clinics are subject to regulation
by governmental authorities, and the Issuer’s business objectives are contingent, in part, upon its and its personnel’s
compliance with regulatory requirements enacted by these governmental authorities, and obtaining all regulatory approvals, where
necessary, for the carrying on of business at the Clinics. Any delays in obtaining, failure to obtain, or violations of regulatory
approvals and requirements would significantly delay
the development of markets and products and could have a material adverse effect on the business, results of operations and financial
condition of the Issuer.
Risks related to Prescribing Medication
Provincial and state medical boards or
other regulatory bodies could take disciplinary action against the Issuer’s physicians for excessive psychedelic prescriptions.
Physician prescription patterns may be tracked and may be used to impose disciplinary action on physicians who prescribe psychedelics
at a high rate. If any of the Issuer’s physicians are deemed to be prescribing psychedelics excessively, such physicians
could face disciplinary action, including, revocation of the physician’s license. Any disciplinary action or license revocation
of physicians who work at a Clinic could result in such Clinic not having sufficient physicians to address patient needs and could
adversely affect the Issuer’s business.
Unfavourable Publicity or Consumer Perception
The success of the psychedelic therapy
industry may be significantly influenced by the public’s perception of psychedelic medicinal applications. Psychedelic therapy
is a controversial topic, and there is no guarantee that future scientific research, publicity, regulations, medical opinion, and
public opinion relating to psychedelic therapy will be favourable. The psychedelic therapy industry is an early-stage business
that is constantly evolving, with no guarantee of viability. The market for psychedelic therapy is uncertain, and any adverse or
negative publicity, scientific research, limiting regulations, medical opinion and public opinion relating to the consumption of
psychedelic therapy may have a material adverse effect on the Issuer’s operational results, consumer base and financial results.
Social Media
There has been a recent marked increase
in the use of social media platforms and similar channels that provide individuals with access to a broad audience of consumers
and other interested persons. The availability and impact of information on social media platforms is virtually immediate and many
social media platforms publish user-generated content without filters or independent verification as to the accuracy of the content
posted. Information posted about the Issuer may be adverse to the Issuer’s interests or may be inaccurate, each of which
may harm the Issuer’s business, financial condition and results of operations.
Patient Acquisitions
The Issuer’s success will depend,
in part, on its ability to attract and retain patients. There are many factors which could impact the Issuer’s ability to
attract and retain patients, including the successful implementation of the Issuer’s patient-acquisition plans and the continued
growth in the aggregate number of patients selecting psychedelic therapy as a treatment option. The Issuer’s failure to acquire
and retain patients as clients would have a material adverse effect on the Issuer’s business, operating results and financial
condition.
Development Risks
Future development of the Issuer’s
business may not yield expected returns and may strain management resources. Development of the Issuer’s revenue streams
is subject to a number of risks, including construction delays, cost overruns, financing risks, cancellation of key service contracts,
and changes in government regulations. Overall costs may significantly exceed the costs that were estimated when the project was
originally undertaken, which could result in reduced returns, or even losses, from such investments.
Substantial Risk of Regulatory or Political Change.
The success of the business strategy of
the Issuer depends on the legality of the use of psychedelics for the treatment of mental health conditions and the acceptance
of such use in the medical community. The political environment surrounding the psychedelics industry in general can be volatile.
As of the date of this Listing Statement, Canada and the United States permit the use of ketamine or a derivative thereof as a
treatment for certain mental health conditions; however, the risk remains that a shift in the regulatory or political realm could
occur and have a drastic impact on the use of psychedelics as a whole, adversely impacting the Issuer’s ability to successfully
operate or grown its business.
Government Regulations, Permits and Licenses
The Issuer’s operations may be subject
to governmental laws or regulations promulgated by various legislatures or governmental agencies from time to time. A breach of
such legislation may result in the imposition of fines and penalties. The cost of compliance with changes in governmental regulations
has the potential to reduce the profitability of operations. The Issuer intends to fully comply with all governmental laws and
regulations. The physicians that recommend psychedelic therapy to the Issuer’s patients will be subject to various federal,
provincial and municipal laws in Canada. While there are currently no indications that the Issuer will require approval by a governmental
or regulatory authority in Canada, the United States or Jamaica, such approvals may ultimately be required. If any permits are
required for the Issuer’s operations and activities in the future, there can be no assurance that such permits will be obtainable
on reasonable terms or on a timely basis, or that applicable laws and regulations will not have an adverse effect on the Issuer’s
business.
The results of pre-clinical testing of
FT-104 are uncertain and it may fail as a product candidate in the pre-clinical phase or at any other stage of clinical development.
For instance, psilocybin is currently a controlled substance with no approved use in Canada or the United States, and the Issuer
selected Jamaica for Psilocybin Research and development because Jamaica is one of the few jurisdictions in the world with a legal
environment that would permit such activities with no regulatory requirements. If a medical use for psilocybin is not developed
or, if developed, is not approved for use in Canada, the United States and other jurisdictions, the commercial opportunity that
the Issuer is pursuing may be highly limited.
The current and future operations of the
Issuer are and will be governed by laws and regulations governing the health care industry, labour standards, occupational health
and safety, land use, environmental protection, and other matters. Amendments to current laws, regulations and permits governing
operations and activities of health clinics, or more stringent implementation thereof, could have a material adverse impact on
the Issuer and cause increases in capital expenditures or costs, or reduction in levels of its medical services.
Ketamine as a Pharmaceutical
The Issuer is currently administering oral
ketamine lozenges to patients at the Toronto Clinic, which is not subject to OHPIP (as such term is defined below) oversight. The
Issuer has received correspondence from the College of Physicians and Surgeons of Ontario (“CPSO”) advising
that, while the administration of lozenges does not currently fall within the scope of the Out-of-Hospital Inspection Program (“
OHPIP”), the OHPIP may be expanded in the future to include lozenges. To the extent that ketamine is administered
by a member of the CPSO, the Issuer may have to cease administration of ketamine by physicians. In such an event and if required
to continue operations, the Issuer intends to seek OHPIP certification for the Toronto Clinic, but as there is no guarantee that
such certificate will be obtained or obtained in a timely manner, the Issuer has developed plans that it believes will enable it
to continue operating the Toronto Clinic without seeking OHPIP certification such as using medical professionals not subject to
CPSO oversight. I For instance, the Issuer has received a legal advice that OHPIP does not apply to the prescribing or administration
of oral ketamine lozenges by nurse practitioners. n either case, such result could have a material impact on the Issuer’s
business and results of operations.
US law does not regulate the mode of administration
of ketamine. Provided the physician is licensed, the method of administration is left to the discretion of the physician.
Non-Referrals
Physicians may not refer patients to the
Clinics. In addition, as the market grows, and general practitioners become more comfortable and knowledgeable about the psychedelic
therapy industry and products available, they may choose to write prescriptions directly for their own patients rather than refer
them to an outside clinic.
Dilution
The financial risk of the Issuer’s
future activities will be borne to a significant degree by purchasers of the Issuer’s Common Shares. If the Issuer issues
Issuer Common Shares from its treasury for financing purposes, control of the Issuer may change, and purchasers may suffer additional
dilution.
Additional Requirements for Capital
Substantial additional financing may be
required for the Issuer to successfully develop its business. No assurances can be given that the Issuer will be able to raise
the additional capital that it may require for its anticipated future development. Any additional equity financing may be dilutive
to investors and debt financing, if available, may involve restrictions on financing and operating activities. There is no assurance
that additional financing will be available on terms acceptable to the Issuer, if at all. If the Issuer is unable to obtain additional
financing as needed, it may be required to reduce the scope of its operations or anticipated expansion.
Negative Cash Flow from Operating Activities
The Issuer has had negative cash flow from
operating activities since inception and may never be profitable. Significant capital investment will be required to achieve the
Issuer’s existing plans. There is no assurance that the Issuer’s business will generate earnings, operate profitably,
or provide a return on investment in the near future. Accordingly, the Issuer may be required to obtain additional financing in
order to meet its future cash commitments
Management of Growth
The Issuer may be subject to growth-related
risks, including pressure on its internal systems and controls. The Issuer’s ability to manage its growth effectively will
require it to continue to implement and improve its operational and financial systems and to expand, train and manage its employee
base. The inability of the Issuer to deal with this growth could have a material adverse impact on its business, operations and
prospects. While management believes that it will have made the necessary investments in infrastructure to process anticipated
volume increases in the short term, the Issuer may experience growth in the number of its employees and the scope of its operating
and financial systems, resulting in increased responsibilities for the Issuer’s personnel, the hiring of additional personnel
and, in general, higher levels of operating expenses. In order to manage its current operations and any future growth effectively,
the Issuer will also need to continue to implement and improve its operational, financial and management information systems and
to hire, train, motivate, manage and retain its employees. There can be no assurance that the Issuer will be able to manage such
growth effectively, that its management, personnel or systems will be adequate to support the Issuer’s operations or that
the Issuer will be able to achieve the increased levels of revenue commensurate with the increased levels of operating expenses
associated with this growth.
Dependence on Management Team
The Issuer will depend on certain key senior
managers who have developed strong relationships in the industry to oversee the Issuer’s core marketing, business development,
operational and fund-raising activities. Their loss or departure in the short-term would have an adverse effect on the Issuer’s
future performance.
Reliance on Third Parties
The Issuer relies on outside sources to
manufacture the psychedelics used in the Clinics and further relies on outside sources to stock and distribute, via a prescription
by a licensed physician, the psychedelics used in the Clinics. The failure of such third parties to deliver either components or
finished goods on a timely basis could have a material adverse effect on the business. As these are third parties over which the
Issuer will have little or no control, the failure of such third parties to provide components or finished goods on a timely basis
could have a material adverse effect on the business, financial condition and operating results.
Intellectual Property
The Issuer currently has not obtained
any trademarks. Failure to obtain or register trademarks for “field trip” could require the Issuer to rebrand, resulting
in a material adverse impact on its business. If the Issuer is unable to register or, if registered, maintain effective patent
rights for its product candidates, the Issuer may not be able to effectively compete in the market. If the Issuer is not able
to protect its proprietary information and know -how, such proprietary information may be used by others to compete against the
Issuer. The Issuer may not be able to identify infringements of its patents (if and when granted), and, accordingly, the enforcement
of its intellectual property rights may be difficult. Once such infringements are identified, enforcement could be costly and
time consuming. Third party claims of intellectual property infringement,
whether or not reasonable, may prevent or delay the Issuer’s development and commercialization efforts.
The Issuer’s success will depend
in part upon its ability to protect its intellectual property and proprietary technologies and upon the nature and scope of the
intellectual property protection the Issuer receives. The ability to compete effectively and to achieve partnerships will depend
on its ability to develop and maintain proprietary aspects of the Issuer’s technology and to operate without infringing
on the proprietary rights of others. The presence of such proprietary rights of others could severely limit its ability to develop
and commercialize its products and to conduct its existing research, and could require financial resources to defend litigation,
which may be in excess of the Issuer’s ability to raise such funds. There is no assurance that the Issuer’s patent
applications submitted or those that it intends to acquire will be approved in a form that will be sufficient to protect its proprietary
technology and gain or keep any competitive advantage that the Issuer may have or, once approved, will be upheld in any post-grant
proceedings brought by any third parties.
The patent positions of pharmaceutical
companies can be highly uncertain and involve complex legal, scientific and factual questions for which important legal principles
remain unresolved. Patents issued to the Issuer may be challenged, invalidated or circumvented. To the extent the Issuer’s
intellectual property offers inadequate protection, or is found to be invalid or unenforceable, the Issuer will be exposed to a
greater risk of direct competition. If its intellectual property does not provide adequate protection against the Issuer’s
competitors, its competitive position could be adversely affected, as could the Issuer’s business, financial condition and
results of operations. Both the patent application process and the process of managing patent disputes can be time consuming and
expensive, and the laws of some foreign countries may not protect the Issuer’s intellectual property rights to the same extent
as do the laws of Canada and the United States. The Issuer will be able to protect its intellectual property from unauthorized
use by third parties only to the extent that its proprietary technologies, key products, and any future products are covered by
valid and enforceable intellectual property rights, including patents, or are effectively maintained as trade secrets, and provided
the Issuer has the funds to enforce its rights, if necessary.
Competition
The psychedelic therapy industry is intensely
competitive, and the Issuer competes with other companies that may have greater financial resources and technical facilities. Numerous
other businesses are expected to compete in the clinic space and provide additional patient servicing. It is possible that physicians
or other third parties could also establish their own psychedelic therapy clinics that are similar to the Issuer’s, as there
are no significant barriers to entry. An increase in competition for psychedelic therapy may decrease prices and result in lower
profits. This increases the risk that the Issuer will not be able to access financing when needed, or at all.
In relation to FT Discovery, the biotechnology
and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. The Issuer’s
competitors include large, well-established pharmaceutical companies, biotechnology companies, and academic and research institutions
developing therapeutics for the same indications the Issuer is targeting and competitors with existing marketed therapies. Many
other companies are developing or commercializing therapies to treat the same diseases or indications for which FT-104 or the Issuer’s
other product candidates may be useful. Many of the Issuer’s competitors have substantially greater financial, technical
and human resources than the Issuer does and have significantly greater experience than the Issuer in conducting preclinical testing
and human clinical trials of product candidates, scaling up manufacturing operations and obtaining regulatory approvals of products.
Accordingly, the Issuer’s competitors may succeed in obtaining regulatory approval for products more rapidly than the Issuer
does.
Litigation
The Issuer may become party to litigation
from time to time in the ordinary course of business, including a medical malpractice claim, or a claim based in related legal
theories of negligence or vicarious liability among others if a physician at one of the Clinics causes injury, which could adversely
affect the Issuer’s business. Should any litigation in which the Issuer becomes involved be determined against the Issuer,
such a decision could adversely affect the Issuer’s ability to continue operating and the market price for the Issuer Common
Shares. Even if the Issuer is involved in litigation and wins, litigation can redirect significant resources. Litigation may also
create a negative perception of the Issuer’s business.
Insurance Coverage
The Issuer believes its insurance coverage
addresses all material risks to which it is exposed and is adequate and customary in its current state of operations, however such
insurance is subject to coverage limits and exclusions and may not be available for the risks and hazards to which the Issuer is
exposed. Moreover, there can be no guarantee that the Issuer will be able to obtain adequate insurance coverage in the future or
obtain or maintain liability insurance on acceptable terms or with adequate coverage against all potential liabilities.
Holding Company
The Issuer is a holding company and essentially
all of its assets are the shares of its material subsidiary, Field Trip Psychedelics Inc., and, in turn, all of this subsidiary’s
material assets are the shares of its material subsidiaries, Field Trip Health Inc., Field Trip USA and FTNP. As a result, investors
in the Issuer are subject to the risks attributable to its subsidiaries. As a holding company, the Issuer will conduct substantially
all of its business through its subsidiaries, which generate substantially all of its revenues. Consequently, the Issuer’s
cash flows and ability to complete current or desirable future enhancement opportunities are dependent on the earnings of its subsidiaries
and the distribution of those earnings to the Issuer. The ability of these entities to pay dividends and other distributions will
depend on their operating results and will be subject to applicable laws and regulations which require that solvency and capital
standards be maintained by such companies and contractual restrictions contained in the instruments governing their debt, as applicable.
In the event of a bankruptcy, liquidation or reorganization of any of the Issuer’s material subsidiaries, holders of any
indebtedness and trade creditors may be entitled to payment of their claims from the assets of those subsidiaries or clinics before
the Issuer.
Smaller Companies
Market perception of junior companies may
change, potentially affecting the value of investors’ holdings and the ability of the Issuer to raise further funds through
the issue of further Issuer Common Shares or otherwise. The share price of publicly traded smaller companies can be highly volatile.
The value of the Issuer Common Shares may rise or fall and, in particular, the share price may be subject to sudden and large falls
in value given the restricted marketability of the Issuer Common Shares.
A Significant Number of Issuer Common Shares are owned
by a Limited Number of Existing Shareholders
The Issuer’s management, directors
and employees own a substantial number of the outstanding Issuer Common Shares (on a non-diluted and partially-diluted basis).
As such, the Issuer’s management, directors and employees, as a group, are in a position to exercise influence over matters
requiring shareholder approval, including the election of directors and the determination of corporate actions. As well, these
shareholders could delay or prevent a change in control of the Issuer that could otherwise be beneficial to the Issuer’s
shareholders.
Difficult to Forecast
The Issuer must rely largely on its own
market research to forecast the utilization of its services, as detailed forecasts are not generally obtainable from other sources
at this early stage of the psychedelics industry in Canada and the U.S. A failure in the demand for its services to materialize
as a result of competition, technological change, market acceptance or other factors could have a material adverse effect on the
business, results of operations and financial condition of the Issuer.
From time to time, studies or clinical
trials on various aspects of biopharmaceutical products are conducted by academic researchers, competitors or others. The results
of these studies or trials, when published, may have a significant effect on the market for the biopharmaceutical product that
is the subject of the study. The publication of negative results of studies or clinical trials or adverse safety events related
to the FT Discovery, or the Clinics, could adversely affect the Issuer’s ability to finance future developments or the price
of the Issuer Common Shares, and the Issuer’s business and financial results could be materially and adversely affected.
Current Market Volatility
The securities markets in the United States
and Canada have recently experienced a high level of price and volume volatility, and the market prices of securities of many companies
have experienced wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset
values or prospects of such companies. There can be no assurance that continual fluctuations in price will not occur. It may be
anticipated that any market for the Issuer Common Shares will be subject to market trends generally, notwithstanding any potential
success of the Issuer. The value of the Issuer Common Shares will be affected by such volatility.
Use of Funds
This Listing Statement includes the Issuer’s
estimate of its use of available funds over the next 12 months. As the Issuer further expands its business, it is possible that
results and circumstances may dictate a departure from the current expected uses. Further, the Issuer may, from time to time, as
opportunities arise, utilise its financial resources to participate in additional opportunities that arise and fit within the Issuer’s
broader objectives, as a means of advancing shareholder value.
Conflicts of Interest
Some of the Issuer’s directors and
officers may act as directors and/or officers of other health and wellness companies. As such, such directors and officers may
be faced with conflicts of interests when evaluating alternative health and wellness opportunities. In addition, the Issuer’s
directors and officers may prioritize the business affairs of another company over the affairs of the Issuer.
Personnel
The Issuer has a small management team
and the loss of any key individual could affect the Issuer’s business. Additionally, the Issuer will be required to secure
other personnel to facilitate its marketing and development initiatives. Any inability to secure and/or retain appropriate personnel
may have a materially adverse impact on the business and operations of the Issuer.
Tax Issues
Income tax consequences in relation to
the purchase and sale of Issuer Common Shares will vary according to the circumstances of each purchaser. Prospective purchasers
should seek independent advice from their own tax and legal advisers prior to purchasing any Issuer Common Shares.
Currency Exchange Rates
Exchange rate fluctuations may adversely
affect the Issuer’s financial position and results. It is anticipated that a significant portion of the Issuer’s business
will be conducted in the United States using U.S. dollars. The Issuer’s financial results will be reported in Canadian dollars
and costs will be incurred primarily in U.S. dollars. The depreciation of the Canadian dollar against the U.S. dollar could increase
the actual capital and operating costs of the Issuer’s U.S. operations and materially adversely affect the results presented
in the Issuer’s financial statements. Currency exchange fluctuations may also materially adversely affect the Issuer’s
future cash flow from operations, its results of operations, financial condition and prospects.
Liquidity of the Issuer Common Shares
The approval of the listing of the Issuer
Common Shares on the CSE should not be taken as implying that there will be a liquid market for the Issuer Common Shares. Investors
should be aware that the value of the Issuer Common Shares may be volatile. Investors may, on disposing of their Issuer Common
Shares, realise less than their original investment, or may lose their entire investment. The Issuer Common Shares, therefore,
may not be suitable as an investment.
The market price of the Issuer Common
Shares may not reflect the underlying value of the Issuer’s net assets. The price at which the Issuer Common Shares will
be traded, and the price at which investors may purchase and sell their Issuer Common Shares, will be influenced by a large number
of factors, some specific to the Issuer and its proposed operations, and some which may affect the
sectors in which the Issuer operates. Such factors could include the performance of the Issuer’s operations, large purchases
or sales of the Issuer Common Shares, liquidity or the absence of liquidity in the Issuer Common Shares, legislative or regulatory
changes relating to the business of the Issuer, and general market and economic conditions.
Substantial Number of Authorized
but Unissued Shares
The Issuer has an unlimited number of Issuer
Common Shares that may be issued by the Board without further action or approval of the Issuer’s shareholders. While the
Board is required to fulfill its fiduciary obligations in connection with the issuance of such shares, the shares may be issued
in transactions with which not all shareholders agree, and the issuance of such shares will cause dilution to the ownership interests
of the Issuer’s shareholders.
Enforcement of Legal Rights
In the event of a dispute arising from
the Issuer’s foreign operations, the Issuer may be subject to the exclusive jurisdiction of foreign courts or may not be
successful in subjecting foreign persons to the jurisdictions of courts in Canada. Similarly, to the extent that the Issuer’s
assets are located outside of Canada, investors may have difficulty collecting from the Issuer any judgments obtained in the Canadian
courts and predicated on the civil liability provisions of securities laws. The Issuer may also be hindered or prevented from enforcing
its rights with respect to a governmental entity or instrumentality because of the doctrine of sovereign immunity.
Emerging Market Risks
The Issuer has operations in Jamaica, an
emerging market country, and may have operations in additional countries in the future. Such operations expose the Issuer to the
socio-economic conditions as well as the laws governing the activities of the Issuer in Jamaica and any other jurisdiction where
the Issuer may have operations in the future. Inherent risks with conducting foreign operations include, but are not limited to:
high rates of inflation; extreme fluctuations in currency exchange rates, military repression; war or civil war; social and labour
unrest; organized crime; hostage taking; terrorism; violent crime; expropriation and nationalization; renegotiation or nullification
of existing licenses, approvals, permits and contracts; changes in taxation policies; restrictions on foreign exchange and repatriation;
and changing political norms, banking and currency controls and governmental regulations that favour or require the Issuer to award
contracts in, employ citizens of, or purchase supplies from, the jurisdiction.
The Jamaican government, or other governments
in emerging markets where the Issuer may have operations in the future, may intervene in its economies, sometimes frequently, and
occasionally make significant changes in policies and regulations. Changes, if any, in the research, cultivation and development
of psilocybin mushroom and other botanicals policies or shifts in political attitude in Jamaica or other countries where the Issuer
may have operations in the future may adversely affect its operations or profitability. Operations may be affected in varying degrees
by government regulations with respect to, but not limited to, restrictions on production, price controls, export controls, currency
remittance, importation of product and supplies, income and other taxes, royalties, the repatriation of profits, expropriation
of property, foreign investment, maintenance of licenses, approvals and permits, environmental matters, land use, land claims of
local people, water use and workplace safety. Failure to comply strictly with applicable laws, regulations and local practices
could materially impact the Issuer’s operations in Jamaica or other countries where the Issuer may have operations in the future.
The Company continues to monitor developments and policies in Jamaica to assess the impact thereof to its operations or future
operations; however, such developments cannot be predicted and could have an adverse effect on the Issuer’s operations in
Jamaica.
Jamaica has a history of economic instability
(such as inflation or recession). In 2013, Jamaica launched an ambitious reform program to stabilize the economy, reduce debt,
and fuel growth, gaining national and international support. While there is no current political instability, and historically
there has been no change in laws and regulations, this is subject to change in the future and could adversely affect the Issuer’s
business, financial condition and results of operations. Jamaica is vulnerable to natural disasters such as hurricanes and flooding
and the effects of climate change. It is an upper middle-income economy that is nevertheless struggling due to low growth, high
public debt, and exposure to external shocks.
Global economic crises could negatively
affect investor confidence in emerging markets or the economies of emerging markets, including Jamaica. Such events could materially
and adversely affect the Issuer’s business, financial condition and results of operations.
Financial and securities markets in Jamaica
are influenced by the economic and market conditions in other countries, including other emerging market countries and other global
markets. Although economic conditions in these countries may differ significantly from economic conditions in Jamaica, investors’
reactions to developments in these other countries, such as the recent developments in the global financial markets, may substantially
affect the capital flows into Jamaica and the market value of the securities of the Issuer.
The legal and regulatory requirements and
local business culture and practices in Jamaica and the foreign countries in which the Issuer may expand are different from those
in which it currently operates. The officers and directors of the Issuer will rely, to a great extent, on the Issuer’s local
legal counsel and local consultants and advisors in respect of legal, banking, labour, financing and tax matters in order to ensure
compliance with material legal, regulatory and governmental developments as they pertain to and affect the Issuer’s operations,
particularly with respect to psilocybin or related operations. Increased compliance costs may be incurred by the Issuer. Further,
there can be no assurance that the Issuer will develop a marketable product or service in Jamaica or any other foreign country.
These factors may have a material adverse effect on the Issuer’s research and development business and the results of its
research and development operations.
In the event of a dispute arising in connection
with the Issuer’s operations in Jamaica or another a foreign jurisdiction where the Issuer may conduct business, the Issuer
may be subject to the exclusive jurisdiction of foreign courts or may not be successful in subjecting foreign persons to the jurisdictions
of the courts of Canada or enforcing Canadian judgments in such other jurisdictions. The Issuer may also be hindered or prevented
from enforcing its rights with respect to a governmental instrumentality because of the doctrine of sovereign immunity. Accordingly,
the Issuer’s activities in foreign jurisdictions could be substantially affected by factors beyond the Issuer’s control.
Other risks include the potential for fraud
and corruption by suppliers or personnel or government officials which may implicate the Issuer, compliance with applicable anti-corruption
laws, including the Corruption of Foreign Public Officials Act (Canada) by virtue of the Issuer’s operating in jurisdictions
that may be vulnerable to the possibility of bribery, collusion, kickbacks, theft, improper commissions, facilitation payments,
conflicts of interest and related party transactions and the Issuer’s possible failure to identify, manage and mitigate instances
of fraud, corruption, or violations applicable regulatory requirements.
Agriculture
FT Discovery’s business involves
the growing of an agricultural product and is subject to the risks inherent in the agricultural business, such as insects, plant
diseases, and invasive species. Although the Issuer expects that any such growing will be completed indoors under climate-controlled
conditions, there can be no assurance that natural elements will not have a material adverse effect on any future production.
Violations of Laws and Regulations Related to Drug Development
In Canada and the United States, certain
psychedelic drugs, are classified as Schedule I drugs under the Controlled Drugs and Substances Act (Canada) and the Controlled
Substances Act (United States) and as such, certain medical and recreational use is illegal under the Canada and U.S. federal
laws. FT Discovery’s programs involving psilocybin are limited to Jamaica and conducted in strict compliance with the laws
and regulations of Jamaica. As such, all facilities engaged with such substances by or on behalf of the Issuer do so in compliance
with appropriate governmental agencies. While the Issuer is focused on programs using psychedelic inspired compounds, the Issuer
does not have any direct or indirect involvement with the illegal selling, production or distribution of any substances in the
jurisdictions in which it operates and does not intend to have any such involvement. However, a violation of any Canadian, United
States or Jamaican laws and regulations, could result in significant fines, penalties, administrative sanctions, convictions or
settlements arising from civil proceedings initiated by either government entities in the jurisdictions in which the Issuer operates,
or private citizens or criminal charges which could have an adverse effect on the Issuer’s operations.
Drug Development
Given
the early stage of FT Discovery’s product development, the Issuer can make no assurance that its research and development
programs will result in regulatory approval or commercially viable products. To achieve profitable operations, the Issuer, alone
or with others, must successfully develop, gain regulatory approval for, and market its future products. The Issuer currently
has no products that have been approved by the FDA, Health Canada or any similar regulatory authority. To obtain regulatory approvals
for its product candidates being developed and to achieve commercial success, clinical trials must demonstrate that the product
candidates are safe for human use and that they demonstrate efficacy. The Issuer has not yet completed later stage clinical trials
for any of its product candidates.
Many
product candidates never reach the stage of clinical testing and even those that do have only a small chance of successfully completing
clinical development and gaining regulatory approval. Product candidates may fail for a number of reasons, including being unsafe
for human use or due to the failure to provide therapeutic benefits equal to or better than the standard of treatment at the time
of testing. Unsatisfactory results obtained from a particular study relating to a research and development program may cause the
Issuer or its collaborators to abandon commitments to that program. Positive results of early pre-clinical research may not be
indicative of the results that will be obtained in later stages of preclinical or clinical research. Similarly, positive results
from early-stage clinical trials may not be indicative of favourable outcomes in later-stage clinical trials, and the Issuer can
make no assurance that any future studies, if undertaken, will yield favourable results.
The
early stage of FT Discovery’s product development makes it particularly uncertain whether any of its product development
efforts will prove to be successful and meet applicable regulatory requirements, and whether any of its product candidates will
receive the requisite regulatory approvals, be capable of being manufactured at a reasonable cost or be successfully marketed.
If the Issuer is successful in developing its current and future product candidates into approved products, the Issuer will still
experience many potential obstacles, which would affect the Issuer’s ability to successfully market and commercialize such
approved products, such as the need to develop or obtain manufacturing, marketing and distribution capabilities, price pressures
from third-party payors, or proposed changes in health care systems. If the Issuer is unable to successfully market and commercialize
any of its products, its financial condition and results of operations may be materially and adversely affected.
The
Issuer can make no assurance that any future studies, if undertaken, will yield favorable results. Many companies in the pharmaceutical
and biotechnology industries have suffered significant setbacks in later-stage clinical trials after achieving positive results
in early-stage development, and the Issuer cannot be certain that it will not face similar setbacks. These setbacks have been
caused by, among other things, pre-clinical findings made while clinical trials were underway or safety or efficacy observations
made in clinical trials, including previously unreported adverse events. Moreover, preclinical and clinical data are often susceptible
to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in
preclinical studies and clinical trials nonetheless failed to obtain FDA approval. If the Issuer fails to produce positive results
in its future clinical trials of FT-104, the development timeline and regulatory approval and commercialization prospects for
FT-104, would be materially adversely affected which may have materially adversely impact on the Issuer’s business.
Reliance
on Third-Parties – Drug Development
The
Issuer relies and will continue to rely on third parties to conduct a significant portion of its pre-clinical and clinical development
activities. Pre-clinical activities include in vivo studies providing access to specific disease models, pharmacology and toxicology
studies, and assay development. Clinical development activities include trial design, regulatory submissions, clinical patient
recruitment, clinical trial monitoring, clinical data management and analysis, safety monitoring and project management. If there
is any dispute or disruption in its relationship with third parties, or if it is unable to provide quality services in a timely
manner and at a feasible cost, the Issuer’s active development programs will face delays. Further, if any of these third
parties fails to perform as the Issuer expects or if their work fails to meet regulatory requirements, the Issuer’s testing
could be delayed, cancelled or rendered ineffective.
Pre-clinical
and clinical development activities must be carried out in accordance with Good Laboratory Practices (“GLP”).
GLP was originally established by the Organisation for Economic Co-operation and Development (“OECD”) to promote
the quality and validity of test data and to establish a basis for mutual acceptance of data among member states at the international
level. GLP was adopted by both Health Canada and the Standards Council of Canada, which has monitoring authority for GLP compliance
of test facilities within Canada, and by the FDA as (Good Laboratory Practice regulations, 21 CFR 58). Labs must adopt these GLP
practices to ensure they are producing valuable test results, and each lab has its own set of approaches to staying compliant.
If any of these third partner or service provider fails to GLP requirements, the Issuer’s pre-clinical and clinical development
activities could be delayed, cancelled or rendered ineffective.
The
Issuer has no manufacturing experience and will rely on contract manufacturing organizations (“CMOs”) to manufacture
its product candidates for pre-clinical studies and clinical trials. The Issuer will rely on CMOs for manufacturing, filling,
packaging, storing and shipping of drug product in compliance with current Good Manufacturing Practices (“cGMP”)
regulations applicable to its products. The FDA and Health Canada ensure the quality of drug products by carefully monitoring
drug manufacturers’ compliance with cGMP regulations. The cGMP regulations for drugs contain minimum requirements for the
methods, facilities and controls used in manufacturing, processing and packing of a drug product.
There
can be no assurances that CMOs will be able to meet the Issuer’s timetable and requirements. The Issuer has not contracted
with suppliers for FT-104 drug substance production but in the event that the selected provider is unable to scale up production,
or if it otherwise experiences any other significant problems and the Issuer is unable to arrange for alternative third-party
manufacturing sources on commercially reasonable terms or in a timely manner, the Issuer may be delayed in the development of
FT-104, or other product candidates. Further, CMOs must operate in compliance with cGMP and failure to do so could result in,
among other things, the disruption of product supplies. The Issuer’s dependence upon third parties for the manufacture of
its products may adversely affect its profit margins and its ability to develop and deliver products on a timely and competitive
basis.
Commercial
Grade Development
To
date, FT-104 has been manufactured in small quantities for pre-clinical studies In order to commercialize its product, the Issuer
needs to manufacture commercial quality drug supply for use in registration clinical trials. Most, if not all, of the clinical
material used in phase 3/pivotal/registration studies must be derived from the defined commercial process, including scale, manufacturing
site, process controls and batch size. If the Issuer has not scaled up and validated the commercial production of its product
prior to the commencement of pivotal clinical trials, it may have to employ a bridging strategy during the trial to demonstrate
equivalency of early stage material to commercial drug product, or potentially delay the initiation or completion of the trial
until drug supply is available. The manufacturing of commercial quality drug product has long lead times, is very expensive and
requires significant efforts, including scale-up of production to anticipated commercial scale, process characterization and validation,
analytical method validation, identification of critical process parameters and product quality attributes, and multiple process
performance and validation runs. If the Issuer does not have commercial drug supply available when needed for pivotal clinical
trials, the Issuer’s regulatory and commercial progress may be delayed, and it may incur increased product development costs.
This may have a material adverse effect on the Issuer’s business, financial condition and prospects, and may delay marketing
of its product.
Clinical
Testing
Before
obtaining marketing approval from regulatory authorities for the sale of the Issuer’s product candidates, it must conduct
pre-clinical studies in animals and extensive clinical trials in humans to demonstrate the safety and efficacy of the product
candidates. Clinical testing is expensive and difficult to design and implement, can take many years to complete and has uncertain
outcomes. The outcome of pre-clinical studies and early clinical trials may not predict the success of later clinical trials,
and interim results of a clinical trial do not necessarily predict final results. A number of companies in the pharmaceutical
and biotechnology industries have suffered significant setbacks in advanced clinical trials due to lack of efficacy or unacceptable
safety profiles, notwithstanding promising results in earlier trials. The Issuer does not know whether the clinical trials it
may conduct will demonstrate adequate efficacy and safety to result in regulatory approval to market any of its product candidates
in any jurisdiction. A product candidate may fail for safety or efficacy reasons at any stage of the testing process. A major
risk the Issuer faces is the possibility that none of its product candidates under development will successfully gain market approval
from the FDA or other regulatory authorities, resulting in the Issuer being unable to derive any commercial revenue from this
business segment after investing significant amounts of capital in its development.
The
Issuer cannot predict whether any clinical trials will begin as planned, will need to be restructured, or will be completed on
schedule, or at all. The Issuer’s product development costs will increase if it experiences delays in clinical testing.
Significant clinical trial delays could shorten any periods during which the Issuer may have the exclusive right to commercialize
its product candidates or allow its competitors to bring products to market before the Issuer, which would impair the Issuer’s
ability to successfully commercialize its product candidates and may harm its financial condition, results of operations and prospects.
The Issuer’s product development costs will increase if it experiences delays in testing or approval or if the Issuer needs
to perform more or larger clinical trials than planned. Additionally, changes in regulatory requirements and policies may occur,
and the Issuer may need to amend study protocols to reflect these changes. Amendments may require the Issuer to resubmit its study
protocols for re-examination, which may impact the cost, timing or successful completion of that trial. Delays or increased product
development costs may have a material adverse effect on the Issuer’s business, financial condition and prospects.
Prior
to commencing clinical trials in Canada, the United States or other jurisdictions, including Jamaica, for FT -104 or any other
product candidates if developed by the Issuer, it may be required to have an allowed investigational new drug application (“IND”)
(or equivalent) for each product candidate and to file additional INDs prior to initiating any additional clinical trials for
FT-104. The Issuer believes that the data from its studies will support the filing of additional INDs to enable the Issuer to
undertake additional clinical studies as it has planned. However, submission of an IND (or equivalent) may not result in the FDA
(or equivalent authorities) allowing further clinical trials to begin and, once begun, issues may arise that will require the
Issuer to suspend or terminate such clinical trials. Additionally, even if relevant regulatory authorities agree with the design
and implementation of the clinical trials set forth in an IND, these regulatory authorities may change their requirements in the
future. Failure to submit or have effective INDs (or equivalent) and commence or continue clinical programs will significantly
limit its opportunity to generate revenue.
Patients
for Clinical Trials
If
the FT-104 advances from pre-clinical testing to clinical testing, and then through progressively larger and more complex clinical
trials, the Issuer will need to enroll an increasing number of patients that meet its eligibility criteria. There is significant
competition for recruiting patients in clinical trials, and the Issuer may be unable to enroll the patients it needs to complete
clinical trials on a timely basis or at all.
Regulatory
Approval Process
The
Issuer’s development and commercialization activities related to FT-104 or other product candidates are significantly regulated
by a number of governmental entities, including the FDA, HC, and comparable authorities in other countries, including Jamaica.
Regulatory approvals are required prior to each clinical trial and the Issuer may fail to obtain the necessary approvals to commence
or continue clinical testing. The Issuer must comply with regulations concerning the manufacture, testing, safety, effectiveness,
labeling, documentation, advertising, and sale of products and product candidates and ultimately must obtain regulatory approval
before it can commercialize a product candidate. The time required to obtain approval by such regulatory authorities is unpredictable
but typically takes many years following the commencement of preclinical studies and clinical trials. Any analysis of data from
clinical activities the Issuer performs is subject to confirmation and interpretation by regulatory authorities, which could delay,
limit or prevent regulatory approval. Even if the Issuer believes results from its clinical trials are favorable to support the
marketing of its product candidates, the FDA or other regulatory authorities may disagree. In addition, approval policies, regulations,
or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s
clinical development and may vary among jurisdictions. The Issuer has not obtained regulatory approval for any product candidate
and it is possible that none of its existing product candidates or any future product candidates will ever obtain regulatory approval.
A
regulatory authority may require more information, including additional preclinical or clinical data to support approval, which
may delay or prevent approval and the Issuer’s commercialization plans, or we may decide to abandon the development program.
If the Issuer were to obtain approval, regulatory authorities may approve any of its product candidates for fewer or more limited
indications than the Issuer requests, may grant approval contingent on the performance of costly post-marketing clinical trials,
or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful
commercialization of that product candidate. Moreover, depending on any safety issues associated with the Corporation’s
product candidates that garner approval, the
FDA may impose a risk evaluation and mitigation strategy, thereby imposing certain restrictions on the sale and marketability
of such products.
Cyber-Attacks
The
Issuer’s operations depend, in part, on how well it protects its information technology systems, networks, equipment and
software from damages from a number of threats. Events such as cable cuts, power loss, hacking, computer viruses and theft could
result in information system failures, delays and/or increase in capital expenses for the Issuer. While the Issuer implements
protective measures to reduce the risk of and detect cyber incidents, cyber-attacks are becoming more sophisticated and frequent,
and the techniques used in such attacks change rapidly; the development of the Issuer’s business and operating results may
be hindered by applicable restrictions on sales and marketing activities imposed by regulatory bodies.
Reliance
upon Insurers and Governments
Even
if the Issuer is able to commercialize pharmaceutical product candidates, the products may not receive adequate reimbursement
from government or private pay insurers. Additionally, fluctuations in drug prices caused by governments and insurers could affect
the Issuer’s business.
Difficulty
in Enforcing Judgments and Effecting Service of Process on Directors and Officers
Certain
directors and officers of the Issuer reside outside of Canada. Some or all of the assets of such persons may be located outside
of Canada. Therefore, it may not be possible for investors to collect or to enforce judgments obtained in Canadian courts predicated
upon the civil liability provisions of applicable Canadian securities laws against such persons. Moreover, it may not be possible
for investors to effect service of process within Canada upon such persons.
General
Although
management believes that the above risks fairly and comprehensibly illustrate all material risks facing the Issuer, the risks
noted above do not necessarily comprise all those potentially faced by the Issuer as it is impossible to foresee all possible
risks.
Although
the Board will seek to minimise the impact of the risk factors, an investment in the Issuer should only be made by investors able
to sustain a total loss of their investment. Investors are strongly recommended to consult a person who specialises in investments
of this nature before making any decision to invest.
|
|
17.2
|
Securityholders’
Additional Contribution
|
There
is no requirement that securityholders of the Issuer may become liable to make any additional contributions beyond the price of
the Issuer Common Shares.
|
|
17.3
|
Other
Material Risk Factors not Described under Sections 17.1 or 17.2
|
There
are no risk factors material to the Issuer that a reasonable investor would consider relevant to an investment in the securities
being listed and that are not otherwise described under Sections 17.1 or 17.2.
The
Issuer does not expect to have any Promoters other than its directors and officers, nor has the Issuer had a Promoter other than
such persons within the two years immediately preceding the date of this Listing Statement.
To
the Issuer’s knowledge, there are no actual or contemplated legal proceedings material to the Issuer or any subsidiary thereof,
or any of their respective properties or businesses.
To
the Issuer’s knowledge, there have been no penalties or sanctions imposed against the Issuer by a court or regulatory authority,
and the Issuer has not entered into any settlement agreements before any court relating to provincial or territorial securities
legislation or with any securities regulatory authority, in the three years prior to the date of this Listing Statement.
To
the Issuer’s knowledge, as of the date of this Listing Statement, neither the Issuer nor any of its subsidiaries have been
subject to any penalties or sanctions imposed by any court or regulatory authority relating to provincial and territorial securities
legislation or by a securities regulatory authority, within the three years immediately preceding the date hereof; nor has the
Issuer and any of its subsidiaries entered into a settlement agreement with a securities regulatory authority within the three
years immediately preceding the date hereof. The Issuer and its subsidiaries have not been subject to any other penalties or sanctions
imposed by a court or regulatory body or self-regulatory authority that are necessary to provide full, true and plain disclosure
of all material facts relating to the Issuer’s securities or would be likely to be considered important to a reasonable
investor making an investment decision.
|
|
20.
|
INTEREST
OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
|
|
|
20.1
|
Interest
of Management and Officers in Material Transactions
|
No
director or executive officer of the Issuer, or person that is the direct or indirect beneficial owner of, or who exercises control
or direction over, more than 10 percent of any class or series of the outstanding voting securities of the Issuer, or any associate
or affiliate of any of the foregoing, has or had any material interest, direct or indirect, in any transaction with the Issuer,
Newton or Field Trip within the three years before the date of this Listing Statement, or in any proposed transaction which has
materially affected, or will materially affect, the Issuer or any of its subsidiaries.
|
|
21.
|
AUDITORS,
TRANSFER AGENTS AND REGISTRARS
|
The
auditors of the Issuer are MNP LLP, located at 3,139 Northfield Drive West, Waterloo, ON N2L 5A6.
|
|
21.2
|
Transfer
Agent and Registrar
|
The
transfer agent and registrar for the Issuer Common Shares is Computershare Trust Company of Canada at its principal offices in
Calgary, Alberta.
Material
contracts of the Issuer, other than contracts entered into in the ordinary course of business, that were entered into within the
two years before the date of this Listing Statement are:
|
|
(a)
|
the
Amalgamation Agreement;
|
|
|
(c)
|
Escrow
Agreement; and
|
The
Issuer’s material contracts described above will be filed on SEDAR upon the listing of the Issuer Common Shares on the CSE.
No
person whose profession or business gives authority to a statement made by the person, and who is named as having prepared or
certified a part of this Listing Statement or as having prepared or certified a report or valuation described or included in this
Listing Statement, holds any beneficial interest, direct or indirect, in any securities or property of the Issuer or of an Associate
or affiliate of the Issuer, and no such person is expected to be elected, appointed or employed as a director, senior officer
or employee of the Issuer or of an Associate or affiliate of the Issuer, or is a Promoter of the Issuer or an Associate or affiliate
of the Issuer.
MNP
LLP, the auditor of Field Trip prior to the Transaction and the current auditor of the Issuer, is independent of Field Trip in
accordance with the code of professional conduct of the Chartered Professional Accountants of Ontario. DeVisser Gray LLP, the
auditor of Newton prior to the Transaction, is independent of Newton and the Issuer in accordance with the rules of professional
conduct of the Institute of Chartered Professional Accountants of Ontario.
Other
than as set out elsewhere in this Listing Statement, there are no other material facts about the Issuer or its securities which
are necessary in order for this Listing Statement to contain full, true and plain disclosure of all material facts relating to
the Issuer and its securities.
Please
refer to Schedule “A” for Newton’s audited annual consolidated financial statements for the years ended December
31, 2019, 2018 and 2017 and for Newton’s reviewed condensed interim consolidated financial statements for the six months
ended June 30, 2020 and 2019.
Please
refer to Schedule “B” for Field Trip’s audited annual consolidated financial statements for the period from
incorporation on April 2, 2019 to March 31, 2020 and reviewed interim consolidated financial statements for the three months ended
June 30, 2020.
Please
refer to Schedule “C” for the unaudited consolidated pro-forma financial statements of the Issuer as at June 30, 2020.
CERTIFICATE
OF THE ISSUER
Pursuant
to a resolution duly passed by its Board of Directors, Field Trip Health Ltd. hereby applies for the listing of the above-mentioned
securities on the Canadian Securities Exchange. The foregoing contains full, true and plain disclosure of all material information
relating to Field Trip Health Ltd. It contains no untrue statement of a material fact and does not omit to state a material fact
that is required to be stated or that is necessary to prevent a statement that is made from being false or misleading in light
of the circumstances in which it was made.
Dated
at Toronto, Ontario this 1st day of October, 2020.
|
“Joseph
del Moral”
|
|
“Donna
Wong”
|
|
Joseph del Moral
|
|
Donna Wong
|
|
Chief Executive Officer
|
|
Chief Financial Officer
|
|
|
|
|
|
“Ronan Levy”
|
|
“Mujeeb
Jafferi”
|
|
Ronan
Levy
|
|
Mujeeb Jafferi
|
|
Director
|
|
Director
|
SCHEDULE
“A”
FINANCIAL
STATEMENTS OF NEWTON
(See
attached)
NEWTON
ENERGY CORPORATION
Financial
Statements
December
31, 2019
and
December
31, 2018
(Expressed
in Canadian Dollars)
401-905 West Pender St
Vancouver BC V6C 1L6
t 604.687.5447
f 604.687.6737
INDEPENDENT
AUDITOR’S REPORT
To
the Shareholders of Newton Energy Corporation
Report
on the Audit of the Financial Statements
Opinion
We
have audited the financial statements of Newton Energy Corporation, which comprise the statements of financial position as at
December 31, 2019 and 2018 and the statements of comprehensive loss, changes in equity and cash flows for the years then ended,
and notes to the financial statements, including a summary of significant accounting policies.
In
our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Newton
Energy Corporation as at December 31, 2019 and 2018 and its financial performance and its cash flows for the years then ended
in accordance with International Financial Reporting Standards (“IFRS”).
Basis
for Opinion
We
conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards
are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are
independent Newton Energy Corporation in accordance with the ethical requirements that are relevant to our audit of the financial
statements in Canada, and we have fulfilled our ethical responsibilities in accordance with these requirements. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Other
Information
Management
is responsible for the other information. The other information comprises the information included in “Management’s Discussion
and Analysis” but does not include the financial statements and our auditor’s report thereon.
Our
opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion
thereon.
In
connection with our audit of the financial statements, our responsibility is to read the other information, and in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit
or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities
of Management and Those Charged with Governance for the Financial Statements
Management
is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal
control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In
preparing the financial statements, management is responsible for assessing Newton Energy Corporation’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless management either intends to liquidate Newton Energy Corporation or to cease operations, or has no realistic alternative
but to do so.
Those
charged with governance are responsible for overseeing Newton Energy Corporation’s financial reporting process.
Auditor’s
Responsibilities for the Audit of the Financial Statements
Our
objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level
of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
As
part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
|
|
•
|
Identify
and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
|
|
|
•
|
Obtain
an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Newton Energy Corporation’s internal control.
|
|
|
•
|
Evaluate
the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by
management.
|
|
|
•
|
Conclude
on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast significant doubt on Newton Energy Corporation’s
ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify
our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause Newton Energy Corporation to cease to continue as a going concern.
|
|
|
•
|
Evaluate
the overall presentation, structure, and content of the financial statements, including the disclosures, and whether the financial
statements represent the underlying transactions and events in a manner that achieves fair presentation.
|
We
communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we identify during our audit.
We
also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, related safeguards.
The
engagement partner on the audit resulting in this independent auditor’s report is James D. Gray.
Chartered
Professional Accountants
Vancouver,
BC, Canada
April
27, 2020
NEWTON ENERGY CORPORATION
Statements of Financial Position
As at December 31, 2019 and 2018
(Expressed in Canadian Dollars)
|
|
|
2019
|
|
|
2018
|
|
|
|
|
$
|
|
|
$
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
533,576
|
|
|
|
692,858
|
|
|
GST receivable
|
|
|
2,260
|
|
|
|
5,348
|
|
|
Prepaid expenses and deposits
|
|
|
6,483
|
|
|
|
2,125
|
|
|
Total Assets
|
|
|
542,319
|
|
|
|
700,331
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities (Note 5)
|
|
|
25,101
|
|
|
|
30,464
|
|
|
Total Liabilities
|
|
|
25,101
|
|
|
|
30,464
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity
|
|
|
|
|
|
|
|
|
|
Share capital (Note 7(a))
|
|
|
6,414,127
|
|
|
|
6,414,127
|
|
|
Reserves
|
|
|
989,124
|
|
|
|
902,030
|
|
|
Deficit
|
|
|
(6,886,033
|
)
|
|
|
(6,646,290
|
)
|
|
Total Equity
|
|
|
517,218
|
|
|
|
669,867
|
|
|
Total Liabilities and Equity
|
|
|
542,319
|
|
|
|
700,331
|
|
See accompanying notes to the financial statements
Nature and continuance of operations (Note 1)
Approved by the Board of Directors and authorized for issue
on April 27, 2020.
|
“Gino DeMichele”
|
|
“Fram Moos”
|
|
Gino DeMichele, Director
|
|
Fram Moos, Director
|
NEWTON ENERGY CORPORATION
Statements of Comprehensive Loss
For the years ended December 31, 2019 and 2018
(Expressed in
Canadian Dollars)
|
|
|
2019
|
|
|
2018
|
|
|
|
|
$
|
|
|
$
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
Accounting
and legal
|
|
|
36,920
|
|
|
|
55,083
|
|
|
Advertising
and promotion
|
|
|
2,437
|
|
|
|
4,290
|
|
|
Consulting
and director’s fees
|
|
|
44,500
|
|
|
|
103,000
|
|
|
Insurance
|
|
|
7,292
|
|
|
|
6,741
|
|
|
Interest
income
|
|
|
(1,754
|
)
|
|
|
(3,772
|
)
|
|
Office
and miscellaneous
|
|
|
17,960
|
|
|
|
11,977
|
|
|
Share-based
payments
|
|
|
87,094
|
|
|
|
42,939
|
|
|
Travel
and business development
|
|
|
32,250
|
|
|
|
14,493
|
|
|
Regulatory
and filing fees
|
|
|
13,044
|
|
|
|
16,346
|
|
|
Net
and comprehensive loss for the year
|
|
|
239,743
|
|
|
|
251,097
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding
|
|
|
6,361,047
|
|
|
|
4,680,682
|
|
|
Basic
and diluted loss per share
|
|
$
|
0.04
|
|
|
$
|
0.05
|
|
See accompanying notes to the financial statements
NEWTON ENERGY CORPORATION
Statements of Cash Flows
For the years ended December 31, 2019 and 2018
(Expressed in
Canadian dollars)
|
|
|
2019
|
|
|
2018
|
|
|
|
|
$
|
|
|
$
|
|
|
Cash provided by (used for):
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
Net loss for the year
|
|
|
(239,743
|
)
|
|
|
(251,097
|
)
|
|
Items not involving the use of cash:
|
|
|
|
|
|
|
|
|
|
Share-based payments
|
|
|
87,094
|
|
|
|
42,939
|
|
|
|
|
|
(152,649
|
)
|
|
|
(208,158
|
)
|
|
Change in non-cash working capital:
|
|
|
|
|
|
|
|
|
|
GST receivable
|
|
|
3,088
|
|
|
|
(2,853
|
)
|
|
Prepaid expenses and deposits
|
|
|
(4,358
|
)
|
|
|
6,866
|
|
|
Accounts payable and accrued liabilities
|
|
|
(5,363
|
)
|
|
|
(2,089
|
)
|
|
Net cash used in operating activities
|
|
|
(159,282
|
)
|
|
|
(206,234
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
Proceeds from private placement
|
|
|
-
|
|
|
|
500,000
|
|
|
Cash share issue cost
|
|
|
-
|
|
|
|
(2,467
|
)
|
|
Net cash from financing activities
|
|
|
-
|
|
|
|
497,533
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash
|
|
|
(159,282
|
)
|
|
|
291,299
|
|
|
Cash, beginning of the year
|
|
|
692,858
|
|
|
|
401,559
|
|
|
Cash, end of the year
|
|
|
533,576
|
|
|
|
692,858
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary cash flow information
|
|
|
|
|
|
|
|
|
|
Interest received
|
|
|
1,754
|
|
|
|
3,772
|
|
See accompanying notes to the financial statements
NEWTON ENERGY CORPORATION
Statements of Changes in Equity
(Expressed in Canadian dollars)
|
|
|
Number of
|
|
|
Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Capital
|
|
|
Reserves
|
|
|
Deficit
|
|
|
Total Equity
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
December 31, 2017
|
|
|
3,027,714
|
|
|
|
5,916,594
|
|
|
|
859,091
|
|
|
|
(6,395,193
|
)
|
|
|
380,492
|
|
|
Issued for cash
|
|
|
3,333,333
|
|
|
|
500,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
500,000
|
|
|
Share issue costs – cash
|
|
|
-
|
|
|
|
(2,467
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,467
|
)
|
|
Share-based payments
|
|
|
-
|
|
|
|
-
|
|
|
|
42,939
|
|
|
|
-
|
|
|
|
42,939
|
|
|
Net loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(251,097
|
)
|
|
|
(251,097
|
)
|
|
December 31, 2018
|
|
|
6,361,047
|
|
|
|
6,414,127
|
|
|
|
902,030
|
|
|
|
(6,646,290
|
)
|
|
|
669,867
|
|
|
Share-based payments
|
|
|
-
|
|
|
|
-
|
|
|
|
87,094
|
|
|
|
-
|
|
|
|
87,094
|
|
|
Net loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(239,743
|
)
|
|
|
(239,743
|
)
|
|
December 31, 2019
|
|
|
6,361,047
|
|
|
|
6,414,127
|
|
|
|
989,124
|
|
|
|
(6,886,033
|
)
|
|
|
517,218
|
|
See accompanying notes to the financial statements
NEWTON ENERGY CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian dollars)
Newton Energy Corporation (“Newton”
or the “Company”) is domiciled and incorporated in Canada. The Company’s financial year-end is December
31. The address of the Company’s registered office is 1600, 333-7 Avenue SW, Calgary, Alberta, Canada T2P 2Z1. Newton trades
on NEX of the TSX Venture Exchange under the symbol “NTN”.
The Company is inactive and is looking
for a suitable acquisition or opportunity to begin operations. The Company is currently evaluating acquisition targets, and to
date, the Company has not generated revenue from operations.
These financial statements have been prepared
on the basis that the Company will continue to meet its commitments, continue operations and realize its assets and discharge its
liabilities in the normal course of business for the foreseeable future. Newton has no recurring source of revenue and has an accumulated
deficit of $6,886,033 at December 31, 2019 (2018 - $6,646,290).
The Company’s continuing operations
as intended are dependent upon its ability to raise sufficient funds in order to finance any acquisition and administrative expenses.
The Company has no assurance that such financing will be available or be available on favorable terms. Factors that could affect
the availability of financing include the Company’s performance (as measured by numerous factors including the progress and
results of its projects), the state of international debt and equity markets, investor perceptions and expectations and the global
financial and energy markets. If successful, the Company would obtain additional financing through, but not limited to, the issuance
of additional equity.
These financial statements were approved
and authorized for issuance by the Board of Directors on April 27, 2020.
These financial statements have been prepared in accordance
with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board
(“IASB”).
|
|
3)
|
SIGNIFICANT ACCOUNTING POLICIES
|
Basis of measurement
These financial statements have been prepared
using the accrual basis of accounting, except for cash flow information. Furthermore, these financial statements are presented
in Canadian dollars which is the functional currency of the Company and all values are rounded to the nearest dollar. These financial
statements have, in management’s opinion, been properly prepared within the framework of the accounting policies summarized
below:
Critical accounting estimates and judgments
The preparation of these financial
statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application
of policies and reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of
income and expenses during the reporting period. The effect of changes in such estimates on the financial statements in future
periods could be significant. 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.
NEWTON ENERGY CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in
Canadian dollars)
|
|
3)
|
SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Critical accounting estimates and judgements (continued)
In particular, information about significant
areas of estimation uncertainty considered by management in preparing the financial statements is described below:
Going concern assumption
Management has applied judgments in the
assessment of the Company’s ability to continue as a going concern when preparing its financial statements for the year ended
December 31, 2019. Management prepares the financial statements on a going concern basis unless management either intends to liquidate
the entity or to cease trading, or has no realistic alternative but to do so. In assessing whether the going concern assumption
is appropriate, management takes into account all available information about the future, which is at least, but is not limited
to, twelve months from the end of the reporting period. Management considered a wide range of factors relating to current and expected
profitability, debt repayment schedules and potential sources of replacement financing. As a result of the assessment, the Company
concluded that its liquidity is sufficient based on existing capital resources.
Cash and cash equivalents
Cash and cash equivalents in the statement
of financial position comprise of cash at banks and highly liquid investments with an original maturity of three months or less,
which are readily convertible into a known amount of cash.
Deferred tax
Deferred tax is recognized on differences
between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation
of taxable profit, and is accounted for using the liability method. Deferred tax liabilities are generally recognized for all taxable
temporary differences, and deferred tax assets are generally recognized for all deductible temporary differences to the extent
that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.
Such assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition
(other than in business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor
the accounting profit.
Fair value of share-based compensation
The Company accounts for stock options
using the fair value method of accounting. Accordingly, the fair value of the options is determined using the Black-Scholes option
pricing model. The fair value of options is charged to operations in a manner to reflect the number of awards for which the related
services are expected to be met, including share issue costs in the case of options issued in relation to share issuances, with
an offsetting credit to share-based payment reserve. If and when the stock options are exercised, the applicable amount of share-based
payment reserve is transferred to share capital.
Earnings per share
Basic per share information
is computed using the weighted average number of common shares outstanding during the period. Diluted per share information is
calculated using the treasury stock method, which assumes that any proceeds from the exercise of “in-the-money” stock
options plus the unamortized share-based compensation expense amounts, would be used to purchase common shares at the average
market price during the period. No adjustment to basic earnings per share is made if the result of these calculations is anti-dilutive.
NEWTON ENERGY CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in
Canadian dollars)
|
|
3)
|
SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Impairment
Impairment of financial assets
Financial assets are assessed at each reporting
date to determine whether there is any objective evidence that they are impaired. A financial asset is considered to be impaired
if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.
An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying
amount and the present value of the estimated future cash flows, discounted at the financial asset’s original effective interest
rate.
Significant financial assets are tested
for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit
risk characteristics. Impairment losses are recognized in profit or loss. An impairment loss is reversed if the reversal can be
related objectively to an event occurring after the impairment loss was recognized.
|
|
4)
|
NEW ACCOUNTING STANDARDS AND RECENT PRONOUNCEMENTS
|
The Company does not expect that the changes
to IFRS that are effective as of January 1, 2020 will have a significant impact on the Company’s results of operations or
financial position.
|
|
5)
|
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
|
Accounts payable and accrued liabilities
are comprised of the following:
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
$
|
|
|
$
|
|
|
Accounts payable
|
|
|
12,711
|
|
|
|
19,974
|
|
|
Accrued liabilities
|
|
|
12,390
|
|
|
|
10,490
|
|
|
|
|
|
25,101
|
|
|
|
30,464
|
|
Accrued liabilities include $490 due to related parties as at
December 31, 2019
|
|
6)
|
RELATED PARTY TRANSACTIONS
|
Compensation of key management personnel
The remuneration of directors and other
members of key management personnel during the years ended December 31, 2019 and 2018 were as follows:
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
$
|
|
|
$
|
|
|
Director’s fees
|
|
|
4,500
|
|
|
|
4,000
|
|
|
Legal fees
|
|
|
20,019
|
|
|
|
37,584
|
|
|
Consulting fees
|
|
|
40,000
|
|
|
|
24,000
|
|
|
Share-based payments
|
|
|
87,094
|
|
|
|
42,939
|
|
|
Total management compensation
|
|
|
151,613
|
|
|
|
108,523
|
|
NEWTON ENERGY CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in
Canadian dollars)
|
|
6)
|
RELATED PARTY TRANSACTIONS (continued)
|
All transactions with related parties have
occurred in the normal course of operations and management represents that they have occurred on a basis consistent with those
involving unrelated parties, and accordingly that they are measured at fair value.
Other than as described above, the Company
has not acquired any assets or services, or provided any assets or services in any transaction with any non-arm’s length
party during the years ended December 31, 2019 and December 31, 2018.
|
|
a)
|
The authorized share capital of the Company consists
of an unlimited number of common shares.
|
During the year ended December 31,
2019, the Company did not issue any common shares.
On July 4, 2018, the Company completed
a non-brokered private placement comprised of 3,333,333 common shares at a purchase price of $0.15 per common share for gross proceeds
of $500,000. The Company paid cash share issue costs of $2,467.
|
|
b)
|
Share-based compensation and share purchase options
|
Option pricing models require the input
of highly subjective assumptions, particularly as to the expected price volatility of the shares and the expected life of the option.
Changes in these assumptions can materially affect the fair value estimate and therefore it is management’s view that the
existing models do not necessarily provide a single reliable measure of the fair value of the Company’s stock option grants
and warrant issuances.
The continuity of stock options is as follows:
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
Number of
|
|
|
Average
|
|
|
Number of
|
|
|
Average
|
|
|
|
|
Options
|
|
|
Exercise Price
|
|
|
Options
|
|
|
Exercise Price
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
$
|
|
|
Balance, beginning of the year
|
|
|
233,121
|
|
|
|
0.37
|
|
|
|
37,500
|
|
|
|
1.00
|
|
|
Granted
|
|
|
400,000
|
|
|
|
0.22
|
|
|
|
195,621
|
|
|
|
0.25
|
|
|
Balance, end of the year
|
|
|
633,121
|
|
|
|
0.28
|
|
|
|
233,121
|
|
|
|
0.37
|
|
The following stock options were outstanding and exercisable
as at December 31, 2019:
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
Exercise
|
|
|
Number of
|
|
|
Contractual
|
|
|
Expiry Date
|
|
Price
|
|
|
Options
|
|
|
Life (Years)
|
|
|
May 4, 2020
|
|
$
|
1.00
|
|
|
|
10,000
|
|
|
|
0.34
|
|
|
May 20, 2020
|
|
$
|
1.00
|
|
|
|
27,500
|
|
|
|
0.39
|
|
|
January 4, 2023
|
|
$
|
0.25
|
|
|
|
195,621
|
|
|
|
3.01
|
|
|
May 10, 2024
|
|
$
|
0.22
|
|
|
|
400,000
|
|
|
|
4.36
|
|
|
Total
|
|
|
|
|
|
|
633,121
|
|
|
|
|
|
|
Weighted average years to expiry
|
|
|
|
|
|
|
|
|
|
|
3.71
|
|
On May 10, 2019, the Company granted 400,000 stock options to
directors, officer and consultants at an exercise price of $0.22 per share for a term of five years.
On January 4, 2018, the Company granted 195,621 stock options
to directors, officer and consultants at an exercise price of $0.25 per share for a term of five years.
NEWTON ENERGY CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in
Canadian dollars)
|
7)
|
SHARE CAPITAL (continued)
|
The Company employed the Black-Scholes option-pricing model
using the following assumptions:
|
|
|
2019
|
|
|
2018
|
|
|
Risk free interest rate
|
|
|
1.61
|
%
|
|
|
1.89
|
%
|
|
Expected life of options in years
|
|
|
5 years
|
|
|
|
3-5 years
|
|
|
Expected volatility
|
|
|
228.24
|
%
|
|
|
272.85
|
%
|
|
Dividend per share
|
|
|
-
|
|
|
|
-
|
|
|
Forfeiture rate
|
|
|
-
|
|
|
|
-
|
|
During the year ended December 31, 2019, compensation expense
of $87,094 (2018 - $42,939) was recognized for options granted and vested during the year.
|
|
c)
|
Share purchase warrants
|
There were no outstanding warrants as at
December 31, 2019 and December 31, 2018.
|
8)
|
FINANCIAL INSTRUMENT RISKS
|
Level 1 – Quoted prices are available
in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions
occur in sufficient frequency and volume to provide pricing information on an ongoing basis. The Company does not have any financial
instruments classified under Level 1.
Level 2 – Pricing inputs are other
than quoted prices in active markets included in Level 1. Prices in Level 2 are either directly (i.e. as prices) or indirectly
(i.e. derived from prices) as of the reporting date. The Company does not have any financial instruments classified under Level
2.
Level 3 – Valuations in Level 3 are
those with inputs for the asset or liability that are not based on observable market data. The Company does not have any financial
instruments under Level 3.
The Company has exposure to the following
risks:
Management believes that the Company is
not exposed to any significant credit risk on its financial assets. As at December 31, 2019 and December 31, 2018, the Company
had no financial assets that were either past due or impaired.
The Company manages the risk
of not meeting its financial obligations as they come due through management of its capital, annual budgeting of its expenditures
and cash flows, and cash flow forecasting.
NEWTON ENERGY CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in
Canadian dollars)
|
8)
|
FINANCIAL INSTRUMENT RISKS (Continued)
|
The Company has cash balances and non-interest
bearing obligations. The Company manages its exposure to interest rate risk through fixed rate investments with no early withdrawal
penalties. It is the Company’s policy to invest its cash reserves in low risk investments in either short term deposits in
primary Canadian banking institutions or overnight money market accounts. The Company monitors interest rate markets to ensure
that appropriate steps can be taken considering interest rate volatility.
|
|
ii)
|
Foreign currency risk
|
The Company’s functional and reporting
currency is the Canadian dollar as expenditures and costs are made in Canada. The Company does not hedge foreign currency transactions.
The Company manages its capital structure
and makes adjustments to it, based on the funds available to the Company in order to maintain the Company in good standing with
the various regulatory authorities. The Board of Directors does not establish quantitative return on capital criteria for management,
but rather relies on the expertise of the Company’s management to sustain future development of the Company. The Company has no
debt and is not subject to externally imposed capital requirements. There were no changes in the Company’s management of
capital during the year ended December 31, 2019.
The Company may make adjustments to its
capital structure in light of changes in economic and market conditions which may include adjusting capital spending to manage
projected financial resources, issuing new shares through public offering or private placement, and/or completing a business combination.
As at December 31, 2019, the Company has a total capital of
$517,218 (2018 - $669,867).
A reconciliation of income taxes at statutory rates is as follows:
|
|
|
2019
|
|
|
2018
|
|
|
|
|
$
|
|
|
$
|
|
|
Net loss for the year before tax
|
|
|
(239,743
|
)
|
|
|
(251,097
|
)
|
|
Expected income recovery
|
|
|
(64,731
|
)
|
|
|
(67,796
|
)
|
|
Net adjustment for non-tax items
|
|
|
24,091
|
|
|
|
10,916
|
|
|
Unrecognized benefit of current non-capital loss
|
|
|
40,640
|
|
|
|
56,880
|
|
|
Total income tax expense (recovery)
|
|
|
-
|
|
|
|
-
|
|
NEWTON ENERGY CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in
Canadian dollars)
|
|
10)
|
INCOME TAXES (Continued)
|
Deductible temporary differences, unused tax losses and unused
tax credits for which no deferred tax assets/(liabilities) have been recognized are attributable to the following:
|
|
|
2019
|
|
|
2018
|
|
|
|
|
$
|
|
|
$
|
|
|
Non-capital loss carryforwards
|
|
|
4,429,000
|
|
|
|
4,273,000
|
|
|
Capital loss carryforwards
|
|
|
3,599,000
|
|
|
|
3,929,000
|
|
|
Capital and share issue costs
|
|
|
19,000
|
|
|
|
23,000
|
|
|
|
|
|
8,047,000
|
|
|
|
8,225,000
|
|
As at December 31, 2019, the Company has Canadian
non-capital losses carried forward of approximately $4,429,000 (2018– $4,273,000). The Company has Canadian capital
losses of $3.6 million to reduce future capital gains.
The non-capital losses are available to be utilized as deductions
against future year’s Canadian taxable income from Canadian operations and, if not utilized, will expire as follows:
|
|
|
|
$
|
|
|
2025
|
|
|
|
134,000
|
|
|
2026
|
|
|
|
141,000
|
|
|
2027
|
|
|
|
342,000
|
|
|
2028
|
|
|
|
202,000
|
|
|
2029
|
|
|
|
541,000
|
|
|
2030
|
|
|
|
454,000
|
|
|
2031
|
|
|
|
329,000
|
|
|
2032
|
|
|
|
603,000
|
|
|
2033
|
|
|
|
296,000
|
|
|
2034
|
|
|
|
434,000
|
|
|
2035
|
|
|
|
251,000
|
|
|
2036
|
|
|
|
212,000
|
|
|
2037
|
|
|
|
125,000
|
|
|
2038
|
|
|
|
211,000
|
|
|
2039
|
|
|
|
154,000
|
|
|
|
|
|
|
4,429,000
|
|
NEWTON ENERGY CORPORATION
Financial Statements
December 31, 2018
and
December 31, 2017
(Expressed in Canadian Dollars)
401-905
West Pender St
Vancouver BC V6C 1L6
t 604.687.5447
f 604.687.6737
Independent Auditor’s Report
To the Shareholders of Newton Energy Corporation
Report on the Audit of the Financial Statements
Opinion
We have audited the financial
statements of Newton Energy Corporation (“the Company”), which comprise the statements of financial position as at
December 31, 2018 and 2017, and the statements of operations and comprehensive loss, changes in equity (deficiency) and cash flows
for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying
financial statements present fairly, in all material respects the financial position of the Company as at December 31, 2018 and
2017, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting
Standards (IFRS).
Basis for Opinion
We conducted our audit
in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described
in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent
of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada,
and we have fulfilled our ethical responsibilities in accordance with these requirements. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our opinion.
Other Information
Management is responsible
for the other information. The other information comprises the information included in “Management’s Discussion and
Analysis”, but does not include the financial statements and our auditor’s report thereon.
Our opinion on the financial
statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our
audit of the financial statements, our responsibility is to read the other information, and in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears
to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance
for the Financial Statements
Management is responsible for the preparation
and fair presentation of the financial statements in accordance with IFRSs, and for such internal control as management determines
is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements,
management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing
the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial
Statements
Our objectives are to obtain reasonable
assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
As part of an audit in accordance with
Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout
the audit. We also:
|
|
•
|
Identify and assess the risks of material misstatement
of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
|
|
|
•
|
Obtain an understanding of internal control relevant
to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Company’s internal control.
|
|
|
•
|
Evaluate the appropriateness of accounting policies used
and the reasonableness of accounting estimates and related disclosures made by management.
|
|
|
•
|
Conclude on the appropriateness of management’s
use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the
Company to cease to continue as a going concern.
|
|
|
•
|
Evaluate the overall presentation, structure, and content
of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions
and events in a manner that achieves fair presentation.
|
We communicate with those charged with
governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including
any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance
with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them
all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent
auditor’s report is James D. Gray.
CHARTERED PROFESSIONAL ACCOUNTANTS
Vancouver, BC, Canada
April 24, 2019
NEWTON ENERGY CORPORATION
Statements of Financial Position
As at December 31, 2018 and 2017
(Expressed in Canadian Dollars)
|
|
|
2018
|
|
|
2017
|
|
|
|
|
$
|
|
|
$
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
692,858
|
|
|
|
401,559
|
|
|
GST receivable
|
|
|
5,348
|
|
|
|
2,495
|
|
|
Prepaid expenses and deposits
|
|
|
2,125
|
|
|
|
8,991
|
|
|
|
|
|
700,331
|
|
|
|
413,045
|
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities (note 6)
|
|
|
30,464
|
|
|
|
32,553
|
|
|
|
|
|
30,464
|
|
|
|
32,553
|
|
|
Shareholders’ equity
|
|
|
|
|
|
|
|
|
|
Share capital (note 8(a))
|
|
|
6,414,127
|
|
|
|
5,916,594
|
|
|
Reserves
|
|
|
902,030
|
|
|
|
859,091
|
|
|
Deficit
|
|
|
(6,646,290
|
)
|
|
|
(6,395,193
|
)
|
|
|
|
|
669,867
|
|
|
|
380,492
|
|
|
|
|
|
700,331
|
|
|
|
413,045
|
|
See accompanying notes to the financial statements
Nature and continuance of operations (note 1)
Approved by the Board of Directors and authorized for issue
on April 24, 2019
|
“Gino DeMichele”
|
|
“Fram Moos”
|
|
Gino DeMichele, Director
|
|
Fram Moos, Director
|
NEWTON ENERGY CORPORATION
Statements of Comprehensive Loss
For the years ended December 31, 2018 and 2017
(Expressed
in Canadian Dollars)
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
Accounting and legal
|
|
|
55,083
|
|
|
|
44,737
|
|
|
Advertising and promotion
|
|
|
4,290
|
|
|
|
153
|
|
|
Consulting and director fees
|
|
|
103,000
|
|
|
|
39,500
|
|
|
Insurance
|
|
|
6,741
|
|
|
|
6,732
|
|
|
Interest (income)
|
|
|
(3,772
|
)
|
|
|
(13,366
|
)
|
|
Office and miscellaneous
|
|
|
11,977
|
|
|
|
5,667
|
|
|
Salaries and benefits
|
|
|
-
|
|
|
|
21,480
|
|
|
Share-based payments
|
|
|
42,939
|
|
|
|
-
|
|
|
Travel and business development
|
|
|
14,493
|
|
|
|
1,941
|
|
|
Regulatory and filing fees
|
|
|
16,346
|
|
|
|
12,465
|
|
|
Loss on write-off of investment (note 5)
|
|
|
-
|
|
|
|
349,154
|
|
|
Net and comprehensive loss for the year
|
|
|
(251,097
|
)
|
|
|
(468,463
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
4,680,682
|
|
|
|
1,602,991
|
|
|
Basic and diluted loss per share
|
|
$
|
0.05
|
|
|
$
|
0.29
|
|
See accompanying notes to the financial statements
NEWTON ENERGY CORPORATION
Statements of Cash Flows
For the years ended December 31, 2018 and 2017
(Expressed
in Canadian dollars)
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
Cash provided by (used for):
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
Net loss for the year
|
|
|
(251,097
|
)
|
|
|
(468,463
|
)
|
|
Items not involving the use of cash:
|
|
|
|
|
|
|
|
|
|
Loss on write-off of investment
|
|
|
-
|
|
|
|
349,154
|
|
|
Share-based payments
|
|
|
42,939
|
|
|
|
-
|
|
|
|
|
|
(208,158
|
)
|
|
|
(119,309
|
)
|
|
Change in non-cash working capital:
|
|
|
|
|
|
|
|
|
|
Amounts receivable
|
|
|
(2,853
|
)
|
|
|
(376
|
)
|
|
Prepaid expenses and deposits
|
|
|
6,866
|
|
|
|
(3,241
|
)
|
|
Accounts payable and accrued liabilities
|
|
|
(2,089
|
)
|
|
|
(19,921
|
)
|
|
Loan interest accrued
|
|
|
-
|
|
|
|
(13,366
|
)
|
|
|
|
|
(206,234
|
)
|
|
|
(156,213
|
)
|
|
Financing activity
|
|
|
|
|
|
|
|
|
|
Proceeds from private placement
|
|
|
500,000
|
|
|
|
500,000
|
|
|
Cash share issue costs
|
|
|
(2,467
|
)
|
|
|
(17,207
|
)
|
|
|
|
|
497,533
|
|
|
|
482,793
|
|
|
Investing activity
|
|
|
|
|
|
|
|
|
|
Repayment of loan receivable, inclusive of interest
|
|
|
-
|
|
|
|
61,975
|
|
|
|
|
|
-
|
|
|
|
61,975
|
|
|
Net increase in cash and cash equivalents
|
|
|
291,299
|
|
|
|
388,555
|
|
|
Cash and cash equivalents, beginning of the year
|
|
|
401,559
|
|
|
|
13,004
|
|
|
Cash and cash equivalents, end of the year
|
|
|
692,858
|
|
|
|
401,559
|
|
|
Cash and cash equivalents consists of:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
342,358
|
|
|
|
51,559
|
|
|
Cash equivalents
|
|
|
350,500
|
|
|
|
350,000
|
|
|
|
|
|
692,858
|
|
|
|
401,559
|
|
See accompanying notes to financial statements
NEWTON ENERGY CORPORATION
Statements of Changes in Equity
(Expressed
in Canadian dollars)
|
|
|
Number of
|
|
|
Share
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
shares
|
|
|
capital
|
|
|
Reserves
|
|
|
Deficit
|
|
|
Equity
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
December 31, 2016
|
|
|
27,220,924
|
|
|
|
5,433,801
|
|
|
|
859,091
|
|
|
|
(5,926,730
|
)
|
|
|
366,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued for cash – non-flow through shares
|
|
|
33,333,333
|
|
|
|
500,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
500,000
|
|
|
Share issue costs – cash
|
|
|
-
|
|
|
|
(17,207
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(17,207
|
)
|
|
Share consolidation
|
|
|
(57,526,543
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Net income for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(468,463
|
)
|
|
|
(468,463
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
3,027,714
|
|
|
|
5,916,594
|
|
|
|
859,091
|
|
|
|
(6,395,193
|
)
|
|
|
380,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued for cash
|
|
|
3,333,333
|
|
|
|
500,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
500,000
|
|
|
Share issue costs – cash
|
|
|
-
|
|
|
|
(2,467
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,467
|
)
|
|
Share consolidation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Share-based payment reserve
|
|
|
-
|
|
|
|
-
|
|
|
|
42,939
|
|
|
|
-
|
|
|
|
42,939
|
|
|
Net loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(233,433
|
)
|
|
|
(233,433
|
)
|
|
December 31, 2018
|
|
|
6,361,047
|
|
|
|
6,414,127
|
|
|
|
902,030
|
|
|
|
(6,628,626
|
)
|
|
|
687,531
|
|
See accompanying notes to financial statements
NEWTON
ENERGY CORPORATION
Notes
to the Financial Statements
For
the years ended December 31, 2018 and 2017
(Expressed
in Canadian dollars)
Newton
Energy Corporation (“Newton”, the “Corporation” or the “Company”) is
domiciled and incorporated in Canada. The Corporation’s financial year-end is December 31. The address of the Corporation’s
registered office is 1600, 333-7 Avenue SW, Calgary, Alberta, Canada T2P 2Z1. Newton trades on NEX of the TSX Venture Exchange.
The
Company is currently inactive and is looking for a suitable acquisition to begin operations. The Company is seeking acquisitions
or opportunities in the clean energy, technology and other sectors, and is currently evaluating acquisition targets. To date,
the Company has not generated revenues from operations.
These
financial statements have been prepared on the basis that the Company will continue to meet its commitments, continue operations,
and realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company
has incurred losses since inception, has no recurring source of revenue and has an accumulated deficit of $6,646,290 at December
31, 2018 (2017 - $6,395,193).
The
Company’s continuing operations as intended is dependent upon its ability to raise sufficient funds in order to finance
acquisition costs and administrative expenses. The Company has no assurance that such financing will be available or will be available
on favourable terms. Factors that could affect the availability of financing include the Company’s performance (as measured
by numerous factors including the progress and results of its projects), the state of international debt and equity markets, investor
perceptions and expectations and the global financial market. If successful, the Company would obtain additional financing through
sources including, but not limited to, the issuance of additional equity.
These
financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as
issued by the International Accounting Standards Board (“IASB”).
|
|
3)
|
SIGNIFICANT
ACCOUNTING POLICIES
|
Basis of measurement
These
financial statements have been prepared using the accrual basis of accounting, except for cash flow information. Furthermore,
these financial statements are presented in Canadian dollars which is the functional currency of the Company and all values are
rounded to the nearest dollar. These financial statements have, in management’s opinion, been properly prepared within the
framework of the accounting policies summarized below:
Critical
accounting estimates and judgments
The
preparation of these financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions
that affect the application of policies and reported amounts of assets and liabilities at the date of the financial statements
and the reported amounts of income and expenses during the reporting period. The effect of changes in such estimates on the financial
statements in future periods could be significant. 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.
NEWTON
ENERGY CORPORATION
Notes
to the Financial Statements
For
the years ended December 31, 2018 and 2017
(Expressed in Canadian dollars)
|
|
3)
|
SIGNIFICANT
ACCOUNTING POLICIES (continued)
|
Critical
accounting estimates and judgments (continued)
In
particular, information about significant areas of estimation uncertainty considered by management in preparing the financial
statements is described below:
Going
concern assumption
Management
has applied judgments in the assessment of the Company’s ability to continue as a going concern when preparing its financial
statements for the year ended December 31, 2018. Management prepares the financial statements on a going concern basis unless
management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so. In assessing
whether the going concern assumption is appropriate, management takes into account all available information about the future,
which is at least, but is not limited to, twelve months from the end of the reporting period. Management considered a wide range
of factors relating to current and expected profitability, debt repayment schedules and potential sources of replacement financing.
As a result of the assessment, the Company concluded its liquidity to remain sufficient based on existing capital resources.
Cash
and cash equivalents
Cash
and cash equivalents in the statement of financial position comprise cash at banks and highly liquid investments with an original
maturity of three months or less, which are readily convertible into a known amount of cash.
Deferred
tax
Deferred
tax is recognized on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding
tax basis used in the computation of taxable profit, and is accounted for using the liability method. Deferred tax liabilities
are generally recognized for all taxable temporary differences, and deferred tax assets are generally recognized for all deductible
temporary differences to the extent that it is probable that taxable profits will be available against which those deductible
temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from
goodwill or from the initial recognition (other than in business combination) of other assets and liabilities in a transaction
that affects neither the taxable profit nor the accounting profit.
Fair
value of share-based compensation
The
Corporation accounts for stock options using the fair value method of accounting. Accordingly, the fair value of the options is
determined using the Black-Scholes option pricing model. The fair value of options is charged to operations in a manner to reflect
the number of awards for which the related services are expected to be met, including share issue costs in the case of options
issued in relation to share issuances, with an offsetting credit to share-based payment reserve. If and when the stock options
are exercised, the applicable amount of share-based payment reserve is transferred to share capital.
Earnings
per share
Basic
per share information is computed using the weighted average number of common shares outstanding during the period. Diluted per
share information is calculated using the treasury stock method, which assumes that any proceeds from the exercise of “in-the-money”
stock options plus the unamortized share-based compensation expense amounts, would be used to purchase common shares at the average
market price during the period. No adjustment to basic earnings per share is made if the result of these calculations is anti-dilutive.
NEWTON
ENERGY CORPORATION
Notes
to the Financial Statements
For
the years ended December 31, 2018 and 2017
(Expressed in Canadian dollars)
|
|
3)
|
SIGNIFICANT
ACCOUNTING POLICIES (continued)
|
Impairment
Impairment
of financial assets
Financial
assets are assessed at each reporting date to determine whether there is any objective evidence that they are impaired. A financial
asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated
future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortized cost is calculated as
the difference between its carrying amount and the present value of the estimated future cash flows, discounted at the financial
asset’s original effective interest rate.
Significant
financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in
groups that share similar credit risk characteristics. Impairment losses are recognized in profit or loss. An impairment loss
is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized.
|
|
4)
|
NEW
ACCOUNTING STANDARDS AND RECENT PRONOUNCEMENTS
|
The
Company does not expect that the changes to IFRS that are effective as of January 1, 2019 will have a significant impact on the
Company’s results of operations or financial position.
On
April 27, 2016, the Company entered into a non-binding letter of intent with Kicker Power Corp. (“Kicker”), a private
corporation continued under the laws of British Columbia, whereby the Company and Kicker were to complete a business combination
(the “Transaction”) and the Company was to acquire all of the issued and outstanding shares of Kicker in exchange
for common shares of Newton such that the existing shareholders of Newton would hold at least 25% of the outstanding shares of
the resulting issuer.
On
October 2, 2017, the Company terminated its non-binding letter of intent with Kicker and entered into a debt settlement agreement
pursuant to which Kicker agreed to issue 4,968,789 common shares in the capital of Kicker valued at $0.070269 per common share
to settle the outstanding debt of $349,154.
During
2018, Kicker commenced its wind-up and dissolution. The Company does not expect to recover its investment. Accordingly, the Company
wrote it off for accounting purposes as at December 31, 2017, resulting in a loss of $349,154.
NEWTON
ENERGY CORPORATION
Notes
to the Financial Statements
For
the years ended December 31, 2018 and 2017
(Expressed in Canadian dollars)
|
|
6)
|
ACCOUNTS
PAYABLE AND ACCRUED LIABILITIES
|
Accounts
payable and accrued liabilities are comprised of the following:
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
Accounts payable
|
|
|
19,974
|
|
|
|
12,550
|
|
|
Accrued liabilities
|
|
|
10,490
|
|
|
|
20,003
|
|
|
|
|
|
30,464
|
|
|
|
32,553
|
|
Accrued
liabilities include $490 due to related parties as at December 31, 2018.
|
|
7)
|
RELATED
PARTY TRANSACTIONS
|
Compensation of key management personnel
The
remuneration of directors and other members of key management personnel during the years ended December 31, 2018 and 2017 were
as follows:
|
|
|
2018
|
|
|
2017
|
|
|
|
|
$
|
|
|
$
|
|
|
Directors’ fees
|
|
|
4,000
|
|
|
|
6,500
|
|
|
Legal fees
|
|
|
37,584
|
|
|
|
31,737
|
|
|
Consultants
|
|
|
24,000
|
|
|
|
33,000
|
|
|
Salaries and benefits
|
|
|
-
|
|
|
|
21,480
|
|
|
Share-based payment
|
|
|
42,939
|
|
|
|
-
|
|
|
Total management compensation
|
|
|
108,523
|
|
|
|
92,717
|
|
All
transactions with related parties have occurred in the normal course of operations and management represents that they have occurred
on a basis consistent with those involving unrelated parties, and accordingly that they are measured at fair value.
Salaries
and benefits for 2018 is $nil, and the comparative figure from 2017 includes a $10,000 settlement fee paid to the former Chief
Executive Officer of the Company.
|
|
a)
|
The
authorized share capital of the Company consists of an unlimited number of common shares.
|
On
July 4, 2018, the Company completed a non-brokered private placement comprised of 3,333,333 common shares at a purchase price
of $0.15 per common share for gross proceeds of $500,000. The Company paid cash share issue costs of $2,467.
NEWTON
ENERGY CORPORATION
Notes
to the Financial Statements
For
the years ended December 31, 2018 and 2017
(Expressed in Canadian dollars)
|
|
8)
|
SHARE
CAPITAL (continued)
|
|
|
b)
|
Share-based
compensation and share purchase options
|
Option
pricing models require the input of highly subjective assumptions, particularly as to the expected price volatility of the shares
and the expected life of the option. Changes in these assumptions can materially affect the fair value estimate and therefore
it is management’s view that the existing models do not necessarily provide a single reliable measure of the fair value
of the Company’s stock option grants and warrant issuances.
The
continuity of stock options is as follows:
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
Number of
|
|
|
Average
|
|
|
Number of
|
|
|
Average
|
|
|
|
|
Options
|
|
|
Exercise Price
|
|
|
Options
|
|
|
Exercise Price
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
Balance, beginning of the year
|
|
|
37,500
|
|
|
|
1.00
|
|
|
|
99,400
|
|
|
|
1.39
|
|
|
Granted
|
|
|
195,621
|
|
|
|
0.25
|
|
|
|
-
|
|
|
|
-
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
(21,900
|
)
|
|
|
2.75
|
|
|
Cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
(40,000
|
)
|
|
|
1.00
|
|
|
Balance, end of the year
|
|
|
233,121
|
|
|
|
0.37
|
|
|
|
37,500
|
|
|
|
1.00
|
|
The
following stock options were outstanding and exercisable as at December 31, 2018:
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
Exercise
|
|
|
Number of
|
|
|
Contractual
|
|
|
Expiry Date
|
|
Price
|
|
|
Options
|
|
|
Life (Years)
|
|
|
May 4, 2020
|
|
$
|
1.00
|
|
|
|
10,000
|
|
|
|
1.34
|
|
|
May 20, 2020
|
|
$
|
1.00
|
|
|
|
27,500
|
|
|
|
1.39
|
|
|
January 4, 2023
|
|
$
|
0.25
|
|
|
|
195,621
|
|
|
|
4.01
|
|
|
Total
|
|
|
|
|
|
|
233,121
|
|
|
|
|
|
|
Weighted average years to expiry
|
|
|
|
|
|
|
|
|
|
|
3.59
|
|
On
January 4, 2018, the Company granted 195,621 stock options to directors, officer and consultants at an exercise price of $0.25
per share for a term of five years.
NEWTON
ENERGY CORPORATION
Notes
to the Financial Statements
For
the years ended December 31, 2018 and 2017
(Expressed in Canadian dollars)
|
|
8)
|
SHARE
CAPITAL (continued)
|
|
|
c)
|
Share
purchase warrants
|
The
continuity of share purchase warrants is as follows:
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
Number of
|
|
|
Average
|
|
|
Number of
|
|
|
Average
|
|
|
|
|
Warrants
|
|
|
Exercise Price
|
|
|
Warrants
|
|
|
Exercise Price
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
$
|
|
|
Balance, beginning of the year
|
|
|
250,992
|
|
|
|
2.00
|
|
|
|
445,992
|
|
|
|
1.56
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Expired/cancelled
|
|
|
(250,992
|
)
|
|
|
2.00
|
|
|
|
(195,000
|
)
|
|
|
1.00
|
|
|
Balance, end of the year
|
|
|
-
|
|
|
|
-
|
|
|
|
250,992
|
|
|
|
2.00
|
|
|
Weighted average years to expiry
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
0.75
|
|
A
total of 250,992 warrants expired on October 1, 2018.
|
|
9)
|
FINANCIAL
INSTRUMENT RISKS
|
The
Company’s financial instruments are exposed to the following risks:
Credit
Risk
Credit
risk is the risk of potential loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligations.
The Company’s credit risk is primarily attributable to its liquid financial assets including cash and cash equivalents and accounts
receivable. The carrying value of these financial assets represent the maximum exposure to credit risk.
The
Company limits the exposure to credit risk by only investing its cash and cash equivalents with high-credit quality financial
institutions in business and savings accounts, which are available on demand by the Company.
Foreign
currency exchange rate risk
Foreign
currency exchange rate risk is the risk that the fair value of financial instruments or future cash flows will fluctuate as a
result of changes in foreign exchange rates.
The
Company’s functional currency is the Canadian dollar and all major transactions are transacted in Canadian dollars. Management
believes the foreign exchange risk derived from currency conversions is minimal.
Liquidity
Risk
Liquidity
risk is the risk that the Company will not be able to pay financial instrument liabilities as they come due. The Company’s
only liquidity risk from financial instruments is its need to meet accounts payable and accrued liabilities and amounts due to
related parties. The Company did maintain sufficient cash balances to meet these needs at December 31, 2018.
NEWTON
ENERGY CORPORATION
Notes
to the Financial Statements
For
the years ended December 31, 2018 and 2017
(Expressed in Canadian dollars)
|
|
9)
|
FINANCIAL
INSTRUMENT RISKS (Continued)
|
Interest
Rate Risk
The
Company is exposed to interest rate risk on its cash. The majority of these deposits have been in discounted instruments with
pre-determined fixed yields. Interest rate movements will affect the fair value of these instruments so the Company manages maturity
dates of these instruments to match cash flow needs, enabling realization at no loss in almost all cases.
Fair
Value of Financial Instruments
The
fair value of the Company’s financial assets and liabilities approximates the carrying amount. Financial instruments measured
at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the
inputs used to estimate the fair values. The three levels of the fair value hierarchy are:
|
|
•
|
Level
1 – Unadjusted quoted prices in active markets for identical assets or liabilities;
|
|
|
|
|
|
|
•
|
Level
2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and Level
3 – Inputs that are not based on observable market data.
|
|
|
|
|
|
|
•
|
Level
3 – Inputs that are not based on observable market data.
|
The
fair value classification of the Company’s financial instruments as at December 31, 2018 and 2017 are as follows:
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
Loans and
|
|
|
|
|
|
Loans and
|
|
|
|
|
|
|
|
Fair value
|
|
|
receivables and
|
|
|
Fair value
|
|
|
receivables and
|
|
|
|
|
Fair
|
|
|
through
|
|
|
other financial
|
|
|
through
|
|
|
other financial
|
|
|
|
|
Value
|
|
|
profit or
|
|
|
liabilities at
|
|
|
profit or
|
|
|
liabilities at
|
|
|
|
|
Level
|
|
|
loss
|
|
|
amortized cost
|
|
|
loss
|
|
|
amortized cost
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
1
|
|
|
|
692,858
|
|
|
|
-
|
|
|
|
401,558
|
|
|
|
-
|
|
|
Accounts receivable
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
692,858
|
|
|
|
-
|
|
|
|
401,558
|
|
|
|
-
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
|
|
-
|
|
|
|
30,464
|
|
|
|
-
|
|
|
|
32,553
|
|
|
Convertible debenture
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
30,464
|
|
|
|
-
|
|
|
|
32,553
|
|
During
the years ended December 31, 2018 and 2017, there were no transfers between level 1, level 2 and level 3 classified assets and
liabilities.
NEWTON
ENERGY CORPORATION
Notes
to the Financial Statements
For
the years ended December 31, 2018 and 2017
(Expressed in Canadian dollars)
The
Corporation manages its capital structure and makes adjustments to it, based on the funds available to the Corporation in order
to maintain the Corporation in good standing with the various regulatory authorities. The Board of Directors does not establish
quantitative return on capital criteria for management, but rather relies on the expertise of the Corporation’s management to
sustain future development of the Corporation. The Corporation has no debt and is not subject to externally imposed capital requirements.
There were no changes in the Corporation’s management of capital during the year ended December 31, 2018.
The
Corporation may make adjustments to its capital structure in light of changes in economic and market conditions which may include
adjusting capital spending to manage projected financial resources, issuing new shares through public offering or private placement,
and/or completing a business combination.
As
at December 31, 2018, the Corporation has a total capital of $669,867 (2017 - $380,492).
A
reconciliation of income taxes at statutory rates is as follows:
|
|
|
2018
|
|
|
2017
|
|
|
|
|
$
|
|
|
$
|
|
|
Net loss for the year before tax
|
|
|
(251,097
|
)
|
|
|
(468,463
|
)
|
|
Expected income recovery
|
|
|
(67,796
|
)
|
|
|
(121,800
|
)
|
|
Net adjustment for non-tax items
|
|
|
10,916
|
|
|
|
89,316
|
|
|
Unrecognized benefit of current non-capital loss
|
|
|
56,880
|
|
|
|
32,484
|
|
|
Total income tax expense (recovery)
|
|
|
-
|
|
|
|
-
|
|
Deductible
temporary differences, unused tax losses and unused tax credits for which no deferred tax assets/ (liabilities) have been recognized
are attributable to the following:
|
|
|
2018
|
|
|
2017
|
|
|
|
|
$
|
|
|
$
|
|
|
Exploration and evaluation carrying amounts in excess of tax pools
|
|
|
-
|
|
|
|
-
|
|
|
Non-capital loss carryforwards
|
|
|
4,273,000
|
|
|
|
4,064,000
|
|
|
Capital loss carryforwards
|
|
|
3,929,000
|
|
|
|
3,250,000
|
|
|
Capital and share issue costs
|
|
|
23,000
|
|
|
|
26,000
|
|
|
|
|
|
8,225,000
|
|
|
|
7,340,000
|
|
NEWTON
ENERGY CORPORATION
Notes
to the Financial Statements
For
the years ended December 31, 2018 and 2017
(Expressed in Canadian dollars)
|
|
11)
|
INCOME
TAXES (Continued)
|
As
at December 31, 2018, the Company has Canadian capital and non-capital losses carried forward of approximately $8,225,000 (2017
– $7,340,000). The Company has Canadian capital losses of $3.9 million to reduce future capital gains. These losses are
available to be utilized as deductions against future year’s Canadian taxable income from Canadian operations and capital
gains. Canadian non-capital losses, if not utilized will expire as follows:
|
|
|
|
$
|
|
|
2025
|
|
|
|
134,000
|
|
|
2026
|
|
|
|
141,000
|
|
|
2027
|
|
|
|
342,000
|
|
|
2028
|
|
|
|
202,000
|
|
|
2029
|
|
|
|
541,000
|
|
|
2030
|
|
|
|
454,000
|
|
|
2031
|
|
|
|
329,000
|
|
|
2032
|
|
|
|
603,000
|
|
|
2033
|
|
|
|
296,000
|
|
|
2034
|
|
|
|
434,000
|
|
|
2035
|
|
|
|
251,000
|
|
|
2036
|
|
|
|
212,000
|
|
|
2037
|
|
|
|
125,000
|
|
|
2038
|
|
|
|
211,000
|
|
|
|
|
|
|
4,273,000
|
|
NEWTON ENERGY CORPORATION
Financial Statements
December 31, 2017
and
December 31, 2016
(Expressed in Canadian Dollars)
401-905 West Pender St
Vancouver BC V6C 1L6
t 604.687.5447
f 604.687.6737
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Newton Energy Corporation
We have audited the accompanying financial
statements of Newton Energy Corporation, which comprise the statement of financial position as at December 31, 2017 and 2016, and
the statements of comprehensive loss, changes in shareholders’ equity and cash flows for the years then ended, and a summary
of significant accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation
and fair presentation of these financial statements in accordance with International Financial Reporting Standards as issued by
the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance whether the financial statements are free of material misstatement.
An audit involves performing procedures
to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation
of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements
present fairly, in all material respects, the financial position of Newton Energy Corporation as at December 31, 2017 and 2016
and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting
Standards as issued by the International Accounting Standards Board.
CHARTERED PROFESSIONAL ACCOUNTANTS
Vancouver, BC
April 20, 2018
NEWTON ENERGY CORPORATION
Statements of Financial Position
As at December 31,
(Expressed in Canadian Dollars)
|
|
|
2017
|
|
|
2016
|
|
|
|
|
$
|
|
|
$
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
401,559
|
|
|
|
13,004
|
|
|
GST receivable
|
|
|
2,495
|
|
|
|
2,119
|
|
|
Prepaid expenses and deposits
|
|
|
8,991
|
|
|
|
5,750
|
|
|
Loan receivable (note 5)
|
|
|
-
|
|
|
|
397,763
|
|
|
|
|
|
413,045
|
|
|
|
418,636
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities (note 6)
|
|
|
32,553
|
|
|
|
52,474
|
|
|
|
|
|
32,553
|
|
|
|
52,474
|
|
|
Shareholders’ equity
|
|
|
|
|
|
|
|
|
|
Share capital (note 8(a))
|
|
|
5,916,594
|
|
|
|
5,433,801
|
|
|
Reserves
|
|
|
859,091
|
|
|
|
859,091
|
|
|
Deficit
|
|
|
(6,395,193
|
)
|
|
|
(5,926,730
|
)
|
|
|
|
|
380,492
|
|
|
|
366,162
|
|
|
|
|
|
413,045
|
|
|
|
418,636
|
|
See accompanying notes to the
financial statements
Nature
and continuance of operations (note 1) Subsequent event (note 12)
Approved
by the Board of Directors and authorized for issue on April 20, 2018.
|
“Gino DeMichele”
|
|
“Fram Moos”
|
|
Gino DeMichele, Director
|
|
Fram Moos, Director
|
NEWTON ENERGY CORPORATION
Statements of Comprehensive Loss
For the years ended December 31,
(Expressed in Canadian Dollars)
|
|
|
2017
|
|
|
2016
|
|
|
|
|
$
|
|
|
$
|
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
Accounting and legal
|
|
|
44,737
|
|
|
|
61,436
|
|
|
Advertising and promotion
|
|
|
153
|
|
|
|
-
|
|
|
Consulting and director fees
|
|
|
39,500
|
|
|
|
44,796
|
|
|
Insurance
|
|
|
6,732
|
|
|
|
6,750
|
|
|
Office and miscellaneous
|
|
|
5,667
|
|
|
|
6,747
|
|
|
Salaries and benefits
|
|
|
21,480
|
|
|
|
68,356
|
|
|
Travel and business development
|
|
|
1,941
|
|
|
|
8,888
|
|
|
Regulatory and filing fees
|
|
|
12,465
|
|
|
|
26,993
|
|
|
Loss before other items
|
|
|
(132,675
|
)
|
|
|
(223,966
|
)
|
|
Interest income
|
|
|
13,366
|
|
|
|
14,154
|
|
|
Loss on write-off of investment (note 12)
|
|
|
(349,154
|
)
|
|
|
-
|
|
|
Net and comprehensive loss for the year
|
|
|
(468,463
|
)
|
|
|
(209,812
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
1,602,991
|
|
|
|
27,220,924
|
|
|
Basic and diluted loss per share
|
|
$
|
0.29
|
|
|
$
|
0.01
|
|
See accompanying notes to the financial statements
NEWTON ENERGY CORPORATION
Statements of Cash Flows
For the years ended December 31,
(Expressed in Canadian Dollars)
|
|
|
2017
|
|
|
2016
|
|
|
|
|
$
|
|
|
$
|
|
|
Cash provided by (used for):
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
Net loss for the year
|
|
|
(468,463
|
)
|
|
|
(209,812
|
)
|
|
Items not involving the use of cash:
|
|
|
|
|
|
|
|
|
|
Expenses paid from loan advance
|
|
|
-
|
|
|
|
15,733
|
|
|
Loss on write-off of investment
|
|
|
349,154
|
|
|
|
-
|
|
|
|
|
|
(119,309
|
)
|
|
|
(194,079
|
)
|
|
Change in non-cash working capital:
|
|
|
|
|
|
|
|
|
|
Amounts receivable
|
|
|
(376
|
)
|
|
|
(1,642
|
)
|
|
Prepaid expenses and deposits
|
|
|
(3,241
|
)
|
|
|
(1,250
|
)
|
|
Accounts payable and accrued liabilities
|
|
|
(19,922
|
)
|
|
|
49,147
|
|
|
Loan interest accrued
|
|
|
(13,366
|
)
|
|
|
(13,085
|
)
|
|
|
|
|
(156,214
|
)
|
|
|
(160,909
|
)
|
|
Financing activity
|
|
|
|
|
|
|
|
|
|
Proceeds from private placement
|
|
|
500,000
|
|
|
|
-
|
|
|
Cash share issue costs
|
|
|
(17,207
|
)
|
|
|
-
|
|
|
|
|
|
482,793
|
|
|
|
-
|
|
|
Investing activity
|
|
|
|
|
|
|
|
|
|
Repayment (advance) of loan receivable, inclusive of interest
|
|
|
61,975
|
|
|
|
(400,411
|
)
|
|
|
|
|
61,975
|
|
|
|
(400,411
|
)
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
388,554
|
|
|
|
(561,320
|
)
|
|
Cash and cash equivalents, beginning of the year
|
|
|
13,004
|
|
|
|
574,324
|
|
|
Cash and cash equivalents, end of the year
|
|
|
401,558
|
|
|
|
13,004
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents consists of:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
51,558
|
|
|
|
13,004
|
|
|
Cash equivalents
|
|
|
350,000
|
|
|
|
-
|
|
|
|
|
|
401,558
|
|
|
|
13,004
|
|
|
Supplementary cash flow information
|
|
|
|
|
|
|
|
|
|
Interest received
|
|
|
14,974
|
|
|
|
14,154
|
|
See accompanying notes to financial statements
NEWTON ENERGY CORPORATION
Statements of Changes in Equity
(Expressed in Canadian Dollars)
|
|
|
Number of
|
|
|
Share
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
shares
|
|
|
capital
|
|
|
Reserves
|
|
|
Deficit
|
|
|
Equity
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
December 31, 2015
|
|
|
27,220,924
|
|
|
|
5,433,801
|
|
|
|
859,091
|
|
|
|
(5,716,918
|
)
|
|
|
575,974
|
|
|
Net income for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(209,812
|
)
|
|
|
(209,812
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
27,220,924
|
|
|
|
5,433,801
|
|
|
|
859,091
|
|
|
|
(5,926,730
|
)
|
|
|
366,162
|
|
|
Issued for cash – non-flow through shares
|
|
|
33,333,333
|
|
|
|
500,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
500,000
|
|
|
Share issue costs – cash
|
|
|
-
|
|
|
|
(17,207
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(17,207
|
)
|
|
Share consolidation
|
|
|
(57,526,543
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Net loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(468,463
|
)
|
|
|
(468,463
|
)
|
|
December 31, 2017
|
|
|
3,027,714
|
|
|
|
5,916,594
|
|
|
|
859,091
|
|
|
|
(6,395,193
|
)
|
|
|
380,492
|
|
See accompanying notes to financial statements
NEWTON
ENERGY CORPORATION
Notes
to the Financial Statements
For
the years ended December 31, 2017 and 2016
(Expressed in Canadian dollars)
Newton
Energy Corporation (“Newton”, the “Corporation” or the “Company”) is
domiciled and incorporated in Canada. The Corporation’s financial year-end is December 31. The address of the Corporation’s
registered office is 1600, 333-7 Avenue SW, Calgary, Alberta, Canada T2P 2Z1. Newton trades on NEX of the TSX Venture Exchange.
The
Company is currently inactive and is looking for a suitable acquisition to begin operations. The Company is seeking acquisitions
or opportunities in the clean energy, technology and other sectors, and is currently evaluating acquisition targets. To date,
the Company has not generated revenues from operations.
These
financial statements have been prepared on the basis that the Company will continue to meet its commitments, continue operations,
and realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company
has incurred losses since inception, has no recurring source of revenue and has an accumulated deficit of $6,390,960 at December
31, 2017 (2016 - $5,926,730).
The
Company’s continuing operations as intended is dependent upon its ability to raise sufficient funds in order to finance
acquisition costs and administrative expenses. The Company has no assurance that such financing will be available or will be available
on favourable terms. Factors that could affect the availability of financing include the Company’s performance (as measured
by numerous factors including the progress and results of its projects), the state of international debt and equity markets, investor
perceptions and expectations and the global financial market. If successful, the Company would obtain additional financing through
sources including, but not limited to, the issuance of additional equity.
These
financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as
issued by the International Accounting Standards Board (“IASB”).
|
|
3)
|
SIGNIFICANT
ACCOUNTING POLICIES
|
Basis of measurement
These
financial statements have been prepared using the accrual basis of accounting, except for cash flow information. Furthermore,
these financial statements are presented in Canadian dollars which is the functional currency of the Company and all values are
rounded to the nearest dollar. These financial statements have, in management’s opinion, been properly prepared within the
framework of the accounting policies summarized below:
Critical
accounting estimates and judgments
The
preparation of these financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions
that affect the application of policies and reported amounts of assets and liabilities at the date of the financial statements
and the reported amounts of income and expenses during the reporting period. The effect of changes in such estimates on the financial
statements in future periods could be significant. 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.
NEWTON
ENERGY CORPORATION
Notes
to the Financial Statements
For
the years ended December 31, 2017 and 2016
(Expressed in Canadian dollars)
|
|
3)
|
SIGNIFICANT
ACCOUNTING POLICIES (continued)
Critical accounting estimates and judgments
(continued)
|
In
particular, information about significant areas of estimation uncertainty considered by management in preparing the financial
statements is described below:
Going
concern assumption
Management
has applied judgments in the assessment of the Company’s ability to continue as a going concern when preparing its financial
statements for the year ended December 31, 2017. Management prepares the financial statements on a going concern basis unless
management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so. In assessing
whether the going concern assumption is appropriate, management takes into account all available information about the future,
which is at least, but is not limited to, twelve months from the end of the reporting period. Management considered a wide range
of factors relating to current and expected profitability, debt repayment schedules and potential sources of replacement financing.
As a result of the assessment, the Company concluded its liquidity to remain sufficient based on existing capital resources.
Cash
and cash equivalents
Cash
and cash equivalents in the statement of financial position comprise cash at banks and highly liquid investments with an original
maturity of three months or less, which are readily convertible into a known amount of cash.
Deferred
tax
Deferred
tax is recognized on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding
tax basis used in the computation of taxable profit, and is accounted for using the liability method. Deferred tax liabilities
are generally recognized for all taxable temporary differences, and deferred tax assets are generally recognized for all deductible
temporary differences to the extent that it is probable that taxable profits will be available against which those deductible
temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from
goodwill or from the initial recognition (other than in business combination) of other assets and liabilities in a transaction
that affects neither the taxable profit nor the accounting profit.
Fair
value of share-based compensation
The
Corporation accounts for stock options using the fair value method of accounting. Accordingly, the fair value of the options is
determined using the Black-Scholes option pricing model. The fair value of options is charged to operations in a manner to reflect
the number of awards for which the related services are expected to be met, including share issue costs in the case of options
issued in relation to share issuances, with an offsetting credit to share-based payment reserve. If and when the stock options
are exercised, the applicable amount of share-based payment reserve is transferred to share capital.
NEWTON
ENERGY CORPORATION
Notes
to the Financial Statements
For
the years ended December 31, 2017 and 2016
(Expressed in Canadian dollars)
|
|
3)
|
SIGNIFICANT
ACCOUNTING POLICIES (continued)
|
Earnings
per share
Basic
per share information is computed using the weighted average number of common shares outstanding during the period. Diluted per
share information is calculated using the treasury stock method, which assumes that any proceeds from the exercise of “in-the-money”
stock options plus the unamortized share-based compensation expense amounts, would be used to purchase common shares at the average
market price during the period. No adjustment to basic earnings per share is made if the result of these calculations is anti-dilutive.
Impairment
Impairment
of financial assets
Financial
assets are assessed at each reporting date to determine whether there is any objective evidence that they are impaired. A financial
asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated
future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortized cost is calculated as
the difference between its carrying amount and the present value of the estimated future cash flows, discounted at the financial
asset’s original effective interest rate.
Significant
financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in
groups that share similar credit risk characteristics. Impairment losses are recognized in profit or loss. An impairment loss
is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized.
|
|
4)
|
NEW
ACCOUNTING STANDARDS AND RECENT PRONOUNCEMENTS
|
Effective
for annual periods beginning on or after January 1, 2018:
|
|
•
|
IFRS
9, Financial Instruments
|
The
Company has not early adopted the new standard and does not expect the impact of IFRS 9 on the Company’s financial statements
to be material.
On
April 27, 2016, the Company entered into a non-binding letter of intent with Kicker Power Corp. (“Kicker”), a private
corporation continued under the laws of British Columbia, whereby the Company and Kicker will complete a business combination
(the “Transaction”) and the Company will acquire all of the issued and outstanding shares of Kicker in exchange for
common shares of Newton such that the existing shareholders of Newton will hold at least 25% of the outstanding shares of the
resulting issuer.
Pursuant
to the Letter of Intent, the Company advanced $400,411 to Kicker (the “Loan”). The Loan bears a simple interest rate
of 5% per annum for an 18 month term and the Loan together with any accrued interest will be due and payable in full at the end
of the term. The loan was subsequently reduced by an amount of $15,733 paid by Kicker on behalf of the Company for legal expenses.
The
Loan may be repaid in whole or in part by Kicker at any time and is secured by a general security agreement over all of the assets
of Kicker. The Loan is ranked as the first charge over any and all of the indebtedness of Kicker. At the time, the Transaction
was a Non-Arm’s Length Transaction pursuant to the policies of the NEX board of the TSX, as Merv Chia, Jimmy Chow, Lori Stewart
and Fram Moos were/are directors, officers and shareholders of Newton and/or were/are directors, officers or shareholders of Kicker.
NEWTON
ENERGY CORPORATION
Notes
to the Financial Statements
For
the years ended December 31, 2017 and 2016
(Expressed in Canadian dollars)
|
|
5)
|
LOAN
RECEIVABLE (continued)
|
As
at December 31, 2016 the total amount owing from Kicker was $397,763 (including accrued interest of $13,085).
During
the December 31, 2017 year, interest accrued to a total of $13,366. During the year Kicker made principal and interest payments
totaling $61,975 to Newton.
On
October 2, 2017, the Company terminated its non-binding letter of intent with Kicker and entered into a debt settlement agreement
pursuant to which Kicker agreed to issue 4,968,789 common shares in the capital of Kicker valued at $0.070269 per common share
to settle the outstanding debt of $349,154.
See
note 12.
|
|
6)
|
ACCOUNTS
PAYABLE AND ACCRUED LIABILITIES
|
Accounts
payable and accrued liabilities are comprised of the following:
|
|
|
December 31,
2017
|
|
|
December 31,
2016
|
|
|
Accounts payable
|
|
|
12,550
|
|
|
|
30,153
|
|
|
Payroll liabilities
|
|
|
-
|
|
|
|
8,721
|
|
|
Accrued liabilities
|
|
|
20,003
|
|
|
|
13,600
|
|
|
|
|
|
32,553
|
|
|
|
52,474
|
|
|
|
7)
|
RELATED
PARTY TRANSACTIONS
Compensation of key management personnel
|
The
remuneration of directors and other members of key management personnel during the years ended December 31, 2017 and 2016 were
as follows:
|
|
|
2017
|
|
|
2016
|
|
|
|
|
$
|
|
|
$
|
|
|
Directors fees
|
|
|
6,500
|
|
|
|
6,000
|
|
|
Legal fees
|
|
|
31,737
|
|
|
|
33,828
|
|
|
Consultants
|
|
|
33,000
|
|
|
|
34,000
|
|
|
Salaries and benefits
|
|
|
21,480
|
|
|
|
68,356
|
|
|
Total management compensation
|
|
|
92,717
|
|
|
|
142,184
|
|
All
transactions with related parties have occurred in the normal course of operations and management represents that they have occurred
on a basis consistent with those involving unrelated parties, and accordingly that they are measured at fair value.
Included
in salaries and benefits is a $10,000 (2016 - $nil) settlement fee paid to the former Chief Executive Officer of the Company as
at December 31, 2017.
Amounts
due to related parties are unsecured, non-interest bearing and due on demand. Accounts payable and accrued liabilities at December
31, 2017 included $nil (December 31, 2016: $14,255), which were due to officers, director and private companies controlled by
directors and officers of the Company.
NEWTON
ENERGY CORPORATION
Notes
to the Financial Statements
For
the years ended December 31, 2017 and 2016
(Expressed in Canadian dollars)
|
|
a)
|
The
authorized share capital of the Company consists of an unlimited number of common shares.
|
In
November 2017, the Company completed a non-brokered private placement comprised of 33,333,333 common shares at a purchase price
of $0.015 per common share for gross proceeds of $500,000. The Company paid finder’s fees of $4,029 cash. Further cash share
issue costs of $13,178 were also paid.
On
December 7, 2017 the Company consolidated the share capital of the Company on a basis of 20 pre-consolidation common shares for
one (1) post-consolidation common share.
|
|
b)
|
Share-based
compensation and share purchase options
|
Option
pricing models require the input of highly subjective assumptions, particularly as to the expected price volatility of the shares
and the expected life of the option. Changes in these assumptions can materially affect the fair value estimate and therefore
it is management’s view that the existing models do not necessarily provide a single reliable measure of the fair value
of the Company’s stock option grants and warrant issuances.
The
continuity of stock options is as follows:
|
|
|
2017
|
|
|
2016
|
|
|
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise Price
|
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise Price
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
$
|
|
|
Balance, beginning of the year
|
|
|
99,400
|
|
|
|
1.39
|
|
|
|
103,400
|
|
|
|
1.40
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Expired
|
|
|
(21,900
|
)
|
|
|
2.75
|
|
|
|
-
|
|
|
|
-
|
|
|
Cancelled
|
|
|
(40,000
|
)
|
|
|
1.00
|
|
|
|
4,000
|
|
|
|
1.60
|
|
|
Balance, end of the year
|
|
|
37,500
|
|
|
|
1.00
|
|
|
|
99,400
|
|
|
|
1.39
|
|
The
following stock options were outstanding and exercisable as at December 31, 2017:
|
Expiry Date
|
|
Exercise
Price
|
|
|
Number of
Options
|
|
|
Remaining
Contractual
Life (Years)
|
|
|
May 4, 2020
|
|
$
|
1.00
|
|
|
|
10,000
|
|
|
|
2.34
|
|
|
May 20, 2020
|
|
$
|
1.00
|
|
|
|
27,500
|
|
|
|
2.39
|
|
|
Total
|
|
|
|
|
|
|
37,500
|
|
|
|
|
|
|
Weighted average years to expiry
|
|
|
|
|
|
|
|
|
|
|
2.37
|
|
See
note 12 for options issued subsequent to the year.
NEWTON
ENERGY CORPORATION
Notes
to the Financial Statements
For
the years ended December 31, 2017 and 2016
(Expressed in Canadian dollars)
|
|
8)
|
SHARE
CAPITAL (continued)
|
|
|
c)
|
Share
purchase warrants
|
The
continuity of share purchase warrants is as follows:
|
|
|
2017
|
|
|
2016
|
|
|
|
|
Number of
Warrants
|
|
|
Weighted
Average
Exercise Price
|
|
|
Number of
Warrants
|
|
|
Weighted
Average
Exercise Price
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
$
|
|
|
Balance, beginning of the year
|
|
|
445,992
|
|
|
|
1.56
|
|
|
|
445,992
|
|
|
|
1.56
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Expired/cancelled
|
|
|
(195,000
|
)
|
|
|
1.00
|
|
|
|
-
|
|
|
|
-
|
|
|
Balance, end of the year
|
|
|
250,992
|
|
|
|
2.00
|
|
|
|
445,992
|
|
|
|
1.56
|
|
|
Weighted average years to expiry
|
|
|
|
|
|
|
0.75
|
|
|
|
|
|
|
|
1.35
|
|
The
following warrants were outstanding as at December 31, 2017:
|
Expiry Date
|
|
Exercise
Price
|
|
|
Number
of Warrants
|
|
|
Remaining
Contractual
Life (Years)
|
|
|
September 30, 2018
|
|
$
|
2.00
|
|
|
|
250,992
|
|
|
|
0.75
|
|
|
Total
|
|
|
|
|
|
|
250,992
|
|
|
|
|
|
|
Weighted average years to expiry
|
|
|
|
|
|
|
|
|
|
|
0.75
|
|
NEWTON
ENERGY CORPORATION
Notes
to the Financial Statements
For
the years ended December 31, 2017 and 2016
(Expressed in Canadian dollars)
|
|
9)
|
FINANCIAL
INSTRUMENT RISKS
|
The
Company’s financial instruments are exposed to the following risks:
Credit
Risk
Credit
risk is the risk of potential loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligations.
The Company’s credit risk is primarily attributable to its liquid financial assets including cash and cash equivalents and accounts
receivable. The carrying value of these financial assets represent the maximum exposure to credit risk.
The
Company limits the exposure to credit risk by only investing its cash and cash equivalents with high-credit quality financial
institutions in business and savings accounts, which are available on demand by the Company.
Foreign
currency exchange rate risk
Foreign
currency exchange rate risk is the risk that the fair value of financial instruments or future cash flows will fluctuate as a
result of changes in foreign exchange rates.
The
Company’s functional currency is the Canadian dollar and all major transactions are transacted in Canadian dollars. Management
believes the foreign exchange risk derived from currency conversions is minimal.
Liquidity
Risk
Liquidity
risk is the risk that the Company will not be able to pay financial instrument liabilities as they come due. The Company’s
only liquidity risk from financial instruments is its need to meet accounts payable and accrued liabilities and amounts due to
related parties. The Company did maintain sufficient cash balances to meet these needs at December 31, 2017.
Interest
Rate Risk
The
Company is exposed to interest rate risk on its cash. The majority of these deposits have been in discounted instruments with
pre-determined fixed yields. Interest rate movements will affect the fair value of these instruments so the Company manages maturity
dates of these instruments to match cash flow needs, enabling realization at no loss in almost all cases.
Fair
Value of Financial Instruments
The
fair value of the Company’s financial assets and liabilities approximates the carrying amount. Financial instruments measured
at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the
inputs used to estimate the fair values. The three levels of the fair value hierarchy are:
|
|
•
|
Level
1 – Unadjusted quoted prices in active markets for identical assets or liabilities;
|
|
|
|
|
|
|
•
|
Level
2 – Inputs other than quoted prices that are observable for the asset or liability
either directly or indirectly; and
|
|
|
|
|
|
|
•
|
Level
3 – Inputs that are not based on observable market data.
|
NEWTON
ENERGY CORPORATION
Notes
to the Financial Statements
For
the years ended December 31, 2017 and 2016
(Expressed in Canadian dollars)
|
|
9)
|
FINANCIAL
INSTRUMENT RISKS (continued)
|
The
fair value classification of the Company’s financial instruments as at December 31, 2017 and 2016 are as follows:
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
Fair
Value
Level
|
|
|
Fair value
through
profit or
loss
|
|
|
Loans and
receivables and
other financial
liabilities at
amortized cost
|
|
|
Fair value
through
profit or
loss
|
|
|
Loans and
receivables and
other financial
liabilities at
amortized cost
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
1
|
|
|
|
401,558
|
|
|
|
-
|
|
|
|
13,004
|
|
|
|
-
|
|
|
Accounts receivable
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
401,558
|
|
|
|
-
|
|
|
|
13,004
|
|
|
|
-
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
|
|
-
|
|
|
|
32,553
|
|
|
|
-
|
|
|
|
52,474
|
|
|
Convertible debenture
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
32,553
|
|
|
|
-
|
|
|
|
52,474
|
|
During
the years ended December 31, 2017 and 2016, there were no transfers between level 1, level 2 and level 3 classified assets and
liabilities.
The
Corporation manages its capital structure and makes adjustments to it, based on the funds available to the Corporation in order
to maintain the Corporation in good standing with the various regulatory authorities. The Board of Directors does not establish
quantitative return on capital criteria for management, but rather relies on the expertise of the Corporation’s management to
sustain future development of the Corporation. The Corporation has no debt and is not subject to externally imposed capital requirements.
There were no changes in the Corporation’s management of capital during the year ended December 31, 2017.
The
Corporation may make adjustments to its capital structure in light of changes in economic and market conditions which may include
adjusting capital spending to manage projected financial resources, issuing new shares through public offering or private placement,
and/or completing a business combination.
As
at December 31, 2017, the Corporation has a total capital of $380,492 (2016 - $366,162).
A
reconciliation of income taxes at statutory rates is as follows:
|
|
|
2017
|
|
|
2016
|
|
|
|
|
$
|
|
|
$
|
|
|
Net income (loss) for the year before tax
|
|
|
(468,463
|
)
|
|
|
(209,812
|
)
|
|
Expected income tax expense (recovery)
|
|
|
(121,800
|
)
|
|
|
(54,551
|
)
|
|
Net adjustment for non-tax items
|
|
|
89,316
|
|
|
|
(519
|
)
|
|
Unrecognized benefit of current non-capital loss
|
|
|
32,484
|
|
|
|
55,070
|
|
|
Total income tax expense (recovery)
|
|
|
-
|
|
|
|
-
|
|
NEWTON
ENERGY CORPORATION
Notes
to the Financial Statements
For
the years ended December 31, 2017 and 2016
(Expressed in Canadian dollars)
|
|
11)
|
INCOME
TAXES (continued)
|
Deductible
temporary differences, unused tax losses and unused tax credits for which no deferred tax assets/ (liabilities) have been recognized
are attributable to the following:
|
|
|
2017
|
|
|
2016
|
|
|
|
|
$
|
|
$
|
|
|
Exploration and evaluation carrying amounts in excess of tax pools
|
|
|
-
|
|
|
|
-
|
|
|
Non-capital loss carryforwards
|
|
|
4,064,000
|
|
|
|
3,939,000
|
|
|
Capital loss carryforwards
|
|
|
3,250,000
|
|
|
|
3250,000
|
|
|
Capital and share issue costs
|
|
|
26,000
|
|
|
|
14,000
|
|
|
|
|
|
7,340,000
|
|
|
|
7,203,000
|
|
As
at December 31, 2017, the Company has Canadian capital and non-capital losses carried forward of approximately $7,663,000 (2016
– $7,189,000). The Company has Canadian capital losses of $3.2 million to reduce future capital gains. These losses are
available to be utilized as deductions against future year’s Canadian taxable income from Canadian operations and capital
gains. Canadian non-capital losses, if not utilized will expire as follows:
|
|
|
|
$
|
|
|
2025
|
|
|
|
134,000
|
|
|
2026
|
|
|
|
141,000
|
|
|
2027
|
|
|
|
342,000
|
|
|
2028
|
|
|
|
202,000
|
|
|
2029
|
|
|
|
541,000
|
|
|
2030
|
|
|
|
454,000
|
|
|
2031
|
|
|
|
329,000
|
|
|
2032
|
|
|
|
603,000
|
|
|
2033
|
|
|
|
296,000
|
|
|
2034
|
|
|
|
434,000
|
|
|
2035
|
|
|
|
251,000
|
|
|
2036
|
|
|
|
212,000
|
|
|
2037
|
|
|
|
125,000
|
|
|
|
|
|
|
4,064,000
|
|
On
January 4, 2018, the Company granted 195,621 stock options to directors, officer and consultants at an exercise price of $0.25
per share for a term of five years.
Subsequent
to December 31, 2017 year-end, Kicker commenced its wind-up and dissolution. The Company does not expect to recover its investment.
Accordingly, the Company wrote it off for accounting purposes as at December 31, 2017, resulting in a loss of $349,154.
NEWTON
ENERGY CORPORATION
INTERIM
FINANCIAL STATEMENTS
For
the Six Months Ended June 30, 2020 and 2019
(Unaudited
– Expressed in Canadian Dollars)
NEWTON ENERGY CORPORATION
Interim Statements of Financial Position
As at June 30, 2020
(Unaudited – Expressed in Canadian Dollars)
|
|
|
June 30, 2020
|
|
|
December 31, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
472,456
|
|
|
|
533,576
|
|
|
GST receivable
|
|
|
1,379
|
|
|
|
2,260
|
|
|
Prepaid expenses and deposits
|
|
|
5,426
|
|
|
|
6,483
|
|
|
Total Assets
|
|
|
479,261
|
|
|
|
542,319
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
21,676
|
|
|
|
25,101
|
|
|
Total Liabilities
|
|
|
21,676
|
|
|
|
25,101
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
6,414,127
|
|
|
|
6,414,127
|
|
|
Reserves
|
|
|
989,124
|
|
|
|
989,124
|
|
|
Deficit
|
|
|
(6,945,666
|
)
|
|
|
(6,886,033
|
)
|
|
Total Equity
|
|
|
457,585
|
|
|
|
517,218
|
|
|
Total Liabilities and Equity
|
|
|
479,261
|
|
|
|
542,319
|
|
See accompanying notes to the financial statements
Nature and continuance of operations (Note 1)
Basis
of Preparation (Note 2)
Approved by the Board of Directors and authorized for issue
on August 27, 2020.
|
“Gino DeMichele”
|
|
“Fram Moos”
|
|
|
|
|
|
Gino DeMichele, Director
|
|
Fram Moos, Director
|
NEWTON ENERGY CORPORATION
Interim Statements of Loss and Comprehensive Loss
For the six months period ended of June 30, 2020
and 2019
(Unaudited – Expressed in Canadian Dollars)
|
|
|
For the three
months ended
June 30, 2020
|
|
|
For the three
months ended
June 30, 2019
|
|
|
For the six
months ended
June 30, 2020
|
|
|
For the six
months ended
June 30, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounting and legal
|
|
|
8,894
|
|
|
|
6,992
|
|
|
|
13,718
|
|
|
|
8,681
|
|
|
Advertising and promotion
|
|
|
-
|
|
|
|
165
|
|
|
|
-
|
|
|
|
1,855
|
|
|
Consulting and directors’ fees
|
|
|
14,000
|
|
|
|
12,500
|
|
|
|
26,000
|
|
|
|
18,500
|
|
|
Insurance
|
|
|
2,035
|
|
|
|
1,850
|
|
|
|
3,947
|
|
|
|
3,592
|
|
|
Office and miscellaneous
|
|
|
4,060
|
|
|
|
3,477
|
|
|
|
8,293
|
|
|
|
4,045
|
|
|
Share-based payments
|
|
|
-
|
|
|
|
80,160
|
|
|
|
-
|
|
|
|
80,160
|
|
|
Travel and business development
|
|
|
-
|
|
|
|
7,344
|
|
|
|
-
|
|
|
|
16,145
|
|
|
Regulatory and filing fees
|
|
|
4,886
|
|
|
|
4,944
|
|
|
|
7,675
|
|
|
|
8,230
|
|
|
Loss before other item
|
|
|
(33,875
|
)
|
|
|
(117,432
|
)
|
|
|
(59,633
|
)
|
|
|
(141,208
|
)
|
|
Interest income
|
|
|
-
|
|
|
|
4
|
|
|
|
-
|
|
|
|
4
|
|
|
Net and comprehensive loss
for the period
|
|
|
(33,875
|
)
|
|
|
(117,428
|
)
|
|
|
(59,633
|
)
|
|
|
(141,204
|
)
|
|
Weighted average of common shares
outstanding
|
|
|
6,361,047
|
|
|
|
6,361,047
|
|
|
|
6,361,047
|
|
|
|
6,361,047
|
|
|
Basic and diluted loss per share
|
|
|
(0.01
|
)
|
|
|
(0.02
|
)
|
|
|
(0.01
|
)
|
|
|
(0.02
|
)
|
See accompanying notes to the financial statements
NEWTON ENERGY CORPORATION
Interim Statements of Changes in Equity
(Unaudited – Expressed in Canadian Dollars)
|
|
|
Number
of
Shares
|
|
|
Share
Capital
|
|
|
Reserves
|
|
|
Deficit
|
|
|
Total
Equity
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Balance at January 1, 2019
|
|
|
6,361,047
|
|
|
|
6,414,127
|
|
|
|
902,030
|
|
|
|
(6,646,290
|
)
|
|
|
669,867
|
|
|
Comprehensive loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(141,204
|
)
|
|
|
(141,204
|
)
|
|
Share-based payments
|
|
|
-
|
|
|
|
-
|
|
|
|
80,160
|
|
|
|
-
|
|
|
|
80,160
|
|
|
Balance at June 30, 2019
|
|
|
6,361,047
|
|
|
|
6,414,127
|
|
|
|
982,190
|
|
|
|
(6,787,494
|
)
|
|
|
608,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2020
|
|
|
6,361,047
|
|
|
|
6,414,127
|
|
|
|
989,124
|
|
|
|
(6,886,033
|
)
|
|
|
517,218
|
|
|
Comprehensive loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(59,633
|
)
|
|
|
(59,633
|
)
|
|
Balance at June 30, 2020
|
|
|
6,361,047
|
|
|
|
6,414,127
|
|
|
|
989,124
|
|
|
|
(6,945,666
|
)
|
|
|
457,585
|
|
See accompanying notes to the financial statements
NEWTON ENERGY CORPORATION
Interim Statements of Cash Flows
(Unaudited – Expressed in Canadian Dollars)
|
|
|
For the six
months ended
June 30, 2020
|
|
|
For the six
months ended
June 30, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
Cash provided by (used for)
|
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
|
(59,633
|
)
|
|
|
(141,204
|
)
|
|
Items not involving the use of cash:
|
|
|
|
|
|
|
|
|
|
Share-based payments
|
|
|
-
|
|
|
|
80,160
|
|
|
|
|
|
(59,633
|
)
|
|
|
(61,044
|
)
|
|
Change in non-cash working capital:
|
|
|
|
|
|
|
|
|
|
GST receivable
|
|
|
881
|
|
|
|
2,618
|
|
|
Prepaid expenses and deposits
|
|
|
1,057
|
|
|
|
(2,808
|
)
|
|
Accounts payable and accrued liabilities
|
|
|
(3,425
|
)
|
|
|
(15,160
|
)
|
|
|
|
|
(61,120
|
)
|
|
|
(76,394
|
)
|
|
Decrease in cash
|
|
|
(61,120
|
)
|
|
|
(76,394
|
)
|
|
Cash, beginning of the period
|
|
|
533,576
|
|
|
|
692,858
|
|
|
Cash, end of the period
|
|
|
472,456
|
|
|
|
616,464
|
|
|
Supplementary cash flow information
|
|
|
|
|
|
|
|
|
|
Interest received
|
|
|
-
|
|
|
|
4
|
|
|
See accompanying notes to financial statements
|
|
|
|
|
|
|
|
|
NEWTON ENERGY CORPORATION
Notes to the Interim Financial Statements
As at and for the six months ended June 30, 2020 and
2019
(Unaudited – Expressed in Canadian Dollars)
|
|
1.
|
NATURE AND CONTINUANCE OF OPERATIONS
|
Newton Energy Corporation (“Newton”,
the “Corporation” or the “Company”) is domiciled and incorporated in Canada. The Corporation’s
financial year-end is December 31. The address of the Corporation’s registered office is 1600, 333 - 7 Avenue SW, Calgary,
Alberta, Canada T2P 2Z1. Newton trades on the NEX of the TSX Venture Exchange under the symbol “NTN”.
The Corporation is currently
inactive and is looking for a suitable acquisition to begin operations. The Company is seeking acquisitions or opportunities and
is currently evaluating acquisition targets. To date, the Corporation has not generated revenues from operations.
These interim financial statements
were approved and authorized for issuance by the Board of Directors on August 27, 2020.
These interim financial statements have been prepared
in accordance with International Financial Reporting Standards (“IFRS”) applicable to the preparation of interim financial
statements, including International Accounting Standards (“IAS”) 34, Interim Financial Reporting. These interim financial
statements do not include all of the information required for full annual financial statements and should be read in conjunction
with the Corporation’s audited annual financial statements for the year ended December 31, 2019, which have been prepared
in accordance with IFRS.
These interim financial statements
were prepared on the basis that the Corporation will continue to meet its commitments, continue operations and realize its assets
and discharge its liabilities in the normal course of business for the foreseeable future. Newton has no operating revenues, working
capital of $457,585 as at June 30, 2020, a net loss of $59,633 and negative cash flow from operating activities of $61,120 for
the six month period ended June 30, 2020.
The Corporation’s continuing
operations as intended is dependent upon its ability to raise sufficient funds in order to finance any acquisition and administrative
expenses. The Corporation has no assurance that such financing will be available or be available on favorable terms. Factors that
could affect the availability of financing include the Corporation’s performance (as measured by numerous factors including
the progress and results of its projects), the state of international debt and equity markets, investor perceptions and expectations
and the global financial and energy markets. If successful, the Corporation would obtain additional financing through, but not
limited to, the issuance of additional equity.
|
|
3.
|
SIGNIFICANT ACCOUNTING POLICIES
|
The significant accounting
policies that have been used in the preparation of these interim financial statements are summarized in the audited financial
statements of the Corporation for the year ended December 31, 2019. These interim financial statements should be read in conjunction
with the audited financial statements for the year ended December 31, 2019.
NEWTON ENERGY CORPORATION
Notes to the Interim Financial Statements
As at and for the six months ended June 30, 2020 and
2019
(Unaudited – Expressed in Canadian Dollars)
|
|
3.
|
SIGNIFICANT ACCOUNTING POLICIES, continued
|
|
|
a)
|
Significant accounting judgments, estimates and assumptions
|
The preparation of the Corporation’s
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 and contingent liabilities at the date
of the interim financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and assumptions
are continuously evaluated and are based on management’s experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates. Revisions
to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. The
most significant judgement applying to the Corporation’s financial statements is the assessment of the Corporation’s
ability to continue as a going concern and whether there are events or conditions that may give rise to significant uncertainty.
|
|
b)
|
New accounting standards and recent pronouncements
|
The Company does not expect
that the changes to IFRS that are effective as of January 1, 2020 will have a significant impact on the Company’s results
of operations of financial positions.
Unlimited number of common voting shares Unlimited
number of preferred shares issuable in series
|
|
b)
|
Issued and outstanding Common Shares
|
|
|
|
Number of
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Issued and outstanding as at December 31, 2018
|
|
|
6,361,047
|
|
|
$
|
6,414,127
|
|
|
Issued and outstanding as at June 30, 2020 and
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
6,361,047
|
|
|
$
|
6,414,127
|
|
|
|
c)
|
Share-based
Compensation
|
|
|
|
$
|
|
|
Reserves
|
|
|
|
|
Balance at December 31, 2019
|
|
|
989,124
|
|
|
Options granted to directors, officers and consultants during the period
|
|
|
-
|
|
|
Balance at June 30, 2020
|
|
|
989,124
|
|
NEWTON ENERGY CORPORATION
Notes to the Interim Financial Statements
As at and for the six months ended June 30, 2020 and
2019
(Unaudited – Expressed in Canadian Dollars)
|
|
4.
|
SHARE CAPITAL, continued
|
The Corporation’s
Stock Option Plan, approved on September 7, 2016 at a Special Annual General Meeting of shareholders, provides for issuance of
stock options to directors, officers, employees and consultants. The options can be granted for a maximum length of five years
and vesting terms are at the discretion of the Board of Directors.
The continuity of stock options
is as follows:
|
|
|
2020
|
|
|
2019
|
|
|
|
|
Number
of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number
of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
$
|
|
|
Balance, beginning of
the year
|
|
|
633,121
|
|
|
|
0.28
|
|
|
|
233,131
|
|
|
|
0.37
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
400,000
|
|
|
|
0.22
|
|
|
Expired
|
|
|
37,500
|
|
|
|
1.00
|
|
|
|
|
|
|
|
|
|
|
Balance,
end of the year
|
|
|
595,621
|
|
|
|
0.23
|
|
|
|
633,121
|
|
|
|
0.28
|
|
As at June
30, 2020, the Corporation had stock options issued to directors, officers, employee and consultants of the Corporation outstanding
as follows:
|
|
|
|
Number of Options
|
|
|
Exercise Price
|
|
|
Expiry Date
|
|
January 4, 2018
|
|
|
|
195,621
|
|
|
$
|
0.25
|
|
|
January 4, 2023
|
|
May 10, 2019
|
|
|
|
400,000
|
|
|
$
|
0.22
|
|
|
May 10, 2024
|
|
Total
|
|
|
|
595,621
|
|
|
|
|
|
|
|
|
|
5.
|
RELATED PARTY TRANSACTIONS
|
Remuneration of key management
(includes the Corporation’s directors and executive team):
|
Expense by nature
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
Directors’ fees
|
|
|
2,000
|
|
|
|
2,500
|
|
|
Legal fees
|
|
|
11,618
|
|
|
|
4,681
|
|
|
Consulting fees
|
|
|
24,000
|
|
|
|
16,000
|
|
|
Total
|
|
|
37,618
|
|
|
|
23,181
|
|
All transactions with related
parties have occurred in the normal course of operations and are measured at their fair value as determined by management. Other
than as described above, the Corporation has not acquired any assets or services or provided any assets or services in any transaction
with any non-arm’s length party within the six month periods ended June 30, 2020 and 2019.
NEWTON ENERGY CORPORATION
Notes to the Interim Financial Statements
As at and for the six months ended June 30, 2020 and
2019
(Unaudited – Expressed in Canadian Dollars)
Financial instruments consist
of recorded amounts of cash and trade and other payables which will result in future cash outlays. In management’s opinion,
carrying amounts approximate fair values due to the short-term maturities of these items.
The Corporation classifies the
fair value of these financial instruments accordingly to the following hierarchy based on the amount of observable inputs used
to value the instrument.
Level 1 – Quoted prices
are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which
transactions occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Cash is classified under
Level 1.
Level 2 – Pricing inputs
are other than quoted prices in active markets included in Level 1. Prices in Level 2 are either directly (i.e. as prices) or indirectly
(i.e. derived from prices) as of the reporting date. The Corporation does not have any financial instruments classified under Level
2.
Level 3 – Valuations in
the level are those with inputs for the asset or liability that are not based on observable market data. The Corporation does not
have any financial instruments under Level 3.
The Corporation has exposure to the following risks:
Management believes that the
Corporation is not exposed to any significant credit risk on its financial assets. Cash includes money market accounts for which
management believes the risk of loss to be remote. As at June 30, 2020 and December 31, 2019, the Corporation had no financial
assets that were either past due or impaired.
The Corporation manages the risk
of not meeting its financial obligations as they come due through management of its capital, annual budgeting of its expenditures
and cash flows, and cash flow forecasting.
The Corporation has cash balances
and non-interest bearing obligations. The Corporation manages its exposure to interest rate risk through fixed rate investments
with no early withdrawal penalties. It is the Corporation’s policy to invest its cash reserves in low risk investments in
either short term deposits in primary Canadian banking institutions or overnight money market accounts. The Corporation monitors
interest rate markets to ensure that appropriate steps can be taken considering interest rate volatility.
|
|
ii)
|
Foreign currency risk
|
The Corporation’s functional and reporting
currency is the Canadian dollar as expenditures and costs are made in Canada. The Corporation does not hedge foreign currency transactions.
NEWTON ENERGY CORPORATION
Notes to the Interim Financial Statements
As at and for the six months ended June 30, 2020 and
2019
(Unaudited – Expressed in Canadian Dollars)
The Corporation manages its
capital structure and makes adjustments to it, based on the funds available to the Corporation in order to support any acquisition
or merger with potential candidates and to maintain the Corporation in good standing with the various regulatory authorities. The
Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise
of the Corporation’s management to sustain future development of the Corporation. The Corporation has no debt and is not subject
to externally imposed capital requirements. There were no changes in the Corporation’s management of capital during the period
ended June 30, 2020.
The Corporation may make adjustments
to its capital structure in light of changes in economic and market conditions which may include adjusting capital spending to
manage projected financial resources, issuing new shares through public offering or private placement, and/or completing a business
combination.
As at June 30, 2020, the Corporation
has total capital of $457,585 (December 31, 2019, $517,218).
Basic loss per share is calculated
using the weighted average number of shares outstanding during the period. Diluted loss per share is calculated to reflect the
dilutive effect of stock options outstanding. Loss per share is calculated as follows:
|
|
|
|
Weighted average
number of shares
|
|
|
Net loss
|
|
|
Loss per share –
basic and diluted
|
|
|
Three months ended June
30, 2020
|
|
|
|
6,361,047
|
|
|
|
(33,875
|
)
|
|
|
(0.01
|
)
|
|
Three months ended June
30, 2019
|
|
|
|
6,361,047
|
|
|
|
(117,428
|
)
|
|
|
(0.02
|
)
|
|
Six months ended June
30, 2020
|
|
|
|
6,361,047
|
|
|
|
(59,633
|
)
|
|
|
(0.01
|
)
|
|
Six months ended June
30, 2019
|
|
|
|
6,361,047
|
|
|
|
(141,204
|
)
|
|
|
(0.02
|
)
|
Outstanding
options were anti-dilutive instruments for the six months ended
June 30, 2020 and 2019 because the Corporation realized a net loss.
|
|
9.
|
AGREEMENT WITH FIELD TRIP PSYCHEDELICS INC.
|
On August
21, 2020, Newton entered into a definitive agreement dated August 21, 2020 with Field Trip Psychedelics Inc. (“Field Trip”),
a North American mental health and wellness company with ground-breaking work in psychedelics and psychedelic therapies, to complete
a going-public transaction in Canada for Field Trip and the listing for trading of the securities of the resulting issuer on the
Canadian Securities Exchange.
SCHEDULE “B”
FINANCIAL STATEMENTS OF FIELD TRIP
(See attached)
Field Trip Psychedelics Inc.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM APRIL 2, 2019 (DATE
OF INCORPORATION) TO
MARCH 31, 2020
(audited, expressed in Canadian Dollars,
unless otherwise noted)
Independent Auditor’s Report
To the Shareholders of Field Trip Psychedelics Inc.:
Opinion
We have audited the consolidated financial
statements of Field Trip Psychedelics Inc. and its subsidiaries (the “Group”), which comprise the consolidated statement
of financial position as at March 31, 2020, and the consolidated statements of loss and other comprehensive loss, changes in equity
and cash flows for the period from April 2, 2019 (date of incorporation) to March 31, 2020, and notes to the consolidated financial
statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated
financial statements present fairly, in all material respects, the consolidated financial position of the Group as at March 31,
2020, and its consolidated financial performance and its consolidated cash flows for the period from April 2, 2019 to March 31,
2020 in accordance with International Financial Reporting Standards.
Basis for Opinion
We conducted our audit in accordance with
Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group
in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada,
and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 2 in the consolidated
financial statements, which indicates that the Group incurred net and net comprehensive losses of $2,678,365 during the period
ended March 31, 2020. As stated in Note 2, this event or condition as set forth in Note 2, indicates that a material uncertainty
exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not modified
in respect of this matter.
Responsibilities of Management and Those Charged with Governance
for the Consolidated Financial Statements
Management is responsible for the preparation
and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards,
and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial
statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate
the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible
for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated
Financial Statements
Our objectives are to obtain reasonable
assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
As part of an audit in accordance with
Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout
the audit. We also:
|
|
•
|
Identify
and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide
a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
|
|
|
|
|
|
|
•
|
Obtain
an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
|
|
|
•
|
Evaluate
the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by
management.
|
|
|
|
|
|
|
•
|
Conclude
on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability
to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events
or conditions may cause the Group to cease to continue as a going concern.
|
|
|
|
|
|
|
•
|
Evaluate
the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether
the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
|
|
|
|
|
|
|
•
|
Obtain
sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group
to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance
of the group audit. We remain solely responsible for our audit opinion.
|
We communicate with those charged with
governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including
any significant deficiencies in internal control that we identify during our audit.
|
|
|
|
Waterloo, Ontario
|
Chartered Professional Accountants
|
|
|
|
|
August 7, 2020
|
Licensed Public Accountants
|
FIELD TRIP PSYCHEDELICS INC.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
|
|
|
|
|
|
As at
|
|
|
|
|
|
|
|
March 31, 2020
|
|
|
(Expressed in Canadian Dollars)
|
|
Notes
|
|
|
$
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
9,590,758
|
|
|
Restricted cash
|
|
4
|
|
|
|
100,000
|
|
|
Accounts receivable
|
|
5
|
|
|
|
203,112
|
|
|
Other assets
|
|
6
|
|
|
|
133,916
|
|
|
TOTAL CURRENT ASSETS
|
|
|
|
|
|
10,027,786
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
7
|
|
|
|
575,446
|
|
|
Intangible assets
|
|
8
|
|
|
|
124,980
|
|
|
Right-of-use assets
|
|
7
|
|
|
|
1,632,661
|
|
|
Other non-current assets
|
|
6
|
|
|
|
180,222
|
|
|
TOTAL NON-CURRENT ASSETS
|
|
|
|
|
|
2,513,309
|
|
|
TOTAL ASSETS
|
|
|
|
|
|
12,541,095
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
CURRENT
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
|
577,878
|
|
|
Deferred revenue
|
|
|
|
|
|
2,000
|
|
|
Current portion of lease obligations
|
|
9
|
|
|
|
462,871
|
|
|
TOTAL CURRENT LIABILITIES
|
|
|
|
|
|
1,042,749
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT
|
|
|
|
|
|
|
|
|
Lease obligations
|
|
9
|
|
|
|
1,078,334
|
|
|
TOTAL LIABILITIES
|
|
|
|
|
|
2,121,083
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
Share capital
|
|
10
|
|
|
|
12,781,270
|
|
|
Share-based payments reserve
|
|
11
|
|
|
|
330,703
|
|
|
Accumulated other comprehensive loss
|
|
|
|
|
|
(49,521
|
)
|
|
Retained deficit
|
|
|
|
|
|
(2,634,096
|
)
|
|
Non-controlling interest
|
|
18
|
|
|
|
(8,344
|
)
|
|
TOTAL EQUITY
|
|
|
|
|
|
10,420,012
|
|
|
TOTAL LIABILITIES AND EQUITY
|
|
|
|
|
|
12,541,095
|
|
The accompanying Notes are an integral part of these Consolidated
Financial Statements.
Approved on behalf of the Board of Directors:
|
/s/ Joseph Del Moral
|
|
/s/ Helen Boudreau
|
|
Director
|
|
Director
|
|
Field Trip Psychedelics Inc. ▪ Consolidated Financial Statements (audited)
|
P a g e | 4
|
FIELD TRIP PSYCHEDELICS INC.
CONSOLIDATED STATEMENTS OF LOSS AND
COMPREHENSIVE LOSS
|
|
|
|
|
|
Period ended
|
|
|
|
|
|
|
|
March 31, 2020
|
|
|
(Expressed in Canadian Dollars)
|
|
Notes
|
|
|
$
|
|
|
REVENUE
|
|
|
|
|
|
|
|
|
Patient services
|
|
|
|
|
|
1,000
|
|
|
Total revenue
|
|
|
|
|
|
1,000
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
General and administration
|
|
12
|
|
|
|
(2,310,076
|
)
|
|
Occupancy costs
|
|
13
|
|
|
|
(317,476
|
)
|
|
Sales and marketing
|
|
14
|
|
|
|
(305,710
|
)
|
|
Research and development
|
|
15
|
|
|
|
(193,192
|
)
|
|
Depreciation and amortization
|
|
|
|
|
|
(146,320
|
)
|
|
Patient services
|
|
|
|
|
|
(9,403
|
)
|
|
Total operating expenses
|
|
|
|
|
|
(3,282,177
|
)
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
Finance expense
|
|
16
|
|
|
|
(19,907
|
)
|
|
Non-operating income
|
|
17
|
|
|
|
672,760
|
|
|
Net loss before income taxes
|
|
|
|
|
|
(2,628,324
|
)
|
|
Income taxes
|
|
24
|
|
|
|
-
|
|
|
Net loss
|
|
|
|
|
|
(2,628,324
|
)
|
|
Exchange loss from translation of foreign subsidiaries
|
|
|
|
|
|
(50,041
|
)
|
|
NET LOSS AND COMPREHENSIVE LOSS
|
|
|
|
|
|
(2,678,365
|
)
|
|
TOTAL COMPREHENSIVE LOSS ATTRIBUTABLE TO:
|
|
|
|
|
|
|
|
|
Shareholders of Field Trip Psychedelics Inc.
|
|
|
|
|
|
(2,670,021
|
)
|
|
Non-controlling interest
|
|
|
|
|
|
(8,344
|
)
|
|
|
|
|
|
|
|
(2,678,365
|
)
|
|
NET LOSS PER SHARE
|
|
|
|
|
|
|
|
|
Weighted average number of common shares - basic
|
|
|
|
|
|
10,373,191
|
|
|
Weighted average number of common shares - diluted
|
|
|
|
|
|
22,474,091
|
|
|
Loss per share – basic and diluted
|
|
|
|
|
|
(0.26
|
)
|
The accompanying Notes are an integral part of these Consolidated
Financial Statements.
|
Field Trip Psychedelics Inc. ▪ Consolidated Financial Statements (audited)
|
P a g e | 5
|
FIELD TRIP PSYCHEDELICS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
|
|
|
Comprehensive
|
|
|
Retained
|
|
|
Shareholders’
|
|
|
|
|
|
|
|
Share Capital
|
|
|
Payments Reserve
|
|
|
Loss
|
|
|
Deficit
|
|
|
Equity
|
|
|
|
|
Notes
|
|
|
# Shares
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Balance, April 2, 2019
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Share issuance - Class A
|
|
16
|
|
|
|
11,510,900
|
|
|
|
1,605,027
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,605,027
|
|
|
Share issuance - Class B
|
|
16
|
|
|
|
9,431,023
|
|
|
|
11,195,540
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,195,540
|
|
|
Share issuance cost
|
|
|
|
|
|
-
|
|
|
|
(19,297
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(19,297
|
)
|
|
Share-based payments
|
|
17
|
|
|
|
-
|
|
|
|
-
|
|
|
|
330,703
|
|
|
|
-
|
|
|
|
-
|
|
|
|
330,703
|
|
|
Shareholder distributions from issuance of below-market loans
|
|
23
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,596
|
)
|
|
|
(13,596
|
)
|
|
Net loss
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,628,324
|
)
|
|
|
(2,628,324
|
)
|
|
Exchange loss from translation of foreign subsidiaries
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(50,041
|
)
|
|
|
-
|
|
|
|
(50,041
|
)
|
|
Balance, March 31, 2020
|
|
|
|
|
|
20,941,923
|
|
|
|
12,781,270
|
|
|
|
330,703
|
|
|
|
(50,041
|
)
|
|
|
(2,641,920
|
)
|
|
|
10,420,012
|
|
|
Less: equity attributable to non-controlling interest holders
|
|
18
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
520
|
|
|
|
7,824
|
|
|
|
8,344
|
|
|
Equity attributable to parent
|
|
|
|
|
|
20,941,923
|
|
|
|
12,781,270
|
|
|
|
330,703
|
|
|
|
(49,521
|
)
|
|
|
(2,634,096
|
)
|
|
|
10,428,356
|
|
The accompanying Notes are an integral part of these Consolidated
Financial Statements.
|
Field Trip Psychedelics Inc. ▪ Consolidated Financial Statements (audited)
|
P a g e | 6
|
FIELD TRIP PSYCHEDELICS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
Period ended
|
|
|
|
|
|
|
|
March 31, 2020
|
|
|
(Canadian dollars in thousands)
|
|
Notes
|
|
|
$
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
(2,628,324
|
)
|
|
Items not involving current cash flows:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
146,320
|
|
|
Share-based payments
|
|
11
|
|
|
|
330,703
|
|
|
Interest expense on lease commitments
|
|
16
|
|
|
|
22,562
|
|
|
Interest income on shareholders’ loan
|
|
16
|
|
|
|
(1,586
|
)
|
|
Interest income on refundable lease deposits
|
|
16
|
|
|
|
(951
|
)
|
|
Unrealized foreign exchange loss
|
|
17
|
|
|
|
1,111
|
|
|
Wage subsidy accrual
|
|
17
|
|
|
|
(6,345
|
)
|
|
Net change in non-cash working capital
|
|
19
|
|
|
|
206,069
|
|
|
CASH USED IN OPERATING ACTIVITIES
|
|
|
|
|
|
(1,930,441
|
)
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Acquisition of property, plant and equipment
|
|
7
|
|
|
|
(589,482
|
)
|
|
Acquisition of intangible assets
|
|
8
|
|
|
|
(126,974
|
)
|
|
Repayment of lease obligation
|
|
9
|
|
|
|
(108,907
|
)
|
|
Refundable security deposit paid for right-of-use assets
|
|
|
|
|
|
(100,986
|
)
|
|
Non-refundable security deposit paid for right-of-use assets
|
|
|
|
|
|
(123,465
|
)
|
|
CASH USED IN INVESTING ACTIVITIES
|
|
|
|
|
|
(1,049,814
|
)
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds on issuance of common shares
|
|
|
|
|
|
12,732,645
|
|
|
Share issuance cost paid
|
|
10
|
|
|
|
(11,375
|
)
|
|
CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
|
|
|
12,721,270
|
|
|
Net change in cash during the period
|
|
|
|
|
|
9,741,015
|
|
|
Effect of exchange rate on changes in cash
|
|
|
|
|
|
(50,257
|
)
|
|
Cash, beginning of the period
|
|
|
|
|
|
-
|
|
|
CASH, END OF PERIOD
|
|
|
|
|
|
9,690,758
|
|
|
Represented by:
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
9,590,758
|
|
|
Restricted cash
|
|
|
|
|
|
100,000
|
|
|
CASH, END OF PERIOD
|
|
|
|
|
|
9,690,758
|
|
The accompanying Notes are an integral part of these Consolidated
Financial Statements.
|
Field Trip Psychedelics Inc. ▪ Consolidated Financial Statements (audited)
|
P a g e | 7
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Consolidated Financial Statements
For
the period ended March 31, 2020
1. NATURE OF OPERATIONS
Field Trip Psychedelics Inc. (the “Group”
or “Field Trip”) is an international organization focused on blending operational execution with strategic investment
across all aspects of the psychedelics value chain. Through its wholly owned subsidiaries Field Trip Health Inc., and Field Trip
Ventures USA Inc., “Field Trip Health” is building a network of world class clinics focused on psychedelics-assisted
therapies. Through its subsidiary Field Trip Natural Products Ltd. and Field Trip Psychedelics research division, “Field
Trip Discovery” performs research on botanical psychedelics and psychedelic-based molecules for future therapeutic application
of select mental health indications.
Field Trip Psychedelics Inc. was incorporated
under the laws of the province of Ontario, Canada as Field Trip Ventures Inc. on April 2, 2019. On October 10, 2019, the Company
amended its name to Field Trip Psychedelics Inc. The Company’s registered office is located at 30 Duncan Street, Unit 401,
Toronto, Ontario, Canada, M5V 2C3.
2. BASIS OF PREPARATION
Going Concern Assumption
At March 31, 2020, the Group had not yet
achieved profitable operations, has net and comprehensive losses of $2,678,365 since its inception, and expects to incur further
losses in the development of its business, all of which creates a material uncertainty that may cast significant doubt about the
Group’s ability to continue as a going concern. The Group’s ability to continue as a going concern is dependent upon
its ability to generate future profitable operations and/or to obtain the necessary financing to conduct its planned business,
meet its on- going levels of corporate overhead and discharge its liabilities as they come due. These financial statements have
been prepared on a going concern basis which assumes that the Group will be able to realize its assets and discharge liabilities
in the normal course of business. The Group has considered the private placement subsequent to March 31, 2020 as disclosed in Note
26 in making this assessment. Accordingly, these financial statements do not give effect to adjustments, if any that would be necessary
should the Company be unable to continue as a going concern and, therefore, be required to realize its assets and liquidate its
liabilities in other than the normal course of business and at amounts which may differ from those shown in these financial statements.
Statement of Compliance
The consolidated financial statements have
been prepared in accordance with International Financial Reporting Standards (“IFRS).
These consolidated financial statements
were approved for issue by the Board of Directors on August 7, 2020.
Basis of Presentation
These consolidated financial statements
have been prepared on a going concern basis, under the historical cost convention, except for certain financial instruments that
are measured at fair value, as detailed in the Group’s accounting policies below.
Functional Currency
The Group’s functional currency is
the Canadian dollar. Transactions undertaken in foreign currencies are translated into Canadian dollars at daily exchange rates
prevailing when the transactions occur. Monetary assets and liabilities denominated in foreign currencies are translated at period-end
exchange rates and non-monetary items are translated at historical exchange rates. Realized and unrealized exchange gains and losses
are recognized in the consolidated statements of loss and comprehensive loss.
The assets and liabilities of foreign
operations are translated into Canadian dollars using the period-end exchange rates. Income, expenses, and cash flows of foreign
operations are translated into Canadian dollars using average exchange rates. Exchange differences resulting from the translation
of foreign operations into Canadian dollars are recognized in other comprehensive (loss) income and accumulated in equity.
|
Field Trip Psychedelics Inc. ▪ Consolidated Financial Statements (audited)
|
P a g e | 8
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Consolidated Financial Statements
For the period ended March 31, 2020
2. BASIS OF PREPARATION (CONT’D)
Basis of Consolidation
These Consolidated Financial Statements
include the accounts of the Group and its subsidiaries as follows:
|
Subsidiary
|
|
Jurisdiction
|
|
Functional Currency
|
|
% Ownership
|
|
|
Field Trip Health Inc.
|
|
Ontario, Canada
|
|
Canadian Dollars
|
|
|
100
|
%
|
|
Field Trip Ventures USA Inc.
|
|
Delaware, USA
|
|
United States Dollars
|
|
|
100
|
%
|
|
Field Trip Natural Products Limited
|
|
Kingston, Jamaica
|
|
United States Dollars
|
|
|
80
|
%
|
Subsidiaries are entities controlled by
the Company. Control exists when the Company has the power, directly and indirectly, to govern the financial and operating policies
of an entity and be exposed to the variable returns from its activities. The financial statements of subsidiaries are included
in the consolidated financial statements from the date that control commences until the date the control ceases. All significant
intercompany balances and transactions have been eliminated upon consolidation.
3. SIGNIFICANT ACCOUNTING POLICIES
Cash and Restricted Cash
Cash includes current balances with four
financial institutions. Restricted cash represents cash held as collateral against Field Trip Psychedelics Inc. credit card limit.
Accounts Receivable
Accounts receivable are recognized initially
at fair value and subsequently measured at amortized cost, less any provisions for impairment. Financial assets measured at amortized
cost are assessed for impairment at the end of each reporting period. Impairment provisions are estimated using the expected credit
loss impairment model where any expected future credit losses are provided for, irrespective of whether a loss event has occurred
at the reporting date.
Estimates of expected credit losses take
into account the Group’s collection history, deterioration of collection rates during the average credit period, as well
as observable changes in and forecasts of future economic conditions that affect default risk. Where applicable, the carrying amount
of a trade receivable is reduced for any expected credit losses through the use of an allowance for doubtful accounts (“AFDA”)
provision. Changes in the AFDA provision are recognized in the statement of loss and comprehensive loss. When the Group determines
that no recovery of the amount owing is possible, the amount is deemed irrecoverable and the financial asset is written off.
Property, Plant and Equipment
Property, plant and equipment (“PP&E”)
is recorded at cost, net of accumulated depreciation and/or accumulated impairment losses.
The Group allocates the amount initially
recognized in respect of an item of PP&E to its significant components and amortizes each such part separately. Residual values,
method of depreciation and useful lives of the assets are reviewed annually or more frequently if required, and any changes in
these estimates are adjusted prospectively.
The following estimates were effective
for the period ended March 31, 2020:
|
Leasehold improvements
|
Shorter of asset life and term of lease
|
Straight-line
|
|
Furniture and fixtures
|
5 years
|
Straight-line
|
|
Medical and laboratory equipment
|
5 years
|
Straight-line
|
|
Computer equipment and software
|
3 years
|
Straight-line
|
|
Construction in progress
|
No term
|
Not amortized
|
Construction in progress is transferred
to property, plant and equipment when the assets are available for use and amortization of the assets commences at that point.
|
Field Trip Psychedelics Inc. ▪ Consolidated Financial Statements (audited)
|
P a g e | 9
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Consolidated Financial Statements
For the period ended March 31, 2020
3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Intangible Assets
Finite life intangible assets are recorded
at cost less accumulated amortization and accumulated impairment losses. Amortization is provided on a straight-line basis over
the following terms:
|
Field Trip Health website
|
4 years
|
Straight-line
|
The estimated success of applications and
useful life are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on
a prospective basis.
Indefinite intangible assets are deemed
to have no foreseeable limit over which the asset is expected to generate net cash inflows. Following initial recognition, intangible
assets with indefinite useful lives are carried at cost less any accumulated impairment losses and are tested annually for impairment,
or more frequently if events or changes in circumstances indicate that they might be impaired.
IFRS 16 Leases
IFRS 16 sets out the principles for the
recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance
sheet model, with certain exemptions. The standard includes two recognition exemptions for lessees – leases of “low-value”
assets and short-term leases with a lease term of 12 months or less. The Group has elected not to recognize right -of -use assets
and lease liabilities for short-term lease that have a lease term of 12 months or less and leases of low value assets. The lease
payments associated with these leases are expensed on a straight-line basis over the lease term.
Right-of-use assets
Leased assets are capitalized at the commencement
date of the lease and are comprised of the initial lease liability amount, initial direct costs incurred when entering the lease,
less any lease incentives received. Right-of-use assets are amortized on a straight-line basis over the life of the underlying
lease agreement.
Lease obligations
The lease liability is measured at the
present value of the fixed payments and variable lease payments that pertain to an index or rate, net of cash lease incentives
that are not paid at the commencement date. Lease payments are apportioned between interest expense and reduction of the lease
liability using the rate implicit in the lease to achieve a constant rate of interest on the remaining balance of the liability.
If this rate cannot be readily determined, the Group uses its incremental borrowing rate.
Impairment of Non-financial Assets
The carrying amounts of the Group’s non-financial
assets are reviewed at each reporting date to determine whether there is any indication of impairment. If such an indication exists,
the recoverable amount is estimated. For the purpose of measuring recoverable amounts, assets are grouped at the lowest levels
for which there are separately identifiable cash flows or cash generating units (CGUs). The recoverable amount is the higher of
an asset’s fair value less costs to sell and value in use (being the present value of the expected future cash flows of the
relevant asset or CGU). An impairment loss is recognized for the amount by which the asset’s carrying value exceeds its recoverable
amount.
An impairment loss is reversed if there
has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization,
if no impairment loss had been recognized.
|
Field Trip Psychedelics Inc. ▪ Consolidated Financial Statements (audited)
|
P a g e | 10
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Consolidated Financial Statements
For the period ended March 31, 2020
3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
IFRS 9 Financial Instruments
Financial assets and liabilities, including
derivatives, are recorded on the statement of financial position when the Group becomes a party to the financial instrument or
derivative contract.
Classification and Measurement of Financial Instruments
The Group measures a financial instrument
at its fair value plus, in the case of a financial instrument not at fair value through profit (loss) (“FVTPL”), transaction
costs that are directly attributable to the acquisition of the financial instrument. Transaction costs of financial instruments
carried at fair value through FVTPL are expensed in profit (loss).
Subsequent measurement of financial assets
depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset. There are three
measurement categories in which the Group classifies its financial instruments:
Amortized Cost
Financial assets that are held for collection
of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized
cost. Finance income from these financial instruments is recorded in the statement of loss and comprehensive loss using the effective
interest rate method.
Fair Value through Other Comprehensive Income (“FVOCI”)
Financial assets that are held for collection
of contractual cash flows and for selling the financial instruments. Changes in the carrying amount are taken through OCI, except
for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses, which are recognized
in net income (loss) . When the financial asset is derecognized, the cumulative gain or loss previously recognized in OCI is reclassified
from equity to net income (loss).
Fair Value through Profit and Loss (“FVTPL”)
Financial assets that do not meet the criteria
for amortized cost or FVOCI are measured at fair value through profit (loss). Subsequent fair value gains or losses are recognized
in profit or loss to the extent they are not part of a designated hedging relationship. The net gain or loss recognized in profit
or loss includes any dividend or interest earned on the financial asset and is included in the ‘other gains and losses’
line item (if any). Fair value is determined in the manner described in note 22.
Financial liabilities are subsequently
measured at amortized cost using the effective interest method or at FVTPL. Financial liabilities are subsequently measured as
FVTPL when the financial liability is (i) contingent consideration of an acquirer in a business combination, (ii) held for trading,
or (iii) it is designated as FVTPL if eligible.
The Group has classified its financial instruments as follows:
|
|
|
|
|
|
|
Fair Value
|
|
Financial instrument
|
|
Classification
|
|
Measurement
|
|
Hierarchy
|
|
Assets
|
|
|
|
|
|
|
|
Cash
|
|
FVTPL
|
|
Fair Value
|
|
Level 1
|
|
Restricted cash
|
|
FVTPL
|
|
Fair Value
|
|
Level 1
|
|
Accounts receivable
|
|
Amortized cost
|
|
Amortized cost
|
|
N/A
|
|
Shareholder loan receivable
|
|
Amortized cost
|
|
Amortized cost
|
|
N/A
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
Amortized cost
|
|
Amortized cost
|
|
N/A
|
|
Field Trip Psychedelics Inc. ▪ Consolidated Financial Statements (audited)
|
P a g e | 11
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Consolidated Financial Statements
For the period ended March 31, 2020
3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Impairment of Financial Assets
For the impairment of financial assets
under IFRS 9, the Group is required to apply an expected credit loss (“ECL”) model to all financial assets not held
at FVTPL, where credit losses that are expected to transpire in future years are provided for, irrespective of whether a loss event
has occurred or not as at the date of Statement of Financial Position. The Group recognizes a loss allowance for expected credit
losses on loan receivables which are measured at amortized cost. The measurement of the loss allowance depends upon the Group’s
assessment at the end of each reporting period as to whether the financial instrument’s credit risk has increased significantly
since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain.
Where there has not been a significant
increase in exposure to credit risk since initial recognition, a 12- month expected credit loss allowance is estimated. This represents
a portion of the asset’s lifetime expected credit losses that is attributable to a default event that is possible within the next
12 months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly,
the loss allowance is based on the asset’s lifetime expected credit losses. The amount of expected credit loss recognized is measured
on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted
at the original effective interest rate.
The carrying amount of financial assets
is reduced by any impairment loss directly for all financial assets. When an account receivable is considered uncollectible, it
is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the
allowance account. Changes in the carrying amount of the allowance account are recognized in the consolidated statement of loss
and comprehensive loss.
If, in a subsequent period, the amount
of the impairment loss decreases, and the decrease can be related objectively to an event occurring after the impairment was recognized,
the previously recognized impairment loss is reversed through the consolidated statement of operations and comprehensive loss for
the period to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the
amortized cost would have been had the impairment not been recognized.
Share-based payments
Share -based payments to employees and
others providing similar services are measured at the estimated fair value of the instruments issued on the grant date and amortized
over the vesting period. Share -based payments to non employees are measured at the fair value of the goods or services received
or the fair value of the equity instruments issued if it is determined that the fair value of the goods or services cannot be reliably
measured and are recorded at the date the goods or services are received. The amount recognized as an expense is adjusted to reflect
the number of awards expected to vest. The corresponding credit is recorded to share-based payments reserve in equity.
Consideration received on the exercise
of stock options is recorded as share capital and the related share-based payments reserve is transferred to share capital. Charges
for options that are forfeited before vesting are reversed from share-based payments reserve.
Revenue Recognition
The Group generates revenue primarily from
the provision of psychotherapy services. The Group uses the following five-step contract-based analysis of transactions to determine
if, when and how much revenue can be recognized:
1. Identify the contract with a customer;
2. Identify the performance obligation(s)
in the contract;
3. Determine the transaction price;
4. Allocate the transaction price to
the performance obligation(s) in the contract; and
5. Recognize revenue when or as the
Group satisfies the performance obligation(s).
|
Field Trip Psychedelics Inc. ▪ Consolidated Financial Statements (audited)
|
P a g e | 12
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Consolidated Financial Statements
For the period ended March 31, 2020
3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Patient service revenues are recognized
over a period of time as performance obligations are completed. Payment of the transaction price for patient counselling is typically
due prior to the services being rendered and therefore, the transaction price is recognized as a contract liability, or deferred
revenue, when payment is received. Contract liabilities are subsequently recognized as revenue when the Group fulfills its performance
obligations.
Research and Development
Expenditures on research activities, undertaken
with the prospect of gaining new scientific or technical knowledge and understanding, are recognized in profit or loss as incurred.
Development expenditures are capitalized
only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic
benefits are probable, and the Group intends to complete development and has sufficient resources to complete development and to
use or sell the asset. Other development expenditures are expensed as incurred. No internal development costs have been capitalized
to date.
Research and development expenses include
all direct and indirect operating expenses supporting the products in development. The costs incurred in establishing and maintaining
patents are expensed as incurred.
Income Taxes
Income tax expense consisting of current
and deferred tax expense is recognized in the consolidated statements of loss and comprehensive loss. Current tax expense is the
expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at period end, adjusted
for amendments to tax payable with regards to previous periods.
Deferred tax assets and liabilities and
the related deferred income tax expense or recovery are recognized for deferred tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized
or the liability settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in
the period that substantive enactment occurs.
A deferred tax asset is recognized to the
extent that it is probable that future taxable income will be available against which the asset can be utilized.
Deferred tax assets and liabilities are
offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate
to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on
a net basis.
Provisions
The Group recognizes provisions if there
is a present obligation as a result of a past event, it is probable that the Group will be required to settle that obligation and
the obligation can be reliably estimated. The amount recognized as a provision reflects management’s best estimate of the
consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties
surrounding the obligation.
Use of Estimates and Judgments
The preparation of financial statements
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure
of contingent assets and liabilities at the date of these Consolidated Financial Statements and the reported amounts of revenue
and expenses during the reporting periods. Actual results could differ from these estimates and such differences could be material.
Key areas of judgment and estimation or
use of managerial assumptions are as follows:
Share-based payments
The fair value of share -based compensation
expenses are estimated using the Black-Scholes option pricing model and rely on a number of estimates, such as the expected life
of the option, the volatility of the underlying share price, the risk free rate of return, and the estimated rate of forfeiture
of options granted. The Group measures equity settled share-based payments based on their
fair value at the grant date and recognizes compensation expense over the vesting period based on the Group’s estimate of
equity instruments that will eventually vest. Expected forfeitures are estimated at the date of grant and subsequently adjusted
if further non-market based information indicates actual forfeitures may vary from the original estimate. Any revisions are recognized
in the consolidated statements of loss and comprehensive loss such that the cumulative expense reflects the revised estimate.
|
Field Trip Psychedelics Inc. ▪ Consolidated Financial Statements (audited)
|
P a g e | 13
|
FIELD TRIP PSYCHEDELICS INC.
Notes to the Consolidated Financial Statements
For the period ended March 31, 2020
3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Estimated useful lives and impairment
considerations of property, plant and equipment and intangible assets
Depreciation of property, plant and equipment
and amortization of intangible assets are dependent upon estimates of useful lives, which are determined through the exercise
of judgment. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that take into
account factors such as economic and market conditions and the useful lives of assets. The impairment is amount by which the carrying
amount of the asset or Cash Generating Unit (CGU) exceeds its recoverable amount. The recoverable amount is the higher of the
fair value less costs of disposal and its value in use. Management exercises judgement in the determination of the Company’s
CGUs.
Deferred taxes
Significant estimates are required in
determining the Company’s income tax provision. Some estimates are based on interpretations of existing tax laws or regulations.
Various internal and external factors may have favourable or unfavourable effects on the Company’s future effective tax
rate. These include, but are not limited to, changes in tax laws, regulations and/or rates, changing interpretations of existing
tax laws or regulations, and results of tax audits by tax authorities.
IFRIC 23 Uncertainty over Income Tax Treatments
In June 2017, the International Accounting
Standards Board (IASB) issued an International Financial Reporting Interpretations Committee (IFRIC) interpretation incorporated
into Part I of the CPA Canada Handbook – Accounting by the Accounting Standards Board (AcSB) to clarify the accounting for
uncertainties in income taxes. IAS 12 Income Taxes provides requirements on the recognition and measurement of current or deferred
income tax liabilities and assets. However, it does not provide a specific requirement for the accounting for income tax when the
application of tax law to a particular transaction or circumstance is uncertain. As a result, the interpretation aims to reduce
the diversity in how entities recognize and measure a tax liability or tax asset when there is uncertainty over income tax treatments.
The interpretation is effective for annual periods beginning on or after January 1, 2019.
Impact of Coronavirus
While the precise impact of the recent
novel coronavirus (“COVID- 19”) outbreak remains unknown, it has introduced uncertainty and volatility in Canadian
and global economies. The Group is monitoring developments and preparing for any impacts related to COVID- 19. The Group has a
comprehensive business continuity plan that ensures its readiness to appropriately address and mitigate regulatory and business
risks as they arise including, but not limited to, impacts on patients, practitioners and employees.
4. RESTRICTED CASH
As at March 31, 2020, the Group had $100,000
of restricted cash held as collateral against Field Trip Psychedelics Inc. credit card limit. The funds are invested in two cashable
GIC accounts. $35,000 matures on November 2, 2020, and $65,000 matures on January 20, 2021 respectively.
5. ACCOUNTS RECEIVABLE
|
|
|
March 31, 2020
|
|
|
|
|
$
|
|
|
Other receivables
|
|
|
11,940
|
|
|
Sales tax receivable
|
|
|
191,172
|
|
|
|
|
|
203,112
|
|
During the period ended March 31, 2020
no expected credit loss allowance was recorded for accounts receivable. No receivable was written off during the year.
|
Field Trip Psychedelics Inc. ▪ Consolidated Financial Statements (audited)
|
P a g e | 14
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Consolidated Financial Statements
For the
period ended March 31, 2020
6.
OTHER ASSETS
|
|
|
March
31, 2020
|
|
|
|
|
$
|
|
|
Prepaid
expenses
|
|
|
133,915
|
|
|
Lease security deposits
|
|
|
95,451
|
|
|
Prepaid additional
(non-lease) rent
|
|
|
36,781
|
|
|
Shareholder loans receivable
(note 23)
|
|
|
47,991
|
|
|
|
|
|
314,138
|
|
|
Less amounts due within
one year
|
|
|
(133,916
|
)
|
|
Non-current
balance
|
|
|
180,222
|
|
7.
PROPERTY, PLANT AND EQUIPMENT
Property,
plant and equipment consists of the following:
|
|
|
|
|
|
|
|
|
Computer
|
|
|
Medical
&
|
|
|
|
|
|
|
|
|
|
|
Leasehold
|
|
|
Furniture
&
|
|
|
Equipment
|
|
|
Laboratory
|
|
|
Construction
|
|
|
|
|
|
|
|
Improvements
|
|
|
Fixtures
|
|
|
&
Software
|
|
|
Equipment
|
|
|
in
Progress
|
|
|
Total
|
|
|
Cost
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Balance,
April 2, 2019
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
-
|
|
|
Additions
|
|
|
342,590
|
|
|
|
56,187
|
|
|
|
78,770
|
|
|
|
5,533
|
|
|
|
106,402
|
|
|
|
589,482
|
|
|
Balance,
March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
April 2, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
Depreciation
expense
|
|
|
(8,645
|
)
|
|
|
(1,041
|
)
|
|
|
(4,111
|
)
|
|
|
(239
|
)
|
|
|
-
|
|
|
|
(14,036
|
)
|
|
Balance,
March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
book value as at April 2, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
Net
book value as at March 31, 2020
|
|
|
333,945
|
|
|
|
55,146
|
|
|
|
74,659
|
|
|
|
5,294
|
|
|
|
106,402
|
|
|
|
575,446
|
|
Right-of-use
assets (“ROU”) consist of the following:
|
|
|
Total
|
|
|
Cost
|
|
$
|
|
|
Balance, April 2, 2019
|
|
-
|
|
|
Additions
|
|
|
1,766,643
|
|
|
Foreign currency translation
adjustment
|
|
|
(3,692
|
)
|
|
Balance,
March 31, 2020
|
|
|
1,762,951
|
|
|
|
|
|
|
|
|
Accumulated
depreciation
|
|
|
|
|
|
Balance, April 2, 2019
|
|
|
-
|
|
|
Depreciation expense
|
|
|
(130,290
|
)
|
|
Balance, March 31,
2020
|
|
|
(130,290
|
)
|
|
Net book value as at April 2, 2019
|
|
|
-
|
|
|
Net book value as
at March 31, 2020
|
|
|
1,632,661
|
|
|
Field Trip Psychedelics Inc. ▪ Consolidated Financial Statements (audited)
|
P a g e | 15
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Consolidated Financial Statements
For the
period ended March 31, 2020
8.
INTANGIBLE ASSETS
Intangible
assets consist of the following:
|
|
|
Field
Trip
|
|
|
|
|
|
|
|
Health
Website
|
|
|
Total
|
|
|
Cost
|
|
$
|
|
|
$
|
|
|
Balance, April 2, 2019
|
|
-
|
|
|
-
|
|
|
Additions
|
|
|
126,974
|
|
|
|
126,974
|
|
|
Balance, March 31,
2020
|
|
|
126,974
|
|
|
|
126,974
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
amortization
|
|
|
|
|
|
|
|
|
|
Balance, April 2, 2019
|
|
|
-
|
|
|
|
-
|
|
|
Amortization expense
|
|
|
(1,994
|
)
|
|
|
(1,994
|
)
|
|
Balance,
March 31, 2020
|
|
|
124,980
|
|
|
|
124,980
|
|
|
Net book value as at April 2, 2019
|
|
|
-
|
|
|
|
-
|
|
|
Net book value as
at March 31, 2020
|
|
|
124,980
|
|
|
|
124,980
|
|
9.
LEASE OBLIGATIONS
The
Group leases real property for its clinical and office locations in Toronto and New York City. Lease obligations consist of the
following as at March 31, 2020:
|
|
|
$
|
|
|
As at April 2, 2019
|
|
-
|
|
|
Additions
during the period
|
|
|
1,626,973
|
|
|
Foreign currency translation
adjustment
|
|
|
577
|
|
|
Payments during the
period
|
|
|
(108,907
|
)
|
|
Interest expense during
the period
|
|
|
22,562
|
|
|
|
|
|
1,541,205
|
|
|
Less amounts due within
one year
|
|
|
(462,871
|
)
|
|
Long-term
balance
|
|
|
1,078,334
|
|
The
Group expenses payments for short-term leases and low-value leases as incurred. These payments for short- term leases and low-value
leases were $172,354 for the period ended March 31, 2020.
The
Group’s future cash outflows may change due to variable lease payments, renewal options, termination options, residual value
guarantees and leases not yet commenced to which the Group is committed that are not reflected in the lease obligations. The following
is a maturity analysis for undiscounted lease payments that are reflected in the lease obligations as at March 31, 2020:
|
|
|
$
|
|
|
Less than
1 year
|
|
|
581,743
|
|
|
1 to 2 years
|
|
|
709,426
|
|
|
2 to 3 years
|
|
|
405,824
|
|
|
3 to 4 years
|
|
|
20,578
|
|
|
4 to 5 years
|
|
|
-
|
|
|
Beyond 5 years
|
|
|
-
|
|
|
|
|
|
1,717,571
|
|
See
Note 20, Commitments for additional information on estimated additional rent payment obligations related to the Group’s
leases on its clinical and office locations.
|
Field Trip Psychedelics Inc. ▪ Consolidated Financial Statements (audited)
|
P a g e | 16
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Consolidated Financial Statements
For the
period ended March 31, 2020
10.
SHARE CAPITAL
Share
Capital Authorized
The
authorized share capital of the Group consists of the following:
Class
A shares – unlimited
Class
B shares – unlimited
Class
C shares – unlimited
Share
Capital Issued
|
|
|
Number
of
|
|
|
Amount
|
|
|
Class
of Shares
|
|
Shares
Issued
|
|
|
$
|
|
|
A (i) (ii)
(iii)
|
|
|
11,510,900
|
|
|
|
1,605,027
|
|
|
B (iv)
|
|
|
9,431,023
|
|
|
|
11,195,540
|
|
|
|
|
|
20,941,923
|
|
|
|
12,800,567
|
|
|
|
(i)
|
On
April 2, 2019, the Group issued 6,300,630 Class A shares at a price of $0.055 per share
yielding gross proceeds of $350,000.
|
|
|
(ii)
|
On
October 3, 2019 directors of the Group exercised options to purchase 2,700,270 Class
A shares at a price of $0.00001 for gross proceeds of $27.
|
|
|
(iii)
|
On
October 19, 2019 the Group issued 2,510,000 Class A shares at a price of $0.50 per share
yielding gross proceeds of $1,255,000. As part of the issuance, shareholder loans of
$50,000 and $10,000 for the purchase of 100,000 and 20,000 shares respectively were entered
into with advisors of the Group, payable 5 years from the loan date and bearing zero
interest.
|
|
|
(iv)
|
On
January 29, 2020 the Group issued 9,431,023 Class B shares at a price of $0.90 USD per
share, yielding gross proceeds of $8,487,962 USD or $11,195,540 CAD.
|
|
|
(v)
|
Total
finance costs incurred for the issuance of share capital during the period ended March
31, 2020 was $19,297 CAD of which $7,922 CAD was settled via the issuance of 6,666 units
of Class B shares at a price of $0.90 USD or $1.1884 CAD per share.
|
Voting
Rights
Each
holder of Class A shares is entitled to receive notice of and to attend all meetings of shareholders of the Corporation and at
all such meetings shall be entitled to one (1) vote in respect of each such share held by such holder. The foregoing, however,
shall not apply to separate meetings of the holders of other classes or series of shares in accordance with the Shareholders Agreement.
On any matter presented to the shareholders of the Corporation for their action or consideration at any meeting of shareholders
of the Corporation (or by written consent of shareholders in lieu of meeting), each holder of outstanding Class B Series Shares
is entitled to cast the number of votes equal to the number of Class B Series Shares held by the holder. Except as provided by
law or by the other provisions of the Articles, holders of Class B Series Shares shall vote together with the holders of Class
A Shares as a single class.
|
Field Trip Psychedelics Inc. ▪ Consolidated Financial Statements (audited)
|
P a g e | 17
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Consolidated Financial Statements
For the
period ended March 31, 2020
Class
B Shares Automatic Conversion
Upon
the completion of a private placement of Class A Shares from treasury for gross proceeds of at least USD $2,500,000 in one or
multiple closings (the “Qualified Financing”), then all of the Class B Series 1 Shares will automatically and concurrently
be converted into Class A Shares (the “Automatic Conversion”) as follows:
10.
SHARE CAPITAL (CONT’D)
|
|
(a)
|
f
the price paid per Class A Share in the Qualified Financing is equal to or greater than
USD $1.125, then each Class B Series 1 Share will convert into one Class A Share; or
|
|
|
(b)
|
If
the price paid per Class A Share in the Qualified Financing is less than USD $1.125,
then the Class B Series 1 Shares held by each holder will be converted into a number
of Class A Shares determined by dividing (x) the Subscription Amount by (y) an amount
equal to the product of (A) the price paid per Class A Share in the Qualified Financing
multiplied by (B) 0.80. For the purposes of this calculation, “Subscription Amount”
means the number of Class B Series 1 Shares held by the holder multiplied by USD $ 0.90.
|
11.
SHARE-BASED PAYMENTS
The
Group has two share-based compensation plans: the “Stock Option Plan” and the “Long Term Incentive Option
Plan”.
Long
Term Incentive Option Plan
On
April 2, 2019 the directors of the Group authorized option agreements with each of the five founding executives of the Group.
Under the terms of the agreement, each option holder received 1,800,180 options to purchase Class A shares at an exercise price
of $0.00001. The options vest over a period of four years and expire on the fifth anniversary of the grant date.
Stock
Option Plan
On
August 1, 2019, the directors of the Group authorized the establishment of the “Stock Option Plan”. The maximum number
of common shares that will be reserved for issuance under the Stock Option Plan shall be 15% of the issued and outstanding Common
Shares from time to time, on a non-diluted basis. For the avoidance of doubt, Long Term Incentive Options are excluded from the
Stock Option Plan maximum. Common Shares in respect of Options that have been exercised, cancelled, surrendered, or terminated
or that expire without being exercised shall again be available for issuance under the Plan.
As
at March 31, 2020, the number of common shares available for issuance under the Share Option Plan was 3,100,000.
Under
the Stock Option Plan, the Group may grant options to purchase common shares to officers, directors, employees or consultants
of the Group or its affiliates. Options issued under the Stock Option Plan are granted for a term not exceeding ten years from
the date of grant. All options issued to-date have a life of ten years or less. In general, options have vested either immediately
upon grant or over a period of four to ten years or upon the achievement of certain performance-related measures or milestones.
The
following is a schedule of the options outstanding as at:
|
|
|
|
|
|
Range
of
|
|
|
Weighted
Average
|
|
|
|
|
|
|
|
Exercise
Price
|
|
|
Exercise
Price
|
|
|
|
|
Options
|
|
|
$
|
|
|
$
|
|
|
Balance, April 2, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Stock Option
Plan - Granted
|
|
|
2,376,806
|
|
|
|
0.50
|
|
|
|
0.50
|
|
|
Long
Term Incentive Options - Granted
|
|
|
9,000,900
|
|
|
|
.00001
|
|
|
|
.00001
|
|
|
Balance,
March 31, 2020
|
|
|
11,377,706
|
|
|
|
0.50
|
|
|
|
0.50
|
|
The
fair value of each tranche is measured at the date of grant using the Black-Scholes option pricing model.
|
Field Trip Psychedelics Inc. ▪ Consolidated Financial Statements (audited)
|
P a g e | 18
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Consolidated Financial Statements
For the
period ended March 31, 2020
11.
SHARE-BASED PAYMENTS (CONT’D)
Options
model inputs for options granted during the period ended March 31, 2020 were as follows:
|
|
|
|
|
|
Share
|
|
|
Exercise
|
|
|
Risk-free
|
|
|
Expected
|
|
|
Volatility
|
|
|
Fair Value per
|
|
|
|
|
|
|
|
Price
|
|
|
Price
|
|
|
Interest Rate
|
|
|
Life
|
|
|
Factor
|
|
|
Option
|
|
|
Options
|
|
|
Grant Date
|
|
$
|
|
|
$
|
|
|
%
|
|
|
(years)
|
|
|
%
|
|
|
$
|
|
|
|
9,000,900
|
|
|
April 2, 2019
|
|
|
.06
|
(i)
|
|
|
.00001
|
|
|
|
1.55
|
|
|
|
5
|
|
|
|
75
|
|
|
|
.06
|
|
|
|
2,376,806
|
|
|
March 30, 2020
|
|
|
0.28
|
(ii)
|
|
|
0.50
|
|
|
|
0.70
|
|
|
|
10
|
|
|
|
75
|
|
|
|
0.19
|
|
|
|
(i)
|
On
April 2, 2019, the Group issued 6,300,630 Class A shares at a price of $0.055 per share
|
|
|
(ii)
|
On
January 29, 2020 the Group issued 9,431,023 Class B shares at a price of $0.90 USD per
share. The Group derived the valuation of the Class A shares on the issuance date based
on the Class B issuance price on January 29, 2020, adjusted for share specific attributes
resulting in an estimated fair value of Class A shares of $0.21 USD or $0.28 CAD.
|
The
following table summarizes the outstanding and exercisable options held by directors, officers, employees and consultants as at
March 31, 2020:
|
|
|
|
Outstanding
|
|
|
Exercisable
|
|
|
Exercise
|
|
|
|
|
Remaining
|
|
Weighted
Average
|
|
|
|
|
|
Weighted
Average
|
|
|
Price
Range
|
|
|
Options
|
|
Contractual
Life
|
|
Exercise
Price
|
|
|
Vested
|
|
|
Exercise
Price
|
|
|
$
|
|
|
000s
|
|
years
|
|
$
|
|
|
Options
|
|
|
$
|
|
|
|
.00001
- 0.50
|
|
|
|
2,376,806
|
|
|
5 - 10
|
|
|
0.10
|
|
|
|
15,000
|
|
|
|
0.50
|
|
Summary
of Stock-based Compensation
Stock-based
compensation was as follows:
|
|
|
March
31, 2020
|
|
|
|
|
$
|
|
|
Stock option
compensation expense - Stock Option Plan
|
|
|
68,177
|
|
|
Stock option compensation
expense - Long Term Incentive Options
|
|
|
262,526
|
|
|
Stock-based
compensation expense
|
|
|
330,703
|
|
12.
GENERAL AND ADMINISTRATION
Components
of general and administrative expenses for the period ended March 31, 2020 were as follows:
|
|
|
March
31, 2020
|
|
|
|
|
$
|
|
|
Personnel
costs
|
|
|
896,227
|
|
|
External services
|
|
|
753,106
|
|
|
Share-based payments
(Note 11)
|
|
|
330,703
|
|
|
Travel and entertainment
|
|
|
231,400
|
|
|
IT and technology
|
|
|
50,536
|
|
|
Office and general
|
|
|
48,104
|
|
|
Total
general and administration
|
|
|
2,310,076
|
|
|
Field Trip Psychedelics Inc. ▪ Consolidated Financial Statements (audited)
|
P a g e | 19
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Consolidated Financial Statements
For the
period ended March 31, 2020
13.
OCCUPANCY COSTS
Components
of occupancy costs for the period ended March 31, 2020 were as follows:
|
|
|
March
31, 2020
|
|
|
|
|
$
|
|
|
Operating
rent expense
|
|
|
172,354
|
|
|
Taxes, maintenance,
insurance
|
|
|
73,884
|
|
|
Minor furniture and
fixtures
|
|
|
37,312
|
|
|
Utilities and services
|
|
|
33,926
|
|
|
Total
occupancy costs
|
|
|
317,476
|
|
14.
SALES AND MARKETING
Components
of sales and marketing for the period ended March 31, 2020 were as follows:
|
|
|
March
31, 2020
|
|
|
|
|
$
|
|
|
Brand and
public relations
|
|
|
214,091
|
|
|
Conference fees
|
|
|
42,803
|
|
|
Personnel costs
|
|
|
29,147
|
|
|
External marketing
services
|
|
|
19,669
|
|
|
Total
sales and marketing
|
|
|
305,710
|
|
15.
RESEARCH AND DEVELOPMENT
Components
of research and development for the period ended March 31, 2020 were as follows:
|
|
|
March
31, 2020
|
|
|
|
|
$
|
|
|
Personnel
costs
|
|
|
178,644
|
|
|
Supplies and services
|
|
|
14,548
|
|
|
Total
research and development
|
|
|
193,192
|
|
The
expenditures above relate to research and development activities which do not qualify for capitalization based on the Group’s
accounting policies for capitalization of development costs. They have therefore been recognised as an expense during the period
ended March 31, 2020.
16.
FINANCE EXPENSE
Components
of finance expense for the period ended March 31, 2020 were as follows:
|
|
|
March
31, 2020
|
|
|
|
|
$
|
|
|
Interest
expense on leases
|
|
|
(22,562
|
)
|
|
Interest income on
shareholders’ loan (note 23)
|
|
|
1,586
|
|
|
Interest income on
refundable lease deposit
|
|
|
951
|
|
|
Interest income on
bank balances
|
|
|
145
|
|
|
Total
finance expense
|
|
|
19,880
|
|
|
Field Trip Psychedelics Inc. ▪ Consolidated Financial Statements (audited)
|
P a g e | 20
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Consolidated Financial Statements
For the
period ended March 31, 2020
17.
NON-OPERATING INCOME
Components
of non-operating income for the period ended March 31, 2020 were as follows:
|
|
|
March
31, 2020
|
|
|
|
|
$
|
|
|
Unrealized
foreign exchange gains
|
|
|
(1,111
|
)
|
|
Realized foreign exchange
gains
|
|
|
667,526
|
|
|
Wage subsidy
|
|
|
6,345
|
|
|
Total
non-operating income
|
|
|
672,760
|
|
18.
NON-CONTROLLING INTEREST
The
following table summarizes the information relating to the Group’s subsidiary Field Trip Natural Products Limited before
intercompany eliminations:
|
|
|
March
31, 2020
|
|
|
|
|
$
|
|
|
Current
assets
|
|
|
30,300
|
|
|
Non-current assets
|
|
|
5,294
|
|
|
Current liabilities
|
|
|
(48,941
|
)
|
|
Non-current liabilities
|
|
|
(28,374
|
)
|
|
Total equity
|
|
|
(41,721
|
)
|
|
Non-controlling interest
(%)
|
|
|
20
|
%
|
|
Equity attributable
to Field Trip
|
|
|
(33,377
|
)
|
|
Equity
attributable to NCI
|
|
|
(8,344
|
)
|
19.
CHANGE IN NON-CASH WORKING CAPITAL
Components
of non-cash working capital for the period ended March 31, 2020 were as follows:
|
|
|
March
31, 2020
|
|
|
|
|
$
|
|
|
Accounts
receivable
|
|
|
(203,112
|
)
|
|
Other current assets
|
|
|
(133,916
|
)
|
|
Other non-current assets
|
|
|
(36,781
|
)
|
|
Accounts payable and
accrued liabilities
|
|
|
577,878
|
|
|
Deferred revenue
|
|
|
2,000
|
|
|
Total
non-operating income
|
|
|
206,069
|
|
20.
COMMITMENTS
The
Group leases real property for its clinical and office locations in Canada. The Group is committed under estimated additional
variable (non-lease) rent payment obligations as follows:
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rent
|
|
|
|
|
|
|
|
|
|
|
|
More
than
|
|
|
|
|
Expiry
|
|
|
Payments
|
|
|
1
year
|
|
|
2-3
years
|
|
|
4-5
years
|
|
|
5
years
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Toronto
corporate office and clinic
|
|
|
2023-10-31
|
|
|
|
260,237
|
|
|
|
111,530
|
|
|
|
148,707
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
260,237
|
|
|
|
111,530
|
|
|
|
148,707
|
|
|
|
-
|
|
|
|
-
|
|
These
additional (non-lease) rent payments are variable, and therefore have not been included in the right-of-use asset or lease obligations.
In
addition to the variable rent payments above, the Group has committed purchase orders related to capital asset expansion of $102,146,
all of which are expected to be paid within the next year.
|
Field Trip Psychedelics Inc. ▪ Consolidated Financial Statements (audited)
|
P a g e | 21
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Consolidated Financial Statements
For
the period ended March 31, 2020
21.
SEGMENT REPORTING
Information
reported to the Chief Operating Decision Maker (“CODM”) for the purpose of resource allocation and assessment of segment
performance focuses on the nature of the operations. The Group operates in three segments. 1) Clinical Operations, which encompasses
the Group’s psychedelic assisted psychotherapy clinics across North America, 2) Research, which consists of the research
of fungi at the Group’s facility in Jamaica and research focused employees of Field Trip Psychedelics, and 3) Corporate,
which encompasses the operations of Field Trip headquarters. Factors considered in determining the operating segments include
the Group’s business activities, the management structure directly accountable to the CODM, availability of discrete financial
information and strategic priorities within the organizational structure.
Segment
information for the period ended March 31, 2020:
|
|
|
Clinical
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations
|
|
|
Research
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Net revenue
|
|
|
1,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,000
|
|
|
Net loss
|
|
|
(947,649
|
)
|
|
|
(111,044
|
)
|
|
|
(2,191,504
|
)
|
|
|
(3,250,197
|
)
|
|
Property, plant, and equipment
|
|
|
482,242
|
|
|
|
5,294
|
|
|
|
87,910
|
|
|
|
575,446
|
|
|
Intangible assets
|
|
|
124,980
|
|
|
|
-
|
|
|
|
-
|
|
|
|
124,980
|
|
Geographic
information for the period ended March 31, 2020:
|
|
|
Canada
|
|
|
United States
|
|
|
Jamaica
|
|
|
Total
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Net revenue
|
|
|
1,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,000
|
|
|
Property, plant, and equipment
|
|
|
460,304
|
|
|
|
109,848
|
|
|
|
5,294
|
|
|
|
575,446
|
|
|
Intangible assets
|
|
|
124,980
|
|
|
|
-
|
|
|
|
-
|
|
|
|
124,980
|
|
22.
FINANCIAL INSTRUMENTS
Classification
of Financial Instruments
Financial
assets and financial liabilities are measured on an ongoing basis at fair value or amortized cost. The classification of the financial
instruments, as well as their carrying values, are shown in the table below:
|
|
|
March 31, 2020
|
|
|
|
|
$
|
|
|
Financial assets at fair value through profit and loss
|
|
|
|
|
|
Cash (Level 1)
|
|
|
9,590,758
|
|
|
Restricted cash (Level 1)
|
|
|
100,000
|
|
|
Financial assets at amortized cost
|
|
|
203,112
|
|
|
Accounts receivable
|
|
|
|
|
|
Shareholders’ loan receivable
|
|
|
47,991
|
|
|
Total financial assets
|
|
|
9,941,861
|
|
|
Financial liabilities at amortized cost
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
577,854
|
|
|
Total financial liabilities
|
|
|
577,854
|
|
|
Field Trip Psychedelics Inc. ▪ Consolidated Financial
Statements (audited)
|
P a g e |
22
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Consolidated Financial Statements
For
the period ended March 31, 2020
22.
FINANCIAL INSTRUMENTS (CONT’D)
Fair
Value
IFRS
13 - Fair Value Measurements requires disclosure of a three-level hierarchy that reflects the significance of the inputs
used in making fair value measurements. All assets and liabilities for which fair value is measured or disclosed in the financial
statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant
to the fair value measurement as a whole:
Level
1 - Unadjusted quoted prices at the measurement date for identical assets or liabilities in active markets
Level
2 - Observable inputs other than quoted prices in Level 1, such as quoted prices for similar assets and liabilities in active
markets; quoted prices for identical or similar assets and liabilities in markets that are note active; or other inputs that are
observable or can be corroborated by observable market data
Level
3 - Significant unobservable inputs that are supported by little or no market activity
Cash,
restricted cash, accounts receivable, and accounts payable and accrued liabilities are all short-term in nature and, as such,
their carrying values approximate fair values.
Credit
Risk
The
Group, in the normal course of business, is exposed to credit risk from its customers. Credit risk is the risk of an unexpected
loss if a counterparty to a financial instrument fails to meet its contractual obligations. The Group is exposed to credit risk
on its cash and accounts receivable. The Group’s objective with regard to credit risk in its operating activities is to
reduce its exposure to losses. As the Group does not utilize credit derivatives or similar instruments, the maximum exposure to
credit risk is the full amount of the carrying value of its cash and accounts receivable.
The
Group’s cash is held with four financial institutions in various bank accounts. These financial institutions are major banks
in Canada, the United States, and Jamaica which the Group believes lessens the degree of credit risk.
Liquidity
Risk
Liquidity
risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its
liquidity risk by reviewing on an ongoing basis its capital requirements. As at March 31, 2020, the Company had $9,690,758 of
cash and cash equivalents.
The
Company is obligated to pay accounts payable and accrued liabilities with total carrying amounts and contractual cash flows amounting
to $577,854 due in the next 12 months. The carrying values of cash, trade receivable, accounts payable and accrued liabilities
approximate their fair values due to their short term to maturity.
Interest
Rate Risk
Financial
instruments that potentially subject the Group to cash flow interest rate risk are those assets and liabilities with a variable
interest rate. Currently, the Group has no assets or liabilities with a variable interest rate. Financial assets and financial
liabilities that bear interest at fixed rates are subject to fair value interest rate risk. The Group’s lease obligations
are at fixed rates of interest.
Currency
Risk
The
Group is exposed to currency risk related to the fluctuation of foreign exchange rates and the degree of volatility of those rates.
Currency risk is limited to the portion of the Group’s business transactions denominated in currencies other than the Canadian
dollar, which are primarily expenses in United States dollars. As at March 31 2020, the Group held USD dollar denominated cash
of $6,472,659 USD and had USD dollar denominated accounts payable and accrued liabilities in the amounts of $142,854 USD. Therefore,
a 1% change in the foreign exchange rate would have a net impact as at March 31, 2020 of $89,801. USD dollar expenses for the
period March 31, 2020 were $597,922 USD. Varying the foreign exchange rate for the period ended March 31, 2020 to reflect a 1%
strengthening of the U.S. dollar would have increased the net loss by approximately $67,954 assuming that all other variables
remained constant.
|
Field Trip Psychedelics Inc. ▪ Consolidated Financial
Statements (audited)
|
P a g e | 23
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Consolidated Financial Statements
For
the period ended March 31, 2020
23.
RELATED PARTY TRANSACTIONS
The
Group’s related parties include certain investors and shareholders, key management personnel, and entities owned by key
management personnel.
Shareholders
Field
Trip entered into shareholder loan agreements with two of its advisors for a total of $60,000 in July 2019. The notes are non-
interest bearing (i.e. not on commercial terms) and are due on demand or five years from the date of note issuance. These loans
are expected to be repaid in full at maturity. The Group measured the loans at fair value at initial recognition using an appropriate
market interest rate. The below-market element of the loans was determined at initial recognition as the difference between the
loan principal amount and fair value. This difference was recognized in equity as distribution to these shareholders. Total distribution
arising from the initial fair value measurement of shareholders’ loan was $13,596. The fair values at initial recognition
were accounted for as amortized cost financial assets in accordance with IFRS 9. The amortized cost of the loans as at the period
ended March 31, 2020 was $47,991 (see note 6) and total interest income accrued at market rate in profit or loss for the period
then ended was $1,586 (see note 16).
Key
Management Personnel
Key
management personnel are those persons having authority and responsibility for planning, directing and controlling the activities
of the Group, including directors. Key management at March 31, 2020 includes five directors and executive officers of the corporation.
Key management personnel compensation for the period ended March 31, 2020 was comprised of:
|
|
|
March 31, 2020
|
|
|
|
|
$
|
|
|
Salaries
|
|
|
83,333
|
|
|
Share-based compensation
|
|
|
240,230
|
|
|
|
|
|
323,563
|
|
Directors
and officers of the Group control 52% or 10,889,786 of the outstanding voting shares of the Group.
Grassfed
Ventures
During
the period, the Group was charged for various capital and operating expenditures by Grassfed Ventures, an entity owned by three
of the Group’s directors and executive officers. For the period ended March 31, 2020 amounts charged to the Group at arms-length
were recorded as:
|
|
|
$
|
|
|
General and administration
|
|
|
146,067
|
|
|
Occupancy costs
|
|
|
67,000
|
|
|
Property, plant and equipment
|
|
|
9,122
|
|
|
Sales and marketing
|
|
|
616
|
|
|
|
|
|
222,805
|
|
There
was no accounts payable to Grassfed Ventures as at March 31, 2020.
|
Field Trip Psychedelics Inc. ▪ Consolidated Financial
Statements (audited)
|
P a g e | 24
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Consolidated Financial Statements
For
the period ended March 31, 2020
24.
INCOME TAXES
The
following table reconciles the expected income tax expenses (recovery) at the Canadian statutory tax rate to the amounts recognized
in the statements of loss and comprehensive loss for the years ended March 31, 2020:
|
|
|
March 31, 2020
|
|
|
|
|
$
|
|
|
Loss for the year before income tax
|
|
|
(2,628,324
|
)
|
|
Statutory tax rate
|
|
|
26.50
|
%
|
|
Expected income tax (recovery)
|
|
|
(696,506
|
)
|
|
Non-deductible items and other
|
|
|
90,056
|
|
|
Foreign tax rate differences
|
|
|
(3,989
|
)
|
|
Change in deferred tax assets not recognized
|
|
|
610,439
|
|
|
Total income tax expense (recovery)
|
|
|
-
|
|
|
|
|
|
|
|
|
Current tax expense (recovery)
|
|
|
-
|
|
|
Deferred tax expense (recovery)
|
|
|
-
|
|
The
deferred tax assets (liabilities) as at March 31, 2020 are comprised of the following:
|
|
|
March 31, 2020
|
|
|
|
|
$
|
|
|
Lease obligations
|
|
|
405,577
|
|
|
Non-capital loss carryforwards
|
|
|
11,547
|
|
|
Start-up Costs - USA
|
|
|
5,606
|
|
|
Right-of-use assets
|
|
|
(405,577
|
)
|
|
Property, plant and equipment
|
|
|
(12,482
|
)
|
|
Foreign exchange
|
|
|
(4,671
|
)
|
|
|
|
|
-
|
|
The
unrecognized deductible temporary differences as at March 31, 2020 are comprised of the following:
|
|
|
March 31, 2020
|
|
|
|
|
$
|
|
|
Non-capital loss carryforwards
|
|
|
1,474,930
|
|
|
Start-up Costs - USA
|
|
|
694,865
|
|
|
Lease obligation
|
|
|
28,315
|
|
|
Property, plant and equipment
|
|
|
38,504
|
|
|
Net operating loss carryforwards - Jamaica
|
|
|
38,423
|
|
|
Shareholder loans
|
|
|
13,596
|
|
|
Total unrecognized deductible temporary differences
|
|
|
2,288,633
|
|
As
at March 31, 2020, the Company has not recognized a deferred tax asset in respect of non- capital loss carryforwards of approximately
$1,474,930 which may be carried forward to apply against future income for Canadian income tax purposes, subject to the final
determination by taxation authorities, expiring in the year 2040.
|
Field Trip Psychedelics Inc. ▪ Consolidated Financial
Statements (audited)
|
P a g e | 25
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Consolidated Financial Statements
For
the period ended March 31, 2020
25.
CONTINGENCIES
Litigation
During
the year, the Group terminated a lease contract with a lessor due to circumstances which it believes constituted a breach of contract
by the lessor. Should the Group become involved in litigation due to the termination of this contract, the Group believes it has
prepared valid legal defenses and that no material exposure exists on the eventual settlement of such litigation. This lease was
treated as a short-term lease under IFRS 16 and all payments including security deposit paid were fully expensed during the period
ended March 31, 2020.
26.
SUBSEQUENT EVENTS
Santa
Monica Clinic
On
June 5, 2020, the Group executed a lease agreement to build its flagship Los Angeles clinic, commencing on June 15, 2020 and ending
120 months from the first day of the first full month of the term. Total commitments under the lease are approximately $2,634,000.
Reverse
Takeover of Newton Energy Corporation
On
June 18, 2020, the Group entered into a letter of intent with Newton Energy Corporation (“Newton”) outlining the
principal terms and conditions which will result in a reverse takeover of Newton by Field Trip Psychedelics Inc. as a
Qualifying Transaction, as defined in the policies of the Canadian Securities Exchange (“CSE”). It is intended
that the Proposed Transaction will proceed by way of a “three-cornered” amalgamation of Field Trip with a
wholly-owned subsidiary of Newton (“Newton Subco”) pursuant to the terms of a definitive agreement to be entered
into by Newton, Newton Subco and Field Trip (the “Definitive Agreement”). The Proposed Transaction will be an
arm’s length transaction.
Completion
of the Proposed Transaction is subject to a number of conditions including, but not limited to: completion of satisfactory
due diligence; execution of the Definitive Agreement; receipt of regulatory approvals; meeting all CSE listing requirements,
majority of minority shareholders’ approval from Newton for the delisting of the common shares of Newton from the NEX
board of the TSXV, as applicable, approval of the TSXV to delist the common shares of Newton from its facilities, receipt of
approval for the listing of the common shares of the Resulting Issuer on the CSE; shareholders of Field Trip approving the
Proposed Transaction and such other matters necessary to complete the Proposed Transaction; and shareholders of Newton
approving certain matters ancillary to the Proposed Transaction, including the appointment of the New Directors, subject to
the completion of the Proposed Transaction. Subject to the foregoing conditions, the parties intend to enter into a
definitive agreement and complete the Proposed Transaction by September 15, 2020. There can, however, be no assurance that
the Proposed Transaction will be completed as planned or at all.
Field
Trip Natural Products Share Purchase
On
June 2, 2020, the Group acquired the remaining 120 shares issued and outstanding of Field Trip Natural Products Limited in exchange
for $120 and 600,000 common shares of Field Trip Psychedelics Inc. As a result of the acquisition, Field Trip Psychedelics Inc.
owns 100% of the shares issued and outstanding.
Chicago
Clinic
On
July 23, 2020, the Group executed a lease agreement to build its Chicago clinic, commencing on October 1, 2020 and ending 120
months from the first day of the first full month of the term. Total commitments under the lease are approximately $2,334,000.
Series
B Financing
As
of August 5, 2020, the Group is in the process of closing its Series B private placement. The Group is offering up to 6,750,000
common shares of Field Trip Psychedelics Inc. for gross proceeds of at least $13,500,000, or 7,762,500 common shares for gross
proceeds of $15,525,000 if the Agents’ Option is fully exercised.
|
Field Trip Psychedelics Inc. ▪ Consolidated Financial
Statements (audited)
|
P a g e | 26
|
Field
Trip Psychedelics Inc.
UNAUDITED
CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
FOR
THE THREE MONTHS ENDED JUNE 30, 2020 AND 2019
(expressed
in Canadian Dollars, unless otherwise noted)
FIELD
TRIP PSYCHEDELICS INC.
CONDENSED
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(unaudited)
|
|
|
|
|
|
As at
June 30, 2020
|
|
|
As at
March 31, 2020
|
|
|
(Expressed in Canadian Dollars)
|
|
Notes
|
|
|
$
|
|
|
$
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
CURRENT
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
7,041,330
|
|
|
9,590,758
|
|
|
Restricted cash
|
|
4
|
|
|
100,000
|
|
|
100,000
|
|
|
Accounts receivable
|
|
5
|
|
|
318,921
|
|
|
203,112
|
|
|
Other assets
|
|
6
|
|
|
287,608
|
|
|
133,916
|
|
|
TOTAL CURRENT ASSETS
|
|
|
|
|
7,747,859
|
|
|
10,027,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
7
|
|
|
873,657
|
|
|
575,446
|
|
|
Intangible assets
|
|
8
|
|
|
234,727
|
|
|
124,980
|
|
|
Right-of-use assets
|
|
9
|
|
|
3,960,043
|
|
|
1,632,661
|
|
|
Other non-current assets
|
|
6
|
|
|
203,218
|
|
|
180,222
|
|
|
TOTAL NON-CURRENT ASSETS
|
|
|
|
|
5,271,645
|
|
|
2,513,309
|
|
|
TOTAL ASSETS
|
|
|
|
|
13,019,504
|
|
|
12,541,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
CURRENT
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
920,567
|
|
|
577,878
|
|
|
Deferred revenue
|
|
|
|
|
4,000
|
|
|
2,000
|
|
|
Current portion of lease obligations
|
|
10
|
|
|
601,281
|
|
|
462,871
|
|
|
TOTAL CURRENT LIABILITIES
|
|
|
|
|
1,525,848
|
|
|
1,042,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT
|
|
|
|
|
|
|
|
|
|
|
Lease obligations
|
|
10
|
|
|
3,219,052
|
|
|
1,078,334
|
|
|
TOTAL LIABILITIES
|
|
|
|
|
4,744,900
|
|
|
2,121,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
11
|
|
|
12,859,058
|
|
|
12,781,270
|
|
|
Share-based payments reserve
|
|
12
|
|
|
1,022,275
|
|
|
330,703
|
|
|
Accumulated other comprehensive loss
|
|
|
|
|
(13,787
|
)
|
|
(49,521
|
)
|
|
Retained deficit
|
|
|
|
|
(5,592,942
|
)
|
|
(2,634,096
|
)
|
|
Non-controlling interest
|
|
19
|
|
|
-
|
|
|
(8,344
|
)
|
|
TOTAL EQUITY
|
|
|
|
|
8,274,604
|
|
|
10,420,012
|
|
|
TOTAL LIABILITIES AND EQUITY
|
|
|
|
|
13,019,504
|
|
|
12,541,095
|
|
Contingencies
(Note 26) and Commitments (Note 21)
Subsequent
events (Note 27)
The
accompanying notes are an integral part of these Condensed Interim Consolidated Financial Statements.
Approved
on behalf of the Board of Directors:
|
/s/
Joseph Del Moral
|
|
/s/
Helen Boudreau
|
|
Director
|
|
Director
|
|
Field
Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P
a g e | 2
|
FIELD
TRIP PSYCHEDELICS INC.
CONDENSED
INTERIM CONSOLIDATED STATEMENTS OF LOSS AND
COMPREHENSIVE
LOSS
(unaudited)
|
|
|
|
|
|
3 Months ended
June 30, 2020
|
|
|
Period ended
June 30, 2019
|
|
|
(Expressed in Canadian Dollars)
|
|
Notes
|
|
|
$
|
|
|
$
|
|
|
REVENUE
|
|
|
|
|
|
|
|
|
|
|
Patient services
|
|
|
|
|
23,359
|
|
|
-
|
|
|
Other revenue
|
|
|
|
|
240
|
|
|
-
|
|
|
Total revenue
|
|
|
|
|
23,599
|
|
|
-
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
General and administration
|
|
13
|
|
|
1,353,920
|
|
|
152,645
|
|
|
Occupancy costs
|
|
14
|
|
|
63,783
|
|
|
14,130
|
|
|
Sales and marketing
|
|
15
|
|
|
151,832
|
|
|
-
|
|
|
Research and development
|
|
16
|
|
|
735,002
|
|
|
-
|
|
|
Depreciation and amortization
|
|
|
|
|
209,760
|
|
|
-
|
|
|
Patient services
|
|
|
|
|
56,975
|
|
|
-
|
|
|
Total operating expenses
|
|
|
|
|
2,571,272
|
|
|
166,775
|
|
|
OTHER INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
Finance expense
|
|
17
|
|
|
(34,984
|
)
|
|
-
|
|
|
Non-operating loss
|
|
18
|
|
|
(376,247
|
)
|
|
-
|
|
|
Net loss before income taxes
|
|
|
|
|
(2,958,904
|
)
|
|
(166,775
|
)
|
|
Income taxes
|
|
25
|
|
|
-
|
|
|
-
|
|
|
Net loss
|
|
|
|
|
(2,958,904
|
)
|
|
(166,775
|
)
|
|
Exchange gain from translation of foreign subsidiaries
|
|
|
|
|
35,794
|
|
|
-
|
|
|
NET LOSS AND COMPREHENSIVE LOSS
|
|
|
|
|
(2,923,110
|
)
|
|
(166,775
|
)
|
|
TOTAL COMPREHENSIVE LOSS ATTRIBUTABLE TO:
|
|
|
|
|
|
|
|
|
|
|
Shareholders of Field Trip Psychedelics Inc.
|
|
|
|
|
(2,921,207
|
)
|
|
(166,775
|
)
|
|
Non-controlling interest
|
|
|
|
|
(1,903
|
)
|
|
-
|
|
|
|
|
|
|
|
(2,923,110
|
)
|
|
(166,775
|
)
|
|
NET LOSS PER SHARE
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares - basic
|
|
|
|
|
14,020,892
|
|
|
6,300,630
|
|
|
Weighted average number of common shares - diluted
|
|
|
|
|
25,947,271
|
|
|
15,301,530
|
|
|
Loss per share – basic and diluted
|
|
|
|
|
(0.21
|
)
|
|
(0.03
|
)
|
The
accompanying notes are an integral part of these Condensed Interim Consolidated Financial Statements.
|
Field
Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P
a g e | 3
|
FIELD
TRIP PSYCHEDELICS INC.
CONDENSED
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited)
|
|
|
|
|
|
Share Capital
|
|
|
Contributed Surplus
|
|
|
Accumulated Other Comprehensive Loss
|
|
|
Retained Deficit
|
|
|
Non-controlling Interest
|
|
|
Shareholders’ Equity
|
|
|
|
|
Notes
|
|
|
# Shares
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Balance, April 1, 2020
|
|
|
|
|
20,941,923
|
|
|
12,781,270
|
|
|
330,703
|
|
|
(50,041
|
)
|
|
(2,641,920
|
)
|
|
8,344
|
|
|
10,428,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share issuance - Class B
|
|
11
|
|
|
76,240
|
|
|
95,617
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
95,617
|
|
|
Share issuance cost
|
|
|
|
|
-
|
|
|
(17,829
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(17,829
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based payments
|
|
12
|
|
|
-
|
|
|
-
|
|
|
691,572
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
691,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange gain from translation of foreign subsidiaries
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
35,701
|
|
|
-
|
|
|
91
|
|
|
35,792
|
|
|
Purchase of non-controlling interest
|
|
19
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
553
|
|
|
9,817
|
|
|
(10,370
|
)
|
|
-
|
|
|
Net loss
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2,960,839
|
)
|
|
1,935
|
|
|
(2,958,904
|
)
|
|
Balance, June 30, 2020
|
|
|
|
|
21,018,163
|
|
|
12,859,058
|
|
|
1,022,275
|
|
|
(13,787
|
)
|
|
(5,592,942
|
)
|
|
-
|
|
|
8,274,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 2, 2019
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share issuance - Class A
|
|
11
|
|
|
6,300,630
|
|
|
350,000
|
|
|
600,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
950,000
|
|
|
Share-based payments
|
|
12
|
|
|
-
|
|
|
-
|
|
|
64,733
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
64,733
|
|
|
Net loss
|
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(166,775
|
)
|
|
-
|
|
|
(166,775
|
)
|
|
Balance, June 30, 2019
|
|
|
|
|
6,300,630
|
|
|
350,000
|
|
|
664,733
|
|
|
-
|
|
|
(166,775
|
)
|
|
-
|
|
|
847,958
|
|
The
accompanying notes are an integral part of these Condensed Interim Consolidated Financial Statements.
|
Field
Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P
a g e | 4
|
FIELD
TRIP PSYCHEDELICS INC.
CONDENSED
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
|
|
|
|
3 months ended
June 30, 2020
|
|
|
Period ended
June 30, 2019
|
|
|
(Canadian dollars in thousands)
|
|
Notes
|
|
|
|
|
|
$
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
(2,958,904
|
)
|
|
(166,775
|
)
|
|
Items not involving current cash flows:
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
209,760
|
|
|
-
|
|
|
Share-based payments
|
|
12
|
|
|
691,572
|
|
|
64,733
|
|
|
Interest expense on lease commitments
|
|
17
|
|
|
37,234
|
|
|
-
|
|
|
Interest income on shareholders’ loan
|
|
17
|
|
|
(621
|
)
|
|
-
|
|
|
Interest income on refundable lease deposits
|
|
17
|
|
|
(1,646
|
)
|
|
-
|
|
|
Net change in non-cash working capital
|
|
20
|
|
|
61,828
|
|
|
30,942
|
|
|
CASH USED IN OPERATING ACTIVITIES
|
|
|
|
|
(1,960,777
|
)
|
|
(71,100
|
)
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Acquisition of property, plant and equipment
|
|
7
|
|
|
(327,411
|
)
|
|
-
|
|
|
Acquisition of intangible assets
|
|
8
|
|
|
(119,173
|
)
|
|
-
|
|
|
Repayment of lease obligation
|
|
10
|
|
|
(211,668
|
)
|
|
-
|
|
|
Refundable security deposit paid for right-of-use assets
|
|
|
|
|
(54,512
|
)
|
|
-
|
|
|
CASH USED IN INVESTING ACTIVITIES
|
|
|
|
|
(712,764
|
)
|
|
-
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Proceeds on issuance of common shares
|
|
|
|
|
95,617
|
|
|
950,000
|
|
|
Share issuance cost paid
|
|
11
|
|
|
(17,829
|
)
|
|
-
|
|
|
CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
|
|
77,788
|
|
|
950,000
|
|
|
Net change in cash during the period
|
|
|
|
|
(2,595,753
|
)
|
|
878,900
|
|
|
Effect of exchange rate on changes in cash
|
|
|
|
|
46,325
|
|
|
-
|
|
|
Cash, beginning of the period
|
|
|
|
|
9,690,758
|
|
|
-
|
|
|
CASH, END OF PERIOD
|
|
|
|
|
7,141,330
|
|
|
878,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Represented by:
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
7,041,330
|
|
|
878,900
|
|
|
Restricted cash
|
|
|
|
|
100,000
|
|
|
-
|
|
|
CASH, END OF PERIOD
|
|
|
|
|
7,141,330
|
|
|
878,900
|
|
The
accompanying notes are an integral part of these Condensed Interim Consolidated Financial Statements.
|
Field
Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P
a g e | 5
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Condensed Interim Consolidated Financial Statements
For
the three months ended June 30, 2020 and period ended June 30, 2019
(unaudited)
1.
NATURE OF OPERATIONS
Field
Trip Psychedelics Inc. (the “Group”, the “Company” or “Field Trip”) is an international organization
focused on blending operational execution with strategic investment across all aspects of the psychedelics value chain. Through
its wholly owned subsidiaries Field Trip Health Inc., and Field Trip Ventures USA Inc., “Field Trip Health” is building
a network of world class clinics focused on psychedelics-assisted therapies. Through its wholly owned subsidiary Field Trip Natural
Products Ltd. and Field Trip Psychedelics research division, “Field Trip Discovery” performs research on botanical
psychedelics and psychedelic-based molecules for future therapeutic application of select mental health indications.
Field
Trip Psychedelics Inc. was incorporated under the laws of the province of Ontario, Canada as Field Trip Ventures Inc. on April
2, 2019. On October 10, 2019, the Company amended its name to Field Trip Psychedelics Inc. The Company’s registered office
is located at 30 Duncan Street, Unit 401, Toronto, Ontario, Canada, M5V 2C3.
2.
BASIS OF PREPARATION
Going
Concern Assumption
At
June 30, 2020, the Group had not yet achieved profitable operations, has a retained deficit of $5,592,942 since its inception,
and expects to incur further losses in the development of its business, all of which creates a material uncertainty that may cast
significant doubt about the Group’s ability to continue as a going concern. The Group’s ability to continue as a going
concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to conduct
its planned business, meet its on-going levels of corporate overhead and discharge its liabilities as they come due. These financial
statements have been prepared on a going concern basis which assumes that the Group will be able to realize its assets and discharge
liabilities in the normal course of business. The Group has considered the private placement subsequent to June 30, 2020 as disclosed
in Note 27 in making this assessment. Accordingly, these financial statements do not give effect to adjustments, if any that would
be necessary should the Company be unable to continue as a going concern and, therefore, be required to realize its assets and
liquidate its liabilities in other than the normal course of business and at amounts which may differ from those shown in these
financial statements.
Statement
of Compliance
The
condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRS) and with IAS 34, Interim Financial Reporting, as issued by the International Accounting Standards Board (“IASB”)
and interpreted by the IFRS Interpretations Committee (“IFRIC”). These condensed interim consolidated financial statements
do not include all of the information required for full annual financial statements and should be read in conjunction with the
most recent audited annual consolidated financial statements of the Company, including the notes thereto, for the year ended March
31, 2020.
These
consolidated financial statements were approved for issue by the Board of Directors on September 9, 2020.
Basis
of Presentation
These
consolidated financial statements have been prepared on a going concern basis, under the historical cost convention, except for
certain financial instruments that are measured at fair value, as detailed in the Group’s accounting policies below.
Functional
Currency
The
Group’s functional currency is the Canadian dollar. Transactions undertaken in foreign currencies are translated into Canadian
dollars at daily exchange rates prevailing when the transactions occur. Monetary assets and liabilities denominated in foreign
currencies are translated at period-end exchange rates and non-monetary items are translated at historical exchange rates. Realized
and unrealized exchange gains and losses are recognized in the consolidated statements of loss and comprehensive loss.
|
Field
Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P
a g e | 6
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Condensed Interim Consolidated Financial Statements
For
the three months ended June 30, 2020 and period ended June 30, 2019
(unaudited)
2.
BASIS OF PREPARATION (CONT’D)
The
assets and liabilities of foreign operations are translated into Canadian dollars using the period-end exchange rates. Income,
expenses, and cash flows of foreign operations are translated into Canadian dollars using average exchange rates. Exchange differences
resulting from the translation of foreign operations into Canadian dollars are recognized in other comprehensive (loss) income
and accumulated in equity.
Basis
of Consolidation
These
condensed interim consolidated financial statements include the accounts of the Group and its subsidiaries as follows:
|
Subsidiary
|
|
Jurisdiction
|
|
Functional
Currency
|
|
%
Ownership
|
|
|
Field Trip Health Inc.
|
|
Ontario, Canada
|
|
Canadian Dollars
|
|
|
100
|
%
|
|
Field Trip Ventures USA Inc.
|
|
Delaware, USA
|
|
United States Dollars
|
|
|
100
|
%
|
|
Field Trip Natural Products Limited (i)
|
|
Kingston,
Jamaica
|
|
United
States Dollars
|
|
|
100
|
%
|
Subsidiaries
are entities controlled by the Company. Control exists when the Company has the power, directly and indirectly, to govern the
financial and operating policies of an entity and be exposed to the variable returns from its activities. The financial statements
of subsidiaries are included in the consolidated financial statements from the date that control commences until the date the
control ceases. All significant intercompany balances and transactions have been eliminated upon consolidation.
|
|
(i)
|
On
June 3, 2020, Field Trip Psychedelics Inc., Darwin Inc., a third party, and Field Trip
Natural Products Limited entered into a Share Purchase Agreement whereby Field Trip Psychedelics
Inc. purchased 120 shares of Field Trip Natural Products Limited from Darwin Inc. for
a nominal amount of $120 USD. As a result of the share transfer, the Group owns 100%
of the authorized capital of Field Trip Natural Products Limited. The Company as part
of this arrangement entered into a share-based compensation agreement with Darwin Inc.
as detailed in Note 12 Share-based Payments.
|
3.
SIGNIFICANT ACCOUNTING POLICIES
The
accounting policies and use of estimates and judgments described in the Company’s annual consolidated financial statements
have been applied consistently to all periods presented in these condensed interim consolidated statements unless otherwise indicated.
The accounting policies have been applied consistently by all subsidiaries.
Use
of Estimates and Judgments
The
preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities at the date of these Consolidated Financial Statements
and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates
and such differences could be material.
Key
areas of judgment and estimation or use of managerial assumptions are as follows:
Share-based
payments
The
fair value of share-based compensation expenses are estimated using the Black-Scholes option pricing model and rely on a number
of estimates, such as the expected life of the option, the volatility of the underlying share price, the risk free rate of return,
and the estimated rate of forfeiture of options granted. The Group measures equity settled share-based payments based on their
fair value at the grant date and recognizes compensation expense over the vesting period based on the Group’s estimate of
equity instruments that will eventually vest. Expected forfeitures are estimated at the date of grant and subsequently adjusted
if further non-market based information indicates actual forfeitures may vary from the original estimate. Any revisions are recognized
in the consolidated statements of loss and comprehensive loss such that the cumulative expense reflects the revised estimate.
|
Field
Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P
a g e | 7
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Condensed Interim Consolidated Financial Statements
For
the three months ended June 30, 2020 and period ended June 30, 2019
(unaudited)
3.
SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Estimated
useful lives and impairment considerations of property, plant and equipment and intangible assets
Depreciation
of property, plant and equipment and amortization of intangible assets are dependent upon estimates of useful lives, which are
determined through the exercise of judgment. The assessment of any impairment of these assets is dependent upon estimates of recoverable
amounts that take into account factors such as economic and market conditions and the useful lives of assets. The impairment is
amount by which the carrying amount of the asset or Cash Generating Unit (CGU) exceeds its recoverable amount. The recoverable
amount is the higher of the fair value less costs of disposal and its value in use. Management exercises judgement in the determination
of the Company’s CGUs.
Deferred
taxes
Significant
estimates are required in determining the Company’s income tax provision. Some estimates are based on interpretations of
existing tax laws or regulations. Various internal and external factors may have favourable or unfavourable effects on the Company’s
future effective tax rate. These include, but are not limited to, changes in tax laws, regulations and/or rates, changing interpretations
of existing tax laws or regulations, and results of tax audits by tax authorities.
IFRIC
23 Uncertainty over Income Tax Treatments
In
June 2017, the International Accounting Standards Board (IASB) issued an International Financial Reporting Interpretations Committee
(IFRIC) interpretation incorporated into Part I of the CPA Canada Handbook – Accounting by the Accounting Standards Board
(AcSB) to clarify the accounting for uncertainties in income taxes. IAS 12 Income Taxes provides requirements on the recognition
and measurement of current or deferred income tax liabilities and assets. However, it does not provide a specific requirement
for the accounting for income tax when the application of tax law to a particular transaction or circumstance is uncertain. As
a result, the interpretation aims to reduce the diversity in how entities recognize and measure a tax liability or tax asset when
there is uncertainty over income tax treatments. The interpretation is effective for annual periods beginning on or after January
1, 2019.
Impact
of Coronavirus
While
the precise impact of the recent novel coronavirus (“COVID-19”) outbreak remains unknown, it has introduced uncertainty
and volatility in Canadian and global economies. The Group is monitoring developments and preparing for any impacts related to
COVID-19. The Group has a comprehensive business continuity plan that ensures its readiness to appropriately address and mitigate
regulatory and business risks as they arise including, but not limited to, impacts on patients, practitioners and employees.
4.
RESTRICTED CASH
As
at June 30, 2020, the Group had $100,000 of restricted cash held as collateral against Field Trip Psychedelics Inc. credit card
limit. The funds are invested in two cashable GIC accounts. $35,000 matures on November 2, 2020, and $65,000 matures on January
20, 2021 respectively. As at March 31, 2020 the Group had $100,000 of restricted cash.
5.
ACCOUNTS RECEIVABLE
|
|
|
As at
June 30, 2020
$
|
|
|
As at
March 31, 2020
$
|
|
|
Other receivables
|
|
|
83,357
|
|
|
|
11,940
|
|
|
Sales tax receivable
|
|
|
235,564
|
|
|
|
191,172
|
|
|
|
|
|
318,921
|
|
|
|
203,112
|
|
During
the 3 months ended June 30, 2020 and period ended March 31, 2020 no expected credit loss allowance was recorded for accounts receivable
& no receivables were written off.
|
Field
Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P
a g e | 8
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Condensed Interim Consolidated Financial Statements
For
the three months ended June 30, 2020 and period ended June 30, 2019
(unaudited)
6.
OTHER ASSETS
|
|
|
As
at
June
30, 2020
$
|
|
|
As
at
March
31, 2020
$
|
|
|
Prepaid
expenses
|
|
|
287,608
|
|
|
|
133,915
|
|
|
Lease
security deposits
|
|
|
121,385
|
|
|
|
95,451
|
|
|
Prepaid
additional (non-lease) rent
|
|
|
33,222
|
|
|
|
36,781
|
|
|
Shareholder
loans receivable (note 24)
|
|
|
48,611
|
|
|
|
47,991
|
|
|
|
|
|
490,826
|
|
|
|
314,138
|
|
|
Less
amounts due within one year
|
|
|
(287,608
|
)
|
|
|
(133,916
|
)
|
|
Non-current
balance
|
|
|
203,218
|
|
|
|
180,222
|
|
7.
PROPERTY, PLANT AND EQUIPMENT
Property,
plant and equipment consist of the following:
|
Cost
|
|
Leasehold
Improvements
$
|
|
|
Furniture &
Fixtures
$
|
|
|
Computer
Equipment
& Software
$
|
|
|
Medical &
Laboratory
Equipment
$
|
|
|
Construction
in Progress
$
|
|
|
Total
$
|
|
|
Balance, April 1, 2020
|
|
|
342,590
|
|
|
|
56,187
|
|
|
|
78,770
|
|
|
|
5,533
|
|
|
|
106,402
|
|
|
|
589,482
|
|
|
Additions
|
|
|
-
|
|
|
|
-
|
|
|
|
23,328
|
|
|
|
-
|
|
|
|
313,173
|
|
|
|
336,501
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
(142
|
)
|
|
|
(218
|
)
|
|
|
(4,193
|
)
|
|
|
(4,553
|
)
|
|
Balance, June 30, 2020
|
|
|
342,590
|
|
|
|
56,187
|
|
|
|
101,956
|
|
|
|
5,315
|
|
|
|
415,382
|
|
|
|
921,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 1, 2020
|
|
|
(8,645
|
)
|
|
|
(1,041
|
)
|
|
|
(4,111
|
)
|
|
|
(239
|
)
|
|
|
-
|
|
|
|
(14,036
|
)
|
|
Depreciation expense
|
|
|
(23,221
|
)
|
|
|
(2,802
|
)
|
|
|
(7,474
|
)
|
|
|
(270
|
)
|
|
|
-
|
|
|
|
(33,767
|
)
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
16 14 - 30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2020
|
|
|
(31,866
|
)
|
|
|
(3,843
|
)
|
|
|
(11,569
|
)
|
|
|
(495
|
)
|
|
|
-
|
|
|
|
(47,773
|
)
|
|
Net book value as at
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
|
310,724
|
|
|
|
52,344
|
|
|
|
90,387
|
|
|
|
4,820
|
|
|
|
415,382
|
|
|
|
873,657
|
|
|
March 31, 2020
|
|
|
333,945
|
|
|
|
55,146
|
|
|
|
74,659
|
|
|
|
5,294
|
|
|
|
106,402
|
|
|
|
575,446
|
|
8.
INTANGIBLE ASSETS
Intangible
assets consist of the following:
|
Cost
|
|
Software in
Progress
$
|
|
|
Field Trip
Health Website
$
|
|
|
Total
$
|
|
|
Balance, April 1, 2020
|
|
|
-
|
|
|
|
126,974
|
|
|
|
126,974
|
|
|
Additions
|
|
|
85,131
|
|
|
|
34,042
|
|
|
|
119,173
|
|
|
Balance, June 30, 2020
|
|
|
85,131
|
|
|
|
161,016
|
|
|
|
246,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 1, 2020
|
|
|
-
|
|
|
|
(1,994
|
)
|
|
|
(1,994
|
)
|
|
Amortization expense
|
|
|
-
|
|
|
|
(9,426
|
)
|
|
|
(9,426
|
)
|
|
Balance, June 30, 2020
|
|
|
-
|
|
|
|
(11,420
|
)
|
|
|
(11,420
|
)
|
|
Net book value as at June 30, 2020
|
|
|
85,131
|
|
|
|
149,596
|
|
|
|
234,727
|
|
|
Net book value as at March 31, 2020
|
|
|
-
|
|
|
|
124,980
|
|
|
|
124,980
|
|
|
Field
Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P
a g e | 9
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Condensed Interim Consolidated Financial Statements
For
the three months ended June 30, 2020 and period ended June 30, 2019
(unaudited)
9.
Right-of-Use Assets
Right-of-use
assets (“ROU”) consist of the following:
|
Cost
|
|
Total
$
|
|
|
Balance, April 1, 2020
|
|
|
1,762,951
|
|
|
Additions
|
|
|
2,524,725
|
|
|
Foreign currency translation adjustment
|
|
|
(31,291
|
)
|
|
Balance, June 30, 2020
|
|
|
4,256,385
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
|
|
|
Balance, April 1, 2020
|
|
|
(130,290
|
)
|
|
Depreciation expense
|
|
|
(166,567
|
)
|
|
Foreign currency translation adjustment
|
|
|
515
|
|
|
Balance, June 30, 2020
|
|
|
(296,342
|
)
|
|
Net book value as at
|
|
|
|
|
|
June 30, 2020
|
|
|
3,960,043
|
|
|
March 31, 2020
|
|
|
1,632,661
|
|
10.
LEASE OBLIGATIONS
The
Group leases real property for its clinical and office locations in Toronto, New York City and Santa Monica as well as its research
facility in Jamaica. Lease obligations consist of the following as at June 30, 2020:
|
|
|
$
|
|
|
As at April 1, 2020
|
|
|
1,541,205
|
|
|
Additions during the period
|
|
|
2,412,154
|
|
|
Foreign currency translation adjustment
|
|
|
41,408
|
|
|
Payments during the period
|
|
|
(211,668
|
)
|
|
Interest expense during the period
|
|
|
37,234
|
|
|
|
|
|
3,820,333
|
|
|
Less amounts due within one year
|
|
|
(601,281
|
)
|
|
Long-term balance
|
|
|
3,219,052
|
|
The
Group expenses payments for short-term leases and low-value leases as incurred. These payments for short- term leases and low-value
leases were $33,470 for the 3 months ended June 30, 2020 and $14,130 for the period ended June 30, 2019.
The
Group’s future cash outflows may change due to variable lease payments, renewal options, termination options, residual value
guarantees and leases not yet commenced to which the Group is committed that are not reflected in the lease obligations. The following
is a maturity analysis for undiscounted lease payments that are reflected in the lease obligations as at June 30, 2020:
|
|
|
$
|
|
|
Less than 1 year
|
|
|
931,792
|
|
|
1 to 2 years
|
|
|
1,020,805
|
|
|
2 to 3 years
|
|
|
561,666
|
|
|
3 to 4 years
|
|
|
327,265
|
|
|
4 to 5 years
|
|
|
337,083
|
|
|
Beyond 5 years
|
|
|
1,809,850
|
|
|
|
|
|
4,988,461
|
|
See
Note 21, Commitments for additional information on estimated additional rent payment obligations related to the Group’s
leases on its clinical and office locations.
|
Field
Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P
a g e | 10
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Condensed Interim Consolidated Financial Statements
For
the three months ended June 30, 2020 and period ended June 30, 2019
(unaudited)
11.
SHARE CAPITAL
Share
Capital Authorized
The
authorized share capital of the Group consists of the following:
Class
A shares – unlimited
Class
B shares – unlimited
Class
C shares – unlimited
Share
Capital Issued as at June 30, 2020
|
Class of Shares
|
|
Number of
Shares Issued
|
|
|
Amount
$
|
|
|
A
|
|
|
11,510,900
|
|
|
|
1,605,027
|
|
|
B (i) (ii)
|
|
|
9,507,263
|
|
|
|
11,254,031
|
|
|
|
|
|
21,018,163
|
|
|
|
12,859,058
|
|
Share
Capital Issued as at March 31, 2020
|
Class of Shares
|
|
Number of
Shares Issued
|
|
|
Amount
$
|
|
|
A
|
|
|
11,510,900
|
|
|
|
1,605,027
|
|
|
B
|
|
|
9,431,023
|
|
|
|
11,176,243
|
|
|
|
|
|
20,941,923
|
|
|
|
12,781,270
|
|
|
|
(i)
|
On
May 20, 2020 the Group issued 76,240 Class B shares at a price of $0.90 USD per share,
yielding gross proceeds of $68,616 USD or $95,617 CAD.
|
|
|
(ii)
|
Total
finance costs incurred for the issuance of share capital during the 3 months ended June
30, 2020 was $17,829 CAD which was settled via the issuance of 14,216 of Class B shares
at a price of $0.90 USD or $1.2542 CAD per share.
|
Voting
Rights
Each
holder of Class A shares is entitled to receive notice of and to attend all meetings of shareholders of the Corporation and at
all such meetings shall be entitled to one (1) vote in respect of each such share held by such holder. The foregoing, however,
shall not apply to separate meetings of the holders of other classes or series of shares in accordance with the Shareholders Agreement.
On any matter presented to the shareholders of the Corporation for their action or consideration at any meeting of shareholders
of the Corporation (or by written consent of shareholders in lieu of meeting), each holder of outstanding Class B Series Shares
is entitled to cast the number of votes equal to the number of Class B Series Shares held by the holder. Except as provided by
law or by the other provisions of the Articles, holders of Class B Series Shares shall vote together with the holders of Class
A Shares as a single class.
Class
B Shares Automatic Conversion
Upon
the completion of a private placement of Class A Shares from treasury for gross proceeds of at least USD $2,500,000 in one or
multiple closings (the “Qualified Financing”), then all of the Class B Series 1 Shares will automatically and concurrently
be converted into Class A Shares (the “Automatic Conversion”) as follows:
|
|
(a)
|
If
the price paid per Class A Share in the Qualified Financing is equal to or greater than
USD $1.125, then each Class B Series 1 Share will convert into one Class A Share; or
|
|
Field
Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P
a g e | 11
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Condensed Interim Consolidated Financial Statements
For
the three months ended June 30, 2020 and period ended June 30, 2019
(unaudited)
11.
SHARE CAPITAL (CONT’D)
|
|
(b)
|
If
the price paid per Class A Share in the Qualified Financing is less than USD $1.125,
then the Class B Series 1 Shares held by each holder will be converted into a number
of Class A Shares determined by dividing (x) the Subscription Amount by (y) an amount
equal to the product of (A) the price paid per Class A Share in the Qualified Financing
multiplied by (B) 0.80. For the purposes of this calculation, “Subscription Amount”
means the number of Class B Series 1 Shares held by the holder multiplied by USD $ 0.90.
|
12.
SHARE-BASED PAYMENTS
The
Group has two share-based compensation plans: the “Stock Option Plan” and the “Long Term Incentive Option Plan”.
Long
Term Incentive Option Plan
On
April 2, 2019 the directors of the Group authorized option agreements with each of the five founding executives of the Group.
Under the terms of the agreement, each option holder received 1,800,180 options to purchase Class A shares at an exercise price
of $0.00001. The options vest over a period of four years and expire on the fifth anniversary of the grant date.
Stock
Option Plan
On
August 1, 2019, the directors of the Group authorized the establishment of the “Stock Option Plan”. The maximum number
of common shares that will be reserved for issuance under the Stock Option Plan shall be 15% of the issued and outstanding Common
Shares from time to time, on a non-diluted basis. For the avoidance of doubt, Long Term Incentive Options are excluded from the
Stock Option Plan maximum. Common Shares in respect of Options that have been exercised, cancelled, surrendered, or terminated
or that expire without being exercised shall again be available for issuance under the Plan.
As
at June 30, 2020, the number of common shares available for issuance under the Share Option Plan was 3,152,725.
Under
the Stock Option Plan, the Group may grant options to purchase common shares to officers, directors, employees or consultants
of the Group or its affiliates. Options issued under the Stock Option Plan are granted for a term not exceeding ten years from
the date of grant. All options issued to-date have a life of ten years or less. In general, options have vested either immediately
upon grant or over a period of four to ten years or upon the achievement of certain performance-related measures or milestones.
The
following is a schedule of the options outstanding as at:
|
|
|
Options
|
|
|
Range
of
Exercise
Price
$
|
|
|
Weighted
Average
Exercise
Price
$
|
|
|
Balance,
April 1, 2020
|
|
|
11,377,706
|
|
|
|
0.00001-0.50
|
|
|
|
0.10
|
|
|
Stock
Option Plan - Granted
|
|
|
775,000
|
|
|
|
0.50
|
|
|
|
0.50
|
|
|
Balance,
June 30, 2020
|
|
|
12,152,706
|
|
|
|
0.00001-0.50
|
|
|
|
0.13
|
|
The
fair value of each tranche is measured at the date of grant using the Black-Scholes option pricing model.
Options
model inputs for options granted during the 3 months ended June 30, 2020 were as follows:
|
Options
|
|
|
Grant
Date
|
|
Share
Price
$
|
|
|
Exercise
Price
$
|
|
|
Risk-free
Interest
Rate
%
|
|
|
Expected
Life
(years)
|
|
|
Volatility
Factor
%
|
|
|
Fair
Value per
Option
$
|
|
|
775,000
|
|
|
April 1, 2020-May 31, 2020
|
|
|
0.28
|
(i)
|
|
|
0.50
|
|
|
|
0.70
|
|
|
|
10
|
|
|
|
75
|
|
|
|
0.19
|
|
|
Field
Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P
a g e | 12
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Condensed Interim Consolidated Financial Statements
For
the three months ended June 30, 2020 and period ended June 30, 2019
(unaudited)
12.
SHARE-BASED PAYMENTS (CONT’D)
|
|
(i)
|
On
January 29, 2020 the Group issued 9,431,023 Class B shares at a price of $0.90 USD per share. The Group derived the valuation
of the Class A shares on the issuance date based on the Class B issuance price on January 29, 2020, adjusted for share specific
attributes resulting in an estimated fair value of Class A shares of $0.21 USD or $0.28 CAD.
|
The
following table summarizes the outstanding and exercisable options held by directors, officers, employees and consultants as at
June 30, 2020:
|
|
|
|
Outstanding
|
|
|
Exercisable
|
|
|
Exercise
Price
Range
$
|
|
|
Options
#
|
|
|
Remaining
Contractual
Life
years
|
|
Weighted
Average
Exercise
Price
$
|
|
|
Vested
Options
|
|
|
Weighted
Average
Exercise
Price
$
|
|
|
|
.00001
- 0.50
|
|
|
|
12,137,706
|
|
|
5 - 10
|
|
|
0.13
|
|
|
|
15,000
|
|
|
|
0.50
|
|
The
following table summarizes the outstanding and exercisable options held by directors, officers, employees and consultants as at
March 31, 2020:
|
|
|
|
Outstanding
|
|
|
Exercisable
|
|
|
Exercise
Price
Range
$
|
|
|
Options
#
|
|
|
Remaining
Contractual
Life
years
|
|
Weighted
Average
Exercise
Price
$
|
|
|
Vested
Options
|
|
|
Weighted
Average
Exercise
Price
$
|
|
|
|
.00001
- 0.50
|
|
|
|
11,362,706
|
|
|
5
- 10
|
|
|
0.10
|
|
|
|
15,000
|
|
|
|
0.50
|
|
Jamaica
Facility Shares
Field
Trip Psychedelics Inc. will issue 1,200,000 fully paid up Common Shares to Darwin Inc. (the “Jamaica Facility Shares”);
600,000 upon commencement of research in the newly renovated research facility, 150,000 one year from the initial closing date
(“Cliff”), and 450,000 on a prorated basis quarterly, commencing on the first calendar quarter following the Cliff
and ending on the date that is 36 months following the Cliff. No shares were issued to Darwin Inc. as at June 30, 2020.
The
fair value of the Jamaica Facility Shares is measured at the date of grant using the Black-Scholes pricing model.
Black-Scholes
model inputs for the Jamaican Facility Shares for the 3 months ended June 30, 2020 were as follows:
|
Shares
to be Issued
|
|
|
Grant
Date
|
|
Share
Price
$
|
|
|
|
Risk-free
Interest
Rate
%
|
|
|
Expected
Life
(years)
|
|
|
Volatility
Factor
%
|
|
|
Fair
Value per
Share
$
|
|
|
1,200,000
|
|
|
June 3, 2020
|
|
|
2.00
|
(i)
|
|
|
|
0.62
|
|
|
|
4
|
|
|
|
75
|
|
|
|
2.00
|
|
Summary
of Stock-based Compensation
|
|
|
3
months ended
June
30, 2020
$
|
|
|
Period
ended
June
30, 2019
$
|
|
|
Stock
option compensation expense - Stock Option Plan
|
|
|
69,634
|
|
|
|
-
|
|
|
Stock
option compensation expense - Long Term Incentive Options
|
|
|
34,035
|
|
|
|
64,733
|
|
|
Stock-based
compensation expense – Jamaica Facility Shares
|
|
|
587,903
|
|
|
|
-
|
|
|
Stock-based
compensation expense
|
|
|
691,572
|
|
|
|
64,733
|
|
|
Field
Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P
a g e | 13
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Condensed Interim Consolidated Financial Statements
For
the three months ended June 30, 2020 and period ended June 30, 2019
(unaudited)
13.
GENERAL AND ADMINISTRATION
|
|
|
3
months ended
June
30, 2020
$
|
|
|
Period
ended
June
30, 2019
$
|
|
|
Personnel
costs
|
|
|
749,840
|
|
|
|
11,684
|
|
|
External
services
|
|
|
432,892
|
|
|
|
72,476
|
|
|
Share-based
payments (Note 12)
|
|
|
103,669
|
|
|
|
64,733
|
|
|
Travel
and entertainment
|
|
|
9,040
|
|
|
|
3,582
|
|
|
IT
and technology
|
|
|
54,448
|
|
|
|
-
|
|
|
Office
and general
|
|
|
4,031
|
|
|
|
170
|
|
|
Total
general and administration
|
|
|
1,353,920
|
|
|
|
152,645
|
|
14.
OCCUPANCY COSTS
|
|
|
3
months ended
June
30, 2020
$
|
|
|
Period
ended
June
30, 2019
$
|
|
|
Operating rent expense
|
|
|
33,469
|
|
|
|
14,130
|
|
|
Taxes, maintenance, insurance
|
|
|
7,009
|
|
|
|
-
|
|
|
Minor furniture and fixtures
|
|
|
1,284
|
|
|
|
-
|
|
|
Utilities and services
|
|
|
22,021
|
|
|
|
-
|
|
|
Total
occupancy costs
|
|
|
63,783
|
|
|
|
14,130
|
|
15.
SALES AND MARKETING
|
|
|
3
months ended
June
30, 2020
$
|
|
|
Period
ended
June
30, 2019
$
|
|
|
Brand and public relations
|
|
|
62,463
|
|
|
|
-
|
|
|
Conference fees
|
|
|
20,392
|
|
|
|
-
|
|
|
Personnel costs
|
|
|
31,317
|
|
|
|
-
|
|
|
External marketing
services
|
|
|
37,660
|
|
|
|
-
|
|
|
Total
sales and marketing
|
|
|
151,832
|
|
|
|
-
|
|
16.
RESEARCH AND DEVELOPMENT
|
|
|
3
months ended
June
30, 2020
$
|
|
|
Period
ended
June
30, 2019
$
|
|
|
External services
|
|
|
590,514
|
|
|
|
-
|
|
|
Personnel costs
|
|
|
142,421
|
|
|
|
-
|
|
|
Supplies and services
|
|
|
2,067
|
|
|
|
-
|
|
|
Total
research and development
|
|
|
735,002
|
|
|
|
-
|
|
The
expenditures above relate to research and development activities which do not qualify for capitalization based on the Group’s
accounting policies for capitalization of development costs. They have therefore been recognised as an expense during the 3 months
ended June 30, 2020.
|
Field
Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P
a g e | 14
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Condensed Interim Consolidated Financial Statements
For
the three months ended June 30, 2020 and period ended June 30, 2019
(unaudited)
17.
FINANCE EXPENSE
|
|
|
3
Months ended
June
30, 2020
$
|
|
|
Period
ended
June
30, 2019
$
|
|
|
Interest expense on leases
|
|
|
(37,233
|
)
|
|
|
-
|
|
|
Interest income on shareholders’ loan
(note 24)
|
|
|
621
|
|
|
|
-
|
|
|
Interest income on refundable lease
deposit
|
|
|
1,646
|
|
|
|
-
|
|
|
Interest expense on bank balances
|
|
|
(18
|
)
|
|
|
-
|
|
|
Total finance expense
|
|
|
(34,984
|
)
|
|
|
-
|
|
18.
NON-OPERATING LOSS
|
|
|
3
months ended
June
30, 2020
$
|
|
|
|
Period
ended
June
30, 2019
$
|
|
|
Unrealized foreign exchange
gains
|
|
|
475
|
|
|
|
|
-
|
|
|
Realized foreign exchange gains (loss)
|
|
|
(394,722
|
)
|
|
|
|
-
|
|
|
Wage subsidy
|
|
|
18,000
|
|
|
|
|
-
|
|
|
Total non-operating
loss
|
|
|
(376,247
|
)
|
|
|
|
-
|
|
19.
NON-CONTROLLING INTEREST
The
following table summarizes the information relating to the Group’s subsidiary Field Trip Natural Products Limited before
intercompany eliminations:
|
|
|
As
at
June
30, 2020
$
|
|
|
As
at
March
31, 2020
$
|
|
|
Current
assets
|
|
|
54,992
|
|
|
|
30,300
|
|
|
Non-current
assets
|
|
|
117,128
|
|
|
|
5,294
|
|
|
Current
liabilities
|
|
|
(159,053
|
)
|
|
|
(48,941
|
)
|
|
Non-current
liabilities
|
|
|
(85,722
|
)
|
|
|
(28,374
|
)
|
|
Total
equity
|
|
|
(72,655
|
)
|
|
|
(41,721
|
)
|
|
Non-controlling
interest (%) (i)
|
|
|
0
|
%
|
|
|
20
|
%
|
|
Equity
attributable to Field Trip
|
|
|
(72,655
|
)
|
|
|
(33,377
|
)
|
|
Equity
attributable to NCI
|
|
|
-
|
|
|
|
(8,344
|
)
|
|
|
(i)
|
See
Note 2 Basis of Presentation for changes to the ownership structure of the Group’s subsidiary Field Trip Natural Products
during the 3 months ended June 30, 2020
|
20.
CHANGE IN NON-CASH WORKING CAPITAL
|
|
|
3
months ended
June
30, 2020
$
|
|
|
Period
ended
June
30, 2019
$
|
|
|
Accounts
receivable
|
|
|
(115,810
|
)
|
|
|
-
|
|
|
Other
current assets
|
|
|
(152,189
|
)
|
|
|
-
|
|
|
Other
non-current assets
|
|
|
(18,614
|
)
|
|
|
-
|
|
|
Accounts
payable and accrued liabilities
|
|
|
346,441
|
|
|
|
30,942
|
|
|
Deferred
revenue
|
|
|
2,000
|
|
|
|
-
|
|
|
Total
non-operating income
|
|
|
61,828
|
|
|
|
30,942
|
|
|
Field
Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P
a g e | 15
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Condensed Interim Consolidated Financial Statements
For
the three months ended June 30, 2020 and period ended June 30, 2019
(unaudited)
21.
COMMITMENTS
The
Group leases real property for its clinical and office locations in Canada. The Group is committed for estimated additional variable
(non-lease) rent payment obligations as follows:
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rent
|
|
|
|
|
|
|
|
|
|
|
|
More than
|
|
|
|
|
Expiry
|
|
|
Payments
|
|
|
1 year
|
|
|
2-3 years
|
|
|
4-5 years
|
|
|
5 years
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Toronto corporate office and clinic
|
|
|
2023-10-31
|
|
|
|
223,060
|
|
|
|
111,530
|
|
|
|
111,530
|
|
|
|
-
|
|
|
|
-
|
|
|
Santa Monica clinic
|
|
|
2030-06-30
|
|
|
|
659,051
|
|
|
|
32,953
|
|
|
|
131,810
|
|
|
|
131,810
|
|
|
|
362,478
|
|
|
|
|
|
|
|
|
|
882,111
|
|
|
|
144,483
|
|
|
|
243,340
|
|
|
|
131,810
|
|
|
|
362,478
|
|
These
additional (non-lease) rent payments are variable, and therefore have not been included in the right-of-use asset or lease obligations.
In
addition to the variable rent payments above, the Group has committed purchase orders related to capital asset expansion of $99,893,
all of which are expected to be paid within the next year.
Jamaica
Facility
On
April 6, 2020, FTNP entered into a partnership with the University of West Indies (“UWI)” to provide advanced research
and development on psilocybin producing mushrooms. FTNP agreed to lease property from UWI on which to construct a 2,072 square
foot research laboratory (“Jamaica Facility”), contribute up to US$1,000,000 of initial capital for the Jamaica Facility
and psilocybin research and a total of US$100,000 to fund student development initiatives at UWI over a 36-month period. UWI has
agreed to provide personnel selected by FTNP to assist it in the psilocybin research and FTNP shall be responsible for the costs
of labour, laboratory supplies, technical assistance and other charges directly related to the psilocybin research, plus 15%.
All equipment, machinery, data and other property purchased by FTNP, and all intellectual property and discoveries developed through
the Psilocybin Research, remain the sole and exclusive property of FTNP. In the event that FTNP develops and commercializes the
intellectual property developed at the Jamaica Facility, UWI shall receive a royalty of 2% of the net sales from any products
developed utilizing such intellectual property.
To-date,
the Group has incurred $380,000 in capital costs related to the Jamaica Facility. The Group is committed for the following obligations
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
More than
|
|
|
|
|
Expiry
|
|
|
Total
|
|
|
1 year
|
|
|
2-3 years
|
|
|
4-5 years
|
|
|
5 years
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Jamaica Facility
|
|
|
2023-04-06
|
|
|
|
1,427,437
|
|
|
|
805,427
|
|
|
|
576,584
|
|
|
|
45,427
|
|
|
|
-
|
|
22.
SEGMENT REPORTING
Information
reported to the Chief Operating Decision Maker (“CODM”) for the purpose of resource allocation and assessment of segment
performance focuses on the nature of the operations. The Group operates in three segments:
|
|
•
|
Clinical
Operations which encompasses the Group’s psychedelic assisted psychotherapy
clinics across North
America.
|
|
|
•
|
Research
which consists of the research of fungi at the Group’s facility in Jamaica
and research focused employees of Field Trip Psychedelics, and
|
|
|
•
|
Corporate
which encompasses the operations of Field Trip headquarters.
|
Factors
considered in determining the operating segments include the Group’s business activities, the management structure directly
accountable to the CODM, availability of discrete financial information and strategic priorities within the organizational structure.
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 16
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Condensed Interim Consolidated Financial Statements
For
the three months ended June 30, 2020 and period ended June 30, 2019
(unaudited)
22.
SEGMENT REPORTING (CONT’D)
|
|
|
Clinical
Operations
|
|
|
Research
|
|
|
Corporate
|
|
|
Total
|
|
|
Segment Information
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
3 months ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
23,359
|
|
|
|
-
|
|
|
|
-
|
|
|
|
23,359
|
|
|
Net loss
|
|
|
(457,343
|
)
|
|
|
(726,886
|
)
|
|
|
(1,774,675
|
)
|
|
|
(2,958,904
|
)
|
|
Property, plant, and equipment
|
|
|
719,149
|
|
|
|
71,643
|
|
|
|
82,865
|
|
|
|
873,657
|
|
|
Intangible assets
|
|
|
234,727
|
|
|
|
-
|
|
|
|
-
|
|
|
|
234,727
|
|
|
Period ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
(166,775
|
)
|
|
|
(166,775
|
)
|
|
Property, plant, and equipment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Intangible assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
Canada
|
|
|
United States
|
|
|
Jamaica
|
|
|
Total
|
|
|
Geographic Information
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
3 months ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
23,359
|
|
|
|
-
|
|
|
|
-
|
|
|
|
23,359
|
|
|
Property, plant, and equipment
|
|
|
443,682
|
|
|
|
358,332
|
|
|
|
71,643
|
|
|
|
873,657
|
|
|
Intangible assets
|
|
|
234,727
|
|
|
|
-
|
|
|
|
-
|
|
|
|
234,727
|
|
|
Period ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Property, plant, and equipment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Intangible assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
23. FINANCIAL INSTRUMENTS
Classification
of Financial Instruments
Financial
assets and financial liabilities are measured on an ongoing basis at fair value or amortized cost. The classification of the financial
instruments, as well as their carrying values, are shown in the table below:
|
|
|
As at
|
|
|
As at
|
|
|
|
|
June 30, 2020
|
|
|
March 31, 2020
|
|
|
|
|
|
|
|
$
|
|
|
Financial assets at fair value through profit and loss
|
|
|
|
|
|
|
|
|
|
Cash (Level 1)
|
|
|
7,041,330
|
|
|
|
9,590,758
|
|
|
Restricted cash (Level 1)
|
|
|
100,000
|
|
|
|
100,000
|
|
|
Financial assets at amortized cost
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
318,921
|
|
|
|
203,112
|
|
|
Shareholders’ loan receivable
|
|
|
48,611
|
|
|
|
47,991
|
|
|
Total financial assets
|
|
|
7,508,862
|
|
|
|
9,941,861
|
|
|
Financial liabilities at amortized cost
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
920,567
|
|
|
|
577,854
|
|
|
Total financial liabilities
|
|
|
920,567
|
|
|
|
577,854
|
|
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 17
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Condensed Interim Consolidated Financial Statements
For
the three months ended June 30, 2020 and period ended June 30, 2019
(unaudited)
23.
FINANCIAL INSTRUMENTS (CONT’D)
Fair
Value
IFRS
13 - Fair Value Measurements requires disclosure of a three-level hierarchy that reflects the significance of the inputs
used in making fair value measurements. All assets and liabilities for which fair value is measured or disclosed in the financial
statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant
to the fair value measurement as a whole:
Level
1 - Unadjusted quoted prices at the measurement date for identical assets or liabilities in active markets
Level
2 - Observable inputs other than quoted prices in Level 1, such as quoted prices for similar assets and liabilities in active
markets; quoted prices for identical or similar assets and liabilities in markets that are note active; or other inputs that are
observable or can be corroborated by observable market data
Level
3 - Significant unobservable inputs that are supported by little or no market activity
Cash,
restricted cash, accounts receivable, and accounts payable and accrued liabilities are all short-term in nature and, as such,
their carrying values approximate fair values.
Credit
Risk
The
Group, in the normal course of business, is exposed to credit risk from its customers. Credit risk is the risk of an unexpected
loss if a counterparty to a financial instrument fails to meet its contractual obligations. The Group is exposed to credit risk
on its cash and accounts receivable. The Group’s objective with regard to credit risk in its operating activities is to
reduce its exposure to losses. As the Group does not utilize credit derivatives or similar instruments, the maximum exposure to
credit risk is the full amount of the carrying value of its cash and accounts receivable.
The
Group’s cash is held with four financial institutions in various bank accounts. These financial institutions are major banks
in Canada, the United States, and Jamaica which the Group believes lessens the degree of credit risk.
Liquidity
Risk
Liquidity
risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its
liquidity risk by reviewing on an ongoing basis its capital requirements. As at June 30, 2020, the Company had $7,141,330 of cash
and cash equivalents.
The
Company is obligated to pay accounts payable and accrued liabilities with total carrying amounts and contractual cash flows amounting
to $920,567 due in the next 12 months. The carrying values of cash, trade receivable, accounts payable and accrued liabilities
approximate their fair values due to their short term to maturity.
Interest
Rate Risk
Financial
instruments that potentially subject the Group to cash flow interest rate risk are those assets and liabilities with a variable
interest rate. Currently, the Group has no assets or liabilities with a variable interest rate. Financial assets and financial
liabilities that bear interest at fixed rates are subject to fair value interest rate risk. The Group’s lease obligations
are at fixed rates of interest.
Currency
Risk
The
Group is exposed to currency risk related to the fluctuation of foreign exchange rates and the degree of volatility
of
those rates. Currency risk is limited to the portion of the Group’s business transactions denominated in currencies other
than the Canadian dollar, which are primarily expenses in United States dollars. As at June 30 2020, the Group held USD dollar
denominated cash of $5,037,806 USD and had USD dollar denominated accounts payable and accrued liabilities in the amounts of $58,675
USD. Therefore, a 1% change in the foreign exchange rate would have a net impact as at June 30, 2020 of $67,856. USD dollar expenses
for the period June 30, 2020 were $814,957 USD. Varying the foreign exchange rate for the period ended June 30, 2020 to reflect
a 1% strengthening of the U.S. dollar would have increased the net loss by approximately $11,298 assuming that all other variables
remained constant.
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 18
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Condensed Interim Consolidated Financial Statements
For
the three months ended June 30, 2020 and period ended June 30, 2019
(unaudited)
24.
RELATED PARTY TRANSACTIONS
The
Group’s related parties include certain investors and shareholders, key management personnel, and entities owned by key
management personnel.
Shareholders
Field
Trip entered into shareholder loan agreements with two of its advisors for a total of $60,000 in July 2019. The notes are non-interest bearing (i.e. not on commercial terms) and are due on demand or five years from the date of note issuance. These loans
are expected to be repaid in full at maturity. The Group measured the loans at fair value at initial recognition using an appropriate
market interest rate. The below-market element of the loans was determined at initial recognition as the difference between the
loan principal amount and fair value. This difference was recognized in equity as distribution to these shareholders. Total distribution
arising from the initial fair value measurement of shareholders’ loan was $13,596. The fair values at initial recognition
were accounted for as amortized cost financial assets in accordance with IFRS 9. The amortized cost of the loans as at June 30,
2020 was $48,611 (see note 6) and total interest income accrued at market rate in profit or loss for the 3 months then ended was
$621 (see note 17).
Key
Management Personnel
Key
management personnel are those persons having authority and responsibility for planning, directing and controlling the activities
of the Group, including directors. Key management at June 30, 2020 includes seven directors and executive officers of the corporation.
Key management personnel compensation for the 3 months ended June 30, 2020 was comprised of:
|
|
|
3 months ended
|
|
|
Period ended
|
|
|
|
|
June 30, 2020
|
|
|
March 31, 2020
|
|
|
|
|
|
|
|
$
|
|
|
Salaries
|
|
|
142,152
|
|
|
|
-
|
|
|
Share-based compensation
|
|
|
37,356
|
|
|
|
64,733
|
|
|
|
|
|
179,508
|
|
|
|
64,733
|
|
Directors
and officers of the Group control 52% or 10,889,786 of the outstanding voting shares of the Group.
25.
INCOME TAXES
Income
tax expense varies from the amount that would be computed by applying the basic federal and provincial tax rates to income (loss)
from operations before income taxes, shown as follows:
|
|
|
3 months ended
|
|
|
3 months ended
|
|
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
|
|
|
|
|
|
$
|
|
|
Expected Tax Rate
|
|
|
26.50
|
%
|
|
|
26.50
|
%
|
|
Expected tax Benefit Resulting From Loss
|
|
|
(784,110
|
)
|
|
|
(44,195
|
)
|
|
Permanent Differences
|
|
|
183,476
|
|
|
|
17,629
|
|
|
Effect of losses not recognized
|
|
|
623,698
|
|
|
|
26,567
|
|
|
Effect of other temporary differences not recognized
|
|
|
(19,618
|
)
|
|
|
-
|
|
|
Recognition of previously unrecognized losses
|
|
|
-
|
|
|
|
-
|
|
|
Difference due to foreign tax rates
|
|
|
(3,447
|
)
|
|
|
-
|
|
|
True-up of prior years taxes
|
|
|
-
|
|
|
|
-
|
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
Income tax expense (recovery)
|
|
|
-
|
|
|
|
-
|
|
Deferred
income taxes reflect the impact of loss carry forwards and of temporary differences between amounts of assets and liabilities
for financial reporting purposes and such amounts as measured by tax laws. The following deferred tax assets and liabilities have
been recognized for accounting purposes:
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 19
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Condensed Interim Consolidated Financial Statements
For
the three months ended June 30, 2020 and period ended June 30, 2019
(unaudited)
25. INCOME TAXES
(CONT’D)
|
|
|
3 months ended
|
|
|
Period ended
|
|
|
|
|
June 30, 2020
|
|
|
March 31, 2020
|
|
|
|
|
|
|
|
$
|
|
|
Deferred tax asset
|
|
|
9,166
|
|
|
|
17,153
|
|
|
Deferred tax liability
|
|
|
(9,166
|
)
|
|
|
(17,153
|
)
|
|
Net deferred tax liability
|
|
|
-
|
|
|
|
-
|
|
The
effect of temporary differences and loss carry forwards that give rise to significant portions of the deferred tax liability,
which has been recognized during the year are as follows:
|
|
|
|
|
|
Recognized
|
|
|
Recognized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
on
|
|
|
in profit and
|
|
|
Recognized
|
|
|
Recognized
|
|
|
June 30,
|
|
|
|
|
2020
|
|
|
acquisition
|
|
|
loss
|
|
|
in goodwill
|
|
|
in equity
|
|
|
2020
|
|
|
Deferred tax asset
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss carry forwards
|
|
|
11,547
|
|
|
|
-
|
|
|
|
(2,381
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
9,166
|
|
|
Start up costs
|
|
|
5,606
|
|
|
|
-
|
|
|
|
(5,606
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Lease liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
17,153
|
|
|
|
-
|
|
|
|
(7,987
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
9,166
|
|
|
Deferred tax liability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed assets
|
|
|
(12,482
|
)
|
|
|
-
|
|
|
|
5,145
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,337
|
)
|
|
ROU assets/lease obligations
|
|
|
-
|
|
|
|
-
|
|
|
|
(116
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(116
|
)
|
|
Other
|
|
|
(4,671
|
)
|
|
|
-
|
|
|
|
2,958
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,713
|
)
|
|
|
|
|
(17,153
|
)
|
|
|
-
|
|
|
|
7,987
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(9,166
|
)
|
|
Net deferred tax liability
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
The
tax effects of temporary differences and loss carry forwards that give rise to significant portions of the deferred tax asset,
which have not been recognized, are approximately as follows:
|
|
|
3 months ended
|
|
|
Period ended
|
|
|
|
|
June 30, 2020
|
|
|
March 31, 2020
|
|
|
|
|
|
|
|
$
|
|
|
Fixed Assets
|
|
|
54,968
|
|
|
|
38,504
|
|
|
Non operating loss carry forwards - Jamaica
|
|
|
-
|
|
|
|
38,423
|
|
|
Shareholder Loans
|
|
|
13,596
|
|
|
|
13,596
|
|
|
ROU assets/lease obligations
|
|
|
26,212
|
|
|
|
28,315
|
|
|
Start Up Costs
|
|
|
703,658
|
|
|
|
694,865
|
|
|
Share Issue Costs
|
|
|
31,411
|
|
|
|
-
|
|
|
Non-Capital Losses
|
|
|
3,864,712
|
|
|
|
1,474,930
|
|
|
Capital Losses
|
|
|
-
|
|
|
|
-
|
|
|
Other
|
|
|
-
|
|
|
|
-
|
|
|
Total
|
|
|
4,694,557
|
|
|
|
2,288,633
|
|
The
company has the following non-capital losses available to reduce future years’ federal and provincial taxable income, which expire
as follows:
|
Canada
|
|
|
|
|
|
2040
|
|
|
|
1,522,412
|
|
|
2041
|
|
|
|
1,486,370
|
|
|
|
|
|
$
|
3,008,782
|
|
|
USA
|
|
|
|
|
|
|
Indefinite
|
|
|
$
|
818,677
|
|
|
|
|
|
|
|
|
|
Jamaica
|
|
|
|
|
|
|
Indefinite
|
|
|
$
|
71,525
|
|
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 20
|
FIELD
TRIP PSYCHEDELICS INC.
Notes
to the Condensed Interim Consolidated Financial Statements
For
the three months ended June 30, 2020 and period ended June 30, 2019
(unaudited)
25.
INCOME TAXES (CONT’D)
Subject
to certain exceptions for newly established and micro businesses in Jamaica, any claim for deduction of tax losses incurred in
a prior year will be capped at 50% of the taxpayer’s chargeable income (before deduction of tax losses carried forward)
of the year in which the claim is being made.
As
at June 30, 2020, the company does not have any gross temporary differences associated with the investment in subsidiaries.
26.
CONTINGENCIES
Litigation
During
the prior year, the Group terminated a lease contract with a lessor due to circumstances which it believes constituted a breach
of contract by the lessor. Should the Group become involved in litigation due to the termination of this contract, the Group believes
it has prepared valid legal defenses and that no material exposure exists on the eventual settlement of such litigation. This
lease was treated as a short-term lease under IFRS 16 and all payments including security deposit paid were fully expensed during
the period ended March 31, 2020.
27.
SUBSEQUENT EVENTS
Chicago
Clinic
On
July 23, 2020, the Group executed a lease agreement to build its Chicago clinic, commencing on October 1, 2020 and ending 120
months from the first day of the first full month of the term. Total commitments under the lease are approximately $2,334,000.
Series
B Financing
On
August 14, 2020, Field Trip Psychedelics Inc. completed brokered and non -brokered private placements of an aggregate of 5,516,724
class A shares in the capital of Field Trip, at a price of $2.00 per Field Trip Share, for aggregate gross proceeds of $11,033,448.
Canaccord Genuity Corp. and Stifel Nicolaus Canada Inc. jointly acted as lead agents in connection with the brokered portion of
the Private Placement, for which they were paid a cash commission of $391,082, and were issued 55,167 class A shares and 299,753
compensation warrants, with each warrant exercisable into one class A share of Field Trip at a price of $2.00 per share until
August 14, 2022. The Series B Financing is a Qualified Financing as defined in Note 11, therefore all of the Class B Series 1
Shares were automatically converted into Class A Shares upon closing of this transaction.
Reverse
Takeover of Newton Energy Corporation
On
August 21, 2020, Field Trip Psychedelics Inc. (“Field Trip”) entered into a definitive agreement with Newton Energy
Corporation and Newton’s wholly-owned subsidiary, Newton Energy Subco Limited, pursuant to which the parties intend to complete
a going-public transaction for the Group. The Transaction is structured as a three-cornered amalgamation, which will result in
Field Trip becoming a wholly-owned subsidiary of Newton by amalgamating with Newton Subco, and the security holders of Field Trip
becoming security holders of Newton. In connection with the completion of the Transaction, it is intended that Newton will change
its name to “Field Trip Health Ltd.” (the “Resulting Issuer”). Field Trip and Newton anticipate the closing
of the Transaction (the “Closing”) will occur on or about September 29, 2020. The Transaction is subject to the receipt
of all necessary regulatory and shareholder approvals as well as the satisfaction of conditions to the Closing as set out in the
Amalgamation Agreement.
Option
Grants
On
September 2, 2020 the Group issued 535,000 options at an issue price of $2.00 per Field Trip Share.
|
Field Trip Psychedelics Inc. ▪ Condensed Interim Consolidated Financial Statements (unaudited)
|
P a g e | 21
|
SCHEDULE “C”
CONSOLIDATED PROFORMA OF THE ISSUER
(See attached)
|
|
Pro Forma Consolidated Statement
of Financial Position of Resulting Issuer
Field Trip Psychedelics Inc.
June 30, 2020
(Expressed in Canadian dollars)
(Unaudited)
|
Table of Contents
|
Pro forma consolidated statements of financial position
|
1
|
|
Notes to pro forma consolidated statements of financial
position
|
2-6
|
Field Trip Psychedelics Inc.
Pro forma consolidated statements of financial position
|
[Expressed in Canadian dollars]
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Newton Energy
|
|
|
Field Trip
|
|
|
|
|
|
Pro forma
|
|
|
Pro forma
|
|
|
|
|
Corporation
|
|
|
Psychedelics Inc.
|
|
|
|
|
|
adjustments
|
|
|
consolidated
|
|
|
As at
|
|
June 30, 2020
|
|
|
June 30, 2020
|
|
|
Notes
|
|
|
June 30, 2020
|
|
|
June 30, 2020
|
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
$
|
|
|
$
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
472,456
|
|
|
|
7,041,330
|
|
|
|
3
|
(a)
|
|
|
11,033,448
|
|
|
|
19,170,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
(a)
|
|
|
(441,082
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
(b)
|
|
|
1,633,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
(b)
|
|
|
(10,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
(d)
|
|
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
(h)
|
|
|
(560,000
|
)
|
|
|
|
|
|
Restricted cash
|
|
|
—
|
|
|
|
100,000
|
|
|
|
|
|
|
|
—
|
|
|
|
100,000
|
|
|
Accounts receivable
|
|
|
1,379
|
|
|
|
318,921
|
|
|
|
|
|
|
|
—
|
|
|
|
320,300
|
|
|
Other assets
|
|
|
5,426
|
|
|
|
287,608
|
|
|
|
|
|
|
|
—
|
|
|
|
293,034
|
|
|
|
|
|
479,261
|
|
|
|
7,747,859
|
|
|
|
|
|
|
|
11,656,320
|
|
|
|
19,883,440
|
|
|
Property, plant and equipment
|
|
|
—
|
|
|
|
873,657
|
|
|
|
|
|
|
|
—
|
|
|
|
873,657
|
|
|
Intangible assets
|
|
|
—
|
|
|
|
234,727
|
|
|
|
|
|
|
|
—
|
|
|
|
234,727
|
|
|
Right-of-use assets
|
|
|
—
|
|
|
|
3,960,043
|
|
|
|
|
|
|
|
—
|
|
|
|
3,960,043
|
|
|
Other non-current assets
|
|
|
—
|
|
|
|
203,218
|
|
|
|
|
|
|
|
—
|
|
|
|
203,218
|
|
|
|
|
|
479,261
|
|
|
|
13,019,504
|
|
|
|
|
|
|
|
11,656,320
|
|
|
|
25,155,085
|
|
|
Liabilities and shareholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
21,676
|
|
|
|
920,567
|
|
|
|
|
|
|
|
—
|
|
|
|
942,243
|
|
|
Deferred revenue
|
|
|
—
|
|
|
|
4,000
|
|
|
|
|
|
|
|
—
|
|
|
|
4,000
|
|
|
Current portion of lease obligations
|
|
|
—
|
|
|
|
601,281
|
|
|
|
|
|
|
|
—
|
|
|
|
601,281
|
|
|
|
|
|
21,676
|
|
|
|
1,525,848
|
|
|
|
|
|
|
|
—
|
|
|
|
1,547,524
|
|
|
Lease obligations
|
|
|
—
|
|
|
|
3,219,052
|
|
|
|
|
|
|
|
—
|
|
|
|
3,219,052
|
|
|
|
|
|
21,676
|
|
|
|
4,744,900
|
|
|
|
|
|
|
|
—
|
|
|
|
4,766,576
|
|
|
Shareholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
6,414,127
|
|
|
|
12,859,058
|
|
|
|
3
|
(a)
|
|
|
11,033,448
|
|
|
|
27,922,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
(a)
|
|
|
(441,082
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
(a)
|
|
|
(228,483
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
(b)
|
|
|
1,633,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
(b)
|
|
|
(10,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
(c)
|
|
|
1,200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
(d)
|
|
|
285,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
(f)
|
|
|
(6,414,127
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
(g)
|
|
|
1,590,212
|
|
|
|
|
|
|
Accumulated other comprehensive loss
|
|
|
—
|
|
|
|
(13,787
|
)
|
|
|
|
|
|
|
|
|
|
|
(13,787
|
)
|
|
Deficit
|
|
|
(6,945,666
|
)
|
|
|
(5,592,942
|
)
|
|
|
3
|
(c)
|
|
|
(1,200,000
|
)
|
|
|
(9,302,061
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
(e)
|
|
|
(741,510
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
(f)
|
|
|
6,945,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
(g)
|
|
|
(1,207,609
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
(h)
|
|
|
(560,000
|
)
|
|
|
|
|
|
Contributed surplus
|
|
|
989,124
|
|
|
|
1,022,275
|
|
|
|
3
|
(a)
|
|
|
228,483
|
|
|
|
1,781,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
(d)
|
|
|
(285,340
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
(e)
|
|
|
741,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
(f)
|
|
|
(989,124
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
(g)
|
|
|
74,982
|
|
|
|
|
|
|
Total shareholders’ equity
|
|
|
457,585
|
|
|
|
8,274,604
|
|
|
|
|
|
|
|
11,656,320
|
|
|
|
20,388,509
|
|
|
|
|
|
479,261
|
|
|
|
13,019,504
|
|
|
|
|
|
|
|
11,656,320
|
|
|
|
25,155,085
|
|
FIELD TRIP PSYCHEDELICS INC.
Notes to Pro Forma Consolidated Statements of Financial
Position
As at June 30, 2020
(Unaudited)
|
|
1.
|
Background and basis of presentation
|
Background
Field Trip Psychedelics Inc. (the “Group”,
the “Company” or “Field Trip”) is an international organization focused on blending operational execution
with strategic investment across all aspects of the psychedelics value chain. Through its wholly owned subsidiaries Field Trip
Health Inc., and Field Trip Health USA Inc., “Field Trip Health” is building a network of world class clinics focused
on psychedelics-assisted therapies. Through its wholly owned subsidiary Field Trip Natural Products Ltd. and Field Trip Psychedelics
research division, “Field Trip Discovery” performs research on botanical psychedelics and psychedelic-based molecules
for future therapeutic application of select mental health indications.
Field Trip Psychedelics Inc. was incorporated
under the laws of the province of Ontario, Canada as Field Trip Ventures Inc. on April 2, 2019. On October 10, 2019, the Company
amended its name to Field Trip Psychedelics Inc. The Company’s registered office is located at 30 Duncan Street, Unit 401,
Toronto, Ontario, Canada, M5V 2C3.
On June 18, 2020, Newton Energy Corporation
(“NEC”) and Field Trip entered into a non-binding letter of intent (the “Letter Agreement”) in respect
of the proposed Qualifying Transaction (as such term is defined in TSX Venture Exchange Policy 2.4 – Capital Pool Companies)
of NEC. On August 21, 2020, Newton Energy Subco Limited, a wholly-owned subsidiary of NEC (“Subco”) and Field Trip
entered into a business combination agreement (the “Business Combination Agreement”), which supersedes the Letter Agreement,
to carry out the proposed Qualifying Transaction.
Pursuant to the terms of the Business Combination
Agreement, NEC will acquire all the issued and outstanding common shares in the capital of Field Trip (the “Field Trip Shares”)
through the three-cornered amalgamation of Field Trip with Subco. Holders of Field Trip Shares will receive one post-Consolidation
(as defined herein) common share (“Resulting Issuer Share”) in the capital of NEC as it exists upon completion of the
proposed Qualifying Transaction (the “Resulting Issuer”) in exchange for each Field Trip Share held.
It is intended that the Resulting Issuer
will be renamed “Field Trip Health Ltd.” and will continue Field Trip’s current operations.
Basis of preparation
This unaudited pro forma consolidated statement of financial
position has been compiled from and includes i) the unaudited interim statement of financial position of NEC as at June 30, 2020,
and ii) the unaudited condensed interim consolidated statement of financial position of Field Trip as at June 30, 2020, giving
effect to the transaction as if it had occurred at June 30, 2020.
The unaudited pro forma consolidated statement
of financial position has been compiled using accounting policies consistent with International Financial Reporting Standards (“IFRS”)
as issued by the International Accounting Standards Board (“IASB”). Management has re-allocated certain line items
from NEC’s statement of financial position in an attempt to conform to the presentation of Field Trip’s financial statements.
The unaudited pro forma consolidated financial
statement should be read in conjunction with the financial statements and notes thereto of NEC and Field Trip described above.
The unaudited pro forma consolidated statement of financial position is not intended to reflect the financial position of the continuing
entity, Field Trip, which would have actually resulted had the proposed transactions been effected on the dates indicated. Further,
the unaudited pro forma consolidated statement of financial position is not necessarily indicative of the financial position that
may be obtained upon completion of the transaction. The pro forma adjustments and allocations of the purchase price of NEC by Field
Trip as a reverse takeover are based in part on estimates of the fair value of the assets acquired and liabilities assumed.
The final purchase price allocation will be completed after asset and liability valuations are finalized. The final valuation will
be based on the actual assets and liabilities of NEC that exist as of the date of completion of the acquisition.
FIELD
TRIP PSYCHEDELICS INC.
Notes to Pro Forma Consolidated Statements of Financial
Position
As at June 30, 2020
(Unaudited)
NEC, Subco and Field Trip have entered
into the Business Combination Agreement pursuant to which NEC will acquire all the issued and outstanding Field Trip Shares through
the three-cornered amalgamation of Field Trip with Subco. Holders of Field Trip Shares will receive one Resulting Issuer Share
in exchange for each Field Trip Share. The proposed Qualifying Transaction will constitute a reverse takeover of NEC by Field Trip.
The Business Combination Agreement sets
out the terms of the proposed Qualifying Transaction, including, among other things, the following:
|
|
a)
|
NEC will have completed a consolidation of its common shares (“NEC Shares”) on the
basis of one NEC consolidated share for every 8 NEC Shares prior to completion of the proposed Qualifying Transaction (the “Consolidation”);
|
|
|
b)
|
NEC will have acquired all of the issued and outstanding Field Trip Shares on the basis of one
Resulting Issuer Share for each Field Trip Share, as applicable;
|
|
|
c)
|
Convertible securities of Field Trip will have been exchanged for convertible securities of the
Resulting Issuer, with each such convertible security of the Resulting Issuer being exercisable into Resulting Issuer Shares on
the same terms and conditions as the original convertible security of Field Trip;
|
|
|
d)
|
Field Trip will have amalgamated with Subco and the amalgamated company will become a wholly-owned
subsidiary of NEC; and
|
|
|
e)
|
the Resulting Issuer will carry on the business carried on by Field Trip.
|
On a pre-Consolidation basis, the total number of NEC Shares
currently outstanding is 6,361,047. On a post-Consolidation basis, NEC will have 795,106 shares outstanding.
3. Pro Forma Adjustments and assumptions
The unaudited pro forma financial statement incorporates the
following pro forma assumptions
|
|
a)
|
On August 14, 2020 Field Trip completed a brokered private placement of an aggregate of
5,516,724 Field Trip Shares at a price of $2.00 per Field Trip Share for gross proceeds of $11,033,448 (the “Tranche 1 Financing”). Financing costs were incurred as follows:
|
|
|
i.
|
An aggregate of $391,082 (excluding relevant taxes) was paid to the Agents in connection with the
Tranche 1 Financing, representing a cash commission. This amount has been treated as issuance costs attributed to common shares
and reflected as a reduction to cash.
|
|
|
ii.
|
A total of 55,167 Field Trip Shares were also issued to the Agents in connection with the Tranche
1 Financing at a deemed price of $2.00 per Field Trip Share.
|
|
|
iii.
|
A total of 299,753 Field Trip Compensation Warrants were also issued to the Agents in connection
with the Tranche 1 Financing. Each compensation warrant is exercisable for one Field Trip Share at a price of $2.00 with an expiry
of August 14, 2022. An increase in contributed surplus of $228,483 and corresponding reduction in share capital based on a valuation
using the Black-Scholes Option Pricing Model using an exercise
price of $2.00, share price of $2.00, volatility of 70%, risk free rate of 0.28%, expected life of two years and dividend yield
of nil.
|
FIELD TRIP PSYCHEDELICS INC.
Notes to Pro Forma Consolidated Statements of Financial
Position
As at June 30, 2020
(Unaudited)
|
|
iv.
|
Other fees and professional costs estimated at $50,000 for the Tranche 1 Financing. This amount
has been treated as issuance costs attributed to common shares and reflected as a reduction to cash. Including the agent’s
cash commission of $391,082 total cash transaction costs before taxes for the Tranche 1 Financing amount to $441,082.
|
|
|
b)
|
On September 21, 2020 Field Trip completed a non-brokered private placement of an aggregate of
816,932 Field Trip Shares at a price of $2.00 per Field Trip Share for gross proceeds of $1,633,864 (the “Tranche 2 Financing”).
Financing costs were incurred as follows:
|
|
|
i.
|
Other fees and professional costs estimated at $10,000 for the Trance 2 Financing. This amount
has been treated as issuance costs attributed to common shares and reflected as a reduction to cash.
|
|
|
c)
|
On September 21, 2020 Field Trip issued the first instalment of Milestone Shares under the FTNP
SPA, being a total of 600,000 Field Trip Shares at a deemed price of $2.00 per Field Trip Share.
|
|
|
d)
|
Subsequent to June 30, 2020 directors of Field Trip exercised 9,000,900 options with a strike price
of $0.00001.
|
|
|
e)
|
To reflect the issuance by Field Trip of 714,000 stock options subsequent to the period at an exercise
price of $2.00 per Field Trip Share which are exercisable for a period of ten years valued at $741,510, described in more detail
below.
|
On September
2, 2020 the Company issued 535,000 stock options which are exercisable for one Field Trip Share at an exercise price of $2.00 per
Field Trip Share vesting evenly over 4 years and expiring after 10 years. The Company will allocate $555,613 to the granted options
based on a valuation using the Black-Scholes Option Pricing Model using an exercise price range of $2.00, stock price range of
$2.00, volatility of 70%, risk free rate of 0.33%, expected life of ten years and dividend yield of nil.
On September 21, 2020 the Company
issued 179,000 stock options which are exercisable for one Field Trip Share at an exercise price of $2.00 per Field Trip Share
vesting evenly over 4 years and expiring after 10 years. The Company will allocate $185,897 to the granted options based on a valuation
using the Black-Scholes Option Pricing Model using an exercise price range of $2.00, stock price range of $2.00, volatility of
70%, risk free rate of 0.33%, expected life of ten years and dividend yield of nil.
|
|
f)
|
The acquisition of Field Trip by NEC constitutes a reverse asset acquisition as NEC does not meet
the definition of a business, as defined in IFRS 3, Business Combinations. Accordingly, as a result of the transaction, the pro
forma financial position has been adjusted for the elimination of NEC’s share capital of $6,414,127, accumulated deficit
of $6,945,666 and contributed surplus of $989,124, within shareholders’ equity.
|
|
|
g)
|
As a result of this reverse asset acquisition, a listing expense of $1,207,659 has been recorded
to reflect the difference between the estimated fair value of the Field Trip Shares to the NEC shareholders less the net fair value
of the assets of NEC acquired.
|
In accordance with reverse acquisition
accounting:
|
|
i)
|
The assets and liabilities of Field Trip are included in the pro forma statement of financial position
at their carrying values;
|
|
|
ii)
|
The net assets of NEC are included at their fair value of $457,585 (equal to the carrying value
of these net assets given the current nature of the net assets);
|
FIELD TRIP PSYCHEDELICS INC.
Notes to Pro Forma Consolidated Statements of Financial
Position
As at June 30, 2020
(Unaudited)
|
|
iii)
|
The
net assets have been allocated as follows:
|
|
|
|
$
|
|
|
Cash
|
|
|
472,456
|
|
|
Other current assets
|
|
|
6,805
|
|
|
Accounts payable and accrued liabilities
|
|
|
(21,676
|
)
|
|
Net Assets
|
|
|
457,585
|
|
|
|
iv)
|
At June 30, 2020 NEC had the equivalent of 74,453 stock options of the Resulting Issuer (on a post-Consolidation
basis) with an exercise price of $1.76 – 2.00 per share and a expiry date of January 4, 2023 - May 10, 2024. Based on the
Black-Scholes pricing model, the 74,453 options have an estimated fair value of $74,982, based on an exercise price of $1.76 –
2.00, stock price of $2.00, volatility of 70%, risk free rate of 0.29 – 0.33%, expected life of 2.52 – 3.86 years and
dividend yield of nil.
|
|
|
v)
|
The listing expense of $1,207,609 was determined as follows:
|
|
|
•
|
Number of Field Trip Shares held by former Field Trip shareholders outstanding immediately prior
to the Qualifying Transaction is estimated to be 37,007,886 or approximately 97.9% of the combined entity.
|
|
|
•
|
Number of outstanding post-Consolidation shares of NEC prior to the Qualifying Transaction is determined
to be 795,106 or approximately 2.1% of the combined entity.
|
|
|
•
|
The fair value of the shares considered issued to acquire NEC under reverse takeover accounting
is $1,590,212 calculated as 795,106 shares at $2.00 per share.
|
|
|
•
|
The fair value of the NEC stock options outstanding at the time of the transaction is assumed to
be $74,982 based on the Black-Sholes pricing model inputs disclosed above.
|
|
|
•
|
The difference between the fair value of $1,665,194 attributed to NEC and the estimated fair value
of the net assets of NEC of $457,585 amounts to a listing expense of $1,207,609.
|
|
|
h)
|
Total cash transaction costs which are expected to be incurred for the reverse asset acquisition
amount to $560,000 which includes exchange fees and professional and consulting fees. This amount has been expensed and reflected
as a reduction to cash.
|
FIELD TRIP PSYCHEDELICS INC.
Notes to Pro Forma Consolidated Statements of Financial Position
As at June 30, 2020
(Unaudited)
|
|
4.
|
Pro forma Shareholders Equity
|
|
|
a)
|
The following table summarizes the impact of the Transaction on the Resulting Issuer’s
shareholders’ equity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares
|
|
|
Contributed
Surplus
|
|
|
Accumulated
other
comprehensive
loss
|
|
|
Deficit
|
|
|
Shareholders’
Equity
|
|
|
|
|
#
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Newton Energy - Balance as of June 30, 2020
|
|
|
6,361,047
|
|
|
|
6,414,127
|
|
|
|
989,124
|
|
|
|
—
|
|
|
|
(6,945,666
|
)
|
|
|
457,585
|
|
|
Newton Energy - Share consolidation prior to Transaction (note 2)
|
|
|
(5,565,941
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Field Trip - Common share balance as of June 30, 2020 (note 3(a))
|
|
|
21,018,163
|
|
|
|
12,859,058
|
|
|
|
1,022,275
|
|
|
|
(13,787
|
)
|
|
|
(5,592,942
|
)
|
|
|
8,274,604
|
|
|
Field Trip - Shares issued subsequent to June 30, 2020 (note 3(a), 3(b), 3(c) 3(d))
|
|
|
15,989,723
|
|
|
|
13,473,177
|
|
|
|
(56,857
|
)
|
|
|
—
|
|
|
|
(1,200,000
|
)
|
|
|
12,216,320
|
|
|
Newton Energy - Equity eliminated upon Transaction (note 3(f))
|
|
|
—
|
|
|
|
(6,414,127
|
)
|
|
|
(989,124
|
)
|
|
|
—
|
|
|
|
6,945,666
|
|
|
|
(457,585
|
)
|
|
Newton Energy - Shares issued to former Field Trip shareholders upon Transaction (note 3(g))
|
|
|
37,007,886
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Field Trip - Shares exchanged upon Transaction (note 3(g))
|
|
|
(37,007,886
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Field Trip - Value of common shares assumed issued
to Newton Energy shareholders (note 3(g))
|
|
|
—
|
|
|
|
1,590,212
|
|
|
|
74,982
|
|
|
|
—
|
|
|
|
(1,207,609
|
)
|
|
|
457,585
|
|
|
Transaction costs (note 3(h))
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(560,000
|
)
|
|
|
(560,000
|
)
|
|
Field Trip - Stock options issued subsequent to June 30, 2020 (note 3(e))
|
|
|
—
|
|
|
|
—
|
|
|
|
741,510
|
|
|
|
—
|
|
|
|
(741,510
|
)
|
|
|
—
|
|
|
Balance, June 30, 2020
|
|
|
37,802,992
|
|
|
|
27,922,447
|
|
|
|
1,781,910
|
|
|
|
(13,787
|
)
|
|
|
(9,302,061
|
)
|
|
|
20,388,509
|
|
1) The Resulting Issuer has authorized unlimited common shares,
without par value.
FIELD
TRIP PSYCHEDELICS INC.
Notes to Pro Forma Consolidated Statements of Financial Position
As at June 30, 2020
(Unaudited)
|
|
b)
|
Convertible instruments
|
On completion of the Transaction, the following convertible
instruments will be outstanding:
|
Expiry Date
|
|
Compensation warrants
#
|
|
|
Equivalent number of
common shares
#
|
|
|
Exercise price
$
|
|
|
August 14, 2022
|
|
|
299,753
|
|
|
|
299,753
|
|
|
|
2.00
|
|
|
|
|
|
299,753
|
|
|
|
299,753
|
|
|
|
2.00
|
|
In conjunction with the Qualifying Transaction,
convertible securities of Field Trip will be exchanged for convertible securities of the Resulting Issuer with terms and conditions
consistent with those that existed immediately prior to the completion of the Qualifying Transaction.
|
|
|
Outstanding
#
|
|
|
Vested
#
|
|
|
Weighted
average
exercise price
$
|
|
|
NEC’s options as at June 30, 2020 (post-Consolidation)
|
|
|
74,453
|
|
|
|
-
|
|
|
|
1.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Field Trip options issued as at June 30, 2020
|
|
|
12,152,706
|
|
|
|
15,000
|
|
|
|
0.13
|
|
|
Field Trip options issued subsequent to the period
|
|
|
714,000
|
|
|
|
-
|
|
|
|
2.00
|
|
|
Field Trip options forfeited subsequent to the period
|
|
|
(25,000
|
)
|
|
|
-
|
|
|
|
0.50
|
|
|
Field Trip options exercised subsequent to the period
|
|
|
(9,000,900
|
)
|
|
|
-
|
|
|
|
0.00001
|
|
|
Pro forma stock options – June 30, 2020
|
|
|
3,915,259
|
|
|
|
15,000
|
|
|
|
0.80
|
|
The following table summarizes the Resulting
Issuer’s expected number of common shares and equivalent number of common shares that can potentially be issued of the Resulting
Issuer by type of security.
|
|
|
Legal number outstanding
#
|
|
|
Equivalent number of common
shares
#
|
|
|
Common shares
|
|
|
37,802,992
|
|
|
|
37,802,992
|
|
|
Compensation options
|
|
|
299,753
|
|
|
|
299,753
|
|
|
Stock options
|
|
|
3,915,259
|
|
|
|
3,915,259
|
|
|
|
|
|
42,018,004
|
|
|
|
42,018,004
|
|
The Resulting Issuer’s effective tax rate on a pro forma
basis is nil given the history of losses.
SCHEDULE “D”
MD&A OF NEWTON
(See attached)
NEWTON
ENERGY CORPORATION
Management’s
Discussion and Analysis
December
31, 2019
(Expressed
in Canadian Dollars)
MANAGEMENT’S
DISCUSSION AND ANALYSIS
The
following management’s discussion and analysis (“MD&A”) reviews Newton Energy Corporation’s (“Newton”
or the “Company”) activities and results for the year ended December 31, 2019. It should be read in conjunction with
the Audited Financial Statements, together with the accompanying notes, included in this report. The Financial Statements have
been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International
Accounting Standards Board (“IASB”).
In
the MD&A, unless otherwise indicated, all dollar amounts are expressed in Canadian dollars. Additional information relating
to the Company’s activities can be found on SEDAR at www.sedar.com.
Date
of Report
This
MD&A is dated April 27, 2020 and presents material information up to this date.
Forward-Looking
Information
This
discussion offers management’s analysis of the financial and operating results of Newton and contains certain forward-looking
statements. Forward-looking information typically contains statements with words such as “anticipate”, “estimate”,
“expect”, “potential”, “could”, or similar words suggesting future outcomes. The Company cautions
readers and prospective investors in the Company’s securities to not place undue reliance on forward-looking information
as by its nature, it is based on current expectations regarding future events that involve a number of assumptions, inherent risks
and uncertainties, which could cause actual results to differ materially from those anticipated by Newton.
Forward
looking information is based on management’s current expectations and assumptions regarding, among other things, future capital
and other expenditures (including the amount, nature and sources of funding thereof), future economic conditions, future currency
and exchange rates. Although the Company believes the expectations and assumptions reflected in such forward-looking information
are reasonable, they may prove to be incorrect. Forward-looking information involves significant known and unknown risks and uncertainties.
See
the Risk Factors section of this MD&A for a further description of these risks. The forward looking information included in
this report is expressly qualified in its entirety by this cautionary statement. Newton assumes no obligation to update or revise
any forward-looking information to reflect new events or circumstances, except as required by law. For additional information
relating to the risks and uncertainties facing Newton, see “Risk Factors”.
Description
of Business
Newton
is a publicly traded, Calgary-based company that is listed under the symbol “NTN” on NEX of the TSX Venture Exchange
(“TSXV”). The year 2014 was a transition for the Company as Newton exited the oil and gas sector with the sale of
100% of its oil and gas assets. The Company has embarked on a new direction and is exploring projects and ventures in other sectors.
The Company is considering business structures including acquisitions, mergers, joint ventures, reverse takeovers or other corporate
arrangements acceptable to regulatory authorities.
Private
Placement
On
July 4, 2018, the Company completed a second non-brokered private placement comprised of 3,333,333 common shares at a purchase
price of $0.15 per common share for gross proceeds of $500,000. The gross proceeds from the private placements will be used by
the Company towards the reduction of accounts payable and for general working capital.
Letter
of Intent with Franchise Cannabis Corp.
Newton
entered into an arm’s length non-binding letter of intent accepted June 7, 2019 with Franchise Cannabis Corp. (“Franchise”),
a global, fully integrated, seed-to-sale medical cannabis company, pursuant to which the Company and Franchise would effect a
business combination that would result in a reverse takeover of the Company by the securityholders of Franchise and the listing
for trading of the securities of the resulting issuer on the Canadian Securities Exchange. The letter of intent has expired and
has not been extended.
Financial
Highlights
As
at December 31, 2019, Newton has $533,576 in cash and cash equivalents (2018 – $692,858). Newton had a comprehensive loss
of $239,743 for the year ended December 31, 2019 (2018 – $251,097) and a net loss of $64,202 for the three months ended
December 31, 2019 (2018 – $79,841).
Selected
Annual Information
The
following table sets forth selected audited financial information of the Company for the last three completed financial years:
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Revenue
|
|
|
1,754
|
|
|
|
3,772
|
|
|
|
13,366
|
|
|
Net comprehensive loss
|
|
|
239,743
|
|
|
|
251,097
|
|
|
|
468,463
|
|
|
Basic and diluted loss per share
|
|
|
0.04
|
|
|
|
0.05
|
|
|
|
0.29
|
|
|
Weighted average number of shares*
|
|
|
6,361,047
|
|
|
|
4,680,682
|
|
|
|
1,602,991
|
|
|
Total assets
|
|
|
542,319
|
|
|
|
700,331
|
|
|
|
413,045
|
|
|
Dividend
|
|
|
Nil
|
|
|
|
Nil
|
|
|
|
Nil
|
|
*On
December 7, 2017, the Company consolidated the share capital of the Company on a basis of 20 pre-consolidation common shares for
one (1) post consolidation share. All figures have been restated to reflect this consolidation.
For
the year ended December 31, 2019, the Company reported no discontinued operations and did not declare any cash dividends.
The
Company’s revenue is comprised entirely of interest earned on cash and cash equivalent balances. Capital expenditures and
certain office and administration expenses represent Newton’s costs associated with its activities for the respective periods.
Operating
Costs and Expenses
For
the year ended December 31, 2019 (“2019”), operating costs and expenses decreased to $241,497 compared to $254,869
for the year ended December 31, 2018 (“2018”). No expenses were capitalized during 2019 or 2018. Accounting and legal
were $36,920 in 2019 compared to $55,083 in 2018. Consulting and directors’ fees were $44,500 in 2019 compared to $103,000
in 2018. Office and miscellaneous were $17,960 in 2019 compared to $11,977 in 2018. Travel and business development were $32,250
in 2019 compared to $14,493 in 2018.
Certain
operating costs and expenses decreased due to the efforts by management to reduce overhead expenses for the Company.
Share-based
payments expense was $87,094 for 2019 compared to $42,939 in 2018.
Newton’s
revenue is comprised entirely of interest earned on cash and cash equivalents. Interest of $1,754 was earned in 2019 compared
to $3,772 in 2018.
Summary
of Quarterly Results
The
flowing table summarizes key financial information on a quarterly basis for the previous two years:
|
|
|
December 31,
|
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
|
2019
|
|
|
2019
|
|
|
2019
|
|
|
2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Revenue
|
|
|
-
|
|
|
|
1,750
|
|
|
|
4
|
|
|
|
-
|
|
|
Net loss
|
|
|
(64,202
|
)
|
|
|
(34,337
|
)
|
|
|
(117,428
|
)
|
|
|
(23,776
|
)
|
|
Basic and diluted loss per share
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
(0.02
|
)
|
|
|
(0.01
|
)
|
|
Total assets
|
|
|
542,319
|
|
|
|
582,160
|
|
|
|
624,127
|
|
|
|
656,696
|
|
|
Total liabilities
|
|
|
25,101
|
|
|
|
6,904
|
|
|
|
15,304
|
|
|
|
10,605
|
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
|
2018
|
|
|
2018
|
|
|
2018
|
|
|
2018
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Revenue
|
|
|
3,559
|
|
|
|
54
|
|
|
|
-
|
|
|
|
159
|
|
|
Net loss
|
|
|
(79,841
|
)
|
|
|
(70,293
|
)
|
|
|
(25,269
|
)
|
|
|
(75,694
|
)
|
|
Basic and diluted loss per share
|
|
|
(0.02
|
)
|
|
|
(0.03
|
)
|
|
|
(0.01
|
)
|
|
|
(0.03
|
)
|
|
Total assets
|
|
|
700,331
|
|
|
|
760,312
|
|
|
|
344,396
|
|
|
|
358,996
|
|
|
Total liabilities
|
|
|
30,464
|
|
|
|
10,604
|
|
|
|
21,928
|
|
|
|
11,259
|
|
Fourth
Quarter
In
the fourth quarter of 2019, Newton had a net loss of $64,202 compared to a net loss of $79,841 in the fourth quarter of 2018.
Operating
costs and expenses for the quarter ended December 31, 2019 were $64,202 compared to $83,400 for the quarter ended December 31,
2018. Accounting and legal were $16,986 for the quarter ended December 31, 2019 compared to $17,664 for the quarter ended December
31, 2018. Consulting and director’s fees were $13,000 for the quarter ended December 31, 2019 and $37,000 for the quarter
ended December 31, 2018. Travel and business development were $16,499 for the quarter ended December 31, 2019 compared to $14,366
for the quarter ended December 31, 2018. Office and miscellaneous were $6,233 for the quarter ended December 31, 2019 compared
to $9,144 for the quarter ended December 31, 2018. The decreases in certain expenses were a result of management’s ongoing
effort to reduce overhead expenses for the Company.
Liquidity
and Capital Resources
Newton
currently has no operational cash flow. Newton’s revenue is comprised entirely of interest earned on cash and cash equivalent
balances. Newton has no outstanding bank debt or other interest-bearing indebtedness as at December 31, 2019.
|
|
•
|
Newton
has $533,576 in cash and cash equivalents and working capital of $517,218. These balances
will be used to fund office and administrative expenditures and working capital requirements.
|
|
|
•
|
Newton
assesses its financing requirements and its ability to access debt or equity markets
on an ongoing basis. Given the current conditions in the financial markets, Newton will
seek to maintain financial flexibility and will monitor and assess its financing requirements.
Newton’s ability to access the equity or debt markets in the future may be affected
by prolonged market instability. The inability to access the equity or debt markets for
sufficient capital, at acceptable terms, and within required timeframes, could have a
material adverse effect on Newton’s financial condition, results of operations
and prospects. Further discussion on these risks can be found in the “Risk Factors”
section of the MD&A.
|
Investor
Relations
The
Company has no investor relation’s agreements.
Changes
in Internal Controls over Financial Reporting
There
have been no changes in the Company’s internal control over financial reporting during the year ended December 31, 2019
that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
Financing
The
Company does not currently have any operations generating cash to any projects or ventures and associated overhead costs. The
Company is therefore dependent upon debt and equity financing to carry out its business plans. There can be no assurance that
such financing will be available to the Company.
Significant
Accounting Judgments, Estimates and Assumptions
A
detailed summary of all the Company’s significant accounting policies is included in Note 3 of the Company’s December 31,
2019 financial statements.
Related
Party Transactions
A
detailed summary of all the Company’s related party transactions is included in Note 6 of the Company’s December 31, 2019
financial statements.
Off
Balance Sheet Arrangements
The
Company has no off-balance sheet arrangements.
Outstanding
Share Data
The
Company is authorized to issue an unlimited number of common shares and an unlimited number of preferred shares. As at April 27,
2020, there were 6,361,047 common shares and nil preferred shares issued and outstanding.
As
at April 27, 2020, there were 633,121 stock options outstanding.
The
Company had no share purchase warrants outstanding as at April 27, 2020.
Subsequent
Events
There
have been no subsequent events.
Risk
Factors
Investment
in the Company must be considered highly speculative due to the nature of the Company’s business, its formative stage of development,
its current financial position and its lack of earnings record. The following is a summary of the risk factors to be considered:
Sale
The
Company has sold all of its oil and gas assets and is now seeking to identify and acquire or merge with an operating entity. Investment
in the common shares of the Company is highly speculative given the unknown nature of the Company’s business and its present
stage. There can be no assurance that an active and liquid market for the Company’s common shares will develop and an investor
may find it difficult to resell the common shares.
Potential
Transaction
Until
identification and acquisition or merger with an operating entity, the Company is not anticipated to generate any cash flow to
meet its operating costs. The Company has only limited funds with which to identify and evaluate potential targets and there can
be no assurance that the Company will be able to identify a suitable target. Even if a proposed target is identified, there can
be no assurance that the Company will be able to successfully complete the transaction. Completion of a target is subject to a
number of conditions including acceptance by the TSXV. Upon public announcement of a proposed target, trading in the common shares
of the Company may be halted and may remain halted for an indefinite period of time. The common shares of the Company will not
be reinstated to trading before the TSXV has reviewed the transaction. Reinstatement to trading provides no assurance with respect
to the merits of the transaction or the likelihood of the Company completing the proposed transaction.
Price
Volatility of Publicly Traded Securities
In
recent years, the securities markets in Canada and the United States have experienced a high level of price and volume
volatility, and the market price of securities of many companies, particularly those considered to be development stage
companies, have experienced wide fluctuations in price which have not necessarily been related to the operating performance,
underlying asset values or prospects of such companies.
Management
of Growth
Newton
may be subject to growth-related risks, including capacity constraints and pressure on its internal systems and controls. The
ability of Newton to manage growth effectively will require it to continue to implement and improve its operational and financial
systems and to expand, train and manage its employee base. The inability of Newton to deal with this growth could have a material
adverse impact on its business, operations and prospects.
Reliance
on Key Personnel
Newton’s
success depends in large measure on certain key personnel. The loss of the services of such key personnel could have a material
adverse effect on Newton. The Company does not have any key person insurance in effect for management. The contributions of the
existing management team to the immediate and near term operations of Newton are likely to be of central importance. In addition,
the competition for qualified personnel in the technology industry can be intense and there can be no assurance that Newton will
be able to continue to attract and retain all personnel necessary for the development and operation of its business. Investors
must rely upon the ability, expertise, judgment, discretion, integrity and good faith of the management of Newton.
Substantial
Capital Requirements
Newton
may be required to make substantial capital expenditures for the acquisition and development of new ventures or projects. Newton’s
ability to access the equity or debt markets in the future may be affected by any prolonged market instability. There can be no
assurance that debt or equity financing, or future cash (if any) generated by operations, would be available or sufficient to
meet these requirements or for other corporate purposes or, if debt or equity financing is available, that it will be on terms
acceptable to Newton. These funding arrangements are not yet in place. There is no assurance that the initiatives undertaken by
management will be successful. The inability of Newton to access sufficient capital for its operations could have a material adverse
effect on Newton’s financial condition, results of operations and prospects.
Dilution
Newton
may make future acquisitions or enter into financings or other transactions involving the issuance of securities of Newton, which
may be substantially dilutive to existing shareholders and which may also result in a change of control of the Company.
Issuance
of Debt
Newton
may enter into transactions to acquire assets or the shares of other organizations. These transactions may be financed in whole
or in part with debt, which may increase Newton’s debt levels above industry standards for companies of similar size. Depending
on future plans, Newton may require additional equity and/or debt financing that may not be available or, if available, may not
be available on favourable terms. Neither Newton’s articles nor its by-laws limit the amount of indebtedness Newton may incur.
The level of Newton’s indebtedness from time to time could impair Newton’s ability to obtain additional financing on a timely
basis to take advantage of business opportunities that may arise.
Dividends
To
date, Newton has not declared or paid any dividends on the outstanding Newton shares. Any decision to pay dividends on the Newton
shares will be made by the board of directors of Newton on the basis of Newton’s earnings, financial requirements and other conditions
existing at such future time. At present, Newton does not anticipate declaring and paying any dividends in the foreseeable future.
Conflicts
of Interest
Certain
directors of Newton are also directors of other technology companies and as such may, in certain circumstances, have a conflict
of interest requiring them to abstain from certain decisions. Conflicts, if any, will be subject to the procedures and remedies
of the Business Corporations Act (Alberta).
Financial
Instruments
The
Company considers its risks in relation to financial instruments in the following categories:
Credit
Risk
Credit
risk is the risk that a counterparty to a financial instrument will not discharge its obligations, resulting in a financial loss
to the Company. The Company has policies and procedures in place that govern the credit risks it will assume. The Company evaluates
credit risks on an ongoing basis including an evaluation of counterparty credit rating and counterparty concentrations measured
by amount and percentage. The Company’s objective is to have no credit losses. The primary sources of credit risk for the Company
arise from the following financial assets: (1) cash and cash equivalents and (2) accounts receivable. The Company has not had
any credit losses in the past and the risk of financial loss is considered to be low. As at December 31, 2019, the Company has
no financial assets that are past due or impaired due to credit risk related defaults.
Liquidity
Risk
Liquidity
risk is the risk that the Company will not be able to meet obligations associated with financial liabilities. The Company’s financial
liabilities are comprised of accounts payable and accrued liabilities. The Company frequently assesses its liquidity position
and obligations under its financial liabilities by preparing regular financial forecasts. The Company mitigates liquidity risk
by maintaining a sufficient cash balance as well as maintaining sufficient current and projected liquidity to meet expected future
payments.
Market
Risk
Market
risk is the risk that the fair value (for assets or liabilities considered to be fair value through profit or loss) or future
cash flows (for assets or liabilities considered to be subsequently measured at amortized cost) of a financial instrument will
fluctuate because of changes in market prices. The Company evaluates market risk on an ongoing basis. At December 31, 2019, all
of the Company’s financial instruments were assessed to have little or no market risk.
NEWTON ENERGY CORPORATION
Management’s
Discussion and Analysis
For
the six-month period ended
June 30, 2020
MANAGEMENT’S
DISCUSSION AND ANALYSIS
The
following management’s discussion and analysis (“MD&A”) reviews Newton Energy Corporation’s (“Newton”
or the “Corporation”) activities and results for the six-month period ended June 30, 2020. It should be read in conjunction
with the unaudited Condensed Interim Financial Statements for the six-month period ended June 30, 2020, together with the accompanying
notes, included in that report. The Financial Statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).
In
the MD&A, unless otherwise indicated, all dollar amounts are expressed in Canadian dollars. Additional information relating
to the Corporation’s activities can be found on SEDAR at www.sedar.com.
Date
of Report
This
MD&A is dated August 27, 2020 and presents material information up to this date.
Forward-Looking
Information
This
discussion offers management’s analysis of the financial and operating results of the Corporation and contains certain forward-looking
statements. Forward-looking information typically contains statements with words such as “anticipate”, “estimate”,
“expect”, “potential”, “could”, or similar words suggesting future outcomes. The Corporation
cautions readers and prospective investors in the Corporation’s securities to not place undue reliance on forward-looking
information as by its nature, it is based on current expectations regarding future events that involve a number of assumptions,
inherent risks and uncertainties, which could cause actual results to differ materially from those anticipated by the Corporation.
Forward
looking information is based on management’s current expectations and assumptions regarding, among other things, future capital
and other expenditures (including the amount, nature and sources of funding thereof), future economic conditions, future currency
and exchange rates. Although the Corporation believes the expectations and assumptions reflected in such forward-looking information
are reasonable, they may prove to be incorrect. Forward-looking information involves significant known and unknown risks and uncertainties.
See
the Risk Factors section of this MD&A for a further description of these risks. The forward-looking information included in
this report is expressly qualified in its entirety by this cautionary statement. The Corporation assumes no obligation to update
or revise any forward-looking information to reflect new events or circumstances, except as required by law. For additional information
relating to the risks and uncertainties facing the Corporation, see “Risk Factors.”
Description
of Business
The
Corporation is a publicly traded, Calgary-based Corporation that is listed under the symbol “NTN” on NEX of the TSX
Venture Exchange (“TSXV”). The year 2014 was a transition for the Corporation as it exited the oil and gas sector
with the sale of 100% of its oil and gas assets. The Corporation has embarked on a new direction and is exploring new projects
and ventures. The Corporation is considering business structures including acquisitions, mergers, joint ventures, reverse takeovers
or other corporate arrangements acceptable to regulatory authorities.
Agreement
with Field Trip Psychedelics Inc.
Newton
entered into a definitive agreement dated August 21, 2020 (the “Amalgamation Agreement”) with Field Trip Psychedelics
Inc. (“Field Trip”) (www.fieldtriphealth.com) and Newton’s wholly-owned subsidiary, Newton Energy Subco Limited
(“Newton Subco”), pursuant to which the parties intend to complete a going-public transaction for Field Trip (the
“Transaction”). The Transaction is structured as a three-cornered amalgamation, which will result in Field Trip becoming
a wholly-owned subsidiary of Newton by amalgamating with Newton Subco, and the security holders of Field Trip becoming security
holders of Newton. In connection with the completion of the Transaction, it is intended that Newton will change its name to “Field
Trip Health Ltd.” (the “Resulting Issuer”). The Amalgamation Agreement will be made available on SEDAR at www.sedar.com.
Field
Trip and Newton anticipate the closing of the Transaction (the “Closing”) will occur on or about September 29, 2020.
The Transaction is subject to the receipt of all necessary regulatory and shareholder approvals as well as the satisfaction of
conditions to the Closing as set out in the Amalgamation Agreement.
Field
Trip was incorporated pursuant to the provisions of the Canada Business Corporations Act on April 2, 2019. Field Trip is redefining
mental health and wellness with ground-breaking work in psychedelics and psychedelic therapies. Through its Field Trip Health
centres opening across North America, that provide best-in-class psychedelic-therapies, and drug development and advanced research
on plant-based psychedelics through Field Trip Discovery, its newly formed drug development division, Field Trip’s goal is to
help those in treatment and those seeking accelerated personal growth with a simple, evidence-based way to heal and heighten engagement
with the world.
|
Audited Financial Information for Period from
|
|
|
Incorporation on April 2, 2019 to March 31, 2020
|
|
|
Total
Assets
|
|
$
|
12,541,095
|
|
|
Total
Liabilities
|
|
$
|
2,121,083
|
|
|
Revenues
|
|
$
|
1,000
|
|
|
Net
Losses
|
|
$
|
2,678,365
|
|
|
Cash
|
|
$
|
9,690,758
|
|
On
August 14, 2020, Field Trip completed brokered and non-brokered private placements of an aggregate of 5,516,724 class A shares
in the capital of Field Trip (each, a “Field Trip Share”), at a price of $2.00 per Field Trip Share, for aggregate gross
proceeds of $11,033,448 (the “Private Placement”). Canaccord Genuity Corp. and Stifel Nicolaus Canada Inc. jointly
acted as lead agents in connection with the brokered portion of the Private Placement, for which they were paid a cash commission
of $391,082, and were issued 55,167 class A shares and 299,753 compensation warrants, with each warrant exercisable into one class
A share of Field Trip at a price of $2.00 per share until August 14, 2022. The funds to be available to the Resulting Issuer upon
the Closing are expected to be approximately $14,000,000 which includes the net proceeds of the Private Placement. These funds
are anticipated to be principally used for the continued expansion and development of the Field Trip clinics, costs associated
with Field Trip’s research, drug discovery and development initiatives, for technology innovation and for general corporate purposes.
While the Resulting Issuer intends to spend the funds available to it as stated herein, there may be circumstances where management
reasonably determines that a reallocation of funds is necessary.
Newton
will hold an annual and special meeting of its shareholders on September 24, 2020, subject to adjournment or postponement (the
“Newton Meeting”), to approve, among other things: (a) the election of the directors of the Resulting Issuer in connection
with the Closing; (b) the authorization to amend the articles of Newton to change its name to “Field Trip Health Ltd.”
or such similar name as may be accepted by the relevant regulatory authorities and approved by the board of directors of Newton;
(c) the consolidation (the “Consolidation”) of the issued and outstanding common shares of Newton (each a “Newton
Share”) prior to the Closing on the basis of one (1) post-Consolidation Newton Share for every eight (8) pre-Consolidation
Newton Shares; (d) the authorization to apply to de-list the Newton Shares from the facilities of the TSX Venture Exchange (the
“TSXV”) and apply to list the Newton Shares on the facilities of the Canadian Securities Exchange (the “CSE”);
(e) the adoption of certain amendments to the bylaws of Newton; and (f) such other special business as may be properly brought
before the Newton Meeting or any postponement or adjournment thereof. Upon completion of the Consolidation, it is anticipated
that the 6,361,047 currently issued and outstanding Newton Shares will be consolidated into 795,131 post-Consolidation Newton
Shares. Details regarding the Newton Meeting are available in a management information circular dated August 21, 2020 that has
been mailed to shareholders of Newton. The Transaction will be approved by the sole shareholder of Newton Subco and by the shareholders
of Field Trip prior to the Closing. Under the terms of the Amalgamation Agreement, at the effective time of the Transaction, among
other things: (a) each issued and outstanding Field Trip Share (other than Field Trip Shares held by holders that have validly
exercised their dissent rights) will be cancelled, and the holder thereof will receive one fully paid and non-assessable common
share of the Resulting Issuer (each, a “Resulting Issuer Share”) (on a post-Consolidation basis) in exchange for such
Field Trip Share; and (b) each outstanding Field Trip stock option and warrant (of which approximately 3,466,806 stock options
and 299,753 warrants are outstanding as at the date hereof) will be cancelled and its holder will receive in exchange therefor
an option or warrant, as applicable of the Resulting Issuer to purchase a Resulting Issuer Share which convertible securities
shall have all of the terms and conditions, including the exercise price, term to expiry, vesting conditions and manner of exercising,
as the Field Trip option or warrant for which it was exchanged. In connection with the Closing, an aggregate of 35,590,954 Resulting
Issuer Shares will be issued to holders of Field Trip Shares. Immediately after the Closing, and after giving effect to the Consolidation,
the shareholders of Newton will own approximately 2.2% of the Resulting Issuer Shares and the former shareholders of Field Trip
will own approximately 97.8% of the Resulting Issuer Shares, each on an undiluted basis.
In
connection with the Transaction, and subject to the receipt of all necessary shareholder and regulatory approvals, Newton intends
to voluntarily de-list the Newton Shares from the NEX board of the TSXV. It is a condition of the Closing that Newton has obtained
the conditional approval of the CSE for listing of the Resulting Issuer Shares on the CSE. As a result, it is anticipated that
the Transaction will be governed by the policies of the CSE. Completion of the Transaction will be subject to the closing conditions
set forth in the Amalgamation Agreement, which include the approval of the listing of Resulting Issuer Shares on the CSE, the
approval of the Transaction by shareholders of Field Trip, approval of matters ancillary to the Transaction by shareholders of
Newton at the Newton Meeting, and certain standard closing conditions, including there being no material adverse change in the
business of Newton or Field Trip prior to completion of the Transaction. The Transaction itself is not subject to shareholder
approval of Newton. The proposed de-listing of the Newton Shares from the TSXV is subject to the approval of a majority of the
minority shareholders of Newton.
The
Transaction is an arm’s length transaction.
Upon
completion of the Transaction, it is anticipated that the following persons identified will serve as directors and officers of
the Resulting Issuer:
Joseph
del Moral, Director & Chief Executive Officer
Ronan
Levy, Director & Executive Chairman & Corporate Secretary
Hannan Fleiman, Director & President of Healthcare
Mujeeb
Jafferi, Director & President
Dr.
Ryan Yermus, Director & Chief Clinical Officer
Tyler
Dyck, Interim Chief Financial Officer
Helen
M. Boudreau, Director
Dieter Weinand, Director
Financial
Highlights
As
at June 30, 2020, the Corporation had $472,456 in cash (June 30, 2019 - $616,464). The Corporation had a total comprehensive loss
of $59,633 for the six months ended June 30, 2020 (June 30, 2018 - $141,204) and $33,875 for the three months ended June 30, 2020
(June 30, 2019 - $117,428). This loss is comprised of operating costs and expenses.
Selected
Financial Information
The
following table summarizes key financial information on a quarterly basis for the previous two years:
|
|
|
June 30
|
|
|
March 31
|
|
|
December 31
|
|
|
September 30
|
|
|
|
|
2020
|
|
|
2020
|
|
|
2019
|
|
|
2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Total revenue
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,750
|
|
|
Net income
|
|
|
(33,875
|
)
|
|
|
(25,758
|
)
|
|
|
(64,202
|
)
|
|
|
(33,567
|
)
|
|
Basic and diluted loss per share
|
|
|
(0.01
|
)
|
|
|
(0.00
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
Total assets
|
|
|
479,261
|
|
|
|
509,065
|
|
|
|
542,317
|
|
|
|
582,160
|
|
|
Total liabilities
|
|
|
21,676
|
|
|
|
17,605
|
|
|
|
25,101
|
|
|
|
6,904
|
|
|
|
|
June 30
|
|
|
March 31
|
|
|
December 31
|
|
|
September 30
|
|
|
|
|
2019
|
|
|
2019
|
|
|
2018
|
|
|
2018
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Total revenue
|
|
|
4
|
|
|
|
-
|
|
|
|
3,559
|
|
|
|
54
|
|
|
Net income
|
|
|
(117,428
|
)
|
|
|
(23,776
|
)
|
|
|
(79,841
|
)
|
|
|
(70,293
|
)
|
|
Basic and diluted loss per share
|
|
|
(0.02
|
)
|
|
|
(0.00
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
Total assets
|
|
|
624,127
|
|
|
|
656,696
|
|
|
|
700,331
|
|
|
|
760,312
|
|
|
Total liabilities
|
|
|
15,304
|
|
|
|
10,605
|
|
|
|
30,464
|
|
|
|
10,604
|
|
For
the six-month period ended June 30, 2020, the Corporation reported no discontinued operations and did not declare any cash dividends.
The Corporation’s revenue is comprised entirely of interest earned on cash and cash equivalent balances. Office and administration
expenses represent the Corporation’s costs associated with its activities for the respective periods.
Operating
Costs and Expenses
For
the six-month period ended June 30, 2020, operating cost and expenses decreased to $59,633 compared to $141,208 for the same period
in 2019. For the three months ended June 30, 2020, operating costs and expenses decreased to $33,875 compared to $117,432 for
the same period in 2019. No expenses were capitalized during the six-month periods ended in 2020 and 2019.
Breakdown
of Operating Costs and Expenses
|
|
|
For the three
|
|
|
For the three
|
|
|
For the six
|
|
|
For the six
|
|
|
|
|
months ended
|
|
|
months ended
|
|
|
months ended
|
|
|
months ended
|
|
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Accounting and legal
|
|
|
8,894
|
|
|
|
6,992
|
|
|
|
13,718
|
|
|
|
8,681
|
|
|
Advertising and promotion
|
|
|
-
|
|
|
|
165
|
|
|
|
-
|
|
|
|
1,855
|
|
|
Consulting and director’s fees
|
|
|
14,000
|
|
|
|
12,500
|
|
|
|
26,000
|
|
|
|
18,500
|
|
|
Insurance
|
|
|
2,035
|
|
|
|
1,850
|
|
|
|
3,947
|
|
|
|
3,592
|
|
|
Office and miscellaneous
|
|
|
4,060
|
|
|
|
3,477
|
|
|
|
8,293
|
|
|
|
4,045
|
|
|
Share-based payments
|
|
|
-
|
|
|
|
80,160
|
|
|
|
-
|
|
|
|
80,160
|
|
|
Travel and business development
|
|
|
-
|
|
|
|
7,344
|
|
|
|
-
|
|
|
|
16,145
|
|
|
Regulatory and filing fees
|
|
|
4,886
|
|
|
|
4,944
|
|
|
|
7,675
|
|
|
|
8,230
|
|
Accounting
and legal were $13,718 for the six-month period and $8,894 for the three-month period ended June 30, 2020 compared to $8,681 for
the six-month period and $6,992 for the three-month period ended June 30, 2019.
Advertising
and promotion were $nil for the six-month period and $nil for the three-month period ended June 30, 2020 compared to $1,855 for
the six-month period and $165 for the three-month period ended June 30, 2019.
Consulting
and directors’ fees were $26,000 for the six-month period and $14,000 for the three-month period ended June 30, 2020 compared
to $18,500 for the six-month period and $12,500 for the three-month period ended June 30, 2019.
Office
and miscellaneous were $8,293 for the six-month period and $4,060 for the three-month period ended June 30, 2020 compared to $4,045
for the six-month period and $3,477 for the three-month period ended June 30, 2019.
Travel
and business development were $nil for the six-month period and $nil for the three-month period ended June 30, 2020 compared to
$16,145 for the six-month period and $7,344 for the three-month period ended June 30, 2019.
Regulatory
and filling fees were $7,675 for the six-month period and $4,886 for the three-month period ended June 30, 2020 compared to $8,230
for the six-month period and $4,944 for the three-month period ended June 30, 2019.
Certain
operating costs and expenses (including advertising and promotion, travel and business development, and regulatory and filing
fees) decreased due to the efforts by management to reduce overhead expenses for the Corporation. Accounting and legal and office
and miscellaneous expenses increased for the six-month period in 2020 over the same period in 2019.
The
Corporation’s revenue is comprised entirely of interest earned on cash and cash equivalents, short-term investment balances.
There was no interest earned for the six-month period ended June 30, 2020.
For
the six-month period ended June 30, 2020, share-based payments expense was $nil compared to $80,160 for the six-month period ended
June 20, 2019 as there were no share options granted during the six-month period ended June 30, 2020.
Liquidity
and Capital Resources
The
Corporation currently has no operational cash flow and has no outstanding bank debt or other interest-bearing indebtedness as
at June 30, 2020.
|
|
a)
|
The
Corporation had $472,456 in cash and working capital of $457,585 as at June 30, 2020.
These balances will be used to fund operating costs and expenses and working capital
requirements.
|
|
|
b)
|
The
Corporation assesses its financing requirements and its ability to access debt or equity
markets on an ongoing basis. Given the current conditions in the financial markets, the
Corporation will seek to maintain financial flexibility and will monitor and assess its
financing requirements. The Corporation’s ability to access the equity or debt
markets in the future may be affected by prolonged market instability. The inability
to access the equity or debt markets for sufficient capital, at acceptable terms, and
within required timeframes, could have a material adverse effect on the Corporation’s
financial condition, results of operations and prospects. Further discussion on these
risks can be found in the “Risk Factors” section of the MD&A.
|
Investor
Relations
The
Corporation has no investor relations’ agreements.
Changes
in Internal Controls over Financial Reporting
There
have been no changes in the Corporation’s internal control over financial reporting during the six-month period ended June
30, 2020 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
Financing
The
Corporation does not currently have any operations generating cash to fund any projects or ventures and associated overhead costs.
The Corporation is therefore dependent upon debt and equity financing to carry out business plans. There can be no assurance that
such financing will be available to the Corporation.
Significant
Accounting Judgments, Estimates and Assumptions
A
detailed summary of all the Corporation’s significant accounting policies is included in Note 3 of the June 30, 2020 financial
statements.
Related
Party Transactions
A
detailed summary of all related party transactions is included in Note 5 of the June 30, 2020 financial statements.
Off
Balance Sheet Arrangements
The
Corporation has no off-balance sheet arrangements.
Outstanding
Share Data and Stock Options
The
Corporation is authorized to issue an unlimited number of common shares and an unlimited number of preferred shares. As at August
27, 2020, there were 6,361,047 common shares and nil preferred shares issued and outstanding.
The
Corporation has a stock option plan. On May 10, 2019, the Corporation granted 400,000 stock options to directors and officers
at an exercise price of $0.22 per share for a term of five years. As at August 27, 2020, there were 595,621 stock options outstanding.
The
Corporation has no share purchase warrants outstanding as at August 27, 2020.
Risk
Factors
Investment
in the Corporation must be considered highly speculative due to the nature of the Corporation’s business, its formative stage
of development, its current financial position and its lack of earnings record. The following is a summary of the risk factors
to be considered:
Sale
The
Corporation has sold all of its oil and gas assets and is now seeking to identify and acquire or merge with an operating entity
in the sector. Investment in the common shares of the Corporation is highly speculative given the unknown nature of the Corporation’s
business and its present stage. There can be no assurance that an active and liquid market for the Corporation’s common
shares will develop and an investor may find it difficult to resell the common shares.
Potential
Transaction
Until
identification and acquisition or merger with an operating entity, the Corporation is not anticipated to generate any cash flow
to meet its operating costs. The Corporation has only limited funds with which to identify and evaluate potential targets and
there can be no assurance that the Corporation will be able to identify a suitable target. Even if a proposed target is identified,
there can be no assurance that the Corporation will be able to successfully complete the transaction. Completion of a target is
subject to a number of conditions including acceptance by the TSXV and, in the case of a non-arm’s length transaction, the
majority of the minority approval of the shareholders of the Corporation. Upon public announcement of a proposed target, trading
in the common shares of the Corporation may be halted and may remain halted for an indefinite period of time. The common shares
of the Corporation will not be reinstated to trading before the TSXV has reviewed the transaction. Reinstatement to trading provides
no assurance with respect to the merits of the transaction or the likelihood of the Corporation completing the proposed transaction.
Price
Volatility of Publicly Traded Securities
In
recent years, the securities markets in Canada and the United States have experienced a high level of price and volume volatility,
and the market price of securities of many companies, particularly those considered to be development stage companies, have experienced
wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset values or prospects
of such companies.
Management
of Growth
The
Corporation may be subject to growth-related risks, including capacity constraints and pressure on its internal systems and controls.
The ability of the Corporation to manage growth effectively will require it to continue to implement and improve its operational
and financial systems and to expand, train and manage its employee base. The inability of the Corporation to deal with this growth
could have a material adverse impact on its business, operations and prospects.
Reliance
on Key Personnel
The
Corporation’s success depends in large measure on certain key personnel. The loss of the services of such key personnel could
have a material adverse effect on the Corporation. The Corporation does not have any key person insurance in effect for management.
The contributions of the existing management team to the immediate and near term operations of the Corporation are likely to be
of central importance. In addition, the competition for qualified personnel in various industries can be intense and there can
be no assurance that the Corporation will be able to continue to attract and retain all personnel necessary for the development
and operation of its business. Investors must rely upon the ability, expertise, judgment, discretion, integrity and good faith
of the management of the Corporation.
Substantial
Capital Requirements
The
Corporation may be required to make substantial capital expenditures for the acquisition and development of ventures and projects.
The Corporation’s ability to access the equity or debt markets in the future may be affected by any prolonged market instability.
There can be no assurance that debt or equity financing, or future cash (if any) generated by operations, would be available or
sufficient to meet these requirements or for other corporate purposes or, if debt or equity financing is available, that it will
be on terms acceptable to the Corporation. These funding arrangements are not yet in place. There is no assurance that the initiatives
undertaken by management will be successful. The inability of the Corporation to access sufficient capital for its operations
could have a material adverse effect on the Corporation’s financial condition, results of operations and prospects.
Dilution
The
Corporation may make future acquisitions or enter into financings or other transactions involving the issuance of securities of
the Corporation, which may be substantially dilutive to existing shareholders and which may also result in a change of control
of the Corporation.
Issuance
of Debt
The
Corporation may enter into transactions to acquire assets or the shares of other organizations. These transactions may be financed
in whole or in part with debt, which may increase the Corporation’s debt levels above industry standards for companies of similar
size. Depending on future plans, the Corporation may require additional equity and/or debt financing that may not be available
or, if available, may not be available on favourable terms. Neither the Corporation’s articles nor its by-laws limit the amount
of indebtedness the Corporation may incur. The level of the Corporation’s indebtedness from time to time could impair the Corporation’s
ability to obtain additional financing on a timely basis to take advantage of business opportunities that may arise.
Dividends
To
date, the Corporation has not declared or paid any dividends on its outstanding shares. Any decision to pay dividends on the shares
will be made by the board of directors of the Corporation on the basis of its earnings, financial requirements and other conditions
existing at such future time. At present, the Corporation does not anticipate declaring and paying any dividends in the foreseeable
future.
Conflicts
of Interest
Certain
directors of the Corporation are also directors of other companies and as such may, in certain circumstances, have a conflict
of interest requiring them to abstain from certain decisions. Conflicts, if any, will be subject to the procedures and remedies
of the Business Corporations Act (Alberta).
Financial
Instruments
The
Corporation considers its risks in relation to financial instruments in the following categories:
Credit
Risk
Credit
risk is the risk that counterparty to a financial instrument will not discharge its obligations, resulting in a financial loss
to the Corporation. The Corporation has policies and procedures in place that govern the credit risk it will assume. The Corporation
evaluates credit risks on an ongoing basis including an evaluation of counterparty credit rating and counterparty concentrations
measured by amount and percentage. The Corporation’s objective is to have no credit losses. The primary sources of credit risk
for the Corporation arise from the following financial assets: (1) cash and cash equivalents and (2) accounts receivable. The
Corporation has not had any credit losses in the past and the risk of financial loss is considered to be low. As at June 30, 2020,
the Corporation has no financial assets that are past due or impaired due to credit risk related defaults.
Liquidity
Risk
Liquidity
risk is the risk that the Corporation will not be able to meet obligations associated with financial liabilities. The Corporation’s
financial liabilities are comprised of accounts payable and accrued liabilities. The Corporation frequently assesses its liquidity
position and obligations under its financial liabilities by preparing regular financial forecasts. The Corporation mitigates liquidity
risk by maintaining a sufficient cash balance as well as maintaining sufficient current and projected liquidity to meet expected
future payments.
Market
Risk
Market
risk is the risk that the fair value (for assets or liabilities considered to be held for trading and available for sale) or future
cash flows (for assets or liabilities considered to be held-to-maturity, other financial liabilities, and loans and receivables)
of a financial instrument will fluctuate because of changes in market prices. The Corporation evaluates market risk on an ongoing
basis. At June 30, 2020, all of the Corporation’s financial instruments were assessed to have little or no market risk.
SCHEDULE
“E”
MD&A
OF FIELD TRIP
(See
attached)
FIELD TRIP PSYCHEDELICS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE
THREE MONTHS ENDED JUNE 30, 2020 AND THE PERIOD FROM APRIL 2, 2019 (DATE
OF INCORPORATION) TO MARCH 31, 2020
(All in
Canadian dollars except number of shares and where otherwise noted)
MANAGEMENT’S
DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED JUNE 30, 2020 AND
THE PERIOD FROM APRIL 2, 2019 (DATE
OF INCORPORATION)
TO MARCH 31, 2020
This management’s discussion and
analysis (“MD&A”) for the three months ended June 30, 2020 and the period from April 2, 2019 (date of incorporation)
to March 31, 2020 provides detailed information on the operating activities, performance and financial position of Field Trip Psychedelics
Inc. (the “Group”, the “Company” or “Field Trip”). This discussion should be read in conjunction
with the Company’s unaudited condensed interim consolidated financial statements and accompanying notes for the three months
ended June 30, 2020 and the audited consolidated financial statements and accompanying notes for the period from April 2, 2019
(date of incorporation) to March 31, 2020. The financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) and are reported in Canadian dollars, unless otherwise noted.
The Company’s fiscal year commences
April 1st of each year and ends on March 31st of the following year. The Company’s current fiscal year, which ends on March
31, 2021, is referred to as the “current fiscal year”, “fiscal 2021”, or using similar words. The Company’s
current three months ended June 30, 2020, is referred to as the “current fiscal quarter, “first quarter of fiscal 2021”,
or using similar words.
This MD&A contains certain “forward
-looking statements” and certain “forward-looking information” as defined under applicable Canadian securities
laws. Please refer to the discussion of forward-looking statements and information set out under the heading “Cautionary
Note Regarding Forward-Looking Statements”, located at the beginning of this Listing Statement. As a result of many factors,
the Company’s actual results may differ materially from those anticipated in these forward-looking statements and information.
OVERVIEW
Business of the Company
Field Trip’s principal business is
providing patient-focused treatments through innovative psychedelic therapies via the operation of medical clinics, which guide
patients through ketamine-enhanced psychotherapy. Field Trip also plans to offer psychedelic-enhanced psychotherapy and psychedelic-integration
psychotherapy, when permissible. Field Trip’s business was founded in response to the urgent need to combat the spiraling
mental health crisis facing Canada and the world, which is a result of the limited effectiveness of current pharmacologic treatments
like anti-depressants. Ketamine was the first psychedelic administered to patients in conjunction with Field Trip’s custom
developed psychotherapy protocol. Evidence shows that ketamine, which is a dissociative psychedelic, is safe in correct doses and
can provide almost immediate and enduring relief from depression symptoms. Beyond its antidepressant effects, ketamine’s
ability to promote neural plasticity makes it a powerful tool to pair with Field Trip’s comprehensive psychotherapy program.
More specifically, Field Trip offers or plans to offer the following types of therapy:
|
|
•
|
Ketamine-enhanced psychotherapy (“KEP”) is a clinic-based treatment that combines the
administration of ketamine with psychotherapy sessions to accelerate the process of discovery, understanding and catharsis. KEP
sessions last longer than traditional therapy, are conducted with medical and psychological support and may include therapy-enhancing
tools such as music.
|
|
|
•
|
Psychedelic-enhanced psychotherapy combines the use of psychedelic medicines with psychotherapy
sessions and other enhancing therapies in a clinical setting. KEP is a type of psychedelic-enhanced psychotherapy.
|
|
|
•
|
Psychedelic-integration psychotherapy consists of one or more psychotherapy sessions to support
a patient’s understanding and processing of past psychedelic experiences through reflection and integration of those experiences.
Psychedelic-integration psychotherapy can be combined with psychedelic-enhanced psychotherapy, including KEP, or may be employed
on its own to integrate patient experience outside of a clinical setting.
|
While the use of ketamine in KEP is considered
“off-label”, such use is legal under medical supervision. As such, ketamine is currently the only legal psychedelic
medicine generally available to mental health providers in Canada and the United States. As existing psychedelic medicines become
available for use in a therapeutic setting and novel psychedelic medicines become available, Field Trip intends to explore the
use of other methods of psychedelic-enhanced psychotherapy.
Additionally, Field Trip conducts research
and development activities related to psychedelics and trains and educates members of the medical community regarding the importance
of novel psychotherapy treatments.
Currently, Field Trip has clinics in Toronto,
Ontario, New York, New York and Santa Monica, California with plans to open a clinic in Chicago, Illinois in November 2020.
Field Trip is comprised of the following companies:
|
|
•
|
Field Trip Health Inc., a wholly-owned Canada corporation;
|
|
|
•
|
Filed Trip Natural Products Limited, a wholly-owned Jamaica corporation;
|
|
|
•
|
Field Trip Health USA Inc., a wholly owned Delaware corporation;
|
|
|
•
|
Field Trip Digital LLC, a wholly owned Delaware limited liability corporation; and
|
|
|
•
|
Field Trip Health B.V., a wholly owned Netherlands corporation.
|
Regulatory Environment
The Canadian psychedelic therapy industry
is an emerging market and serves a medical market only. In Ontario, physicians working in medical clinics are regulated by the
College of Physicians and Surgeons of Ontario, via the Regulated
Health Professions Act, 1991 (Ontario) and the Medicine Act, 1991 (Ontario).
Ketamine clinics in the State of New York
that are owned solely by New York-licensed physicians are organized as physician practices. Physician practices in the State of
New York are overseen by the New York State Education Department, Office of the Professions, State Board for Medicine (the “NY
Medical Board”). Laws that apply specifically to physician practices in the State of New York are New York Education Law
§§ 6500 – 6516 and 6520 – 6532 and 8 New York Codes, Rules and Regulations (“NYCRR”) §§
59.1 et. seq. and 8 NYCRR §§ 60.1 et. seq. The New York Clinic is likely to utilize, in addition to physicians, mid-level
practitioners such as physician assistants and nurse practitioners and mental health practitioners such as psychologists and psychotherapists.
Physician assistants are also subject to oversight of the NY Medical Board (and subject to laws codified at New York Education
Law (“NYEL”) §§ 6540 et. seq.) and nurse practitioners are subject to oversight of the New York State Education
Department, Office of the Professions (“NYOP”), State Board for Nursing (and subject to laws codified at NYEL
§§ 6900 et. seq. and additional regulation that apply only to nurses at NYCRR §§ 64.1 et. seq.). Psychologists
are licensed by the NYOP, State Board for Psychology (and subject to additional laws and regulations codified at NYEL §§
7600 et. seq. and 8 NY CRR §§ 72.1 et. seq.), and psychotherapists are licensed by the NYOP, State Board for Mental
Health Practitioners (and subject to additional laws and regulations codified at NYEL §§ 8400 et. seq. and 8 NY CRR
§ 52.35 and 8 NY CRR §§ 79.12 et. seq.).
Similarly, ketamine clinics in the State
of California that are owned solely by California -licensed physicians are organized as California professional medical corporations
while unlicensed persons are able to participate in a medical practice via a management service company. The Medical Board of
California (the “CA Medical Board”) regulates physicians and surgeons under the Business and Professions Code, §2190.5.
The CA Medical Board also regulates medical assistants, while nurses, nurse practitioners and certain psychotherapists are regulated
by the Board of Registered Nursing. Psychologists are licensed by the California Board of Psychology.
In the State of Illinois, the Illinois
Department of Financial and Professional Regulation (“IDFPR”) regulates physicians and surgeons under the Medical Practice
Act (225 ILCS 60/2) and Medical Corporations under the Medical Corporation Act (805 ILCS 15/1). The IDFPR
also regulates nurses under the Nurse Practice Act (225 ILCS 65/), psychologists under the Clinical Psychologist Licensing Act
(225 ILCS 15/), and both licensed professional counselors and licensed clinical professional counselors
under the Illinois Professional Counselor and Clinical Professional Counselor Licensing and Practice Act (225 ILCS 107/1).
In states where ketamine clinics are physician-owned,
Field Trip Ventures USA Inc. will provide management services to the physician practice that will own the Clinics located in the
United States. The relationship between Field Trip Ventures USA Inc. and the physician practice that it manages is subject to various
standards of corporate practice and fee-splitting rules.
In Jamaica, psilocybin is not prohibited
by the Jamaica Dangerous Drugs Act, 1948. Research conducted by FTNP at the Jamaica Facility is governed by the Jamaica
Ministry of Health (“JMH”), Ethics and Medico-Legal Affairs Panel and by the JMH Standards and Regulation Division.
In addition to GLP and cGMP, research involving human subject is governed by the JMH Guidelines for the Conduct of Research on
Human Subjects. Furthermore, medicines, including natural products, require registration with the JMH prior to importation, distribution
and sale in Jamaica as outlined in the Food and Drugs Act, 1964.
SELECTED CONSOLIDATED FINANCIAL DATA
|
|
|
Three Months
Ended June 30,
2020
|
|
|
Period Ended
March 31, 2020
|
|
|
Revenue
|
|
$
|
23,599
|
|
|
$
|
1,000
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
General and administration
|
|
|
1,353,920
|
|
|
|
2,310,076
|
|
|
Occupancy costs
|
|
|
63,783
|
|
|
|
317,476
|
|
|
Sales and marketing
|
|
|
151,832
|
|
|
|
305,710
|
|
|
Research and development
|
|
|
735,002
|
|
|
|
193,192
|
|
|
Depreciation and amortization
|
|
|
209,760
|
|
|
|
146,320
|
|
|
Patient services
|
|
|
56,975
|
|
|
|
9,403
|
|
|
|
|
$
|
2,571,272
|
|
|
$
|
3,282,177
|
|
|
Other Income (Expenses)
|
|
|
|
|
|
|
|
|
|
Finance expense
|
|
$
|
(34,984
|
)
|
|
$
|
(19,907
|
)
|
|
Non-operating loss
|
|
|
(376,247
|
)
|
|
|
672,760
|
|
|
Net Loss
|
|
$
|
(2,958,904
|
)
|
|
$
|
(2,628,324
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss per Share - Basic and Diluted
|
|
$
|
(0.21
|
)
|
|
$
|
(0.26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss Attributable to Field Trip
|
|
$
|
(2,921,207
|
)
|
|
$
|
(2,670,021
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
13,019,504
|
|
|
$
|
12,541,095
|
|
|
Total Non-Current Financial Liabilities
|
|
|
3,219,052
|
|
|
|
1,078,334
|
|
|
Distributions
|
|
|
-
|
|
|
|
-
|
|
RESULTS OF OPERATIONS
For the First Quarter of Fiscal 2021
Overview
Since inception, we have incurred losses
while opening our North American clinics and advancing the research and development of our products. For the three months ended
June 30, 2020 and period ended March 31, 2020, we earned patient services revenues of $23,599 and $1,000 from our Toronto clinic
which opened in March 2020 amid the coronavirus (“COVID-19”) pandemic. Net loss for the current fiscal quarter of $2,958,904
was primarily due to general and administration expenses of $1,353,920, research and development expenses of $735,002, sales &
marketing expenses of $151,832 and realized foreign exchange loss of $394,722.
General and Administration
Components of general and administrative
expenses for the three months ended June 30, 2020 and comparative periods were as follows:
|
|
|
Three Months Ended
|
|
|
Period Ended
|
|
|
Period Ended
|
|
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
|
March 31, 2020
|
|
|
Personnel costs
|
|
$
|
749,840
|
|
|
$
|
11,684
|
|
|
$
|
896,227
|
|
|
External services
|
|
|
432,892
|
|
|
|
72,476
|
|
|
|
753,106
|
|
|
Share-based payments
|
|
|
103,669
|
|
|
|
64,733
|
|
|
|
330,703
|
|
|
Travel and entertainment
|
|
|
9,040
|
|
|
|
3,582
|
|
|
|
231,400
|
|
|
IT and technology
|
|
|
54,448
|
|
|
|
-
|
|
|
|
50,536
|
|
|
Office and general
|
|
|
4,031
|
|
|
|
170
|
|
|
|
48,104
|
|
|
Total general and administration
|
|
$
|
1,353,920
|
|
|
$
|
152,645
|
|
|
$
|
2,310,076
|
|
During the current fiscal quarter, we designed
a mobile software application that will be made available in both the iOS and Android app stores (the “Trip App”).
The Trip App provides users with a framework and tools to make the most of self-directed consciousness-expanding activities such
as meditation and breathwork. We launched a beta testing version of Trip App in August 2020. Our New York and Santa Monica clinics
also became operational.
Occupancy costs
Components of occupancy costs for the three months ended June
30, 2020 and comparative periods were as follows:
|
|
|
Three Months Ended
|
|
|
Period Ended
|
|
|
Period Ended
|
|
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
|
March 31, 2020
|
|
|
Operating rent expense
|
|
$
|
33,469
|
|
|
$
|
14,130
|
|
|
$
|
172,354
|
|
|
Taxes, maintenance, insurance
|
|
|
7,009
|
|
|
|
-
|
|
|
|
73,884
|
|
|
Minor furniture and fixtures
|
|
|
1,284
|
|
|
|
-
|
|
|
|
37,312
|
|
|
Utilities and services
|
|
|
22,021
|
|
|
|
-
|
|
|
|
33,926
|
|
|
Total occupancy costs
|
|
$
|
63,783
|
|
|
$
|
14,130
|
|
|
$
|
317,476
|
|
Occupancy costs relate to our Toronto
headquarters, Toronto, New York and Santa Monica clinics. Renovation of our Chicago clinic is underway, and we expect it to become
operational in November 2020. As we continue our rollout of clinics across North America, we anticipate we will open up to 6 additional
clinics by the end of March 2021.
Sales and Marketing
Components of sales and marketing for the
three months ended June 30, 2020 and comparative periods were as follows:
|
|
|
Three Months Ended
|
|
|
Period Ended
|
|
|
Period Ended
|
|
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
|
March 31, 2020
|
|
|
Brand and public relations
|
|
$
|
62,463
|
|
|
$
|
-
|
|
|
$
|
214,091
|
|
|
Conference fees
|
|
|
20,392
|
|
|
|
-
|
|
|
|
42,803
|
|
|
Personnel costs
|
|
|
31,317
|
|
|
|
-
|
|
|
|
29,147
|
|
|
External marketing services
|
|
|
37,660
|
|
|
|
-
|
|
|
|
19,669
|
|
|
Total sales and marketing
|
|
$
|
151,832
|
|
|
$
|
|
|
|
$
|
305,710
|
|
During the current fiscal quarter, we continued
to promote brand awareness of the Company among doctors and patients through our attendance at virtual conferences. We also continued
to provide education on the potential benefits of providing ketamine-enhanced, psychedelic-enhanced and psychedelic-integrated
psychotherapies to an individual’s mental health and well-being.
Research and Development
Components of research and development
for the three months ended June 30, 2020 and comparative periods were as follows:
|
|
|
Three Months Ended
|
|
|
Period Ended
|
|
|
Period Ended
|
|
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
|
March 31, 2020
|
|
|
External services
|
|
$
|
590,514
|
|
|
$
|
-
|
|
|
$
|
|
|
|
Personnel costs
|
|
|
142,421
|
|
|
|
-
|
|
|
|
178,644
|
|
|
Supplies and services
|
|
|
2,067
|
|
|
|
-
|
|
|
|
14,548
|
|
|
Total research and development
|
|
$
|
735,002
|
|
|
$
|
-
|
|
|
$
|
193,192
|
|
External services relate primarily to fees
paid by FTNP to Darwin Inc., a third party, to manage the construction and project management of a research laboratory in Jamaica
(“Jamaica Facility”), oversee the operations of the Jamaica Facility, provide legal advice and manage government relations.
The Jamaica Facility will provide advanced research and development of psilocybin producing mushrooms in partnership with the University
of West Indies (“UWI”). We anticipate the Jamaica Facility will open in October 2020.
We also continued development of FT-104.
Currently, FT-104 is in the pre-clinical development stage and optimization of a GLP synthesis of FT-104 is underway with completion
expected before Q4 2020. This will support ongoing pre-clinical efforts which are in turn expected to be completed by Q3 2021.
Finance Expense
Components of finance expense for the three months ended June
30, 2020 and comparative periods were as follows:
|
|
|
Three Months Ended
|
|
|
Period Ended
|
|
|
Period Ended
|
|
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
|
March 31, 2020
|
|
|
Interest expense on leases
|
|
$
|
(37,233
|
)
|
|
$
|
-
|
|
|
$
|
(22,562
|
)
|
|
Interest income on shareholders’ loan
|
|
|
621
|
|
|
|
-
|
|
|
|
1,586
|
|
|
Interest income on refundable lease deposit
|
|
|
1,646
|
|
|
|
-
|
|
|
|
951
|
|
|
Interest expense on bank balances
|
|
|
(18
|
)
|
|
|
-
|
|
|
|
145
|
|
|
Total finance expense
|
|
$
|
(34,984
|
)
|
|
$
|
-
|
|
|
$
|
(19,880
|
)
|
Non-operating Loss
Components of the non-operating loss for
the three months ended June 30, 2020 and comparative periods were as follows:
|
|
|
Three Months Ended
|
|
|
Period Ended
|
|
|
Period Ended
|
|
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
|
March 31, 2020
|
|
|
Unrealized foreign exchange gains
|
|
|
475
|
|
|
$
|
-
|
|
|
$
|
(1,111
|
)
|
|
Realized foreign exchange gains (loss)
|
|
|
(394,722
|
)
|
|
|
-
|
|
|
|
667,526
|
|
|
Wage subsidy
|
|
|
18,000
|
|
|
|
-
|
|
|
|
6,345
|
|
|
Total non-operating loss
|
|
$
|
(376,247
|
)
|
|
$
|
-
|
|
|
$
|
672,760
|
|
During the current fiscal quarter, we recorded
a realized foreign exchange loss of $394,722 which reflected a strengthening of the U.S. dollar against the Canadian dollar on
our U.S.-denominated bank balances.
SELECTED FINANCIAL INFORMATION – SUMMARY OF QUARTERLY
RESULTS
The following table sets out selected quarterly
information for all completed fiscal quarters of the Company up to June 30, 2020:
|
|
|
Three Months
Ended June 30,
2020
|
|
|
Three Months
Ended March 31,
2020
|
|
|
Three Months
Ended Dec 31,
2019
|
|
|
Three Months
Ended Sep 30,
2019
|
|
|
Period Ended
June 30, 2019
|
|
|
Revenue
|
|
$
|
23,599
|
|
|
$
|
1,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Net Loss
|
|
$
|
(2,958,904
|
)
|
|
$
|
(893,816
|
)
|
|
$
|
(1,053,507
|
)
|
|
$
|
(514,226
|
)
|
|
$
|
(166,775
|
)
|
|
Loss per share - basic and diluted
|
|
$
|
(0.21
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.03
|
)
|
Historically, the Company’s operating
results have fluctuated on a quarterly basis and we expect that quarterly financial results will continue to fluctuate. If anticipated
patient services revenues in any quarter do not occur when we expect due to unexpected delays in our North American clinic rollout
and the economic impact of COVID-19 outbreak, our operating results for that quarter and future quarters may be adversely affected.
Furthermore, historical patterns of expenditures cannot be taken as an indication of future expenditures. The amount and timing
of expenditures and therefore liquidity and capital resources vary substantially from period to period depending on the number
of clinics opened, the number of research and development programs being undertaken at any one time, the stage of the development
programs, the timing of significant expenditures for pre-clinical studies and clinical trials and the availability of funding
from investors. Because of the historical variations in our operating results, our limited operating history and the rapidly evolving
nature of our business, we believe that period-to -period comparisons of our revenue and operating results are not necessarily
meaningful and should not be relied upon as indications of our future performance.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations
primarily from the issuance of equity. Our primary capital needs are funds to support the rollout of our North American clinics,
to further advance our pioneering work with our next generation psychedelic molecule, FT-104 and our advanced research and development
on psilocybin producing mushrooms in partnership with the UWI.
On April 2, 2019, the Company issued 6,300,630
Class A shares at a price of $0.055 per share yielding gross proceeds of $350,000.
On October 3, 2019 directors of the Company
exercised options to purchase 2,700,270 Class A shares at a price of $0.00001 for gross proceeds of $27.
On October 19, 2019 the Company issued
2,510,000 Class A shares at a price of $0.50 per share yielding gross proceeds of $1,255,000. As part of the issuance, shareholder
loans of $50,000 and $10,000 for the purchase of 100,000 and 20,000 shares respectively were entered into with advisors of the
Company, payable 5 years from the loan date and bearing zero interest.
On January 29, 2020, the Company issued
9,431,023 Class B shares at a price of $0.90 USD per share, yielding gross proceeds of $8,487,962 USD or $11,195,540 CAD.
Total finance costs incurred for the issuance
of share capital during the period ended March 31, 2020 was $19,297 CAD of which $7,299 CAD was settled via the issuance of 6,666
units of Class B shares at a price of $0.90 USD or $1.1884 CAD per share.
On May 20, 2020, the Company issued 76,240
Class B shares at a price of $0.90 USD per share, yielding gross proceeds of $68,616 USD or $95,617 CAD. The share issuance costs
of $17,829 were settled via the issuance of 14,216 Class B shares at a price of $0.90 USD or $1.2542 CAD per share.
We periodically evaluate the opportunity
to raise additional funds through either the public or private placement of equity capital to strengthen our financial position
and to provide sufficient cash reserves for growth and development of the business; however , there can be no assurance that we
will be successful in continuing to finance our operations.
The table below sets out our cash, restricted cash and working
capital as at June 30 and March 31, 2020:
|
|
|
As at
|
|
|
As at March 31,
|
|
|
|
|
June 30, 2020
|
|
|
2020
|
|
|
Cash
|
|
$
|
7,041,330
|
|
|
$
|
9,590,753
|
|
|
Restricted cash
|
|
$
|
100,000
|
|
|
$
|
100,000
|
|
|
Working capital
|
|
$
|
6,222,011
|
|
|
$
|
8,985,037
|
|
Restricted cash is cash held as collateral against the Company’s
credit card limit.
Working capital represents the excess
of current assets over current liabilities. The decrease in our cash and working capital was primarily due to cash used in operating
activities of $1,960,777 and cash used in investing activities of $712,764.
The following table shows our cash flows from operating, investing
and financing activities for the periods indicated:
|
|
|
Three Months
Ended June 30,
2020
|
|
|
Period Ended
June 30, 2019
|
|
|
Cash used in operating activities
|
|
$
|
(1,960,777
|
)
|
|
$
|
(71,100
|
)
|
|
Cash used in investing activities
|
|
$
|
(712,764
|
)
|
|
|
-
|
|
|
Cash provided by financing activities
|
|
|
77,788
|
|
|
|
950,000
|
|
Cash used in operating activities
During the current fiscal quarter,
cash used in operating activities of $1,960,777 was the primary driver for the net loss of $2,958,904.
Cash used in investing activities
During the current fiscal quarter,
cash used in investing activities consisted primarily of acquisition of property, plant and equipment for our New York and Santa
Monica clinics of $327,411, repayment of lease obligation of $211,668 and acquisition of intangible assets of $119,173 relating
to our digital patient portal (“Patient Portal”) and Trip App.
Cash provided by financing activities
On May 20, 2020, the Company issued
76,240 Class B shares at a price of $0.90 USD per share, yielding gross proceeds of $68,616 USD or $95,617 CAD, net of share issuance
costs of $17,829, which were settled via the issuance of 14,216 Class B shares.
OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS
We do not have any off-balance
sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, revenues
or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
The Company leases real property
for its clinical and office locations. Additional (non-lease) rent payments for these locations are variable, and therefore have
not been included in the right-of-use asset or lease obligations. In addition, the Company has committed purchase orders related
to capital asset expansion all of which are expected to be paid within the next year. The Company is committed for estimated additional
variable (non-lease) rent and capital asset payments obligations as follows:
|
|
|
|
|
|
|
|
Within
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
>1
|
|
|
|
|
|
>3
|
|
|
>4
|
|
|
>5
|
|
|
|
|
Lease Expiry
|
|
Total
|
|
|
Months
|
|
|
Year
|
|
|
>2 Years
|
|
|
Years
|
|
|
Years
|
|
|
Years
|
|
|
Lease obligations
|
|
October 31, 2023 to June 30, 2030
|
|
|
882,110
|
|
|
|
144,483
|
|
|
|
177,435
|
|
|
|
65,905
|
|
|
|
65,905
|
|
|
|
65,905
|
|
|
|
362,478
|
|
|
Jamaica Facility
|
|
April 6, 2023
|
|
|
1,427,437
|
|
|
|
805,427
|
|
|
|
576,584
|
|
|
|
45,427
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Capital commitments
|
|
N/A
|
|
|
99,893
|
|
|
|
99,893
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Total contractual obligations and commitments
|
|
|
|
|
2,409,440
|
|
|
|
1,049,802
|
|
|
|
754,019
|
|
|
|
111,332
|
|
|
|
65,905
|
|
|
|
65,905
|
|
|
|
362,478
|
|
On April 6, 2020, FTNP entered
into a partnership with UWI to provide advanced research and development on psilocybin producing mushrooms. FTNP agreed to lease
property from UWI on which to construct a 2,072 square foot research laboratory (“Jamaica Facility”), contribute up
to US$1,000,000 of initial capital for the Jamaica Facility and psilocybin research and a total of US$100,000 to fund student
development initiatives at UWI over a 36-month period. To-date, we have incurred $380,000 in capital costs related to the Jamaica
Facility.
CONTINGENCIES
Litigation
During the prior year, we terminated a
lease contract with a lessor due to circumstances which we believe constituted a breach of contract by the lessor. Should we become
involved in litigation due to the termination of this contract we believe we have prepared valid legal defenses and that no material
exposure exists on the eventual settlement of such litigation. This lease was treated as a short-term lease under IFRS 16 and all
payments including security deposit paid were fully expensed during the period ended March 31, 2020.
OUTSTANDING SHARE DATA
The Company has an unlimited number of
Class A, Class B Series 1 and Class C common shares authorized for issuance, of which the following common shares are issued and
outstanding as at June 30, 2020:
|
Class of Shares
|
|
As at June 30,
2020
|
|
|
As at March 31,
2020
|
|
|
A
|
|
|
11,510,900
|
|
|
|
11,510,900
|
|
|
B
|
|
|
9,507,263
|
|
|
|
9,431,023
|
|
|
Total shares issued and outstanding
|
|
|
21,018,163
|
|
|
|
20,941,923
|
|
For additional information on share data
please refer to notes 3, 11 and 12 of the unaudited condensed interim consolidated financial statements for the three months ended
June 30, 2020 and notes 3, 10 and 11 of the audited consolidated financial statements for the period from April 2, 2019 (date of
incorporation) to March 31, 2020.
TRANSACTIONS WITH RELATED PARTIES
The Company’s related parties include
certain investors and shareholders, key management personnel, and entities owned by key management personnel.
Shareholders
Field Trip entered into shareholder loan
agreements with two of its advisors for a total of $60,000 in July 2019. The notes are non-interest bearing and are due on demand
or five years from the date of note issuance.
Key Management Personnel
Key management personnel are those persons
having authority and responsibility for planning, directing and controlling the activities of the Company, including directors.
Key management personnel at June 30, 2020 included seven directors and executive officers of the corporation.
Compensation for key management personnel
for the three month period ended June 30, 2020 consisted of salaries, short-term benefits and other compensation of $179,508.
Directors and officers of the Company control 52% or 10,889,786 outstanding voting shares of the Company.
FOURTH FISCAL QUARTER (THREE MONTH PERIOD ENDED MARCH 31,
2020)
On January 29, 2020, the Company issued
9,431,023 Class B shares at a price of $0.90 USD per share, yielding gross proceeds of $8,487,962 USD or $11,195,540 CAD.
On March 4, 2020, Field Trip opened the
Toronto clinic and began conducting initial consultations with patients who were interested in ketamine as a treatment for depression
symptoms. The Toronto clinic operates using a custom developed psychotherapy protocol, which it will replicate in its other clinics.
On February 14, 2020, we entered into a
lease agreement to develop an additional clinic in New York. The New York clinic became operational during our current fiscal quarter.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements
in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets and liabilities, revenue and expenses and the related disclosures of contingent assets
and liabilities and the determination of our ability to continue as a going concern. We regularly evaluate our estimates and assumptions
related to share-based transaction expense, property plant and equipment, intangible assets and shareholder loans. We base our
estimates and assumption on current facts, historical experience and various other factors that we believe to be reasonable under
the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
and the recording of costs and expenses that are not readily apparent from other sources. Actual results could differ materially
from these estimates and assumptions. We review our estimates and underlying assumptions on an ongoing basis. Revisions are recognized
in the period in which the estimates are revised and may impact future periods.
The areas involving a higher degree of
judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, have been set out
in note 2 of our unaudited condensed interim consolidated financial statements for the three months ended June 30, 2020 and are
more fully described in note 3 of our audited consolidated financial statements for the period from April 2, 2019 (date of incorporation)
to March 31, 2020.
There have been no material changes in any of critical
accounting policies and estimates during the three months ended June 30, 2020.
ACCOUNTING CHANGES AND IMPACT OF RECENTLY ISSUED
ACCOUNTING PRONOUNCEMENTS
Accounting standards or amendments to existing
accounting standards that have been issued, but have future effective dates, are either not applicable or are not expected to have
a significant impact on our financial statements.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Fair Value
IFRS
13 – Fair Value Measurements provides a hierarchy of valuation techniques based on whether the inputs to those
valuation techniques are observable or unobservable. Observable inputs are those that reflect market data obtained from independent
sources, while unobservable inputs reflect the Company’s assumptions with respect to how market participants would price
an asset or liability. These two inputs to measure fair value fall into the following three different levels of the fair value
hierarchy:
|
Level 1 –
|
Quoted prices in active markets for identical instruments that are observable
|
|
Level 2 –
|
Quoted prices in active markets for similar instruments; inputs other than
quoted prices that are observable and derived from or corroborated by observable market data
|
|
Level 3 –
|
Valuations derived from valuation techniques in which one or more significant
inputs are unobservable.
|
The hierarchy requires the use of observable market data when
available.
Cash, restricted cash, accounts receivable,
and accounts payable and accrued liabilities are all short-term in nature and, as such, their carrying values approximate fair
values.
Risks
The Company is exposed to credit risk,
liquidity risk, interest rate risk and currency risk. The Company’s Board of Directors has overall responsibility for the
establishment and oversight of the Company’s risk management framework. The Audit Committee of the board of directors is
responsible for review the Company’s financial risk management policies.
Credit Risk
Credit risk is the risk of an unexpected
loss if a counterparty to a financial instrument fails to meet its contractual obligations. The Company is exposed to credit risk
on its cash and accounts receivable. The carrying amount of these financial assets represents the maximum credit exposure. The
Company’s cash is held on with major banks in Canada, the United States, and Jamaica which we believe lessens the degree
of credit risk.
Liquidity Risk
Liquidity risk is the risk that the Company
will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by reviewing on an
ongoing basis its capital requirements. As at June 30, 2020, the Company had $7,141,330 of cash and cash equivalents.
The Company is obligated to pay accounts
payable and accrued liabilities with total carrying amounts and contractual cash flows amounting to $920,567 due in the next 12
months. The carrying values of cash, trade receivable, accounts payable and accrued liabilities approximate their fair values due
to their short term to maturity.
Interest Rate Risk
Financial instruments that potentially
subject the Company to cash flow interest rate risk are those assets and liabilities with a variable interest rate. Currently,
the Company has no assets or liabilities with a variable interest rate. Financial assets and financial liabilities that bear interest
at fixed rates are subject to fair value interest rate risk. The Company’s lease obligations are at fixed rates of interest.
Currency Risk
The Company is exposed to currency risk
related to the fluctuation of foreign exchange rates and the degree of volatility of those rates. Currency risk is limited to
the portion of the Company’s business transactions denominated in currencies other than the Canadian dollar, which are primarily
expenses in United States dollars. As at June 30, 2020, the Company held USD dollar denominated cash of $5,037,806 USD and had
USD dollar denominated accounts payable and accrued liabilities in the amounts of $58,675 USD. Therefore, a 1% change in the foreign
exchange rate would have a net impact as at June 30, 2020 of $ 67,856. USD dollar expenses for the period June 30, 2020 were $814,957
USD. Varying the foreign exchange rate for the period ended June 30, 2020 to reflect a 1% strengthening of the U.S. dollar would
have increased the net loss by approximately $11,298 assuming that all other variables remained constant.
SUBSEQUENT EVENTS
Chicago Clinic
On July 23, 2020, the Group executed a
lease agreement to build its Chicago clinic, commencing on October 1, 2020 and ending 120 months from the first day of the first
full month of the term. Total commitments under the lease are approximately $2,334,000.
Series B Financing
On August 14, 2020, the Company completed
brokered and non-brokered private placement of an aggregate of 5,516,724 class A shares in the capital of Field Trip, at a price
of $2.00 per Field Trip Share, for aggregate gross proceeds of $11,033,448. Canaccord Genuity Corp. and Stifel Nicolaus Canada
Inc. jointly acted as lead agents in connection with the brokered portion of the Private Placement, for which they were paid a
cash commission of $391,082, and were issued 55,167 class A shares and 299,753 compensation warrants, with each warrant exercisable
into one class A share of Field Trip at a price of $2.00 per share until August 14, 2022. All of the Class B Series 1 Shares were
automatically converted into Class A Shares upon closing of this transaction.
On September 21, 2020 Field Trip completed
a non-brokered private placement of an aggregate of 816,932 Field Trip Shares at a price of $2.00 per Field Trip Share for gross
proceeds of $1,633,864.
Reverse Takeover of Newton Energy Corporation
On August 21, 2020, Field Trip entered
into a definitive agreement with Newton Energy Corporation and Newton’s wholly-owned subsidiary, Newton Energy Subco Limited,
pursuant to which the parties intend to complete a going-public transaction for the Group (the “Transaction”). The
Transaction is structured as a three-cornered amalgamation, which will result in Field Trip becoming a wholly-owned subsidiary
of Newton by amalgamating with Newton Subco, and the security holders of Field Trip becoming security holders of Newton. In connection
with the completion of the Transaction, it is intended that Newton will change its name to “Field Trip Health Ltd.”
Option Grants
On September 2, 2020, Field Trip issued 535,000 options at an
issue price of $2.00 per Field Trip Share.
On September 22, 2020, Field Trip issued 172,500 options at
an issue price of $2.00 per Field Trip Share.
RISKS AND UNCERTAINTIES
Investing in the Company involves risk.
Prospective investors should carefully consider the risk factors contained in the Listing Statement to which this MD&A is attached.
If any of the following risk factors occur, the business, financial condition or results of operations of the Company could be
harmed.
While the precise impact of the recent
COVID-19 outbreak remains unknown, it has introduced uncertainty and volatility in Canadian and global economies. The Company
is monitoring development and preparing for any impacts related to COVID-19. We have a comprehensive business continuity plan
that ensures its readiness to appropriately address and mitigate regulatory and business risks as they arise including, but not
limited to, impacts on patients, practitioners and employees.
Exhibit 99.36
EXECUTION VERSION
agency AGREEMENT
August 14, 2020
Field Trip Psychedelics Inc.
30 Duncan Street
4th Floor, Unit 401
Toronto, ON M5V 2C3
Attention: Ronan Levy – Executive Chairman & Director
Dear Mesdames/Sirs:
Canaccord Genuity Corp. (“Canaccord”) and Stifel Nicolaus Canada Inc. (collectively, the “Agents” and each individually, an “Agent”) understand that Field Trip Psychedelics Inc. (the “Corporation”) proposes to issue up to 7,000,000 class A shares of the Corporation (the “Class A Shares”) at a price of $2.00 per Class A Share (the “Offering Price”) for aggregate gross proceeds of up to $14,000,000. The Corporation hereby grants to the Agents an option (the “Agents’ Option”), which may be exercised in the Agents’ sole discretion and without obligation, in whole or in part at any time before the Closing Date (defined below) by written notice delivered to the Corporation by the Agents, to offer up to an additional 500,000 Class A Shares for aggregate additional gross proceeds of up to $1,000,000. The offering of Class A Shares by the Corporation is referred to in this Agreement as the “Offering” and Class A Shares sold pursuant to this Agreement are referred to as the “Offered Shares”.
The Agents understand that the Corporation entered into a letter of intent dated June 18, 2020 (the “LOI”) with Newton Energy Corporation (“Newton”), a corporation listed on the NEX board of the TSX Venture Exchange (the “TSXV”), to be completed pursuant to the terms of a definitive agreement to be entered into between the Corporation and Newton which will result in the reverse take-over of Newton by the Corporation (the “Proposed Transaction”). Prior to the Proposed Transaction, Newton will seek to voluntarily delist its common shares from the TSXV and apply to list the common shares of Newton on the Canadian Securities Exchange (the “CSE”). Newton, as it will exist following the completion of the Proposed Transaction, is referred to in this Agreement as the “Resulting Issuer”. In connection with the closing of the Proposed Transaction, the securities of the Corporation, including the Class A Shares, will be exchanged for securities of the Resulting Issuer on an economically equivalent basis. The common shares in the capital of the Resulting Issuer are referred to in this Agreement as “Resulting Issuer Shares”. The Agents acknowledge and agree that the Proposed Transaction may not be completed on the terms currently contemplated, or at all, and the Corporation has no obligation to complete the Proposed Transaction.
In the event that the Corporation does not complete the Proposed Transaction or any other Liquidity Event (defined below) prior to: (i) the date that is six (6) months from the Closing Date, the Corporation shall issue to each Subscriber (defined below), for no additional consideration and in addition to the Offered Shares subscribed for and purchased by such Subscriber (the “Purchased Shares”), such number of Class A Shares equal to 5% of the Purchased Shares; and (ii) the date that is twelve (12) months from the Closing Date, the Corporation shall issue to each Subscriber, for no additional consideration and in addition to the Purchased Shares, such number of Class A Shares equal to 5% of the Purchased Shares (with the additional Class A Shares referred to in (i) and (ii) being collectively referred to as, the “Penalty Shares”). For greater certainty, the total number of Penalty Shares that may be issued to Subscribers shall not exceed 10% of the total number of Offered Shares. If the Corporation effects a subdivision or consolidation of the outstanding Class A Shares, the number of issuable Penalty Shares immediately before such subdivision or consolidation will be proportionately adjusted and calculated based on the number of Purchased Shares as adjusted for such subdivision or consolidation. The parties to this Agreement acknowledge that, if issued, the Penalty Shares shall be issued as liquidated damages for the delay in completion of a Liquidity Event.
The Agents may offer the Class A Shares and may solicit offers to purchase the Class A Shares (i) in each of the provinces of Canada on a private placement basis, (ii) to, or for the account or benefit of, persons in the “United States” or “U.S. Persons” (defined below) that are U.S. Accredited Investors (as such term is defined in Schedule “B” hereto), in transactions that are exempt from the registration requirements of the U.S. Securities Act (defined below), and applicable state securities laws, and (iii) in such offshore jurisdictions as agreed upon by the Agents and the Corporation pursuant to available prospectus or registration exemptions in accordance with Applicable Securities Laws (defined below) (collectively, the “Selling Jurisdictions”).
Upon and subject to the terms and conditions of this Agreement, the Agents agree to act as, and the Corporation appoints the Agents as, the exclusive agents of the Corporation to offer the Class A Shares for sale and purchase on a “commercially reasonable efforts” basis and without underwriter liability, to Subscribers resident in the Selling Jurisdictions. The Agents agree to use commercially reasonable efforts to solicit offers to purchase the Class A Shares in the Selling Jurisdictions but it is understood and agreed that the Agents shall act as agents only and are under no obligation to purchase any of the Class A Shares, although the Agents may subscribe for and purchase Class A Shares if they so desire.
The Corporation agrees that the Agents shall be permitted to appoint, at their sole expense, other registered dealers or other dealers duly qualified in their respective jurisdictions (in any case, a “Selling Firm”), as agents, to assist in the Offering in the Selling Jurisdictions and that the Agents may determine, and shall be solely responsible for, the remuneration payable to any such Selling Firm appointed.
The Agents agree that up to 1,250,000 Offered Shares may be allocated to certain (i) insiders, shareholders and affiliates of the Corporation, and (ii) persons who are not institutions or otherwise clients of the Agents (collectively, the “President’s List Subscribers”), provided that the President’s List Subscribers shall be identified by the Corporation to the Agents at least three Business Days (defined below) prior to the Closing Date and that the issuances of Offered Shares to such President’s List Subscribers comply with Applicable Securities Laws.
In consideration of the services rendered by the Agents in connection with the Offering, the Corporation shall pay to the Agents at the Closing Time, as set forth in Section 11, a commission (the “Agents’ Commission”) equal to: (i) 5.0% of the aggregate gross proceeds raised from the sale of Offered Shares other than in respect of gross proceeds from the sale of Offered Shares to President’s List Subscribers; plus (ii) 2.5% of the aggregate gross proceeds raised from the sale of Offered Shares to President’s List Subscribers, in each case payable by the Corporation in cash or Class A Shares, or any combination of cash and Class A Shares at the option of the Agents. As additional compensation for the services provided, the Corporation shall issue to the Agents at the Closing Time, in aggregate, that number of compensation warrants (the “Agents’ Warrants”) which is equal to (i) 5.0% of the aggregate number of Offered Shares sold to Subscribers other than President’s List Subscribers; plus (ii) 2.5% of the aggregate number of Offered Shares sold to President’s List Subscribers. Each Agents’ Warrant shall be exercisable to acquire one Class A Share (each, an “Agents’ Warrant Share”) at an exercise price equal to the Offering Price for a period of 24 months following the Closing Date, pursuant to the terms of the certificates representing the Agents’ Warrants (the “Agents’ Warrant Certificates”). The Agents will also be entitled to additional consideration for their advisory services provided to the Corporation in connection with the Offering and as such, the Corporation shall pay to the Agents, at the Closing Time, a corporate finance fee comprised of (i) that number of Class A Shares which is equal to 1.0% of the aggregate number of Offered Shares (the “Corporate Finance Shares”); and (ii) that number of Agents’ Warrants which is equal to 1.0% of the aggregate number of Offered Shares. For greater certainty, no additional Agents’ Commission, Agents’ Warrants or Corporate Finance Shares will be paid or issuable in connection with any issuance of Penalty Shares.
The Agents acknowledge and agree that any Class A Shares issued in settlement of the Agents’ Commission, the Corporate Finance Shares, the Agents’ Warrants, and if applicable, the Agents’ Warrant Shares, shall be subject to the restrictions on trading as set forth in Schedule “C” hereto.
TERMS AND CONDITIONS
The following are additional terms and conditions of this Agreement between the Corporation and the Agents:
Section 1 Definitions and Interpretation
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(1)
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Where used in this Agreement or in any amendment hereto, the following terms have the following meanings, respectively:
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“Agents” has the meaning ascribed thereto in the first paragraph of this Agreement;
“Agents’ Commission” has the meaning ascribed thereto in the opening paragraphs of this Agreement;
“Agents’ Option” has the meaning ascribed thereto in the first paragraph of this Agreement;
“Agents’ Warrant Certificate” has the meaning ascribed thereto in the opening paragraphs of this Agreement;
“Agents’ Warrant Share” has the meaning ascribed thereto in the opening paragraphs of this Agreement;
“Agents’ Warrants” has the meaning ascribed thereto in the opening paragraphs of this Agreement;
“Agreement” means this agency agreement dated the date hereof, including the schedules hereto, as modified, amended and/or supplemented from time to time;
“Alternative Transaction” has the meaning ascribed thereto in Section 15;
“Alternative Transaction Fee” has the meaning ascribed thereto in Section 15;
“Applicable Law” means, in relation to any person, the Business or the Offering, all applicable laws, statutes, Authorizations, ordinances, decrees, rules, regulations, by-laws, legally enforceable policies, codes or guidelines, judicial, arbitral, administrative, ministerial, departmental or regulatory judgements, orders, decisions, directives, rulings, subpoenas, or awards, and conditions of any grant or maintenance of any approval, permission, certification, consent, registration, authority or licence, any applicable federal or provincial pricing policies, and any other requirements of any Governmental Authority, by which such person is bound or having application to the Business or the Offering and any amendments or supplements to, or replacements and substitutions of, any of the foregoing;
“Applicable Securities Laws” means collectively, Canadian Securities Laws and all applicable securities laws, rules, regulations, policies and other instruments promulgated by the Securities Regulators in any of the other Selling Jurisdictions;
“associate”, “affiliate” and “insider” have the respective meanings given to them in the Securities Act;
“Authorizations” means any approval, consent, exemption, ruling, authorization, notice, permit, including an import permit or export permit, or acknowledgement that may be required from any Governmental Authority pursuant to Applicable Law, or which is otherwise required under Applicable Law for the parties to perform their obligations under this Agreement or in relation to the Business, including any, ethical review board approval or other authorization for a study, including authorizations related to medical clinics, authorizations necessary to administer ketamine to patients, or other authorizations related to the Business;
“Business” means the business of delivery of Drug Products, or other drug substances for therapeutic purposes, including the development, formulation and compounding of Drug Products or other drug substances, in the jurisdictions in which the Corporation operates, including in the context of clinical trials, research, development, service delivery or other contexts, and the business of developing, cultivating fungal inputs for, and manufacturing natural health products, and the operation of clinics for physicians engaged in any of the foregoing activities;
“Business Assets” means all tangible and intangible property and assets owned (either directly or indirectly), leased, licensed, loaned, operated or used, including all real property, fixed assets, facilities, equipment, inventories and accounts receivable, by the Corporation and the Subsidiaries in connection with the Business;
“Business Day” means a day other than a Saturday, a Sunday or statutory or civic holiday in the city of Toronto, Ontario;
“Canaccord” has the meaning ascribed thereto in the first paragraph of this Agreement;
“Canadian Securities Laws” means, collectively, all applicable securities laws of each of the applicable Selling Jurisdictions in Canada and the respective rules and regulations under such laws together with applicable published instruments, notices and orders of the securities regulatory authorities in the applicable Selling Jurisdictions in Canada, including the rules and policies of the TSXV and the CSE, as applicable;
“CDS” means CDS Clearing and Depository Services Inc.;
“CDSA” means the Controlled Drugs and Substances Act (Canada);
“Claims” has the meaning ascribed thereto in Section 10;
“Class A Shares” has the meaning ascribed thereto in the first paragraph of this Agreement;
“Closing” means the completion of the Offering;
“Closing Date” means the date hereof or such later date as may be agreed to in writing by the Corporation and the Agents, each acting reasonably;
“Closing Time” means 10:00 a.m. (Toronto time) on the Closing Date, or such other time on the Closing Date as may be agreed to by the Corporation and the Agents;
“controlled substance” has the meaning ascribed thereto in section 2(1) of the CDSA;
“Corporate Finance Share” has the meaning ascribed thereto in the opening paragraphs of this Agreement;
“Corporation” has the meaning ascribed thereto in the first paragraph of this Agreement;
“CPSO” means the College of Physicians and Surgeons of Ontario;
“Criminal Code” means the Criminal Code (Canada);
“CSE” has the meaning ascribed thereto in the opening paragraphs of this Agreement;
“Debt Instrument” means any and all loans, bonds, notes, debentures, indentures, promissory notes, mortgages, guarantees or other instruments evidencing indebtedness (demand or otherwise) for borrowed money or other liability to which the Corporation or a Subsidiary are a party or to which their property or assets are otherwise bound;
“distribution” means distribution or distribution to the public, as the case may be, for the purposes of Canadian Securities Laws or any of them;
“Drug Product” means any drug product regulated for sale or use under supervision of a health care practitioner and that includes an active pharmaceutical ingredient that is ketamine, psilocin, psilocybin, and other restricted drugs or controlled substances in the jurisdictions in which the Corporation operates;
“Employee Plans” has the meaning ascribed thereto in Section 7(kk) of this Agreement;
“Environmental Laws” means all Applicable Law relating to the environment or environmental issues (including air, surface, water and stratospheric matters), pollution or protection of human health and safety, including without limitation relating to the release, threatened release, manufacture, processing, blending, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials;
“FDA” mean the Food and Drugs Act (Canada);
“FDR-J” means part J of the Food and Drugs Regulations (Canada) of the CDSA;
“Financial Statements” means the draft audited consolidated annual financial statements of the Corporation for the year ended March 31, 2020 and related notes thereto;
“Government Official” means (a) any official, officer, employee, or representative of, or any person acting in an official capacity for or on behalf of, any Governmental Authority, (b) any salaried political party official, elected member of political office or candidate for political office, or (c) any company, business, enterprise or other entity owned or controlled by any person described in the foregoing clauses;
“Governmental Authority” means any provincial, territorial or federal, and as applicable in the circumstances, any foreign: (a) government; (b) court, arbitral or other tribunal or governmental or quasi-governmental authority of any nature (including any governmental agency, political subdivision, instrumentality, branch, department, official, or entity); (c) body or other instrumentality exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature pertaining to government, including Health Canada, the New York State Medical Board and/or the California Medical Board; (d) any formulary body with responsibility for determining listability of a Drug Product on any applicable formulary or for determining the pricing of Drug Products for reimbursement, with jurisdiction to review the pricing of and payment for Drug Products under Applicable Law; (e) any provincial, state, territorial or federal government or review board with jurisdiction over pricing of patented products or with jurisdiction over competition aspects of pricing of products; or (f) any other body or entity created under the authority of or otherwise subject to the jurisdiction of any of the foregoing, including any stock or other securities exchange;
“Hazardous Materials” means chemicals, fluids, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products;
“IFRS” means International Financial Reporting Standards as issued by the International Accounting Standards Board;
“including” (or any conjugation thereof) means including (or any conjugation thereof) without any limitation;
“Indemnified Party” or “Indemnified Parties” have the meanings ascribed thereto in Section 10 of this Agreement;
“Intellectual Property Rights” means all industrial and other intellectual property rights comprising or relating to (a) trademarks, trade dress, trade and business names, branding, brand names, logos, design rights, corporate names and domain names and other similar designations of source, sponsorship, association or origin, together with the goodwill symbolized by any of the foregoing; (b) internet domain names registered by any authorized private registrar or Governmental Authority, web addresses, web pages, website and URLs; (c) works of authorship, expressions, designs and industrial design registrations, whether or not copyrightable, including copyrights and copyrightable works, software and firmware, data, data files, and databases and other specifications and documentation; (d) inventions, discoveries, trade secrets, business and technical information, know-how, databases, data collections, patent disclosures and other confidential or proprietary information; (e) plant or fungal varieties, strains or cultivars; and (f) all industrial and other intellectual property rights, and all rights, interests and protections that are associated with, equivalent or similar to, or required for the exercise of, any of the foregoing, however arising, in each case whether registered or unregistered, such registered rights including patent, registered plant breeders’ rights, trademark, industrial design and copyright, and including all registrations and applications for, and renewals or extensions of, such rights or forms of protection under the Applicable Law of any jurisdiction which the Corporation operates;
“ketamine” means 2-(2-chlorophenyl)-2-(methylamino)cyclohexanone;
“Liens” means any encumbrance or title defect of whatever kind or nature, regardless of form, whether or not registered or registrable and whether or not consensual or arising by law (statutory or otherwise), including any mortgage, lien, charge, pledge or security interest, whether fixed or floating, or any assignment, lease, option, right of pre-emption, privilege, easement, servitude, right of way, restrictive covenant, right of use or any other right or claim of any kind or nature whatever which affects ownership or possession of, or title to, any interest in, or right to use or occupy such property or assets;
“Liquidity Event” means the occurrence of any transaction or event that leads to the Class A Shares, or other securities of the Corporation issued in substitution therefor to the holders of Class A Shares (or the common shares of the applicable resulting issuer), being listed on a recognized Canadian or United States stock exchange, including:
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(i)
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the Corporation completing a bona-fide public offering of Class A Shares, or other securities of the Corporation issued in substitution therefor to the holders of Class A Shares, under a prospectus or registration statement filed with securities regulatory authorities in Canada or the United States;
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(ii)
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the consummation of any transaction, including any consolidation, amalgamation, merger, plan of arrangement, reverse take-over, qualifying transaction or any other business combination or similar transaction; or
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(iii)
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the Proposed Transaction;
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“LOI” has the meaning ascribed thereto in the opening paragraphs of this Agreement;
“Losses” has the meaning ascribed thereto in Section 10 of this Agreement;
“Material Adverse Effect” means any event, change, fact, or state of being which could reasonably be expected to have a significant and adverse effect on the business, affairs, capital, operation, properties, permits, assets, liabilities (absolute, accrued, contingent or otherwise), condition (financial or otherwise) or prospects of the Corporation and its Subsidiaries considered on a consolidated basis;
“Material Agreement” means any and all contracts, commitments, agreements (written or oral), instruments, leases or other documents, including licences, sub-licences, supply agreements, manufacturing agreements, distribution agreements, sales agreements, or any other similar type agreements, to which the Corporation or any Subsidiary is a party or to which their Business Assets are otherwise bound, and which is material to the Corporation and the Subsidiaries on a consolidated basis;
“material change”, “material fact” and “misrepresentation” have the respective meanings ascribed thereto in the Securities Act;
“Maximum Offering” means the Offering if aggregate gross proceeds are at least $14,000,000;
“Newton” has the meaning ascribed thereto in the opening paragraphs of this Agreement;
“NI 45-102” means National Instrument 45-102 – Resale of Securities;
“NI 51-102” means National Instrument 51-102 – Continuous Disclosure Obligations;
“Offered Shares” has the meaning ascribed thereto in the opening paragraphs of this Agreement;
“Offering” has the meaning ascribed thereto in the opening paragraphs of this Agreement;
“Offering Documents” means this Agreement, the Presentation and the Subscription Agreements;
“Offering Price” has the meaning ascribed thereto in the first paragraph of this Agreement;
“Penalty Shares” has the meaning ascribed thereto in the opening paragraphs of this Agreement;
“person” shall be broadly interpreted and shall include any individual, corporation, partnership, joint venture, association, trust or other legal entity;
“Presentation” means the investor presentation of the Corporation dated May 2020 and the amended and restated investor presentation dated August 2020;
“Proposed Transaction” has the meaning ascribed thereto in the opening paragraphs of this Agreement;
“psilocin” means 3–[2–(dimethylamino)ethyl]–4–hydroxyindole and any salt thereof;
“psilocybin” means 3–[2–(dimethylamino)ethyl]–4–phosphoryloxyindole and any salt thereof;
“Purchased Shares” has the meaning ascribed thereto in the opening paragraphs of this Agreement;
“Qualified Institutional Buyers” means “qualified institutional buyers” as such term is defined in Rule 144A that are also U.S. Accredited Investors (as defined in Schedule “B” hereto);
“Reg A Offering” has the meaning ascribed thereto in Section 15 of this Agreement;
“Repayment Event” means any event or condition which gives the holder of any Debt Instrument (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a material portion of such indebtedness by the Corporation or the Subsidiaries;
“restricted drug” has the meaning ascribed thereto in section J.01.001 of the FDR-J;
“Resulting Issuer” has the meaning ascribed thereto in the opening paragraphs of this Agreement;
“Resulting Issuer Shares” has the meaning ascribed thereto in the opening paragraphs of this Agreement;
“Rule 144A” means Rule 144A under the U.S. Securities Act;
“Securities Act” means the Securities Act (Ontario);
“Securities Regulators” means collectively, the securities regulators or other securities regulatory authorities in the Selling Jurisdictions;
“Selling Firm” has the meaning ascribed thereto in the opening paragraphs of this Agreement;
“Selling Jurisdictions” has the meaning ascribed thereto in the opening paragraphs of this Agreement;
“Shareholders Agreement” means the unanimous shareholders’ agreement among the Corporation and its shareholders dated April 2, 2019, attached to the Subscription Agreements as Schedule H, as the same may be amended from time to time;
“Subscriber” means, for the purposes of this Agreement, the person who executes a Subscription Agreement or, if such person executes a Subscription Agreement as a duly authorized agent of one or more principals, the principal or principals of such person;
“Subscription Agreements” mean, collectively, the subscription agreements in the form mutually acceptable to the Corporation and the Agents, entered into between the Subscriber and the Corporation in respect of the Offering, as amended or supplemented;
“subsidiary” or “subsidiaries” has the meaning ascribed thereto in the Securities Act;
“Subsidiaries” has the meaning ascribed thereto in Section 7(b) of this Agreement;
“TSXV” has the meaning ascribed thereto in the opening paragraphs of this Agreement;
“United States” means the United States of America, its territories and possessions, any state of the United States and the District of Columbia;
“U.S. Person” means a “U.S. person” as that term is defined in Rule 902(k) of Regulation S; and
“U.S. Securities Act” means the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
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(2)
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Any reference in this Agreement to a section or subsection shall refer to a section or subsection of this Agreement.
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(3)
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All words and personal pronouns relating thereto shall be read and construed as the number and gender of the party or parties referred to in each case required and the verb shall be construed as agreeing with the required word and/or pronoun.
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(4)
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Any reference in this Agreement to $ or to “dollars” shall refer to the lawful currency of Canada, unless otherwise specified.
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(5)
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The following are the schedules to this Agreement, which schedules are deemed to be a part hereof and are hereby incorporated by reference herein:
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Schedule “A” - Subsidiaries
Schedule “B” - Compliance with United States Securities Laws
Schedule “C” - Restrictive Legends
Section 2 Representations, Warranties and Covenants of the Agents
Each of the Agents hereby represents, warrants, covenants and agrees with the Corporation, and acknowledges that the Corporation is relying upon such representations, warranties and covenants, that:
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(a)
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it has been duly incorporated, formed or organized, and is validly existing, under the laws of the jurisdiction in which it was incorporated, formed or organized, as the case may be, and no steps or proceedings have been taken by any Governmental Authority or any other person requiring or authorizing the dissolution or winding up of such Agent;
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(b)
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it has good and sufficient right and authority to enter into this Agreement and to complete the transactions contemplated hereunder;
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(c)
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it will not, and will require any Selling Firm not to, solicit subscriptions for Offered Shares, trade in Offered Shares or otherwise do any act in furtherance of a trade of Offered Shares in any jurisdiction outside of the Selling Jurisdictions, provided that the Agent or Selling Firm may so solicit, trade or act within any such jurisdiction only if such solicitation, trade or act is in compliance with Applicable Law in such jurisdiction and does not (i) obligate the Corporation to take any action to qualify any of its securities or any trade of any of its securities, (ii) obligate the Corporation to establish or maintain any office or director or officer in such jurisdiction, or (iii) subject the Corporation to any reporting or other requirement in such jurisdiction;
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(d)
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in respect of the offer and sale of the Offered Shares, it will, and will require any Selling Firm to, conduct its activities in connection with the Offering in compliance with all Applicable Securities Laws and the provisions of this Agreement and the Subscription Agreements;
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(e)
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it is duly registered pursuant to the provisions of the Applicable Securities Laws, and is duly registered or licensed as an investment dealer in those jurisdictions in which it is required to be so registered in order to perform the services contemplated by this Agreement, or if or where not so registered or licensed, the Agent will act only through members of a selling group who are so registered or licensed;
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(f)
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it shall not, and shall require any Selling Firm to agree that it shall not, make any representation or warranty with respect to the Offered Shares in connection with the Offering, other than as set forth in this Agreement or the Subscription Agreements;
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(g)
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it will not, and will require any Selling Firm to agree that it will not, advertise the proposed sale of the Offered Shares in printed media of general and regular paid circulation, radio or television, nor provide or make available to prospective purchasers of Offered Shares any document or material which would constitute an offering memorandum as defined in Applicable Securities Laws, other than the Presentation;
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(h)
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it shall, and shall require any Selling Firm to, obtain and deliver such agreements, documents and instruments to the Corporation as may be reasonably requested by the Corporation to comply with Applicable Securities Laws;
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(i)
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it is acquiring any Corporate Finance Shares, Class A Shares issued in settlement of the Agents’ Commission, Agents’ Warrants and Agents’ Warrant Shares for its own account and not for the benefit of any other person, for investment only and not with a view to resale or distribution of any such securities, and is an “accredited investor” as defined in National Instrument 45-106 – Prospectus Exemptions; and
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(j)
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it acknowledges and agrees that, in addition to any hold periods or resale restrictions applicable under Applicable Securities Laws, all securities issued hereunder will be subject to contractual restrictions on transfer pursuant to the terms of the Shareholders Agreement.
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The parties to this Agreement acknowledge that the Offered Shares have not been and will not be registered under the U.S. Securities Act or any U.S. state securities laws and may not be offered or sold to, or for the account or benefit of, persons in the United States or U.S. Persons except that the Offered Shares may be offered and sold to, or for the account or benefit of, persons in the United States or U.S. Persons pursuant to transactions that are exempt from the registration requirements of the U.S. Securities Act and the applicable laws of any U.S. state. Accordingly, the Corporation and the Agents hereby agree that all offers and sales of the Offered Shares, including, but not limited to, offers and sales of the Offered Shares made in Selling Jurisdictions other than the United States, shall be conducted only in the manner specified in Schedule “B”, the terms and conditions of which are hereby incorporated by reference in and shall form a part of this Agreement. Notwithstanding the foregoing provisions of this section, an Agent will not be liable to the Corporation under this section or Schedule “B” with respect to a violation by another Agent or the U.S. Affiliate(s) (as defined in Schedule “B” hereto) of that other Agent of the provisions of this section or Schedule “B” if the Agent first referred to above or its U.S. Affiliate, as applicable, is not itself also in violation.
Section 3 Delivery of Subscription Agreements
The Agents agree to obtain from each Subscriber executed Subscription Agreements (including the execution of applicable schedules to such Subscription Agreements) and deliver such Subscription Agreements (including applicable schedules) to the Corporation on the Closing Date. In addition, the Agents agree to obtain from each Subscriber such forms and other documents as may be required by Securities Regulators and provided by the Corporation to the Agents for delivery under this Agreement.
The Corporation may not reject any properly completed Subscription Agreement unless the number of Class A Shares subscribed for pursuant to the Subscription Agreements and tendered by the Agents exceeds the maximum number of Class A Shares to be sold under this Agreement or unless the distribution cannot be completed in accordance with Applicable Securities Laws.
Section 4 Diligence
Prior to the Closing Time, the Corporation shall: (i) allow the Agents and their representatives the opportunity to conduct all due diligence investigations which the Agents may reasonably require to be conducted in connection with the Offering prior to and until the Closing Time; (ii) make available to the Agents (and their counsel), on a timely basis all books and records, including all corporate, financial, property, legal and operational information and documentation of the Corporation, and will provide reasonable access to all facilities, properties, employees, auditors, legal counsel, consultants or other experts of the Corporation, to permit the Agents, their legal counsel and other advisers to conduct their due diligence investigation of the business and affairs of the Corporation and its Subsidiaries; (iii) assist the Agents in sourcing any other information useful and reasonably necessary to conducting such due diligence; and (iv) make available its senior management and its legal counsel to answer any questions which the Agents may have and to participate in one or more due diligence sessions to be held prior to Closing.
Section 5 Covenants of the Corporation
The Corporation hereby covenants to the Agents and the Subscribers, and acknowledges that each of them is relying on such covenants in connection with the purchase of the Offered Shares, that the Corporation shall:
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(a)
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maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with IFRS and to maintain asset accountability, (iii) access to monies and investments is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences;
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(b)
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at or prior to the Closing Time, satisfy all terms, conditions and covenants contained in this Agreement to be complied with or satisfied by the Corporation (unless waived by the Agents) in all material respects (except where already qualified by a materiality qualification, in which case the Corporation shall have complied or satisfied in all respects);
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(c)
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ensure that, at the Closing Time, the Offered Shares and the Corporate Finance Shares will be issued as fully paid and non-assessable shares in the capital of the Corporation on payment of the purchase price therefor and the Agents’ Warrants have been duly created and issued and shall have attributes corresponding in all material respects to the description thereof set forth in this Agreement and the Agents’ Warrant Certificates, as applicable;
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(d)
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ensure that, upon due exercise of the Agents’ Warrants in accordance with their terms, the Agents’ Warrant Shares shall be duly issued as fully paid and non-assessable shares in the capital of the Corporation on payment of the purchase price therefor;
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(e)
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obtain all Authorizations or filings as may be required under Applicable Securities Laws or otherwise necessary for the execution and delivery of and the performance by the Corporation of its obligations hereunder and under the Subscription Agreements, other than customary post-closing filings required to be submitted within the applicable time frame pursuant to Applicable Securities Laws;
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(f)
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use the net proceeds of the Offering for the Corporation’s North American clinical expansion, drug development and general working capital purposes;
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(g)
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prepare and file all forms, documents, notices and certificates within prescribed time periods required by Securities Regulators in connection with the issuance and sale of the Offered Shares by the Corporation, so as to permit and enable such securities to be lawfully distributed on an exempt basis in the Selling Jurisdictions and any other jurisdictions where Offered Shares are offered and sold in accordance with this Agreement and the Subscription Agreements;
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(h)
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prior to the Closing Date:
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(i)
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promptly notify the Agents (and, if requested by the Agents, confirm such notification in writing) of any material change or change in a material fact (in either case, whether actual, anticipated, contemplated or threatened, financial or otherwise) or any event or development involving a prospective material change or a change in a material fact or any other material change in the business, affairs, operations, assets, liabilities (contingent or otherwise), capital, ownership, control or management of the Corporation which would constitute a material change to, or a change in a material fact concerning, the Corporation or any other change which is of such a nature; and
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(ii)
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promptly, and in any event, within any applicable time limitation period, comply with all applicable filings and other requirements under Applicable Securities Laws as a result of such change. During such period, the Corporation shall in good faith discuss with the Agents as promptly as possible any fact or change in circumstances (actual, anticipated, contemplated or threatened, financial or otherwise) which is of such a nature that there is reasonable doubt as to whether notice in writing need be given to the Agents pursuant to this Section 5(h)(ii).
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Section 6 Standstill
The Corporation agrees not to issue or announce a proposed issuance of any additional equity securities or quasi-equity securities of the Corporation without the prior written consent of the Agents, such consent not to be unreasonably withheld, other than in connection with: (i) the grant or exercise of stock options and other similar issuances pursuant to the share incentive plan of the Corporation and other share compensation arrangements, (ii) pursuant to the exercise of outstanding options and warrants of the Corporation, (iii) obligations in respect of existing agreements between the Corporation and any other person, (iv) the issuance of securities in connection with arm’s length property or share acquisitions, (v) the issuance of up to such number of Class A Shares as is equal to 7,500,000 minus the number of Purchased Shares sold under the Offering, by way of a non-brokered private placement, at a price equal to the Offering Price, provided, however, that any such offering will be subject to compensation payable to the Agents in accordance with Section 11 hereof, or (vi) any Liquidity Event, for a period of 90 days from the Closing Date.
Section 7 Representations and Warranties of the Corporation.
The Corporation represents and warrants to each of the Agents and the Subscribers, and acknowledges that each of them is relying upon such representations and warranties in connection with the purchase of the Offered Shares, that:
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(a)
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Good Standing of the Corporation. The Corporation (i) is a corporation existing under the laws of Canada and is and will at the Closing Time be current and up-to-date with all material filings required to be made and in good standing under the Canada Business Corporations Act, (ii) has all requisite corporate power and capacity to own, lease and operate its properties and assets, including its Business Assets, and to conduct the Business as now carried on by it, and (iii) has, and at the Closing Time will have, all requisite corporate power and authority to issue and sell the Offered Shares, to create and issue the Agents’ Warrants and to execute, deliver and perform its obligations under this Agreement and the Agents’ Warrant Certificates.
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(b)
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Good Standing of Subsidiaries. The Corporation’s only subsidiaries are listed in Schedule “A” (collectively, the “Subsidiaries”), which schedule is true, complete and accurate in all respects. Each Subsidiary is formed, organized and existing under the laws of the jurisdiction set out in Schedule “A”, is current and up-to-date with all material filings required to be made and has all requisite corporate power and capacity to own, lease and operate its properties and assets, including its business assets, and to conduct its business as is now carried on by it, and is duly qualified to transact business and is in good standing in each jurisdiction in which such qualification is required in all material respects. All of the issued and outstanding shares in the capital of the Subsidiaries have been duly authorized and validly issued, are fully paid and, except as set out in Schedule “A”, are directly or indirectly beneficially owned by the Corporation. All of the issued and outstanding shares in the capital of the Subsidiaries owned by the Corporation are owned free and clear of any Liens, and none of the outstanding securities of the Subsidiaries were issued in violation of the pre-emptive or similar rights of any security holder of the Subsidiaries. There exist no options, warrants, purchase rights, or other contracts or commitments that could require the Corporation to sell, transfer or otherwise dispose of any securities of the Subsidiaries.
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(c)
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No Proceedings for Dissolution. No act or proceeding has been taken by or against the Corporation or the Subsidiaries in connection with their liquidation, winding-up or bankruptcy, or, to its knowledge, is pending.
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(d)
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Share Capital of the Corporation. The authorized and issued share capital of the Corporation consists of an unlimited number of Class A Shares, an unlimited number of class B shares and an unlimited number of class C shares, of which 11,510,900 Class A Shares, 9,507,263 Class B Shares and nil class C shares were issued and outstanding as at the close of business on August 13, 2020. Other than the Shareholders Agreement, neither the Corporation nor the Subsidiaries are party to any agreement, nor is the Corporation aware of any agreement, which in any manner affects the voting control of any securities of the Corporation or its Subsidiaries.
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(e)
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Share Capital of Subsidiaries. The authorized and issued share capital of the Subsidiaries as set forth in Schedule “A” hereto is true and correct.
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(f)
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Form of Agents’ Warrant Certificate. The form of Agents’ Warrant Certificate respecting the Agents’ Warrants has been approved and adopted by the board of directors of the Corporation and does not conflict with any Applicable Law.
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(g)
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Class A Shares Validly Issued. The Offered Shares and the Corporate Finance Shares, at or prior to the Closing Time, and the Agents’ Warrant Shares, upon the exercise of the Agents’ Warrants, shall be duly and validly authorized for issuance and sale pursuant to this Agreement, and when issued and delivered by the Corporation pursuant to this Agreement, against payment of the consideration therefor, will be validly issued as fully paid and non-assessable Class A Shares and will not be issued in violation of any pre-emptive rights or contractual rights to purchase securities issued by the Corporation.
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(h)
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Penalty Shares Validly Issued. The maximum number of Penalty Shares issuable under this Agreement have been duly authorized for issuance and, if and when so issued as liquidated damages as described in the introductory paragraphs to this Agreement, will be validly issued, fully paid and non-assessable. Such Class A Shares will not be issued in violation of any pre-emptive rights or contractual rights to purchase securities issued by the Corporation.
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(i)
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Agents’ Warrants Validly Issued. The Agents’ Warrants have been duly authorized for issuance pursuant to this Agreement and the maximum number of Class A Shares issuable upon due exercise of the Agents’ Warrants have been duly authorized for issuance upon due exercise of such Agents’ Warrants and, when so issued, will be validly issued, fully paid and non-assessable. Such Class A Shares, upon due exercise of any Agents’ Warrants, will not be issued in violation of any pre-emptive rights or contractual rights to purchase securities issued by the Corporation.
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(j)
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Registrar and Transfer Agent. Odyssey Trust Company at its principal office in Vancouver, British Columbia has been duly appointed as transfer agent and registrar for the Class A Shares.
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(k)
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Absence of Rights. As of the date hereof, except for the rights set out in the Shareholders Agreement, no person has any existing right, agreement or option, present or future, contingent or absolute, or any right capable of becoming a right, agreement or option, for the issue or allotment of any unissued shares of the Corporation or any other agreement or option, for the issue or allotment of any unissued shares of the Corporation or any other security convertible into or exchangeable for any such shares or to require the Corporation to purchase, redeem or otherwise acquire any of the issued and outstanding shares of the Corporation, other than pursuant to outstanding stock options and the share purchase agreement among the Corporation, Field Trip Natural Products Limited and Darwin Inc. dated June 3, 2020. The Offered Shares, upon issuance, will not be issued in violation of any pre-emptive rights or contractual rights to purchase securities issued by the Corporation.
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(l)
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Corporate Actions. The Corporation has taken, or will have taken prior to the Closing Time, all necessary corporate action, (i) to authorize the execution, delivery and performance of this Agreement and the Agents’ Warrant Certificates, (ii) to authorize the execution and filing, as applicable, of the Offering Documents, (iii) to validly issue and sell the Offered Shares as fully paid and non-assessable Class A Shares, (iv) to validly reserve for issuance the Penalty Shares, (v) to validly issue the Corporate Finance Shares, (vi) to validly issue the Agents’ Warrants and (vii) to validly issue the Agents’ Warrant Shares upon due exercise of the Agents’ Warrants as fully paid and non-assessable Class A Shares.
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(m)
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Valid and Binding Documents. This Agreement, the Subscription Agreements and the Agents’ Warrant Certificates have been duly authorized, executed and delivered by the Corporation, and each of this Agreement, the Subscription Agreements and the Agents’ Warrant Certificates constitute legal, valid and binding obligations of the Corporation, enforceable against the Corporation in accordance with their terms, provided that enforcement thereof may be limited by laws affecting creditors’ rights generally, that specific performance and other equitable remedies may only be granted in the discretion of a court of competent jurisdiction, and that the provisions relating to indemnity, contribution and waiver of contribution may be unenforceable and that enforceability is subject to the provisions of the Limitations Act (Ontario).
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(n)
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No Consents, Approvals etc. The execution and delivery of this Agreement, the Subscription Agreements and the Agents’ Warrant Certificates, as applicable, and the fulfilment of the terms of such documents by the Corporation, including the issuance, sale and delivery of the Offered Shares, the issuance and delivery of the Penalty Shares (if applicable), the issuance and delivery of the Corporate Finance Shares and the issuance and delivery of the Agents’ Warrants, do not and will not require any Authorization of, or registration or qualification of or with, any Governmental Authority, stock exchange or other third party (including under the terms of any Material Agreement or Debt Instrument), except: (i) those which may be required and shall be obtained prior to the Closing Time under Applicable Securities Laws, and (ii) such customary post-closing notices or filings required to be submitted within the applicable time frame pursuant to Applicable Securities Laws, as may be required in connection with the Offering.
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(o)
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Financial Statements. The Financial Statements:
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(i)
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present fairly, in all material respects, the financial position of the Corporation on a consolidated basis and the statements of operations, retained earnings, cash flow from operations and changes in financial information of the Corporation on a consolidated basis for the periods specified in such Financial Statements;
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(ii)
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have been prepared in accordance with IFRS, applied on a consistent basis throughout the periods involved; and
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(iii)
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do not contain any misrepresentations, with respect to the period covered by the Financial Statements.
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(p)
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Presentation. The Presentation:
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(i)
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(A) did not as at the date it was most recently provided to Subscribers, and does not at as of the date of this Agreement contain any misrepresentation; (B) disclosed all relevant material assumptions; and (C) to the extent the Presentation contained any estimates of the prospects of the Business, such estimates were reasonable;
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(ii)
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complies in all material respects with applicable Securities Laws; and
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(iii)
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contains forward looking information that reflects the currently available estimates and good faith judgments of the management of the Corporation as to the matters covered thereby, and the Corporation has a reasonable basis for disclosing any forward-looking information contained in the Presentation, subject to the risk factors and disclaimers set forth in the Presentation, and is not, as of the date hereof, required to update any such forward looking information pursuant to NI 51-102.
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(q)
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Off-Balance Sheet Transactions. There are no off-balance sheet transactions, arrangements, obligations or liabilities of the Corporation or its Subsidiaries, whether direct, indirect, absolute, contingent or otherwise.
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(r)
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Accounting Policies. There has been no change in accounting policies or practices of the Corporation or its Subsidiaries other than as disclosed in the Financial Statements.
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(s)
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Liabilities. Neither the Corporation nor the Subsidiaries have any liabilities, obligations, indebtedness or commitments, whether accrued, absolute, contingent or otherwise, which are not disclosed in the Financial Statements, other than liabilities, obligations, or indebtedness or commitments: (i) incurred in the normal course of business; or (ii) which would not, individually or in the aggregate, have a Material Adverse Effect.
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(t)
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Independent Auditors. The Corporation’s current auditors are independent with respect to the Corporation within the meaning of the rules of professional conduct applicable to auditors in Canada and there has never been a “reportable event” (within the meaning of NI 51-102) with the current auditors of the Corporation.
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(u)
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Accounting Controls. The Corporation maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with IFRS and to maintain asset accountability, (iii) access to monies and investments is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
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(v)
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Purchases and Sales. Except for the Proposed Transaction, neither the Corporation nor any of the Subsidiaries has approved, has entered into any agreement in respect of, or has any knowledge, as the case may be, of:
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(i)
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the sale, transfer or other disposition of any Business Assets or any interest therein currently owned, directly or indirectly, by the Corporation or any Subsidiary, whether by asset sale, transfer of shares, or otherwise;
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(ii)
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a transaction which would result in the change of control (by sale or transfer of Class A Shares or sale of all or substantially all of the Business Assets) of the Corporation or any Subsidiary; or
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(iii)
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a proposed or planned disposition of Class A Shares by any shareholder who owns, directly or indirectly, 10% or more of the outstanding Class A Shares.
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(w)
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Title to Business Assets. The Corporation and the Subsidiaries have good, valid and marketable title to, and have all necessary rights in respect of, all of their Business Assets as owned, leased, licensed, loaned, operated or used by them or over which they have rights, free and clear of Liens and, except as set out in the Presentation, no other rights or Business Assets are necessary for the conduct of the Business as currently conducted. The Corporation knows of no claim or basis for any claim that would reasonably be likely to result in a Material Adverse Effect on the rights of the Corporation or the Subsidiaries to use, transfer, lease, licence, operate, sell or otherwise exploit such Business Assets and neither the Corporation nor any Subsidiary has any obligation to pay any commission, licence fee or similar payment to any person in respect thereof and there are no outstanding rights of first refusal or other pre-emptive rights of purchase which entitle any person to acquire any of the rights, title or interests in such Business Assets.
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(x)
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Standard Operating Procedures. All research and development activities, including quality assurance, quality control, testing, and research and analysis activities, conducted or contemplated by the Corporation and the Subsidiaries in connection with the Business are being or will be conducted in compliance, in all material respects, with all industry, laboratory safety, management and training standards in the jurisdiction where such activities take place which are applicable to the Business, and all such processes, procedures and practices required in connection with such activities are or will be in place as necessary at the applicable time, and are or will be being complied with in all material respects.
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(y)
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Business Relationships. All agreements with third parties in connection with the Business have been entered into and are being performed by the Corporation and the Subsidiaries and, to the knowledge of the Corporation, by all other third parties thereto, in compliance with their terms in all material respects. There exists no actual or, to the knowledge of the Corporation, threatened termination, cancellation or limitation of, or any material adverse modification or material change in, the business relationship of the Corporation or the Subsidiaries, with any supplier or customer, or any group of suppliers or customers, whose business with or whose purchases or inventories/components provided to the Business are, individually or in the aggregate, material to the assets, Business, properties, operations or financial condition of the Corporation or the Subsidiaries.
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(z)
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Privacy Protection. Each of the Corporation and the Subsidiaries have complied, in all material respects, with all applicable privacy and consumer protection legislation and neither the Corporation nor the Subsidiaries has collected, received, stored, disclosed, transferred, used, misused or permitted unauthorized access to any information protected by privacy laws, whether collected directly or from third parties, in an unlawful manner.
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(aa)
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Intellectual Property. The Corporation and the Subsidiaries, as applicable, own or possess the right to use all material Intellectual Property Rights necessary for the conduct of the Business, and the Corporation is not aware of any bona fide claim to the contrary or any challenge by any other person to the rights of the Corporation and the Subsidiaries with respect to the foregoing. To the knowledge of the Corporation, the Business of the Corporation, including that of the Subsidiaries, as now conducted does not infringe any Intellectual Property Rights of any person. The Corporation has not received notice of any bona fide claim made against the Corporation or the Subsidiaries alleging the infringement by the Corporation or the Subsidiaries of any Intellectual Property Rights of any person.
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(bb)
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Environmental and Workplace Laws. To the Corporation’s knowledge, each of the Corporation and the Subsidiaries is currently in compliance, in all material respects, with all Environmental Laws, and there are no pending or, to the knowledge of the Corporation, any threatened, administrative, regulatory or judicial actions, suits, demands, claims, liens, notices of non-compliance or violation, investigation or proceedings relating to any Environmental Laws. Neither the Corporation nor the Subsidiaries have ever received any notice of any non-compliance in respect of Environmental Laws, there are no events or circumstances that might reasonably be expected to form the basis of an order for clean up or remediation under Environmental Laws or relating to any Hazardous Materials, and there are no permits required under Environmental Laws for the conduct of the Business. The facilities and operations of the Corporation and the Subsidiaries are currently being conducted, and to the knowledge of the Corporation have been conducted, in all material respects in accordance with all applicable workers’ compensation and health and safety and workplace laws, regulations and policies.
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(cc)
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Insurance. The Corporation and the Subsidiaries maintain in good standing insurance, or where insurance has not yet been obtained, shall use commercially reasonable efforts to obtain and maintain insurance, by insurers of recognized financial responsibility, against such losses, risks and damages to their Business Assets in such amounts that are customary for the business in which they are engaged and on a basis consistent with reasonably prudent persons in comparable businesses. Each of the Corporation and the Subsidiaries has complied with the terms of such policies and instruments in all material respects and there are no material claims by the Corporation or the Subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause. The Corporation has no reason to believe that it will not be able to renew such existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue the Business at a cost that would not have a Material Adverse Effect, and neither the Corporation nor the Subsidiaries have failed to promptly give any notice of any material claim thereunder.
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(dd)
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Material Agreements and Debt Instruments. Each Material Agreement and Debt Instrument is valid, subsisting, in good standing in all material respects and in full force and effect, enforceable in accordance with the terms thereof, subject to bankruptcy, insolvency and other laws affecting the rights of creditors generally, and subject to other standard assumptions and qualifications, including the qualifications that equitable remedies may be granted in the discretion of a court of competent jurisdiction and that enforcement of rights to indemnity, contribution and waiver of contribution set out in such agreements may be limited by Applicable Law. The Corporation and the Subsidiaries have, in all material respects, performed all obligations in a timely manner under, and are in compliance, in all material respects, with all terms and conditions (including any financial covenants) contained in, each Material Agreement and Debt Instrument.
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(ee)
|
No Material Changes. Except as disclosed to the Agents in writing, since March 31, 2020 (i) there has been no material change in the assets, liabilities, obligations (absolute, accrued, contingent or otherwise) business, condition (financial or otherwise), properties, capital or results of operations of the Corporation and the Subsidiaries considered as one enterprise, and (ii) there have been no transactions entered into by the Corporation or the Subsidiaries, other than those in the ordinary course of business, which are material with respect to the Corporation and the Subsidiaries considered as one enterprise.
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(ff)
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Absence of Proceedings. There is no action, suit, proceeding, inquiry or investigation before or brought by any Governmental Authority, domestic or foreign, now pending or, to the knowledge of the Corporation, threatened against or affecting the Corporation, any Subsidiary or the Business Assets (including in respect of any product liability claims) which would have a Material Adverse Effect, or would materially and adversely affect the consummation of the transactions contemplated in this Agreement or the performance by the Corporation of its obligations hereunder. The aggregate of all pending legal or governmental proceedings to which the Corporation or the Subsidiaries is a party or of which any of their respective property or assets is subject would not reasonably be expected to result in a Material Adverse Effect.
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(gg)
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Absence of Defaults and Conflicts. Neither the Corporation nor any of the Subsidiaries is in material violation, default or breach of, and the execution, delivery and performance of this Agreement, the Offering Documents and the consummation of the transactions and compliance by the Corporation with its obligations hereunder and thereunder, the sale of the Offered Shares, the issuance of the Corporate Finance Shares and the issuance of the Agents’ Warrants, do not and will not, whether with or without the giving of notice or passage of time or both, result in a material violation, default or breach of, or conflict with, or result in a Repayment Event or the creation or imposition of any Lien upon any property or assets of the Corporation, including the Business Assets, or the Subsidiaries, under the terms or provisions of (i) any Material Agreements or Debt Instruments, (ii) the articles or by-laws or other constating documents or resolutions of the directors or shareholders of the Corporation or the Subsidiaries, (iii) to the knowledge of the Corporation, any existing Applicable Law, including Applicable Securities Laws, or (iv) to the knowledge of the Corporation, any judgment, order, writ or decree of any Governmental Authority.
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(hh)
|
Labour Matters. No material work stoppage, strike, lock-out, labour disruption, dispute, grievance, arbitration, proceeding or other conflict with the employees of the Corporation or the Subsidiaries currently exists or, to the knowledge of the Corporation, is imminent or pending and the Corporation and the Subsidiaries are in material compliance with all Applicable Law respecting employment and employment practices, terms and conditions of employment and wages and hours.
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(ii)
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Employment Standards. To the knowledge of the Corporation, there are no material complaints against the Corporation or the Subsidiaries before any employment standards branch or tribunal or human rights tribunal, nor any complaints or any occurrence which would reasonably be expected to lead to a complaint under any human rights legislation or employment standards legislation that would be material to the Corporation. There are no outstanding decisions or settlements or pending settlements under applicable employment standards legislation, which place any material obligation upon the Corporation or the Subsidiaries to do or refrain from doing any act. The Corporation and the Subsidiaries are currently in material compliance with all workers’ compensation, occupational health and safety and similar legislation, including payment in full of all amounts owing thereunder, and there are no pending claims or outstanding orders of a material nature against either of them under applicable workers’ compensation legislation, occupational health and safety or similar legislation nor has any event occurred which may give rise to any such material claim.
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(jj)
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Collective Bargaining Agreements. Neither the Corporation nor any Subsidiary is party to any collective bargaining agreements with unionized employees. To the knowledge of the Corporation, no action has been taken or is being contemplated to organize or unionize any employees of the Corporation or any Subsidiary that would have a Material Adverse Effect.
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(kk)
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Employee Plans. Each material plan for retirement, bonus, stock purchase, profit sharing, stock option, deferred compensation, severance or termination pay, insurance, medical, hospital, dental, vision care, drug, sick leave, disability, salary continuation, legal benefits, unemployment benefits, vacation, incentive or other benefits contributed to, or required to be contributed to, by the Corporation for the benefit of any current or former director, officer, employee or consultant of the Corporation (the “Employee Plans”) has been maintained in all material respects with its terms and with the requirements prescribed by any and all statutes, orders, rules and regulations that are applicable to such Employee Plans.
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(ll)
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Taxes. All tax returns, reports, elections, remittances and payments of the Corporation and the Subsidiaries required by Applicable Law to have been filed or made in any applicable jurisdiction, have been filed or made (as the case may be) and are true, complete and correct, except where the failure to make such filing, election, or remittance and payment would not constitute a Material Adverse Effect on the Corporation taken as a whole, and all taxes of the Corporation and of the Subsidiaries have been paid or accrued in the Financial Statements (except as any extension may have been requested or granted and in any case in which the failure to file, pay or accrue such taxes would not result in a Material Adverse Effect). To the knowledge of the Corporation, there are no examinations of any tax return of the Corporation or the Subsidiaries currently in progress and there are no disputes outstanding with any Governmental Authority respecting any taxes that have been paid, or may be payable, by the Corporation or the Subsidiaries.
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(mm)
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Anti-Bribery Laws. Neither the Corporation nor any Subsidiary nor, to the knowledge of the Corporation, any director, officer, employee, consultant, representative or agent of the foregoing, has (i) violated any anti-bribery or anti-corruption laws applicable to the Corporation and the Subsidiaries, including Canada’s Corruption of Foreign Public Officials Act, or (ii) offered, paid, promised to pay, or authorized the payment of, any money, or offered, given, promised to give, or authorized the giving of, anything of value, that goes beyond what is reasonable and customary and/or of modest value: (X) to any Government Official, whether directly or through any other person, for the purpose of influencing any act or decision of a Government Official in his or her official capacity; inducing a Government Official to do or omit to do any act in violation of his or her lawful duties; securing any improper advantage; inducing a Government Official to influence or affect any act or decision of any Governmental Authority; or assisting any representative of the Corporation or the Subsidiaries in obtaining or retaining business for or with, or directing business to, any person; or (Y) to any person in a manner which would constitute, or have the purpose or effect of, public or commercial bribery, or the acceptance of or acquiescence in extortion, kickbacks, or other unlawful or improper means of obtaining business or any improper advantage. Neither the Corporation nor the Subsidiaries, nor, to the knowledge of the Corporation, any director, officer, employee, consultant, representative or agent of the foregoing, has (i) conducted or initiated any review, audit or internal investigation that concluded the Corporation, a Subsidiary, or any director, officer, employee, consultant, representative or agent of the foregoing, violated such laws or committed any material wrongdoing, or (ii) made a voluntary, directed, or involuntary disclosure to any Governmental Authority responsible for enforcing anti-bribery or anti-corruption laws, in each case with respect to any alleged act or omission arising under or relating to non-compliance with any such laws, or received any notice, request, or citation from any person alleging non-compliance with any such laws.
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(nn)
|
No Significant Acquisitions. Other than the Proposed Transaction, no proposed acquisition by the Corporation or any Subsidiary has progressed to a state where a reasonable person would believe that the likelihood of the Corporation or any Subsidiary completing the acquisition is high.
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(oo)
|
Compliance with Applicable Law. The Corporation acknowledges that the Business is subject to restrictions, requirements and prohibitions under Applicable Law in force (including the CDSA, the FDA, the FDR-J, the Criminal Code, and provincial, territorial and municipal laws relating to controlled substances, the Controlled Substances Act, the Racketeering and Influenced and Corrupt Practices Act, the Secure Air Travel Act, the Bank Secrecy Act, the Agricultural Improvement Act of 2018, any applicable state corporate practice of medicine statues or any applicable anti-money laundering statute), which may change from time to time. The Corporation and the Subsidiaries have obtained, are in compliance with, have complied with, will continue to comply with or will have complied with, in all material respects, all Applicable Law, including all Authorizations, prior to the Closing Time in connection with the Offering. All Authorizations issued to date are valid and in full force and effect and neither the Corporation nor any Subsidiary has received any correspondence or notice from the Office of Controlled Substances, other offices of Health Canada, the CPSO, the New York State Medical Board, the California Medical Board or any Governmental Authority alleging or asserting material non-compliance with any Applicable Law or Authorization. Neither the Corporation nor any Subsidiary has received any notice of proceedings or actions relating to the revocation, suspension, limitation or modification of any Authorizations or any notice advising of the refusal to grant any Authorization that has been applied for or is in process of being granted under Applicable Law including the FDA, the FDR-J or the Out of Hospital Premise Program of the CPSO, and has no knowledge or reason to believe that any such Governmental Authority is considering taking or would have reasonable ground to take any such action. Neither the Corporation nor any Subsidiary is aware of any non-compliance with any Applicable Law, including the CDSA, the FDA, the FDR-J, the Criminal Code or any provincial, territorial or municipal legislation that the Corporation or any Subsidiary has reason to believe could result in a Material Adverse Effect.
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(pp)
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No Loans. Except as disclosed to the Agents in writing, neither the Corporation nor any Subsidiary has made any material loans to or guaranteed the material obligations of any person.
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(qq)
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Directors and Officers. To the knowledge of the Corporation, none of the directors or officers of the Corporation are now, or have been, subject to an order or ruling of any securities regulatory authority or stock exchange prohibiting such individual from acting as a director or officer of a public company or of a company listed on a particular stock exchange.
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(rr)
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Minute Books and Records. The minute books and records of the Corporation and the Subsidiaries made available to counsel for the Agents in connection with their due diligence investigation of the Corporation for the periods requested to the date hereof are all of the minute books and material records of the Corporation and the Subsidiaries and contain copies of all material proceedings (or certified copies thereof or drafts thereof pending approval) of the shareholders, the directors and all committees of directors of the Corporation and the Subsidiaries, as the case may be, to the date of review of such corporate records and minute books and there have been no other meetings, resolutions or proceedings of the shareholders, directors or any committees of the directors of the Corporation and the Subsidiaries to the date hereof not reflected in such minute books and other records, other than those which have been disclosed to the Agents or which are not material in the context of the Corporation and the Subsidiaries.
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(ss)
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No Dividends. During the previous 12 months, the Corporation has not, directly or indirectly, declared or paid any dividend, or declared or made any other distribution on any of its shares or securities of any class, or, directly or indirectly, redeemed, purchased or otherwise acquired any of its Class A Shares or other securities, or agreed to do any of the foregoing. There are no restrictions upon the declaration or payment of dividends by the directors of the Corporation or the payment of dividends by the Corporation in the constating documents or in any Material Agreements or Debt Instruments.
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(tt)
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Fees and Commissions. Other than the Agents (and their selling group members) pursuant to this Agreement, there is no other person acting at the request of the Corporation, or to the knowledge of the Corporation, purporting to act, who is entitled to any brokerage, agency or other fiscal advisory or similar fee in connection with the Offering or transactions contemplated herein.
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(uu)
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Entitlement to Proceeds. Other than the Corporation, there is no person that is or will be entitled to demand any of the net proceeds of the Offering.
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(vv)
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Related Parties. Except as disclosed in the Financial Statements, none of the directors, officers or employees of the Corporation, any known holder of more than 10% of any class of securities of the Corporation or securities of any person exchangeable for more than 10% of any class of securities of the Corporation, or any known associate or affiliate of any of the foregoing persons or companies (as such terms are defined in the Securities Act), has had any material interest, direct or indirect, in any material transaction with the Corporation since the incorporation of the Corporation, or any proposed material transaction which, as the case may be, materially affected or is reasonably expected to materially affect the Corporation and any Subsidiary, on a consolidated basis. Neither the Corporation nor any Subsidiary has any material loans or other indebtedness outstanding which has been made to any of its shareholders, officers, directors or employees, past or present, or any person not dealing at “arm’s length” (within the meaning of the Income Tax Act (Canada)) with them.
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(ww)
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Anti-Money Laundering. The operations of the Corporation and the Subsidiaries (or any related party thereof) are and have been conducted at all times in compliance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, all applicable financial recordkeeping and reporting requirements, the applicable anti-money laundering statutes of jurisdictions where the Corporation and the Subsidiaries (or any related party thereof) conduct business, the rules and regulations thereunder and any related or similar rules or regulations, issued, administered or enforced by any governmental agency applicable to the Corporation and the Subsidiaries (or any related party thereof) (collectively, the “Anti-Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Corporation and the Subsidiaries (or any related party thereof) with respect to the Anti-Money Laundering Laws is, to the knowledge of the Corporation, pending or threatened.
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Section 8 Conditions of Closing
The obligations of the Agents under this Agreement shall be conditional upon the satisfaction or waiver of each of the following conditions prior to the Closing, it being understood that the Agents may waive, in whole or in part, or extend the time for compliance with, any of such conditions without prejudice to the rights of the Agents in respect of any such conditions or any other or subsequent breach or non-compliance, provided that to be binding, any such waiver or extension must be in writing:
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(1)
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the Agents receiving a legal opinion from Bennett Jones LLP, counsel to the Corporation (who may rely, to the extent appropriate in the circumstances, on the opinions of local counsel acceptable to counsel to the Agents as to the qualification of the Offered Shares for sale to the public in Canada and as to other matters governed by the laws of jurisdictions in Canada other than the provinces in which they are qualified to practice and may rely, to the extent appropriate in the circumstances, as to matters of fact on certificates of officers, public and exchange officials or of the auditor or transfer agent of the Corporation), in form and substance acceptable to the Agents and their counsel, acting reasonably, substantially to the effect set forth below, subject to customary assumptions, qualifications and limitations:
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(a)
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the Corporation is incorporated and exists under the Canada Business Corporations Act and has all requisite corporate power and capacity to carry on its business as currently conducted and to own and lease properties and assets;
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(b)
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as to the authorized and issued capital of the Corporation, prior to the issue of the Offered Shares;
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(c)
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the Corporation has all necessary corporate power, capacity and authority to (i) execute, deliver and perform its obligations under this Agreement, the Subscription Agreements and the Agents’ Warrant Certificates, as applicable, (ii) create, issue and sell the Offered Shares, and (iii) issue the Corporate Finance Shares and the Agents’ Warrants;
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(d)
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all necessary corporate action has been taken by the Corporation to authorize the execution and delivery of this Agreement, the Subscription Agreements and the Agents’ Warrant Certificates, as applicable, and the performance of its obligations thereunder, each of this Agreement the Subscription Agreements and the Agents’ Warrant Certificates have been duly executed and delivered by the Corporation and constitute legal, valid and binding obligations of the Corporation enforceable against it in accordance with their terms, subject to bankruptcy, insolvency and other laws affecting the rights of creditors generally and subject to other standard assumptions and qualifications, including the qualifications that equitable remedies may be granted in the discretion of a court of competent jurisdiction and that enforcement of rights to indemnity, contribution and waiver of contribution set out in this Agreement, the Subscription Agreements and the Agents’ Warrant Certificates may be limited by Applicable Law;
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(e)
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the execution and delivery of this Agreement, the Subscription Agreements and the Agents’ Warrant Certificates, the fulfilment of the terms of this Agreement, the Subscription Agreements and the Agents’ Warrant Certificates by the Corporation, and the (i) issuance, sale and delivery of the Offered Shares, and (ii) issuance and delivery of the Corporate Finance Shares and the Agents’ Warrants, do not and will not result in a breach of or default under, and do not and will not create a state of facts which, after notice or lapse of time or both, will result in a breach of or default under, and do not and will not conflict with the articles and by-laws of the Corporation, any resolutions of the shareholders or directors of the Corporation, the Canada Business Corporations Act or any applicable Canadian Securities Laws;
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(f)
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the Offered Shares have been validly issued as fully paid and non-assessable shares in the capital of the Corporation;
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(g)
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the Corporate Finance Shares have been validly issued as fully paid and non-assessable shares in the capital of the Corporation;
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(h)
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the Agents’ Warrants have been validly created and issued by the Corporation;
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(i)
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the Penalty Shares have been duly and validly authorized, allotted and reserved for issuance, and, if issued, upon issuance as liquidated damages, the Penalty Shares will be validly issued as fully paid and non-assessable shares in the capital of the Corporation;
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(j)
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the Agents’ Warrant Shares have been duly and validly authorized, allotted and reserved for issuance, and upon due exercise of the Agents’ Warrants in accordance with their terms, the Agents’ Warrant Shares will be validly issued as fully paid and non-assessable shares in the capital of the Corporation;
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(k)
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the offering, sale and issuance of the Offered Shares through the Agents to the Subscribers resident in the Selling Jurisdictions in Canada and the issuance and delivery of the Corporate Finance Shares and the Agents’ Warrants to the Agents in accordance with the terms of this Agreement are each exempt from the prospectus requirements of Canadian Securities Laws;
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(l)
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no prospectus is required nor are any other documents, proceedings or approvals, permits, consents or authorizations of regulatory authorities required to be filed, taken or obtained prior to the Closing (other than those which have been filed, taken or obtained) under Canadian Securities Laws to permit the issuance by the Corporation of the Offered Shares or the Penalty Shares; provided that, with respect to the Penalty Shares, all representations and warranties of the Subscribers contained in the Subscription Agreements will continue to be true and correct as at the date of issuance of the Penalty Shares;
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(m)
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no prospectus is required nor are any other documents, proceedings or approvals, permits, consents or authorizations of regulatory authorities required to be filed, taken or obtained prior to the Closing (other than those which have been filed, taken or obtained) under Canadian Securities Laws to permit the issuance by the Corporation of the Agents’ Warrant Shares on the exercise of the Agents’ Warrants in accordance with their terms;
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(n)
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the first trade in the Offered Shares, Penalty Shares, Corporate Finance Shares and the Agents’ Warrant Shares will be exempt from the prospectus requirements of applicable Canadian Securities Laws and no prospectus, offering memorandum or other document will be required to be filed, no proceeding required to be taken and no approval, permit, consent or authorization of regulatory authorities required to be obtained by the Corporation under Applicable Securities Laws to permit such trade through registrants registered under Applicable Securities Laws who have complied with such laws and the terms and conditions of their registration, provided that at the time of such trade, among other requirements;
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(i)
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the Corporation is and has been a “reporting issuer” (within the meaning of Canadian Securities Laws) in a jurisdiction of Canada for the four months immediately preceding the trade;
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(ii)
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the trade is not a “control distribution” (as defined in NI 45-102);
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(iii)
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no unusual effort is made to prepare the market or to create a demand for the security that is the subject of the trade;
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(iv)
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no extraordinary commission or consideration is paid to a person or company in respect of the trade; and
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(v)
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if the selling security holder is an insider or officer of the Corporation, the selling securityholder has no reasonable grounds to believe that the Corporation is in default of “securities legislation” (as defined in National Instrument 14-101 – Definitions and Interpretation);
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(o)
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Odyssey Trust Company, at its principal office in Vancouver, British Columbia, has been duly appointed as registrar and transfer agent for the Class A Shares; and
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(p)
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the form of Agents’ Warrant Certificate has been duly approved and adopted by the board of directors of the Corporation and complies in all material respects with the constating documents of the Corporation;
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(2)
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the Agents receiving a legal opinion from Osler, Hoskin & Harcourt LLP (“Osler”), in the same form as the opinion dated July 24, 2020 delivered by Osler to the Corporation;
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(3)
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the Agents receiving legal opinions from counsel to each Subsidiary (who may rely, to the extent appropriate in the circumstances, as to matters of fact on certificates of officers, public and exchange officials related to each Subsidiary), in form and substance acceptable to the Agents and their counsel, acting reasonably, substantially to the effect set forth below, subject to customary assumptions, qualifications and limitations:
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(a)
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such Subsidiaries having been incorporated and existing under the Applicable Law of their respective jurisdictions of incorporation;
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(b)
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such Subsidiaries having the corporate capacity and power to own and lease their properties and assets and to conduct their business as currently being conducted;
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(c)
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as to the authorized and issued share capital of such Subsidiaries and to the ownership thereof; and
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(d)
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such Subsidiaries being current with all corporate filings required to be made under their respective jurisdictions of incorporation and all other jurisdictions in which they exist or carry on any material business, and have all necessary licences, leases, permits, authorizations and other approvals necessary to permit them to conduct their respective business as currently conducted;
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(4)
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if any sales of Offered Shares are made to, or for the account or benefit of, persons in the United States or U.S. Persons, the Agents receiving an opinion of Jenner & Block LLP, addressed to the Agents, in form and substance reasonably satisfactory to the Agents and their counsel, acting reasonably, to the effect that no registration is required under the U.S. Securities Act, in connection with the offer, sale and delivery of the Offered Shares to, or for the account or benefit of, persons in the United States and U.S. Persons;
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(5)
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the Agents receiving certificates dated the Closing Date and signed by two senior officers of the Corporation as may be acceptable to the Agents, acting reasonably, in form and substance satisfactory to the Agents, acting reasonably, with respect to:
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(a)
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the constating documents of the Corporation;
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(b)
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the resolutions of the directors of the Corporation relevant to the sale of the Offered Shares, the issuance and delivery of the Corporate Finance Shares and the Agents’ Warrants, and the authorization of the Offering Documents and the transactions contemplated herein and therein; and
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(c)
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the incumbency and signatures of signing officers for the Corporation;
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(6)
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the Agents having received a certificate dated the Closing Date of each Subsidiary, signed by an appropriate officer of such Subsidiary and addressed to the Agents and Agents’ counsel, in form and substance satisfactory to the Agents, acting reasonably, certifying for and on behalf of such Subsidiary and not in their personal capacity, to the actual knowledge of the person signing such certificate, after having made due and relevant inquiry, as to: (i) the corporate good standing, and (ii) the authorized capital and ownership, of such Subsidiary;
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(7)
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the Agents receiving certificates of status and/or compliance, where issuable under Applicable Law, for the Corporation and the Subsidiaries, each dated within three Business Days prior to the Closing Date;
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(8)
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the Agents receiving a certificate, dated as of the Closing Date, signed by two senior officers of the Corporation as may be acceptable to the Agents, acting reasonably, certifying for and on behalf of the Corporation (without personal liability), to the best of their knowledge, information and belief, after due inquiry, that:
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(a)
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the representations and warranties of the Corporation contained in this Agreement, and in any certificates of the Corporation delivered pursuant to or in connection with this Agreement, are true and correct in all material respects (or, in the case of any representation or warranty containing a materiality qualification, in all respects) as of the Closing Time, as if such representations and warranties were made as at the Closing Time, after giving effect to the transactions contemplated hereby;
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(b)
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the Corporation has complied in all material respects (except where already qualified by a materiality qualification, in which case the Corporation shall have complied in all respects) with all the covenants and satisfied in all material respects all the terms and conditions of this Agreement on its part to be complied with and satisfied at or prior to the Closing Time; and
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(c)
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since the date of this Agreement (A) there has been no material change (actual, anticipated, contemplated or threatened, whether financial or otherwise) in the Business, affairs, operations, Business Assets, liabilities (contingent or otherwise), prospects or capital of the Corporation on a consolidated basis, and (B) no transaction has been entered into by the Corporation or any Subsidiary which is material to the Corporation on a consolidated basis;
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(9)
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the Agents receiving fully executed Agents’ Warrant Certificates;
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(10)
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the Subscription Agreements having been executed, endorsed or authenticated, as applicable, and delivered by the parties thereto in form and substance satisfactory to the Corporation and the Agents, acting reasonably;
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(11)
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the Corporation having delivered, or caused to be delivered, the Offered Shares and the Corporate Finance Shares in accordance with Section 9;
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(12)
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the Agents receiving a certificate from Odyssey Trust Company as to the number of Class A Shares issued and outstanding as at the end of the Business Day on the date prior to the Closing Date;
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(13)
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the Corporation complying with all of its covenants and obligations under this Agreement required to be satisfied at or prior to the Closing Time in all material respects (except where already qualified by a materiality qualification, in which case the Corporation shall have complied in all respects); and
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(14)
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the Agents not having exercised any rights of termination set forth herein.
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Section 9 Closing
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(1)
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Location of Closing. The Closing will be completed electronically at the Closing Time.
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(2)
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Securities. At the Closing Time, subject to the terms and conditions contained in this Agreement, the Corporation shall deliver to the Agents in Toronto, Ontario, the Offered Shares and the Corporate Finance Shares in electronic form, and physical copies of the Agents’ Warrants Certificates, immediately following the receipt of payment to the Corporation by the Agents of the aggregate Offering Price for the Offered Shares by wire transfer, net of the Agents’ Commission and expenses of the Agents payable by the Corporation as set out in this Agreement.
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(3)
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Settlement. Except as otherwise agreed to by the parties and for issuances to Subscribers that are, or are acting for the account or benefit of, a person in the United States or a U.S. Person (other than Qualified Institutional Buyers), who shall be issued the Offered Shares in a certificated form, the Corporation shall cause Odyssey Trust Company to issue electronically and register through the non-certificated inventory process, the Offered Shares against payment therefor in the manner as set forth above, such electronic issuance being registered in the name of CDS (or in such other name as the Agents may direct); and
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(a)
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the Agents will create an instant deposit in CDS’ automated clearing and settlement system in the aggregate amount of the Offered Shares to be purchased through the non-certificated inventory process and shall provide the deposit identification number (the “Deposit ID”) to the Corporation and Odyssey Trust Company prior to the Closing Time to permit the further crediting of the accounts of those participants of CDS acting on behalf of Subscribers for such Offered Shares;
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(b)
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the Corporation shall provide an executed treasury direction, dated as of the Closing Date, to the Corporation’s transfer agent authorizing and directing Odyssey Trust Company to issue a non-certificated inventory credit to CDS in the amount equal to the aggregate number of Offered Shares to be purchased through the non-certificated inventory process in accordance with the registration instructions provided by the Agents; and
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(c)
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immediately following receipt by the Corporation of the aggregate Offering Price (net of the Agents’ Commission and expenses of the Agents payable by the Corporation as set out in this Agreement), the Corporation shall cause Odyssey Trust Company to electronically confirm the CDS deposit represented by the Deposit ID.
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Section
10 Indemnification by Corporation
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(1)
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The Corporation hereby agrees to indemnify and hold each of the Agents, and/or any of their respective subsidiaries and affiliates and each of their respective directors, officers, employees, partners, agents, shareholders, each other person, if any, controlling the Agents or any of their subsidiaries or affiliates (collectively, the “Indemnified Parties” and individually an “Indemnified Party”) harmless from and against any and all expenses, losses, suits, proceedings, fees, claims, actions (including shareholder actions, derivative actions or otherwise) damages, obligations, liabilities or expenses of whatever nature or kind, whether joint or several, including the aggregate amount paid in reasonable settlement of any actions, suits, proceedings, investigations or claims and the reasonable fees, expenses and taxes of one counsel to the Indemnified Parties taken as a whole (collectively, the “Losses”) that may be incurred in investigating or advising with respect to and/or defending or settling any action, suit, proceeding, investigation or claim that may be made or threatened against any Indemnified Party or in enforcing this indemnity (collectively, the “Claims”) or to which the Indemnified Parties may become subject or otherwise involved in any capacity insofar as such Claims relate to, are caused by, result from, arise out of or are based, directly or indirectly, upon the performance of professional services rendered to the Corporation by the Indemnified Parties hereunder or otherwise in connection with the matters referred to in this Agreement, and to reimburse each Indemnified Party forthwith, upon demand for any legal or other expenses reasonably incurred by such Indemnified Party in connection with any Claim. Provided, however that this indemnity shall not apply to the extent that a court of competent jurisdiction in a final judgment that has become non-appealable shall determine that such Losses were solely caused by the gross negligence, wilful misconduct or fraud of the Indemnified Party.
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(2)
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If for any reason (other than a determination as to any of the events referred to above) the foregoing indemnity is unavailable to an Indemnified Party, or is insufficient to hold them harmless, then the Corporation shall contribute to the Losses paid or payable by such Indemnified Party as a result of such Claim in such proportion as is appropriate to reflect not only the relative benefits received by the Corporation or its shareholders on the one hand and the Indemnified Party on the other hand but also the relative fault of the Corporation and the Indemnified Party as well as any relevant equitable considerations, provided that the Corporation shall in any event contribute to the Losses paid or payable by the Indemnified Party as a result of such Claim, in such amount that is in excess of the amount of the Agents’ Commission actually received by the Agents pursuant to this Agreement. In the event that the Corporation may be entitled to contribution from the Indemnified Parties under the provisions of any statute or law, the Corporation shall be limited to contribution in any amount not exceeding the lesser of the portion of the Losses giving rise to such contribution for which the Agents are responsible and the amount of the Agents’ Commission received by the Agents. However, no party shall be entitled to contribution under this subsection to the extent that a court of competent jurisdiction in a final judgment that has become non-appealable shall determine that such Losses for which contribution is being sought hereunder, were directly caused by the gross negligence, wilful misconduct or fraud of such party.
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(3)
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Promptly after receipt of notice of the commencement of any Claim against an Indemnified Party or after receipt of notice of the commencement of any investigation, which is based, directly or indirectly, upon any matter in respect of which indemnification may be sought from the Corporation hereunder, the Agents will notify the Corporation in writing of the commencement thereof and, through the course thereof, will provide copies of all relevant documentation to the Corporation, will keep the Corporation advised of the progress thereof, and will discuss with the Corporation all significant actions proposed. However, the failure by the Indemnified Party to so notify the Corporation shall not relieve the Corporation of any liability which the Corporation may have to an Indemnified Party except only to the extent that any such delay in giving or failure to give notice as herein required results in the forfeiture by the Corporation of substantive rights or defences. The Corporation shall, on behalf of itself and the Indemnified Party, be entitled (but not required) to assume the defence of any suit brought to enforce such Claim; provided, however, that the defence shall be conducted through legal counsel acceptable to the Indemnified Party, acting reasonably, that no settlement of any such Claim may be made by the Corporation without the prior written consent of the Indemnified Party, and the Indemnified Party shall not be liable for any settlement of any such Claim unless it has consented in writing to such settlement, such consent not to be unreasonably withheld. The Indemnified Party shall have the right to appoint its own separate counsel at the Corporation’s cost, provided the Indemnified Party acts reasonably in selecting such counsel.
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(4)
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The Corporation agrees that if any Claim shall be brought or commenced against the Corporation and/or any Indemnified Party and the personnel of such Indemnified Party shall be required to testify in connection therewith or shall be required to participate or respond to procedures designed to discover information regarding, in connection with, or by reason of the performance of professional services rendered to the Corporation by the Indemnified Parties hereunder, the Indemnified Party shall have the right to employ its own counsel in connection therewith, and the reasonable fees and expenses of such counsel as well as the reasonable costs (including an amount to reimburse the Indemnified Party for time spent by the personnel of the Indemnified Party in connection therewith) and out-of-pocket expenses incurred by the Indemnified Party in connection therewith shall be paid by the Corporation upon delivery of invoices to the Corporation. The Corporation also agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to the Corporation or any person asserting Claims on behalf of or in right of the Corporation for or in connection with the performance of professional services rendered to the Corporation by the Indemnified Parties hereunder or otherwise in connection with the matters referred to in this Agreement (whether performed before or after the Corporation’s execution of this Agreement).
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(5)
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A party hereunder shall not, without the other party’s prior written consent, such consent not to be unreasonably withheld, conditioned or delayed, settle, compromise, consent to the entry of any judgment, or make an admission of liability with respect to any Claims or seek to terminate any Claims in respect of which indemnification may be sought hereunder.
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(6)
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The rights accorded to the Indemnified Parties hereunder shall be in addition to any rights an Indemnified Party may have at common law or otherwise.
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(7)
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The Corporation agrees to waive any right the Corporation may have of first requiring the Indemnified Party to proceed against or enforce any right, power, remedy, security or claim payment from any other person before claiming under this indemnity. The Corporation hereby acknowledges that the Agents are acting as trustees for each of the other Indemnified Parties of the Corporation’s covenants under this indemnity and the Agents agree to accept such trust and to hold and enforce such covenants on behalf of such persons.
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(8)
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The indemnity and contribution obligations of the Corporation shall be in addition to any liability which the Corporation may otherwise have, shall extend upon the same terms and conditions to the Indemnified Parties who are not signatories hereto and shall be binding upon and enure to the benefit of any successors, assigns, heirs and personal representatives of the Corporation and the Indemnified Parties.
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Section 11 Compensation of the Agents
In consideration of the services rendered by the Agents in connection with the Offering, at the Closing Time, the Corporation shall:
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(a)
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Agents’ Commission: Pay to Canaccord, for and on behalf of the Agents, the Agents’ Commission in an amount equal to: (i) 5.0% of the aggregate gross proceeds raised from the sale of Offered Shares other than in respect of gross proceeds from the sale of Offered Shares to President’s List Subscribers; plus (ii) 2.5% of the aggregate gross proceeds raised from the sale of Offered Shares to President’s List Subscribers, in each case payable by the Corporation in cash or Class A Shares, or any combination of cash and Class A Shares at the option of the Agents, provided that Canaccord, for and on behalf of the Agents, shall notify the Corporation of its election as to the split between cash and Class A Shares at least two Business Days prior to the Closing Date.
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(b)
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Agent’s Warrants: Create and issue to the Agents, or as directed by the Agents, in the aggregate, a number of Agent’s Warrants equal to: (i) 5.0% of the aggregate number of Offered Shares sold to Subscribers other than President’s List Subscribers; plus (ii) 2.5% of the aggregate number of Offered Shares sold to President’s List Subscribers; plus (iii) that number of Agents’ Warrants which is equal to 1.0% of the aggregate number of Offered Shares.
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(c)
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Corporate Finance Shares: Create and issue to the Agents, or as directed by the Agents, the Corporate Finance Shares.
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Any portion of the Agents’ Commission that is payable in cash will be deducted from the aggregate gross proceeds of the Offering and withheld for the account of the Agents.
In the event of the completion of the Proposed Transaction, the Corporation agrees to cause each Agents’ Warrant to be exchanged for warrants of the Resulting Issuer exercisable to purchase Resulting Issuer Shares at an exercise price equal to the Offering Price until the date that is twenty-four (24) months following the Closing Date.
Section 12 Expenses
Whether or not the Offering shall be completed, all costs and expenses of or incidental to the sale and delivery of the Offered Shares and of or incidental to all matters in connection with the transactions herein shall be borne by the Corporation, subject to the applicable maximums set out in the letter of engagement dated May 22, 2020 among the Agents and the Corporation, including fees and disbursements of accountants and auditors, technical consultants, translators and other applicable experts; all costs and expenses related to roadshows and marketing activities, printing, filing, issue, sale and distribution and other regulatory compliance; all fees and out-of-pocket expenses of the Agents including, but not limited to, travel expenses in connection with due diligence and marketing activities, and fees and disbursements of the Agents’ legal counsel and all applicable taxes on such fees and disbursements; all costs incurred in connection with the preparation of this Agreement and all other documentation related to the Offering. The Agents’ expenses will be netted out of the gross proceeds of the Offering.
Section 13 Termination by Agents in Certain Events
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(1)
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In addition to any other remedies which may be available to the Agents, each of the Agents shall be entitled, at their option, to terminate and cancel, without any liability on such Agent’s part, its obligations hereunder, and the obligations of any Subscriber under any Subscription Agreement provided by the Agent, by written notice to the Corporation and the other Agent, in the event that at or prior to the Closing Time:
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(a)
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Due Diligence – the Agents are not satisfied, in their sole discretion, acting reasonably, with their due diligence review and investigations in respect of the Corporation;
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(b)
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Regulatory Proceedings – there shall be any inquiry, action, suit, investigation or other proceeding (whether formal or informal) commenced, announced or threatened, or any order is made or issued under or pursuant to any Governmental Authority against the Corporation, its Subsidiaries or any of its officers, directors or principal shareholders, or there is a change in any law, rule or regulation, or the interpretation or administration thereof, which, in the reasonable opinion of the Agents, operates to prevent, restrict or otherwise materially adversely affect the marketability, issuance or distribution of the Offered Shares;
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(c)
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Material Adverse Change - there should develop, occur, be discovered, or come into effect or existence, any event, action, state, condition (including, without limitation, terrorism or accident) or financial occurrence of national or international consequence, or any action by government, law or regulation, enquiry or any other occurrence of any nature whatsoever, or any change in the operations, capital, condition (financial or otherwise), results of operations, business or business prospects of the Corporation, or the properties, assets, prospects, liabilities or obligations (absolute, accrued, contingent or otherwise) of the Corporation, which, in the sole opinion of the Agents, acting reasonably, materially adversely affects, or involves, or might be reasonably expected to materially adversely affect or involve, the financial markets generally, or the Business, operations or affairs of the Corporation, or the market price, value or marketability of the Offered Shares;
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(d)
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Disaster Out – there should develop, occur or come into effect or existence any event, action, state or condition, or any action, law, regulation or inquiry, including, without limitation, terrorism, accident or major financial, political or economic occurrence of national or international consequence, any material escalation in the severity of the COVID-19 pandemic, or any action, government, law, regulation, inquiry or other occurrence of any nature, which, in the reasonable opinion of the Agents, seriously adversely affects or involves, or may seriously adversely affect or involve, the financial markets in Canada or the United States or the business, operations or affairs of the Corporation or the marketability of the Offered Shares; or
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(e)
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Breach Out - the Corporation is in breach of any term, condition or covenant of this Agreement that may not be reasonably expected to be remedied prior to the Closing Time or any material representation or warranty given by the Corporation in this Agreement becomes or is false.
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(2)
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If this Agreement is terminated by any of the Agents pursuant to Section 13(1), there shall be no further liability on the part of such Agent or of the Corporation to such Agent, except in respect of any liability which may have arisen or may thereafter arise under Section 10 and Section 10(1).
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(3)
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The right of the Agents or any of them to terminate their respective obligations under this Agreement is in addition to such other remedies as they may have in respect of any default, act or failure to act of the Corporation in respect of any of the matters contemplated by this Agreement. A notice of termination given by one Agent under this Section 13 shall not be binding upon the other Agent.
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(4)
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Notwithstanding the foregoing and for the avoidance of doubt, this Agreement may be terminated at any time at or prior to the Closing Time upon the mutual written agreement of the Corporation and the Agents if the parties hereto decide not to proceed with the Offering.
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Section 14 Notices
Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be delivered,
(a) in the case of the Corporation, to:
Field Trip Psychedelics Inc.
30 Duncan Street, Suite 401
Toronto, Ontario M5V 2C3
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Attention:
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Ronan Levy, Executive Chairman & Director
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Email:
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ronan@fieldtriphealth.com
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With a copy to (which copy shall not constitute notice hereunder):
Bennett Jones LLP
100 King St. W., Suite 3400
Toronto, Ontario M5X 1A4
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Attention:
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Aaron Sonshine
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Email:
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sonshinea@bennettjones.com
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(b) in the case of the Agents, to:
Canaccord Genuity Corp.
Brookfield Place
161 Bay Street, Suite 3000
Toronto, Ontario M5J 2S1
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Attention:
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Derek Ham
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Email:
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DHam@cgf.com
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and to:
Stifel Nicolaus Canada Inc.
145 King Street West, Suite 300
Toronto, Ontario M5H 1J8
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Attention:
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Harris Fricker
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Email:
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hfricker@stifel.com
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with a copy of any such notice to:
Borden Ladner Gervais LLP
Bay Adelaide Centre – East Tower
22 Adelaide Street West King Street West
Toronto, ON M5H 4E3
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Attention:
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Andrew Powers
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Email:
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apowers@blg.com
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The Corporation and the Agents may change their respective addresses for notice by notice given in the manner aforesaid. Any such notice or other communication shall be in writing, and unless delivered personally to the addressee or to a responsible officer of the addressee, as applicable, shall be emailed and shall be deemed to have been given when: (i) in the case of a notice delivered personally to a responsible officer of the addressee, when so delivered; and (ii) in the case of a notice delivered or given by email on the first Business Day following the day on which it is sent.
Section 15 Alternative Transaction
If the Corporation does not complete the Maximum Offering, but the Corporation or any affiliate or Subsidiary thereof completes any debt or equity financing transaction (excluding a bank loan from commercial lenders) prior to November 18, 2020 (an “Alternative Transaction”) in respect of which the Agents are not the lead underwriter, placement agent, arranger or initial purchaser, or in respect of which the Agents do not receive at least the same amount of compensation pursuant to such Alternative Transaction as to which they would have been entitled under the Offering, the Agents shall be entitled to receive immediately upon the completion of such Alternative Transaction the lesser of (i) the amount of compensation assuming completion of the Maximum Offering; and (ii) the Agents’ Commission and Agents’ Warrants calculated based on the amount raised pursuant to the Alternative Transaction; provided, however, that the Agents shall not be entitled to any amount under this Section 15: (i) in connection with an offering pursuant to Regulation A under the U.S. Securities Act (the “Reg A Offering”) (other than proceeds raised from investors introduced to the Corporation by the Agents in the process of the Offering); (ii) in connection with an offering contemplated under Section 6(v); (iii) in the event that the Agents voluntarily terminate this Agreement (other than as a result of a material breach by the Corporation of its obligations hereunder); or (iv) if the Corporation voluntarily terminates this Agreement as a result of a material breach by the Agents of their obligations hereunder. If the Corporation and the Agents, acting reasonably and in good faith, are unable to complete the Offering due to market conditions or otherwise and the Corporation voluntarily terminates this Agreement, the Agents shall only be entitled to the compensation described above in connection with proceeds raised in an Alternative Transaction from investors introduced to the Corporation by the Agents in the process of the Offering.
Section 16 Miscellaneous
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(a)
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Successors and Assigns. This Agreement shall enure to the benefit of, and shall be binding upon, the Agents and the Corporation and their respective successors, permitted assigns and legal representatives.
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(b)
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Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein, and the parties attorn to the exclusive jurisdiction of the courts of the Province of Ontario.
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(c)
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Time of the Essence. Time shall be of the essence hereof and, following any waiver or indulgence by any party, time shall again be of the essence hereof.
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(d)
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Interpretation. The words, “hereunder”, “hereof” and similar phrases mean and refer to this Agreement.
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(e)
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Survival. All representations, warranties, covenants and agreements of the Corporation and/or the Agents herein contained or contained in documents submitted pursuant to this Agreement and in connection with the transaction of purchase and sale herein contemplated shall survive for a period ending on the date that is two years following the Closing Date. The Agents and the Corporation shall be entitled to rely on the representations and warranties of the Corporation or the Agents, as the case may be, contained herein or delivered pursuant hereto notwithstanding any investigation which the Agents or the Corporation may undertake or which may be undertaken on their behalf.
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(f)
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Electronic Copies. Each of the parties hereto shall be entitled to rely on delivery of a DocuSign, PDF or other electronic copy of this Agreement and acceptance by each such party of any such DocuSign, PDF or other electronic copy shall be legally effective to create a valid and binding agreement between the parties hereto in accordance with the terms hereof.
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(g)
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Severability. If one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be construed as if such invalid, illegal or unenforceable provision or provisions had never been contained herein.
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(h)
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Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.
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(i)
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Several and Joint. In performing their respective obligations under this Agreement, the Agents shall be acting severally and not jointly and severally. Nothing in this Agreement is intended to create any relationship in the nature of a partnership, or joint venture between the Agents.
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(j)
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No Fiduciary Duty. The Corporation acknowledges that in connection with the Offering, the Agents: (i) have acted at arm’s length, are not agents of, and owe no fiduciary duties to, the Corporation or any other person, (ii) owe the Corporation only those duties and obligations set forth in this Agreement, and (iii) may have interests that differ from those of the Corporation. The Corporation waives to the full extent permitted by Applicable Law any claims it may have against the Agents arising from an alleged breach of fiduciary duty in connection with the Offering.
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(k)
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Entire Agreement. This Agreement constitutes the only agreement between the parties with respect to the subject matter hereof and shall supersede any and all prior negotiations and understandings in respect of the Offering, including the engagement letter dated May 22, 2020, as amended. This Agreement may be amended or modified only on signed agreement of each of the parties hereto.
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[Remainder of page intentionally left blank]
If this Agreement accurately reflects the terms of the transactions which we are to enter into and are agreed to by you, please communicate your acceptance by executing the enclosed copies of this Agreement where indicated and returning them to us.
Yours very truly,
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CANACCORD GENUITY CORP.
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By:
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STIFEL NICOLAUS CANADA INC.
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By:
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The foregoing is hereby accepted and agreed to by the undersigned as of the date first written above.
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FIELD TRIP PSYCHEDELICS INC.
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By:
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SCHEDULE “A”
SUBSIDIARIES
Field Trip Health Inc.
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•
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Existing under the laws of Canada.
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•
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Wholly-owned subsidiary of the Corporation.
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•
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The authorized and issued share capital consists of an unlimited number of common shares, of which 100 common shares were outstanding as at the close of business on August 13, 2020.
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Field Trip Ventures USA Inc.
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•
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Existing under the laws of Delaware.
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•
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Wholly-owned subsidiary of the Corporation.
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•
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The authorized and issued share capital consists of 5,000 shares of common stock, with a par value of US$0.01 per share and an unlimited number of preferred shares, of which 1,000 shares of common stock were outstanding as at the close of business on August 13, 2020.
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Field Trip Natural Products Limited
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•
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Existing under the laws of Jamaica.
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•
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Wholly-owned subsidiary of the Corporation.
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•
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The authorized and issued share capital consists of 1,000,000 ordinary shares, of which 600 ordinary shares were outstanding as at the close of business on August 13, 2020.
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SCHEDULE “B”
COMPLIANCE WITH UNITED STATES SECURITIES LAWS
As used in this Schedule and related exhibits, the following terms shall have the meanings indicated:
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(a)
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“Directed Selling Efforts” means “directed selling efforts” as that term is defined in Rule 902(c) of Regulation S, which, without limiting the foregoing, but for greater clarity in this Schedule, includes, subject to the exclusions from the definition of “directed selling efforts” contained in Regulation S, any activity undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for any of the Offered Shares, and includes the placement of any advertisement in a publication with a general circulation in the United States that refers to the offering of the Offered Shares;
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(b)
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“Foreign Issuer” means “foreign issuer” as that term is defined in Rule 902(e) of Regulation S. Without limiting the foregoing, but for greater clarity in this Schedule B, it means any issuer that is (a) the government of any country, or of any political subdivision of a country, other than the United States, or (b) a national of any country other than the United States, or (c) a corporation or other organization incorporated or organized under the laws of any country other than the United States, except an issuer meeting the following conditions as of the last business day of its most recently completed second fiscal quarter: (1) more than 50 percent of the outstanding voting securities of such issuer are directly or indirectly owned of record by residents of the United States, and (2) any of the following: (i) the majority of the executive officers or directors are United States citizens or residents, (ii) more than 50 percent of the assets of the issuer are located in the United States, or (iii) the business of the issuer is administered principally in the United States;
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(c)
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“General Solicitation” and “General Advertising” means “general solicitation” and “general advertising”, respectively, as used under Rule 502(c) of Regulation D, including, without limitation, advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or the internet, or broadcast over radio or television or the internet, or any seminar or meeting whose attendees had been invited by general solicitation or general advertising;
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(d)
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“Offshore Transaction” means an “offshore transaction” as that term is defined in Rule 902(h) of Regulation S;
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(e)
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“Regulation D” means Regulation D adopted by the SEC under the U.S. Securities Act;
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(f)
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“Regulation S” means Regulation S adopted by the SEC under the U.S. Securities Act;
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(g)
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“SEC” means the United States Securities and Exchange Commission;
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(h)
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“Substantial U.S. Market Interest” means “substantial U.S. market interest” as that term is defined in Rule 902(j) of Regulation S;
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(i)
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“United States” means the United States of America, its territories and possessions, any state of the United States, and the District of Columbia;
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(j)
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“U.S. Accredited Investor” means an “accredited investor” as defined in Rule 501(a) of Regulation D;
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(k)
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“U.S. Affiliate” means the U.S. registered broker-dealer affiliate of an Agent that makes offers of the Offered Shares to, or for the account or benefit of, persons in the United States or U.S. Persons; and
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(l)
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“U.S. Person” means a “U.S. person” as that term is defined in Rule 902(k) of Regulation S.
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All other capitalized terms used but not otherwise defined in this Schedule shall have the meanings assigned to them in the Agency Agreement to which this Schedule is attached.
Representations, Warranties and Covenants of the Corporation
The Corporation represents, warrants, acknowledges, covenants and agrees with the Agents, as at the date hereof and as at the Closing Date, that:
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1.
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The Corporation is a Foreign Issuer and reasonably believes that there is no Substantial U.S. Market Interest with respect to the any of its equity securities.
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2.
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The Corporation is not, and after giving effect to the Offering contemplated hereby and the application of the proceeds, will not be, registered or required to be registered as an “investment company” (as such term is defined under the Investment Company Act of 1940, as amended), under such Act.
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3.
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The Corporation acknowledges that the Offered Shares have not been and will not be registered under the U.S. Securities Act or any state securities laws, and that the Offered Shares may be offered and sold only in transactions exempt from or not subject to the registration requirements of, the U.S. Securities Act and applicable state securities laws. Except with respect to sales of Offered Shares by the Agents, the U.S. Affiliates or any members of the selling group formed by them (as to whom the Corporation makes no representation, warranty, acknowledgement, covenant or agreement), neither the Corporation nor any of its affiliates, nor any person acting on any of their behalf (other than the Agents, the U.S. Affiliates, or any members of the selling group formed by them, as to whom the Corporation makes no representation, warranty, acknowledgement, covenant or agreement), has made or will make: (A) any offer to sell, or any solicitation of an offer to buy, any Offered Shares to, or for the account or benefit of, a person in the United States or a U.S. Person; or (B) any sale of Offered Shares unless, at the time the buy order was or will have been originated, the Subscriber is (i) outside the United States and not a U.S. Person, or (ii) the Corporation, its affiliates, and any person acting on any of their behalf reasonably believe that the Subscriber is outside the United States and not a U.S. Person.
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4.
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None of the Corporation, any of its affiliates nor any person acting on any of their behalf (other than the Agents, the U.S. Affiliates, or any members of the selling group formed by them, as to whom the Corporation makes no representation, warranty, acknowledgement, covenant or agreement), has engaged or will engage in any Directed Selling Efforts, or has taken or will take any action that would cause the applicable exemption afforded by Section 4(a)(2) of the U.S. Securities Act to be unavailable for offers and sales of the Offered Shares pursuant to this Agreement, or the exclusion afforded by Rule 903 of Regulation S to be unavailable for offers and sales of the Offered Shares in Offshore Transactions pursuant to this Agreement.
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5.
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None of the Corporation, any of its affiliates nor any person acting on any of their behalf (other than the Agents, the U.S. Affiliates, or any members of the selling group formed by them, as to whom the Corporation makes no representation, warranty, acknowledgement, covenant or agreement), has offered or will offer to sell, or has solicited or will solicit offers to buy, any of the Offered Shares to, or for the account or benefit of, persons in the United States or U.S. Persons by means of any form of General Solicitation or General Advertising or in any manner involving a public offering within the meaning of Section 4(a)(2) of the U.S. Securities Act.
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6.
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Neither the Corporation nor any person acting on behalf of the Corporation has, within six months prior to the commencement of the Offering, sold, offered for sale or solicited any offer to buy any of the Corporation’s securities, and will not do so during or for a period of six months following the completion of this Offering, in a manner that would be integrated with the offer and sale of the Offered Shares and would cause the exemption from registration set forth in Section 4(a)(2) of the U.S. Securities Act and Rule 506(b) of Regulation D to become unavailable with respect to the offer and sale of the Offered Shares.
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7.
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Neither the Corporation nor any of its predecessors or affiliates has been subject to any order, judgment or decree of any court of competent jurisdiction temporarily, preliminarily or permanently enjoining such person for failure to comply with Rule 503 of Regulation D.
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8.
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None of the Corporation, its affiliates or any person acting on any of their behalf (other than the Agents, the U.S. Affiliates, or any members of the selling group formed by them, as to whom the Corporation makes no representation, warranty, acknowledgement, covenant or agreement) has engaged or will engage in any violation of Regulation M under the U.S. Exchange Act in connection with the offer and sale of Offered Shares contemplated hereby.
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9.
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The Corporation shall provide to a Subscriber that is, or is acting for the account or benefit of, a person in the United States or a U.S. Person, upon written request, all of the information that would be required for United States income tax reporting purposes by a United States security holder making an election to treat the Corporation as a “qualified electing fund” for the purposes of the United States Internal Revenue Code of 1986, as amended, should the Corporation determine that the Corporation is a “passive foreign investment company” in any calendar year following such Subscriber’s purchase of the Offered Shares.
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10.
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None of the Corporation, any of its subsidiaries, or to the knowledge of the Corporation, any member, officer, agent, employee or affiliate of the Corporation or any of its affiliates is currently subject to any sanctions administered by the Office of Foreign Assets Control of the U.S. Department of Treasury (“OFAC”); and the Corporation will not directly or indirectly use the proceeds hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any sanctions administered by OFAC.
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11.
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None of the Corporation or any of its predecessors has had the registration of a class of securities under the U.S. Exchange Act revoked by the SEC pursuant to Section 12(j) of the U.S. Exchange Act and any rules or regulations promulgated thereunder.
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Representations, Warranties and Covenants of the Agents
Each Agent, on its own behalf and on behalf of its U.S. Affiliate, severally (and not jointly and severally) represents, warrants and covenants to and with the Corporation, as at the date hereof and as at the Closing Date, that:
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1.
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It acknowledges that the Offered Shares have not been and will not be registered under the U.S. Securities Act or any state securities laws and may be offered and sold only in transactions exempt from or not subject to the registration requirements of the U.S. Securities Act and applicable state securities laws. It has offered for sale by the Corporation, and will offer for sale by the Corporation, any Offered Shares only as follows: (a) offers of Offered Shares in Offshore Transactions in accordance with Rule 903 of Regulation S; or (b) offers of Offered Shares to, or for the account or benefit of, persons in the United States and U.S. Persons that are U.S. Accredited Investors and/or Qualified Institutional Buyers, in transactions that are exempt from the registration requirements of the U.S. Securities Act and state blue sky laws, as provided in paragraphs 2 through 12 below. Accordingly, none of the Agent, its U.S. Affiliate, any of their affiliates or any persons acting on behalf of any of them, has made or will make (except as permitted in paragraphs 2 through 12 below) any: (x) offer to sell, or any solicitation of an offer to buy, any Offered Shares to, or for the account or benefit of, any person in the United States or any U.S. Person; (y) any sale of Offered Shares to any Subscriber unless, at the time the buy order was or will have been originated, the Subscriber was outside the United States and not a U.S. Person, or such Agent, U.S. Affiliate, affiliate or person acting on any of their behalf reasonably believed that such Subscriber was outside the United States and not a U.S. Person; or (z) Directed Selling Efforts.
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2.
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It has not entered and will not enter into any contractual arrangement with respect to the offer and sale of the Offered Shares, except with its U.S. Affiliate, any selling group members or with the prior written consent of the Corporation. It shall require its U.S. Affiliate and each selling group member to agree, for the benefit of the Corporation, to comply with, and shall use its commercially reasonable efforts to ensure that its U.S. Affiliate and each selling group member complies with, the provisions of this Schedule applicable to the Agent as if such provisions applied directly to its U.S. Affiliate and such selling group member.
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3.
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All offers of Offered Shares for sale by the Corporation to, or for the account or benefit of, persons in the United States and U.S. Persons shall be solicited and arranged by the Agent through its U.S. Affiliate, which on the dates of such offers and subsequent sales by the Corporation was and will be duly registered as a broker-dealer under the U.S. Exchange Act and under all applicable state securities laws (unless exempted therefrom), and a member of, and in good standing with, the Financial Industry Regulatory Authority, Inc. in accordance with all applicable United States state and federal securities (including broker-dealer) laws.
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4.
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It and its U.S. Affiliate and their respective affiliates, either directly or through a person acting on behalf of any of them, have not solicited and will not solicit offers for, and have not offered to sell and will not offer to sell, any of the Offered Shares in the United States by any form of General Solicitation or General Advertising or in any manner involving a public offering within the meaning of Section 4(a)(2) of the U.S. Securities Act.
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5.
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Any offer, or solicitation of an offer to buy, Offered Shares that has been made or will be made to, or for the account or benefit of, a person in the United States or a U.S. Person was or will be made only to U.S. Accredited Investors and/or Qualified Institutional Buyers.
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6.
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Immediately prior to soliciting any Subscriber that is, or is acting for the account or benefit of, a person in the United States or a U.S. Person, the Agent, its U.S. Affiliate, their respective affiliates, and any person acting on behalf of any of them, had reasonable grounds to believe and did believe that each such Subscriber was a U.S. Accredited Investor or a Qualified Institutional Buyer, as applicable, and at the time of completion of each sale by the Corporation to, or for the benefit or account of, a person in the United States or a U.S. Person identified by such Agent and U.S. Affiliate, the Agent, its U.S. Affiliate, their respective affiliates, and any person acting on behalf of any of them will have reasonable grounds to believe, and will believe, that each Subscriber designated by the Agent or the U.S. Affiliate to purchase Offered Shares from the Corporation is a U.S. Accredited Investor or a Qualified Institutional Buyer, as applicable.
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7.
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Prior to arranging for any sale of Offered Shares by the Corporation to, or for the account or benefit of, a person in the United States or a U.S. Person, it shall cause each Subscriber to execute a Subscription Agreement.
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8.
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At least two Business Days prior to the applicable Closing Date, the transfer agent for the Corporation will be provided with a list of the names and addresses of all Subscribers of the Offered Shares in the United States.
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9.
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At the Closing, the Agent and its U.S. Affiliate that has offered or solicited offers and arranged for the sale of the Offered Shares by the Corporation to, or for the account or benefit of, persons in the United States or U.S. Persons, will provide a certificate, substantially in the form of Exhibit I, relating to the manner of the offer and sale of the Offered Shares to, or for the account or benefit of, persons in the United States or U.S. Persons, or be deemed to represent and warrant that no offers or sales of the Offered Shares were made to, or for the account or benefit of, persons in the United States or U.S. Persons by such persons.
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10.
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Each Subscriber will be informed that the Offered Shares have not been and will not be registered under the U.S. Securities Act and are being offered by the Agent through its U.S. Affiliate and sold by the Corporation to such Subscriber in reliance on an exemption from the registration requirements of the U.S. Securities Act.
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11.
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None of the Agent, its U.S. Affiliate or any person acting on any of their behalf has engaged or will engage in any violation of Regulation M under the U.S. Exchange Act in connection with the offering of Offered Shares contemplated hereby.
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EXHIBIT I TO SCHEDULE b
(TERMS AND CONDITIONS OF U.S. SALES)
FORM OF AGENT’S CERTIFICATE
In connection with the offer and sale
to, or for the account or benefit of, persons in the United States and U.S. Persons of class A shares (collectively, the “Class
A Shares”) of Field Trip Psychedelics Inc. (the “Corporation”) pursuant to an agency agreement (the “Agency
Agreement”) effective as of [·], 2020
between the Corporation and the Agents named in the Agency Agreement, [·] (the “Agent”)
and [·] (the “U.S. Affiliate”), the U.S. broker-dealer affiliate of
the Agent, hereby certify as follows:
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(i)
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on the date hereof and on the date of each offer, solicitation of an offer, or sale, of Class A Shares to, or for the account or benefit of, a person in the United States or a U.S. Person by the undersigned, the U.S. Affiliate is and was: (A) a duly registered broker-dealer with the United States Securities and Exchange Commission and under the laws of each state where offers and sales of Class A Shares were made (unless exempted therefrom); and (B) a member of and in good standing with the Financial Industry Regulatory Authority, Inc.;
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(ii)
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all offers of Class A Shares for sale by the Corporation to, or for the account or benefit of, persons in the United States and U.S. Persons have been and will be effected and arranged by the U.S. Affiliate in accordance with all applicable U.S. federal and state broker-dealer requirements;
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(iii)
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immediately prior to offering or soliciting offers for the Class A Shares to or from offerees that were, or were acting for the account or benefit of, persons in the United States or U.S. Persons, we had reasonable grounds to believe, and did believe, that each such offeree was a U.S. Accredited Investor, and, on the date hereof, we continue to believe that each such person purchasing Class A Shares from the Corporation is a U.S. Accredited Investor;
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(iv)
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no form of “general solicitation” or “general advertising” (as those terms are used in Regulation D under the U.S. Securities Act) was used by us, including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or the internet, or broadcast over radio or television or the internet, or any seminar or meeting whose attendees had been invited by general solicitation or general advertising, in connection with the offer or sale of the Class A Shares to, or for the account or benefit of, persons in the United States and U.S. Persons;
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(v)
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no Directed Selling Efforts were made by us in the United States in connection with the offer or sale of Class A Shares;
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(vi)
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the offers and solicitations of offers of the Class A Shares to, or for the account or benefit of, persons in the United States and U.S. Persons have been conducted by us in accordance with the terms of the Agency Agreement; and
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(vii)
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in connection with each sale of Class A Shares to, or for the account or benefit of, a person in the United States or a U.S. Person, we caused each such Subscriber to execute and deliver to the Corporation a Subscription Agreement, including all applicable schedules thereto.
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Terms used in this certificate have the meanings given to them in the Agency Agreement unless otherwise defined herein.
Dated this ____ day of ____________, 2020.
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[INSERT NAME OF AGENT]
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[INSERT NAME OF U.S. AFFILIATE]
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By:
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By:
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Name:
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Name:
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Title:
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Title:
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SCHEDULE “C”
RESTRICTIVE LEGENDS
All Offered Shares, Penalty Shares, Corporate Finance Shares and Agents’ Warrant Certificates (and if the Agents’ Warrants are exercised before the date that is four months and one day after the distribution date of the Agents’ Warrants, the certificates representing the Agents’ Warrant Shares) shall be subject to the following restrictions on trading and certificates representing any of the foregoing may bear the following legends:
“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) DATE OF DISTRIBUTION OF THE SECURITIES AND (II) THE DATE THE CORPORATION BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.”
“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR UNDER ANY OTHER APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED EXCEPT (A) PURSUANT TO A REGISTRATION STATEMENT EFFECTIVE UNDER THE U.S. SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER. HEDGING TRANSACTIONS INVOLVING SUCH SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE U.S. SECURITIES ACT.”
“THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF AN AGREEMENT ENTERED INTO AMONG THE CORPORATION AND THE SHAREHOLDERS THEREOF, WHICH AGREEMENT CONTAINS RESTRICTIONS ON THE RIGHT TO TRANSFER, PLEDGE OR OTHERWISE DEAL WITH SUCH SECURITIES. NOTICE OF SUCH RESTRICTIONS AND THE OTHER PROVISIONS OF SUCH AGREEMENT IS HEREBY GIVEN.”
Exhibit 99.37
FORM 62-103F1
EARLY WARNING REPORT
Item 1 - Security and Reporting Issuer
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1.1
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State the designation of securities to which this report relates and the name and address of the head office of the issuer of the securities.
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The
designation of securities to which this report relates is common shares (“Common Shares”) of Field Trip Health
Ltd., (formerly Newton Energy Corporation, the “Company”).
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The address of the head office of the Company is:
30 Duncan Street
Suite 401
Toronto, Ontario
M5V 2C3
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1.2
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State the name of the market in which the transaction or other occurrence that triggered the requirement to file this report took place.
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The transaction triggering the requirement to file this report was the acquisition of Common Shares from treasury of the Company pursuant to the Amalgamation (as defined herein).
Item 2 - Identity of the Acquiror
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2.1
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State the name and address of the acquiror.
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2360203 Ontario Limited, a holding company beneficially owned by Joseph del Moral (“Joseph”)
30 Duncan Street
Suite 401
Toronto, Ontario
M5V 2C3
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2.2
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State the date of the transaction or other occurrence that triggered the requirement to file this report and briefly describe the transaction or other occurrence.
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On
October 1, 2020, the Company completed the acquisition of Field Trip Psychedelics Inc. (“FTP”)
effected via a “three-cornered amalgamation” of FTP with a wholly-owned subsidiary of the Company
(the “Amalgamation”). On closing of the Amalgamation, the Company acquired of all of the issued
and outstanding securities of FTP in exchange for the issuance to FTP shareholders of Common Shares. As consideration
for its securities in FTP, Joseph was issued 5,517,026 Common Shares.
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2.3
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State the names of any joint actors.
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Not applicable.
Item 3 - Interest in Securities of the Reporting Issuer
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3.1
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State the designation and number or principal amount of securities acquired or disposed of that triggered the requirement to file the report and the change in the acquiror’s securityholding percentage in the class of securities.
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On October 1, 2020, Joseph acquired 5,517,026 Common Shares, which represents approximately 14.59% of the issued and outstanding Common Shares.
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3.2
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State whether the acquiror acquired or disposed ownership of, or acquired or ceased to have control over, the securities that triggered the requirement to file the report.
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Joseph acquired the securities that triggered the requirement to file the report from treasury.
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3.3
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If the transaction involved a securities lending arrangement, state that fact.
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Not applicable.
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3.4
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State the designation and number or principal amount of securities and the acquiror’s securityholding percentage in the class of securities, immediately before and after the transaction or other occurrence that triggered the requirement to file this report.
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Immediately prior to the transaction that gave rise to the obligation to file this report, Joseph did not have beneficial ownership of, or control or direction over, any Common Shares. Immediately following the transaction that gave rise to the obligation to file this report, Joseph has beneficial ownership of and exercises control or direction over 5,517,026 Common Shares, representing approximately 14.59% of the issued and outstanding Common Shares (on the basis of 37,802,992 Common Shares issued and outstanding as of the date hereof).
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3.5
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State the designation and number or principal amount of securities and the acquiror’s securityholding percentage in the class of securities referred to in Item 3.4 over which
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(a)
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the acquiror, either alone or together with any joint actors, has ownership and control,
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Joseph beneficially owns and exercises control and direction over the Common Shares referred to in Item 3.4.
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(b)
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the acquiror, either alone or together with any joint actors, has ownership but control is held by persons or companies other than the acquiror or any joint actor, and
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Not applicable.
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(c)
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the acquiror, either alone or together with any joint actors, has exclusive or shared control but does not have ownership.
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Not applicable.
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3.6
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If the acquiror or any of its joint actors has an interest in, or right or obligation associated with, a related financial instrument involving a security of the class of securities in respect of which disclosure is required under this item, describe the material terms of the related financial instrument and its impact on the acquiror’s securityholdings.
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Not applicable.
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3.7
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If the acquiror or any of its joint actors is a party to a securities lending arrangement involving a security of the class of securities in respect of which disclosure is required under this item, describe the material terms of the arrangement including the duration of the arrangement, the number or principal amount of securities involved and any right to recall the securities or identical securities that have been transferred or lent under the arrangement.
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Not applicable.
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3.8
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If the acquiror or any of its joint actors is a party to an agreement, arrangement or understanding that has the effect of altering, directly or indirectly, the acquiror’s economic exposure to the security of the class of securities to which this report relates, describe the material terms of the agreement, arrangement or understanding.
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Not applicable.
Item 4 - Consideration Paid
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4.1
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State the value, in Canadian dollars, of any consideration paid or received per security and in total.
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The securities were issued for the non-cash consideration described in Item 2.2.
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4.2
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In the case of a transaction or other occurrence that did not take place on a stock exchange or other market that represents a published market for the securities, including an issuance from treasury, disclose the nature and value, in Canadian dollars, of the consideration paid or received by the acquiror.
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The securities were issued for the non-cash consideration described in Item 2.2.
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4.3
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If the securities were acquired or disposed of other than by purchase or sale, describe the method of acquisition or disposition.
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Not applicable.
Item 5 - Purpose of the Transaction
State the purpose or purposes of the acquiror and any joint actors for the acquisition or disposition of securities of the reporting issuer. Describe any plans or future intentions which the acquiror and any joint actors may have which relate to or would result in any of the following: (a) the acquisition of additional securities of the reporting issuer, or the disposition of securities of the reporting issuer; (b) a corporate transaction, such as a merger, reorganization or liquidation, involving the reporting issuer or any of its subsidiaries; (c) a sale or transfer of a material amount of the assets of the reporting issuer or any of its subsidiaries;(d) a change in the board of directors or management of the reporting issuer, including any plans or intentions to change the number or term of directors or to fill any existing vacancy on the board; (e) a material change in the present capitalization or dividend policy of the reporting issuer; (f) a material change in the reporting issuer’s business or corporate structure; (g) a change in the reporting issuer’s charter, bylaws or similar instruments or another action which might impede the acquisition of control of the reporting issuer by any person or company; (h) a class of securities of the reporting issuer being delisted from, or ceasing to be authorized to be quoted on, a marketplace; (i) the issuer ceasing to be a reporting issuer in any jurisdiction of Canada; (j) a solicitation of proxies from securityholders; (k) an action similar to any of those enumerated above.
Joseph acquired the Common Shares for investment purposes. Joseph may acquire or dispose of additional securities of the Company in the future through the market, privately, or otherwise, as circumstances or market conditions warrant. Any transaction that Joseph may pursue may be made at any time and from time to time without prior notice and will depend on a variety of factors, including, without limitation, the price and availability of the Company’s securities, subsequent developments affecting the Company, its business and prospects, other investment and business opportunities available to Joseph, general industry and economic conditions, the securities markets in general, tax considerations and other factors deemed relevant by Joseph.
Item 6 - Agreements, Arrangements, Commitments or Understandings With Respect to Securities of the Reporting Issuer
Describe the material terms of any agreements, arrangements, commitments or understandings between the acquiror and a joint actor and among those persons and any person with respect to securities of the class of securities to which this report relates, including but not limited to the transfer or the voting of any of the securities, finder’s fees, joint ventures, loan or option arrangements, guarantees of profits, division of profits or loss, or the giving or withholding of proxies. Include such information for any of the securities that are pledged or otherwise subject to a contingency, the occurrence of which would give another person voting power or investment power over such securities, except that disclosure of standard default and similar provisions contained in loan agreements need not be included.
Not applicable.
Item 7 - Change in material fact
If applicable, describe any change in a material fact set out in a previous report filed by the acquiror under the early warning requirements or Part 4 in respect of the reporting issuer’s securities.
Not applicable.
Item 8 - Exemption
If the acquiror relies on an exemption from requirements in securities legislation applicable to formal bids for the transaction, state the exemption being relied on and describe the facts supporting that reliance.
Not applicable.
Item 9 - Certification
I, as the acquiror, certify, or I, as the agent filing the report on behalf of an acquiror, certify to the best of my knowledge, information and belief, that the statements made in this report are true and complete in every respect.
Dated as of the 2nd day of October, 2020.
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2360203 ONTARIO LIMITED
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Per:
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(signed) Joseph del Moral
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Name: Joseph del Moral
Title: President
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Exhibit 99.39
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NEWTON
ENERGY CORPORATION 8th Floor, 100 University Avenue Toronto, Ontario M5J 2Y1 www.computershare.com Security Class Holder Account
Number Fold This Form of Proxy is solicited by and on behalf of Management. Notes to proxy 1. Every holder has the right to appoint
some other person or company of their choice, who need not be a holder, to attend and act on their behalf at the meeting or any adjournment
or postponement thereof. If you wish to appoint a person or company other than the persons whose names are printed herein, please
insert the name of your chosen proxyholder in the space provided (see reverse). 2. If the securities are registered in the name of
more than one owner (for example, joint ownership, trustees, executors, etc.), then all those registered should sign this proxy.
If you are voting on behalf of a corporation or another individual you must sign this proxy with signing capacity stated, and you
may be required to provide documentation evidencing your power to sign this proxy. 3. This proxy should be signed in the exact manner
as the name(s) appear(s) on the proxy. 4. If this proxy is not dated, it will be deemed to bear the date on which it is mailed by
Management to the holder. 5. The securities represented by this proxy will be voted as directed by the holder, however, if such a
direction is not made in respect of any matter, this proxy will be voted as recommended by Management. 6. The securities represented
by this proxy will be voted in favour or withheld from voting or voted against each of the matters described herein, as applicable,
in accordance with the instructions of the holder, on any ballot that may be called for and, if the holder has specified a choice
with respect to any matter to be acted on, the securities will be voted accordingly. 7. This proxy confers discretionary authority
in respect of amendments or variations to matters identified in the Notice of Meeting or other matters that may properly come before
the meeting or any adjournment or postponement thereof. 8. This proxy should be read in conjunction with the accompanying documentation
provided by Management including the management information circular dated August 21, 2020 (the “Circular”). Capitalized
terms used but not otherwise defined shall have the meanings ascribed thereto in the Circular. Proxies submitted must be received
by 10:00 AM, M.D.T, on Monday, September 21, 2020. Fold VOTE USING THE TELEPHONE OR INTERNET 24 HOURS A DAY 7 DAYS A WEEK! To Vote
Using the Telephone To Vote Using the Internet • Call the number listed BELOW from a touch tone telephone. 1-866-732-VOTE (8683)
Toll Free • Go to the following web site: www.investorvote.com Smartphone? Scan the QR code to vote now. • If you vote
by telephone or the Internet, DO NOT mail back this proxy. Voting by mail may be the only method for securities held in the name
of a corporation or securities being voted on behalf of another individual. Voting by mail or by Internet are the only methods by
which a holder may appoint a person as proxyholder other than the Management nominees named on the reverse of this proxy. Instead
of mailing this proxy, you may choose one of the two voting methods outlined above to vote this proxy. To vote by telephone or the
Internet, you will need to provide your CONTROL NUMBER listed below. CONTROL NUMBER 01N34B Form of Proxy - Annual General and Special
Meeting to be held on Wednesday, September 23, 2020
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Appointment
of Proxyholder I/We being shareholder(s) of Newton Energy Corporation hereby appoint(s): Gino DeMichele, President, Chief Executive
Officer and Director, or failing him, V.E. Dale Burstall, Director Print the name of the person you are appointing if this person
is someone other than the Management Nominees listed herein. OR as my/our proxyholder with full power of substitution and to attend,
act and to vote for and on behalf of the shareholder in accordance with the following direction (or if no directions have been given,
as the proxyholder sees fit) and all other matters that may properly come before the Annual General and Special Meeting of shareholders
of Newton Energy Corporation to be held at Suite 1600 Dome Tower, 333 - 7th Avenue SW, Calgary, Alberta T2P 2Z1 on Wednesday, September
23, 2020 at 10:00 AM (M.D.T) and at any adjournment or postponement thereof. VOTING RECOMMENDATIONS ARE INDICATED BY HIGHLIGHTED
TEXT OVER THE BOXES. Against 1. Number of Directors - To fix: at three the number of directors to be elected at the Meeting, to hold
office until the earlier of (i) completion of the Transaction and (ii) the close of the next annual meeting of Shareholders or until
their successors are duly elected or appointed pursuant to the by-laws of the Corporation, unless their offices are earlier vacated
in accordance with the provisions of the ABCA or the Corporation’s by-laws; and at seven the number of directors to be elected
at the Meeting, to hold office, subject to completion of the Transaction, from completion of the Transaction until the close of the
next annual meeting of Shareholders or until their successors are duly elected or appointed pursuant to the by-laws of the Corporation,
unless their offices are earlier vacated in accordance with the provisions of the ABCA or the Corporation’s by-laws. 2. Election
of Directors - To elect the following Newton Nominees as directors of the Corporation to hold office until the earlier of (i) completion
of the Transaction and (ii) the close of the next annual meeting of Shareholders or until their successors are duly elected or appointed
pursuant to the by-laws of the Corporation, unless their offices are earlier vacated in accordance with the provisions of the ABCA
or the Corporation’s by-laws. Withhold Withhold Withhold 01. Fram Moos 02. V.E. Dale Burstall 03. Gino DeMichele 3. Election
of Directors - To elect the following Field Trip Nominees as directors of the Corporation, subject to completion of the Transaction,
to hold office from completion of the Transaction until the close of the next annual meeting of Shareholders or until their successors
are duly elected or appointed pursuant to the by-laws of the Corporation, unless their offices are earlier vacated in accordance
with the provisions of the ABCA or the Corporation’s by-laws. Fold Withhold Withhold Withhold 01. Joseph del Moral 02. Ronan
Levy 03. Hannan Fleiman 04. Mujeeb Jafferi 05. Dr. Ryan Yermus 06. Helen M. Boudreau 07. Dieter Weinand Withhold 4. Appointment of
Auditors - To appoint DeVisser Gray LLP as the auditor of the Corporation until the earlier of the close of the next annual meeting
of shareholders of the Corporation, or their resignation or replacement, and to authorize the directors of the Corporation to fix
the auditors’ remuneration. Against Against 5. Name Change - To consider and, if deemed appropriate, to pass, with or without
variation, a special resolution authorizing the amendment of the articles of the Corporation to effect the change of the Corporation’s
name to “Field Trip Health Ltd.”, or such other name as the Board, in its sole discretion, deems appropriate or as may
be required or permitted by applicable regulatory authorities, as more particularly described in the Circular. 8. Listing Transfer
to CSE - To consider and, if deemed appropriate, to pass, with or without variation, an ordinary resolution approving the de-listing
of the Common Shares of the Corporation from the NEX Board of the TSX Venture Exchange, as more particularly described in the Circular.
9. Amendment to By-Laws - To consider, and, if deemed advisable, to 6. Consolidation - To consider and, if deemed appropriate, to
pass, with or without variation, a special resolution authorizing a consolidation of the outstanding Common Shares of the Corporation,
as more particularly described in the Circular. Fold pass, with or without variation, an ordinary resolution approving the adoption
of an amended and restated by-law of the Corporation, as more particularly described in the Circular. 10. Continuance of the Corporation
- To consider, and, if deemed advisable, to pass, with or without variation, a special resolution approving the continuance of the
Corporation to the Canada Business Corporations Act, as more particularly described in the Circular. 7. Approval of Stock Option
Plan - To consider, and, if deemed advisable, to pass, with or without variation, an ordinary resolution approving the option plan
of the Corporation, as more particularly described in the Circular. Signature(s) Date Authorized Signature(s) – This section
must be completed for your instructions to be executed. I/We authorize you to act in accordance with my/our instructions set out
above. I/We hereby revoke any proxy previously given with respect to the Meeting. If no voting instructions are indicated above,
this Proxy will be voted as recommended by Management. MM / DD / YY Interim Financial Statements – Mark this box if you would
like to receive Interim Financial Statements and accompanying Management’s Discussion and Analysis by mail. Annual Financial
Statements – Mark this box if you would NOT like to receive the Annual Financial Statements and accompanying Management’s
Discussion and Analysis by mail. If you are not mailing back your proxy, you may register online to receive the above financial report(s)
by mail at www.computershare.com/mailinglist. N W E Q 01N35C 303910 A R 2 For For For For For For For For For For
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Exhibit
99.40
NEWTON ENERGY CORPORATION
NOTICE OF ANNUAL GENERAL AND
SPECIAL MEETING OF SHAREHOLDERS
AND
MANAGEMENT INFORMATION CIRCULAR
FOR
THE ANNUAL GENERAL AND SPECIAL
SHAREHOLDERS MEETING TO BE HELD ON
SEPTEMBER 23, 2020
AUGUST 21, 2020
This
management information circular and the accompanying materials require your immediate attention. If you are in doubt as to how to deal
with these documents or the matters to which they refer, please consult your financial, legal, tax or other professional advisor.
NEWTON ENERGY CORPORATION
1600, 333 - 7th
Avenue SW
Calgary, AB
T2P 2Z1
NOTICE OF ANNUAL GENERAL
AND SPECIAL MEETING OF SHAREHOLDERS
TAKE
NOTICE that the annual general and special meeting (the “Meeting”) of holders (“Shareholders”)
of common shares (the “Common Shares”) in the capital of Newton Energy Corporation (the “Corporation”)
will be held at the offices of Burstall LLP, Suite 1600 Dome Tower, 333 7th Avenue S.W. Calgary, Alberta and broadcast via teleconference
at 1-866-806-8616, conference code 2014361726 on September 23, 2020 at 10:00 A.M. (Calgary time), as it may be postponed or adjourned.
Accompanying
this Notice are materials delivered in connection with the Meeting including:
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·
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the
management information circular of the Corporation, dated August 21, 2020 (the “Circular”);
and
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The
Corporation and Newton Energy Subco Limited (“Subco”), a wholly-owned subsidiary of the Corporation, have entered
into an amalgamation agreement dated August 21, 2020 with Field Trip Psychedelics Inc. (“Field Trip”) in respect of
a proposed business combination with Field Trip (the “Transaction”). The Transaction does not require Shareholder
approval. However, the Transaction is very important to the Corporation and certain matters to be considered at the Meeting are necessary
in order to prepare the Corporation to complete the Transaction. All references herein to the “Resulting Issuer” refer
to the Corporation after completion of the Transaction.
The
Meeting will be for the following purposes:
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1.
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to receive the audited consolidated financial statements
for the Corporation as at and for the financial years ended December 31, 2019, 2018 and 2017, and the
auditor’s reports thereon;
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2.
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to fix the number of directors of the Corporation
to be elected at the Meeting as more particularly described in the Circular;
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3.
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to elect the directors of the Corporation as more particularly described
in the Circular;
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4.
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to appoint DeVisser Gray LLP as the auditor of the Corporation until the
earlier of the close of the next annual meeting of shareholders of the Corporation or their earlier resignation
or replacement, and to authorize the directors of the Corporation to fix the auditors’ remuneration;
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5.
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to consider and, if deemed appropriate, to pass, with or without variation,
a special resolution authorizing the amendment of the articles of the Corporation to effect the change
of the Corporation’s name to “Field Trip Health Ltd.”, or such other name as the board
of directors, in its sole discretion, deems appropriate or as may be required or permitted by applicable
regulatory authorities;
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6.
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to consider and, if deemed appropriate, to pass, with or without variation,
a special resolution authorizing a consolidation of the outstanding Common Shares of the Corporation (the“Consolidation”)
on the basis of one post-Consolidation Common Share for every eight pre- Consolidation Common Shares that
are outstanding prior to the effective date;
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7.
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to consider, and, if deemed advisable, to pass, with or without variation,
an ordinary resolution approving the option plan of the Corporation;
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8.
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to consider and, if deemed appropriate, to pass, with or without variation,
an ordinary resolution approving the de-listing of the Common Shares of the Corporation from the NEX Board
of the TSX Venture Exchange;
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9.
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to consider, and, if deemed advisable, to pass, with or without variation,
an ordinary resolution approving the adoption of an amended and restated By-law Number 2;
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10.
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to consider, and, if deemed advisable, to pass, with or without variation,
a special resolution approving the continuance of the Corporation from the Business Corporations Act
(Alberta) to the Canada Business Corporations Act and the adoption of a new general by-law
(which will include, among other things, advance notice provisions); and
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11.
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to transact such other business as may properly
come before the Meeting or any adjournment thereof.
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The
full text of resolutions in respect of special business can be found in the Circular.
If
you are a Shareholder of record of the Corporation at the close of business on August 19, 2020, you are entitled to receive notice of,
participate in, and vote at the Meeting. We encourage you to vote your Common Shares and participate in the Meeting.
Due
to the ongoing concerns related to the spread of the coronavirus (COVID-19) and in order to protect the health and safety of Shareholders,
employees, other stakeholders and the community, Shareholders are strongly encouraged to listen to the Meeting via teleconference
instead of attending the Meeting in person and to vote on the matters before the Meeting by proxy.
We
ask that Shareholders also review and follow the instructions of any health authorities of Canada, the Province of Alberta, the City
of Calgary and any other place you must travel through to attend the Meeting. Please do not attend the Meeting in person if you are experiencing
any cold or flu-like symptoms, or if you or someone with whom you have been in close contact has travelled to or from outside of Canada
within the 14 days immediately prior to the Meeting or any adjournment thereof. All Shareholders are strongly encouraged to vote by submitting
their completed form of proxy (or voting instruction form) prior to the Meeting by one of the means described in the Circular accompanying
this Notice.
The
Corporation reserves the right to take any additional precautionary measures deemed to be appropriate, necessary or advisable in relation
to the Meeting in response to further developments in the COVID-19 pandemic and in order to ensure compliance with federal, provincial
and local laws and orders including, without limitation: (i) holding the Meeting virtually or by providing a webcast of the Meeting;
(ii) hosting the Meeting solely by means of remote communication; (iii) changing the Meeting date and/or changing the means of holding
the Meeting; (iv) denying access to persons who exhibit cold or flu-like symptoms, or who have, or have been in close contact with someone
who has, travelled to or from outside of Canada within the 14 days immediately prior to the Meeting or any adjournment thereof; and (v)
such other measures as may be recommended by public health authorities in connection with gatherings of persons such as the Meeting.
Should any such changes to the Meeting format occur, the Corporation will announce any and all of these changes by way of news release,
which will be filed under the Corporation’s profile on SEDAR at www.sedar.com. We strongly recommend that you review the Corporation’s
profile on SEDAR at www.sedar.com prior to the Meeting for the most current information. In the event of any changes to the Meeting format
due to the COVID-19 pandemic, the Corporation will not prepare or mail amended materials in respect of the Meeting.
The
Board has approved the contents of the Circular. Please review the Circular, as it contains important information about the Meeting,
the items of business, and explains who can vote and how to vote.
DATED
August 21, 2020.
BY
ORDER OF THE BOARD
(signed)
“Gino DeMichele”
Gino DeMichele
Chief
Executive Officer and Director
Newton
Energy Corporation
TABLE OF CONTENTS
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Details about the Meeting
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1
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Meeting Date, Time and Location
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1
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Participation at the Meeting
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2
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General Proxy Information
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2
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Who is Seeking my Vote?
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2
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Who can Vote?
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3
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How to Vote
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3
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Changing Your Vote
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4
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Advance Notice Requirement
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5
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Cautionary Statement Regarding Forward- Looking Information
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5
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Business Combination with Field Trip
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7
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Voting Securities and Principal Holders of Voting Securities
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9
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Votes Necessary to Pass Resolutions
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9
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Financial Statements
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10
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Statement of Corporate Governance Practices 10 Corporate Governance
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10
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Board of Directors
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10
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Audit Committee
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13
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Statement of Executive Compensation
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14
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Compensation Discussion and Analysis
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14
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Summary Compensation Table for Named Executive Officers
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16
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Narrative Description of Named Executive Officer Compensation
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17
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Outstanding Option-Based Awards and Share-Based Awards for Named Executive Officers
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17
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Incentive Award Plans
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18
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Pension Plan Benefits
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18
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Termination and Change of Control Benefits and Management Contracts
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18
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Compensation of Directors
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19
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Securities Authorized for Issuance under Equity Compensation Plans
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21
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Indebtedness of Directors and Executive Officers
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21
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Interest of Informed Persons in Material Transactions
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21
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Interest of Certain Persons in Matters to be Acted Upon
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21
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Particulars of Matters to be Acted Upon
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22
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Audited Financial Statements
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22
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Number of Directors
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22
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Election of Directors
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22
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Appointment of Auditor
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29
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Name Change
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29
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Consolidation.
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30
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Approval of Stock Option Plan
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32
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Listing Transfer to CSE
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34
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Amendment to By-Laws
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35
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Continuance
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37
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Indication of Officer and Directors
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45
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Additional Information
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45
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Other Matters
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45
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Appendices
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Appendix “A”
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–
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Audit Committee Charter
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Appendix “B”
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–
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Newton Option Plan
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Appendix “C”
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–
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Amended and Restated By-law
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Appendix “D”
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–
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Post-Continuance By-laws
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Appendix “E”
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–
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Section 191 of the Business Corporations Act (Alberta)
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NEWTON ENERGY CORPORATION
1600, 333 - 7th
Avenue SW
Calgary, AB
T2P 2Z1
MANAGEMENT INFORMATION
CIRCULAR AS AT AUGUST 21, 2020
This
management information circular (the “Circular”) is furnished in connection with the solicitation of proxies by management
(“Management”) of Newton Energy Corporation (the “Corporation” or “Newton”)
for use at the annual general and special meeting (the “Meeting”) of the holders (the “Shareholders”)
of common shares of the Corporation (the “Common Shares”) to be held at the offices of Burstall LLP, Suite 1600 Dome
Tower, 333 7th Avenue S.W. Calgary, Alberta and will be broadcast via teleconference at 1-866-806-8616, conference code 2014361726 on
September 23, 2020 at 10:00 A.M. (Calgary time), as it may be postponed or adjourned, for the purposes set forth in the accompanying
notice of the Meeting (the “Notice”).
In
this Circular, references to “we” and “our” refer to Newton Energy Corporation. References to “intermediaries”
refer to brokers, investment firms, clearing houses and similar entities that own securities on behalf of Shareholders.
No
person has been authorized to give any information or make any representation in connection with any matters to be considered at the
Meeting other than those contained in this Circular and, if given or made, any such information or representation must not be relied
upon as having been authorized. Information contained in this Circular is given as at August 21, 2020, unless otherwise stated and all
dollar amounts are expressed in Canadian dollars.
DETAILS ABOUT THE MEETING
Shareholder
participation at the Meeting is important to the Corporation.
Due
to the ongoing concerns related to the spread of the coronavirus (COVID-19) and in order to protect the health and safety of Shareholders,
employees, other stakeholders and the community, Shareholders are strongly encouraged to listen to the Meeting via teleconference
instead of attending the Meeting in person and to vote on the matters before the Meeting by proxy.
The
following sections provide detailed information about the Meeting and how Shareholders can participate in the Meeting and vote their
Common Shares.
Meeting
Date, Time and Location
The
Meeting will be held at the offices of Burstall LLP, Suite 1600 Dome Tower, 333 7th Avenue S.W. Calgary, Alberta and will be broadcast
via teleconference at 1-866-806-8616, conference code 2014361726 on September 23, 2020 at 10:00 A.M. (Calgary time).
We
ask that Shareholders also review and follow the instructions of any health authorities of Canada, the Province of Alberta, the City
of Calgary and any other place you must travel through to attend the Meeting. Please do not attend the Meeting in person if you are experiencing
any cold or flu-like symptoms, or if you or someone with whom you have been in close contact has travelled to or from outside of Canada
within the 14 days immediately prior to the Meeting or any adjournment thereof. All Shareholders are strongly encouraged to vote by submitting
their completed form of proxy (or voting instruction form) prior to the Meeting by one of the means described in this Circular.
The
Corporation reserves the right to take any additional precautionary measures deemed to be appropriate, necessary or advisable in relation
to the Meeting in response to further developments in the COVID-19 pandemic and in order to ensure compliance with federal, provincial
and local laws and orders including, without limitation: (i) holding the Meeting virtually or by providing a webcast of the Meeting;
(ii) hosting the Meeting solely by means of remote communication; (iii) changing the Meeting date and/or changing the means of holding
the Meeting; (iv) denying access to persons who exhibit cold or flu-like symptoms, or who have, or have been in close contact with someone
who has, travelled to or from outside of Canada within the 14 days immediately prior to the Meeting or any adjournment thereof; and (v)
such other measures as may be recommended by public health authorities in connection with gatherings of persons such as the Meeting.
Should any such changes to the Meeting format occur, the Corporation will announce any and all of these changes by way of news release,
which will be filed under the Corporation’s profile on SEDAR at www.sedar.com. We strongly recommend that you review the Corporation’s
profile on SEDAR at www.sedar.com prior to the Meeting for the most current information. In the event of any changes to the Meeting format
due to the COVID-19 pandemic, the Corporation will not prepare or mail amended materials in respect of the Meeting.
Please
note that you will not be able to vote via teleconference. If you intend to listen to the Meeting via teleconference you must vote by
proxy prior to the Meeting. See “General Proxy Information – How to Vote“.
Participation
at the Meeting
The
procedures for participation at the Meeting are different for a Shareholder whose name appears on the Corporation’s records as
a Shareholder (a “Registered Shareholder”) and a non-registered Shareholder whose Common Shares are registered in
the name of a nominee, such as a bank, trust company, securities broker or other intermediary (a “Beneficial Shareholder”).
Registered
Shareholders
Registered
Shareholders may vote in person at the Meeting, as described below under “General Proxy Information – How to Vote –
Registered Shareholders“.
Beneficial
Shareholders
A
Beneficial Shareholder that would like to vote at the Meeting must appoint themselves as a proxyholder, as described below under “General
Proxy Information – How to Vote – Beneficial Shareholders“. Beneficial Shareholders who have not appointed themselves
as proxyholders will be able to participate as a guest but will not be able to vote or ask questions at the Meeting.
GENERAL PROXY INFORMATION
Who
is Seeking my Vote?
Management
is soliciting proxies from Shareholders for the Meeting. The costs incurred in the preparation and mailing of the form of proxy, Notice
and this Circular will be borne by the Corporation. In addition to solicitation by mail, proxies may be solicited by personal interviews,
telephone or other means of communication and by directors, officers and employees of the Corporation, who will not be specifically remunerated
therefor.
Who
can Vote?
Shareholders
at the close of business on August 19, 2020 (the “Record Date”) are entitled to receive notice of, and to vote at,
the Meeting. To the extent a Shareholder transfers the ownership of any of their Common Shares after the Record Date and the transferee
of those Common Shares establishes that they own such Common Shares and request, at least ten days before the Meeting, to be included
in the list of Shareholders eligible to vote at the Meeting, such transferee will be entitled to vote those Common Shares at the Meeting.
A
quorum will be present at the Meeting if there are at least two persons present together holding or representing by proxy at least 10%
of the total number of votes attaching to the issued Common Shares with voting rights at the Meeting.
How
to Vote
The procedures
for voting are different for a Registered Shareholder and a Beneficial Shareholder.
Registered
Shareholders
A
Registered Shareholder may vote in person at the Meeting or by proxy or they may appoint another person, who does not have to be a Shareholder,
as their proxy to attend in person and vote in their place. The persons named in the enclosed form of proxy are directors and/or officers
of the Corporation.
Each
Registered Shareholder submitting a proxy has the right to appoint a proxyholder other than the persons designated in the form of proxy
furnished by the Corporation, who need not be a Shareholder, to attend and act for the Registered Shareholder and on the Registered Shareholder’s
behalf at the Meeting. To exercise such right, the names of the persons designated by Management should be crossed out and the name
of the Registered Shareholder’s appointee should be legibly printed in the blank space provided in the enclosed form of proxy or
by submitting another appropriate form of proxy.
Registered
shareholders can vote by proxy in one of three ways:
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call 1-866-732-VOTE (8683)
toll-free and follow the instructions. Registered Shareholders will need to enter their 15-digit
control number (located on the bottom left corner of the first page of the proxy form that
was sent to them) to identify themselves as a Registered Shareholder on the telephone voting
system;
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·
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go to www.investorvote.com.
Registered Shareholders will need to enter their 15-digit control number (located on the
bottom left corner of the first page of the proxy form that was sent to them) to identify
themselves as a Registered Shareholder on the voting website; or
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·
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complete the proxy form
that was sent to them, sign and date it and return to: Computershare Trust Company of Canada,
8th floor, 100 University Avenue, Toronto, Ontario, M5J 2Y1 (Attention: Proxy Department).
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Computershare
must receive completed proxy forms not less than 48 hours, excluding Saturdays, Sundays and statutory holidays in the Province of Alberta,
before the time set for the holding of the Meeting or any adjournment(s) thereof.
All
Common Shares represented at the Meeting by properly completed forms of proxy will be voted or withheld from voting in accordance with
the specifications of the Registered Shareholder contained in the proxy. In the absence of such specification, such Common Shares
will be voted in favour of the matters set forth in the Circular. All Common Shares represented at the Meeting will be voted or withheld
from voting in accordance with the instructions of the Shareholder on any ballot that may be called. The form of proxy confers discretionary
authority upon the persons named therein with respect to amendments or variations to matters identified in the Notice and with respect
to other matters which may properly come before the Meeting or any adjournment(s) thereof. At the time of printing this Circular, Management
knows of no such amendments, variations or other matters to come before the Meeting.
Beneficial
Shareholders
The
majority of the Common Shares are held by Beneficial Shareholders. Most intermediaries delegate responsibility for obtaining voting instructions
from their clients to Broadridge Financial Solutions Inc. (“Broadridge”). Broadridge typically mails a scannable voting
instruction form (the “Voting Instruction Form”) in lieu of the form of proxy provided by the Corporation.
Beneficial
Shareholders can vote by proxy in the following ways:
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complete and return the
Voting Instruction Form to Broadridge;
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call the toll-free telephone
number (1-800-474-7493); or
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access
Broadridge’s dedicated voting website at www.proxyvote.com to deliver their voting
instructions.
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Broadridge
will tabulate the results of all instructions received and provide appropriate instructions respecting the voting of Common Shares to
be represented at the Meeting. The Voting Instruction Form must be returned as directed by Broadridge well in advance of the Meeting
in order to have the Common Shares voted. Beneficial Shareholders cannot use the Voting Instruction Form to vote Common Shares directly
at the Meeting.
If
you received voting materials from a company other than Broadridge, you need to complete and return the form following the instructions
they have provided.
If
the Beneficial Shareholder wishes to vote their Common Shares at the Meeting, it must do so as proxyholder for the Registered Shareholder.
To do this, the Beneficial Shareholder should enter their name in the blank space on the Voting Instruction Form provided and return
the same to their broker or other intermediary (or the agent of such broker or other intermediary) in accordance with the instructions
provided by such broker, intermediary or agent well in advance of the Meeting.
Changing
Your Vote
Registered
Shareholders can revoke their previously submitted proxy form by voting at the Meeting. That will automatically revoke their previous
proxy (but will not affect a matter on which a vote is taken before such revocation). In addition, a proxy may be revoked by instrument
in writing executed by the Registered Shareholder or their attorney authorized in writing or, if the Registered Shareholder is a corporation,
under its corporate seal and by a director, officer or attorney thereof duly authorized, and deposited either: (i) at the offices of
the Corporation’s transfer agent, Computershare Trust Company of Canada, 8th floor, 100 University Avenue, Toronto, Ontario, M5J
2Y1 (Attention: Proxy Department) not less than 48 hours, excluding Saturdays, Sundays and statutory holidays in the Province of Alberta,
before the time set for the holding of the Meeting or any adjournment(s) thereof; or (ii) at the head office of the Corporation at any
time up to and including the last business day preceding the day of the Meeting, or any adjournment thereof, at which the proxy is to
be used.
Beneficial
Shareholders may revoke their previously submitted voting instructions by contacting their intermediary.
Advance
Notice Requirement
The
Corporation’s by-laws include an advance notice requirement relating to the nomination of directors (the “Advance Notice
Requirement”) designed to facilitate an orderly and efficient director nomination process by ensuring that all Shareholders
receive adequate notice of director nominations and sufficient information in respect of all nominees so that the proposed nominees’
qualifications and suitability as directors can be evaluated and an informed vote cast for the election of directors. The Advance Notice
Requirement is intended to provide Shareholders, the Board of Directors and the Corporation with a clear framework for nominating directors
and sets certain deadlines before each Shareholder meeting for a Shareholder to notify the Corporation of its intention to nominate one
or more directors.
For
the purposes of the Meeting, to be valid under the Advance Notice Requirement, notice must be received not less than 30 days prior to
the date of the Meeting, provided that if the Meeting is to be held on a date that is less than 50 days after the date of the first public
announcement of the date of the Meeting, notice must be received not later than the 10th day following the date of the first public announcement
of the Meeting.
The
Corporation’s by-laws set out the information that must be included in or that must accompany the nominating shareholder’s
notice. The Board of Directors may, in its sole discretion, waive any provision under the Advance Notice Requirement.
The
entirety of the Advance Notice Requirement is set out in Corporation’s By-law No. 3 (the “Advance Notice By-law”),
which is available on the Corporation’s SEDAR profile at www.sedar.com.
Cautionary
Statement Regarding Forward-Looking Information
This
Circular contains certain statements or disclosures that may constitute forward-looking information within the meaning of applicable
Canadian securities legislation (“forward-looking information”). All statements and disclosures, other than those
of historical fact, which address activities, events, outcomes, results or developments that Management anticipates or expects may or
will occur in the future (in whole or in part) should be considered forward-looking information. In some cases, forward-looking information
can be identified by terms such as “anticipate”, “believe”, “can”, “could”, “expect”,
“intend”, “may”, “potential”, “shall”, “should”, “will”, “would”,
or other comparable terminology.
Various
assumptions or factors are typically applied in drawing conclusions or making the forecasts or projections set out in forward-looking
information. Those assumptions and factors are based on information currently available to the Corporation, including information obtained
from third-party industry analysts and other third party sources. In some instances, material assumptions and factors are presented or
discussed elsewhere in this Circular in connection with the statements or disclosure containing the forward-looking information. You
are cautioned that the following list of material factors and assumptions is not exhaustive. The factors and assumptions include, but
are not limited to:
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receipt
of required shareholder and regulatory approvals in a timely manner or at all;
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receipt
and/or maintenance of required licenses and third party consents in a timely manner or at
all; and
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the
success of the operations of the Resulting Issuer.
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In
particular, this Circular contains forward-looking information and statements, including forward- looking information and statements
pertaining to the following:
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the Transaction (as defined
herein);
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·
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the Resulting Issuer (as
defined herein);
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the Listing Statement (as
defined herein);
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Nominees (as defined herein);
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the business of the Meeting;
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the auditor of the Resulting
Issuer;
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effect of the Consolidation
(as defined herein);
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the Corporation’s
incentive plans;
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De-listing and the Listing
Transfer (each as defined herein); and
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the Continuance (as defined
herein).
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The
forward-looking information in statements or disclosures in this Circular is based (in whole or in part) upon factors which may cause
actual results, performance or achievements of the Corporation to differ materially from those contemplated (whether expressly or by
implication) in the forward-looking information. Those factors are based on information currently available to the Corporation including
information obtained from third-party industry analysts and other third party sources. Actual results or outcomes may differ materially
from those predicted by such statements or disclosures. While the Corporation does not know what impact any of those differences may
have, the Corporation’s business, results of operations and financial condition may be materially adversely affected. Factors that
could cause actual results or outcomes to differ materially from the results expressed or implied by forward- looking information include,
among other things:
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the availability of sources
of income to generate cash flow and revenue;
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the dependence on management
and directors;
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risks relating to the receipt
of the required licenses;
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risks relating to additional
funding requirements;
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potential transaction and
legal risks;
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risks
relating to laws and regulations applicable to companies operating in the psychedelics industry;
and
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·
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other factors beyond the
Issuer’s control as more particularly described in Newton’s management’s
discussion and analysis and other documents filed with Canadian securities regulators and
available under Newton’s profile at www.sedar.com.
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The
forward-looking statements contained in this Circular are made as of the date hereof. The Corporation is not obligated to update or revise
any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable
law. Because of the risks, uncertainties and assumptions contained herein, investors should not place undue reliance on forward- looking
statements or disclosures. The foregoing statements expressly qualify any forward-looking information contained herein.
The
reader is further cautioned that the preparation of financial statements in accordance with International Financial Reporting Standards
(“IFRS”) requires Management to make certain judgments and estimates that affect the reported amounts of assets, liabilities,
revenues and expenses. These estimates may change and such changes may be material, having either a negative or positive effect on net
earnings as further information becomes available, and as the economic environment changes.
Shareholders
are cautioned that these factors and risks are difficult to predict and that the assumptions used in the preparation of such information,
although considered reasonably accurate at the time of preparation, may prove to be incorrect. Accordingly, Shareholders are cautioned
that the actual results achieved will vary from the information provided herein and the variations may be material. The Corporation cautions
you that the above list of factors is not exhaustive. Consequently, there is no representation by the Corporation that actual results
achieved will be the same in whole or in part as those set out in the forward-looking information. Other factors which could cause actual
results, performance or achievements of the Corporation to differ materially from those contemplated (whether expressly or by implication)
in the forward-looking statements or other forward-looking information will be disclosed in the Listing Statement (as defined below).
BUSINESS COMBINATION
WITH FIELD TRIP
The
Corporation and Newton Energy Subco Limited (“Subco”), a wholly-owned subsidiary of the Corporation, have entered
into an amalgamation agreement dated August 21, 2020 (the “Amalgamation Agreement”) with Field Trip Psychedelics Inc.
(“Field Trip”) in respect of a proposed business combination with Field Trip (the “Transaction”).
The Transaction will proceed by way of a “three- cornered” amalgamation, pursuant to which:
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·
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Subco and Field Trip will
amalgamate and the resulting entity (“Amalco”) will become a wholly- owned
subsidiary of the Corporation; and
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holders of shares of Field
Trip will become shareholders of the Corporation.
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All
references herein to the “Resulting Issuer” refer to the Corporation after completion of the Transaction.
Field
Trip was incorporated pursuant to the provisions of the Canada Business Corporations Act on April 2, 2019. Field Trip is redefining
mental health and wellness with ground-breaking work in psychedelics and psychedelic therapies. Through its Field Trip Health centres
opening across North America, that provide best-in-class psychedelic-therapies, and drug development and advanced research on plant-based
psychedelics through Field Trip Discovery, its newly formed drug development division, Field Trip’s goal is to help those in treatment
and those seeking accelerated personal growth with a simple, evidence- based way to heal and heighten engagement with the world.
Pursuant
to the Amalgamation Agreement, the holders of common shares of Field Trip (“Field Trip Shares”) will receive Common
Shares in exchange for their Field Trip Shares at a ratio of one post- Consolidation Common Share for each Field Trip Share held. Following
the completion of the Transaction, all of Field Trip’s outstanding options and other securities exercisable or exchangeable for,
or convertible into, and any other rights to acquire Field Trip Shares will be exchanged for securities exercisable for, exchangeable
for or convertible into, or other rights to acquire, Common Shares on economically equivalent terms.
On
August 14, 2020 Field Trip completed brokered and non-brokered private placements of 5,516,724 Field Trip Shares at a price of $2.00
per Field Trip Share, for aggregate gross proceeds of $11,033,448. It is expected that approximately 35,590,954 Common Shares will be
issued to the shareholders of Field Trip as consideration for 100% of the issued and outstanding Field Trip Shares. As a result, upon
completion of the Transaction, the securityholders of Field Trip are expected to own approximately 97.8% of the Common Shares, on an
undiluted basis.
Upon
the completion of the Transaction, it is anticipated that the executive officers of the Resulting Issuer will be:
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Chief Executive Officer
– Joseph del Moral;
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Executive Chairman –
Ronan Levy;
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President of Health Care
Practice – Hannan Fleiman;
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President & Chief Operating
Officer – Mujeeb Jafferi
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Chief Financial Officer
(interim) – Tyler Dyck; and
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Chief Clinical Officer
– Dr. Ryan Yermus.
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Subject
to Shareholder approval, it is anticipated that the directors of the Resulting Issuer will be the nominees set out under “Particulars
of Matters to be Acted Upon – Election of Directors – Field Trip Nominees”.
Please
see the comprehensive press release issued by the Corporation upon the execution of the Amalgamation Agreement. Full details regarding
Field Trip and the Transaction will be disclosed by the Corporation in a listing statement (the “Listing Statement”)
to be prepared and filed in accordance with the policies of the Canadian Securities Exchange (“CSE”). The Listing
Statement will be posted on SEDAR at www.sedar.com in connection with the completion of the Transaction.
The
Transaction does not require Shareholder approval. However, the Transaction is very important to the Corporation and certain matters
to be considered at the Meeting are necessary in order to prepare the Corporation to complete the Transaction. Failure to approve the
corresponding resolutions could impede or prevent the completion of the Transaction.
Completion
of the Transaction will be subject to the closing conditions set forth in the Amalgamation Agreement, which include the approval of the
listing of the Common Shares of the Resulting Issuer on the CSE, the approval of the Transaction by shareholders of Field Trip, and certain
standard closing conditions, including there being no material adverse change in the business of Newton or Field Trip prior to completion
of the Transaction.
Subject to
receipt of all approvals, the Transaction is expected to close in September 2020.
VOTING SECURITIES AND
PRINCIPAL HOLDERS OF VOTING SECURITIES
The
authorized capital of the Corporation consists of an unlimited number of Common Shares. As of the date of this Circular, 6,361,047 Common
Shares were issued and outstanding, each Common Share carrying one vote in respect of each matter to be voted upon at a meeting of Shareholders.
As
at the Record Date, to the knowledge of the Corporation, no person owns, directly or indirectly, or exercises control or direction over,
Common Shares carrying more than 10% of the voting rights attached to all outstanding Common Shares of the Corporation except as outlined
below.
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Shareholder Name
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Number of Held
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Common Shares
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Percentage of
Common Shares
Held(1)
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Ron Schmeichel
|
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1,133,333
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(2)
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17.82
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%
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James Eaton
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850,000
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(3)
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13.36
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%
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Kevin Taylor
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850,000
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(4)
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13.36
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%
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Gino DeMichele
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797,773
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(5)
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12.54
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%
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Elena Masters
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666,667
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(6)
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10.48
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%
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Notes:
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(1)
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Calculated based on the number of issued
and outstanding Common Shares as of the date of this Circular.
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(2)
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666,667 Common Shares held by JJR Capital
Holdings Inc., a corporation controlled by Mr. Schmeichel.
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(3)
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850,000 Common Shares held by 2464344
Ontario Inc., a corporation controlled by Mr. Eaton.
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(4)
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850,000 Common Shares held by Terei
International Inc., a corporation controlled by Mr. Taylor.
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(5)
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797,773 Common Shares held by A2 Capital
Management Inc., a corporation controlled by Mr. DeMichele.
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|
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(6)
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666,667 Common Shares held by 1921142
Ontario Inc., a corporation controlled by Ms. Masters.
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VOTES NECESSARY TO
PASS RESOLUTIONS
A simple
majority of affirmative votes cast at the Meeting is required to pass the resolutions described herein, except for:
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·
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the Name Change Resolution,
Consolidation Resolution and Continuance Resolution (each as defined below), each of which
must be approved by the affirmative vote of not less than two- thirds (2/3) of the votes
cast by the holders of Common Shares present in person or represented by proxy at the Meeting;
and
|
|
·
|
pursuant to the policies
of the NEX board of the TSX Venture Exchange (the “TSXV”), the De- listing
Resolution (as defined below) must be approved by (i) at least a majority of the votes cast
on the De-listing Resolution, and (ii) a simple majority of the votes cast on the De-listing
Resolution by Shareholders voting in person or by proxy other than votes attaching to Common
Shares beneficially owned by Non Arm’s Length Parties (as defined below). A “Non
Arm’s Length Party” is defined in TSXV Policy 1.1 – Interpretation
(“Policy 1.1”) as a Promoter, officer, director, other Insider or
Control Person of the Corporation and any Associates or Affiliates of any such persons; or
another entity or an Affiliate of that entity, if that entity or its Affiliate have the same
Promoter, officer, director, Insider or Control Person as the Corporation. The foregoing
capitalized terms are defined in Policy 1.1.
|
Subject
to the Advance Notice Requirement, if there are more nominees (each a “Nominee”) for election as directors or appointment
of the Corporation’s auditor than there are vacancies to fill, those Nominees receiving the greatest number of votes will be elected
or appointed, as the case may be, until all such vacancies have been filled.
FINANCIAL STATEMENTS
In
connection with the Meeting, Shareholders are encouraged to read the audited annual financial statements of the Corporation for the years
ended December 31, 2019, 2018 and 2017, the report of the auditor thereon and accompanying management’s discussion and analysis.
Copies of such documents may be obtained by a Shareholder upon request without charge from the Secretary of the Corporation. These documents
are also available on SEDAR, which can be accessed at www.sedar.com.
STATEMENT OF CORPORATE
GOVERNANCE PRACTICES
Corporate
Governance
Corporate
governance relates to the activities of the Corporation’s Board of Directors (the “Board”), the members of which
are elected by and are accountable to the Shareholders, and takes into account the role of the individual members of Management who are
appointed by the Board and charged with the day-to- day management of the Corporation. The Canadian Securities Administrators have published
National Instrument 58-101 – Disclosure of Corporate Governance Practices (“NI 58-101”), National Policy
58-201 – Corporate Governance Guidelines (“NP 58-201”) and National Instrument 52-110 – Audit
Committees (“NI 52-110”). These set out a series of guidelines and requirements for effective corporate governance
(collectively, the “Guidelines”). The Guidelines address matters such as the constitution and independence of corporate
boards, the functions to be performed by boards and their committees and the effectiveness and education of Board members. NI 58-101
requires reporting issuers to disclose on an annual basis their approach to corporate governance with reference to the Guidelines. Set
out below is a description of the Corporation’s approach to corporate governance in relation to the Guidelines.
Board
of Directors
The
Board is currently composed of three directors: Messrs. Gino DeMichele, Fram Moos and V.E. Dale Burstall. It is proposed that all three
of the current directors (the “Newton Nominees”) will be nominated at the Meeting to hold office until the earlier
of (i) completion of the Transaction and (ii) the close of the next annual meeting of Shareholders or until their successors are duly
elected or appointed pursuant to the by-laws of the Corporation, unless their offices are earlier vacated in accordance with the provisions
of the Business Corporations Act (Alberta) (“ABCA”) or the Corporation’s by-laws. In connection with
the Transaction, it is also proposed that Joseph del Moral, Ronan Levy, Hannan Fleiman, Mujeeb Jafferi, Ryan Yermus, Helen M. Boudreau
and Dieter Weinand (the “Field Trip Nominees”) will be nominated at the Meeting to hold office, subject to completion
of the Transaction, from completion of the Transaction until the close of the next annual meeting of Shareholders or until their successors
are duly elected or appointed pursuant to the by-laws of the Corporation, unless their offices are earlier vacated in accordance with
the provisions of the ABCA or the Corporation’s by-laws. In the event that the Transaction is not completed, the Field Trip Nominees
will not become directors of the Corporation.
NP 58-201 suggests that the Board of every reporting
issuer should be constituted with a majority of individuals who qualify as “independent” directors, within the meaning set
out under NI 52-110, which provides that a director is independent if he or she has no direct or indirect “material relationship”
with the company. “Material relationship” is defined as a relationship which could, in the view of the Board, be reasonably
expected to interfere with the exercise of a director’s independent judgment.
Mr. DeMichele is the Chief Executive Officer
of the Corporation and, accordingly, is not considered “independent”; and Mr. Burstall is considered to have a potentially
material relationship with the Corporation by virtue of his position as a partner of Burstall LLP, one of the law firms that provide
legal services to the Corporation. The remaining Newton Nominee, Mr. Moos, is considered “independent”, as he is free from
a direct or indirect material relationship with the Corporation, which could reasonably be expected to interfere with the exercise of
his independent judgment as director. The basis for this determination is that, since the commencement of the Corporation’s fiscal
year ended December 31, 2019, Mr. Moos has not worked for the Corporation, received remuneration from the Corporation (other than in
his capacity as director) or had material contracts with or material interests in the Corporation which could interfere with his ability
to act in the Corporation’s best interests.
Of the Field Trip Nominees: Joseph del Moral,
Ronan Levy, Hannan Fleiman, Mujeeb Jafferi and Ryan Yermus are not considered “independent”. The remaining Field Trip Nominees,
Helen M. Boudreau and Dieter Weinand, are expected to be considered “independent,” as they will be free from a direct or
indirect material relationship with the Corporation, which could reasonably be expected to interfere with the exercise of their independent
judgment as directors. The basis for this determination is that, since the commencement of the Corporation’s fiscal year ended
December 31, 2019, none of the expected independent Field Trip Nominees will have worked for the Corporation or Field Trip, received
remuneration from the Corporation or Field Trip (other than in their capacity as directors) or had material contracts with or material
interests in the Corporation or Field Trip which could interfere with their ability to act in the Corporation’s best interests.
The Board believes that it functions independently
of Management. To enhance its ability to act independently of Management, the members of the Board may meet without Management and the
non- independent directors. In the event of a conflict of interest at a meeting of the Board, the conflicted director will, in accordance
with corporate law and his or her fiduciary obligations as a director of the Corporation, disclose the nature and extent of his or her
interest to the meeting and abstain from voting on the matter at issue. In addition, the members of the Board who are not members of
Management are encouraged to obtain advice from external advisors and legal counsel as they may deem necessary in order to reach a conclusion
with respect to issues brought before the Board.
Directorships
The following table sets forth the directors of the Corporation and Field Trip Nominees who currently hold directorships
in other reporting issuers:
|
Name of Director
|
|
Other Issuer
|
|
V.E. Dale Burstall
|
|
Marksmen Energy Inc. (TSXV: MAH)
Composite Alliance Group Inc. (TSXV: CAG)
Big Dougie Capital Corp. (TSXV: STUV)
|
|
Gino DeMichele
|
|
GR Silver Mining Ltd. (TSXV: GRSL)
|
|
Helen M. Boudreau
|
|
Premier, Inc. (NASDAQ: PINC)
|
|
Joseph del Moral
|
|
Cherry Street Capital Inc. (TSXV: CHSC)
|
|
Dieter Weinand
|
|
Replimune Group Inc. (NASDAQ: REPL)
|
Directorships
The following table sets forth
the directors of the Corporation and Field Trip Nominees who currently hold directorships in other reporting issuers:
|
Name of Director
|
|
Other Issuer
|
|
V.E. Dale Burstall
|
|
Marksmen Energy Inc. (TSXV: MAH)
|
|
|
|
Composite Alliance Group Inc. (TSXV: CAG)
|
|
|
|
Big Dougie Capital Corp. (TSXV: STUV)
|
|
Gino DeMichele
|
|
GR Silver Mining Ltd. (TSXV: GRSL)
|
|
Helen M. Boudreau
|
|
Premier, Inc. (NASDAQ: PINC)
|
|
Joseph del Moral
|
|
Cherry Street Capital Inc. (TSXV: CHSC)
|
|
Dieter Weinand
|
|
Replimune Group Inc. (NASDAQ: REPL)
|
Orientation and Continuing Education
The Board has no formal orientation and education
program for new directors. When a new member joins the Board, he or she is provided with sufficient information to ensure he or she is
familiarized with the Corporation’s strategic plans, its significant financial, accounting and risk management issues and its principal
officers.
Ethical Business Conduct
The Board has adopted a written code of business
conduct and ethics, and encourages and promotes a culture of ethical business conduct (the “Code”). The Code establishes
the Corporation’s commitment to conducting business ethically and legally. The Code applies to all directors, officers, employees
and consultants. The Code makes specific reference to the maintenance of an ethical corporate climate and compliance with legal and regulatory
obligations.
Nomination of Directors
The Board considers its size each year when it
considers the number of directors to recommend to the Shareholders for election at the annual meeting of Shareholders, taking into account
the number required to carry out the Board’s duties effectively and to maintain a diversity of views and experience. There is no
set process for identifying new Board candidates, but a pool of candidates may be generated using the existing network of Management
or the Board members, a search firm, or any other method that the Board may choose.
Compensation
The Board has appointed the compensation and
governance committee (“Compensation Committee”). The Compensation Committee has a written mandate which establishes
the responsibilities of the Compensation Committee. The primary function of the Compensation Committee is to assist the Board in carrying
out its responsibilities by reviewing compensation and human resources issues in support of the achievement of the Corporation’s
business strategy and making recommendations to the Board as appropriate. In particular, the Compensation Committee is responsible for
reviewing and approving corporate goals and objectives relevant to Chief Executive Officer compensation, evaluating the Chief Executive
Officer’s performance against those goals and objectives and making recommendations to the Board with respect to the Chief Executive
Officer’s compensation. The Compensation Committee also approves and reports to the Board on the compensation for the Corporation’s
other senior officers. The Compensation Committee is comprised of Messrs. Moos, Burstall and DeMichele.
See “Particulars of Matters to be Acted
Upon – Election of Directors“ for a discussion of the relevant experience of the Compensation Committee members.
Other Board Committees
The Corporation has no standing committees at
this time, other than the Compensation Committee as discussed above and the Audit Committee as discussed below.
Assessment of Directors, the Board
and Board Committees
The Board monitors the adequacy of information
given to directors, communication between the Board and Management and the strategic direction and processes of the Board and committees.
Audit Committee
The audit committee (the “Audit Committee”)
is a committee of the Board established for the purpose of overseeing the accounting and financial reporting process of the Corporation
and annual external audits of the financial statements. The Audit Committee has set out its responsibilities and composition requirements
in fulfilling its oversight in relation to the Corporation’s internal accounting standards and practices, financial information,
accounting systems and procedures, which procedures are set out below in the Corporation’s audit committee mandate.
Audit Committee Charter
The Board has developed a written audit committee
charter (the “Charter”). A copy of the Charter is attached as Appendix “A” to this Circular.
Composition of the Audit Committee
The Audit Committee is comprised of Messrs. Moos,
Burstall and DeMichele. Mr. Moos is the chairman of the Audit Committee. Mr. DeMichele is the Chief Executive Officer of the Corporation
and, accordingly, is not considered “independent”; and Mr. Burstall is considered to have a potentially material relationship
with the Corporation by virtue of his position as a partner of Burstall LLP, one of the law firms that provide legal services to the
Corporation. Each member of the Audit Committee is financially literate within the meaning of NI 52-110.
It is anticipated that the Audit Committee of
the Resulting Issuer will be comprised of Helen M. Boudreau, Dieter Weinand and Mujeeb Jafferi, and the chair of the Audit Committee
of the Resulting Issuer will be Ms. Boudreau. It is anticipated that a majority of the members of the Audit Committee of the Resulting
Issuer will not be executive officers, employees or control persons of the Resulting Issuer or an affiliate thereof, and that all will
be financially literate within the meaning of NI 52-110.
Relevant Education and Experience
The relevant education and experience of the
members of the Audit Committee are described below. See “Election of Directors“.
Audit Committee Oversight
At no time since the commencement of the Corporation’s
most recently completed financial year, has a recommendation of the Audit Committee to nominate or compensate an external auditor not
been adopted by the Board.
External Auditor Service Fees
DeVisser Gray LLP are the auditors of the Corporation.
The following table provides information about the aggregate fees billed to the Corporation for professional services rendered by DeVisser
Gray LLP during the fiscal years ended December 31, 2019, 2018, 2017 and 2016, respectively.
|
|
|
December
31, 2019
|
|
|
December
31, 2018
|
|
|
December
31, 2017
|
|
|
December
31, 2016
|
|
|
Audit Fees(1)
|
|
$
|
7,000
|
|
|
$
|
7,000
|
|
|
$
|
7,000
|
|
|
$
|
7,000
|
|
|
Audit Related Fees(2)
|
|
|
Nil
|
|
|
|
Nil
|
|
|
|
Nil
|
|
|
|
Nil
|
|
|
Tax Fees(3)
|
|
$
|
1,000
|
|
|
$
|
1,000
|
|
|
$
|
1,000
|
|
|
$
|
1,000
|
|
|
All Other Fees
|
|
|
Nil
|
|
|
|
Nil
|
|
|
|
Nil
|
|
|
|
Nil
|
|
Notes:
|
|
(1)
|
Aggregate fees billed
for the Corporation’s annual financial statements and services normally provided by
the auditors in connection with the Corporation’s statutory and regulatory filings.
|
|
|
|
|
|
|
(2)
|
Aggregate
fees billed for assurance and related services that are reasonably related to the performance
of the audit or review of the Corporation’s financial statements and are not reported
as “Audit Fees”.
|
|
|
|
|
|
|
(3)
|
Aggregate fees billed for assistance with the
filing of tax returns.
|
Exemption
The Common Shares trade on the NEX board of the
TSXV. Accordingly, the Corporation is a “venture issuer” pursuant to NI 52-110 (its securities are not listed or quoted on
any of the Toronto Stock Exchange, a market in the U.S., or a market outside of Canada and the U.S.), and under section 6.1 of NI 52-110
it is exempt from the requirements of Part 3 (Composition of the Audit Committee) and Part 5 (Reporting Obligations) of NI 52-110.
Assessments
The Board has not adopted formal procedures for
assessing the effectiveness of the Board, its Audit Committee or individual directors.
STATEMENT OF EXECUTIVE
COMPENSATION
For the purpose of this section, a “CEO”
or “CFO” means each individual who served as Chief Executive Officer or Chief Financial Officer, respectively, of the Corporation
or acted in a similar capacity during the years ended December 31, 2019, 2018 and 2017. A “Named Executive Officer” or “NEO”
means each CEO; each CFO; each of the Corporation’s three most highly compensated executive officers, other than the CEO and CFO,
who were serving as executive officers at the end of the most recently completed financial year of the Corporation and whose total salary
and bonus exceeds $150,000; and any additional individuals (other than the CEO and CFO) for whom disclosure would have been provided
except that the individual was not serving as an officer of the Corporation at the end of the most recently completed financial year
end.
Compensation Discussion and Analysis
In assessing the compensation of its executive
officers, the Corporation does not have in place any formal objectives, criteria or analysis; instead, it relies mainly on discussions
between the Compensation Committee and the Board.
The Compensation Committee is currently comprised
of Messrs. Moos, Burstall and DeMichele of whom Mr. Moos is independent pursuant to NI 52-110. Mr. DeMichele is the Chief Executive Officer
of the Corporation and, accordingly, is not considered “independent”; and Mr. Burstall is considered to have a potentially
material relationship with the Corporation by virtue of his position as a partner of Burstall LLP, one of the law firms that provide
legal services to the Corporation. The Compensation Committee reviews all proposed agreements between executives and the Corporation
and provides recommendations to the Board. All members of the Compensation Committee are ineligible to participate in all of the Corporation’s
executive compensation and benefit programs, other than Mr. DeMichele. All of the members of the Compensation Committee are eligible
to receive options. The Compensation Committee determines the total compensation of the Chief Executive Officer and other executive officers
of the Corporation.
Meetings of the Compensation Committee are held periodically
to review compensation policies and to consider the overall compensation to be paid by the Corporation to its employees, executive officers
and directors. Following review of data and discussion by members of the Compensation Committee, recommendations are made to the Board.
In all cases, the Board has acted upon the Compensation Committee’s recommendations without modification in any material way.
One of the duties of the Chief Executive Officer
is to provide the Compensation Committee with compensation recommendations for each of the executives, other than himself, on an annual
basis. In making compensation recommendations, the Chief Executive Officer considers each executive’s performance and other relevant
factors, including the scope of each executive’s position and responsibilities, the achievement of corporate goals, the current
business environment and anticipated changes, and executive retention and recruitment considerations.
The Corporation’s executive compensation program
has three principal components: base salary, incentive bonus plan and stock options.
Risk and Compensation
The Corporation’s compensation program is designed
to provide executive officers incentives for the achievement of near-term and long-term objectives, without motivating them to take unnecessary
risk. As part of its review and discussion of executive compensation, the Compensation Committee assesses facts that discourage the Corporation’s
executives from taking unnecessary or excessive risk including:
|
|
·
|
the
Corporation’s operating strategy and related compensation philosophy;
|
|
|
·
|
the
effective balance, in each case, between cash and equity mix, near-term, and long-term focus,
corporate and individual performance, and financial and non-financial performance; and
|
|
|
·
|
that
the Corporation’s approach to performance evaluation and compensation provides greater
rewards to an executive officer achieving both short-term and long-term agreed upon objectives.
|
Based on this review, the Compensation Committee
believes that the Corporation’s total executive compensation program does not encourage executive officers to take unnecessary
or excessive risk.
Base Salary
The base salary element is designed to establish
a target compensation level of fixed income based on the market value of each position. Additionally, the base salary is the metric upon
which bonus and severance compensation is based. In establishing base salaries, the Compensation Committee reviews general market salary
levels for individuals in positions with similar responsibilities and experience. Generally, the Compensation Committee targets base
salaries at levels approximating those holding similar positions in comparably sized companies in the industry and hopes to achieve targeted
total compensation levels through the fixed and variable components. Comparable corporations are chosen based on their being in the industry
and having a comparable asset base and/or revenues in a particular financial year. Comparable positions are identified based on publicly
available information on such corporations. The Compensation Committee reviews base salaries annually and makes adjustments as reasonably
necessary to allow base salary to continue to serve its purposes as a retention device and as the building block for other cash compensation.
Bonus
Incentive bonuses, in the form of cash payments,
are designed to add a variable component of compensation based on corporate and individual performance for executive officers. The bonus
plan is designed to provide an incentive to the NEOs to achieve and exceed goals relating to overall corporate and individual performance.
The Compensation Committee reviews and approves the incentive bonus plan. Given the phase of development of the Corporation, no bonuses
were paid to NEOs during the fiscal years ended December 31, 2019, 2018 or 2017.
Option-Based Awards
Stock options are granted to provide an incentive
to the directors, officers, employees and consultants of the Corporation to achieve the longer-term objectives of the Corporation. The
purpose of the Newton Option Plan (as defined below) is to give suitable recognition to the ability and industry of such persons who
contribute materially to the success of the Corporation and to attract and retain persons of experience and ability by providing them
with the opportunity to acquire an increased proprietary interest in the Corporation. Stock options are also used as a means to promote
the long-term retention of individuals. The Corporation awards stock options to its executive officers based upon the recommendation
of the Compensation Committee, which recommendation is based upon the committee’s review of proposals from the Chief Executive
Officer. Previous grants of incentive stock options are taken into account when considering new grants.
Implementation of a new incentive stock option plan
and amendments to the existing Plan are the responsibility of the Compensation Committee.
Summary Compensation Table for Named Executive
Officers
The following table provides a summary of total compensation
earned during the fiscal years ended December 31, 2019, 2018, 2017 and 2016 by the Corporation’s Named Executive Officers. The
Named Executive Officers of the Corporation for the purposes of this Circular are Messrs. DeMichele, Chow and Chia.
|
Name
and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Option-based
Awards
($)
|
|
All
Other
Comp.
($)
|
|
Total
Comp.
($)
|
Gino
DeMichele(2)
CEO
|
|
2019
|
|
Nil
|
|
43,547
|
|
Nil
|
|
43,547
|
|
|
|
2018
|
|
Nil
|
|
24,719
|
|
Nil
|
|
24,719
|
|
|
|
2017
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
|
|
2016
|
|
n/a
|
|
n/a
|
|
n/a
|
|
n/a
|
Jimmy
Chow
CFO
|
|
2019
|
|
24,000
|
|
6,532
|
|
Nil
|
|
30,532
|
|
|
|
2018
|
|
24,000
|
|
3,621
|
|
Nil
|
|
27,621
|
|
|
|
2017
|
|
33,000
|
|
Nil
|
|
Nil
|
|
33,000
|
|
|
|
2016
|
|
24,000
|
|
Nil
|
|
Nil
|
|
24,000
|
Merv
Chia(3)
Former CEO
|
|
2019
|
|
n/a
|
|
n/a
|
|
n/a
|
|
n/a
|
|
|
|
2018
|
|
n/a
|
|
n/a
|
|
n/a
|
|
n/a
|
|
|
|
2017
|
|
25,000
|
|
Nil
|
|
Nil
|
|
25,000
|
|
|
|
2016
|
|
60,000
|
|
Nil
|
|
Nil
|
|
60,000
|
Notes:
|
|
(1)
|
When the Corporation issues stock options,
it accounts for them using the fair value method for stock-based compensation as recommended
under IFRS. The fair value of options is determined by using the Black- Scholes Option Pricing
Model (which model is commonly used by junior public companies) with assumptions for risk-free
interest rates, dividend yields, volatility factors of the expected market price of the Common
Shares and expected life of the options.
|
|
|
|
|
|
|
(2)
|
Mr. DeMichele was
appointed to the Board and as President and Chief Executive Officer of the Corporation in
October 2017.
|
|
|
|
|
|
|
(3)
|
Mr. Chia resigned as Chief Executive Officer
and a director of the Corporation in October 2017.
|
Narrative Description of Named Executive
Officer Compensation
During the financial years ended December 2019,
2018 and 2017, a salary or fee was paid as compensation to the Named Executive Officers, and there was no other compensation awarded
other than option-based awards. See “Outstanding Option-Based Awards and Share-Based Awards for Named Executive Officers“.
Outstanding Option-Based Awards and Share-Based
Awards for Named Executive Officers
The table below reflects all option-based awards
for each Named Executive Officer outstanding as at December 31, 2019 (including option-based awards granted to a Named Executive Officer
before such fiscal year). The Corporation does not have any equity incentive plans other than its fixed stock option plan (the “Newton
Option Plan”) as hereinafter described, and did not have any share-based awards outstanding as at December 31, 2019.
|
Name and Principal
Position
|
|
Number of
Securities
Underlying
Unexercised
Options
|
|
Option
Exercise
Price
($/Common
Share)
|
|
Option
Expiration
Date
|
|
Value of
Unexercised
In-
the-Money
Options ($)(1)
|
Gino DeMichele
CEO
|
|
200,000
|
|
0.22
|
|
May 10, 2024
|
|
Nil
|
|
|
|
112,621
|
|
0.25
|
|
January 4, 2023
|
|
Nil
|
|
|
|
|
|
|
|
|
|
|
Jimmy Chow
CFO
|
|
30,000
|
|
0.22
|
|
May 10, 2024
|
|
Nil
|
|
|
|
16,500
|
|
0.25
|
|
January 4, 2023
|
|
Nil
|
Notes:
|
|
(1)
|
Value of unexercised options is equal
to the difference between the closing price of the Common Shares on the NEX board of the
TSXV on December 31, 2019 (being the last day of the Corporation’s most recently completed
financial year) of $0.14 and the exercise prices of options outstanding, multiplied by the
number of Common Shares available for purchase under such options.
|
Incentive Award Plans
The only incentive award plan of the Corporation
during the fiscal year ended December 31, 2019 was the Newton Option Plan. See “Particulars of Matters to be Acted Upon –
Approval of Stock Option Plan“ below for a description of the Newton Option Plan. The table below reflects the value vested
during the year ended December 31, 2019 for all option-based awards for each Named Executive Officer.
|
Name and Principal
Position
|
|
Value vested during
the year ($)
|
Gino DeMichele
CEO
|
|
43,547
|
Jimmy Chow
CFO
|
|
6,532
|
Pension Plan Benefits
The Corporation does not have a pension plan
that provides for payments or benefits at, following, or in connection with retirement. The Corporation does not have a defined contribution
plan.
Termination and Change of Control Benefits
and Management Contracts
Except as may otherwise be disclosed in this
Circular, there is no contract, agreement, plan or arrangement that provides for payments to a Named Executive Officer at, following
or in connection with any termination (whether voluntary, involuntary or constructive), resignation, retirement, a change of control
of the Corporation or a change in a Named Executive Officer’s responsibilities following a change of control.
Compensation of Directors
Individual Director Compensation
The following table provides a summary of the
compensation provided to the directors of the Corporation during the fiscal years ended December 31, 2019, 2018 and 2017. Except as otherwise
disclosed below, the Corporation did not pay any fees or compensation to directors for serving on the Board (or any committee) beyond
reimbursing such directors for travel and related expenses and the granting of stock options under the Newton Option Plan.
|
Name
|
|
Fiscal
Year
Ended
|
|
Fees
Earned
($)
|
|
Option-
Based
Awards(1)
($)
|
|
All
Other
Comp.
($)
|
|
Total
($)
|
|
V.E. Dale Burstall
|
|
2019
|
|
Nil
|
|
15,241
|
|
Nil
|
|
15,241
|
|
|
|
2018
|
|
Nil
|
|
3,622
|
|
Nil
|
|
3,622
|
|
|
|
2017
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Fram Moos
|
|
2019
|
|
4,500
|
|
21,774
|
|
Nil
|
|
26,274
|
|
|
|
2018
|
|
4,000
|
|
10,975
|
|
Nil
|
|
14,975
|
|
|
|
2017
|
|
6,000
|
|
Nil
|
|
Nil
|
|
6,000
|
|
Lorraine Stewart(2)
|
|
2019
|
|
n/a
|
|
n/a
|
|
n/a
|
|
n/a
|
|
|
|
2018
|
|
n/a
|
|
n/a
|
|
n/a
|
|
n/a
|
|
|
|
2017
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
Notes:
|
|
(1)
|
When the Corporation
issues stock options, it accounts for them using the fair value method for stock-based compensation
as recommended under IFRS. The fair value of options is determined by using the Black- Scholes
Option Pricing Model with assumptions for risk-free interest rates, dividend yields, volatility
factors of the expected market price of the Common Shares and expected life of the options.
|
|
|
|
|
|
|
(2)
|
Ms. Stewart resigned as a director of the Corporation
in October 2017.
|
The Corporation provides, at its
expense, insurance for the directors and officers as well as the directors and officers of the Corporation’s affiliates and subsidiaries.
The insurance is for liability incurred by any of them in their capacity as a director or officer of the Corporation. This insurance
policy provides coverage of up to $2,000,000 for the directors and officers of the Corporation in aggregate. Each loss or claim is subject
to a $25,000 retention pursuant to the specific type of claim. The by-laws of the Corporation and indemnification agreements also provide
indemnification of the directors and officers, subject to certain limitations. The most recent annual premium for the directors’
and officers’ liability policy was $8,140.
Director Outstanding
Option-Based Awards and Share-Based Awards
The table below reflects all option-based
awards for each director outstanding as at December 31, 2019 (including option-based awards granted to a director before such fiscal
year). The Corporation does not have any equity incentive plans other than the Newton Option Plan, and did not have any share-based awards
outstanding as at December 31, 2019.
Name and Principal
Position
|
|
Number
of
Securities
Underlying
Unexercised
Options
|
|
|
Option
Exercise
Price
($/ Security)
|
|
|
Option
Expiration Date
|
|
Value of
Unexercised In-
the- Money
Options($)(1)
|
|
V.E. Dale Burstall
|
|
|
70,000
|
|
|
$
|
0.22
|
|
|
May 10, 2024
|
|
Nil
|
|
|
|
|
16,500
|
|
|
$
|
0.25
|
|
|
January 4, 2023
|
|
Nil
|
|
Fram Moos
|
|
|
100,000
|
|
|
$
|
0.22
|
|
|
May 10, 2024
|
|
Nil
|
|
|
|
|
50,000
|
|
|
$
|
0.25
|
|
|
January 4, 2023
|
|
Nil
|
Notes:
|
|
(1)
|
Value of unexercised options is equal
to the difference between the closing price of the Common Shares on the NEX on December 31,
2019 (being the last day of the Corporation’s most recently completed financial year)
of $0.14 and the exercise prices of options outstanding, multiplied by the number of Common
Shares available for purchase under such options.
|
Incentive Award Plans
The only incentive award plan of the Corporation
during the fiscal year ended December 31, 2019 was the Newton Option Plan. See “Particulars of Matters to be Acted Upon –
Approval of Stock Option Plan“ below for a description of the Newton Option Plan. The table below reflects the value vested
during the year ended December 31, 2019 for all option-based awards for each director.
|
Name and Principal Position
|
|
Value vested during
the year ($)
|
|
|
V.E. Dale Burstall
|
|
|
15,241
|
|
|
Fram Moos
|
|
|
21,774
|
|
SECURITIES AUTHORIZED
FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table provides
information as of December 31, 2019 with respect to the Common Shares that may be issued under the Newton Option Plan.
|
Plan Category
|
|
Fiscal Year
Ended
|
|
Number
of
securities to be
issued upon exercise
of outstanding
options, warrants
and rights
(a)
|
|
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
|
|
|
Number of
securities
remaining
available for
future
issuance
under equity
compensation
plans
(excluding
securities
reflected in
column (a))
(c)
|
|
|
Equity compensation plans approved by Shareholders (the Newton Option
Plan)
|
|
December 31, 2019
|
|
|
633,121
|
|
|
$
|
0.275
|
|
|
|
2,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans not approved by
Shareholders
|
|
December 31, 2019
|
|
|
Nil
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
N/A
|
|
|
633,121
|
|
|
|
N/A
|
|
|
|
2,983
|
|
INDEBTEDNESS OF DIRECTORS
AND EXECUTIVE OFFICERS
Other than as disclosed
in this Circular (including in the financial statements of the Corporation for the fiscal years ended December 31, 2019, 2018 and 2017),
no directors, proposed Nominees for election as directors, executive officers or their respective associates or affiliates, or other
management of the Corporation are indebted to the Corporation as of the date hereof or were indebted to the Corporation at any time during
the fiscal year ended December 31, 2019, and no indebtedness of such individuals to another entity is the subject of a guarantee, support
agreement, letter of credit or other similar arrangement or understanding provided by the Corporation.
INTEREST OF INFORMED
PERSONS IN MATERIAL TRANSACTIONS
Management is not aware
of any material interest, direct or indirect, of any informed person of the Corporation, or any associate or affiliate of any such informed
person, in any transaction since January 1, 2017, or in any proposed transaction, that has materially affected or would materially affect
the Corporation or any of its subsidiaries.
INTEREST OF CERTAIN
PERSONS IN MATTERS TO BE ACTED UPON
No director or member of
Management of the Corporation or any associate of the foregoing has any material interest, direct or indirect, by way of beneficial ownership
of Common Shares or otherwise in the matters to be acted upon at the Meeting, other than the election of directors, except for any interest
arising from the ownership of Common Shares of the Corporation where the Shareholder will receive no extra or special benefit or advantage
not shared on a pro rata basis by all Shareholders.
PARTICULARS OF MATTERS
TO BE ACTED UPON
Audited Financial
Statements
The audited financial statements
of the Corporation for the financial years ended December 31, 2019, 2018 and 2017 and the report of the auditors thereon, will be submitted
to the Meeting, although no vote by the Shareholders with respect thereto is required or proposed to be taken.
Number of Directors
The Corporation’s
articles stipulate there shall be not more than 15 directors and not less than 3 directors. The Board is currently composed of three
directors. At the Meeting, the shareholders will be asked to consider and, if thought fit, to approve an ordinary resolution:
|
|
·
|
fixing
at three the number of directors to be elected at the Meeting, to hold office until the earlier
of (i) completion of the Transaction and (ii) the close of the next annual meeting of Shareholders
or until their successors are duly elected or appointed pursuant to the by-laws of the Corporation,
unless their offices are earlier vacated in accordance with the provisions of the ABCA or
the Corporation’s by-laws; and
|
|
|
·
|
fixing
at seven the number of directors to be elected at the Meeting, to hold office, subject to
completion of the Transaction, from completion of the Transaction until the close of the
next annual meeting of Shareholders or until their successors are duly elected or appointed
pursuant to the by-laws of the Corporation, unless their offices are earlier vacated in accordance
with the provisions of the ABCA or the Corporation’s by-laws.
|
Unless otherwise directed,
it is the intention of the persons designated in the accompanying form of proxy to vote IN FAVOUR of the ordinary resolution fixing the
number of directors to be elected at the Meeting as set out above.
Election of Directors
At the Meeting, Shareholders
will be asked to elect:
|
|
·
|
the
three Newton Nominees as directors of the Corporation to hold office until the earlier of
(i) completion of the Transaction and (ii) the close of the next annual meeting of Shareholders
or until their successors are duly elected or appointed pursuant to the by-laws of the Corporation,
unless their offices are earlier vacated in accordance with the provisions of the ABCA or
the Corporation’s by-laws; and
|
|
|
·
|
the
seven Field Trip Nominees as directors of the Corporation, subject to completion of the Transaction,
to hold office from completion of the Transaction until the close of the next annual meeting
of Shareholders or until their successors are duly elected or appointed pursuant to the by-
laws of the Corporation, unless their offices are earlier vacated in accordance with the
provisions of the ABCA or the Corporation’s by-laws.
|
In the event that the Transaction
is not completed, the Field Trip Nominees will not become directors of the Corporation. See “Statement of Corporate Governance
Practices – Board of Directors“.
Unless otherwise directed,
it is the intention of the persons named in the enclosed form of proxy to vote proxies IN FAVOUR of the election of the Newton Nominees
and Field Trip Nominees as directors of the Corporation as set out above.
Newton Nominees
The following table sets
forth a brief background regarding the Newton Nominees. The information contained herein is based upon information furnished by the respective
Newton Nominees.
Name of Nominee,
Current Position with
the Corporation, and
Province/State and
Country of Residence
|
|
Occupation, Business or
Employment
|
|
Director Since
|
|
|
Number
and
Percentage of
Common Shares
Beneficially Owned,
or Controlled or
Directed, Directly or
Indirectly
|
|
|
Gino DeMichele(1)(2)(3) Calgary, Alberta President,
Chief Executive Officer and Director
|
|
Chief Executive Officer of the Corporation from October 2017
to present. CEO and Director of Vogogo Inc., a company listed on the TSXV, from June 2016 to present. President, CEO, CFO, Secretary
and Director of Medicenna Therapeutics Corp (formerly A2 Acquisition Corp.) from May 2015 to March 2017. President and CEO of A2
Capital Management Inc. a private merchant banking and trading operation since April 2006.Until July 2013, an investment advisor,
most recently with Macquarie Private Wealth.
|
|
October 2, 2017
|
|
|
797,773
12.54
|
%
|
|
V.E. Dale Burstall(1)(2)(4) Calgary, Alberta Director
|
|
Partner at Burstall LLP since 1994.
|
|
February 11, 2013
|
|
|
183,223
2.88
|
%
|
|
Fram Moos(1)(2)(5) Calgary, Alberta Director
|
|
Director and President of Falcon Energy Inc., a private corporation,
since 1994.
|
|
February 11, 2013
|
|
|
225,000
3.54
|
%
|
Notes:
|
|
(1)
|
Member of the Audit Committee.
|
|
|
|
|
|
|
(2)
|
Member of the Compensation Committee.
|
|
|
|
|
|
|
(3)
|
Mr. DeMichele does
not own 797,773 Common Shares directly, but is, under applicable securities legislation,
deemed to beneficially own the Common Shares held by A2 Capital Management Inc., by reason
of control of A2 Management Inc.
|
|
|
|
|
|
|
(4)
|
Mr. Burstall does
not own 70,000 Common Shares directly, but is, under applicable securities legislation, deemed
to beneficially own the Common Shares held by Lost In Space, Inc., by reason of control of
Lost In Space, Inc. Mr. Burstall holds 86,500 options.
|
|
|
|
|
|
|
(5)
|
Mr. Moos holds 150,000 options.
|
Field Trip
Nominees
The following table sets
forth a brief background regarding the Field Trip Nominees, none of whom are currently directors of the Corporation, followed by additional
biographical information. The information contained herein is based upon information furnished by the respective Field Trip Nominees.
Name of Nominee,
Current Position with
the Corporation, and
Province/State and
Country of Residence
|
|
Occupation,
Business or
Employment
|
|
Director
of Field
Trip Since(1)
|
|
|
Number
and
Percentage of
Common Shares
Beneficially Owned,
or Controlled or
Directed, Directly or
Indirectly(2)
|
|
|
Joseph
del Moral
Toronto,
Ontario
|
|
Chief Executive Officer
of Field Trip
|
|
April 2019
|
|
|
5,267,026
14.48
|
(3)
%
|
|
Ronan
Levy
Toronto,
Ontario
|
|
Executive Chairman of
Field Trip
|
|
April 2019
|
|
|
3,517,027
9.67
|
(4)
%
|
|
Hannan
Fleiman
Toronto,
Ontario
|
|
President of Healthcare
of Field Trip
|
|
April 2019
|
|
|
3,580,915
9.84
|
(5)
%
|
|
Mujeeb
Jafferi
Toronto,
Ontario
|
|
President & Chief
Operating Officer of Field Trip
|
|
January 2020
|
|
|
3,622,582
9.96
|
%
|
|
Dr.
Ryan Yermus
Toronto,
Ontario
|
|
Chief Clinical Officer
of Field Trip
|
|
January 2020
|
|
|
3,655,915
10.5
|
(6)
%
|
|
Helen
M. Boudreau
Cambridge,
Massachusetts
|
|
Ms. Boudreau is a retired senior executive
with 30 years experience across biotech, pharmaceuticals, consulting and banking industries. She has worked in board environments, both
as a public company CFO and a board member. Ms. Boudreau was most recently COO of the Bill & Melinda Gates Medical Research Institute.
|
|
April 2020
|
|
|
Nil
|
(7)
|
|
Dieter
Weinand
Pompano
Beach, Florida
|
|
Mr. Weinand is an experienced executive with over 30 year of experience
in the pharmaceuticals and biotech industries. Mr. Weinand presently services as the Chairman of the Board of Directors of Replimune
Group Inc. (NASDAQ: REPL).
|
|
April 2020
|
|
|
Nil
|
(8)
|
Notes:
|
|
(1)
|
In
the event that the Transaction is not completed, the Field Trip Nominees will not become
directors of the Corporation. See “Statement of Corporate Governance Practices –
Board of Directors“.
|
|
|
|
|
|
|
(2)
|
Anticipated
percentage of Common Shares to be beneficially owned, or controlled or directed, directly
or indirectly, upon completion of the Transaction.
|
|
|
(3)
|
Mr.
del Moral does not own 5,267,026 Field Trip Shares directly, but is, under applicable securities
legislation, deemed to beneficially own the Field Trip Shares held by 2360203 Ontario Limited,
by reason of control of 2360203 Ontario Limited.
|
|
|
|
|
|
|
(4)
|
Mr.
Levy does not own 3,544,804 Field Trip Shares directly, but is, under applicable securities
legislation, deemed to beneficially own the Field Trip Shares held by Iron and Fuzz Holdings
Inc., by reason of control of Iron and Fuzz Holdings Inc.
|
|
|
|
|
|
|
(5)
|
Mr.
Fleiman does not own 3,655,915 Field Trip Shares directly, but is, under applicable securities
legislation, deemed to beneficially own the Field Trip Shares held by CRS Energy Inc., by
reason of control of CRS Energy Inc.
|
|
|
|
|
|
|
(6)
|
Dr.
Yermus does not own 3,655,915 Field Trip Shares directly, but is, under applicable securities
legislation, deemed to beneficially own the Field Trip Shares held by 2423450 Ontario Limited,
by reason of control of 2423450 Ontario Limited.
|
|
|
|
|
|
|
(7)
|
Ms.
Boudreau holds 100,000 options, each of which is exercisable into one Field Trip Share.
|
|
|
|
|
|
|
(8)
|
Mr.
Weinand holds 100,000 options, each of which is exercisable into one Field Trip Share.
|
Joseph del Moral, Director,
Age 42
Mr. del Moral is an experienced
entrepreneur and a founder of Field Trip. In 2014, he was the founder and CEO of CanvasRx Inc. and Canadian Cannabis Clinics, which grew
to be the largest cannabis clinic company in Canada. In 2016, CanvasRx was acquired by Aurora Cannabis Inc. (NYSE: ACB) (“Aurora”)
and he joined Aurora’s board of directors. During his time at Aurora, Mr. del Moral ensured that CanvasRx continued to grow and
achieve its milestones as well as assisted in corporate development, M&A and strategy. After leaving Aurora in 2018, Mr. del Moral
assumed the role of CEO of Trait Biosciences Inc., a leading biotech company in the hemp and cannabis industries. Prior to his time in
the cannabis industry, Mr. del Moral co-founded Newten Home Comfort, a fast growing home services company acquired by Just Energy Inc.
in 2009, and he is also on the board of directors of Felix Health, an innovative direct to consumer healthcare company that is changing
how Canadians access prescription drugs. Mr. del Moral holds a Bachelor of Commerce degree (Finance and Entrepreneurship) from McGill
University.
Ronan Levy, Director,
Age 41
Mr. Levy is an entrepreneur
and is a co-founder and Executive Chairman of Field Trip. Concurrent with his work at Field Trip, he is a partner at Grassfed Ventures,
a venture capital and advisory firm focused on the cannabis and biotech industries, and a member of the board of directors of Trait Biosciences
Inc., a leading biotech company in the hemp and cannabis industries. Prior to his current roles, Mr. Levy co- founded Canadian Cannabis
Clinics and CanvasRx Inc., which were acquired by Aurora in 2016, after which he served as Senior Vice President, Business and Corporate
Affairs, for Aurora. A lawyer by training, Mr. Levy started his career as a corporate lawyer at Blake, Cassels & Graydon LLP and
as legal counsel at CTVglobemedia Inc. (now Bell Media Inc.). Mr. Levy holds a Juris Doctor and a Bachelor of Commerce degree, both from
the University of Toronto.
Hannan Fleiman, Director,
Age 40
Mr. Fleiman is a serial
entrepreneur and has co-founded and operated several companies, including Field Trip, CanvasRx Inc., Canadian Cannabis Clinic and Dominion
Home Insulation. Prior to founding these companies, Mr. Fleiman managed the hospital department, animal health and OTC divisions at Teva
Canada. Mr. Fleiman is a board member of a MedicNL, a contract research organization, and was a board member of Abacus Health Products,
Inc., where he headed its audit and compensation committees, before the successful sale to Charlotte’s Web Holdings, Inc. (CSE:
CWEB). Mr. Fleiman earned his MBA from McMaster University and his Bachelor of Science degree from the University of Guelph.
Mujeeb Jafferi, Director,
Age 37
Mr. Jafferi is an experienced
management executive and a founder of Field Trip. Prior to joining Field Trip, Mr. Jafferi spent over a decade in the retail and renewable
energy sectors, in a variety of transformative leadership roles. Between 2016 and 2019, Mr. Jafferi served as the Vice President of Sales
Operations and Strategy at Just Energy Inc. (TSX: JE) and the President of Just Energy Solar. In 2015, Mr. Jafferi served as a Partner
at a renewable energy technology startup, LightWing Partners, leading its business development efforts across the US market. LightWing
Partners was subsequently acquired by SunEdison. Between 2009 and 2015, Mr. Jafferi held several progressive and diverse leadership roles
at Just Energy, including Director of Corporate Planning and Financial Analysis, and Asst. Regional General Manager for the US Northeast
region. He holds a BA in Information Technology degree from York University and a Global Professional Master of Laws degree from the
University of Toronto.
Dr. Ryan Yermus, Director,
Age 39
Dr. Yermus is a physician
who completed his medical training at the University of Ottawa in 2007 and his residency at the University of Toronto in 2009. As a pioneer
in the Canadian medical cannabis industry, he was responsible for the development of a clinical protocol that led to the treatment of
thousands of medical cannabis patients. In 2014, Dr. Yermus founded Medical Marijuana Clinics of Canada (“MMCC”),
the first fully compliant cannabis clinic in Ontario. MMCC went on to be acquired by Canadian Cannabis Clinics, which grew to become
the nation’s largest cannabis clinic network and was acquired by Aurora in 2016. For the past decade, Dr. Yermus has also worked
as a clinician, helping patients suffering from addictions.
Helen M. Boudreau, Director,
Age 54
Ms. Boudreau is a retired
senior executive, with 30 years’ experience across the biotech, pharmaceuticals, consulting and banking industries. She was most
recently COO of the Bill & Melinda Gates Medical Research Institute, a non-profit biotech company focused on diseases that cause
mortality, poverty and inequality in low and middle-income countries. Previously, she served as CFO for public and private biotech companies,
Proteostasis Therapeutics and FORMA Therapeutics. Ms. Boudreau spent 16 years at Novartis and Pfizer, serving in strategy and senior
finance roles, including Global CFO, Oncology Business Unit, CFO, US Corporate, VP Investor Relations, VP Finance, Customer Business
Unit and Commercial Operations, and VP Finance, Global R&D. She started her career in banking and was an engagement manager at McKinsey
& Company, a strategic consulting firm. Ms. Bourdreau is currently a member of the board of Premier, Inc. (NASDAQ: PINC), a healthcare
improvement company, and is also on the boards of two private biotech companies. Helen earned a BA in Economics, summa cum laude, from
the University of Maryland, and an MBA from the Darden Graduate School of Business at the University of Virginia.
Dieter Weinand, Director,
Age 59
Mr. Weinand is an experienced
executive with over 30 years of experience in the pharmaceuticals and biotech industries. Mr. Weinand presently serves as the Chairman
of the board of directors of Replimune Group Inc. (NASDAQ: REPL). Previously, Mr. Weinand served as the Executive Vice President of Primary
Care and was a member of the Executive Committee at Sanofi from November 1, 2018 to February 2020. Before moving to Sanofi, Mr. Weinand
was CEO and Chairman of the Board of Management of Bayer Pharma AG and member of the Management Board at Bayer AG. Prior to his work
at Sanofi and Bayer, Mr. Weinand has held various positions in commercial, operational and strategic areas of the pharmaceutical industry.
These included responsibilities spanning various therapeutic areas and geographies for companies such as Pfizer, Bristol Myers Squibb
and Otsuka. Mr. Weinand earned an MS in Pharmacology and Toxicology from Long Island University, New York, and a BA in Biology from Concordia
College, New York. Mr. Weinand is a former board member of the Pharmaceutical Research and Manufacturers of America (PhRMA), the European
Federation of Pharmaceutical Industries & Associations (EFPIA), and the International Federation of Pharmaceutical Manufacturers
(IFPMA), and served as a member of the board of directors of HealthPrize Technologies.
Orders, Penalties
and Bankruptcies
To the knowledge of the
Corporation, as of the date hereof, other than as disclosed herein, no Newton Nominee or Field Trip Nominee:
|
|
·
|
is,
or has been, within 10 years before the date hereof, a director, CEO or CFO of any company
(including the Corporation) that:
|
|
|
·
|
was
subject to an order that was issued while the proposed director was acting in the capacity
as director, CEO or CFO, or
|
|
|
·
|
was
subject to an order that was issued after the proposed director ceased to be a director,
CEO or CFO and which resulted from an event that occurred while that person was acting in
the capacity as director, CEO or CFO;
|
|
|
·
|
is,
or has been, within 10 years before the date hereof, a director or executive officer of any
company (including the Corporation) that, while such Nominee was acting in that capacity,
or within a year of such Nominee ceasing to act in that capacity, became bankrupt, made a
proposal under any legislation relating to bankruptcy or insolvency or was subject to or
instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver
manager or trustee appointed to hold its assets; or
|
|
|
·
|
has,
within 10 years before the date hereof, become bankrupt, made a proposal under any legislation
relating to bankruptcy or insolvency, or become subject to or instituted any proceedings,
arrangements or compromise with creditors, or had a receiver, receiver manager or trustee
appointed to hold the assets of such Nominee.
|
For the purposes of the
above section, the term “order” means:
|
|
·
|
a
cease trade order, including a management cease trade order;
|
|
|
|
|
|
|
·
|
an
order similar to a cease trade order; or
|
|
|
|
|
|
|
·
|
an
order that denied the relevant company access to any exemption under securities legislation,
that was in effect for a period of more than 30 consecutive days.
|
Mr. Burstall was a director
of Ranger Canyon Energy Inc. until September 27, 2011, which was cease traded by the Alberta Securities Commission on May 21, 2009 and
continues to be cease traded for failure to file financial statements, management discussion and analysis and certificates of annual
filings for the year ended December 31, 2008 and subsequent periods. On or about April 2, 2014, the Alberta Securities Commission cease
traded QSolar Limited (“QSolar”) based on the fact that the entire board of directors and all of the executive officers
resigned and QSolar discontinued operations. Pursuant to a court order dated on or about April 17, 2015, Mr. Burstall, along with three
other individuals, were appointed directors of QSolar in order to try to preserve the assets of QSolar. Mr. Burstall resigned as a director
of QSolar effective June 18, 2015. Mr. Burstall has been a director of CanAsia Financial Inc. (“CanAsia”) since March
25, 2015. On May 5, 2016, the Alberta Securities Commission and other securities commissions cease traded CanAsia for failing to file
annual audited financial statements, annual management’s discussion and analysis and certification of annual filings for the year
ended December 31, 2015 and subsequent periods. On September 27, 2017, the Alberta Securities Commission and other securities commissions
revoked CanAsia’s cease trade order.
To the knowledge of the
Corporation, as of the date hereof, no Newton Nominee or Field Trip Nominee has been subject to:
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any
penalties or sanctions imposed by a court relating to securities legislation or by a securities
regulatory authority or has entered into a settlement agreement with a securities regulatory
authority; or
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any
other penalties or sanctions imposed by a court or regulatory body,
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that would likely be considered
important to a reasonable Shareholder in deciding to vote for a proposed director.
Appointment of
Auditor
DeVisser Gray LLP of Vancouver,
British Columbia, the present auditor of the Corporation, was first appointed as such on October 10, 2014. Management recommends the
re-appointment of DeVisser Gray LLP as the auditor to hold office until the close of the next annual meeting of the Shareholders.
Field Trip has notified
the Corporation of its expectation that, in the event that the Transaction is completed, the Resulting Issuer’s fiscal year end
will be changed from December 31 to March 31, being Field Trip’s fiscal year end, and MNP LLP, being Field Trip’s auditors,
will be appointed as auditors of the Resulting Issuer.
The determination by the
Resulting Issuer to use MNP LLP as auditor of the Resulting Issuer in the event that the Transaction is completed is expected to be made
in the context of the Transaction and not because of any “reportable event” (as that term is defined in National Instrument
51-102 – Continuous Disclosure Obligations).
Unless otherwise directed
to the contrary, it is the intention of the persons named in the enclosed form of proxy to vote proxies IN FAVOUR of the appointment
of DeVisser Gray LLP as auditors of the Corporation at remuneration to be fixed by the Board.
Name Change
Upon
completion of the Transaction, the Corporation intends that the business of Field Trip will be the business of the Corporation. In connection
therewith, the Corporation wishes to change its name to “Field Trip Health Ltd.”, or such other name as the Board, in its
sole discretion, deems appropriate or as may be required or permitted by applicable regulatory authorities (the “Name Change”)
pursuant to subsection 173(1)(a) of the ABCA. The Board has determined that the Name Change is in the best interests of the Corporation
in order to reflect the change in its business activities.
The Shareholders will be
asked to consider and, if deemed appropriate, to pass, with or without variation, a special resolution authorizing the amendment of the
articles of the Corporation to effect the Name Change (the “Name Change Resolution”). To be effective, the Name Change
Resolution must be approved by the affirmative vote of not less than two-thirds (2/3) of the votes cast by the holders of Common Shares
present in person or by proxy at the Meeting.
Approval of the Name
Change is a condition to the completion of the Transaction. Failure to approve the Name Change Resolution could impede or prevent the
completion of the Transaction. Shareholders are urged to vote in favour of this special resolution. The
text of the Name Change Resolution is as follows:
“BE
IT RESOLVED as a special resolution of the Shareholders that:
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the articles of the Corporation be amended
to change the name of the Corporation to “Field Trip Health Ltd.” or such other
name as the Board, in its sole discretion, deems appropriate and the Registrar (as defined
in the ABCA) may permit;
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2.
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any one director or officer be and is hereby
authorized to send to the Registrar Articles of Amendment of the Corporation in the prescribed
form, and any one or more directors are hereby authorized to prepare, execute and file Articles
of Amendment in the prescribed form in order to give effect to this special resolution;
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3.
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any director or officer of the Corporation
is hereby authorized, empowered and instructed, acting for, in the name and on behalf of
Corporation, to execute or cause to be executed, under the seal of Corporation or otherwise,
and to deliver or to cause to be delivered, all such other documents and to do or to cause
to be done all such other acts and things as in such person’s opinion may be necessary
or desirable in order to carry out the intent of these resolutions and the matters authorized
hereby, such determination to be conclusively evidenced by the execution and delivery of
such document or the doing of such act or thing; and
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4.
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the directors of the Corporation are hereby
authorized and granted with absolute discretion and without further approval of the Shareholders,
to revoke and rescind the foregoing resolution before the issuance by the Registrar of a
certificate of amendment or articles in respect of such amendment.”
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The requisite regulatory
approvals for the Name Change, including the approvals of the TSXV, if required (or any other stock exchange on which the Common Shares
are listed), may not be sought by the Corporation until after the Board decides to implement the Name Change. There can be no assurance
that the applicable regulatory approvals for the Name Change will be obtained. The Name Change Resolution authorizes the Board not to
proceed with the Name Change, without further approval of the Shareholders, before the issuance by the Registrar of a certificate of
amendment or articles in respect of such amendment.
Unless otherwise directed
to the contrary, it is the intention of the persons named in the enclosed form of proxy to vote proxies IN FAVOUR of the Name Change
Resolution. The Board unanimously recommends that Shareholders vote for the Name Change Resolution.
Consolidation
In order to effect the
Transaction on the terms set out in the Amalgamation Agreement, the Shareholders will be asked to approve a special resolution approving
a consolidation of the outstanding Common Shares of the Corporation (the “Consolidation”) on the basis of one post-Consolidation
Common Share for every eight pre-Consolidation Common Shares that are outstanding prior to the effective date, pursuant to subsection
173(1)(f) of the ABCA.
The Shareholders will be
asked to consider and, if deemed appropriate, to pass, with or without variation, a special resolution authorizing the Consolidation
(the “Consolidation Resolution”). To be effective, the Consolidation Resolution must be approved by the affirmative
vote of not less than two-thirds (2/3) of the votes cast by the holders of Common Shares present in person or by proxy at the Meeting.
Approval of the Consolidation
is a condition to the completion of the Transaction. Failure to approve the Consolidation Resolution could impede or prevent the completion
of the Transaction. Shareholders are urged to vote in favour of this special resolution.
The text of the Consolidation
Resolution is as follows:
“BE
IT RESOLVED as a special resolution of the Shareholders that:
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1.
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the Corporation be and is hereby authorized
to consolidate the issued and outstanding Common Shares on the basis of one Common Share
for every eight issued and outstanding Common Shares;
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2.
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no fractional Common Shares shall be issued
in connection with the Consolidation. Where the Consolidation would otherwise result in a
Shareholder being entitled to a fractional Common Share, the number of post-Consolidation
Common Shares issued to such Shareholder shall be rounded down to the next whole number of
Common Shares. In calculating such fractional interests, all Common Shares held by a beneficial
holder shall be aggregated;
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3.
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any director or officer of the Corporation
is hereby authorized, empowered and instructed, acting for, in the name and on behalf of
Corporation, to execute or cause to be executed, under the seal of Corporation or otherwise,
and to deliver or to cause to be delivered, all such other documents and to do or to cause
to be done all such other acts and things as in such person’s opinion may be necessary
or desirable in order to carry out the intent of these resolutions and the matters authorized
hereby, such determination to be conclusively evidenced by the execution and delivery of
such document or the doing of such act or thing; and
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4.
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the directors of the Corporation are hereby
authorized and granted with absolute discretion and without further approval of the Shareholders,
to revoke and rescind the foregoing resolution before it is acted upon.”
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The requisite regulatory
approvals for the Consolidation, including the approvals of the TSXV, if required (or any other stock exchange on which the Common Shares
are listed), may not be sought by the Corporation until after the Board decides to implement the Consolidation. There can be no assurance
that the applicable regulatory approvals for the Consolidation will be obtained. The Consolidation Resolution authorizes the Board not
to proceed with the Consolidation, without further approval of the Shareholders, before it is acted upon.
Unless otherwise directed
to the contrary, it is the intention of the persons named in the enclosed form of proxy to vote proxies IN FAVOUR of the Consolidation
Resolution. The Board unanimously recommends that Shareholders vote for the Consolidation Resolution.
Effect of Consolidation
The Consolidation will
not materially affect any Shareholders’ percentage ownership in the Corporation, although such ownership will be represented by
a smaller number of post-Consolidation Common Shares. If the Consolidation is approved and given effect, the number of Common Shares
outstanding prior to completion of the Transaction will be approximately 795,130 Common Shares, or such other amount depending on the
final Consolidation ratio agreed to by the Board. The Consolidation is expected to lead to an increase in the number of Shareholders
who will hold “odd lots”; that is, a number of shares not evenly divisible into board lots (a board lot is either 100, 500
or 1,000 shares, depending on the price of the shares). As a general rule, the cost to Shareholders transferring an odd lot of Common
Shares is somewhat higher than the cost of transferring a “board lot”. Nonetheless, the Board believes the Consolidation
is in the best interest of the Corporation as the Consolidation is a condition to complete the Transaction despite the potential increased
cost to Shareholders in transferring odd lots of post- Consolidation Common Shares.
Fractional
Shares
If the Consolidation is
implemented, fractional post-Consolidation Common Shares will not be issued to Shareholders. Where the Consolidation would otherwise
result in a Shareholder being entitled to a fractional Common Share, the number of post-Consolidation Common Shares issued to such holder
of Common Shares shall be rounded down to the next whole number of Common Shares. In calculating such fractional interests, all Common
Shares held by a beneficial holder shall be aggregated.
Implementation
of Consolidation
Shareholders will be notified
as soon as practicable after the Consolidation becomes effective. The Corporation expects that Computershare will act as exchange agent
for purposes of implementing the exchange of share certificates.
Following the filing by
the Corporation of articles of amendment implementing the Name Change and Consolidation (assuming that the Name Change Resolution and
Consolidation Resolution are passed at the Meeting), all Common Shares held by Shareholders will be consolidated without any further
action required by Shareholders. Upon completion of the Name Change and Consolidation, the number of Common Shares outstanding will be
so adjusted on the Corporation’s register of Common Shares maintained by the Corporation’s transfer agent, and registered
Shareholders will receive a share certificate or a statement prepared by such transfer agent pursuant to its direct registration system
(a “DRS Advice Statement”) evidencing the post-Consolidation Common Shares to which such Shareholder is entitled.
Beneficial Shareholders should note that their intermediaries may have various procedures for processing the Name Change and Consolidation.
Beneficial Shareholders will not receive a share certificate or DRS Advice Statement upon completion of the Name Change and Consolidation.
If a Beneficial Shareholder has any questions in this regard, the Beneficial Shareholder is encouraged to contact its intermediary.
Approval of Stock
Option Plan
The TSXV requires that
all listed companies with a 10% rolling stock option plan obtain shareholder approval of the plan on an annual basis. Shareholders will
be asked at the Meeting to vote on a resolution to approve, for the ensuing year, the Newton Option Plan as described below.
The Newton Option Plan
provides that the Board may from time to time, in its discretion, grant to directors, officers, employees and consultants of the Corporation,
or any subsidiary of the Corporation, the option to purchase Common Shares. The purpose of the Newton Option Plan is to develop the interests
of directors, officers, employees and consultants of the Corporation and its affiliates in the growth and development of the Corporation
and its affiliates by providing them with the opportunity through share options to acquire an increased proprietary interest in the Corporation.
The number of Common Shares
issuable upon the exercise of options granted under the Newton Option Plan at any time may not exceed 10% of the total number of issued
and outstanding Common Shares (on a non-diluted basis) and the aggregate number of Common Shares issuable to any one individual may not
exceed 5% of the total number of issued and outstanding Common Shares. The period during which an option granted under the Newton Option
Plan is exercisable may not exceed five years from the date such option is granted. All options are non-assignable and non-transferrable.
The price which the Common Shares may be acquired upon exercise of an option may not be less than the price permitted under the rules
of any stock exchange on which the Common Shares are listed and the vesting provisions are determined by the Board at the time of grant.
If prior to the exercise
of an option, the holder ceases to be a director, officer, employee or consultant of the Corporation for any reason other than death,
the option may be exercised within the earlier of up to 90 days after such cessation or the expiry of the option, but only to the extent
that the holder was entitled to exercise the option at the date of cessation. In the case of death an optionee, the option may be exercised
within the earlier of up to 12 months after such death or the expiry of the option, but only to the extent that the holder was entitled
to exercise the option at the date of death.
The Shareholders will be
asked to consider and, if deemed appropriate, to pass, with or without variation, an ordinary resolution approving the Newton Option
Plan (the “Newton Option Plan Resolution”). To be effective, the Newton Option Plan Resolution must be approved by
the affirmative vote of not less than a majority of the votes cast by the holders of Common Shares present in person or by proxy at the
Meeting.
The text of the Newton
Option Plan Resolution is as follows:
“BE
IT RESOLVED as an ordinary resolution of the Shareholders that:
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the Newton Option Plan in the form attached
as Appendix “B” to the Circular, be and is hereby approved with such modifications
as may be required by the TSXV (or any other stock exchange on which the Common Shares are
listed);
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2.
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the maximum number of Common Shares of
the Corporation which may be issued under the Newton Option Plan shall be equal to ten percent
(10%) of the then issued and outstanding Common Shares of the Corporation from time to time;
and
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3.
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any director or officer of the Corporation
is hereby authorized, empowered and instructed, acting for, in the name and on behalf of
Corporation, to execute or cause to be executed, under the seal of Corporation or otherwise,
and to deliver or to cause to be delivered, all such other documents and to do or to cause
to be done all such other acts and things as in such person’s opinion may be necessary
or desirable in order to carry out the intent of these resolutions and the matters authorized
hereby, such determination to be conclusively evidenced by the execution and delivery of
such document or the doing of such act or thing.”
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The
requisite regulatory approvals for the Newton Option Plan, including the approvals of the TSXV (or any other stock exchange on which
the Common Shares are listed), may not be sought by the Corporation until after the Meeting. There can be no assurance that the applicable
regulatory approvals for the Newton Option Plan will be obtained.
It is expected that the
Resulting Issuer will adopt a new stock option plan upon completion of the Transaction under which options issued on and after completion
of the Transaction will be issued. It is expected that only options existing prior to the Transaction will be governed by the Newton
Option Plan until their exercise or expiry.
Unless otherwise directed
to the contrary, it is the intention of the persons named in the enclosed form of proxy to vote proxies IN FAVOUR of the Newton Option
Plan Resolution.
Listing Transfer
to CSE
The Common Shares are currently
listed on the NEX under the trading symbol “NTN.H”. In connection with the Transaction, the Corporation intends to (i) apply
to the TSXV to voluntarily de-list its Common Shares from the NEX (the “De-listing”), and (ii) apply to list the Common
Shares on the facilities of the CSE (together, the “Listing Transfer”). Consequently, the Corporation is seeking the
approval of the Shareholders (exclusive of Non Arm’s Length Parties) to proceed with the De-listing.
The Shareholders will be
asked to consider and, if deemed appropriate, to pass, with or without variation, a special resolution authorizing the De-listing (the
“De-listing Resolution”). To be effective, the De- listing Resolution must be approved by (i) at least a majority
of the votes cast on the De-listing Resolution, and (ii) a simple majority of the votes cast on the De-listing Resolution by Shareholders
voting in person or by proxy other than votes attaching to Common Shares beneficially owned by Non Arm’s Length Parties.
Approval of the De-listing
Resolution is a condition to the completion of the Transaction. Failure to approve the De-listing Resolution could impede or prevent
the completion of the Transaction. Shareholders are urged to vote in favour of this ordinary resolution.
The text of the De-listing
Resolution is as follows:
“BE
IT RESOLVED as an ordinary resolution of the Shareholders that:
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the Corporation is hereby authorized to voluntarily
de-list the Common Shares from the NEX Board of the TSXV;
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2.
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the Corporation is authorized to prepare
such disclosure documents and make such submissions and filings with the TSXV as the Corporation
may deem necessary or desirable to obtain TSXV acceptance of the De-listing;
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3.
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any director or officer of the Corporation
is hereby authorized, empowered and instructed, acting for, in the name and on behalf of
Corporation, to execute or cause to be executed, under the seal of Corporation or otherwise,
and to deliver or to cause to be delivered, all such other documents and to do or to cause
to be done all such other acts and things as in such person’s opinion may be necessary
or desirable in order to carry out the intent of these resolutions and the matters authorized
hereby, such determination to be conclusively evidenced by the execution and delivery of
such document or the doing of such act or thing; and
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4.
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the directors of the Corporation are hereby
authorized and granted with absolute discretion and without further approval of the Shareholders,
to revoke and rescind the foregoing resolution before it is acted upon.”
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The requisite regulatory
approvals for the De-listing and the Listing Transfer, including the approvals of the TSXV and CSE, may not be sought by the Corporation
until after the Board decides to implement the De-listing and/or the Listing Transfer. The Listing Transfer is conditional upon the Corporation
obtaining any necessary regulatory consent, including from the TSXV and CSE. If the CSE conditionally approves the listing of the Common
Shares, and subject to the approval of the TSXV and Shareholder approval of the De-listing Resolution, the Corporation intends to de-list
the Common Shares from the NEX and commence trading on the CSE in connection with the closing of the Transaction. Unless the CSE conditionally
approves the listing of the Common Shares, the Corporation will not de-list the Common Shares from the NEX. There can be no assurance
that either the TSXV will approve the De-listing or that the CSE will approve the Listing Transfer. The De-listing Resolution authorizes
the Board not to proceed with the De-listing, without further approval of the Shareholders, before it is acted upon.
De-listing will occur following
the Corporation’s receipt of the CSE’s conditional approval to list the Common Shares. After the De-listing and until the
Common Shares are listed on the CSE or another stock exchange, there will be no marketplace for the trading of the Common Shares.
The Board believes that
the CSE has a preferred fee structure for the Corporation which will allow the Corporation to devote a larger portion of its financial
resources to executing its business strategy. Additionally, the Board believes that the rules and policies of the CSE are more suitable
for the Resulting Issuer and that the CSE will provide a marketplace that is as good as or better than the NEX for the trading of its
Common Shares.
Unless otherwise directed
to the contrary, it is the intention of the persons named in the enclosed form of proxy to vote proxies IN FAVOUR of the De-listing Resolution.
The Board unanimously recommends that Shareholders vote for the De-listing Resolution.
Amendment to By-Laws
General
At the Meeting, Shareholders
will be asked to consider, and, if deemed advisable, to pass, with or without variation, an ordinary resolution (the “By-law
Amendment Resolution”) approving the adoption of an amended and restated By-law Number 2 (the “Amended and Restated
By-law”). The Amended and Restated By-law includes: (i) additions and clarification to the reporting requirements of directors
and officers regarding conflicts of interest, (ii) amendments to corporate governance provisions, (iii) amendments to notice requirements
for meetings of shareholders, (iv) deletion of references to a unanimous shareholders agreement, which are not applicable given the Corporation
is a public company, and (v) modernization of the Amended and Restated By-law to contemplate electronic, book-based or other non-certificated
registered positions of Common Shares, the giving of electronic notice or documents, and other minor amendments of an administrative
or clerical nature, all as described in further detail below. There have been no other changes other than amendments of a housekeeping
nature.
The Amended and Restated
By-law was approved by the Board on August 21, 2020, subject to the approval of the By-law Amendment Resolution at the Meeting and completion
of the Transaction. Pursuant to the requirements of the ABCA, the adoption of the Amended and Restated By-law must be submitted to Shareholders
for confirmation. If approved by ordinary resolution, the Amended and Restated By-law will be in full force and effect following completion
of the Transaction. If not, By-law Number 2 will remain effective.
Description of Key Differences
Between the Previous By-law and the Amended and Restated By-law
The following summarizes
the key differences between By-law Number 2 and the Amended and Restated By-law and is qualified in its entirety by the text of the Amended
and Restated By-law, which is attached to the Circular as Appendix “C”. Shareholders should review the Amended and Restated
By-law in its entirety. Those changes that are generally of a housekeeping nature are not outlined below.
Conflict of Interest
The Amended and Restated
By-law adds the requirement that a director or officer of the Corporation must disclose to the Corporation the nature and extent of any
interest they have in a material contract or a material transaction, whether made or proposed. By-law Number 2 previously only
required notification regarding any interests a director or officer has in a material contract.
- 36 -
In addition, this notification must
be provided in writing or by entering the notification in the minutes of meetings of directors, or of meetings of committees of directors,
at the time and in the manner provided in the ABCA. The notification must include the nature and extent of the interest and, if the director
or officer: (i) is a party to the contract or transaction, (ii) is a director or an officer, or an individual acting in a similar capacity,
of a party to the contract or transaction, or (iii) has a material interest in a party to the contract or transaction.
A contract or transaction for which
disclosure is required is not invalid, and the director or officer is not accountable to the Corporation or its shareholders for any
profit realized from the contract or transaction, because of the director’s or officer’s interest in the contract or transaction
or because the director was present or was counted to determine whether a quorum existed at the meeting of directors or committee of
directors that considered the contract or transaction, if the director or officer disclosed his interest in accordance with the provisions
of the Act and the contract or transaction was approved by the directors, and it was reasonable and fair to the Corporation when it was
approved.
Even if these conditions are not
met, a director or officer, acting honestly and in good faith, shall not, by reason only of his office, be accountable to the Corporation
or to the Shraeholders for any profit realized from a contract or transaction for which disclosure is required, and the contract or transaction
is not invalid by reason only of the interest of the director or officer in the contract or transaction, if the contract or transaction
is approved or confirmed by special resolution at a meeting of the Shareholders, disclosure of the interest was made to the Shareholders
in a manner sufficient to indicate its nature before the contract or transaction was approved or confirmed, and the contract or transaction
was reasonable and fair to the Corporation when it was approved or confirmed.
Corporate Governance
With respect to corporate governance
matters, the Amended and Restated By-law:
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clarifies
certain provisions including the calling of Board meetings and the calling of special meetings
of shareholders;
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removes
the concept of a “managing director”, as the Corporation does not have a “managing
director”;
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replaces
most references to the “president” to the “chief executive officer”
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provides
that, unless invited by the chairman of a meeting of Shareholders, only Shareholders entitled
to vote thereat, the directors and auditors of the Corporation, and those otherwise entitled
or required under any provision of the Act or the Corporation’s articles or by-laws
to be present, are entitled to be admitted to a meeting of Shareholders; and
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clarifies
the validity of acts of a director or officer where there is an irregularity in their election
or appointment, or a defect in their qualification.
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Modernization and Administrative Changes
The Amended and Restated By-law contains
a number of additional minor amendments of an administrative or clerical nature, most of which are updates intended to ensure that the
Amended and Restated By-law remains consistent with current practice among Canadian public companies. In particular, the Amended and
Restated By-law:
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provides
for registered securityholders to have their holdings evidenced by an electronic, book- based,
direct registration service or other non-certificated entry or position on the register of
securityholders to be kept by the Corporation in place of a physical security certificate;
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adds,
where applicable, reference to the Securities Transfer Act (Alberta) and the Civil
Enforcement Act (Alberta); and
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provides
for the giving of notice or a document by electronic means.
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Shareholder Approval
The text of the By-law Amendment Resolution
is as follows:
“BE IT RESOLVED as an ordinary resolution
of the Shareholders that:
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1.
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the Amended and Restated
By-law, approved by the Board on August 21, 2020, is hereby authorized and approved as a
by-law of the Corporation, subject to completion of the Transaction; and
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2.
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any director or officer
of the Corporation is hereby authorized, empowered and instructed, acting for, in the name
and on behalf of Corporation, to execute or cause to be executed, under the seal of Corporation
or otherwise, and to deliver or to cause to be delivered, all such other documents and to
do or to cause to be done all such other acts and things as in such person’s opinion
may be necessary or desirable in order to carry out the intent of these resolutions and the
matters authorized hereby, such determination to be conclusively evidenced by the execution
and delivery of such document or the doing of such act or thing.”
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Unless otherwise directed to
the contrary, it is the intention of the persons named in the enclosed form of proxy to vote proxies IN FAVOUR of the By-law Amendment
Resolution. The Board unanimously recommends that Shareholders vote for the By-law Amendment Resolution.
Continuance
The Corporation is currently governed
by the ABCA. Field Trip has notified the Corporation of its expectation that, in the event that the Transaction is completed, the Resulting
Issuer will wish to apply for the continuance of the Corporation (the “Continuance”) from the ABCA to the federal
jurisdiction of the Canada Business Corporations Act (“CBCA”) pursuant to section 189 of the ABCA and section
187 of the CBCA.
The Shareholders will be asked to
consider and, if deemed appropriate, to pass, with or without variation, a special resolution authorizing the Continuance (the “Continuance
Resolution”) including the adoption, effective upon the issuance of the Certificate of Continuance, of the by-laws attached
as Appendix “D” to this Circular. See “ – Effect of the Continuance“. To be effective, the Continuance
Resolution must be approved by the affirmative vote of not less than two-thirds (2/3) of the votes cast by the holders of Common Shares
present in person or by proxy at the Meeting.
Approval of the Continuance Resolution
is a not condition to the completion of the Transaction.
The text of the Continuance Resolution
is as follows:
“BE IT RESOLVED as a special resolution of
the Shareholders that:
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1.
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the Corporation
be authorized to make application to the Registrar (as defined in the ABCA) for the issuance
of a consent to file articles of continuance with the Director (as defined in the CBCA) to
continue the Corporation as if it had been incorporated under the CBCA, and to make application
to the Registrar of Corporations of Alberta for the issuance of a certificate of discontinuance
(“Certificate of Discontinuance”);
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2.
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the Corporation
be authorized to make application to the Director for a certificate of continuance (the “Certificate
of Continuance”) and prepare for the Director, articles of continuance, a notice
of directors and a notice of registered office, all in the form that the Director fixes,
to continue the Corporation under the CBCA;
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3.
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subject to completion
of the Continuance and the issue of the Certificate of Discontinuance and without affecting
the validity of the Corporation and existence of the Corporation by or under its articles
and of any act done thereunder, its articles are hereby amended to make all changes necessary
to conform to the requirements of the CBCA;
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4.
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effective upon the
issuance of the Certificate of Continuance, the by-laws attached as Appendix “D”
to this Circular are hereby adopted and approved as the only by-laws of the Corporation;
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5.
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effective upon
the issuance of the Certificate of Continuance, the Board is hereby authorized to determine,
from time to time, the number of directors within the minimum and maximum number provided
for in the articles of the Corporation;
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6.
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any director or
officer of the Corporation is hereby authorized, empowered and instructed, acting for, in
the name and on behalf of Corporation, to execute or cause to be executed, under the seal
of Corporation or otherwise, and to deliver or to cause to be delivered, all such other documents
and to do or to cause to be done all such other acts and things as in such person’s
opinion may be necessary or desirable in order to carry out the intent of these resolutions
and the matters authorized hereby, such determination to be conclusively evidenced by the
execution and delivery of such document or the doing of such act or thing; and
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7.
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notwithstanding
that this special resolution has been duly passed by the Shareholders, the directors of the
Corporation be, and they hereby are, authorized and empowered to revoke this special resolution,
abandon any application made in connection with the Continuance and to determine not to proceed
with the Continuance without further approval of the Shareholders before the issuance by
the Director of the Certificate of Continuance.”
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The requisite regulatory approvals
for the Continuance, including the approvals of the TSXV (or any other stock exchange on which the Common Shares are listed), may not
be sought by the Corporation until after the Board decides to implement the Continuance. There can be no assurance that the applicable
regulatory approvals for the Continuance will be obtained. The Continuance Resolution authorizes the Board not to proceed with the Continuance,
without further approval of the Shareholders, before the issuance by the Director of the Certificate of Continuance.
Reasons for the Continuance
Field Trip has notified the Corporation
of its expectation that, in the event that the Transaction is completed, it may be desirable to continue the Corporation such that it
will be governed by the CBCA.
Furthermore, upon completion of the
Transaction, the Resulting Issuer intends for its registered office to be outside of the Province of Alberta.
Procedure to Effect Continuance
In order to effect the Continuance, the
following steps must be taken:
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1.
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the shareholders must
approve the Continuance Resolution at the Meeting, authorizing the Corporation to, among
other things, file an application for a certificate of continuance (the “Certificate
of Continuance”) with the Director requesting that the Corporation be continued
as if it had been incorporated under the CBCA. The application for the Certificate of Continuance
requires that the Corporation send to the following documents to the Director: (i) articles
of continuance (the “Articles of Continuance”); (ii) a notice of directors;
and (iii) a notice of registered office, all in the form that the Director fixes;
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2.
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the Registrar must
consent to the proposed Continuance (the “Consent”), upon being satisfied
that the Continuance is effected in compliance with section 189 of the ABCA;
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3.
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the Corporation must
file a notice of continuance with the Registrar satisfying the Registrar that the Corporation
has continued under the CBCA. The Registrar will then issue the Certificate of Discontinuance;
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4.
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on the date shown on
the Certificate of Continuance, (i) the Corporation becomes a Corporation to which the CBCA
applies as if it had been incorporated under the CBCA; (ii) the Articles of Continuance are
deemed to be the articles of incorporation of the continued Corporation; and (iii) the Certificate
of Continuance is deemed to be the certificate of incorporation of the continued Corporation;
and
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5.
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on the date shown on
the Certificate of Discontinuance, the Corporation becomes an extra- provincial corporation
as if it had been incorporated under the laws of the CBCA.
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Effect of the Continuance
If the Continuance is approved by
Shareholders and implemented by the Board, the Corporation shall apply to and file all necessary documentation with the Registrar for
the Consent. Immediately following the receipt of the Consent, the Corporation shall apply for the Certificate of Continuance and file
the Articles of Continuance under the CBCA to continue the Corporation into the federal jurisdiction of Canada. The Articles of Continuance
will be deemed to be the articles of incorporation of the continued Corporation under the CBCA and the Certificate of Continuance issued
by the Director under the CBCA will be deemed to be the certificate of incorporation of the continued Corporation.
In connection with the Continuance,
the existing articles and by-laws of the Corporation will be repealed and the Corporation will adopt articles and by-laws which are suitable
for a CBCA corporation. The material differences between the existing by-laws of the Corporation and the proposed post-Continuance by-laws
of the Corporation are summarized below. Shareholders are encouraged to read the full text of the post-Continuance by-laws attached
hereto as Appendix “D” and the following description of the post-Continuance by-laws is qualified in its entirety by such
appendix and by the Amended and Restated By-law and Advance Notice By-law.
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While
the Amended and Restated By-law and the proposed post-Continuance by-laws of the Corporation,
at sections 8.06 and 65, respectively, allow for the Corporation to apply and enforce a lien
on shares of the Corporation for certain debts of shareholders owed to the Corporation, the
post-Continuance by-laws do not allow a shareholder to sell the shares subject to such lien
until such time as the Corporation makes a demand and delivers a notice in writing stating
the amount due and demanding payment. There is no similar restriction in the Amended and
Restated By- law.
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·
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Section
10.05 of the Amended and Restated By-law provides that a maximum of 50 days’ notice
can be given before a meeting of the shareholders. The proposed post-Continuance by-laws,
at section 45, increases the maximum number of days’ notice can be given before a meeting
of the shareholders to 60 days.
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·
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Section
10.11 of the Amended and Restated By-law sets a quorum for the transaction of business at
any meeting of shareholders at two persons, who are shareholders or duly appointed proxyholders,
and representing in the aggregate not less than ten percent (10%) of the outstanding shares
of the Corporation carrying voting rights. The proposed post-Continuance by-laws at section
56, reduces the number of voting shares that need to be represented at a shareholders meeting
for the transaction of business to five percent (5%).
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The
proposed post-Continuance by-law of the Corporation adds certain additional requirements
to the advance notice provisions contained in the Advance Notice By-law. Section 85(c) of
the proposed post-Continuance by-law requires that, when notice-and-access is used to deliver
proxy- related materials to shareholders, and a shareholder (a “Nominating Shareholder”)
wishes to propose nominees to the board of directors of the Corporation (a “Proposed
Nominee”) for consideration at a shareholders meeting of the Corporation, such
notice must be delivered not less than forty (40) days prior to the date of the meeting,
provided, however, in the event that the meeting is to be held on a date that is less than
fifty (50) days after the date on which the first public announcement of the date of the
meeting was made, (i) in the case of an annual meeting, notice by the Nominating Shareholder
shall be made not later than the tenth (10th) day following
the date of such public announcement, and (ii) in the case of a special meeting, notice by
the Nominating Shareholder shall be made not later than the fifteenth (15th)
day following the date of such public announcement. Additionally, the proposed post-Continuance
by-laws require that a Nominating Shareholder provide the following additional disclosures
regarding a Proposed Nominee, which are in addition to the requirements currently contained
in the by-laws of the Corporation: (i) the name and principal business of any company which
the Proposed Nominee was employed by within the five years preceding the date of the notice;
(ii) a description of any relationship, agreement, arrangement or understanding, including
financial compensation and indemnity related relationships, agreements, arrangements or understandings,
between the Nominating Shareholder and the Proposed Nominee, or any affiliates or associates
of, or any person or entity acting jointly or in concert with, the Nominating Shareholder
or the Proposed Nominee with respect to the Proposed Nominee’s nomination and election
as a director; and (iii) whether the Proposed Nominee is party to any existing or proposed
relationship, agreement, arrangement or understanding with any competitor of the Corporation
or any other third party which may give rise to a real or perceived conflict of interest
between the interests of the Corporation and the interests of the Proposed Nominee.
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The Corporation will not change its business
or operations as a result of the Continuance.
As of the effective date of the Continuance,
the election, duties, resignations and removal of the Corporation’s directors and officers shall be governed by the CBCA and the
Corporation will no longer be subject to the corporate governance provisions of the ABCA.
By operation of law applicable under
the CBCA, as of the effective date of the Continuance:
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the
property of the Corporation prior to the Continuance continues to be the property of the
Corporation;
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the
Corporation continues to be liable for its obligations;
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an
existing cause of action, claim or liability to prosecution is unaffected;
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a
civil, criminal or administrative action or proceeding pending by or against the body corporate
may be continued to be prosecuted by or against the corporation; and
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a
conviction against, or ruling, order or judgment in favour of or against, the body corporate
may be enforced by or against the corporation.
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Certain Corporate Differences
between the ABCA and the CBCA
If the Continuance Resolution is
approved by the Shareholders and the Continuance is completed, the Corporation will be governed by the CBCA instead of the ABCA. While
the rights of shareholders under the CBCA are broadly similar to those under the ABCA, there are a number of variations in the rights
afforded to Shareholders under the two pieces of legislation.
The following is a summary of certain
similarities and differences between the CBCA and the ABCA on matters pertaining to Shareholder rights. This summary is not exhaustive
and is of a general nature only and is not intended to be, and should not be construed to be, legal advice to Shareholders. Accordingly,
Shareholders should consult their own legal advisors with respect to the corporate law consequences of the Continuance.
Board of Directors
Under the ABCA, at least one-quarter
of a corporation’s directors, and at least one-quarter of the members of any committee of directors, must be resident Canadians.
Under the CBCA, at least one- quarter of a corporation’s directors must be resident Canadians; however, there is no similar requirement
for committees of directors.
Place of Meetings
The ABCA provides that a meeting
may be held outside Alberta where the articles so provide or where all shareholders entitled to vote at such a meeting so agree. The
CBCA provides that a meeting of shareholders may be held outside Canada if the place is specified in the articles or where all the shareholders
entitled to vote at such a meeting so agree.
Financial Assistance
The ABCA requires disclosure of financial
assistance given by a corporation to
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shareholders
or directors of the corporation or its affiliates,
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any
of their associates, and
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to
any person for the purpose of or in connection with the purchase of shares of the corporation
or an affiliated corporation.
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The CBCA has no such requirement.
Shareholder Proposals
Both the ABCA and the CBCA provide
for shareholder proposals. Under the CBCA, a registered or beneficial owner of shares entitled to be voted at an annual meeting may submit
a proposal. To be eligible, the registered or beneficial shareholder must either:
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have
owned for six months not less than 1% of the total number of voting shares or voting shares
with a fair market value of a least $2,000, or
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have
the support of persons who have owned for six months not less than 1% of the total number
of voting shares or voting shares with a fair market value of at least $2,000.
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Under the ABCA, a registered
holder of shares entitled to vote at an annual meeting of shareholders, or a beneficial owner of shares, may submit a proposal. To be
eligible to make a proposal a person must:
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be
a registered holder or beneficial owner of at least one percent (1%) of all issued voting
shares of the corporation for at least six months with a fair market value of a least $2,000,
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have
the support of other registered holders or beneficial owners of shares of at least five percent
(5%) of the issued voting shares of the corporation,
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provide
to the corporation his or her name and address and the names and addresses of those registered
holders or beneficial owners of shares who support the proposal, and
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continue
to hold or own the prescribed number of shares up to and including the day of the meeting
at which the proposal is to be made.
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Record Date for Voting
The ABCA permits a transferee of
common shares after the record date for a shareholder meeting, not later than ten days before the shareholder meeting, to establish a
right to vote at the meeting by providing evidence of ownership of common shares and demanding that the transferee’s name be placed
on the voting list in place of the transferor. The CBCA does not have an equivalent provision.
Rights of Dissent
Under both the ABCA and the CBCA,
shareholders have substantially the same rights of dissent if a corporation resolves to effect certain fundamental changes. Under the
CBCA, the corporation must, within ten days of the resolution to which the shareholder dissents being adopted, send notice to the dissenting
shareholder. The dissenting shareholder, within 20 days of receiving notice from the corporation or, if such notice was not received,
within 20 days after learning that the resolution has been adopted, shall send the corporation notice of his demand for payment of the
fair value of his shares, the number and class of shares in respect of which the shareholder dissents and his relevant personal information.
Within 30 days of this notice, the dissenting shareholder must send the corporation, or its transfer agent, his share certificates. No
more than seven days after the later of the day on which the resolution is effective and the day the corporation receives notice from
the dissenting shareholder, the corporation must send to the dissenting shareholder an offer to pay. The corporation or the dissenting
shareholder may apply to the court to fix a fair value for the shares of the dissenting shareholder.
Under the ABCA, a dissenting shareholder
may send a corporation a written objection to a resolution affecting a fundamental change at or before any meeting of shareholders at
which the resolution is to be voted on. Once the resolution is adopted the dissenting shareholder may make application to the court to
fix the fair value of his shares. If an application is made to the court, unless the court otherwise orders, the corporation must
send an offer to pay to each dissenting shareholder an amount considered by the directors to be the fair value of the shares. Unless
the court otherwise orders, the dissenting shareholder may accept the offer to pay from the corporation or wait for an order from the
court fixing the fair value of the shares. The dissenting shareholder may accept the offer to pay from the corporation or wait for an
order from the court fixing the fair value of the shares. The dissent rights under the ABCA apply to the Continuance Resolution.
Sale of Property
Under both the ABCA and the CBCA,
any proposed sale, lease or exchange of all or substantially all of the property of a corporation, other than in the ordinary course
of business, must be approved by a special resolution passed by not less than two-thirds of the votes cast by shareholders voting in
person or by proxy at a meeting of shareholders. The holder of shares of a class or series of shares of a corporation are entitled to
vote separately as a class or series in respect of such a sale, lease or exchange if that class or series is affected by the sale, lease
or exchange in a manner different from the shares of another class or series.
Amendments to the Articles of the
Corporation
Under both the ABCA and the CBCA,
certain fundamental changes to the articles of a corporation, such as an alteration of any restrictions on the business carried on by
the corporation, changes in the name of the corporation, increases or decreases in the authorized capital, the creation of any new classes
of shares and changes in the jurisdiction of incorporation, must be approved by a special resolution passed by a majority of not less
than two-thirds of the votes cast by shareholders voting in person or by proxy at a meeting of the shareholders of the corporation.
Oppression Remedies
Under the ABCA and the CBCA, a registered
or beneficial shareholder, former registered or beneficial shareholder, director, former director, officer or former officer of a corporation
or any of its affiliates, or any other person who, in the discretion of a court, is a proper person to seek an oppression remedy, may
apply to a court to rectify the matters complained of where:
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any
act or omission of a corporation or its affiliates effects a result;
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the
business or affairs of a corporation or any of its affiliates are or have been carried on
or conducted in a manner; or
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the
powers of a corporation or any of its affiliates are or have been exercised in a manner;
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that is oppressive or unfairly prejudicial
to, or that unfairly disregards the interests of, any securityholder, creditor, director or officer.
Shareholders’ Derivative Action
Under the ABCA and the CBCA, a registered
or beneficial shareholder, former registered or beneficial shareholder, director, former director, officer or former officer of a corporation
or its affiliates who, in the discretion of the court, is a proper person to do so, may apply for the court’s leave to:
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bring
a derivative action in the name and on behalf of a corporation or any of its subsidiaries;
or
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intervene
in the action to which a corporation or any of its subsidiaries is a party, for the purpose
of prosecuting, defending or discontinuing the action on behalf of a corporation or the subsidiary.
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Dissident Proxy Solicitation
Under both the ABCA and the CBCA,
in the case of a solicitation by or on behalf of management of a corporation, a person is not entitled to solicit proxies unless a management
proxy circular in prescribed form is made available in the prescribed manner to, among others, all of the shareholders whose proxies
are solicited. Similarly, a person (other than management or on behalf of management) (a “dissident”) is not entitled
to solicit proxies unless a dissident’s proxy circular in prescribed form and stating the purposes of the solicitation is made
available in the prescribed manner to, among others, all of the shareholders whose proxies are solicited.
However, under the CBCA, a dissident
may solicit proxies without making available a dissident’s proxy circular if the total number of shareholders whose proxies are
solicited is 15 or fewer. In contrast, under the ABCA, a dissident is only entitled to solicit proxies without making available a dissident’s
proxy circular if the total number of shareholders of the corporation entitled to vote at shareholder meetings is 15 or fewer.
Disclosure Relating to Diversity
Under the CBCA, at each annual meeting of
the shareholders, the directors of a distributing corporation must place before the shareholders certain prescribed information respecting
the diversity among:
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the
chair and vice-chair of the board of directors;
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the
president of the corporation;
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the
chief executive officer and chief financial officer;
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the
vice-president in charge of a principal business unit, division or function; and
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individuals
who perform policy-making functions in respect of the corporation.
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The
ABCA has no such requirement.
Rights of Dissent to the
Continuance
Shareholders are entitled to dissent
in respect of the Continuance in accordance with section 191 of the ABCA. Strict compliance with the provisions of section 191 is
required in order to exercise the right to dissent. Provided the Continuance becomes effective, each dissenting Shareholder will
be entitled to be paid the fair value of its Common Shares in respect of which such Shareholder dissents in accordance with section 191
of the ABCA. Persons who are Beneficial Shareholders who wish to dissent should be aware that only Registered Shareholders are entitled
to dissent.
Accordingly, a Beneficial Shareholder
desiring to exercise its right to dissent must make arrangements for the Common Shares beneficially owned by such person to be registered
in its name, or alternatively, make arrangements for the registered holder of its Common Shares to dissent on its behalf. See Appendix
“E” to this Circular for the full text of section 191.
In order to be effective, a written
notice of objection to the Continuance Resolution must be received by the Corporation prior to the commencement of the Meeting, or at
the Meeting. The registered address of the Corporation for such purpose is c/o Burstall LLP, Suite 1600 Dome Tower, 333 - 7th Avenue
SW, Calgary, Alberta T2P 2Z1, Attention: Dale Burstall. The foregoing summary does not purport to provide a comprehensive statement
of the procedures to be followed by a dissenting Shareholder who seeks payment of the fair value of its Common Shares. The complete
dissent provisions of the ABCA are set forth in Appendix “E” to this Circular. The ABCA requires strict adherence to the
procedures established therein and failure to do so may result in the loss of all dissenters’ rights. Accordingly, each Shareholder
who might desire to exercise the dissenters’ rights should carefully consider and comply with the provisions of the ABCA and consult
such Shareholder’s legal advisor.
The Board may elect not to proceed with
the Continuance if any notices of dissent are received.
INDICATION OF OFFICER AND
DIRECTORS
All of the directors and executive
officers of the Corporation have indicated that they intend to vote their Common Shares in favour of each of the above resolutions. In
addition, unless authority to do so is indicated otherwise, the persons named in the enclosed form of proxy intend to vote the Common
Shares represented by such proxies in favour of each of the above resolutions.
ADDITIONAL INFORMATION
Additional information relating
to the Corporation is on SEDAR at www.sedar.com. Shareholders may also contact Gino DeMichele, President and Chief Executive Officer
of the Corporation at 403-680-7898.
Financial information is provided
in the Corporation’s comparative financial statements and management discussion and analysis for the fiscal years ended December
31, 2019, 2018 and 2017 and subsequent interim periods, which are filed on SEDAR.
OTHER MATTERS
Management of the Corporation is
not aware of any other matter to come before the Meeting other than as set forth in the Notice. If any other matter properly comes before
the Meeting, it is the intention of the persons named in the enclosed form of proxy to vote the shares represented thereby in accordance
with their best judgment on such matter.
The contents of this Circular and its
distribution to Shareholders have been approved by the Board.
DATED August 21, 2020.
BY ORDER OF THE BOARD
(signed) “Gino DeMichele”
Gino DeMichele
Chief Executive Officer and Director
APPENDIX A
Audit Committee Charter
[See attached]
NEWTON ENERGY
CORPORATION
(the "Corporation")
May 27,
2008
AUDIT COMMITTEE
CHARTER
OVERALL ROLE AND RESPONSIBILITY
The Audit Committee shall:
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1.1
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assist the Board of Directors in its oversight
role with respect to:
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(a)
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the quality and integrity of financial information;
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(b)
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the independent auditor’s performance,
qualifications and independence;
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(c)
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the performance of the Corporation’s
internal audit function, if applicable; and
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(d)
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the Corporation’s compliance with legal
and regulatory requirements and
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1.2
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prepare such reports
of the Audit Committee required to be included in the information/proxy circular of the Corporation
in accordance with applicable laws or the rules of applicable securities regulatory authorities.
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MEMBERSHIP AND MEETINGS
The Audit Committee
shall consist of three (3) or more Directors appointed by the Board of Directors, of which a majority shall not be officers or employees
of the Corporation or any of the Corporation’s affiliates. Each of the members of the Audit Committee shall satisfy the applicable
independence and experience requirements of the laws governing the Corporation, and applicable securities regulatory authorities.
The Board of Directors
shall designate one (1) member of the Audit Committee as the Committee Chair. Each member of the Audit Committee shall be financially
literate as such qualification is interpreted by the Board of Directors in its business judgment. The Board of Directors shall determine
whether and how many members of the Audit Committee qualify as a financial expert as defined by applicable law.
STRUCTURE AND
OPERATIONS
The affirmative vote
of a majority of the members of the Audit Committee participating in any meeting of the Audit Committee is necessary for the adoption
of any resolution.
The Audit Committee
shall meet as often as it determines, but not less frequently than quarterly. The Committee shall report to the Board of Directors on
its activities after each of its meetings at which time minutes of the prior Committee meeting shall be tabled for the Board.
The Audit Committee shall review and
assess the adequacy of this Charter periodically and, where necessary, will recommend changes to the Board of Directors for its approval.
The Audit Committee is expected to establish
and maintain free and open communication with management and the independent auditor and shall periodically meet separately with each
of them.
SPECIFIC DUTIES
Oversight of the Independent Auditor
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Make
recommendations to the board for the appointment and replacement of the independent auditor.
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Responsibility
for the compensation and oversight of the work of the independent auditor (including resolution
of disagreements between management and the independent auditor regarding financial reporting)
for the purpose of preparing or issuing an audit report or related work. The independent
auditor shall report directly to the Audit Committee.
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Authority
to pre-approve all audit services and permitted non-audit services (including the fees, terms
and conditions for the performance of such services) to be performed by the independent auditor.
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Evaluate
the qualifications, performance and independence of the independent auditor, including
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(i) reviewing and
evaluating the lead partner on the independent auditor’s engagement with the Corporation, and (ii) considering whether the auditor’s
quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditor’s independence.
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Obtain
from the independent auditor and review the independent auditor’s report regarding
the management internal control report of the Corporation to be included in the Corporation’s
annual information/proxy circular, as required by applicable law.
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Ensure
the rotation of the lead (or coordinating) audit partner having primary responsibility for
the audit and the audit partner responsible for reviewing the audit as required by law (currently
at least every 5 years).
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Financial Reporting
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Review
and discuss with management and the independent auditor:
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prior
to the annual audit the scope, planning and staffing of the annual audit,
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the
annual audited financial statements,
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the
Corporation’s annual and quarterly disclosures made in management’s discussion
and analysis,
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approve
any reports for inclusion in the Corporation’s Annual Report, as required by applicable
legislation,
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the
Corporation’s quarterly financial statements, including the results of the independent
auditor’s review of the quarterly financial statements and any matters required to
be communicated by the independent auditor under applicable review standards,
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significant
financial reporting issues and judgments made in connection with the preparation of the Corporation’s
financial statements,
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any
significant changes in the Corporation’s selection or application of accounting principles,
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any
major issues as to the adequacy of the Corporation’s internal controls and any special
steps adopted in light of material control deficiencies, and
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other
material written communications between the independent auditor and management, such as any
management letter or schedule of unadjusted differences.
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Discuss
with the independent auditor matters relating to the conduct of the audit, including any
difficulties encountered in the course of the audit work, any restrictions on the scope of
activities or access to requested information and any significant disagreements with management.
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AUDIT COMMITTEE’S
ROLE
The Audit Committee
has the oversight role set out in this Charter. Management, the Board of Directors, the independent auditor and the internal auditor
all play important roles in respect of compliance and the preparation and presentation of financial information. Management is responsible
for compliance and the preparation of financial statements and periodic reports. Management is responsible for ensuring the Corporation’s
financial statements and disclosures are complete, accurate, in accordance with generally accepted accounting principles and applicable
laws. The Board of Directors in its oversight role is responsible for ensuring that management fulfills its responsibilities. The independent
auditor, following the completion of its annual audit, opines on the presentation, in all material respects, of the financial position
and results of operations of the Corporation in accordance with Canadian generally accepted accounting principles.
FUNDING FOR
THE INDEPENDENT AUDITOR AND RETENTION OF OTHER INDEPENDENT ADVISORS
The Corporation shall
provide for appropriate funding, as determined by the Audit Committee, for payment of compensation to the independent auditor for the
purpose of issuing an audit report and to any advisors retained by the Audit Committee. The Audit Committee shall also have the authority
to retain such other independent advisors as it may from time to time deem necessary or advisable for its purposes and the payment of
compensation therefore shall also be funded by the Corporation.
APPROVAL
OF AUDIT AND REMITTED NON-AUDIT SERVICES PROVIDED BY EXTERNAL AUDITORS
Over the course
of any year there will be two levels of approvals that will be provided. The first is the existing annual Audit Committee approval of
the audit engagement and identifiable permitted non-audit services for the coming year. The second is in-year Audit Committee pre-approvals
of proposed audit and permitted non-audit services as they arise.
Any proposed
audit and permitted non-audit services to be provided by the External Auditor to the Corporation or its subsidiaries must receive prior
approval from the Audit Committee, in accordance with this protocol. The CFO shall act as the primary contact to receive and assess any
proposed engagements from the External Auditor.
Following receipt
and initial review for eligibility by the primary contacts, a proposal would then be forwarded to the Audit Committee for review and
confirmation that a proposed engagement is permitted.
In the majority
of such instances, proposals may be received and considered by the Chair of the Audit Committee (or such other member of the Audit Committee
who may be delegated authority to approve audit and permitted non-audit services), for approval of the proposal on behalf of the Audit
Committee. The Audit Committee Chair will then inform the Audit Committee of any approvals granted at the next scheduled meeting.
APPENDIX B
Newton Option Plan
[See attached]
NEWTON
ENERGY CORPORATION
OPTION
PLAN
Dated and
Effective as of October 23, 2012.
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(a)
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The purpose
of the Option Plan (the "Plan") is to assist Newton Energy Corporation. (the "Corporation")
in attracting, retaining and motivating directors, officers, employees and consultants of
the Corporation and of its subsidiaries and to closely align the personal interests of such
directors, officers, employees and consultants with those of the Shareholders by providing
them with the opportunity, through options, to acquire common shares (the "Common Shares")
in the capital of the Corporation.
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(b)
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Capitalized
words and phrases used but not defined herein shall have the same meanings herein as ascribed
thereto in the Corporate Finance Manual of the TSX Venture Exchange (the "Exchange")
and, in particular, in policies 1.1 and 4.4 of the such Corporate Finance Manual, and Outstanding
Common Shares shall mean, at the time of any share issuance or grant of Options, the number
of Common Shares that are outstanding immediately prior to the share issuance or grant of
Options in question on a non-diluted basis, or such other number as may be determined under
applicable rules and regulations of all regulatory authorities to which the Corporation is
subject, including the Exchange.
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The grant and exercise
of any options under the Plan are subject to compliance with the applicable requirements of the Exchange and each stock exchange on which
the shares of the Corporation are or become listed and of any governmental authority or regulatory body to which the Corporation is subject.
The Plan shall be
administered by the Board of Directors of the Corporation which shall, without limitation, have full and final authority and discretion,
subject to the express provisions of the Plan, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating
to it and to make all other determinations deemed necessary or advisable for the administration of the Plan. The Board of Directors may
delegate any or all of its authority with respect to the administration of the Plan and any or all of the rights, powers and discretions
with respect to the Plan granted to it under this Plan to the Compensation and Governance Committee (the "Compensation Committee")
of the Board of Directors or such other committee of directors of the Corporation as the Board of Directors may designate. Upon any such
delegation the Compensation Committee or other committee of directors, as the case may be, as well as the Board of Directors, shall be
entitled to exercise any or all of such authority, rights, powers and discretions with respect to the Plan. When used in the context
of this Plan "Board of Directors" shall be deemed to include the Compensation Committee or other committee of directors acting
on behalf of the Board of Directors.
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4.
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Number of Shares Under Plan
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A maximum number
of Common Shares equal to ten percent (10%) (the "Optioned Shares") of the Outstanding Common Shares, from time to time, shall
be reserved, set aside and made available for issue under and in accordance with the Plan by resolution of the Board of Directors; provided
that, in no event shall options be granted entitling any single individual to purchase in excess of five percent (5%) of the Outstanding
Common Shares in a twelve month period. If option rights granted to an individual under the Plan shall expire or terminate for any reason
without having been exercised in respect of certain Optioned Shares, such Optioned Shares may be made available for other options to
be granted under the Plan. In addition:
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(a)
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The aggregate
number of Common Shares reserved for issuance on exercise of Options, within any twelve month
period, granted to any one Consultant of the Corporation may not exceed 2% of the Outstanding
Common Shares;
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(b)
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The aggregate
number of the Common Shares reserved for issuance on exercise of Options, in any twelve month
period, granted to an Employee conducting Investor Relations Activities may not exceed 2%
of the Outstanding Common Shares;
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(c)
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The maximum
number of Common Shares reserved for issuance pursuant to Options granted to Insiders at
any time may not exceed 10% of number of Outstanding Common Shares; and
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(d)
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The maximum
number of Common Shares issuable on exercise of Options granted to Insiders in a twelve month
period shall not exceed 10% of the number of Outstanding Common Shares.
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Provided that, for
the purposes of paragraphs (c) and (d) above, an entitlement granted prior to the grantee becoming an Insider may be excluded in determining
the number of Common Shares issuable to Insiders.
Options may be granted
under the Plan to such directors, officers, employees or consultants of the Corporation, or of its subsidiaries, as the Board of Directors
may from time to time designate as participants (the "Participants") under the Plan. Subject to the provisions of this Plan,
the total number of Optioned Shares to be made available under the Plan and to each Participant, the time or times and price or prices
at which options shall be granted, the vesting dates, the time or times at which such options are exercisable, and any conditions or
restrictions on the exercise of options, shall be in the full and final discretion of the Board of Directors. By granting Options hereunder
to an Employee or Consultant the Board of Directors of the Corporation represents on behalf of the Corporation that the Optionee is a
bona fide Employee or Consultant.
All options under
the Plan shall be granted upon and subject to the terms and conditions hereinafter set forth.
The exercise price
to each Participant for each Optioned Share shall be as determined by the Board of Directors, but shall in no event be less than the
closing market price of the Common Shares of the Corporation on the Exchange on the trading day immediately prior to the time of the
grant of the option (or, if no trades occurred on such day, then the next previous day on which trading took place) less the maximum
discount permitted under the regulations of the Exchange or such other price as may be agreed to by the Corporation and approved by the
Exchange. In the event that the Corporation proposes to reduce the exercise price of Options granted to an Optionee who is an Insider
of the Corporation at the time of the proposed amendment, such amendment shall not be effective until disinterested shareholder approval
has been obtained in respect of the reduction of the exercise price if required by the rules and policies of the Exchange then in effect.
All options granted
under the Plan shall be evidenced by means of an agreement between the Corporation and each Participant (the "Option Agreement")
in a form as may be approved by the Board of Directors, such approval to be conclusively evidenced by the execution of the Option Agreement
by any two (2) directors or officers of the Corporation other than the Participant.
All options granted
under the Plan shall expire not later than the fifth anniversary of the date such Options were granted and may be exercised by the Participant
as to such varying percentages, on a cumulative basis, during the terms thereof as the Board of Directors shall determine.
Notwithstanding
the length of grant as set forth in subparagraph 6(c) above, the time or times at which Options are exercisable and vesting dates shall
be the dates so fixed by the Board of Directors of the Corporation, the Compensation Committee of the Board of Directors of the Corporation
or such other committee of directors as the Board of Directors may designate at the time of the award of the Options, subject to the
provisions of subparagraph 6(j) below which provides for automatic vesting of all Options upon the occurrence of certain specified events,
but in any event Options issued to Consultants performing Investor Relations Activities must vest in stages over 12 months with no more
than one quarter of such Options vesting in any three month period.
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(e)
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Assignability of Options
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An option granted
under the Plan shall not be transferable or assignable (whether absolutely or by way of mortgage, pledge or other charge) by a Participant
other than by will or other testamentary instrument or the laws of succession and may be exercisable during the lifetime of the Participant
only by the Participant.
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(f)
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Right to Postpone Exercise
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Each Participant,
upon becoming entitled to exercise an option in respect of any Optioned Shares in accordance with the Option Agreement, shall be entitled
to exercise the option to purchase such Optioned Shares at any time prior to the expiration or other termination of the Option Agreement
or the option rights granted there under in accordance with such agreement.
Any option granted
under the Plan may be exercised by a Participant or the legal representative of a Participant giving written notice to the Corporation
specifying the number of shares in respect of which such option is being exercised, accompanied by payment (by cash or cheque payable
to the Corporation) of the entire exercise price (determined in accordance with the Option Agreement) for the number of shares specified
in the notice. Upon any such exercise of an option by a Participant the Corporation shall cause the transfer agent and registrar of the
Common Shares of the Corporation to promptly deliver to such Participant or the legal representative of such Participant, as the case
may be, a share certificate in the name of such Participant or the legal representative of such Participant, as the case may be, representing
the number of shares specified in the notice.
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(h)
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Rights of Participants
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The
Participants shall have no rights as Shareholders in respect of any of the Optioned Shares (including, without limitation, any right
to receive dividends or other distributions there from, voting rights, warrants or rights under any rights offering) other than Optioned
Shares in respect of which Participants have exercised their option to purchase and which have been issued by the Corporation.
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(i)
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Alterations in Shares
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In the event
of a share dividend, share split, issuance of shares or instruments convertible into Common Shares (other than pursuant to the Plan)
for less than market value, share consolidation, share reclassification, exchange of shares, recapitalization, amalgamation, merger,
consolidation, corporate arrangement, reorganization, liquidation or the like of or by the Corporation, the Board of Directors may make
such adjustment, if any, of the number of Optioned Shares, or of the exercise price, or both, as it shall deem appropriate to give proper
effect to such event, including to prevent, to the extent possible, substantial dilution or enlargement of rights granted to Participants
under the Plan. In any such event, the maximum number of shares available under the Plan may be appropriately adjusted by the Board of
Directors. If because of a proposed merger, amalgamation or other corporate arrangement or reorganization, the exchange or replacement
of shares in the Corporation by those in another company is imminent, the Board of Directors may, in a fair and equitable manner, determine
the manner in which all unexercised option rights granted under the Plan shall be treated including, for example, requiring the acceleration
of the time for the exercise of such rights by the Participants and of the time for the fulfillment of any conditions or restrictions
on such exercise. All determinations of the Board of Directors under this paragraph 6(i) shall be full and final.
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(j)
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Time of Exercise and Change of Control
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All Options will
be exercisable in whole on the date upon the occurrence of a written proposal by the Corporation or any other person or corporation to
implement a transaction that would, if implemented, result in the following:
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(i)
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The acquisition
by any person or corporation, or any persons or corporations acting jointly or in concert
(as determined by the Securities Act (Alberta)), whether directly or indirectly, of
voting securities of the Corporation which, together with all other voting securities of
the Corporation held by such persons or corporations, constitutes, in the aggregate, more
than 40% of the Common Shares;
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(ii)
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an amalgamation,
arrangement or other form of business combination of the Corporation with another corporation
which results in the holders of voting securities of that other corporation holding, in the
aggregate, more than 40% of all outstanding voting securities of the Corporation resulting
from any such business combination; and
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(iii)
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the sale, lease
or exchange of all or substantially all of the property of the Corporation to another person
or corporation, other than in the ordinary course of business of the Corporation or to a
subsidiary.
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Subject to subparagraphs
7(b), (c), (d) and (e), Options granted under the Plan shall expire on the date provided for in the respective Option Agreement or on
such later date as may be permitted by the Board of Directors, which shall be no later than the fifth anniversary of the date on which
any such Option is granted.
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(b)
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Retirement or Disability
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Subject to subparagraph
7(c), in the event of the termination of employment or of a consulting agreement of a Participant with the Corporation or any of its
subsidiaries due to normal retirement in accordance with the policies of the Corporation or the respective subsidiary, as the case may
be, or due to permanent disability of the Participant (as determined by the Board of Directors), the Participant may exercise such part
of the Option as is exercisable immediately prior to the time of such termination within a period of 30 days following such termination
in the case of a Participant who is engaged in Investor Relations Activities and ceases to be employed to provide Investor Relations
Activities and within a period of 90 days following such termination in every other case but in no event later than the normal expiry
date of the Option and any such Option not fully exercised at the end of such period shall then terminate.
In the event of
the death of any Participant prior to the expiry of outstanding Options granted to such Participant, the executors or personal representatives
of the Participant shall have the right to exercise any such Option within 180 days of the Participant’s death, but in no event
later than the normal expiry date of the Option and for not more than the number of Options for which the Participant could have exercised
any such Option immediately prior to the Participant’s death, and any such Option not fully exercised at the end of such period
shall then terminate.
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(d)
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Resignation or Termination not for Cause
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Subject to subparagraph
7(e), in the event of the resignation of a Participant from, the termination of employment of a Participant with, or the removal or resignation
of a Participant who is a director, officer, employee or consultant of the Corporation or any of its subsidiaries prior to the expiry
of all outstanding Options granted to such Participant, the Participant shall have the right to exercise any such Options within a period
of 30 days following the effective date of such resignation in the case of a Participant who is engaged in Investor Relations Activities
and ceases to be employed to provide Investor Relations Activities and within a period of 90 days following the effective date of such
resignation or termination in every other case but in no event later than the normal expiry date of the Options, but for not more than
the number of Options for which the Participant could have exercised any such Option immediately prior to such resignation or termination
and any such Option not fully exercised at the end of such period shall then terminate.
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(e)
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Termination for Cause
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If a Participant
is dismissed or terminated as a director, officer, employee or consultant (as the case may be by the Corporation or by one of its subsidiaries)
for cause, all unexercised Options of that Participant under the Plan shall immediately terminate forthwith without further notice to
the Participant, notwithstanding the original term or vesting of the Options granted to such Participant under the Plan or Option Agreement.
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8.
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Amendment and Discontinuance of Plan
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The Board of Directors
may from time to time amend or revise the terms of the Plan or may discontinue the Plan at any time, provided that no such action may
in any manner adversely affect the rights under any options earlier granted to a Participant under the Plan without the consent of that
Participant.
Nothing contained
in the Plan nor in any option granted under this Plan shall give any Participant or any other person, any interest or title in or to
any Common Shares of the Corporation or any rights as a shareholder of the Corporation or any other legal or equitable right against
the Corporation other than as set out in the Plan and pursuant to the exercise of any option, nor shall it confer upon the Participants
any right to continue as an employee, officer, consultant or director of the Corporation or of its subsidiaries.
The obligations
of the Corporation to sell Common Shares and deliver share certificates under the Plan are subject to such compliance by the Corporation
and the Participants as the Corporation deems necessary or advisable with all applicable corporate and securities laws, rules and regulations.
The use of the masculine gender in this
Plan shall be deemed to include or be replaced by the feminine gender where appropriate to the particular Participant.
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12.
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Stock Exchange Requirements
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The terms and conditions
of the Plan and the implementation thereof shall at all times be subject to the rules and regulations of any stock exchange on which
the Shares are listed, and, in the event of any inconsistency between the terms and conditions of the Plan and the rules and regulations
of any such exchange, the rules and regulations of such exchange shall prevail.
APPENDIX C
Amended and Restated By-law
[See attached]
BY-LAW NUMBER 2
A by-law
relating generally to the transaction of the business and affairs of the Corporation.
CONTENTS
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SECTION
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ONE
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INTERPRETATION
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TWO
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ADMINISTRATION
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THREE
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BORROWING AND SECURITIES
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FOUR
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DIRECTORS
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FIVE
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COMMITTEES
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SIX
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OFFICERS
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SEVEN
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PROTECTION OF DIRECTORS, OFFICERS AND OTHERS
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EIGHT
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SHARES
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NINE
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DIVIDENDS AND RIGHTS
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TEN
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MEETINGS OF SHAREHOLDERS
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ELEVEN
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DIVISIONS AND DEPARTMENTS
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TWELVE
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INFORMATION AVAILABLE TO SHAREHOLDERS
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THIRTEEN
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NOTICES
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FOURTEEN
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EFFECTIVE DATE (AND REPEAL)
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BE IT ENACTED as a by-law of NEWTON ENERGY CORPORATION
(hereinafter called the “Corporation”)
as follows:
SECTION
ONE
INTERPRETATION
1.1
DEFINITIONS. In the by-laws and all resolutions of the Corporation, unless the context otherwise
requires:
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(a)
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“Act”
means the Business Corporations Act (Alberta) and the regulations made thereunder,
as from time to time amended, and in the case of such amendment any reference in the by-laws
shall be read as referring to the amended provisions thereof;
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(b)
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“Applicable
Securities Laws” means the applicable securities legislation of each relevant province
and territory of Canada, as amended from time to time, the written rules, regulations and
forms made or promulgated under any such statute, and the published national instruments,
multilateral instruments, policies, bulletins and notices of the securities commissions and
similar regulatory authorities of each relevant province and territory of Canada;
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(c)
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“appoint” includes “elect”
and vice versa;
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(d)
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“articles”
means the original or restated articles of incorporation, articles
of amendment, articles of amalgamation,
articles of continuance, articles of reorganization, articles of arrangement,
articles of dissolution and articles of revival and includes an amendment to any of
them;
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(e)
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“board” means the board of directors
of the Corporation;
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(f)
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“by-laws”
means this by-law and all other by-laws of the Corporation from time to time in force and
effect;
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(g)
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“corporation”
means a body corporate incorporated or continued under the Act and not discontinued under
the Act;
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(h)
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“meeting of
shareholders” means an annual meeting of shareholders and a special meeting of shareholders;
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(i)
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“non-business
day” means Saturday, Sunday and any other day that is a holiday as defined in the Interpretation
Act (Alberta) or the Interpretation Act (Canada);
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(j)
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“notice-and-access”
has the meaning ascribed thereto in Applicable Securities Laws;
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(k)
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“ordinary resolution” means a resolution
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(i)
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passed by a majority
of the votes cast by the shareholders who voted in respect of that resolution, or
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(ii)
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signed by all the shareholders entitled to
vote on that resolution;
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(l)
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“recorded address”
means, in the case of a shareholder, his address as recorded
in the securities register of the Corporation; and, in the case of joint shareholders, the
address appearing in the securities register of the Corporation in respect of such joint
holding or the first address so appearing if there are more than one; and,
in the case of a director,
officer, auditor or member of a committee of the board, his
latest address as recorded in the records of the Corporation;
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(m)
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“resident Canadian” means an individual
who is
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(i)
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a Canadian citizen ordinarily resident in Canada,
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(ii)
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a Canadian citizen
not ordinarily resident in Canada who is a member of a prescribed class of persons,
or
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(iii)
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a permanent resident
within the meaning of the Immigration Act (Canada) and ordinarily resident in Canada;
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(n)
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“signing
officer” means, in relation to any instrument, any person authorized to sign the same
on behalf of the Corporation by Clause 0 or by a resolution passed pursuant thereto;
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(o)
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“special business”
means all business transacted at a special meeting of shareholders and all business transacted
at an annual meeting of shareholders, except consideration of the financial statements and
auditor’s report, fixing the number of directors for the following year, election of
directors and reappointment of the incumbent auditor;
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(p)
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“special meeting
of shareholders” means a meeting, other than an annual meeting, of shareholders entitled
to vote at an annual meeting of shareholders, and includes a meeting of any class or classes
of shareholders acting separately from any other class or classes of shareholders; and
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(q)
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“special resolution”
means a resolution passed by a majority of not less than 2/3 of the votes cast by the shareholders
who voted in respect of that resolution or signed by all the shareholders entitled to vote
on that resolution.
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Save as aforesaid,
words and expressions defined in the Act have the same meanings when used herein; and words importing the singular number include the
plural and vice versa; words importing gender include the masculine, feminine and neuter genders; and words importing persons include
individuals, bodies corporate, partnerships, trusts and unincorporated organizations.
SECTION
TWO
ADMINISTRATION
2.1 REGISTERED
OFFICE, RECORDS OFFICE AND ADDRESS FOR SERVICE. Until changed in accordance with the Act, the registered office of the Corporation, the
designated records office (if separate from the registered office) of the Corporation and the post office box (if any) designated as
the address for service upon the Corporation by mail shall initially be at the address or addresses in Alberta specified in the notice
thereof filed with the articles and thereafter as the board may from time to time determine.
2.2
CORPORATE SEAL. The corporate seal of the Corporation shall be in the form as determined by the board from time to time.
2.3
FINANCIAL YEAR. The financial year of the Corporation shall be determined by the board from time to time.
2.4 EXECUTION
OF INSTRUMENTS. Any officer or any director may sign certificates and similar instruments (other than share certificates) on the Corporation’s
behalf with respect to any factual matters relating to the Corporation’s business and affairs, including certificates certifying
copies of the articles, by-laws, resolutions and minutes of meetings of the Corporation. Subject to the foregoing:
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(a)
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deeds,
transfers, assignments,
contracts, obligations and other instruments shall be
signed on behalf of the Corporation by one or more persons who hold the office of director,
chairman of the board,
chief executive officer, president,
vice- president,
secretary, treasurer,
assistant
secretary or assistant treasurer, or any other office created by by-law or by resolution
of the board. When
there is only one
director and that director is the only officer
of the Corporation, deeds, transfers,
assignments, contracts,
obligations and other instruments may be signed by that
person alone, as director or officer, on
behalf of the Corporation; and
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(b)
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security certificates
(including share certificates) shall be signed by at least one director or officer of the
Corporation or by or on behalf of a registrar, transfer
agent or branch transfer agent of the Corporation or by a trustee who certifies it in accordance
with a trust indenture. Any signatures required on a
security certificate (including share certificates) may be printed or otherwise mechanically
reproduced on it.
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In addition,
the board may from time to time direct the person or persons by whom any particular instrument or class of instruments may or
shall be signed. Any signing officer or director may affix the corporate seal to any instrument requiring the same.
Any resolutions
of the directors or shareholders of the Corporation and any documents and other instruments in writing requiring execution on behalf
of the Corporation may be executed in separate counterparts, and all such executed counterparts when
taken together shall constitute one resolution, document or other instrument in writing as the case may be. The Corporation and the directors
and shareholders shall be entitled to rely on delivery of a facsimile or other electronic copy of any executed resolution of the directors
or shareholders of the Corporation or any executed document or other instrument in writing and such
facsimile or other electronic copy shall be legally effective to create a valid and binding resolution,
document or other instrument in writing as the case may be.
2.5
BANKING ARRANGEMENTS. The banking business of the Corporation including, without limitation,
the borrowing of money and the giving of security therefor, shall
be transacted with such banks, trust companies or other bodies corporate or organizations as may from time to time be designated by or
under the authority of the board. Such banking business or any part thereof shall be transacted under
such agreements, instructions and delegations of powers as the board may from time to time prescribe
or authorize.
2.6
VOTING RIGHTS IN OTHER BODIES CORPORATE. The signing officers of the Corporation may execute
and deliver proxies and arrange for the issuance of voting certificates or other evidence of the right to exercise the voting rights
attaching to any securities held by the Corporation. Such instruments, certificates or other evidence
shall be in favour of such person or persons as may be determined by the officers executing such proxies or arranging for the issuance
of voting certificates or such other evidence of the right to exercise such voting rights. In addition,
the board, or failing the board, the signing officers of the Corporation, may from time to
time direct the manner in which, and the person or persons by whom, any particular voting rights
or class of voting rights may or shall be exercised.
SECTION THREE
BORROWING AND SECURITIES
3.1
BORROWING POWER. Without limiting the borrowing powers of the Corporation as set forth in the Act, but subject to the articles,
the board may from time to time on behalf of the Corporation, without authorization of the shareholders:
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(a)
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borrow money upon
the credit of the Corporation in such amounts and on such terms as
may be deemed expedient by obtaining loans or
advances or by way
of overdraft or otherwise;
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(b)
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issue, reissue, sell
or pledge bonds, debentures, notes or other evidences of indebtedness or guarantee of the
Corporation, whether secured or unsecured, for such sums and at such prices as may be deemed
expedient;
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(c)
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to the extent permitted
by the Act, give a guarantee on behalf of the Corporation to secure performance of any present
or future indebtedness, liability or obligation of any person;
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(d)
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charge,
mortgage, hypothecate, pledge or otherwise create a security interest in all or any
present and future property, real and personal, immoveable and moveable, of the Corporation,
including its undertakings and rights, to secure any bonds, debentures, notes or other evidences
of indebtedness or guarantee or any other indebtedness, liability or obligation of the Corporation,
present or future; and
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(e)
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delegate to a committee
of the board, a director or an officer of the Corporation all or any of the powers conferred
aforesaid or by the Act to such extent and in such manner as the directors may determine.
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Nothing in this
section limits or restricts the borrowing of money by the Corporation on bills of exchange or promissory notes made, drawn, accepted
or endorsed by or on behalf of the Corporation.
3.2
DELEGATION. The board may from time to time delegate to such one or more of the directors and officers of the Corporation as may
be designated by the board all or any of the powers conferred on the board by Clause 3.01 or by the Act to such extent and in such manner
as the board shall determine at the time of each such delegation.
SECTION FOUR
DIRECTORS
4.1 NUMBER
OF DIRECTORS AND QUORUM. Until changed in accordance with the Act, the board shall consist of not fewer than the minimum number and not
more than the maximum number of directors provided in the articles. Subject to Clause 4.08, the quorum for the transaction of business
at any meeting of the board shall consist of a majority of the directors or such greater or lesser number of directors as the board may
from time to time determine. If a quorum is present at the opening of any meeting of directors, the directors present may proceed with
the business of the meeting, notwithstanding that a quorum is not present throughout the meeting. If a quorum is not present at the opening
of any meeting of directors, the directors present may adjourn the meeting to a fixed time and place but may not transact any other business
other than as provided in these by-laws or in the Act until a quorum is present.
4.2
QUALIFICATION. The following persons are disqualified from being a director of the Corporation:
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(a)
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anyone who is less than 18 years of age;
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(i)
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is a represented
adult as defined in the Adult Guardianship and Trustee Act (Alberta) or is the subject
of a certificate of incapacity that is in effect under the Public Trustee Act (Alberta),
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(ii)
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is a formal patient as defined in the Mental
Health Act (Alberta),
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(iii)
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is the subject of an order under the Mentally
Incapacitated Persons Act (Alberta)
appointing a committee of his person or estate or both, or
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(iv)
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has been found to
be a person of unsound mind by a court elsewhere than in Alberta;
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(c)
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a person who is not an individual; and
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(d)
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a person who has the status of bankrupt.
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A director need not be a shareholder.
At least one-quarter of the directors, or such other number of directors (if any) as may be prescribed by the Act, shall be resident
Canadians.
4.3
CONSENT TO ACT. A person who is elected or appointed a director is not a director unless:
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(a)
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he was present at
the meeting when he was elected or appointed and did not refuse to act as a director; or
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(b)
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if he was not present
at the meeting when he was elected or appointed, he consented to act as a director in writing
before his election or appointment or within 10 days after it, or he has acted as a director
pursuant to the election or appointment.
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4.4
ELECTION AND TERM. Shareholders of the Corporation shall, by ordinary resolution at the first meeting of shareholders and at each
succeeding annual meeting at which an election of directors is required, elect directors to hold office for a term expiring not later
than the close of the annual meeting of shareholders following the election. At each annual meeting of shareholders, all directors whose
term of office has expired or then expires shall retire but, if qualified, shall be eligible for re-election. A director not elected
for an expressly stated term ceases to hold office at the close of the first annual meeting of shareholders following his election. Notwithstanding
the foregoing, if directors are not elected at a meeting of shareholders, the incumbent directors continue in office until their successors
are elected. The number of directors to be elected at any such meeting shall be the number of directors whose term of office has expired
or then expires unless the directors or the shareholders otherwise determine. It is not necessary that all directors elected at a meeting
of shareholders hold office for the same term. If the articles so provide, the directors may, between annual meetings of shareholders,
appoint one or more additional directors of the Corporation to serve until the next annual meeting of shareholders, but the number of
additional directors shall not at any time exceed one-third of the number of directors who held office at the expiration of the last
annual meeting of the Corporation.
4.5 REMOVAL
OF DIRECTORS. Subject to the Act, the shareholders may, by ordinary resolution passed at a special meeting, remove any director from
office and the vacancy created by such removal may be filled at the meeting of the shareholders at which the director was removed or,
if not so filled, may be filled by the directors.
4.6 CEASING
TO HOLD OFFICE. A director ceases to hold office when he dies, when he is removed from office by the shareholders, when he ceases to
be qualified for election as a director, or when his written resignation is sent or delivered to the Corporation, or if a time is specified
in such resignation, at the time so specified, whichever is later; provided always that, subject to the Act, the shareholders of the
Corporation may by ordinary resolution at a special meeting remove any director or directors from office.
4.7 VACANCIES.
Subject to the Act, a quorum of the board may fill a vacancy in the board. In the absence of a quorum
of the board, the board shall forthwith call a special meeting of the shareholders to fill the vacancy. If the board fails to call such
meeting or if there are no such directors then in office, any shareholder may call the meeting.
4.8 ACTION
BY THE BOARD. The board shall manage or supervise the management of the business and affairs of the Corporation. Subject to Clauses 4.09
and 4.100, the powers of the board may be exercised by a meeting at which the quorum is present or by resolution in writing signed by
all the directors entitled to vote on that resolution at a meeting of the board. Where there is a vacancy in the board, the remaining
directors may exercise all the powers of the board so long as a quorum remains in office. Where the Corporation has only one director,
that director may constitute a meeting.
4.9
CANADIAN REPRESENTATION. Subject to the Act, the board shall not transact business at a meeting, other than filling a vacancy
in the board, unless at least one- quarter of the directors present are resident Canadians, except where:
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(a)
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a resident Canadian
director who is unable to be present approves in writing or by telephone or other communications
facilities the business transacted at the meeting; and
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(b)
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the number of resident
Canadian directors present at the meeting, together with any resident Canadian director who
gives his approval under clause (a), totals at least one-quarter of the directors present
at the meeting.
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4.10 PARTICIPATION
IN MEETING. A director may participate in a meeting of the board or of a committee of the board by electronic means, telephone or other
communication facilities as permit all persons participating in the meeting to hear each other, and a director participating in such
a meeting by such means is deemed to be present at the meeting.
4.11 PLACE
OF MEETINGS. Subject to the articles, meetings of the board may be held at any place in or outside Canada.
4.12 CALLING
OF MEETINGS. Meetings of the board shall be held from time to time at such time and at such place as the board, the chairman of the board,
the chief executive officer or any two directors may determine, and the Secretary shall, upon direction of any of the foregoing, convene
a meeting of directors; provided always that, should more than one of the above named call a meeting at or for substantially the same
time, there shall be held only one meeting and such meeting shall occur at the time and place determined by, in order of priority, the
board, the chairman or the chief executive officer.
4.13 NOTICE
OF MEETING. Notice of the time and place of each meeting of the board shall be given in the manner provided in Clause 13.01 to each director
not less than forty- eight hours before the time when the meeting is to be held. A notice of a meeting of directors need not specify
the purpose of or the business to be transacted at the meeting, except where the Act requires such purpose or business to be specified,
including any proposal to:
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(a)
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submit to the shareholders
any question or matter requiring approval of the shareholders;
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(b)
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fill a vacancy among the directors or in the
office of auditor;
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(c)
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appoint additional directors;
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(f)
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purchase, redeem, or otherwise acquire shares
of the Corporation;
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(g)
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pay a commission for the sale of shares;
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(h)
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approve a management proxy circular;
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(i)
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approve any annual financial statements; or
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(j)
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adopt, amend or repeal by-laws.
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A
director may, in any manner, waive notice of or otherwise consent to a meeting of the board, and attendance of a director at a meeting
of directors is a waiver of notice of the meeting, except when a director attends a meeting for the express purpose of objecting to the
transaction of business on the grounds that the meeting is not lawfully called.
4.14
FIRST MEETING OF NEW BOARD. Provided a quorum of directors is present, each newly elected board may, without notice, hold its
first meeting immediately following the meeting of shareholders at which such board is elected.
4.15 ADJOURNED
MEETING. Notice of an adjourned meeting of the board is not required if the time and place of the adjourned meeting is announced at the
original meeting.
4.16
REGULAR MEETINGS. The board may appoint a day or days in any month or months for regular meetings of the board at a place and
hour to be named. A copy of any resolution of the board fixing the place and time of such regular meetings shall be sent to each director
forthwith after being passed, but no other notice shall be required for any such regular meeting except where the Act requires the purpose
thereof or the business to be transacted thereat to be specified.
4.17 CHAIRMAN
AND SECRETARY. The chairman of the board, or, in his absence, the chief executive officer, or in his absence, a president or vice-president
shall be chairman of any meeting of the board. If none of the said officers are present, the directors present shall choose one of their
number to be chairman. The secretary of the Corporation shall act as secretary at any meeting of the board, and if the secretary of the
Corporation be absent, the chairman of the meeting shall appoint a person, who need not be a director, to act as secretary of the meeting.
4.18 CASTING
VOTES. At all meetings of the board every question shall be decided by a majority of the votes cast on the question. In case of an equality
of votes the chairman of the meeting shall not be entitled to a second or casting vote.
4.19
CONFLICT OF INTEREST. A director or officer shall not be disqualified by his office, or be required to vacate his office, by reason
only that he is a party to, or is a director or officer of, or has a material interest in, any person who is party to, a material contract
or material transaction or proposed material contract or material transaction with the Corporation or any subsidiary thereof. Such a
director or officer shall, however, disclose to the Corporation and the board, in writing or by requesting to have it entered in the
minutes of meetings of directors or of meetings of committees of directors at the time and in the manner provided in the Act, the nature
and extent of any interest that he has in any material contract or material transaction, whether made or proposed, with the Corporation,
if the director or officer: (a) is a party to the contract or transaction, (b) is a director or an officer, or an individual acting in
a similar capacity, of a party to the contract or transaction, or (c) has a material interest in a party to the contract or transaction.
Except as provided in the Act, no such director of the Corporation shall vote on any resolution to approve such contract or transaction.
A contract or transaction for which disclosure is required is not invalid, and the director or officer is not accountable to the Corporation
or its shareholders for any profit realized from the contract or transaction, because of the director’s or officer’s interest
in the contract or transaction or because the director was present or was counted to determine whether a quorum existed at the meeting
of directors or committee of directors that considered the contract or transaction, if the director or officer disclosed his interest
in accordance with the provisions of the Act and the contract or transaction was approved by the directors, and it was reasonable and
fair to the Corporation when it was approved.
Even
if these conditions are not met, a director or office, acting honestly and in good faith, shall not, by reason only of his office, be
accountable to the Corporation or to its shareholders for any profit realized from a contract or transaction for which disclosure is
required, and the contract or transaction is not invalid by reason only of the interest of the director or officer in the contract or
transaction, if the contract or transaction is approved or confirmed by special resolution at a meeting of the shareholders, disclosure
of the interest was made to the shareholders in a manner sufficient to indicate its nature before the contract or transaction was approved
or confirmed, and the contract or transaction was reasonable and fair to the Corporation when it was approved or confirmed.
4.20 REMUNERATION
AND EXPENSES. The directors shall be paid such remuneration for their services as the board may from time to time determine. The directors
shall also be entitled to be reimbursed for traveling and other expenses properly incurred by them in attending meetings of the board
or any committee thereof. Nothing herein contained shall preclude any director from serving the Corporation in any other capacity and
receiving remuneration therefor.
SECTION FIVE
COMMITTEES
5.1 COMMITTEE
OF DIRECTORS. The board may appoint a committee of directors, however designated, or a managing director, who must be a resident Canadian,
and delegate to such committee or managing director any of the powers of the board except those which,
under the Act, a committee of directors or managing director has no authority to exercise. At least one-quarter of the members of such
committee (or such other number of directors, if any, as may be prescribed by the Act from time to time) shall be resident Canadians.
A committee may be comprised of one director.
5.2
TRANSACTION OF BUSINESS. Subject to the provisions of these by-laws relating to participation by electronic means or telephone,
the powers of a committee of directors may be exercised by a meeting at which a quorum is present or by resolution in writing signed
by all the members of such committee who would have been entitled to vote on that resolution at a meeting of the committee. Meetings
of any committee may be held at any place in or outside Canada and may be called by any one member of the committee giving notice in
accordance with the by-laws governing the calling of directors’ meetings.
5.3 PROCEDURE.
Unless otherwise determined herein or by the board, each committee shall have the power to fix its quorum at not less than a majority
of its members, to elect its chairman and to regulate its procedure.
SECTION SIX
OFFICERS
6.1
APPOINTMENT OF OFFICERS. The board may from time to time appoint a chairman of the board, a managing director (who shall be a
resident Canadian), a chief executive officer, a president, one or more vice-presidents, a secretary, a treasurer and such other officers
as the board may determine, including one or more assistants to any of the officers so appointed. The board may specify the duties of
and, in accordance with this by-law and subject to the provisions of the Act, delegate to, such officers powers to manage the business
and affairs of the Corporation. Except for a managing director and a chairman of the board, an officer may but need not be a director
and one person may hold more than one office. The chief executive officer, or if there is no chief executive officer appointed, the president,
shall be the chief executive officer of the Corporation.
6.2
CHAIRMAN OF THE BOARD. The board may from time to time appoint a chairman of the board who shall be a director. If appointed,
the board may assign to him any of the powers and duties that are, by any provisions of this by-law, assigned to the managing director
or to the chief executive officer; and he shall, subject to the provisions of the Act, have such other powers and duties as the board
may specify. He shall preside at all meetings of the shareholders at which he is present. During the absence or disability of the chairman
of the board, his duties shall be performed and his powers exercised by the managing director, if any, or by the chief executive officer
if there is no managing director.
6.3 MANAGING
DIRECTOR. The board may from time to time appoint a managing director who shall be a resident Canadian
and a director. If appointed, he shall have, subject to the authority of the board, general supervision of the business and affairs of
the Corporation, and he shall, subject to the provisions of the Act, have such other powers and duties as the board may specify. During
the absence or disability of the chief executive officer, or if no chief executive officer has been appointed, the managing director
shall also have the powers and duties of that office.
6.4 CHIEF
EXECUTIVE OFFICER. If appointed, the chief executive officer shall, subject to the discretion of the board, subject to the authority
of the board, have general supervision of the business of the Corporation, and he shall have such other
powers and duties as the board may specify. During the absence or disability of the managing director, or if no managing director has
been appointed, the chief executive officer shall also have the powers and duties of that office.
6.5 PRESIDENT
AND VICE-PRESIDENT. A president or vice-president, if appointed, shall have such powers and duties as the board or the chief executive
officer may specify.
6.6
SECRETARY. The secretary, if appointed, shall attend and be the secretary of all meetings of the board, shareholders and committees
of the board and shall enter or cause to be entered in records kept for that purpose minutes of all proceedings thereat. He shall give
or cause to be given, as and when instructed, all notices to shareholders, directors, officers, auditors and members of committees of
the board, shall be the custodian of the stamp or mechanical device generally used for affixing the corporate seal of the Corporation
and of all books, papers, records, documents and instruments belonging to the Corporation, except when some other officer or agent has
been appointed for that purpose, and shall have such other powers and duties as the board or the chief executive officer may specify.
6.7
TREASURER. The treasurer, if appointed, shall keep proper accounting records in compliance with the Act and shall be responsible
for the deposit of money, the safekeeping of securities and the disbursement of the funds of the Corporation. He shall render to the
board, whenever required, an account of all his transactions as treasurer and of the financial position of the Corporation, and he shall
have such other powers and duties as the board or the chief executive officer may specify.
6.8 POWERS
AND DUTIES OF OTHER OFFICERS. The powers and duties of all other officers shall be such as the terms of their engagement call for or
as the board or the chief executive officer may specify. Any of the powers and duties of an officer
to whom an assistant has been appointed may be exercised and performed by such assistant, unless the board or the chief executive officer
otherwise directs.
6.9
VARIATION OF POWERS AND DUTIES. The board may from time to time and subject to the provisions of the Act, vary, add to or limit
the powers and duties of any officer.
6.10 TERM
OF OFFICE. The board, in its discretion, may remove any officer of the Corporation, without prejudice to such officer’s rights
under any employment contract. Otherwise each officer appointed by the board shall hold office until his successor is appointed.
6.11
TERMS OF EMPLOYMENT AND REMUNERATION. The terms of employment and the remuneration of officers appointed by the board shall be
settled by the board from time to time. The fact that any officer is a director or shareholder of the Corporation shall not disqualify
him from receiving such remuneration as an officer as may be determined.
6.12 CONFLICT
OF INTEREST. An officer shall disclose his interest in any material contract or material transaction or proposed material contract or
material transaction with the Corporation in accordance with Clause 4.19.
6.13 AGENTS
AND ATTORNEYS. The board shall have power from time to time to appoint agents or attorneys for the Corporation in or outside Canada with
such powers of management or otherwise (including the power to sub-delegate) as may be thought fit.
6.14 FIDELITY
BONDS. The board may require such officers, employees and agents of the Corporation as the board deems advisable to furnish bonds for
the faithful discharge of their powers and duties, in such forms and with such surety as the board may from time to time determine.
SECTION SEVEN
PROTECTION OF DIRECTORS,
OFFICERS AND OTHERS
7.1 LIMITATION
OF LIABILITY. Every director and officer of the Corporation, in exercising his powers and discharging his duties, shall act honestly
and in good faith with a view to the best interests of the Corporation, and exercise the care, diligence
and skill that a reasonably prudent person would exercise in comparable circumstances. Subject to the foregoing, no director or officer
shall be liable for the acts, receipts, neglects or defaults of any other director or officer or employee, or for joining in any receipt
or other act for conformity, or for any loss, damage or expense happening to the Corporation through the insufficiency or deficiency
of title to any property acquired for or on behalf of the Corporation, or for the insufficiency or deficiency of any security in or upon
which any of the moneys of the Corporation shall be invested, or for any loss or damage arising from the bankruptcy, insolvency or tortious
acts of any person with whom any of the moneys, securities or effects of the Corporation shall be deposited, or for any loss occasioned
by any error of judgment or oversight on his part, or for any other loss,
damage or misfortune whatsoever which shall happen in the execution of the duties of his office or in relation thereto, unless
the same are occasioned by his own wilful neglect or default; provided that nothing herein shall relieve any director or officer from
the duty to act in accordance with the Act and the regulations thereunder or from liability for any breach thereof.
An
act of a director or officer is valid notwithstanding an irregularity in the director’s or officer’s election or appointment
or a defect in the director’s or officer’s qualifications.
Directors
may rely upon the accuracy of any statement or report prepared by the Corporation’s auditors, internal accountants or other responsible
officials and shall not be responsible or held liable for any loss or damage resulting from the paying of any dividends or otherwise
acting upon such statement or report.
7.2 INDEMNITY.
Subject to the limitations contained in the Act, the Corporation shall indemnify a director or officer,
a former director or officer, or a person who acts or acted at the Corporation’s request as a director or officer of a body corporate
of which the Corporation is or was a shareholder or creditor (or a person who undertakes or has undertaken any liability on behalf of
the Corporation or any such body corporate) and his heirs and legal representatives, against all costs, charges and expenses, including
an amount paid to settle an action or satisfy a judgment, reasonably incurred by him in respect of any civil, criminal or administrative
action or proceeding to which he is made a party by reason of being or having been a director or officer of the Corporation or such body
corporate, if:
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(a)
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he acted honestly
and in good faith with a view to the best interests of the Corporation; and
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(b)
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in the case of a
criminal or administrative action or proceeding that is enforced by a monetary penalty, he
had reasonable grounds for believing that his conduct was lawful.
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7.3 INSURANCE.
Subject to the limitations contained in the Act, the Corporation may purchase and maintain such insurance
for the benefit of any person referred to in Clause 7.02 0against any liability incurred by him, as
the board may from time to time determine.
SECTION EIGHT
SHARES
8.1
ALLOTMENT AND ISSUE. The board may, from time to time,
allot, or grant options to purchase, the whole or any part of the authorized and unissued shares of the Corporation at such times
and to such persons and for such consideration as the board shall determine, provided that no share shall
be issued until it is fully paid as prescribed by the Act. Subject to the articles, no holder of any class of share of the capital of
the Corporation shall be entitled as of right to subscribe for, purchase or receive any part of any new or additional issue of shares
of any class, whether now or hereafter authorized, or any bonds, debentures or other securities convertible into shares of any class.
8.2 COMMISSIONS.
The board may from time to time authorize the Corporation to pay a reasonable commission to any person in consideration of his purchasing
or agreeing to purchase shares of the Corporation, whether from the Corporation or from any other person, or procuring or agreeing to
procure purchasers for any such shares.
8.3 SECURITIES
REGISTER. The Corporation shall maintain a securities register in which it records the securities issued by it in registered form, showing
with respect to each class or series of securities:
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(a)
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the names, alphabetically
arranged, and the latest known address of each person who is or has been a security holder;
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(b)
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the number of securities held by each security
holder; and
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(c)
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the date and particulars of the issue and transfer
of each security.
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The
Corporation shall keep the information entered in the securities register for the period of time prescribed in the regulations to the
Act.
8.4 TRANSFER
AGENTS AND REGISTRARS. The board may from time to time appoint one or more trust companies registered under The Trust Companies Act
(Alberta) as its agent or agents to maintain the central securities register or registers, and an agent or agents to maintain branch
securities registers. Such a person may be designated as transfer agent or registrar according to his functions and one person may be
appointed both registrar and transfer agent. The board may at any time terminate such appointment.
8.5
REGISTRATION OF TRANSFER. Subject to, and except as otherwise provided in, the Act and the Securities Transfer Act (Alberta),
no transfer of shares shall be registered in a securities register except upon presentation of the certificate representing such shares
with a transfer endorsed thereon or delivered therewith duly executed by the registered holder or by his attorney or successor duly appointed,
together with such reasonable assurance or evidence of signature,
identification and authority to transfer as the board may from time to time prescribe, upon payment of all applicable taxes and any fees
prescribed by the board; upon compliance with such restrictions on transfer as are authorized by the articles and upon satisfaction of
any lien referred to in Clause 8.06.
8.6 LIEN
FOR INDEBTEDNESS. If the articles provide that the Corporation shall have a lien on shares registered in the name of a shareholder indebted
to the Corporation, such lien may be enforced, subject to any other provision of the articles, by the sale of the shares thereby affected,
or by the cancellation by the Corporation of the shares thereby affected and the appropriate corresponding reduction of the stated capital
account for said shares, or by any other action, suit, remedy or proceeding authorized or permitted by law or by equity and, pending
such enforcement, may refuse to register a transfer of the whole or any part of such shares.
8.7
NON-RECOGNITION OF TRUSTS. Subject to the Act, the Securities Transfer Act (Alberta), the Civil Enforcement Act (Alberta)
and this by-law, the Corporation may treat the registered owner of a security as the person exclusively entitled to vote, to receive
notices, to receive any interest, dividend or other payments in respect of the security, and otherwise to exercise all the rights and
powers of an owner of the security.
8.8
SHARE CERTIFICATES. Every holder of one or more shares of the Corporation shall be entitled, at his option, to a share certificate,
or to a non-transferable written acknowledgement of his right to obtain a share certificate, stating the name of the person to whom the
certificate or acknowledgment was issued, and the number and class or series of shares held by him as shown on the securities register.
Share certificates and acknowledgments of a shareholder’s right to a share certificate, shall, subject to the Act, be in such form
as the board shall from time to time approve. Any share certificate shall be signed in accordance with Clause 2.04 and need not be under
the corporate seal; provided that, unless the board otherwise determines, certificates representing shares in respect of which a transfer
agent and/or registrar has been appointed shall not be valid unless countersigned by or on behalf of such transfer agent and/or registrar.
The signature of one of the signing officers or, in the case of share certificates which are not valid unless countersigned by or on
behalf of a transfer agent and/or registrar, the signatures of both signing officers, may be printed or mechanically reproduced in facsimile
upon share certificates and every such facsimile signature shall for all purposes be deemed to be the signature of the officer whose
signature it reproduces and shall be binding upon the Corporation. A share certificate executed as aforesaid shall be valid notwithstanding
that one or both of the officers whose facsimile signature appears thereon no longer holds office at the date of issue of the certificate.
8.9 REPLACEMENT
OF SHARE CERTIFICATES. The board or any officer or agent designated by the board may in its or his discretion direct the issue of a new
share certificate in lieu of and upon cancellation of a share certificate that has been mutilated, or in substitution for a share certificate
claimed to have been lost, destroyed or wrongfully taken, on payment of such fee, not exceeding the maximum amount prescribed in the
regulations to the Act, for a share certificate issued in respect of a transfer, and on such terms as to indemnity, reimbursement of
expenses and evidence of loss and of title as the board may from time to time prescribe, whether generally or in any particular case.
8.10 JOINT
SHAREHOLDERS. If two or more persons are registered as joint holders of any share, the Corporation shall not be bound to issue more than
one certificate in respect thereof, and delivery of such certificate to one of such persons shall be sufficient delivery to all of them.
Any one of such persons may give effectual receipts for the certificates issued in respect thereof or for any dividend, bonus, return
of capital or other money payable or warrant issuable in respect of such shares.
8.11
DECEASED SHAREHOLDERS. In the event of the death of a holder, or one of the joint holders, of any share, the Corporation shall not be
required to make any entry in the register of shareholders in respect thereof, except on production of all such documents as may be required
by law and upon compliance with the reasonable requirements of the Corporation and its transfer agents.
8.12 ELECTRONIC,
BOOK-BASED OR OTHER NON-CERTIFICATED REGISTERED POSITIONS. For greater certainty but subject to subsection (1) of section 48 of the Act,
a registered securityholder may have his holdings of securities of the Corporation evidenced by an electronic, book-based, direct registration
service or other non-certificated entry or position on the register of securityholders to be kept by the Corporation in place of a physical
security certificate pursuant to a registration system that may be adopted by the Corporation, in conjunction with its transfer agent
(if any). This by-law shall be read such that a registered holder of securities of the Corporation pursuant to any such electronic, book-based,
direct registration service or other non-certificated entry or potion shall be entitled to all of the same benefits, rights, entitlements
and shall incur the same duties and obligations as a registered holder of securities evidenced by a physical security certificate. The
Corporation and its transfer agent may adopt such policies and procedures and require such documents and evidence as they may determine
necessary or desirable in order to facilitate the adoption and maintenance of a security registration system by electronic, book-based,
direct registration system or other non- certificated means.
SECTION NINE
DIVIDENDS AND RIGHTS
9.1 DIVIDENDS.
Subject to the provisions of the Act, the board may, from time to time, declare dividends payable to the shareholders according to their
respective rights and interest in the Corporation. Dividends may be paid in money or property or by issuing fully paid shares of the
Corporation.
9.2 DIVIDEND
CHEQUES. A dividend payable in cash shall be paid by cheque drawn on the Corporation’s bankers or one of them to the order of each
registered holder of shares of the class or series in respect of which it has been declared and mailed by prepaid ordinary mail to such
registered holder at his recorded address, unless such holder otherwise directs. In the case of joint holders the cheque shall, unless
such joint holders otherwise direct, be made payable to the order of all such joint holders and mailed to them at their recorded address.
The mailing of such cheque as aforesaid, unless the same is not paid on due presentation, shall satisfy and discharge the liability for
the dividend to the extent of the sum represented thereby plus the amount of any tax which the Corporation is required to and does withhold.
9.3 NON-RECEIPT
OF CHEQUES. In the event of non-receipt of any dividend cheque by the person to whom it is sent as aforesaid, the Corporation shall issue
to such person a replacement cheque for a like amount on such terms as to indemnity, reimbursement of expenses and evidence of non-receipt
and of title as the board may from time to time prescribe, whether generally or in any particular case.
9.4 RECORD
DATE FOR DIVIDENDS AND RIGHTS. The board may fix in advance a date, preceding by not more than 50 days the date for the payment of any
dividend or the date for the issue of any warrant or other evidence of right to subscribe for securities of the Corporation, as a record
date for the determination of the persons entitled to receive payment of such dividend or to receive the right to subscribe for such
securities, provided that if the Corporation is a distributing corporation, notice of any such record date is given, not less than 7
days before such record date, in the manner provided in the Act. Where no record date is fixed in
advance as aforesaid, the record date for the determination of the persons entitled to receive payment of any dividend or to receive
the right to subscribe for such securities of the Corporation shall be at the close of business on the day on which the resolution relating
to such dividend or right to subscribe is passed by the board.
9.5 UNCLAIMED
DIVIDENDS. Any dividend unclaimed after a period of six years from the date on which the same has
been declared to be payable shall be forfeited and shall revert to the Corporation.
SECTION TEN
MEETINGS OF SHAREHOLDERS
10.1 ANNUAL
MEETINGS. The annual meeting of shareholders shall be held at such time in each year and, subject to the Act and to Clause 10.04, at
such place, as the board, the chairman of the board, the managing director or the chief executive officer may, from time to time, determine,
for the purpose of considering the financial statements and reports required by the Act to be placed before the annual meeting, electing
directors, appointing auditors and for the transaction of such other business as may properly be brought before the meeting.
10.2 SPECIAL
MEETINGS. The board may, at any time, call a special meeting of shareholders to be held on such day and at such time and, subject to
section 132 of the Act, at such place within Canada (or outside Canada if the place is specified in the articles), as the board may determine.
10.3 SPECIAL
BUSINESS. All business transacted at a special meeting of shareholders and all business transacted at an annual meeting of shareholders,
except consideration of the financial statements and auditor’s report, fixing the number of directors for the following year, election
of directors and reappointment of the incumbent auditors, is deemed to be special business.
10.4 PLACE
OF MEETINGS. Meetings of shareholders shall be held at the registered office of the Corporation or elsewhere in the municipality in which
the registered office is situate or, if the board shall so determine, at some other place in Alberta or, if all the shareholders entitled
to vote at the meeting so agree, at some place outside Alberta. Notwithstanding the foregoing, if the articles of the Corporation so
provide, meetings of shareholders may be held outside Alberta.
C-18
10.5 NOTICE
OF MEETINGS. Notice of the time and place of each meeting of shareholders shall be given in the manner provided in Clause 13.01 not less
than 21 days nor more than 50 days before the date of the meeting to each director, to the auditor and to each shareholder who at the
close of business on the record date for notice is entered in the securities register as the holder of one or more shares carrying the
right to vote at the meeting. Notice of a meeting of shareholders called for any purpose other than consideration of the financial statements
and auditor’s report, election of directors and re-appointment of the incumbent auditor shall state the nature of such business
in sufficient detail to permit the shareholder to form a reasoned judgment thereon and shall state the text of any special
resolution to be submitted to the meeting. A shareholder may in any manner waive notice of or otherwise
consent to a meeting of shareholders.
Subject
to the Act and Applicable Securities Laws, for so long as the Corporation is a distributing corporation any notice of a meeting of shareholders
shall be sufficiently given if given in accordance with the requirements applicable to notice-and-access.
10.6
RECORD DATE FOR NOTICE. The board may fix in advance a date, preceding the date of any meeting of shareholders by not more than 50 days
and not less than 21 days, as a record date for the determination of the shareholders entitled to notice of or to vote at the meeting,
provided that if the Corporation is a distributing corporation, notice of any such record date shall be given not less than 7 days before
such record date in the manner provided in the Act. If no such record date is so fixed, the record date for the determination of the
shareholders entitled to receive notice of the meeting shall be at the close of business on the last business day immediately preceding
the day on which the notice is sent or, if no notice is sent, shall be the day on which the meeting is held.
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10.7
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LISTS OF SHAREHOLDERS ENTITLED TO NOTICE AND TO VOTE.
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(a)
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For
every meeting of shareholders,
the Corporation shall, within the time period prescribed by the Act, prepare a list of shareholders
entitled to receive notice of the meeting, arranged in alphabetical order and showing the
number of shares held by each shareholder entitled to receive notice of the meeting, as of
the record date for notice of the meeting as fixed by the directors, or, if no record date
is fixed by the directors, as deemed by the Act.
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(b)
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For
every meeting of shareholders, the Corporation shall, within the time period prescribed by
the Act, prepare a list of shareholders entitled to vote at the meeting, arranged in alphabetical
order and showing the number of shares held by each shareholder entitled to vote at the meeting,
as of the record date for voting at the meeting as fixed by the directors, or, if no record
date is fixed by the directors, as deemed by the Act.
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10.8
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MEETINGS WITHOUT NOTICE. A meeting of shareholders
may be held without notice at any time and place permitted by
the Act:
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(a)
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if all the shareholders entitled
to vote thereat are present in person or represented by proxy and waive notice of or otherwise
consent to such meeting being held, and
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(b)
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if the auditors
and the directors are present or waive notice of or otherwise consent to such meeting being
held,
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so long as such shareholders,
auditors or directors present are not attending for the express purpose of objecting to the
transaction of any business on the grounds that the meeting is not lawfully called. At such
a meeting any business may be transacted which the Corporation at a meeting of shareholders
may transact. If the meeting is held at a place outside Alberta, shareholders not present
or represented by proxy, but who have waived notice of or otherwise consented to such meeting,
shall also be deemed to have consented to the meeting being held at such place.
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10.9 CHAIRMAN
AND SECRETARY. The chairman of any meeting of shareholders shall be the chairman, or in his absence, the chief executive officer, or
in his absence, a president or vice-president who is a shareholder. If no such officer is present within fifteen minutes from the time
fixed for holding the meeting, the persons present and entitled to vote shall choose one of their number to be chairman. If the secretary
of the Corporation is absent, the chairman shall appoint some person, who need not be a shareholder, to act as secretary of the meeting.
10.10
PERSONS ENTITLED TO BE PRESENT. The only persons entitled to be present at a meeting of shareholders shall be those entitled to vote
thereat, the directors and auditors of the Corporation, and others who, although not entitled to vote, are entitled or required under
any provision of the Act or the articles or by-laws to be present at
the meeting. Any other person may be admitted only on the invitation of the chairman of the meeting.
10.11 QUORUM.
A quorum for the transaction of business at any meeting of shareholders shall be at least two persons present in person,
each being a shareholder entitled to vote thereat or a duly appointed proxy or representative for an absent shareholder so entitled,
and representing in the aggregate not less than ten percent (10%) of the outstanding shares of the Corporation carrying voting rights
at the meeting. If a quorum is present at the opening of any meeting of shareholders, the shareholder(s) present or represented may proceed
with the business of the meeting notwithstanding that a quorum is not present throughout the meeting. If a quorum is not present at the
opening of any meeting of shareholders, the shareholder(s) present or represented may adjourn the meeting to a fixed time and place but
may not transact any other business other than as provided in these By-laws or in the Act until a quorum is present.
10.12 RIGHT
TO VOTE. Every person named in the list of shareholders entitled to vote referred to in Clause 10.07
shall be entitled to vote the shares shown thereon opposite his name at the meeting to which such list relates, except to the extent
that:
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(a)
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where the Corporation has fixed
a record date in respect of such meeting, such person has transferred any of his shares after
such record date or, where the Corporation has not fixed a record date in respect of such
meeting, such person has transferred any of his shares after the date on which the list of
shareholders entitled to notice of the meeting is prepared; and
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(b)
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the
transferee, having produced properly endorsed certificates evidencing such shares or having
otherwise established that he owns such shares, has demanded not later than 10 days before
the meeting that his name be included in such list.
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In any such excepted
case, the transferee shall be entitled to vote the transferred
shares at such meeting.
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10.13
PROXIES AND REPRESENTATIVES. Every shareholder entitled to vote at a meeting of shareholders may
appoint a proxyholder, and one or more alternate proxyholders, who need not be shareholders, to attend
and act at the meeting in the manner and to the extent authorized and with the authority conferred by the proxy.
A proxy shall be in writing executed by the shareholder or his attorney and shall conform with the requirements of the Act. Alternatively,
every such shareholder which is a body corporate or association may authorize, by resolution of its
directors or governing body, an individual, who need not be a shareholder, to represent it at a meeting of shareholders, and such individual
may exercise on the shareholder’s behalf all the powers it could exercise if it were an individual shareholder. The authority of
such an individual shall be established by depositing with the Corporation a certified copy of such resolution, or in such other manner
as may be satisfactory to the secretary of the Corporation or the chairman of the meeting.
10.14 TIME
FOR DEPOSIT OF PROXIES. The board may specify in a notice calling a meeting of shareholders a time,
preceding the time of such meeting or an adjournment thereof by not more than 48 hours, exclusive
of non-business days, before which proxies to be used at such meeting must be deposited. A proxy
shall be acted upon only if, prior to the time so specified, it shall have been deposited with the
Corporation or an agent thereof specified in such notice or, if no such time is specified in such
notice, it has been received by the secretary of the Corporation or by the chairman of the meeting or any adjournment thereof prior to
the time of voting; provided that the chairman of the meeting may, in his sole discretion, at the
meeting, elect to waive the requirement that proxies be deposited prior to the time specified in such notice and accept any and all proxies
deposited at or before the time of the meeting or any adjournment thereof.
10.15 JOINT
SHAREHOLDERS. If two or more persons hold shares jointly, any
one of them present in person or represented at a meeting of shareholders may, in the absence of the other or others vote the shares;
but if two or more of those persons are present in person or represented and vote, they shall vote as one on the shares jointly held
by them.
10.16 VOTES
TO GOVERN. At any meeting of shareholders every question shall, unless otherwise required by the articles or by-laws or by law, be determined
by the majority of the votes cast on the question. In case of an equality of votes, either upon a show of hands or upon a poll, the chairman
of the meeting shall not be entitled to a second or casting vote.
10.17 SHOW
OF HANDS. Subject to the provisions of the Act, any question at a meeting of shareholders shall be decided by a show of hands, unless
a ballot thereon is required or demanded as hereinafter provided. Upon a show of hands every person
who is present and entitled to vote shall have one vote. Whenever a vote by a show of hands shall have been taken upon a question,
unless a ballot thereon is so required or demanded, a declaration by the chairman of the meeting
that the vote upon the question has been carried or carried by a particular majority or not carried, and an entry to that effect in the
minutes of the meeting, shall be prima facie evidence of the fact, without proof of the number or proportion of the votes recorded in
favour of or against any resolution or other proceeding in respect of the said question, and the
result of the vote so taken shall be the decision of the shareholders upon the said question.
10.18
BALLOTS. On any question proposed for consideration at a meeting of shareholders, any shareholder or proxyholder entitled to vote at
the meeting may require or demand a ballot, either before or on the declaration of the result of
any vote by show of hands. A ballot so required or demanded shall be taken in such manner as the
chairman shall direct. A requirement or demand for a ballot may be withdrawn at any time prior to the taking of the ballot. If a ballot
is taken, each person present shall be entitled, in respect of the shares which he is entitled to vote at the meeting upon the question,
to that number of votes provided by the Act or the articles, and the result of the ballot so taken shall be the decision of the shareholders
upon the said question.
10.19 ADMISSION
OR REJECTION OF A VOTE. In case of any dispute as to the admission or rejection of a vote, the chairman shall determine the same and
such determination made in good faith shall be final and conclusive.
10.20 ADJOURNMENT.
If a meeting of the shareholders is adjourned by one or more adjournments for an aggregate of less than thirty days, it shall not be
necessary to give notice of the adjourned meeting, other than by announcement at the time of an adjournment.
If a meeting of shareholders is adjourned by one or more adjournments for an aggregate of thirty days or more, notice of the adjourned
meeting shall be given as for an original meeting.
10.21
PARTICIPATION IN MEETINGS. Subject to the Act, a shareholder or any other person entitled to attend a meeting of shareholders may participate
in the meeting by electronic means, telephone or other communication facilities that permit all persons participating in the meeting
to hear or otherwise communicate with each other, and a person
participating in such a meeting by those means is deemed to be present at the meeting. If the directors or the shareholders of the Corporation
call a meeting of shareholders, the directors or the shareholders, as the case may be, may determine
that the meeting shall be held, in accordance with the Act, entirely by electronic means, telephone or other communication facility that
permits all participants to communicate adequately with each other during the meeting. Notwithstanding
Clause 10.17, a vote at any meeting of shareholders may be held, in accordance with the Act, entirely
by electronic means, telephone or other communication facility, if the Corporation makes such a communication
facility available. Any person participating in a meeting of shareholders by electronic means, telephone or other communication facilities
as provided in this Clause 10.21 and entitled to vote at the meeting may vote, in accordance with
the Act, by electronic means, telephone or other communication
facility that the Corporation has made available for that purpose.
10.22 RESOLUTION
IN WRITING. A resolution in writing signed by all the shareholders entitled to vote on that resolution at a meeting of shareholders is
as valid as if it had been passed at a meeting of the shareholders.
10.23
ONLY ONE SHAREHOLDER. Where the Corporation has only one shareholder or only one holder of any class or series of shares, the shareholder
present in person or by proxy constitutes a meeting.
SECTION ELEVEN
DIVISIONS AND DEPARTMENTS
11.1 CREATION
AND CONSOLIDATION OF DIVISIONS. The board may cause the business and operations of the Corporation or any part thereof to be divided
or to be segregated into one or more divisions upon such basis, including character or type of operation,
geographical territory, product manufactured or service rendered, as the board may consider appropriate in each case. The board
may also cause the business and operations of any such division to be further divided into sub-units and the business and operations
of any such divisions or sub-units shall be consolidated upon such basis as the board may consider appropriate in each case.
11.2 NAME
OF DIVISION. Subject to law, any division or its sub-units may be designated by such name as the
board may from time to time determine and may transact business, enter into contracts,
sign cheques and other documents of any kind and do all acts and things under such name. Any such contract, cheque or document
shall be binding upon the Corporation as if it had been entered into or signed in the name of the Corporation.
11.3
OFFICERS OF DIVISIONS. From time to time the board or, if authorized by the board, the chief executive
officer, may appoint one or more officers for any division, prescribe
their powers and duties, and settle their terms of employment and remuneration. The board or, if authorized by the board, the chief executive
officer, may remove, at its or his pleasure, any officer so appointed without prejudice to such officer’s rights under any employment
contract. Officers of divisions or their sub-units shall not, as such, be officers of the Corporation.
SECTION TWELVE
INFORMATION AVAILABLE
TO SHAREHOLDERS
12.1 DIRECTORS
MAY RESTRICT ACCESS. Except as provided by the Act, no shareholder shall be entitled to discovery of any information respecting any details
or conduct of the Corporation’s business which, in the opinion of the board, would be inexpedient in the interests of the Corporation
to communicate to the public.
12.2
DIRECTORS TO DETERMINE ACCESS. The directors may, from time to time, subject to the rights conferred
by the Act, determine whether and to what extent and at what time and place and under what circumstances or regulations the documents,
books and registers and accounting records of the Corporation, or any of them, shall be open to inspection
of shareholders, and no shareholder shall have any right to inspect any document or book or register or accounting records of the Corporation
except as conferred by statute or authorized by the board or by a resolution of the shareholders.
SECTION THIRTEEN
NOTICES
13.1
METHOD OF GIVING NOTICES. Any notice (which term includes any communication or document) to be given (which term includes sent, delivered
or served) pursuant to the Act, the articles, the by-laws or otherwise to any shareholder, director or officer shall be delivered personally
to, sent by mail addressed to:
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(a)
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the shareholder
at the shareholder’s latest address as shown in the records of the Corporation or its
transfer agent; and
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(b)
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the director or officer at the director’s
or officer’s latest address as shown in the records of the Corporation or in the last
notice filed under section 106 or 113 of the Act.
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A
notice so delivered shall be deemed to have been given when it is delivered personally or to the recorded address as aforesaid; a notice
so mailed shall be deemed to have been given when deposited in a post office or public letter box; and a notice so sent by any means
of transmitted or recorded communication shall be deemed to have been given when dispatched or delivered to the appropriate communication
company or agency or its representative for dispatch. Subject to subsection (2) of section 134 of the Act, a notice sent in accordance
with the foregoing shall be deemed to have been received by the recipient at the time it would be delivered in the ordinary course of
mail, unless there are reasonable grounds for believing that the recipient did not receive the notice at that time or at all. The secretary
may change or cause to be changed the recorded address of any shareholder, director, or officer in accordance with any information believed
by him to be reliable
A
notice required to be sent or delivered as noted above in this Clause 13.01 or pursuant to section 256 or section 257 of the Act may
be sent by electronic means in accordance with the provisions of the Electronic Transactions Act (Alberta).
Notwithstanding
the foregoing, subject to the Act and Applicable Securities Laws, for so long as the Corporation is a distributing corporation, any notice
of a meeting of shareholders shall be sufficiently given if given in accordance with the requirements applicable to notice-and-access.
13.2
NOTICE TO JOINT SHAREHOLDERS. If two or more persons are registered as joint holders of any share, any notice shall be addressed to all
of such joint holders but notice to one of such persons shall be sufficient notice to all of them.
13.3
COMPUTATION OF TIME. In computing the date when notice must be given under any provision requiring a specified number of days’
notice of any meeting or other event, the date of giving the notice shall be excluded and the date of the meeting or other event shall
be included.
13.4
UNDELIVERED NOTICES. If notices given to a shareholder pursuant to Clause 13.01 are returned on two consecutive occasions because he
cannot be found, the Corporation shall not be required to give any further notices to such shareholder until he informs the Corporation
in writing of his new address.
13.5 OMISSIONS
AND ERRORS. The accidental omission to give any notice to any shareholder, director, officer, auditor or member of a committee of the
board or the non-receipt of any notice by any such person or any error in any notice not affecting the substance thereof shall not invalidate
any action taken at any meeting held pursuant to such notice or otherwise founded thereon.
13.6 PERSONS
ENTITLED BY DEATH OR OPERATION OF LAW. Every person who, by operation of law, transfer, death of a shareholder or any other means whatsoever,
shall become entitled to any share, shall be bound by every notice in respect of such share which shall have been duly given to the shareholder
from whom he derives his title to such share prior to his name and address being entered on the securities register (whether such notice
was given before or after the happening of the event upon which be became so entitled) and prior to his furnishing to the Corporation
the proof of authority or evidence of his entitlement prescribed by the Act.
13.7
WAIVER OF NOTICE. Any shareholder (or his duly appointed proxyholder), director, officer, auditor or member of a committee of the board
may at any time waive any notice, or waive or abridge the time for any notice, required to be given to him under any provision of the
Act, the regulations thereunder, the articles, the by-laws or otherwise and such waiver or abridgement shall cure any default in the
giving or in the time of such notice, as the case may be. Any such waiver or abridgement shall be in writing except a waiver of notice
of a meeting of shareholders or of the board which may be given in any manner.
SECTION FOURTEEN
EFFECTIVE DATE (AND
REPEAL)
14.1
EFFECTIVE DATE. This by-law shall come into force when made by the board in accordance with the Act.
14.2 REPEAL.
All previous by-laws of the Corporation are repealed as of the coming into force of this by-law. Such repeal shall not affect the previous
operation of any by-law so repealed or affect the validity of any act done or right, privilege, obligation or liability acquired or incurred
under, or the validity of any contract or agreement made pursuant to, or the validity of any articles (as defined in the Act) or predecessor
charter documents of the Corporation obtained pursuant to, any such by-law prior to its repeal. All
officers and persons acting under any by-law so repealed shall continue to act as if appointed under the provisions of this by-law and
all resolutions of the shareholders or the board or a committee of the board with continuing effect passed under any repealed by-law
shall continue to be good and valid except to the extent inconsistent with this by-law and until amended or repealed.
MADE AND ADOPTED by the board of directors the [●]
day of July, 2020
CONFIRMED by
the shareholders in accordance with the Act the [20th] day of July,2020.
APPENDIX D
Post-Continuance By-laws
[See attached]
FIELD
TRIP HEALTH LTD.
BY-LAW NO. 1
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TABLE OF CONTENTS
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Page
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DEFINITIONS
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D-1
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1.
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Definitions
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D-1
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REGISTERED
OFFICE
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D-1
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2.
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Registered Office
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D-1
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SEAL
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D-2
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3.
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Seal
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D-2
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DIRECTORS
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D-2
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4.
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Numberd
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D-2
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5.
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Vacancies
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D-2
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6.
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Powers
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D-2
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7.
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Duties
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D-2
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8.
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Qualification
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D-2
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9.
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Election/Term of Office
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D-3
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10.
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Consent to Election
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D-3
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11.
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Removal
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D-3
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12.
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Vacancy of Office
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D-3
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13.
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Validity of Acts
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D-4
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MEETINGS
OF DIRECTORS
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D-4
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14.
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Regular and Special Purpose Meetings
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D-4
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15.
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Notice
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D-4
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16.
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Waiver of Notice
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D-5
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17.
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Omission of Notice
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D-5
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18.
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Electronic, Telephone Participation, Etc.
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D-5
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19.
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Adjournment
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D-5
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20.
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Quorum and Voting
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D-5
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21.
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Resolution in Lieu of Meeting
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D-6
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COMMITTEES
OF DIRECTORS
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D-6
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22.
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General
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D-6
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23.
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Audit Committee
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D-7
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REMUNERATION
OF DIRECTORS, OFFICERS AND EMPLOYEES
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D-7
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24.
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Remuneration of Directors, Officers and Employees
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D-7
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SUBMISSION
OF CONTRACTS OR TRANSACTIONS TO SHAREHOLDERS FOR APPROVAL
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D-8
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25.
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Submission of Contracts or Transactions to Shareholders for Approval
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D-8
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CONFLICT
OF INTEREST
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D-8
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26.
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Conflict of Interest
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D-8
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FOR
THE PROTECTION OF DIRECTORS AND OFFICERS
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D-9
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27.
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For the Protection of Directors and Officers
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D-9
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INDEMNITIES
TO DIRECTORS AND OTHERS.
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D-9
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28.
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Indemnities to Directors and Others
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D-9
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OFFICERS
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D-10
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29.
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Appointment of Officers
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D-10
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30.
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Removal of Officers and Vacancy of Office
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D-10
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TABLE OF CONTENTS
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(continued)
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Page
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31.
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Chair of the Board
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D-11
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32.
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Chief Executive Officer
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D-11
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33.
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President.
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D-11
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34.
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Vice-President
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D-11
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35.
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Secretary
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D-11
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36.
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Treasurer
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D-12
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37.
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Managing Director
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D-12
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38.
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Duties of Officers may be Delegated
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D-12
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39.
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Agents and Attorneys
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D-12
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SHAREHOLDERS' MEETINGS
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D-12
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40.
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Annual Meeting
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D-12
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41.
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Special Meetings
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D-12
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42.
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Meeting on Requisition of Shareholders
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D-13
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43.
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Participation in Meetings by Electronic Means
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D-13
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44.
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Meetings held by Electronic Means
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D-13
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45.
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Notice
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D-13
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46.
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Waiver of Notice
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D-13
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47.
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Omission of Notice
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D-13
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48.
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Record Dates
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D-14
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49.
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Chair of the Meeting
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D-14
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50.
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Votes
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D-14
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51.
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Electronic Voting
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D-15
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52.
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Right to Vote
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D-15
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53.
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Proxies
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D-16
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54.
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Conduct of Meeting
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D-16
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55.
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Adjournment
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D-16
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56.
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Quorum
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D-16
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57.
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Persons Entitled to be Present
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D-17
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58.
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Resolution in Lieu of Meeting
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D-17
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SHARES AND TRANSFERS
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D-17
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59.
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Issuance
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D-17
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60.
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Security Certificates
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D-17
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61.
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Agent
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D-17
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62.
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Dealings with Registered Holder
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D-18
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63.
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Surrender of Security Certificates
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D-18
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64.
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Defaced, Destroyed, Stolen or Lost Security Certificates
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D-18
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65.
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Enforcement of Lien for Indebtedness
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D-18
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66.
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Electronic, Book-Based or Other Non-Certificated Registered Positions
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D-19
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DIVIDENDS
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D-19
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67.
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Dividends
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D-19
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68.
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Joint Shareholders
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D-19
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69.
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Dividend Payments
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D-19
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VOTING SECURITIES IN OTHER BODIES CORPORATE
|
D-20
|
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|
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|
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70.
|
Voting Securities in Other Bodies Corporate
|
D-20
|
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|
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NOTICES, ETC.
|
D-20
|
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71.
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Service
|
D-20
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|
TABLE OF CONTENTS
|
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(continued)
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Page
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72.
|
Failure to Locate Shareholder
|
D-21
|
|
73.
|
Notice to Joint Shareholders
|
D-21
|
|
74.
|
Persons Becoming Entitled by Operation of Law
|
D-21
|
|
75.
|
Signatures upon Notices
|
D-21
|
|
76.
|
Computation of Time
|
D-21
|
|
77.
|
Proof of Service
|
D-21
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CUSTODY OF SECURITIES
|
D-21
|
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|
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78.
|
Custody of Securities
|
D-21
|
|
|
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EXECUTION OF CONTRACTS, ETC.
|
D-22
|
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|
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79.
|
Execution of Contracts, etc.
|
D-22
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|
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FISCAL PERIOD
|
D-22
|
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|
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80.
|
Fiscal Period
|
D-22
|
|
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DELIVERY OF DOCUMENTS
|
D-23
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81.
|
Delivery of Documents
|
D-23
|
|
|
|
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BORROWING MONEY, ETC.
|
D-23
|
|
|
|
|
|
82.
|
Borrowing Money, etc.
|
D-23
|
|
|
|
|
|
ADVANCED NOTICE PROVISIONS
|
D-23
|
|
|
|
|
|
83.
|
Nomination Procedures
|
D-23
|
|
84.
|
Timely Notice
|
D-24
|
|
85.
|
Manner of Timely Notice.
|
D-24
|
|
86.
|
Proper Form of Notice
|
D-25
|
|
87.
|
Notice to be Updated
|
D-26
|
|
88.
|
Eligibility for Nomination as a Director
|
D-26
|
|
89.
|
Delivery of Notice
|
D-27
|
|
90.
|
Board Discretion
|
D-27
|
BY-LAW NO. 1
A by-law relating generally to the conduct
of the business and affairs of [CORPORATION NAME] (the "Corporation") is made as follows:
DEFINITIONS
In this by-law and all other by-laws of
the Corporation, unless the context otherwise specifies or requires:
|
|
(a)
|
"Act" means the Canada Business Corporations Act and the
regulations made thereunder, as from time to time amended, and in the case of such amendment any reference in the by-laws shall be read
as referring to the amended provisions thereof;
|
|
|
(b)
|
"Applicable Securities Laws" means the applicable securities legislation
of each relevant province and territory of Canada, as amended from time to time, the rules, regulations and forms made or promulgated
under any such statute and the published national instruments, multilateral instruments, policies, bulletins and notices of the securities
commission and similar regulatory authority of each relevant province and territory of Canada;
|
|
|
(c)
|
"board" means the board of directors of the Corporation;
|
|
|
(d)
|
"by-laws" means this by-law and all other by-laws of the Corporation
from time to time in force and effect; and
|
|
|
(e)
|
"Chair" or "Chairperson" means chairperson of the board.
|
|
|
(f)
|
"close of business" means 5:00 p.m. (Toronto time) on a business
day in Toronto, Ontario.
|
|
|
(g)
|
"public announcement" means disclosure in a press release reported
by a national news service in Canada, or in a document publicly filed by the Corporation under its profile on the System for Electronic
Document Analysis and Retrieval at www.sedar.com
|
All terms used in the by-laws
that are defined in the Act and are not otherwise defined in the by-laws shall have the meanings given to such terms in the Act. Words
importing the singular number include the plural and vice versa and words importing the use of any gender include all genders, including
the neutral gender "it". The headings used in the by-laws are inserted for reference purposes only and are not to be considered
or taken into account in construing the terms or provisions thereof or be deemed in any way to clarify, modify or explain the effect of
any such terms or provisions.
REGISTERED OFFICE
The Corporation shall at all times
have a registered office in the province in Canada specified in its articles. The board may, in its discretion, change the place and address
of the registered office within the province specified in its articles.
SEAL
The directors may by resolution
from time to time adopt and change a corporate seal of the Corporation.
DIRECTORS
The number of directors shall be
the number fixed by the articles or, where the articles specify a variable number, the board shall be comprised of the number of directors
elected by the shareholders at the annual meeting or, subject to subsection 106(8) of the Act, by resolution of the board between annual
meetings. At least 25% of the directors of the Corporation, or such other number of directors (if any) as may be prescribed by the Act
from time to time, shall be resident Canadians. If the Corporation has less than four directors, at least one director shall be a resident
Canadian.
Subject to section 111 of the Act,
a quorum of directors may fill a vacancy among the directors, except a vacancy resulting from an increase in the number, or minimum or
maximum number, of directors, or from a failure to elect the number, or minimum number of directors, provided for in the articles. If
there is not a quorum of directors, or if there has been a failure to elect the number or minimum number of directors provided for in
the articles, the directors then in office shall call a special meeting of shareholders to fill the vacancy and, if they fail to call
a meeting or if there are no directors then in office, the meeting may be called by any shareholder.
A director appointed or elected to
fill a vacancy holds office for the unexpired term of his or her predecessor.
The directors shall manage, or supervise
the management of, the business and affairs of the Corporation and may exercise all such powers and do all such acts and things as may
be exercised or done by the Corporation, and are not expressly directed or required to be done in some other manner by the Act, the articles,
the by-laws, any special resolution of the shareholders of the Corporation or by statute.
Every director and officer of the Corporation, in exercising
his or her powers and discharging his or her duties, shall:
|
|
(a)
|
act honestly and in good faith with a view to the best interests of the Corporation; and
|
|
|
(b)
|
exercise the care, diligence and skill that a reasonably prudent person would exercise
in comparable circumstances.
|
The following persons are disqualified from being a director
of the Corporation:
|
|
(a)
|
anyone who is less than 18 years of age;
|
|
|
(b)
|
anyone who is incapable;
|
|
|
(c)
|
a person who is not an individual; and
|
|
|
(d)
|
a person who has the status of bankrupt.
|
A director of the Corporation is not required to hold shares
issued by the Corporation.
|
|
9.
|
Election/Term of Office
|
Subject to sections 106 and 107 of
the Act, the shareholders of the Corporation shall at the first meeting of shareholders and at each succeeding annual meeting at which
an election of directors is required, elect directors to hold office for a term expiring not later than the close of the first annual
meeting of shareholders following the election. A director not elected for an expressly stated term ceases to hold office at the close
of the first annual meeting of shareholders following his or her election but, if qualified, is eligible for re-election. Notwithstanding
the foregoing, if directors are not elected at a meeting of shareholders, the incumbent directors continue in office until their successors
are elected.
If a meeting of shareholders fails
to elect the number or the minimum number of directors required by the articles by reason of the lack of consent, disqualification, incapacity
or death of any candidates, the directors elected at that meeting may exercise all the powers of the directors if the number of directors
so elected constitutes a quorum.
A person who is elected or appointed
as a director is not a director unless such person was present at the meeting when the person was elected or appointed and did not refuse
to act as a director, or if the person was not present at the meeting when the person was elected or appointed, the person consented to
act as a director in writing before the person's election or appointment or within 10 days after it, or the person has acted as a director
pursuant to the election or appointment.
Subject to subsection 107(g) of the
Act, the shareholders of the Corporation may, by ordinary resolution at a special meeting, remove any director from office before the
expiration of his or her term of office, and may elect any person in his or her stead for the remainder of the director's term. Notwithstanding
the foregoing sentence, where the holders of any class or series of shares of the Corporation have an exclusive right to elect one or
more directors, a director so elected may only be removed by an ordinary resolution at a meeting of the shareholders of that class or
series.
A director of the Corporation ceases to hold office when:
|
|
(a)
|
the director dies or resigns;
|
|
|
(b)
|
the director is removed from office; or
|
|
|
(c)
|
the director becomes disqualified under Section 105(1) of the Act.
|
A resignation of a director becomes effective at the
time a written resignation is sent to the Corporation or at the time specified in the resignation, whichever is later.
An act of a director or officer is valid notwithstanding
an irregularity in the director's or officer's election or appointment or a defect in the director's or officer's qualification.
MEETINGS OF DIRECTORS
|
|
14.
|
Regular and Special Purpose Meetings
|
Unless the articles otherwise provide,
meetings of directors and of any committee of directors may be held at any place. A meeting of directors may be convened by the Chair
(if any), the Chief Executive Officer (if any) or any director at any time. The Secretary (if any) or any other officer or any director
shall, as soon as reasonably practicable following receipt of a direction from any of the foregoing, send a notice of the applicable meeting
to the directors.
Notice of the time and place for
the holding of any meeting of directors or of any committee of directors shall be sent to each director, or each director who is a member
of such committee, as the case may be, not less than 48 hours before the time of the meeting; provided that a meeting of directors or
of any committee of directors may be held at any time without notice if all of the directors or members of such committee are present
(except where a director attends the meeting for the express purpose of objecting to the transaction of any business on the grounds that
the meeting is not lawfully called) or if all the absent directors waive notice of the meeting. The notice of a meeting of directors shall
specify any of the following matters that are to be dealt with at the meeting, but need not otherwise specify the purpose or the business
to be transacted at the meeting:
|
|
(a)
|
submitting to the shareholders any question or matter requiring the approval of the
shareholders;
|
|
|
(b)
|
filling a vacancy among the directors or in the office of auditor, or appointing additional
directors;
|
|
|
(d)
|
issuing shares of a series under section 27 of the Act;
|
|
|
(f)
|
purchasing, redeeming or otherwise acquiring shares issued by the Corporation;
|
|
|
(g)
|
paying a commission referred to in section 41 of the Act;
|
|
|
(h)
|
approving a management proxy circular;
|
|
|
(i)
|
approving a take-over bid circular or directors' circular;
|
|
|
(j)
|
approving any financial statements referred to in section 155 of the Act; or
|
|
|
(k)
|
adopting, amending or repealing by-laws of the Corporation.
|
Notice of any meeting of directors
or of any committee of directors, or the time for the giving of any such notice or any irregularity in any meeting or in the notice thereof,
may be waived by any director in writing or by email or other form of electronic transmission addressed to the Corporation, or in any
other manner, and any such waiver may be validly given either before or after the meeting to which such waiver relates. Attendance of
a director at any meeting of directors or of any committee of directors is a waiver of notice of such meeting, except when a director
attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully
called.
The accidental omission to give notice
of any meeting of directors or of any committee of directors to, or the non-receipt of any notice by, any person shall not invalidate
any resolution passed, or any proceeding taken, at such meeting.
|
|
18.
|
Electronic, Telephone Participation, Etc.
|
If all of the directors of the Corporation
consent, a director may participate in a meeting of directors, or of any committee of directors, by means of telephonic, electronic or
other communication facility that permits all persons participating in the meeting to communicate adequately with each other during the
meeting. A director's consent shall be effective whether given before or after the meeting to which it relates, and may be given with
respect to all meetings of the board or a committee thereof held while the director holds office. A director participating in such a meeting
by such means is deemed, for the purposes of the Act and the by-laws, to be present at that meeting.
Any meeting of directors or of any
committee of directors may be adjourned from time to time by the chair of the meeting, with the consent of the meeting, to a fixed time
and place. Notice of an adjourned meeting of directors, or committee of directors, is not required to be given if the time and place of
the adjourned meeting is announced at the original meeting. Any adjourned meeting shall be duly constituted if held in accordance with
the terms of the adjournment and a quorum is present thereat. The directors who formed a quorum at the original meeting are not required
to form the quorum at the adjourned meeting. If there is no quorum present at the adjourned meeting, the original meeting shall be deemed
to have terminated forthwith after its adjournment. Any business may be brought before or dealt with at the adjourned meeting that might
have been brought before or dealt with at the original meeting in accordance with the notice calling the same.
A majority of the number of directors
then in office constitutes a quorum at any meeting of directors. Notwithstanding any vacancy among the directors, a quorum of directors
may exercise all of the powers of the directors. Subject to section 111 of the Act and subsections 114 (3) and (4) of the Act, directors
shall not transact business at a meeting of directors unless a quorum is present and at least 25% of the directors present are resident
Canadians. Questions arising at any meeting of directors shall be decided by a majority of votes. In the case of an equality of votes,
the chair of the meeting in addition to his or her original vote shall not have a second or casting vote.
|
|
21.
|
Resolution in Lieu of Meeting
|
A resolution in writing, signed by
all of the directors entitled to vote on that resolution at a meeting of directors or committee of directors, is as valid as if it had
been passed at a meeting of directors or committee of directors. A resolution in writing dealing with all matters required by the Act
or the by-laws to be dealt with at a meeting of directors, and signed by all the directors entitled to vote at that meeting, satisfies
all the requirements of the Act and the by-laws relating to meetings of directors.
COMMITTEES OF DIRECTORS
The directors
may from time to time appoint from their numbers one or more committees of directors, and may delegate any such managing director or committee
any of the powers of the directors, except that no committee shall have the authority to:
|
|
(a)
|
submit to the shareholders any question or matter requiring the approval of the shareholders;
|
|
|
(b)
|
fill a vacancy among the directors or in the office of auditor, or appoint additional
directors;
|
|
|
(c)
|
issue securities, except as authorized by the directors;
|
|
|
(d)
|
issue shares of a series under section 27 of the Act, except as authorized by the directors;
|
|
|
(f)
|
purchase, redeem or otherwise acquire shares issued by the Corporation;
|
|
|
(g)
|
pay a commission referred to in section 41 of the Act, except as authorized by the
directors;
|
|
|
(h)
|
approve a management proxy circular;
|
|
|
(i)
|
approve a take-over bid circular or directors' circular;
|
|
|
(j)
|
approve any financial statements referred to in section 155 of the Act;
|
|
|
(k)
|
adopt, amend or repeal by-laws of the Corporation; or
|
|
|
(l)
|
exercise any other power which, under the Act, a managing director or committee of
directors has no authority to exercise.
|
Notwithstanding the foregoing, the directors
may, by resolution, delegate to a committee of directors, or an officer of the Corporation, the power to:
|
|
(i)
|
borrow money on the credit of the Corporation;
|
|
|
(ii)
|
issue, reissue, sell, pledge or hypothecate debt obligations of the Corporation;
|
|
|
(iii)
|
give a guarantee on behalf of the Corporation to secure performance of an obligation
of any person; and
|
|
|
(iv)
|
mortgage, hypothecate, pledge, or otherwise create a security interest in, all
or any property of the Corporation, owned or subsequently acquired, to secure any obligation of the Corporation.
|
The directors shall appoint from
among their number an audit committee to be composed of not fewer than three directors, a majority of whom are not officers or employees
of the Corporation or any of its affiliates and a majority of whom must be independent and financially literate directors as defined in
National Instrument 52-110 – Audit Committees ("NI 52-110"). At any time when the Corporation is not a "distributing
corporation", the directors may (but shall not be required to) appoint from among their number an audit committee to be composed
of not fewer than three directors, a majority of whom are not officers or employees of the Corporation or any of its affiliates and a
majority of whom must be independent and financially literate directors as defined in NI 52-110.
Each member of the audit committee
shall be appointed by the board annually, and from time to time to fill vacancies, as required. A committee member may be removed or replaced
at any time at the discretion of the board and will cease to be a member of the committee on ceasing to be an independent director.
The audit committee, if appointed,
shall have the power to fix its quorum at not less than a majority of its members, and to determine its own rules of procedure, subject
to any requirements imposed by the board from time to time and to the following paragraph.
The auditor of the Corporation is
entitled to receive notice of every meeting of the audit committee and, at the expense of the Corporation, to attend and be heard thereat,
and, if so requested by a member of the audit committee, attend every meeting of the committee held during the term of office of the auditor.
The auditor of the Corporation or any member of the audit committee may call a meeting of the audit committee.
The audit committee, if appointed,
shall review the financial statements of the Corporation referred to in section 155 of the Act prior to approval thereof by the board,
and shall have such other powers and duties as may from time to time by resolution be assigned to it by the board.
REMUNERATION OF DIRECTORS, OFFICERS AND EMPLOYEES
|
|
24.
|
Remuneration of Directors, Officers and Employees
|
The directors of the Corporation may
fix the remuneration of the directors, officers and employees of the Corporation. Any remuneration paid to a director of the Corporation
shall be in addition to the salary paid to such director in his or her capacity as an officer or employee of the Corporation. Subject
to section 120 of the Act, the directors may also, by resolution, award special remuneration to any director in undertaking any special
services on the Corporation's behalf, other than the routine work ordinarily required of a director of the Corporation. The confirmation
of any such resolution by the shareholders shall not be required. The directors, officers and employees of the Corporation shall also
be entitled to be paid their travelling and other expenses properly incurred by them in connection with the affairs of the Corporation.
SUBMISSION OF CONTRACTS
OR
TRANSACTIONS TO SHAREHOLDERS FOR APPROVAL
|
|
25.
|
Submission of Contracts or Transactions
to Shareholders for Approval
|
The directors, in their discretion,
may submit any contract, act or transaction for approval, ratification or confirmation at any annual meeting of the shareholders or at
any special meeting of the shareholders called for the purpose of considering the same, and any contract, act or transaction that shall
be approved, ratified or confirmed by resolution passed by a majority of the votes cast at any such meeting (unless any different or
additional requirement is imposed by the Act or other applicable law or by the Corporation's articles or any other by-law), shall be
as valid and as binding upon the Corporation, and upon all the shareholders, as though it had been approved, ratified and/or confirmed
by every shareholder of the Corporation.
CONFLICT OF INTEREST
A director or an officer of the
Corporation shall disclose to the Corporation, in writing or by requesting to have it entered in the minutes of meetings of directors
or of meetings of committees of directors at the time and in the manner provided in the Act, the nature and extent of any interest that
he or she has in any material contract or material transaction, whether made or proposed, with the Corporation, if the director or officer:
|
|
(a)
|
is a party to the contract or transaction;
|
|
|
(b)
|
is a director or an
officer, or an individual acting in a similar capacity, of a party to the contract or transaction;
or
|
|
|
(c)
|
has a material interest in a party to the
contract or transaction.
|
Except as provided in the Act,
no such director of the Corporation shall vote on any resolution to approve such contract or transaction. A contract or transaction for
which disclosure is required is not invalid, and the director or officer is not accountable to the Corporation or its shareholders for
any profit realized from the contract or transaction, because of the director's or officer's interest in the contract or transaction,
or because the director was present or was counted to determine whether a quorum existed at the meeting of directors or committee of
directors that considered the contract or transaction, if:
|
|
(a)
|
the director or officer
disclosed his or her interest in accordance with the provisions of the Act;
|
|
|
(b)
|
the contract or transaction was approved
by the directors; and
|
|
|
(c)
|
it was reasonable and fair to the Corporation
when it was approved.
|
Even if the foregoing conditions
are not met, a director or officer, acting honestly and in good faith, is not accountable to the Corporation or to its shareholders for
any profit realized from a contract or transaction for which disclosure is required, and the contract or transaction is not invalid by
reason only of the interest of the director or officer in the contract or transaction, if:
|
|
(a)
|
the contract or transaction
is approved or confirmed by special resolution at a meeting of the shareholders;
|
|
|
(b)
|
disclosure of the
interest was made to the shareholders in a manner sufficient to indicate its nature before
the contract or transaction was approved or confirmed; and
|
|
|
(c)
|
the contract or transaction
was reasonable and fair to the Corporation when it was approved or confirmed.
|
FOR THE PROTECTION OF
DIRECTORS AND OFFICERS
|
|
27.
|
For the Protection of Directors and Officers
|
No director or officer of the Corporation
shall be liable to the Corporation for the acts, receipts, neglects or defaults of any other director, officer or employee of the Corporation,
or for joining in any receipt or act for conformity, or for any loss, damage or expense happening to the Corporation through the insufficiency
or deficiency of title to any property acquired by the Corporation, or for or on behalf of the Corporation, or for the insufficiency
or deficiency of any security in or upon which any of the monies of, or belonging to, the Corporation shall be placed out or invested,
or for any loss or damage arising from the bankruptcy, insolvency or tortious act of any person, including any person with whom or which
any monies, securities or effects shall be lodged or deposited, or for any loss, conversion, misapplication or misappropriation of or
any damage resulting from any dealings with any monies, securities or other assets belonging to the Corporation, or for any other loss,
damage or misfortune, whatever that may happen in the execution of the duties of such director's or officer's respective office of trust
or in relation thereto, unless the same shall happen by or through the director's or officer's failure to exercise the powers, and to
discharge the duties, of office honestly and in good faith, with a view to the best interests of the Corporation, and in connection therewith
to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances, provided that
nothing herein contained shall relieve a director or officer from the duty to act in accordance with the Act or relieve such director
or officer from liability under the Act. If any director or officer of the Corporation shall be employed by, or shall perform services
for, the Corporation, otherwise than as a director or officer, or shall be a member of a firm, or a shareholder, director or officer
of a body corporate, which is employed by or performs services for the Corporation, the fact that the director or officer is a shareholder,
director or officer of the Corporation, or body corporate or member of the firm, shall not disentitle such director or officer, or such
firm or body corporate, as the case may be, from receiving proper remuneration for such services.
INDEMNITIES TO DIRECTORS
AND OTHERS
|
|
28.
|
Indemnities to Directors and Others
|
|
|
(a)
|
The Corporation
shall indemnify a director or officer of the Corporation, a former director or officer of
the Corporation, any other individual who acts or acted at the Corporation's request as a
director or officer, any individual acting in a similar capacity of another entity, or any
other individual permitted by the Act to be so indemnified, in the manner and to the fullest
extent permitted by the Act. Without limiting the generality of the foregoing, the Corporation
shall indemnify a director or officer of the Corporation, a former director or officer of
the Corporation, any other individual who acts or acted at the Corporation's request as a
director or officer, or any individual acting in a similar capacity of another entity, against
all costs, charges and expenses, including costs reasonably incurred in the defence of an
action or proceeding and an amount paid to settle an action or satisfy a judgment, reasonably
incurred by the individual in respect of any civil, criminal, administrative, investigative
or other proceeding in which the individual is involved because of that association with
the Corporation or other entity.
|
|
|
(b)
|
The Corporation
shall advance moneys to a director, officer or other individual for the costs, charges and
expenses of a proceeding referred to in Section 28(a). The individual shall repay the moneys
if the individual does not fulfill the conditions of Section 28(c).
|
|
|
(c)
|
The Corporation
shall not indemnify an individual under Section 28(a) unless the individual:
|
|
|
(i)
|
acted honestly
and in good faith, with a view to the best interests of the Corporation, or, as the case
may be, to the best interests of the other entity for which the individual acted as director
or officer or in a similar capacity at the Corporation's request; and
|
|
|
(ii)
|
in the case of
a criminal or administrative action or proceeding that is enforced by a monetary penalty,
had reasonable grounds for believing that the individual's conduct was lawful.
|
|
|
(d)
|
The Corporation
shall, with the approval of a court, indemnify an individual referred to in Section 28(a),
or advance moneys under Section 28(b), in respect of an action by or on behalf of the Corporation
or other entity to procure a judgment in its favour, to which the individual is made a party
because of the individual's association with the Corporation or other entity as described
in Section 28(a), against all costs, charges and expenses reasonably incurred by the individual
in connection with such action, if the individual fulfills the conditions set out in Section
28(c).
|
|
|
(e)
|
The Corporation
may purchase and maintain insurance for the benefit of any individual referred to in Section
28(a) to the extent permitted by the Act.
|
OFFICERS
|
|
29.
|
Appointment of Officers
|
The directors, annually, or as often
as may be required, may appoint from among themselves a Chair (either on a full-time or part-time basis), and may appoint a Chief Executive
Officer, a President, one or more Vice-Presidents (to which title may be added words indicating seniority or function), a Secretary,
a Treasurer and one or more assistants to any of the officers so appointed. None of such officers except the Chair needs to be a director
of the Corporation, although a director may be appointed to any office of the Corporation. Two or more offices of the Corporation may
be held by the same person. The directors may, from time to time, appoint such other officers, employees and agents as they shall deem
necessary, who shall have such authority and shall perform such functions and duties as may from time to time be prescribed by resolution
of the directors. The directors may, from time to time, and subject to the provisions of the Act, vary, add to or limit the duties and
powers of any officer, employee or agent of the Corporation.
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30.
|
Removal of Officers and Vacancy of
Office
|
All officers, employees and agents shall be subject to
removal by resolution of the directors at any time, with or without cause.
An officer of the Corporation ceases
to hold office when such officer dies, resigns or is removed from office. A resignation of an officer becomes effective at the time a
written resignation is sent to the Corporation, or at the time specified in the resignation, whichever is later.
The Chair of the board, if any,
shall, if present, preside as chair at all meetings of the board and at all meetings of the shareholders of the Corporation. The Chair
shall have such powers and shall perform such duties as may from time to time be assigned to him or her by resolution of the directors,
or as are incidental to his or her office.
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32.
|
Chief Executive Officer
|
The Chief Executive Officer of the
Corporation, if any, shall, unless otherwise determined by resolution of the board, and subject to the direction of the board, exercise
general supervision and control over the business and affairs of the Corporation. In the absence of the Chair, if any, and if the Chief
Executive Officer is also a director of the Corporation, the Chief Executive Officer shall, when present, preside as chair at all meetings
of directors and the shareholders of the Corporation. The Chief Executive Officer shall have such powers and shall perform such duties
as may from time to time be assigned to him or her by resolution of the directors or as are incidental to his or her office.
The President of the Corporation,
if any, shall be vested with all the powers and shall perform all the duties of the Chief Executive Officer in the absence, or inability
or refusal to act, of the Chief Executive Officer, provided, however, that a President who is not a director shall not preside as chair
at any meeting of directors or shareholders. The President shall have such powers and shall perform such duties as may from time to time
assigned to him or her by resolution of the directors or as are incidental to his or her office.
The Vice-President of the Corporation,
if any, or, if more than one, the Vice-Presidents, in order of seniority, shall be vested with all the powers and shall perform all the
duties of the President in the absence, or inability or refusal to act, of the President, provided, however, that a Vice-President who
is not a director shall not preside as chair at any meeting of directors or shareholders. The Vice-President or, if more than one, the
Vice-Presidents shall have such powers and shall perform such duties as may from time to time be assigned to him, her or them by resolution
of the directors, or as are incidental to the office of the applicable Vice-President.
Unless another officer has been
appointed for that purpose, the Secretary of the Corporation, if any, shall give, or cause to be given, notices for all meetings of directors,
any committee of directors and shareholders when directed to do so, and shall maintain the records referred to in subsections 20(1) and
(2) of the Act. The Secretary shall have such powers, and shall perform such duties, as may from time to time be assigned to the Secretary
by resolution of the directors or as are incidental to the office of the Secretary.
Subject to the provisions of any
resolution of the directors, the Treasurer of the Corporation, if any, or such other officer who has been appointed for that purpose
shall have the care and custody of all the funds and securities of the Corporation and shall deposit the same in the name of the Corporation
in such bank or banks, or with such other depositary or depositaries, as the directors may by resolution direct; provided that the Treasurer
may, from time to time, arrange for the temporary deposit of moneys of the Corporation in banks, trust companies or other financial institutions
within or outside Canada not so directed by the board for the purpose of facilitating transfer thereof to the credit of the Corporation
in a bank, trust company or other financial institution so directed. Unless another officer has been appointed for that purpose, the
Treasurer shall prepare and maintain adequate accounting records. The Treasurer shall have such powers and shall perform such duties
as may from time to time be assigned to such person by resolution of the directors or as are incident to the office of the Treasurer.
The Treasurer may be required to give such bond for the faithful performance of his or her duties as the directors in their sole discretion
may require and no director shall be liable for failure to require any such bond or for the insufficiency of any such bond or for any
loss by reason of the failure of the Corporation to receive any indemnity thereby provided.
The Managing Director of the Corporation,
if any, shall conform to all lawful orders given to him or her by the directors, and shall at all reasonable times give to the directors,
or any of them, all information they may require regarding the affairs of the Corporation.
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38.
|
Duties of Officers may be Delegated
|
In case of the absence or inability,
or refusal to act, of any officer of the Corporation, or for any other reason that the directors may deem sufficient, the directors may
delegate all or any of the powers of such officer to any other officer or to any director for the time being.
The Corporation shall have power,
from time to time, to appoint agents or attorneys for the Corporation in or outside Canada with such powers (including the power to sub-delegate)
of management, administration or otherwise as may be thought fit.
SHAREHOLDERS' MEETINGS
Subject to sections 132 and 133 of
the Act, the annual meeting of shareholders shall be held at a place within Canada (or outside Canada if the place is specified in the
articles or all the shareholders entitled to vote at the meeting agree that the meeting is to be held at that place) determined by the
directors on such day in each year and at such time as the directors may determine.
The directors of the Corporation
may at any time call a special meeting of shareholders to be held on such day and at such time and, subject to section 132 of the Act,
at such place within Canada (or outside Canada if the place is specified in the articles or all the shareholders entitled to vote at
the meeting agree that the meeting is to be held at that place) as the directors may determine.
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42.
|
Meeting on Requisition of Shareholders
|
The holders of not less than
5% of the issued shares of the Corporation that carry the right to vote at a meeting sought to be held may requisition the directors
to call a meeting of shareholders for the purposes stated in the requisition. The requisition shall state the business to be transacted
at the meeting and shall be sent to each director and to the registered office of the Corporation. Subject to subsection 143(3) of the
Act, upon receipt of the requisition, the directors shall call a meeting of shareholders to transact the business stated in the requisition
(but if the directors are obligated to call a meeting and do not do so within 21 days after receiving the requisition, any shareholder
who signed the requisition may call the meeting).
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|
43.
|
Participation in Meetings by Electronic
Means
|
Any person entitled to attend
a meeting of shareholders may participate in the meeting, in accordance with the Act, by means of a telephonic, electronic or other communication
facility that permits all participants to communicate adequately with each other during the meeting, if the Corporation makes available
such a communication facility, and a person participating in a meeting by those means is deemed for the purposes of the Act and the by-laws
to be present at the meeting.
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44.
|
Meetings held by Electronic Means
|
If the directors or the shareholders
of the Corporation call a meeting of shareholders pursuant to the Act, those directors or shareholders, as the case may be, may determine
that the meeting shall be held, in accordance with the Act, entirely by means of a telephonic, electronic or other communication facility
that permits all participants to communicate adequately with each other during the meeting.
A notice in writing of a meeting
of shareholders stating the day, hour and place of meeting, and, if special business is to be transacted thereat, stating: (a) the nature
of that business in sufficient detail to permit the shareholder to form a reasoned judgment on that business and (b) the text of any
special resolution to be submitted to the meeting, shall be sent to each shareholder entitled to vote at the meeting, who on the record
date for notice is registered on the records of the Corporation or its transfer agent as a shareholder, to each director of the Corporation,
and to the auditor of the Corporation, in each case not less than 21 days and not more than 60 days before the date of the meeting.
Notice of any meeting of shareholders
or the time for the giving of any such notice, or any irregularity in any meeting or in the notice thereof, may be waived by any shareholder,
the duly appointed proxy of any shareholder, any director or the auditor of the Corporation, in writing or by email or other form of
electronic transmission addressed to the Corporation, or in any other manner, and the attendance of any such person at a meeting of shareholders
is a waiver of notice of the meeting, except where he or she attends the meeting for the express purpose of objecting to the transaction
of any business on the grounds that the meeting is not lawfully called. Any such waiver may be validly given either before or after the
meeting to which such waiver relates.
The accidental omission to give notice
of any meeting of shareholders to, or the non-receipt of any notice by, any person shall not invalidate any resolution passed or any
proceeding taken at any such meeting.
Subject to subsection 134(3) of the
Act, the directors may, within the period prescribed by the Act, fix in advance a date as the record date for the determination of shareholders:
(a) entitled to receive payment of a dividend, (b) entitled to participate in a liquidation distribution, (c) entitled to receive notice
of a meeting of shareholders, (d) entitled to vote at a meeting of shareholders, or (e) for any other purpose.
If no record date is fixed,
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|
(a)
|
the record date
for the determination of shareholders entitled to receive notice of a meeting of shareholders
shall be:
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|
(i)
|
at the close of
business on the business day immediately preceding the day on which the notice is given,
or
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(ii)
|
if no notice is given, the day on which
the meeting is held; and
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|
(b)
|
the record date
for the determination of shareholders for any purpose other than to establish a shareholder's
right to receive notice of a meeting or to vote shall be at the close of business on the
day on which the directors pass the resolution relating to that purpose.
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The Chair, if any, or, in his or
her absence, or in case of his or her inability or refusal or failure to act, such other person as may have been designated by the Chair
to exercise such function, shall preside at meetings of shareholders. In the absence of all such persons or, in case of their inability
or refusal or failure to act, the persons present entitled to vote shall choose another director as chair, and if no director is present,
or if all the directors present refuse to act, then the persons entitled to vote shall choose one of their number to be chair of the
meeting.
Votes at meetings of shareholders
may be cast either personally or by proxy. Subject to the Act and Section 52, every question submitted to any meeting of shareholders
shall be decided on a show of hands, except when a ballot is required by the chair of the meeting or is demanded by a shareholder or
proxyholder entitled to vote at the meeting, or is otherwise required by the Act. A shareholder or proxyholder may demand a ballot either
before or after any vote by a show of hands. At every meeting at which shareholders are entitled to vote, each shareholder present on
his or her own behalf, and every proxyholder present, shall have one vote. Upon any ballot at which shareholders are entitled to vote,
each shareholder present on his or her own behalf, or by proxy, shall (subject to the provisions, if any, of the articles) have one vote
for every share registered in the name of such shareholder. In the case of an equality of votes under this paragraph, the chair of the
meeting shall not have a second or casting vote in addition to the vote or votes to which he or she may be entitled as a shareholder
or proxyholder.
At any meeting of shareholders,
unless a ballot is demanded, an entry in the minutes for the applicable meeting of shareholders, following a vote on the applicable resolution
by a show of hands, to the effect that the chair of the meeting declared a resolution to be carried or defeated is, in the absence of
evidence to the contrary, proof of the fact, without proof of the number or proportion of the votes recorded in favour of or against
the resolution, although the chair may direct that a record be kept of the number or proportion of votes in favour of or against the
resolution for any purpose the chair of the meeting considers appropriate.
If, at any meeting, a ballot is demanded
on the election of a chair for the meeting, or on the question of adjournment or termination, the ballot shall be taken forthwith without
adjournment. If a ballot is demanded on any other question or as to the election of directors, the ballot shall be taken in such manner
and either at once or later at the meeting or after adjournment as the chair of the meeting directs. The result of a ballot shall be
deemed to be the resolution of the meeting at which the ballot was demanded. A demand for a ballot may be withdrawn.
Any person participating in a meeting
of shareholders by telephonic, electronic or other communication facility under Section 43 or Section 44 and entitled to vote at that
meeting may vote, in accordance with the Act, by means of the telephonic, electronic or other communication facility that the Corporation
has made available for that purpose. Despite Section 50, any vote referred to in Section 50 may be held, in accordance with the Act,
entirely by means of a telephonic, electronic or other communication facility, if the Corporation makes such a communication facility
available
Unless the articles otherwise provide,
each share of the Corporation entitles the holder of such share to one vote at a meeting of shareholders.
Where a body corporate, or a trust,
association or other unincorporated organization, is a shareholder of the Corporation, any individual authorized by a resolution of the
directors of the body corporate, or the directors, trustees or other governing body of the association, trust or unincorporated organization,
to represent it at meetings of shareholders of the Corporation, shall be recognized as the person entitled to vote at all such meetings
of shareholders in respect of the shares held by such body corporate, or by such trust, association or other unincorporated organization,
and the chair of the meeting may establish or adopt rules or procedures in relation to the recognition of a person to vote shares held
by such body corporate, or by such trust, association or other unincorporated organization.
Where a person holds shares as a
personal representative, such person, or his or her proxy, is the person entitled to vote at all meetings of shareholders in respect
of the shares so held by him or her, and the chair of the meeting may establish or adopt rules or procedures in relation to the recognition
of such person to vote the shares in respect of which such person has been appointed as a personal representative.
Where a person mortgages, pledges
or hypothecates his or her shares, such person, or such person's proxy, is the person entitled to vote at all meetings of shareholders
in respect of such shares, so long as such person remains the registered owner of such shares, unless, in the instrument creating the
mortgage, pledge or hypothec, the person has expressly empowered the person holding the mortgage, pledge or hypothec to vote in respect
of such shares, in which case, subject to the articles, such holder, or such holder's proxy, is the person entitled to vote in respect
of the shares, and the chair of the meeting may establish or adopt rules or procedures in relation to the recognition of the person holding
the mortgage, pledge or hypothec as the person entitled to vote in respect of the applicable shares.
Where two or more persons hold shares
jointly, one of those holders present at a meeting of shareholders may, in the absence of the others, vote the shares, but if two or
more of those persons are present on their own behalf or by proxy, they shall vote as one on the shares jointly held by them, and the
chair of the meeting may establish or adopt rules or procedures in that regard.
Every shareholder, including a shareholder
that is a body corporate, or a trust, association or other unincorporated organization, entitled to vote at a meeting of shareholders
may, by means of a proxy, appoint a proxyholder or one or more alternate proxyholders, who are not required to be shareholders, to attend
and act at the meeting in the manner, and to the extent, authorized by the proxy, and with the authority conferred by the proxy.
An instrument appointing a proxyholder
shall be in written form executed by the shareholder or by such shareholder's duly authorized attorney, or be in the form of an electronic
document executed as contemplated by the Act by the shareholder or by his, her or its duly authorized attorney, and shall conform with
the requirements of the Act, and is valid only at the meeting in respect of which it is given or any adjournment of that meeting. An
instrument appointing a proxyholder may be in any form which complies with the requirements of the Act.
The directors may specify in a
notice calling a meeting of shareholders a time not exceeding 48 hours, excluding Saturdays and holidays, preceding the meeting or an
adjournment of the meeting before which time proxies to be used at the meeting must be deposited with the Corporation or its agent.
The chair of the meeting shall conduct
the proceedings at the meeting, and his or her decision in any matter or thing, including, without limitation, any question regarding
the validity or invalidity of any instruments of proxy and any question as to the admission or rejection of a vote, shall be conclusive
and binding upon the shareholders.
The chair of the meeting may,
with the consent of the meeting, adjourn any meeting of shareholders from time to time and place to place to a fixed time and place and,
if the meeting is adjourned by one or more adjournments for an aggregate of less than 30 days, it is not necessary to give notice of
the adjourned meeting, other than by announcement at the time of an adjournment. If a meeting of shareholders is adjourned by one or
more adjournments for an aggregate of 30 days or more, notice of the adjourned meeting shall be given as for an original meeting but,
unless the meeting is adjourned by one or more adjournments for an aggregate of more than 90 days, subsection (1) of section 149 of the
Act does not apply.
Any adjourned meeting shall be
duly constituted if held in accordance with the terms of the adjournment and a quorum is present thereat. The persons who formed a quorum
at the original meeting are not required to form the quorum at the adjourned meeting. If there is no quorum present at the adjourned
meeting, the original meeting shall be deemed to have terminated forthwith after its adjournment. Any business may be brought before
or dealt with at any adjourned meeting that might have been brought before or dealt with at the original meeting in accordance with the
notice calling the same.
At all meetings of shareholders,
it shall be necessary in order to constitute a quorum for two persons entitled to vote at the meeting to be present, and for not less
than 5% of the outstanding shares of the Corporation which may be voted at the meeting to be represented in person or by proxy or by
a duly authorized representative of a shareholder. If a quorum is present at the opening of a meeting of shareholders, the shareholders
present may proceed with the business of the meeting, notwithstanding that a quorum is not present throughout the meeting. If a quorum
is not present at the opening of any meeting of shareholders, the shareholders present may adjourn the meeting to a fixed time and place
but may not transact any other business.
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|
57.
|
Persons Entitled to be Present
|
The only persons entitled to be present
at a meeting of shareholders shall be those entitled to vote thereat, the directors and auditor of the Corporation, and others who, although
not entitled to vote, are entitled or required under any provision of the Act or the articles or by-laws to be present at the meeting.
Any other person may be admitted only on the invitation of the chair of the meeting or with the consent of the meeting.
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58.
|
Resolution in Lieu of Meeting
|
A resolution in writing signed by
all the shareholders entitled to vote on that resolution is as valid as if it had been passed at a meeting of the shareholders except
where a written statement is submitted by a director under subsection (2) of section 110 of the Act or by an auditor under subsection
(5) of section 168 of the Act.
SHARES AND TRANSFERS
Subject to the articles and to section
28 of the Act, shares in the Corporation may be issued at the times and to the persons and for the consideration that the directors determine;
provided that a share shall not be issued until the consideration for the share is fully paid in money or in property or past service
that is not less in value than the fair equivalent of the money that the Corporation would have received if the share had been issued
for money.
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60.
|
Security Certificates
|
Security certificates (if any) shall
(subject to compliance with section 49 of the Act) be in such form as the directors may from time to time by resolution approve, and
such certificates shall be signed manually, or the signature shall be printed or otherwise mechanically reproduced on the certificate,
by at least one director or officer of the Corporation, or by a registrar, transfer agent or branch transfer agent of the Corporation
or an individual on their behalf, or by a trustee who certifies it in accordance with a trust indenture, and any additional signatures
required on a security certificate may be printed or otherwise mechanically reproduced thereon. If a security certificate contains a
printed or mechanically reproduced signature of a person, the Corporation may issue the security certificate, notwithstanding that the
person has ceased to be a director or an officer of the Corporation, and the security certificate is as valid as if he or she were a
director or an officer at the date of its issue.
The directors may from time to time by resolution appoint
or remove an agent to maintain a central securities register and one or more branch securities registers for the Corporation.
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|
62.
|
Dealings with Registered Holder
|
Subject to the Act, the Corporation
may treat the registered owner of a security as the person exclusively entitled to vote, to receive notices, to receive any interest,
dividends or other payments in respect of the security, and otherwise to exercise all the rights and powers of an owner of the security.
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|
63.
|
Surrender of Security Certificates
|
Subject to the Act, no transfer
of a security issued by the Corporation shall be registered unless or until the security certificate representing the security to be
transferred has been presented for registration or, if no security certificate has been issued by the Corporation in respect of such
security, unless or until a duly executed transfer in respect thereof has been presented for registration.
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|
64.
|
Defaced, Destroyed, Stolen or Lost
Security Certificates
|
In case of the defacement, destruction,
theft or loss of a security certificate, the fact of such defacement, destruction, theft or loss shall be reported by the owner to the
Corporation or to an agent of the Corporation (if any) with a statement verified by oath or statutory declaration as to the defacement,
destruction, theft or loss and the circumstances concerning the same, and with a request for the issuance of a new security certificate
to replace the one so defaced (together with the surrender of the defaced security certificate), destroyed, stolen or lost. Upon the
giving to the Corporation (or if there be an agent, hereinafter in this paragraph referred to as the "Corporation's agent",
then to the Corporation and the Corporation's agent) of a bond of a surety company (or other security approved by the directors) in such
form as is approved by the directors or by any officer of the Corporation, indemnifying the Corporation (and the Corporation's agent,
if any) against all loss, damage or expense, which the Corporation and/or the Corporation's agent may suffer or be liable for by reason
of the issuance of a new security certificate to such shareholder, and provided the Corporation or the Corporation's agent does not have
notice that the security has been acquired by a bona fide purchaser, a new security certificate may be issued in replacement of the one
defaced, destroyed, stolen or lost, if such issuance is ordered and authorized by any officer of the Corporation or by the directors.
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|
65.
|
Enforcement of Lien for Indebtedness
|
Subject to subsection 49(8) of
the Act, if the articles of the Corporation provide that the Corporation may have a lien on the shares registered in the name of a shareholder
or the shareholder's legal representative for a debt of that shareholder to the Corporation, such lien may be enforced by the sale of
the shares thereby affected, or by any other action, suit, remedy or proceeding authorized or permitted by law or by equity, and, pending
such enforcement, the Corporation may refuse to register a transfer of the whole or any part of such shares. No sale shall be made until
such time as the debt ought to be paid and until a demand and notice in writing stating the amount due and demanding payment and giving
notice of intention to sell on default shall have been served on the holder, or such shareholder's legal representative, of the shares
subject to the lien and default shall have been made in payment of such debt for seven days after service of such notice. Upon any such
sale, the proceeds shall be applied, firstly, in payment of all costs of such sale, and, secondly, in satisfaction of such debt and the
residue (if any) shall be paid to the shareholder or as such shareholder shall direct. Upon any such sale, the directors may enter or
cause to be entered the purchaser's name in the securities register of the Corporation as holder of the shares, and the purchaser shall
not be bound to see to the regularity or validity of, or be affected by, any irregularity or invalidity in the proceedings, or be bound
to see to the application of the purchase money, and after the purchaser's name or the name of the purchaser's legal representative has
been entered in the securities register, the validity of the sale shall not be impeached by any person.
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66.
|
Electronic, Book-Based or Other Non-Certificated
Registered Positions
|
Subject to subsection 49(1) of the
Act, a registered security holder may have his, her or its holdings of securities of the Corporation evidenced by an electronic, book-based,
direct registration service or other non-certificated entry or position on the register of securityholders to be kept by the Corporation
or its agent in place of a physical security certificate pursuant to a registration system that may be adopted by the Corporation. The
by-laws shall be read such that a registered holder of securities of the Corporation pursuant to any such electronic, book-based, direct
registration service or other non-certificated entry or position shall be entitled to all of the same benefits, rights, entitlements
and shall incur the same duties and obligations as a registered holder of securities evidenced by a physical security certificate. The
Corporation and its transfer agent (if any) may adopt such policies and procedures and require such documents and evidence as they may
determine necessary or desirable in order to facilitate the adoption and maintenance of a security registration system by electronic,
book-based, direct registration system or other non-certificated means.
DIVIDENDS
The directors may from time to time by
resolution declare, and the Corporation may pay, dividends on its issued shares, subject to the provisions (if any) of the Corporation's
articles.
The directors shall not declare, and the Corporation shall
not pay, a dividend if there are reasonable grounds for believing that:
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|
(a)
|
the Corporation is,
or would after the payment be, unable to pay its liabilities as they become due; or
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|
|
(b)
|
the realizable value
of the Corporation's assets would thereby be less than the aggregate of its liabilities and
stated capital of all classes.
|
The Corporation may pay a dividend
consisting of fully paid shares of the Corporation and, subject to Section 42 of the Act, the Corporation may pay a dividend in money
or other property.
In case several persons are registered
as the joint holders of any securities of the Corporation, any one of such persons may give effectual receipts for all dividends and
payments on account of dividends, principal, interest and/or redemption payments in respect of such securities.
A dividend payable in money shall
be paid by cheque to the order of each registered holder of shares of the class or series in respect of which it has been declared and
mailed by prepaid ordinary mail to such registered holder at the recorded address of such registered holder, or paid by electronic funds
transfer to the bank account designated by the registered holder, unless such holder otherwise directs. In the case of joint holders,
the cheque or payment shall, unless such joint holders otherwise direct, be made payable to the order of all of such joint holders and,
if more than one address is recorded in the Corporation's security register in respect of such joint holding, the cheque shall be mailed
to the first address so appearing. The mailing of such cheque as aforesaid, unless the same is not paid on due presentation, or the electronic
funds transfer as aforesaid, shall satisfy and discharge the liability for the dividend to the extent of the sum represented thereby
plus the amount of any tax which the Corporation is required to and does withhold. In the event of non-receipt of any dividend cheque
or payment by the person to whom it is sent as aforesaid, the Corporation shall issue to such person a replacement cheque or payment
for a like amount on such terms as to indemnity, reimbursement of expenses and evidence of non-receipt and of title as any officer or
the directors may from time to time prescribe, whether generally or in any particular case.
VOTING SECURITIES IN
OTHER BODIES CORPORATE
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|
70.
|
Voting Securities in Other Bodies Corporate
|
All securities of or other interests
held from time to time by the Corporation in a body corporate or a trust, association or other unincorporated organization carrying voting
rights that may be exercised by or on behalf of the Corporation, whether as a holder, trustee or otherwise, may be voted at all meetings
of shareholders, unitholders, bondholders, debenture holders or holders of such securities or other interests, as the case may be, of
such other body corporate or a trust, association or other unincorporated organization, and in such manner and by such person or persons
as the directors of the Corporation shall from time to time determine and authorize by resolution. Any officer of the Corporation may
also, from time to time, execute and deliver, for and on behalf of the Corporation, proxies and arrange for the issuance of voting certificates
or other evidence of the right to vote in such names as such officer may determine, without the necessity of a resolution or other action
by the directors.
NOTICES, ETC.
Any notice or document required
by the Act, the articles or the by-laws to be sent to any shareholder or director of the Corporation may be delivered personally to or
sent by pre-paid mail addressed to:
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(a)
|
the shareholder at
the shareholder's latest address as shown in the records of the Corporation or its transfer
agent; and
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|
|
(b)
|
the director at the
director's latest address as shown in the records of the Corporation or in the last notice
filed under section 106 or 113 of the Act.
|
A notice or document sent by
mail as contemplated by this Section 71 to a shareholder or director of the Corporation shall be deemed to have been received by the
shareholder or director (as the case may be) at the time it would be delivered in the ordinary course of mail, unless there are reasonable
grounds for believing that the shareholder or director (as the case may be) did not receive the notice or document at that time or at
all.
Notwithstanding the foregoing,
provided that the addressee has consented in writing and has designated an information system for the receipt of electronic documents
as contemplated by the Act, the Corporation may satisfy the requirements to send any notice or document referred to above, subject to
the Act, by creating an electronic document and providing such electronic document to the applicable specified information system or
otherwise posting or making such document available on a generally accessible electronic source, such as a website, and providing written
notice of the availability and location of that electronic document, unless otherwise prescribed by the Act. Any such electronic document
shall be deemed to have been sent to and received by the addressee when it enters the information system of the addressee or, if posted
or otherwise made available through a generally accessible electronic source, when the addressee receives written notice of the availability
and location of that electronic document.
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72.
|
Failure to Locate Shareholder
|
If the Corporation sends a notice
or document to a shareholder and the notice or document is returned on two consecutive occasions because the shareholder cannot be found,
the Corporation is not required to send any further notices or documents to the shareholder until the shareholder informs the Corporation
in writing of the shareholder's new address.
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73.
|
Notice to Joint Shareholders
|
All notices or documents shall,
with respect to any shares in the capital of the Corporation registered in more than one name, be sent to whichever of such persons is
named first in the records of the Corporation and any notice or document so sent shall be sufficient notice of delivery of such document
to all the holders of such shares.
|
|
74.
|
Persons Becoming Entitled by Operation
of Law
|
Every person who, by operation of
law, transfer or by any other means whatsoever, shall become entitled to any shares in the capital of the Corporation, shall be bound
by every notice or document in respect of such shares which, prior to his or her name and address being entered on the records of the
Corporation in respect of such shares, shall have been duly sent to the person or persons from whom such person derives his or her title
to such shares.
|
|
75.
|
Signatures upon Notices
|
The signature of any director or officer of the Corporation
upon any notice need not be a manual signature.
Where a given number of days' notice
or notice extending over any period is required to be given under any provisions of the articles or the by-laws of the Corporation, the
day the notice is sent shall, unless it is otherwise provided by applicable law, be counted in such number of days or other period.
A certificate
of any officer of the Corporation in office at the time of the making of the certificate, or of an agent of the Corporation, as to facts
in relation to the mailing or delivery or sending of any notice or document to any shareholder, director, officer or auditor of the Corporation
or any other person, or publication of any notice or document, shall be conclusive evidence thereof and shall be binding on every shareholder,
director, officer or auditor of the Corporation or other person, as the case may be.
CUSTODY OF SECURITIES
|
|
78.
|
Custody of Securities
|
All securities (including warrants)
owned by the Corporation may be lodged (in the name of the Corporation) with a chartered bank, brokerage, or a trust company or in a
safety deposit box or with such other depositaries or in such other manner as may be determined from time to time by any officer or director.
All securities (including warrants)
belonging to the Corporation may be issued and held in the name of a nominee or nominees of the Corporation (and if issued or held in
the names of more than one nominee shall be held in the names of the nominees jointly with right of survivorship), and shall be endorsed
in blank with endorsement guaranteed in order to enable transfer thereof to be completed and registration thereof to be effected.
EXECUTION OF CONTRACTS,
ETC.
|
|
79.
|
Execution of Contracts, etc.
|
Contracts, documents or instruments
requiring the signature of the Corporation may be signed by any director or officer alone or any person or persons authorized by resolution
of the directors, and all contracts, documents or instruments so signed shall be binding upon the Corporation without any further authorization
or formality. The directors are authorized from time to time by resolution to appoint any officer or officers or any other person or
persons on behalf of the Corporation to sign contracts, documents or instruments generally or to sign specific contracts, documents or
instruments.
The corporate seal (if any) of the
Corporation may be affixed by any director or officer to contracts, documents or instruments signed by such director or officer as aforesaid,
or by an officer or officers, person or persons appointed as aforesaid by resolution of the directors.
The term "contracts, documents
or instruments" as used in this by-law shall include notices, deeds, mortgages, hypothecs, charges, cheques, drafts, orders
for the payment of money, notes, acceptances, bills of exchange, conveyances, transfers and assignments of property, real or personal,
immovable or movable, agreements, releases, receipts and discharges for the payment of money or other obligations, conveyances, transfers
and assignments of securities and all paper writings.
The signature or signatures of any
director or officer or any other person or persons appointed as aforesaid by resolution of the directors may be printed, engraved, lithographed
or otherwise mechanically or electronically reproduced upon all contracts, documents or instruments executed or issued by or on behalf
of the Corporation, and all contracts, documents or instruments on which the signature or signatures of any of the foregoing persons
shall be so reproduced shall be as valid to all intents and purposes as if they had been signed manually, and notwithstanding that the
persons whose signature or signatures is or are so reproduced may have ceased to hold office at the date of the delivery or issue of
such contracts, documents or instruments.
FISCAL PERIOD
The fiscal period of the Corporation shall terminate
on such day in each year as the board may from time to time by resolution determine.
DELIVERY OF DOCUMENTS
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|
81.
|
Delivery of Documents
|
The delivery of an executed copy
of any and all by-laws, minutes of meetings, resolutions, consents, instruments, or like documents required by the Act to be kept with
the records of the Corporation in counterparts, by facsimile, DocuSign or other form of electronic means or transmission shall be deemed
to be the equivalent of the delivery of an original executed copy thereof and the counterparts together shall constitute one and the
same document.
BORROWING MONEY, ETC.
|
|
82.
|
Borrowing Money, etc.
|
The directors of the Corporation may from time to time:
|
|
(a)
|
borrow money on the credit of the Corporation;
|
|
|
(b)
|
issue, reissue,
sell or pledge debt obligations of the Corporation, including bonds, debentures, notes or
other evidences of indebtedness or guarantees of the Corporation, whether secured or unsecured;
|
|
|
(c)
|
give a guarantee
on behalf of the Corporation to secure performance of an obligation of any person, including
any individual, partnership, association, body corporate or personal representative;
|
|
|
(d)
|
mortgage, hypothecate,
pledge or otherwise create a security interest in all or any property of the Corporation,
owned or subsequently acquired, to secure any obligation of the Corporation; or
|
|
|
(e)
|
delegate to one
or more directors, a committee of directors or one or more officers of the Corporation as
may be designated by the directors, all or any of the powers conferred by the foregoing clauses
of this Paragraph to such extent and in such manner as the directors shall determine at the
time of each such delegation.
|
ADVANCED NOTICE PROVISIONS
|
|
83.
|
Nomination Procedures
|
Subject only to the provisions of
the Act, Applicable Securities Laws and the articles of the Corporation, only persons who are nominated in accordance with the following
procedures shall be eligible for election as directors of the Corporation. Nominations of persons for election as directors of the Corporation
may be made at any annual meeting of shareholders or at any special meeting of shareholders if one of the purposes for which the special
meeting was called is the election of directors. Such nominations may be made in the following manner:
|
|
(a)
|
by or at the direction of the Board, including
pursuant to a notice of meeting;
|
|
|
(b)
|
by or at the direction
or request of one or more shareholders pursuant to a proposal made in accordance with the
provisions of the Act, or a requisition of a meeting of shareholders by one or more shareholders
made in accordance with the provisions of the Act; or
|
|
|
(c)
|
by any person (a "Nominating Shareholder")
who:
|
|
|
(i)
|
complies with the notice procedures set
forth below in this by-law; and
|
|
|
(ii)
|
at the close
of business on the date of the giving of notice by the Nominating Shareholder in accordance
with the notice procedures set forth below in this by- law and on the record date for notice
of such meeting, is entered in the securities register of the Corporation as a holder of
one or more shares carrying the right to vote at such meeting or who beneficially owns shares
that are entitled to be voted at such meeting and provides evidence of such beneficial ownership
to the Secretary of the Corporation.
|
In addition to any other applicable
requirements, for a nomination to be made by a Nominating Shareholder, the Nominating Shareholder must have given timely notice thereof
in proper written form to the Secretary of the Corporation in accordance with the procedures set forth below in this by-law.
|
|
85.
|
Manner of Timely Notice
|
To be timely, a Nominating Shareholder's notice to the Secretary
of the Corporation must be given:
|
|
(a)
|
in the case of
an annual meeting (including an annual and special meeting) of shareholders, not less than
thirty (30) days prior to the date of the meeting; provided, however, in the event that the
meeting is to be held on a date that is less than fifty (50) days after the date on which
the first public announcement of the date of the meeting was made, notice by the Nominating
Shareholder shall be made not later than the close of business on the tenth (10th) day following
the date of such public announcement;
|
|
|
(b)
|
in the case of
a special meeting (which is not also an annual meeting) of shareholders called for the purpose
of electing directors (whether or not also called for other purposes), notice by the Nominating
Shareholder shall be made not later than the close of business on the fifteenth (15th) day
following the date of such public announcement; and
|
|
|
(c)
|
in the case of an
annual meeting of shareholders or a special meeting of shareholders called for the purpose
of electing directors (whether or not also called for other purposes) where notice-and-access
is used to deliver proxy-related materials to shareholders, not less than forty (40) days
prior to the date of the meeting (and, in any event, not prior to the date on which the first
public announcement of the date of the meeting was made); provided, however, in the event
that the meeting is to be held on a date that is less than fifty (50) days after the date
on which the first public announcement of the date of the meeting was made, (i) in the case
of an annual meeting of shareholders, notice by the Nominating Shareholder shall be made
not later than the close of business on the tenth (10th) day following the date of such public
announcement, and (ii) in the case of a special meeting of shareholders, notice by the Nominating
Shareholder shall be made not later than the close of business on the fifteenth (15th) day
following the date of such public announcement.
|
The adjournment or postponement of a meeting of shareholders
or the announcement thereof shall commence a new time period for the giving of a Nominating Shareholder’s notice as described above.
|
|
86.
|
Proper Form of Notice
|
To be in proper written form, a Nominating Shareholder's
notice to the Secretary of the Corporation must set forth or include:
|
|
(a)
|
as to each person
whom the Nominating Shareholder proposes to nominate for election as a director of the Corporation
(a "Proposed Nominee"):
|
|
|
(i)
|
the name, age and business and residential
address of the Proposed Nominee;
|
|
|
(ii)
|
the principal
occupation, business or employment of the Proposed Nominee and the name and principal business
of any company in which such employment is carried on, both present and within the five years
preceding the date of the notice;
|
|
|
(iii)
|
whether the
Proposed Nominee is a "resident Canadian" within the meaning of the Act;
|
|
|
(iv)
|
the number
of securities of each class or series of voting securities of the Corporation beneficially
owned, or controlled or directed, directly or indirectly, by the Proposed Nominee as of the
record date for the meeting of shareholders (if such date shall then have been made publicly
available and shall have occurred) and as of the date of such notice;
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|
|
(v)
|
a description
of any relationship, agreement, arrangement or understanding, including financial compensation
and indemnity related relationships, agreements, arrangements or understandings, between
the Nominating Shareholder and the Proposed Nominee, or any affiliates or associates of,
or any person or entity acting jointly or in concert with, the Nominating Shareholder or
the Proposed Nominee with respect to the Proposed Nominee's nomination and election as a
director;
|
|
|
(vi)
|
whether the Proposed
Nominee is party to any existing or proposed relationship, agreement, arrangement or understanding
with any competitor of the Corporation or any other third party which may give rise to a
real or perceived conflict of interest between the interests of the Corporation and the interests
of the Proposed Nominee; and
|
|
|
(vii)
|
any other information
relating to the Proposed Nominee that would be required to be disclosed in a dissident's
proxy circular or other filings required to be made in connection with solicitations of proxies
for election of directors pursuant to the Act or any Applicable Securities Laws.
|
|
|
(b)
|
as to the Nominating Shareholder:
|
|
|
(i)
|
the name and business and residential address
of such Nominating Shareholder;
|
|
|
(ii)
|
the number of
securities of each class or series of voting securities of the Corporation beneficially owned,
or controlled or directed, directly or indirectly, by such Nominating Shareholder, or any
other person with whom such Nominating Shareholder is acting jointly or in concert with respect
to the Corporation or any of its securities, as of the record date for the meeting of shareholders
(if such date shall then have been made publicly available and shall have occurred) and as
of the date of such notice;
|
|
|
(iii)
|
any derivatives
or other economic or voting interests in the Corporation and any hedges implemented with
respect to the nominating shareholders’ interests in the Corporation;
|
|
|
(iv)
|
any proxy,
contract, arrangement, understanding or relationship pursuant to which the Nominating Shareholder
has the right to vote any shares of the Corporation;
|
|
|
(v)
|
whether such Nominating
Shareholder intends to deliver a proxy circular and/or form of proxy to any shareholder of
the Corporation in connection with such nomination or otherwise solicit proxies or votes
from shareholders of the Corporation in support of such nomination; and
|
|
|
(vi)
|
any other information
relating to such Nominating Shareholder that would be required to be disclosed in a dissident's
proxy circular or other filings required to be made in connection with solicitations of proxies
for election of directors pursuant to the Act or any Applicable Securities Laws; and
|
|
|
(c)
|
a written consent
duly signed by the Proposed Nominee to being named as a nominee for election to the Board
and to serving as a director of the Corporation if elected.
|
The Corporation may require any
Proposed Nominee to furnish such other information as may be reasonably required by the Corporation to determine, pursuant to Applicable
Securities Laws, the independence, or lack thereof, of such proposed nominee, provided that such disclosure request does not go beyond
that required of management nominees for election as directors of the Corporation. References to "Nominating Shareholder" in
this Section 4 shall be deemed to refer to each shareholder that nominates or proposes to nominate a person for election as a director
of the Corporation in the case of a nomination proposal where more than one shareholder is involved in making such nomination proposal.
All information provided in a Nominating Shareholders’ notice will be made publicly available to shareholders of the Corporation.
In addition, to be considered timely
and in proper written form, a Nominating Shareholder's notice shall be promptly updated and supplemented, if necessary, so that the information
provided or required to be provided in such notice shall be true and correct as of the record date for the meeting.
|
|
88.
|
Eligibility for Nomination as a Director
|
No person shall be eligible for election
as a director of the Corporation unless nominated in accordance with the procedures set forth in this by-law. The requirements of this
by-law shall apply to any Proposed Nominee to be brought before a meeting by a shareholder whether such Proposed Nominees are to be included
in the Corporation’s management information circular under the Act and Applicable Securities Laws or presented to shareholders
by means of an independently financed proxy solicitation. The requirements of this by-law are included to provide the Corporation notice
of a shareholder’s intention to bring one or more Proposed Nominees before a meeting and shall in no event be construed as (i)
imposing upon any shareholder the requirement to seek approval from the Corporation as a condition precedent to nominate such Proposed
Nominee before a meeting or (ii) deeming to preclude discussion by a shareholder (as distinct from the nomination of directors) at a
meeting of shareholders of any matter in respect of which such shareholder would have been entitled to submit a proposal pursuant to
the provisions of the Act. The Chair of the meeting shall have the power and duty to determine whether a nomination was made in accordance
with the procedures set forth in this by-law and, if any proposed nomination is determined not to be in compliance with such procedures,
to declare that such defective nomination shall be disregarded.
Notwithstanding any other provision
of this by-law or any other by-law of the Corporation, notice given to the Secretary of the Corporation pursuant to this by-law may only
be given by personal delivery or by electronic mail (at such e-mail address as may be stipulated from time to time by the Secretary of
the Corporation for purposes of this notice), and shall be deemed to have been given and made only at the time it is served by personal
delivery to the Secretary at the address of the principal executive offices of the Corporation or, in the case of electronic mail, at
the time it is sent to the Secretary at the email address as aforesaid; provided that if such delivery or electronic communication is
made on a day which is a not a business day or later than 5:00 p.m. (Toronto time) on a day which is a business day, then such delivery
or electronic communication shall be deemed to have been made on the next following day that is a business day.
Notwithstanding the foregoing, the Board may, in its sole
discretion, waive any requirement in by-laws 82 to 88 (inclusive).
* * * * *
This By-law No. 1 was made by
the director[s] of the Corporation on [month] [date], [year] and confirmed by the shareholder[s] of the Corporation
on [month] [date], [year].
|
DATED [month] [date], [year].
|
|
|
|
|
|
|
|
|
|
|
|
|
Name:
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|
|
|
|
|
Title:
|
APPENDIX E
Section 191 of the Business
Corporations Act (Alberta)
Shareholder’s right to
dissent
191(1) Subject to sections
192 and 242, a holder of shares of any class of a corporation may dissent if the corporation resolves to
|
|
(a)
|
amend its articles
under section 173 or 174 to add, change or remove any provisions restricting or constraining
the issue or transfer of shares of that class,
|
|
|
(b)
|
amend
its articles under section 173 to add, change or remove any restrictions on the business
or businesses that the corporation may carry on,
|
|
|
(b.1)
|
amend
its articles under section 173 to add or remove an express statement establishing the unlimited
liability of shareholders as set out in section 15.2(1),
|
|
|
(c)
|
amalgamate with another corporation,
otherwise than under section 184 or 187,
|
|
|
(d)
|
be continued under the laws of another
jurisdiction under section 189, or
|
|
|
(e)
|
sell, lease or exchange all or substantially
all its property under section 190.
|
(2)
A holder of shares of any class or series of shares entitled to vote under section 176, other than section 176(1)(a), may
dissent if the corporation resolves to amend its articles in a manner described in that section.
(3)
In addition to any other right the shareholder may have, but subject to subsection (20), a shareholder entitled to dissent
under this section and who complies with this section is entitled to be paid by the corporation the fair value of the shares held by
the shareholder in respect of which the shareholder dissents, determined as of the close of business on the last business day before
the day on which the resolution from which the shareholder dissents was adopted.
(4)
A dissenting shareholder may only claim under this section with respect to all the shares of a class held by the shareholder
or on behalf of any one beneficial owner and registered in the name of the dissenting shareholder.
(5)
A dissenting shareholder shall send to the corporation a written objection to a resolution referred to in subsection (1) or
(2)
|
|
(a)
|
at or before any meeting
of shareholders at which the resolution is to be voted on, or
|
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(b)
|
if
the corporation did not send notice to the shareholder of the purpose of the meeting or of
the shareholder’s right to dissent, within a reasonable time after the shareholder
learns that the resolution was adopted and of the shareholder’s right to dissent.
|
(6)
An application may be made to the Court after the adoption of a resolution referred to in subsection (1) or (2),
|
|
(a)
|
by the corporation,
or
|
|
|
(b)
|
by a shareholder if
the shareholder has sent an objection to the corporation under subsection (5),
|
to fix the fair value in accordance
with subsection (3) of the shares of a shareholder who dissents under this section, or to fix the time at which a shareholder of an unlimited
liability corporation who dissents under this section ceases to become liable for any new liability, act or default of the unlimited
liability corporation.
(7)
If an application is made under subsection (6), the corporation shall, unless the Court otherwise orders, send to each dissenting
shareholder a written offer to pay the shareholder an amount considered by the directors to be the fair value of the shares.
(8)
Unless the Court otherwise orders, an offer referred to in subsection (7) shall be sent to each dissenting shareholder
|
|
(a)
|
at least 10 days before
the date on which the application is returnable, if the corporation is the applicant, or
|
|
|
(b)
|
within 10 days after
the corporation is served with a copy of the application, if a shareholder is the applicant.
|
|
|
(9)
|
Every offer made under subsection
(7) shall
|
|
|
(a)
|
be made on the same terms, and
|
|
|
(b)
|
contain or be accompanied with a statement
showing how the fair value was determined.
|
(10)
A dissenting shareholder may make an agreement with the corporation for the purchase of the shareholder’s shares by
the corporation, in the amount of the corporation’s offer under subsection (7) or otherwise, at any time before the Court pronounces
an order fixing the fair value of the shares.
|
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(11)
|
A dissenting shareholder
|
|
|
(a)
|
is not required to
give security for costs in respect of an application under subsection (6), and
|
|
|
(b)
|
except in special
circumstances must not be required to pay the costs of the application or appraisal.
|
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(12)
|
In connection with an application
under subsection (6), the Court may give directions for
|
|
|
(a)
|
joining
as parties all dissenting shareholders whose shares have not been purchased by the corporation
and for the representation of dissenting shareholders who, in the opinion of the Court, are
in need of representation,
|
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|
(b)
|
the trial of issues
and interlocutory matters, including pleadings and questioning under Part 5 of the Alberta
Rules of Court,
|
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(c)
|
the payment to the
shareholder of all or part of the sum offered by the corporation for the shares,
|
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|
(d)
|
the deposit of the share certificates
with the Court or with the corporation or its transfer agent,
|
|
|
(e)
|
the appointment and
payment of independent appraisers, and the procedures to be followed by them,
|
|
|
(f)
|
the service of documents, and
|
|
|
(g)
|
the burden of proof on the parties.
|
|
|
(13)
|
On an application under subsection
(6), the Court shall make an order
|
|
|
(a)
|
fixing the fair value
of the shares in accordance with subsection (3) of all dissenting shareholders who are parties
to the application,
|
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|
(b)
|
giving judgment in
that amount against the corporation and in favour of each of those dissenting shareholders,
|
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(c)
|
fixing the time within which the corporation
must pay that amount to a shareholder, and
|
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(d)
|
fixing
the time at which a dissenting shareholder of an unlimited liability corporation ceases to
become liable for any new liability, act or default of the unlimited liability corporation.
|
|
|
(a)
|
the action approved
by the resolution from which the shareholder dissents becoming effective,
|
|
|
(b)
|
the
making of an agreement under subsection (10) between the corporation and the dissenting shareholder
as to the payment to be made by the corporation for the shareholder’s shares, whether
by the acceptance of the corporation’s offer under subsection (7) or otherwise, or
|
|
|
(c)
|
the pronouncement
of an order under subsection (13),
|
whichever first occurs, the shareholder
ceases to have any rights as a shareholder other than the right to be paid the fair value of the shareholder’s shares in the amount
agreed to between the corporation and the shareholder or in the amount of the judgment, as the case may be.
|
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(15)
|
Subsection (14)(a) does not
apply to a shareholder referred to in subsection (5)(b).
|
|
|
(16)
|
Until one of the events mentioned
in subsection (14) occurs,
|
|
|
(a)
|
the shareholder may withdraw the shareholder’s
dissent, or
|
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|
(b)
|
the corporation may rescind the resolution,
|
and in either event proceedings under
this section shall be discontinued.
(17)
The Court may in its discretion allow a reasonable rate of interest on the amount payable to each dissenting shareholder,
from the date on which the shareholder ceases to have any rights as a shareholder by reason of subsection (14) until the date of payment.
|
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(18)
|
If subsection (20) applies,
the corporation shall, within 10 days after
|
(a)
the pronouncement of an order under subsection (13), or
(b)
the making of an agreement between the shareholder and the corporation as to the payment to be made for the shareholder’s
shares,
notify each dissenting shareholder
that it is unable lawfully to pay dissenting shareholders for their shares.
(19)
Notwithstanding that a judgment has been given in favour of a dissenting shareholder under subsection (13)(b), if subsection
(20) applies, the dissenting shareholder, by written notice delivered to the corporation within 30 days after receiving the notice under
subsection (18), may withdraw the shareholder’s notice of objection, in which case the corporation is deemed to consent to the
withdrawal and the shareholder is reinstated to the shareholder’s full rights as a shareholder, failing which the shareholder retains
a status as a claimant against the corporation, to be paid as soon as the corporation is lawfully able to do so or, in a liquidation,
to be ranked subordinate to the rights of creditors of the corporation but in priority to its shareholders.
(20)
A corporation shall not make a payment to a dissenting shareholder under this section if there are reasonable grounds for
believing that
|
|
(a)
|
the corporation is or
would after the payment be unable to pay its liabilities as they become due, or
|
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|
(b)
|
the realizable value
of the corporation’s assets would by reason of the payment be less than the aggregate
of its liabilities.
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RSA 2000 cB-9 s191;2005 c40 s7;2009 c53 s30
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Exhibit 99.41
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530-8th Avenue SW, 6th floor
Calgary
AB, T2P 3S8
www.computershare.com
|
August
07, 2020
To:
All Canadian Securities Regulatory Authorities
Subject:
NEWTON ENERGY CORPORATION
Dear
Sir/Madam:
We
advise of the following with respect to the upcoming Meeting of Security Holders for the subject Issuer:
|
Meeting
Type :
|
Annual
General and Special Meeting
|
|
Record
Date for Notice of Meeting :
|
August
19, 2020
|
|
Record
Date for Voting (if applicable) :
|
August
19, 2020
|
|
Beneficial
Ownership Determination Date :
|
August
19, 2020
|
|
Meeting
Date :
|
September
23, 2020
|
|
Meeting
Location (if available) :
|
Calgary,
AB
|
|
Issuer
sending proxy related materials directly to NOBO:
|
No
|
|
Issuer
paying for delivery to OBO:
|
Yes
|
|
|
|
|
Notice
and Access (NAA) Requirements:
|
|
|
NAA
for Beneficial Holders
|
No
|
|
NAA
for Registered Holders
|
No
|
|
|
|
|
Voting
Security Details:
|
|
|
Description
|
|
CUSIP Number
|
|
ISIN
|
|
COMMON SHARES
|
|
652720202
|
|
CA6527202023
|
Sincerely,
Computershare
Agent for NEWTON ENERGY CORPORATION
Exhibit
99.42
NEWTON ENERGY CORPORATION
NOTICE OF ANNUAL GENERAL AND SPECIAL MEETING OF
SHAREHOLDERS
AND
MANAGEMENT INFORMATION CIRCULAR
FOR
THE ANNUAL GENERAL AND SPECIAL SHAREHOLDERS
MEETING TO BE HELD ON
SEPTEMBER 23, 2020
AUGUST 21, 2020
This management information circular and the accompanying materials require your immediate attention. If you are in doubt as to how to deal with these documents or the matters to which they refer, please consult your financial, legal, tax or other professional advisor.
NEWTON ENERGY CORPORATION
1600, 333 - 7th Avenue SW
Calgary, AB
T2P 2Z1
NOTICE OF ANNUAL GENERAL AND SPECIAL MEETING OF SHAREHOLDERS
TAKE NOTICE that the annual general and special meeting (the “Meeting”) of holders (“Shareholders”) of common shares (the “Common Shares”) in the capital of Newton Energy Corporation (the “Corporation”) will be held at the offices of Burstall LLP, Suite 1600 Dome Tower, 333 7th Avenue S.W. Calgary, Alberta and broadcast via teleconference at 1-866-806-8616, conference code 2014361726 on September 23, 2020 at 10:00 A.M. (Calgary time), as it may be postponed or adjourned.
Accompanying this Notice are materials delivered in connection with the Meeting including:
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the management information circular of the Corporation, dated August 21, 2020 (the “Circular”); and
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The Corporation and Newton Energy Subco Limited (“Subco”), a wholly-owned subsidiary of the Corporation, have entered into an amalgamation agreement dated August 21, 2020 with Field Trip Psychedelics Inc. (“Field Trip”) in respect of a proposed business combination with Field Trip (the “Transaction”). The Transaction does not require Shareholder approval. However, the Transaction is very important to the Corporation and certain matters to be considered at the Meeting are necessary in order to prepare the Corporation to complete the Transaction. All references herein to the “Resulting Issuer” refer to the Corporation after completion of the Transaction.
The Meeting will be for the following purposes:
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to receive the audited consolidated financial statements for the Corporation as at and for the financial years ended December 31, 2019, 2018 and 2017, and the auditor’s reports thereon;
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to fix the number of directors of the Corporation to be elected at the Meeting as more particularly described in the Circular;
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to elect the directors of the Corporation as more particularly described in the Circular;
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to appoint DeVisser Gray LLP as the auditor of the Corporation until the earlier of the close of the next annual meeting of shareholders of the Corporation or their earlier resignation or replacement, and to authorize the directors of the Corporation to fix the auditors’ remuneration;
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to consider and, if deemed appropriate, to pass, with or without variation, a special resolution authorizing the amendment of the articles of the Corporation to effect the change of the Corporation’s name to “Field Trip Health Ltd.”, or such other name as the board of directors, in its sole discretion, deems appropriate or as may be required or permitted by applicable regulatory authorities;
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to consider and, if deemed appropriate, to pass, with or without variation, a special resolution authorizing a consolidation of the outstanding Common Shares of the Corporation (the “Consolidation”) on the basis of one post-Consolidation Common Share for every eight pre- Consolidation Common Shares that are outstanding prior to the effective date;
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to consider, and, if deemed advisable, to pass, with or without variation, an ordinary resolution approving the option plan of the Corporation;
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to consider and, if deemed appropriate, to pass, with or without variation, an ordinary resolution approving the de-listing of the Common Shares of the Corporation from the NEX Board of the TSX Venture Exchange;
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to consider, and, if deemed advisable, to pass, with or without variation, an ordinary resolution approving the adoption of an amended and restated By-law Number 2;
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to consider, and, if deemed advisable, to pass, with or without variation, a special resolution approving the continuance of the Corporation from the Business Corporations Act (Alberta) to the Canada Business Corporations Act and the adoption of a new general by-law (which will include, among other things, advance notice provisions); and
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to transact such other business as may properly come before the Meeting or any adjournment thereof.
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The full text of resolutions in respect of special business can be found in the Circular.
If you are a Shareholder of record of the Corporation at the close of business on August 19, 2020, you are entitled to receive notice of, participate in, and vote at the Meeting. We encourage you to vote your Common Shares and participate in the Meeting.
Due to the ongoing concerns related to the spread of the coronavirus (COVID-19) and in order to protect the health and safety of Shareholders, employees, other stakeholders and the community, Shareholders are strongly encouraged to listen to the Meeting via teleconference instead of attending the Meeting in person and to vote on the matters before the Meeting by proxy.
We ask that Shareholders also review and follow the instructions of any health authorities of Canada, the Province of Alberta, the City of Calgary and any other place you must travel through to attend the Meeting. Please do not attend the Meeting in person if you are experiencing any cold or flu-like symptoms, or if you or someone with whom you have been in close contact has travelled to or from outside of Canada within the 14 days immediately prior to the Meeting or any adjournment thereof. All Shareholders are strongly encouraged to vote by submitting their completed form of proxy (or voting instruction form) prior to the Meeting by one of the means described in the Circular accompanying this Notice.
The Corporation reserves the right to take any additional precautionary measures deemed to be appropriate, necessary or advisable in relation to the Meeting in response to further developments in the COVID-19 pandemic and in order to ensure compliance with federal, provincial and local laws and orders including, without limitation: (i) holding the Meeting virtually or by providing a webcast of the Meeting; (ii) hosting the Meeting solely by means of remote communication; (iii) changing the Meeting date and/or changing the means of holding the Meeting; (iv) denying access to persons who exhibit cold or flu-like symptoms, or who have, or have been in close contact with someone who has, travelled to or from outside of Canada within the 14 days immediately prior to the Meeting or any adjournment thereof; and (v) such other measures as may be recommended by public health authorities in connection with gatherings of persons such as the Meeting. Should any such changes to the Meeting format occur, the Corporation will announce any and all of these changes by way of news release, which will be filed under the Corporation’s profile on SEDAR at www.sedar.com. We strongly recommend that you review the Corporation’s profile on SEDAR at www.sedar.com prior to the Meeting for the most current information. In the event of any changes to the Meeting format due to the COVID-19 pandemic, the Corporation will not prepare or mail amended materials in respect of the Meeting.
The Board has approved the contents of the Circular. Please review the Circular, as it contains important information about the Meeting, the items of business, and explains who can vote and how to vote.
DATED August 21, 2020.
BY ORDER OF THE BOARD
(signed) “Gino DeMichele”
Gino DeMichele
Chief Executive Officer and Director
Newton Energy Corporation
TABLE OF CONTENTS
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Details about the Meeting
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1
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Meeting Date, Time and Location
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Participation at the Meeting
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2
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General Proxy Information
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2
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Who is Seeking my Vote?
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2
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Who can Vote?
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3
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How to Vote
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3
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Changing Your Vote
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4
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Advance Notice Requirement
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5
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Cautionary Statement Regarding Forward- Looking Information
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5
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Business Combination with Field Trip
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7
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Voting Securities and Principal Holders of Voting Securities
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9
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Votes Necessary to Pass Resolutions
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9
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Financial Statements
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10
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Statement of Corporate Governance Practices
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10
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Corporate Governance
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10
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Board of Directors
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10
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Audit Committee
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Statement of Executive Compensation
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Compensation Discussion and Analysis
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Summary Compensation Table for Named Executive Officers
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Narrative Description of Named Executive Officer Compensation
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Outstanding Option-Based Awards and Share-Based Awards for Named Executive Officers
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Incentive Award Plans
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Pension Plan Benefits
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Termination and Change of Control Benefits and Management Contracts
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Compensation of Directors
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19
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Securities Authorized for Issuance under Equity Compensation Plans
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20
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Indebtedness of Directors and Executive Officers
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21
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Interest of Informed Persons in Material Transactions
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21
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Interest of Certain Persons in Matters to be Acted Upon
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21
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Particulars of Matters to be Acted Upon
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22
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Audited Financial Statements
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Number of Directors
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22
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Election of Directors
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22
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Appointment of Auditor
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29
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Name Change
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Consolidation
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30
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Approval of Stock Option Plan
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Listing Transfer to CSE
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Amendment to By-Laws
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35
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Continuance
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37
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Indication of Officer and Directors
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45
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Additional Information
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45
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Other Matters
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45
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Appendices
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Appendix “A”
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Audit Committee Charter
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Appendix “B”
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Newton Option Plan
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Appendix “C”
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Amended and Restated By-law
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Appendix “D”
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Post-Continuance By-laws
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Appendix “E”
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Section 191 of the Business Corporations Act (Alberta)
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NEWTON ENERGY CORPORATION
1600, 333 - 7th Avenue SW
Calgary, AB
T2P 2Z1
MANAGEMENT INFORMATION CIRCULAR
AS AT AUGUST 21, 2020
This management information circular (the “Circular”) is furnished in connection with the solicitation of proxies by management (“Management”) of Newton Energy Corporation (the “Corporation” or “Newton”) for use at the annual general and special meeting (the “Meeting”) of the holders (the “Shareholders”) of common shares of the Corporation (the “Common Shares”) to be held at the offices of Burstall LLP, Suite 1600 Dome Tower, 333 7th Avenue S.W. Calgary, Alberta and will be broadcast via teleconference at 1-866-806-8616, conference code 2014361726 on September 23, 2020 at 10:00 A.M. (Calgary time), as it may be postponed or adjourned, for the purposes set forth in the accompanying notice of the Meeting (the “Notice”).
In this Circular, references to “we” and “our” refer to Newton Energy Corporation. References to “intermediaries” refer to brokers, investment firms, clearing houses and similar entities that own securities on behalf of Shareholders.
No person has been authorized to give any information or make any representation in connection with any matters to be considered at the Meeting other than those contained in this Circular and, if given or made, any such information or representation must not be relied upon as having been authorized. Information contained in this Circular is given as at August 21, 2020, unless otherwise stated and all dollar amounts are expressed in Canadian dollars.
DETAILS ABOUT THE MEETING
Shareholder participation at the Meeting is important to the Corporation.
Due to the ongoing concerns related to the spread of the coronavirus (COVID-19) and in order to protect the health and safety of Shareholders, employees, other stakeholders and the community, Shareholders are strongly encouraged to listen to the Meeting via teleconference instead of attending the Meeting in person and to vote on the matters before the Meeting by proxy.
The following sections provide detailed information about the Meeting and how Shareholders can participate in the Meeting and vote their Common Shares.
Meeting Date, Time and Location
The Meeting will be held at the offices of Burstall LLP, Suite 1600 Dome Tower, 333 7th Avenue S.W. Calgary, Alberta and will be broadcast via teleconference at 1-866-806-8616, conference code 2014361726 on September 23, 2020 at 10:00 A.M. (Calgary time).
We ask that Shareholders also review and follow the instructions of any health authorities of Canada, the Province of Alberta, the City of Calgary and any other place you must travel through to attend the Meeting. Please do not attend the Meeting in person if you are experiencing any cold or flu-like symptoms, or if you or someone with whom you have been in close contact has travelled to or from outside of Canada within the 14 days immediately prior to the Meeting or any adjournment thereof. All Shareholders are strongly encouraged to vote by submitting their completed form of proxy (or voting instruction form) prior to the Meeting by one of the means described in this Circular.
The Corporation reserves the right to take any additional precautionary measures deemed to be appropriate, necessary or advisable in relation to the Meeting in response to further developments in the COVID-19 pandemic and in order to ensure compliance with federal, provincial and local laws and orders including, without limitation: (i) holding the Meeting virtually or by providing a webcast of the Meeting; (ii) hosting the Meeting solely by means of remote communication; (iii) changing the Meeting date and/or changing the means of holding the Meeting; (iv) denying access to persons who exhibit cold or flu-like symptoms, or who have, or have been in close contact with someone who has, travelled to or from outside of Canada within the 14 days immediately prior to the Meeting or any adjournment thereof; and (v) such other measures as may be recommended by public health authorities in connection with gatherings of persons such as the Meeting. Should any such changes to the Meeting format occur, the Corporation will announce any and all of these changes by way of news release, which will be filed under the Corporation’s profile on SEDAR at www.sedar.com. We strongly recommend that you review the Corporation’s profile on SEDAR at www.sedar.com prior to the Meeting for the most current information. In the event of any changes to the Meeting format due to the COVID-19 pandemic, the Corporation will not prepare or mail amended materials in respect of the Meeting.
Please note that you will not be able to vote via teleconference. If you intend to listen to the Meeting via teleconference you must vote by proxy prior to the Meeting. See “General Proxy Information – How to Vote“.
Participation at the Meeting
The procedures for participation at the Meeting are different for a Shareholder whose name appears on the Corporation’s records as a Shareholder (a “Registered Shareholder”) and a non-registered Shareholder whose Common Shares are registered in the name of a nominee, such as a bank, trust company, securities broker or other intermediary (a “Beneficial Shareholder”).
Registered Shareholders
Registered Shareholders may vote in person at the Meeting, as described below under “General Proxy Information – How to Vote – Registered Shareholders“.
Beneficial Shareholders
A Beneficial Shareholder that would like to vote at the Meeting must appoint themselves as a proxyholder, as described below under “General Proxy Information – How to Vote – Beneficial Shareholders“. Beneficial Shareholders who have not appointed themselves as proxyholders will be able to participate as a guest but will not be able to vote or ask questions at the Meeting.
GENERAL PROXY INFORMATION
Who is Seeking my Vote?
Management is soliciting proxies from Shareholders for the Meeting. The costs incurred in the preparation and mailing of the form of proxy, Notice and this Circular will be borne by the Corporation. In addition to solicitation by mail, proxies may be solicited by personal interviews, telephone or other means of communication and by directors, officers and employees of the Corporation, who will not be specifically remunerated therefor.
Who can Vote?
Shareholders at the close of business on August 19, 2020 (the “Record Date”) are entitled to receive notice of, and to vote at, the Meeting. To the extent a Shareholder transfers the ownership of any of their Common Shares after the Record Date and the transferee of those Common Shares establishes that they own such Common Shares and request, at least ten days before the Meeting, to be included in the list of Shareholders eligible to vote at the Meeting, such transferee will be entitled to vote those Common Shares at the Meeting.
A quorum will be present at the Meeting if there are at least two persons present together holding or representing by proxy at least 10% of the total number of votes attaching to the issued Common Shares with voting rights at the Meeting.
How to Vote
The procedures for voting are different for a Registered Shareholder and a Beneficial Shareholder.
Registered Shareholders
A Registered Shareholder may vote in person at the Meeting or by proxy or they may appoint another person, who does not have to be a Shareholder, as their proxy to attend in person and vote in their place. The persons named in the enclosed form of proxy are directors and/or officers of the Corporation.
Each Registered Shareholder submitting a proxy has the right to appoint a proxyholder other than the persons designated in the form of proxy furnished by the Corporation, who need not be a Shareholder, to attend and act for the Registered Shareholder and on the Registered Shareholder’s behalf at the Meeting. To exercise such right, the names of the persons designated by Management should be crossed out and the name of the Registered Shareholder’s appointee should be legibly printed in the blank space provided in the enclosed form of proxy or by submitting another appropriate form of proxy.
Registered shareholders can vote by proxy in one of three ways:
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call 1-866-732-VOTE (8683) toll-free and follow the instructions. Registered Shareholders will need to enter their 15-digit control number (located on the bottom left corner of the first page of the proxy form that was sent to them) to identify themselves as a Registered Shareholder on the telephone voting system;
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go to www.investorvote.com. Registered Shareholders will need to enter their 15-digit control number (located on the bottom left corner of the first page of the proxy form that was sent to them) to identify themselves as a Registered Shareholder on the voting website; or
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complete the proxy form that was sent to them, sign and date it and return to: Computershare Trust Company of Canada, 8th floor, 100 University Avenue, Toronto, Ontario, M5J 2Y1 (Attention: Proxy Department).
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Computershare must receive completed proxy forms not less than 48 hours, excluding Saturdays, Sundays and statutory holidays in the Province of Alberta, before the time set for the holding of the Meeting or any adjournment(s) thereof.
All Common Shares represented at the Meeting by properly completed forms of proxy will be voted or withheld from voting in accordance with the specifications of the Registered Shareholder contained in the proxy. In the absence of such specification, such Common Shares will be voted in favour of the matters set forth in the Circular. All Common Shares represented at the Meeting will be voted or withheld from voting in accordance with the instructions of the Shareholder on any ballot that may be called. The form of proxy confers discretionary authority upon the persons named therein with respect to amendments or variations to matters identified in the Notice and with respect to other matters which may properly come before the Meeting or any adjournment(s) thereof. At the time of printing this Circular, Management knows of no such amendments, variations or other matters to come before the Meeting.
Beneficial Shareholders
The majority of the Common Shares are held by Beneficial Shareholders. Most intermediaries delegate responsibility for obtaining voting instructions from their clients to Broadridge Financial Solutions Inc. (“Broadridge”). Broadridge typically mails a scannable voting instruction form (the “Voting Instruction Form”) in lieu of the form of proxy provided by the Corporation.
Beneficial Shareholders can vote by proxy in the following ways:
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complete and return the Voting Instruction Form to Broadridge;
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call the toll-free telephone number (1-800-474-7493); or
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access Broadridge’s dedicated voting website at www.proxyvote.com to deliver their voting instructions.
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Broadridge will tabulate the results of all instructions received and provide appropriate instructions respecting the voting of Common Shares to be represented at the Meeting. The Voting Instruction Form must be returned as directed by Broadridge well in advance of the Meeting in order to have the Common Shares voted. Beneficial Shareholders cannot use the Voting Instruction Form to vote Common Shares directly at the Meeting.
If you received voting materials from a company other than Broadridge, you need to complete and return the form following the instructions they have provided.
If the Beneficial Shareholder wishes to vote their Common Shares at the Meeting, it must do so as proxyholder for the Registered Shareholder. To do this, the Beneficial Shareholder should enter their name in the blank space on the Voting Instruction Form provided and return the same to their broker or other intermediary (or the agent of such broker or other intermediary) in accordance with the instructions provided by such broker, intermediary or agent well in advance of the Meeting.
Changing Your Vote
Registered Shareholders can revoke their previously submitted proxy form by voting at the Meeting. That will automatically revoke their previous proxy (but will not affect a matter on which a vote is taken before such revocation). In addition, a proxy may be revoked by instrument in writing executed by the Registered Shareholder or their attorney authorized in writing or, if the Registered Shareholder is a corporation, under its corporate seal and by a director, officer or attorney thereof duly authorized, and deposited either: (i) at the offices of the Corporation’s transfer agent, Computershare Trust Company of Canada, 8th floor, 100 University Avenue, Toronto, Ontario, M5J 2Y1 (Attention: Proxy Department) not less than 48 hours, excluding Saturdays, Sundays and statutory holidays in the Province of Alberta, before the time set for the holding of the Meeting or any adjournment(s) thereof; or (ii) at the head office of the Corporation at any time up to and including the last business day preceding the day of the Meeting, or any adjournment thereof, at which the proxy is to be used.
Beneficial Shareholders may revoke their previously submitted voting instructions by contacting their intermediary.
Advance Notice Requirement
The Corporation’s by-laws include an advance notice requirement relating to the nomination of directors (the “Advance Notice Requirement”) designed to facilitate an orderly and efficient director nomination process by ensuring that all Shareholders receive adequate notice of director nominations and sufficient information in respect of all nominees so that the proposed nominees’ qualifications and suitability as directors can be evaluated and an informed vote cast for the election of directors. The Advance Notice Requirement is intended to provide Shareholders, the Board of Directors and the Corporation with a clear framework for nominating directors and sets certain deadlines before each Shareholder meeting for a Shareholder to notify the Corporation of its intention to nominate one or more directors.
For the purposes of the Meeting, to be valid under the Advance Notice Requirement, notice must be received not less than 30 days prior to the date of the Meeting, provided that if the Meeting is to be held on a date that is less than 50 days after the date of the first public announcement of the date of the Meeting, notice must be received not later than the 10th day following the date of the first public announcement of the Meeting.
The Corporation’s by-laws set out the information that must be included in or that must accompany the nominating shareholder’s notice. The Board of Directors may, in its sole discretion, waive any provision under the Advance Notice Requirement.
The entirety of the Advance Notice Requirement is set out in Corporation’s By-law No. 3 (the “Advance Notice By-law”), which is available on the Corporation’s SEDAR profile at www.sedar.com.
Cautionary Statement Regarding Forward-Looking Information
This Circular contains certain statements or disclosures that may constitute forward-looking information within the meaning of applicable Canadian securities legislation (“forward-looking information”). All statements and disclosures, other than those of historical fact, which address activities, events, outcomes, results or developments that Management anticipates or expects may or will occur in the future (in whole or in part) should be considered forward-looking information. In some cases, forward-looking information can be identified by terms such as “anticipate”, “believe”, “can”, “could”, “expect”, “intend”, “may”, “potential”, “shall”, “should”, “will”, “would”, or other comparable terminology.
Various assumptions or factors are typically applied in drawing conclusions or making the forecasts or projections set out in forward-looking information. Those assumptions and factors are based on information currently available to the Corporation, including information obtained from third-party industry analysts and other third party sources. In some instances, material assumptions and factors are presented or discussed elsewhere in this Circular in connection with the statements or disclosure containing the forward-looking information. You are cautioned that the following list of material factors and assumptions is not exhaustive. The factors and assumptions include, but are not limited to:
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receipt of required shareholder and regulatory approvals in a timely manner or at all;
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receipt and/or maintenance of required licenses and third party consents in a timely manner or at all; and
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the success of the operations of the Resulting Issuer.
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In particular, this Circular contains forward-looking information and statements, including forward- looking information and statements pertaining to the following:
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the Transaction (as defined herein);
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the Resulting Issuer (as defined herein);
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the Listing Statement (as defined herein);
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Nominees (as defined herein);
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the business of the Meeting;
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the auditor of the Resulting Issuer;
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effect of the Consolidation (as defined herein);
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the Corporation’s incentive plans;
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De-listing and the Listing Transfer (each as defined herein); and
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the Continuance (as defined herein).
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The forward-looking information in statements or disclosures in this Circular is based (in whole or in part) upon factors which may cause actual results, performance or achievements of the Corporation to differ materially from those contemplated (whether expressly or by implication) in the forward-looking information. Those factors are based on information currently available to the Corporation including information obtained from third-party industry analysts and other third party sources. Actual results or outcomes may differ materially from those predicted by such statements or disclosures. While the Corporation does not know what impact any of those differences may have, the Corporation’s business, results of operations and financial condition may be materially adversely affected. Factors that could cause actual results or outcomes to differ materially from the results expressed or implied by forward- looking information include, among other things:
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the availability of sources of income to generate cash flow and revenue;
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the dependence on management and directors;
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risks relating to the receipt of the required licenses;
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risks relating to additional funding requirements;
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potential transaction and legal risks;
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risks relating to laws and regulations applicable to companies operating in the psychedelics industry; and
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other factors beyond the Issuer’s control as more particularly described in Newton’s management’s discussion and analysis and other documents filed with Canadian securities regulators and available under Newton’s profile at www.sedar.com.
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The forward-looking statements contained in this Circular are made as of the date hereof. The Corporation is not obligated to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Because of the risks, uncertainties and assumptions contained herein, investors should not place undue reliance on forward- looking statements or disclosures. The foregoing statements expressly qualify any forward-looking information contained herein.
The reader is further cautioned that the preparation of financial statements in accordance with International Financial Reporting Standards (“IFRS”) requires Management to make certain judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates may change and such changes may be material, having either a negative or positive effect on net earnings as further information becomes available, and as the economic environment changes.
Shareholders are cautioned that these factors and risks are difficult to predict and that the assumptions used in the preparation of such information, although considered reasonably accurate at the time of preparation, may prove to be incorrect. Accordingly, Shareholders are cautioned that the actual results achieved will vary from the information provided herein and the variations may be material. The Corporation cautions you that the above list of factors is not exhaustive. Consequently, there is no representation by the Corporation that actual results achieved will be the same in whole or in part as those set out in the forward-looking information. Other factors which could cause actual results, performance or achievements of the Corporation to differ materially from those contemplated (whether expressly or by implication) in the forward-looking statements or other forward-looking information will be disclosed in the Listing Statement (as defined below).
BUSINESS COMBINATION WITH FIELD TRIP
The Corporation and Newton Energy Subco Limited (“Subco”), a wholly-owned subsidiary of the Corporation, have entered into an amalgamation agreement dated August 21, 2020 (the “Amalgamation Agreement”) with Field Trip Psychedelics Inc. (“Field Trip”) in respect of a proposed business combination with Field Trip (the “Transaction”). The Transaction will proceed by way of a “three- cornered” amalgamation, pursuant to which:
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Subco and Field Trip will amalgamate and the resulting entity (“Amalco”) will become a wholly- owned subsidiary of the Corporation; and
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holders of shares of Field Trip will become shareholders of the Corporation.
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All references herein to the “Resulting Issuer” refer to the Corporation after completion of the Transaction.
Field Trip was incorporated pursuant to the provisions of the Canada Business Corporations Act on April 2, 2019. Field Trip is redefining mental health and wellness with ground-breaking work in psychedelics and psychedelic therapies. Through its Field Trip Health centres opening across North America, that provide best-in-class psychedelic-therapies, and drug development and advanced research on plant-based psychedelics through Field Trip Discovery, its newly formed drug development division, Field Trip’s goal is to help those in treatment and those seeking accelerated personal growth with a simple, evidence- based way to heal and heighten engagement with the world.
Pursuant to the Amalgamation Agreement, the holders of common shares of Field Trip (“Field Trip Shares”) will receive Common Shares in exchange for their Field Trip Shares at a ratio of one post- Consolidation Common Share for each Field Trip Share held. Following the completion of the Transaction, all of Field Trip’s outstanding options and other securities exercisable or exchangeable for, or convertible into, and any other rights to acquire Field Trip Shares will be exchanged for securities exercisable for, exchangeable for or convertible into, or other rights to acquire, Common Shares on economically equivalent terms.
On August 14, 2020 Field Trip completed brokered and non-brokered private placements of 5,516,724 Field Trip Shares at a price of $2.00 per Field Trip Share, for aggregate gross proceeds of $11,033,448. It is expected that approximately 35,590,954 Common Shares will be issued to the shareholders of Field Trip as consideration for 100% of the issued and outstanding Field Trip Shares. As a result, upon completion of the Transaction, the securityholders of Field Trip are expected to own approximately 97.8% of the Common Shares, on an undiluted basis.
Upon the completion of the Transaction, it is anticipated that the executive officers of the Resulting Issuer will be:
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Chief Executive Officer – Joseph del Moral;
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Executive Chairman – Ronan Levy;
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President of Health Care Practice – Hannan Fleiman;
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President & Chief Operating Officer – Mujeeb Jafferi
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•
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Chief Financial Officer (interim) – Tyler Dyck; and
|
|
•
|
Chief Clinical Officer – Dr. Ryan Yermus.
|
Subject to Shareholder approval, it is anticipated that the directors of the Resulting Issuer will be the nominees set out under “Particulars of Matters to be Acted Upon – Election of Directors – Field Trip Nominees”.
Please see the comprehensive press release issued by the Corporation upon the execution of the Amalgamation Agreement. Full details regarding Field Trip and the Transaction will be disclosed by the Corporation in a listing statement (the “Listing Statement”) to be prepared and filed in accordance with the policies of the Canadian Securities Exchange (“CSE”). The Listing Statement will be posted on SEDAR at www.sedar.com in connection with the completion of the Transaction.
The Transaction does not require Shareholder approval. However, the Transaction is very important to the Corporation and certain matters to be considered at the Meeting are necessary in order to prepare the Corporation to complete the Transaction. Failure to approve the corresponding resolutions could impede or prevent the completion of the Transaction.
Completion of the Transaction will be subject to the closing conditions set forth in the Amalgamation Agreement, which include the approval of the listing of the Common Shares of the Resulting Issuer on the CSE, the approval of the Transaction by shareholders of Field Trip, and certain standard closing conditions, including there being no material adverse change in the business of Newton or Field Trip prior to completion of the Transaction.
Subject to receipt of all approvals, the Transaction is expected to close in September 2020.
VOTING SECURITIES AND PRINCIPAL HOLDERS OF VOTING SECURITIES
The authorized capital of the Corporation consists of an unlimited number of Common Shares. As of the date of this Circular, 6,361,047 Common Shares were issued and outstanding, each Common Share carrying one vote in respect of each matter to be voted upon at a meeting of Shareholders.
As at the Record Date, to the knowledge of the Corporation, no person owns, directly or indirectly, or exercises control or direction over, Common Shares carrying more than 10% of the voting rights attached to all outstanding Common Shares of the Corporation except as outlined below.
|
Shareholder Name
|
|
Number of Common Shares
Held
|
|
|
Percentage of Common Shares
Held(1)
|
|
|
Ron Schmeichel
|
|
|
1,133,333
|
(2)
|
|
|
17.82
|
%
|
|
James Eaton
|
|
|
850,000
|
(3)
|
|
|
13.36
|
%
|
|
Kevin Taylor
|
|
|
850,000
|
(4)
|
|
|
13.36
|
%
|
|
Gino DeMichele
|
|
|
797,773
|
(5)
|
|
|
12.54
|
%
|
|
Elena Masters
|
|
|
666,667
|
(6)
|
|
|
10.48
|
%
|
Notes:
|
|
(1)
|
Calculated based on the number of issued and outstanding Common Shares as of the date of this Circular.
|
|
|
(2)
|
666,667 Common Shares held by JJR Capital Holdings Inc., a corporation controlled by Mr. Schmeichel.
|
|
|
(3)
|
850,000 Common Shares held by 2464344 Ontario Inc., a corporation controlled by Mr. Eaton.
|
|
|
(4)
|
850,000 Common Shares held by Terei International Inc., a corporation controlled by Mr. Taylor.
|
|
|
(5)
|
797,773 Common Shares held by A2 Capital Management Inc., a corporation controlled by Mr. DeMichele.
|
|
|
(6)
|
666,667 Common Shares held by 1921142 Ontario Inc., a corporation controlled by Ms. Masters.
|
VOTES NECESSARY TO PASS RESOLUTIONS
A simple majority of affirmative votes cast at the Meeting is required to pass the resolutions described herein, except for:
|
•
|
the Name Change Resolution, Consolidation Resolution and Continuance Resolution (each as defined below), each of which must be approved by the affirmative vote of not less than two- thirds (2/3) of the votes cast by the holders of Common Shares present in person or represented by proxy at the Meeting; and
|
|
•
|
pursuant to the policies of the NEX board of the TSX Venture Exchange (the “TSXV”), the De- listing Resolution (as defined below) must be approved by (i) at least a majority of the votes cast on the De-listing Resolution, and (ii) a simple majority of the votes cast on the De-listing Resolution by Shareholders voting in person or by proxy other than votes attaching to Common Shares beneficially owned by Non Arm’s Length Parties (as defined below). A “Non Arm’s Length Party” is defined in TSXV Policy 1.1 – Interpretation (“Policy 1.1”) as a Promoter, officer, director, other Insider or Control Person of the Corporation and any Associates or Affiliates of any such persons; or another entity or an Affiliate of that entity, if that entity or its Affiliate have the same Promoter, officer, director, Insider or Control Person as the Corporation. The foregoing capitalized terms are defined in Policy 1.1.
|
Subject to the Advance Notice Requirement, if there are more nominees (each a “Nominee”) for election as directors or appointment of the Corporation’s auditor than there are vacancies to fill, those Nominees receiving the greatest number of votes will be elected or appointed, as the case may be, until all such vacancies have been filled.
FINANCIAL STATEMENTS
In connection with the
Meeting, Shareholders are encouraged to read the audited annual financial statements of the Corporation for the years ended December
31, 2019, 2018 and 2017, the report of the auditor thereon and accompanying management’s discussion and analysis. Copies
of such documents may be obtained by a Shareholder upon request without charge from the Secretary of the Corporation. These documents
are also available on SEDAR, which can be accessed at www.sedar.com.
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
Corporate Governance
Corporate governance relates
to the activities of the Corporation’s Board of Directors (the “Board”), the members of which are elected
by and are accountable to the Shareholders, and takes into account the role of the individual members of Management who are appointed
by the Board and charged with the day-to- day management of the Corporation. The Canadian Securities Administrators have published
National Instrument 58-101 – Disclosure of Corporate Governance Practices (“NI 58-101”), National
Policy 58-201 – Corporate Governance Guidelines (“NP 58-201”) and National Instrument 52-110 –
Audit Committees (“NI 52-110”). These set out a series of guidelines and requirements for effective
corporate governance (collectively, the “Guidelines”). The Guidelines address matters such as the constitution
and independence of corporate boards, the functions to be performed by boards and their committees and the effectiveness and education
of Board members. NI 58-101 requires reporting issuers to disclose on an annual basis their approach to corporate governance with
reference to the Guidelines. Set out below is a description of the Corporation’s approach to corporate governance in relation
to the Guidelines.
Board of Directors
The Board is currently composed of three directors: Messrs. Gino DeMichele, Fram Moos and V.E. Dale Burstall. It is proposed that all three of the current directors (the “Newton Nominees”) will be nominated at the Meeting to hold office until the earlier of (i) completion of the Transaction and (ii) the close of the next annual meeting of Shareholders or until their successors are duly elected or appointed pursuant to the by-laws of the Corporation, unless their offices are earlier vacated in accordance with the provisions of the Business Corporations Act (Alberta) (“ABCA”) or the Corporation’s by-laws. In connection with the Transaction, it is also proposed that Joseph del Moral, Ronan Levy, Hannan Fleiman, Mujeeb Jafferi, Ryan Yermus, Helen M. Boudreau and Dieter Weinand (the “Field Trip Nominees”) will be nominated at the Meeting to hold office, subject to completion of the Transaction, from completion of the Transaction until the close of the next annual meeting of Shareholders or until their successors are duly elected or appointed pursuant to the by-laws of the Corporation, unless their offices are earlier vacated in accordance with the provisions of the ABCA or the Corporation’s by-laws. In the event that the Transaction is not completed, the Field Trip Nominees will not become directors of the Corporation.
NP 58-201 suggests that the Board of every reporting issuer should be constituted with a majority of individuals who qualify as “independent” directors, within the meaning set out under NI 52-110, which provides that a director is independent if he or she has no direct or indirect “material relationship” with the company. “Material relationship” is defined as a relationship which could, in the view of the Board, be reasonably expected to interfere with the exercise of a director’s independent judgment.
Mr. DeMichele is the Chief Executive Officer of the Corporation and, accordingly, is not considered “independent”; and Mr. Burstall is considered to have a potentially material relationship with the Corporation by virtue of his position as a partner of Burstall LLP, one of the law firms that provide legal services to the Corporation. The remaining Newton Nominee, Mr. Moos, is considered “independent”, as he is free from a direct or indirect material relationship with the Corporation, which could reasonably be expected to interfere with the exercise of his independent judgment as director. The basis for this determination is that, since the commencement of the Corporation’s fiscal year ended December 31, 2019, Mr. Moos has not worked for the Corporation, received remuneration from the Corporation (other than in his capacity as director) or had material contracts with or material interests in the Corporation which could interfere with his ability to act in the Corporation’s best interests.
Of the Field Trip Nominees: Joseph del Moral, Ronan Levy, Hannan Fleiman, Mujeeb Jafferi and Ryan Yermus are not considered “independent”. The remaining Field Trip Nominees, Helen M. Boudreau and Dieter Weinand, are expected to be considered “independent,” as they will be free from a direct or indirect material relationship with the Corporation, which could reasonably be expected to interfere with the exercise of their independent judgment as directors. The basis for this determination is that, since the commencement of the Corporation’s fiscal year ended December 31, 2019, none of the expected independent Field Trip Nominees will have worked for the Corporation or Field Trip, received remuneration from the Corporation or Field Trip (other than in their capacity as directors) or had material contracts with or material interests in the Corporation or Field Trip which could interfere with their ability to act in the Corporation’s best interests.
The Board believes that it functions independently of Management. To enhance its ability to act independently of Management, the members of the Board may meet without Management and the non- independent directors. In the event of a conflict of interest at a meeting of the Board, the conflicted director will, in accordance with corporate law and his or her fiduciary obligations as a director of the Corporation, disclose the nature and extent of his or her interest to the meeting and abstain from voting on the matter at issue. In addition, the members of the Board who are not members of Management are encouraged to obtain advice from external advisors and legal counsel as they may deem necessary in order to reach a conclusion with respect to issues brought before the Board.
Directorships
The following table sets forth the directors of the Corporation and Field Trip Nominees who currently hold directorships in other reporting issuers:
|
Name of Director
|
|
Other Issuer
|
|
|
|
|
|
V.E. Dale Burstall
|
|
Marksmen Energy Inc. (TSXV: MAH)
|
|
|
|
|
|
|
|
Composite Alliance Group Inc. (TSXV: CAG)
|
|
|
|
|
|
|
|
Big Dougie Capital Corp. (TSXV: STUV)
|
|
|
|
|
|
Gino DeMichele
|
|
GR Silver Mining Ltd. (TSXV: GRSL)
|
|
|
|
|
|
Helen M. Boudreau
|
|
Premier, Inc. (NASDAQ: PINC)
|
|
|
|
|
|
Joseph del Moral
|
|
Cherry Street Capital Inc. (TSXV: CHSC)
|
|
|
|
|
|
Dieter Weinand
|
|
Replimune Group Inc. (NASDAQ: REPL)
|
Orientation and Continuing Education
The Board has no formal orientation and education program for new directors. When a new member joins the Board, he or she is provided with sufficient information to ensure he or she is familiarized with the Corporation’s strategic plans, its significant financial, accounting and risk management issues and its principal officers.
Ethical Business Conduct
The Board has adopted a written code of business conduct and ethics, and encourages and promotes a culture of ethical business conduct (the “Code”). The Code establishes the Corporation’s commitment to conducting business ethically and legally. The Code applies to all directors, officers, employees and consultants. The Code makes specific reference to the maintenance of an ethical corporate climate and compliance with legal and regulatory obligations.
Nomination of Directors
The Board considers its size each year when it considers the number of directors to recommend to the Shareholders for election at the annual meeting of Shareholders, taking into account the number required to carry out the Board’s duties effectively and to maintain a diversity of views and experience. There is no set process for identifying new Board candidates, but a pool of candidates may be generated using the existing network of Management or the Board members, a search firm, or any other method that the Board may choose.
Compensation
The Board has appointed the compensation and governance committee (“Compensation Committee”). The Compensation Committee has a written mandate which establishes the responsibilities of the Compensation Committee. The primary function of the Compensation Committee is to assist the Board in carrying out its responsibilities by reviewing compensation and human resources issues in support of the achievement of the Corporation’s business strategy and making recommendations to the Board as appropriate. In particular, the Compensation Committee is responsible for reviewing and approving corporate goals and objectives relevant to Chief Executive Officer compensation, evaluating the Chief Executive Officer’s performance against those goals and objectives and making recommendations to the Board with respect to the Chief Executive Officer’s compensation. The Compensation Committee also approves and reports to the Board on the compensation for the Corporation’s other senior officers. The Compensation Committee is comprised of Messrs. Moos, Burstall and DeMichele.
See “Particulars of Matters to be Acted Upon – Election of Directors“ for a discussion of the relevant experience of the Compensation Committee members.
Other Board Committees
The Corporation has no standing committees at this time, other than the Compensation Committee as discussed above and the Audit Committee as discussed below.
Assessment of Directors, the Board and Board Committees
The Board monitors the adequacy of information given to directors, communication between the Board and Management and the strategic direction and processes of the Board and committees.
Audit Committee
The audit committee (the “Audit Committee”) is a committee of the Board established for the purpose of overseeing the accounting and financial reporting process of the Corporation and annual external audits of the financial statements. The Audit Committee has set out its responsibilities and composition requirements in fulfilling its oversight in relation to the Corporation’s internal accounting standards and practices, financial information, accounting systems and procedures, which procedures are set out below in the Corporation’s audit committee mandate.
Audit Committee Charter
The Board has developed a written audit committee charter (the “Charter”). A copy of the Charter is attached as Appendix “A” to this Circular.
Composition of the Audit Committee
The Audit Committee is comprised of Messrs. Moos, Burstall and DeMichele. Mr. Moos is the chairman of the Audit Committee. Mr. DeMichele is the Chief Executive Officer of the Corporation and, accordingly, is not considered “independent”; and Mr. Burstall is considered to have a potentially material relationship with the Corporation by virtue of his position as a partner of Burstall LLP, one of the law firms that provide legal services to the Corporation. Each member of the Audit Committee is financially literate within the meaning of NI 52-110.
It is anticipated that the Audit Committee of the Resulting Issuer will be comprised of Helen M. Boudreau, Dieter Weinand and Mujeeb Jafferi, and the chair of the Audit Committee of the Resulting Issuer will be Ms. Boudreau. It is anticipated that a majority of the members of the Audit Committee of the Resulting Issuer will not be executive officers, employees or control persons of the Resulting Issuer or an affiliate thereof, and that all will be financially literate within the meaning of NI 52-110.
Relevant Education and Experience
The relevant education and experience of the members of the Audit Committee are described below. See “Election of Directors”.
Audit Committee Oversight
At no time since the commencement of the Corporation’s most recently completed financial year, has a recommendation of the Audit Committee to nominate or compensate an external auditor not been adopted by the Board.
External Auditor Service Fees
DeVisser Gray LLP are the auditors of the Corporation. The following table provides information about the aggregate fees billed to the Corporation for professional services rendered by DeVisser Gray LLP during the fiscal years ended December 31, 2019, 2018, 2017 and 2016, respectively.
|
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
|
December 31,
2017
|
|
|
December 31,
2016
|
|
|
Audit Fees(1)
|
|
$
|
7,000
|
|
|
$
|
7,000
|
|
|
$
|
7,000
|
|
|
$
|
7,000
|
|
|
Audit Related Fees(2)
|
|
|
Nil
|
|
|
|
Nil
|
|
|
|
Nil
|
|
|
|
Nil
|
|
|
Tax Fees(3)
|
|
$
|
1,000
|
|
|
$
|
1,000
|
|
|
$
|
1,000
|
|
|
$
|
1,000
|
|
|
All Other Fees
|
|
|
Nil
|
|
|
|
Nil
|
|
|
|
Nil
|
|
|
|
Nil
|
|
Notes:
|
|
(1)
|
Aggregate fees billed for the Corporation’s annual financial statements and services normally provided by the auditors in connection with the Corporation’s statutory and regulatory filings.
|
|
|
(2)
|
Aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Corporation’s financial statements and are not reported as “Audit Fees”.
|
|
|
(3)
|
Aggregate fees billed for assistance with the filing of tax returns.
|
Exemption
The Common Shares trade on the NEX board of the TSXV. Accordingly, the Corporation is a “venture issuer” pursuant to NI 52-110 (its securities are not listed or quoted on any of the Toronto Stock Exchange, a market in the U.S., or a market outside of Canada and the U.S.), and under section 6.1 of NI 52-110 it is exempt from the requirements of Part 3 (Composition of the Audit Committee) and Part 5 (Reporting Obligations) of NI 52-110.
Assessments
The Board has not adopted formal procedures for assessing the effectiveness of the Board, its Audit Committee or individual directors.
STATEMENT OF EXECUTIVE COMPENSATION
For the purpose of this section, a “CEO” or “CFO” means each individual who served as Chief Executive Officer or Chief Financial Officer, respectively, of the Corporation or acted in a similar capacity during the years ended December 31, 2019, 2018 and 2017. A “Named Executive Officer” or “NEO” means each CEO; each CFO; each of the Corporation’s three most highly compensated executive officers, other than the CEO and CFO, who were serving as executive officers at the end of the most recently completed financial year of the Corporation and whose total salary and bonus exceeds $150,000; and any additional individuals (other than the CEO and CFO) for whom disclosure would have been provided except that the individual was not serving as an officer of the Corporation at the end of the most recently completed financial year end.
Compensation Discussion and Analysis
In assessing the compensation of its executive officers, the Corporation does not have in place any formal objectives, criteria or analysis; instead, it relies mainly on discussions between the Compensation Committee and the Board.
The Compensation Committee is currently comprised of Messrs. Moos, Burstall and DeMichele of whom Mr. Moos is independent pursuant to NI 52-110. Mr. DeMichele is the Chief Executive Officer of the Corporation and, accordingly, is not considered “independent”; and Mr. Burstall is considered to have a potentially material relationship with the Corporation by virtue of his position as a partner of Burstall LLP, one of the law firms that provide legal services to the Corporation. The Compensation Committee reviews all proposed agreements between executives and the Corporation and provides recommendations to the Board. All members of the Compensation Committee are ineligible to participate in all of the Corporation’s executive compensation and benefit programs, other than Mr. DeMichele. All of the members of the Compensation Committee are eligible to receive options. The Compensation Committee determines the total compensation of the Chief Executive Officer and other executive officers of the Corporation.
Meetings of the Compensation Committee are held periodically to review compensation policies and to consider the overall compensation to be paid by the Corporation to its employees, executive officers and directors. Following review of data and discussion by members of the Compensation Committee, recommendations are made to the Board. In all cases, the Board has acted upon the Compensation Committee’s recommendations without modification in any material way.
One of the duties of the Chief Executive Officer is to provide the Compensation Committee with compensation recommendations for each of the executives, other than himself, on an annual basis. In making compensation recommendations, the Chief Executive Officer considers each executive’s performance and other relevant factors, including the scope of each executive’s position and responsibilities, the achievement of corporate goals, the current business environment and anticipated changes, and executive retention and recruitment considerations.
The Corporation’s executive compensation program has three principal components: base salary, incentive bonus plan and stock options.
Risk and Compensation
The Corporation’s compensation program is designed to provide executive officers incentives for the achievement of near-term and long-term objectives, without motivating them to take unnecessary risk. As part of its review and discussion of executive compensation, the Compensation Committee assesses facts that discourage the Corporation’s executives from taking unnecessary or excessive risk including:
|
•
|
the
Corporation’s operating strategy and related compensation philosophy;
|
|
•
|
the
effective balance, in each case, between cash and equity mix, near-term, and long-term focus, corporate and individual performance,
and financial and non-financial performance; and
|
|
•
|
that
the Corporation’s approach to performance evaluation and compensation provides greater rewards to an executive officer
achieving both short-term and long-term agreed upon objectives.
|
Based on this review, the Compensation Committee believes that the Corporation’s total executive compensation program does not encourage executive officers to take unnecessary or excessive risk.
Base Salary
The base salary element is designed to establish a target compensation level of fixed income based on the market value of each position. Additionally, the base salary is the metric upon which bonus and severance compensation is based. In establishing base salaries, the Compensation Committee reviews general market salary levels for individuals in positions with similar responsibilities and experience. Generally, the Compensation Committee targets base salaries at levels approximating those holding similar positions in comparably sized companies in the industry and hopes to achieve targeted total compensation levels through the fixed and variable components. Comparable corporations are chosen based on their being in the industry and having a comparable asset base and/or revenues in a particular financial year. Comparable positions are identified based on publicly available information on such corporations. The Compensation Committee reviews base salaries annually and makes adjustments as reasonably necessary to allow base salary to continue to serve its purposes as a retention device and as the building block for other cash compensation.
Bonus
Incentive bonuses, in the form of cash payments, are designed to add a variable component of compensation based on corporate and individual performance for executive officers. The bonus plan is designed to provide an incentive to the NEOs to achieve and exceed goals relating to overall corporate and individual performance. The Compensation Committee reviews and approves the incentive bonus plan. Given the phase of development of the Corporation, no bonuses were paid to NEOs during the fiscal years ended December 31, 2019, 2018 or 2017.
Option-Based Awards
Stock options are granted to provide an incentive to the directors, officers, employees and consultants of the Corporation to achieve the longer-term objectives of the Corporation. The purpose of the Newton Option Plan (as defined below) is to give suitable recognition to the ability and industry of such persons who contribute materially to the success of the Corporation and to attract and retain persons of experience and ability by providing them with the opportunity to acquire an increased proprietary interest in the Corporation. Stock options are also used as a means to promote the long-term retention of individuals. The Corporation awards stock options to its executive officers based upon the recommendation of the Compensation Committee, which recommendation is based upon the committee’s review of proposals from the Chief Executive Officer. Previous grants of incentive stock options are taken into account when considering new grants.
Implementation of a new incentive stock option plan and amendments to the existing Plan are the responsibility of the Compensation Committee.
Summary Compensation Table for Named Executive Officers
The following table provides a summary of total compensation earned during the fiscal years ended December 31, 2019, 2018, 2017 and 2016 by the Corporation’s Named Executive Officers. The Named Executive Officers of the Corporation for the purposes of this Circular are Messrs. DeMichele, Chow and Chia.
Name
and Principal
Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Option-based
Awards
($)
|
|
|
All
Other
Comp. ($)
|
|
Total
Comp.
($)
|
|
|
Gino
DeMichele(2)
|
|
2019
|
|
|
|
Nil
|
|
|
|
43,547
|
|
|
Nil
|
|
|
43,547
|
|
|
CEO
|
|
2018
|
|
|
|
Nil
|
|
|
|
24,719
|
|
|
Nil
|
|
|
24,719
|
|
|
|
|
2017
|
|
|
|
Nil
|
|
|
|
Nil
|
|
|
Nil
|
|
|
Nil
|
|
|
|
|
2016
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
Jimmy Chow
|
|
2019
|
|
|
|
24,000
|
|
|
|
6,532
|
|
|
Nil
|
|
|
30,532
|
|
|
CFO
|
|
2018
|
|
|
|
24,000
|
|
|
|
3,621
|
|
|
Nil
|
|
|
27,621
|
|
|
|
|
2017
|
|
|
|
33,000
|
|
|
|
Nil
|
|
|
Nil
|
|
|
33,000
|
|
|
|
|
2016
|
|
|
|
24,000
|
|
|
|
Nil
|
|
|
Nil
|
|
|
24,000
|
|
|
Merv Chia(3)
|
|
2019
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
Former CEO
|
|
2018
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
|
|
|
2017
|
|
|
|
25,000
|
|
|
|
Nil
|
|
|
Nil
|
|
|
25,000
|
|
|
|
|
2016
|
|
|
|
60,000
|
|
|
|
Nil
|
|
|
Nil
|
|
|
60,000
|
|
Notes:
|
|
(1)
|
When the Corporation issues stock options, it accounts for them using the fair value method for stock-based compensation as recommended under IFRS. The fair value of options is determined by using the Black- Scholes Option Pricing Model (which model is commonly used by junior public companies) with assumptions for risk-free interest rates, dividend yields, volatility factors of the expected market price of the Common Shares and expected life of the options.
|
|
|
(2)
|
Mr. DeMichele was appointed to the Board and as President and Chief Executive Officer of the Corporation in October 2017.
|
|
|
(3)
|
Mr. Chia resigned as Chief Executive Officer and a director of the Corporation in October 2017.
|
Narrative Description of Named Executive Officer Compensation
During the financial years ended December 2019, 2018 and 2017, a salary or fee was paid as compensation to the Named Executive Officers, and there was no other compensation awarded other than option-based awards. See “Outstanding Option-Based Awards and Share-Based Awards for Named Executive Officers”.
Outstanding Option-Based Awards and Share-Based Awards for Named Executive Officers
The table below reflects all option-based awards for each Named Executive Officer outstanding as at December 31, 2019 (including option-based awards granted to a Named Executive Officer before such fiscal year). The Corporation does not have any equity incentive plans other than its fixed stock option plan (the “Newton Option Plan”) as hereinafter described, and did not have any share-based awards outstanding as at December 31, 2019.
Name and
Principal Position
|
|
Number of
Securities
Underlying
Unexercised
Options
|
|
|
Option Exercise
Price
($/Common
Share)
|
|
|
Option
Expiration Date
|
|
Value of
Unexercised In-
the-Money
Options
($)(1)
|
Gino DeMichele
CEO
|
|
|
200,000
|
|
|
|
0.22
|
|
|
May 10, 2024
|
|
Nil
|
|
|
|
|
112,621
|
|
|
|
0.25
|
|
|
January 4, 2023
|
|
Nil
|
Jimmy Chow
CFO
|
|
|
30,000
|
|
|
|
0.22
|
|
|
May 10, 2024
|
|
Nil
|
|
|
|
|
16,500
|
|
|
|
0.25
|
|
|
January 4, 2023
|
|
Nil
|
Notes:
|
|
(1)
|
Value of unexercised options is equal to the difference between the closing price of the Common Shares on the NEX board of the TSXV on December 31, 2019 (being the last day of the Corporation’s most recently completed financial year) of $0.14 and the exercise prices of options outstanding, multiplied by the number of Common Shares available for purchase under such options.
|
Incentive Award Plans
The only incentive award plan of the Corporation during the fiscal year ended December 31, 2019 was the Newton Option Plan. See “Particulars of Matters to be Acted Upon – Approval of Stock Option Plan” below for a description of the Newton Option Plan. The table below reflects the value vested during the year ended December 31, 2019 for all option-based awards for each Named Executive Officer.
|
Name and Principal Position
|
|
Value vested during the year ($)
|
|
Gino DeMichele
CEO
|
|
|
43,547
|
|
Jimmy Chow
CFO
|
|
|
6,532
|
|
Pension Plan Benefits
The Corporation does not have a pension plan that provides for payments or benefits at, following, or in connection with retirement. The Corporation does not have a defined contribution plan.
Termination and Change of Control Benefits and Management Contracts
Except as may otherwise be disclosed in this Circular, there is no contract, agreement, plan or arrangement that provides for payments to a Named Executive Officer at, following or in connection with any termination (whether voluntary, involuntary or constructive), resignation, retirement, a change of control of the Corporation or a change in a Named Executive Officer’s responsibilities following a change of control.
Compensation of Directors
Individual Director Compensation
The following table provides a summary of the compensation provided to the directors of the Corporation during the fiscal years ended December 31, 2019, 2018 and 2017. Except as otherwise disclosed below, the Corporation did not pay any fees or compensation to directors for serving on the Board (or any committee) beyond reimbursing such directors for travel and related expenses and the granting of stock options under the Newton Option Plan.
|
Name
|
|
Fiscal Year Ended
|
|
Fees Earned ($)
|
|
Option- Based
Awards(1) ($)
|
|
All Other
Comp.
($)
|
|
Total ($)
|
|
V.E. Dale Burstall
|
|
2019
|
|
Nil
|
|
15,241
|
|
Nil
|
|
15,241
|
|
|
|
2018
|
|
Nil
|
|
3,622
|
|
Nil
|
|
3,622
|
|
|
|
2017
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Fram Moos
|
|
2019
|
|
4,500
|
|
21,774
|
|
Nil
|
|
26,274
|
|
|
|
2018
|
|
4,000
|
|
10,975
|
|
Nil
|
|
14,975
|
|
|
|
2017
|
|
6,000
|
|
Nil
|
|
Nil
|
|
6,000
|
|
Lorraine Stewart(2)
|
|
2019
|
|
n/a
|
|
n/a
|
|
n/a
|
|
n/a
|
|
|
|
2018
|
|
n/a
|
|
n/a
|
|
n/a
|
|
n/a
|
|
|
|
2017
|
|
Nil
|
|
Nil
|
|
Nil
|
|
Nil
|
|
|
Notes:
|
|
|
|
|
|
|
(1)
|
When the Corporation issues stock options, it accounts for them using the fair value method for stock-based compensation as recommended under IFRS. The fair value of options is determined by using the Black- Scholes Option Pricing Model with assumptions for risk-free interest rates, dividend yields, volatility factors of the expected market price of the Common Shares and expected life of the options.
|
|
|
(2)
|
Ms. Stewart resigned as a director of the Corporation in October 2017.
|
The Corporation provides, at its expense, insurance for the directors and officers as well as the directors and officers of the Corporation’s affiliates and subsidiaries. The insurance is for liability incurred by any of them in their capacity as a director or officer of the Corporation. This insurance policy provides coverage of up to $2,000,000 for the directors and officers of the Corporation in aggregate. Each loss or claim is subject to a $25,000 retention pursuant to the specific type of claim. The by-laws of the Corporation and indemnification agreements also provide indemnification of the directors and officers, subject to certain limitations. The most recent annual premium for the directors’ and officers’ liability policy was $8,140.
Director Outstanding Option-Based Awards and Share-Based Awards
The table below reflects all option-based awards for each director outstanding as at December 31, 2019 (including option-based awards granted to a director before such fiscal year). The Corporation does not have any equity incentive plans other than the Newton Option Plan, and did not have any share-based awards outstanding as at December 31, 2019.
|
Name and Principal
Position
|
|
Number of Securities
Underlying
Unexercised Options
|
|
Option Exercise
Price
($/ Security)
|
|
Option Expiration
Date
|
|
Value of Unexercised
In- the- Money Options ($)(1)
|
|
V.E. Dale Burstall
|
|
70,000
|
|
$0.22
|
|
May 10, 2024
|
|
Nil
|
|
|
|
16,500
|
|
$0.25
|
|
January 4, 2023
|
|
Nil
|
|
Fram Moos
|
|
100,000
|
|
$0.22
|
|
May 10, 2024
|
|
Nil
|
|
|
|
50,000
|
|
$0.25
|
|
January 4, 2023
|
|
Nil
|
|
|
Notes:
|
|
|
|
|
|
|
|
(1)
|
Value
of unexercised options is equal to the difference between the closing price of the Common Shares on the NEX on
December 31, 2019 (being the last day of the Corporation’s most recently completed financial year) of $0.14
and the exercise prices of options outstanding, multiplied by the number of Common Shares available for purchase
under such options.
|
Incentive Award Plans
The only incentive award plan of the Corporation during the fiscal year ended December 31, 2019 was the Newton Option Plan. See “Particulars of Matters to be Acted Upon – Approval of Stock Option Plan“ below for a description of the Newton Option Plan. The table below reflects the value vested during the year ended December 31, 2019 for all option-based awards for each director.
|
Name and Principal Position
|
|
Value vested during the year ($)
|
|
|
V.E. Dale Burstall
|
|
|
15,241
|
|
|
Fram Moos
|
|
|
21,774
|
|
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table provides information as of December 31, 2019 with respect to the Common Shares that may be issued under the Newton Option Plan.
-21-
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
securities
|
|
|
|
|
|
|
|
|
|
remaining
|
|
|
|
|
|
|
|
|
|
available for
|
|
|
|
|
|
|
|
|
|
future
|
|
|
|
|
|
|
|
|
|
issuance
|
|
|
|
|
|
|
|
|
|
under equity
|
|
|
|
|
|
Number of
|
|
|
|
compensation
|
|
|
|
|
|
securities to be
|
|
|
|
plans
|
|
|
|
|
|
issued upon exercise
|
|
Weighted-average
|
|
(excluding
|
|
|
|
|
|
of outstanding
|
|
exercise price of
|
|
securities
|
|
|
|
|
|
options, warrants
|
|
outstanding options,
|
|
reflected in
|
|
|
|
Fiscal Year
|
|
and rights
|
|
warrants and rights
|
|
column (a))
|
|
Plan Category
|
|
Ended
|
|
(a)
|
|
(b)
|
|
(c)
|
Equity
compensation
plans approved by
Shareholders (the
Newton Option
Plan)
|
|
December 31,
2019
|
|
633,121
|
|
$
|
0.275
|
|
|
2,983
|
Equity
compensation
plans not approved
by Shareholders
|
|
December 31,
2019
|
|
Nil
|
|
|
N/A
|
|
|
N/A
|
|
Total
|
|
N/A
|
|
633,121
|
|
|
N/A
|
|
|
2,983
|
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
Other than as disclosed in this Circular (including in the financial statements of the Corporation for the fiscal years ended December 31, 2019, 2018 and 2017), no directors, proposed Nominees for election as directors, executive officers or their respective associates or affiliates, or other management of the Corporation are indebted to the Corporation as of the date hereof or were indebted to the Corporation at any time during the fiscal year ended December 31, 2019, and no indebtedness of such individuals to another entity is the subject of a guarantee, support agreement, letter of credit or other similar arrangement or understanding provided by the Corporation.
INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS
Management is not aware of any material interest, direct or indirect, of any informed person of the Corporation, or any associate or affiliate of any such informed person, in any transaction since January 1, 2017, or in any proposed transaction, that has materially affected or would materially affect the Corporation or any of its subsidiaries.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
No director or member of Management of the Corporation or any associate of the foregoing has any material interest, direct or indirect, by way of beneficial ownership of Common Shares or otherwise in the matters to be acted upon at the Meeting, other than the election of directors, except for any interest arising from the ownership of Common Shares of the Corporation where the Shareholder will receive no extra or special benefit or advantage not shared on a pro rata basis by all Shareholders.
PARTICULARS OF MATTERS TO BE ACTED UPON
Audited Financial Statements
The audited financial statements of the Corporation for the financial years ended December 31, 2019, 2018 and 2017 and the report of the auditors thereon, will be submitted to the Meeting, although no vote by the Shareholders with respect thereto is required or proposed to be taken.
Number of Directors
The Corporation’s articles stipulate there shall be not more than 15 directors and not less than 3 directors. The Board is currently composed of three directors. At the Meeting, the shareholders will be asked to consider and, if thought fit, to approve an ordinary resolution:
|
•
|
fixing at three the number of directors to be elected at the Meeting, to hold office until the earlier of (i) completion of the Transaction and (ii) the close of the next annual meeting of Shareholders or until their successors are duly elected or appointed pursuant to the by-laws of the Corporation, unless their offices are earlier vacated in accordance with the provisions of the ABCA or the Corporation’s by-laws; and
|
|
•
|
fixing at seven the number of directors to be elected at the Meeting, to hold office, subject to completion of the Transaction, from completion of the Transaction until the close of the next annual meeting of Shareholders or until their successors are duly elected or appointed pursuant to the by-laws of the Corporation, unless their offices are earlier vacated in accordance with the provisions of the ABCA or the Corporation’s by-laws.
|
Unless otherwise directed, it is the intention of the persons designated in the accompanying form of proxy to vote IN FAVOUR of the ordinary resolution fixing the number of directors to be elected at the Meeting as set out above.
Election of Directors
At the Meeting, Shareholders will be asked to elect:
|
•
|
the three Newton Nominees as directors of the Corporation to hold office until the earlier of (i) completion of the Transaction and (ii) the close of the next annual meeting of Shareholders or until their successors are duly elected or appointed pursuant to the by-laws of the Corporation, unless their offices are earlier vacated in accordance with the provisions of the ABCA or the Corporation’s by-laws; and
|
|
•
|
the seven Field Trip Nominees as directors of the Corporation, subject to completion of the Transaction, to hold office from completion of the Transaction until the close of the next annual meeting of Shareholders or until their successors are duly elected or appointed pursuant to the by- laws of the Corporation, unless their offices are earlier vacated in accordance with the provisions of the ABCA or the Corporation’s by-laws.
|
In the event that the Transaction is not completed, the Field Trip Nominees will not become directors of the Corporation. See “Statement of Corporate Governance Practices – Board of Directors”.
Unless otherwise directed, it is the intention of the persons named in the enclosed form of proxy to vote proxies IN FAVOUR of the election of the Newton Nominees and Field Trip Nominees as directors of the Corporation as set out above.
Newton Nominees
The following table sets forth a brief background regarding the Newton Nominees. The information contained herein is based upon information furnished by the respective Newton Nominees.
|
Name of Nominee,
Current Position with
the Corporation, and
Province/State and
Country of Residence
|
|
Occupation, Business or
Employment
|
|
Director Since
|
|
Number and
Percentage of
Common Shares
Beneficially Owned,
or Controlled or
Directed, Directly or
Indirectly
|
|
|
Gino DeMichele(1)(2)(3)
|
|
Chief Executive Officer of the
|
|
October 2, 2017
|
|
|
797,773
|
|
|
Calgary, Alberta
|
|
Corporation from October 2017
|
|
|
|
|
12.54
|
%
|
|
President, Chief
|
|
to present. CEO and Director of
|
|
|
|
|
|
|
|
Executive Officer and
|
|
Vogogo Inc., a company listed on
|
|
|
|
|
|
|
|
Director
|
|
the TSXV, from June 2016 to
|
|
|
|
|
|
|
|
|
|
present. President, CEO, CFO,
|
|
|
|
|
|
|
|
|
|
Secretary and Director of
|
|
|
|
|
|
|
|
|
|
Medicenna Therapeutics Corp
|
|
|
|
|
|
|
|
|
|
(formerly A2 Acquisition Corp.)
|
|
|
|
|
|
|
|
|
|
from May 2015 to March 2017.
|
|
|
|
|
|
|
|
|
|
President and CEO of A2 Capital
|
|
|
|
|
|
|
|
|
|
Management Inc. a private
|
|
|
|
|
|
|
|
|
|
merchant banking and trading
|
|
|
|
|
|
|
|
|
|
operation since April 2006. Until
|
|
|
|
|
|
|
|
|
|
July 2013, an investment advisor,
|
|
|
|
|
|
|
|
|
|
most recently with Macquarie
|
|
|
|
|
|
|
|
|
|
Private Wealth.
|
|
|
|
|
|
|
|
V.E. Dale Burstall(1)(2)(4)
|
|
Partner at Burstall LLP since
|
|
February 11, 2013
|
|
|
183,223
|
|
|
Calgary, Alberta
|
|
1994.
|
|
|
|
|
2.88
|
%
|
|
Director
|
|
|
|
|
|
|
|
|
|
Fram Moos(1)(2)(5)
|
|
Director and President of Falcon
|
|
February 11, 2013
|
|
|
225,000
|
|
|
Calgary, Alberta
|
|
Energy Inc., a private
|
|
|
|
|
3.54
|
%
|
|
Director
|
|
corporation, since 1994.
|
|
|
|
|
|
|
|
|
Notes:
|
|
|
|
|
|
|
|
(1)
|
Member of the Audit Committee.
|
|
|
(2)
|
Member of the Compensation Committee.
|
|
|
(3)
|
Mr. DeMichele does not own 797,773 Common Shares directly, but is, under applicable securities legislation, deemed to beneficially own the Common Shares held by A2 Capital Management Inc., by reason of control of A2 Management Inc.
|
|
|
(4)
|
Mr. Burstall does not own 70,000 Common Shares directly, but is, under applicable securities legislation, deemed to beneficially own the Common Shares held by Lost In Space, Inc., by reason of control of Lost In Space, Inc. Mr. Burstall holds 86,500 options.
|
|
|
(5)
|
Mr. Moos holds 150,000 options.
|
Field Trip Nominees
The following table sets forth a brief background regarding the Field Trip Nominees, none of whom are currently directors of the Corporation, followed by additional biographical information. The information contained herein is based upon information furnished by the respective Field Trip Nominees.
|
Name of Nominee,
Current Position with
the Corporation, and
Province/State and
Country of Residence
|
Occupation, Business or
Employment
|
Director of Field
Trip Since(1)
|
Number and
Percentage of
Common Shares
Beneficially Owned,
or Controlled or
Directed, Directly or
Indirectly(2)
|
|
Joseph del Moral
Toronto, Ontario
|
Chief Executive Officer of Field Trip
|
April 2019
|
5,267,026(3)
14.48%
|
|
Ronan Levy
Toronto, Ontario
|
Executive Chairman of Field Trip
|
April 2019
|
3,517,027(4)
9.67%
|
|
Hannan Fleiman
Toronto, Ontario
|
President of Healthcare of Field Trip
|
April 2019
|
3,580,915(5)
9.84%
|
|
Mujeeb Jafferi
Toronto, Ontario
|
President & Chief Operating Officer of Field Trip
|
January 2020
|
3,622,582
9.96%
|
|
Dr. Ryan Yermus
Toronto, Ontario
|
Chief Clinical Officer of Field Trip
|
January 2020
|
3,655,915(6)
10.5%
|
|
Helen M. Boudreau Cambridge, Massachusetts
|
Ms. Boudreau is a retired senior executive with 30 years experience across biotech, pharmaceuticals, consulting and banking industries. She has worked in board environments, both as a public company CFO and a board member. Ms. Boudreau was most recently COO of the Bill & Melinda Gates Medical Research Institute.
|
April 2020
|
Nil(7)
|
|
Dieter Weinand
Pompano Beach,
Florida
|
Mr. Weinand is an experienced executive with over 30 year of experience in the pharmaceuticals and biotech industries. Mr. Weinand presently services as the Chairman of the Board of Directors of Replimune Group Inc. (NASDAQ: REPL).
|
April 2020
|
Nil(8)
|
Notes:
|
|
(1)
|
In the event that the Transaction is not completed, the Field Trip Nominees will not become directors of the Corporation. See “Statement of Corporate Governance Practices – Board of Directors”.
|
|
|
(2)
|
Anticipated percentage of Common Shares to be beneficially owned, or controlled or directed, directly or indirectly, upon completion of the Transaction.
|
|
|
(3)
|
Mr. del Moral does not own 5,267,026 Field Trip Shares directly, but is, under applicable securities legislation, deemed to beneficially own the Field Trip Shares held by 2360203 Ontario Limited, by reason of control of 2360203 Ontario Limited.
|
|
|
(4)
|
Mr. Levy does not own 3,544,804 Field Trip Shares directly, but is, under applicable securities legislation, deemed to beneficially own the Field Trip Shares held by Iron and Fuzz Holdings Inc., by reason of control of Iron and Fuzz Holdings Inc.
|
|
|
(5)
|
Mr. Fleiman does not own 3,655,915 Field Trip Shares directly, but is, under applicable securities legislation, deemed to beneficially own the Field Trip Shares held by CRS Energy Inc., by reason of control of CRS Energy Inc.
|
|
|
(6)
|
Dr. Yermus does not own 3,655,915 Field Trip Shares directly, but is, under applicable securities legislation, deemed to beneficially own the Field Trip Shares held by 2423450 Ontario Limited, by reason of control of 2423450 Ontario Limited.
|
|
|
(7)
|
Ms. Boudreau holds 100,000 options, each of which is exercisable into one Field Trip Share.
|
|
|
(8)
|
Mr. Weinand holds 100,000 options, each of which is exercisable into one Field Trip Share.
|
Joseph del Moral, Director, Age 42
Mr. del Moral is an experienced entrepreneur and a founder of Field Trip. In 2014, he was the founder and CEO of CanvasRx Inc. and Canadian Cannabis Clinics, which grew to be the largest cannabis clinic company in Canada. In 2016, CanvasRx was acquired by Aurora Cannabis Inc. (NYSE: ACB) (“Aurora”) and he joined Aurora’s board of directors. During his time at Aurora, Mr. del Moral ensured that CanvasRx continued to grow and achieve its milestones as well as assisted in corporate development, M&A and strategy. After leaving Aurora in 2018, Mr. del Moral assumed the role of CEO of Trait Biosciences Inc., a leading biotech company in the hemp and cannabis industries. Prior to his time in the cannabis industry, Mr. del Moral co-founded Newten Home Comfort, a fast growing home services company acquired by Just Energy Inc. in 2009, and he is also on the board of directors of Felix Health, an innovative direct to consumer healthcare company that is changing how Canadians access prescription drugs. Mr. del Moral holds a Bachelor of Commerce degree (Finance and Entrepreneurship) from McGill University.
Ronan Levy, Director, Age 41
Mr. Levy is an entrepreneur and is a co-founder and Executive Chairman of Field Trip. Concurrent with his work at Field Trip, he is a partner at Grassfed Ventures, a venture capital and advisory firm focused on the cannabis and biotech industries, and a member of the board of directors of Trait Biosciences Inc., a leading biotech company in the hemp and cannabis industries. Prior to his current roles, Mr. Levy co- founded Canadian Cannabis Clinics and CanvasRx Inc., which were acquired by Aurora in 2016, after which he served as Senior Vice President, Business and Corporate Affairs, for Aurora. A lawyer by training, Mr. Levy started his career as a corporate lawyer at Blake, Cassels & Graydon LLP and as legal counsel at CTVglobemedia Inc. (now Bell Media Inc.). Mr. Levy holds a Juris Doctor and a Bachelor of Commerce degree, both from the University of Toronto.
Hannan Fleiman, Director, Age 40
Mr. Fleiman is a serial entrepreneur and has co-founded and operated several companies, including Field Trip, CanvasRx Inc., Canadian Cannabis Clinic and Dominion Home Insulation. Prior to founding these companies, Mr. Fleiman managed the hospital department, animal health and OTC divisions at Teva Canada. Mr. Fleiman is a board member of a MedicNL, a contract research organization, and was a board member of Abacus Health Products, Inc., where he headed its audit and compensation committees, before the successful sale to Charlotte’s Web Holdings, Inc. (CSE: CWEB). Mr. Fleiman earned his MBA from McMaster University and his Bachelor of Science degree from the University of Guelph.
Mujeeb Jafferi, Director, Age 37
Mr. Jafferi is an experienced management executive and a founder of Field Trip. Prior to joining Field Trip, Mr. Jafferi spent over a decade in the retail and renewable energy sectors, in a variety of transformative leadership roles. Between 2016 and 2019, Mr. Jafferi served as the Vice President of Sales Operations and Strategy at Just Energy Inc. (TSX: JE) and the President of Just Energy Solar. In 2015, Mr. Jafferi served as a Partner at a renewable energy technology startup, LightWing Partners, leading its business development efforts across the US market. LightWing Partners was subsequently acquired by SunEdison. Between 2009 and 2015, Mr. Jafferi held several progressive and diverse leadership roles at Just Energy, including Director of Corporate Planning and Financial Analysis, and Asst. Regional General Manager for the US Northeast region. He holds a BA in Information Technology degree from York University and a Global Professional Master of Laws degree from the University of Toronto.
Dr. Ryan Yermus, Director, Age 39
Dr. Yermus is a physician who completed his medical training at the University of Ottawa in 2007 and his residency at the University of Toronto in 2009. As a pioneer in the Canadian medical cannabis industry, he was responsible for the development of a clinical protocol that led to the treatment of thousands of medical cannabis patients. In 2014, Dr. Yermus founded Medical Marijuana Clinics of Canada (“MMCC”), the first fully compliant cannabis clinic in Ontario. MMCC went on to be acquired by Canadian Cannabis Clinics, which grew to become the nation’s largest cannabis clinic network and was acquired by Aurora in 2016. For the past decade, Dr. Yermus has also worked as a clinician, helping patients suffering from addictions.
Helen M. Boudreau, Director, Age 54
Ms. Boudreau is a retired senior executive, with 30 years’ experience across the biotech, pharmaceuticals, consulting and banking industries. She was most recently COO of the Bill & Melinda Gates Medical Research Institute, a non-profit biotech company focused on diseases that cause mortality, poverty and inequality in low and middle-income countries. Previously, she served as CFO for public and private biotech companies, Proteostasis Therapeutics and FORMA Therapeutics. Ms. Boudreau spent 16 years at Novartis and Pfizer, serving in strategy and senior finance roles, including Global CFO, Oncology Business Unit, CFO, US Corporate, VP Investor Relations, VP Finance, Customer Business Unit and Commercial Operations, and VP Finance, Global R&D. She started her career in banking and was an engagement manager at McKinsey & Company, a strategic consulting firm. Ms. Bourdreau is currently a member of the board of Premier, Inc. (NASDAQ: PINC), a healthcare improvement company, and is also on the boards of two private biotech companies. Helen earned a BA in Economics, summa cum laude, from the University of Maryland, and an MBA from the Darden Graduate School of Business at the University of Virginia.
Dieter Weinand, Director, Age 59
Mr. Weinand is an experienced executive with over 30 years of experience in the pharmaceuticals and biotech industries. Mr. Weinand presently serves as the Chairman of the board of directors of Replimune Group Inc. (NASDAQ: REPL). Previously, Mr. Weinand served as the Executive Vice President of Primary Care and was a member of the Executive Committee at Sanofi from November 1, 2018 to February 2020. Before moving to Sanofi, Mr. Weinand was CEO and Chairman of the Board of Management of Bayer Pharma AG and member of the Management Board at Bayer AG. Prior to his work at Sanofi and Bayer, Mr. Weinand has held various positions in commercial, operational and strategic areas of the pharmaceutical industry. These included responsibilities spanning various therapeutic areas and geographies for companies such as Pfizer, Bristol Myers Squibb and Otsuka. Mr. Weinand earned an MS in Pharmacology and Toxicology from Long Island University, New York, and a BA in Biology from Concordia College, New York. Mr. Weinand is a former board member of the Pharmaceutical Research and Manufacturers of America (PhRMA), the European Federation of Pharmaceutical Industries & Associations (EFPIA), and the International Federation of Pharmaceutical Manufacturers (IFPMA), and served as a member of the board of directors of HealthPrize Technologies.
Orders, Penalties and Bankruptcies
To the knowledge of the Corporation, as of the date hereof, other than as disclosed herein, no Newton Nominee or Field Trip Nominee:
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is, or has been, within 10 years before the date hereof, a director, CEO or CFO of any company (including the Corporation) that:
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was subject to an order that was issued while the proposed director was acting in the capacity as director, CEO or CFO, or
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was subject to an order that was issued after the proposed director ceased to be a director, CEO or CFO and which resulted from an event that occurred while that person was acting in the capacity as director, CEO or CFO;
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is, or has been, within 10 years before the date hereof, a director or executive officer of any company (including the Corporation) that, while such Nominee was acting in that capacity, or within a year of such Nominee ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or
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has, within 10 years before the date hereof, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangements or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of such Nominee.
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For the purposes of the above section, the term “order” means:
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a cease trade order, including a management cease trade order;
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an order similar to a cease trade order; or
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an order that denied the relevant company access to any exemption under securities legislation,
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that was in effect for a period of more than 30 consecutive days.
Mr. Burstall was a director of Ranger Canyon Energy Inc. until September 27, 2011, which was cease traded by the Alberta Securities Commission on May 21, 2009 and continues to be cease traded for failure to file financial statements, management discussion and analysis and certificates of annual filings for the year ended December 31, 2008 and subsequent periods. On or about April 2, 2014, the Alberta Securities Commission cease traded QSolar Limited (“QSolar”) based on the fact that the entire board of directors and all of the executive officers resigned and QSolar discontinued operations. Pursuant to a court order dated on or about April 17, 2015, Mr. Burstall, along with three other individuals, were appointed directors of QSolar in order to try to preserve the assets of QSolar. Mr. Burstall resigned as a director of QSolar effective June 18, 2015. Mr. Burstall has been a director of CanAsia Financial Inc. (“CanAsia”) since March 25, 2015. On May 5, 2016, the Alberta Securities Commission and other securities commissions cease traded CanAsia for failing to file annual audited financial statements, annual management’s discussion and analysis and certification of annual filings for the year ended December 31, 2015 and subsequent periods. On September 27, 2017, the Alberta Securities Commission and other securities commissions revoked CanAsia’s cease trade order.
To the knowledge of the Corporation, as of the date hereof, no Newton Nominee or Field Trip Nominee has been subject to:
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any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or
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any other penalties or sanctions imposed by a court or regulatory body,
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that would likely be considered important to a reasonable Shareholder in deciding to vote for a proposed director.
Appointment of Auditor
DeVisser Gray LLP of Vancouver, British Columbia, the present auditor of the Corporation, was first appointed as such on October 10, 2014. Management recommends the re-appointment of DeVisser Gray LLP as the auditor to hold office until the close of the next annual meeting of the Shareholders.
Field Trip has notified the Corporation of its expectation that, in the event that the Transaction is completed, the Resulting Issuer’s fiscal year end will be changed from December 31 to March 31, being Field Trip’s fiscal year end, and MNP LLP, being Field Trip’s auditors, will be appointed as auditors of the Resulting Issuer.
The determination by the Resulting Issuer to use MNP LLP as auditor of the Resulting Issuer in the event that the Transaction is completed is expected to be made in the context of the Transaction and not because of any “reportable event” (as that term is defined in National Instrument 51-102 – Continuous Disclosure Obligations).
Unless otherwise directed to the contrary, it is the intention of the persons named in the enclosed form of proxy to vote proxies IN FAVOUR of the appointment of DeVisser Gray LLP as auditors of the Corporation at remuneration to be fixed by the Board.
Name Change
Upon completion of the Transaction, the Corporation intends that the business of Field Trip will be the business of the Corporation. In connection therewith, the Corporation wishes to change its name to “Field Trip Health Ltd.”, or such other name as the Board, in its sole discretion, deems appropriate or as may be required or permitted by applicable regulatory authorities (the “Name Change”) pursuant to subsection 173(1)(a) of the ABCA. The Board has determined that the Name Change is in the best interests of the Corporation in order to reflect the change in its business activities.
The Shareholders will be asked to consider and, if deemed appropriate, to pass, with or without variation, a special resolution authorizing the amendment of the articles of the Corporation to effect the Name Change (the “Name Change Resolution”). To be effective, the Name Change Resolution must be approved by the affirmative vote of not less than two-thirds (2/3) of the votes cast by the holders of Common Shares present in person or by proxy at the Meeting.
Approval of the Name Change is a condition to the completion of the Transaction. Failure to approve the Name Change Resolution could impede or prevent the completion of the Transaction. Shareholders are urged to vote in favour of this special resolution. The text of the Name Change Resolution is as follows:
“BE IT RESOLVED as a special resolution of the Shareholders that:
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the articles of the Corporation be amended to change the name of the Corporation to “Field Trip Health Ltd.” or such other name as the Board, in its sole discretion, deems appropriate and the Registrar (as defined in the ABCA) may permit;
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any one director or officer be and is hereby authorized to send to the Registrar Articles of Amendment of the Corporation in the prescribed form, and any one or more directors are hereby authorized to prepare, execute and file Articles of Amendment in the prescribed form in order to give effect to this special resolution;
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any director or officer of the Corporation is hereby authorized, empowered and instructed, acting for, in the name and on behalf of Corporation, to execute or cause to be executed, under the seal of Corporation or otherwise, and to deliver or to cause to be delivered, all such other documents and to do or to cause to be done all such other acts and things as in such person’s opinion may be necessary or desirable in order to carry out the intent of these resolutions and the matters authorized hereby, such determination to be conclusively evidenced by the execution and delivery of such document or the doing of such act or thing; and
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the directors of the Corporation are hereby authorized and granted with absolute discretion and without further approval of the Shareholders, to revoke and rescind the foregoing resolution before the issuance by the Registrar of a certificate of amendment or articles in respect of such amendment.”
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The requisite regulatory approvals for the Name Change, including the approvals of the TSXV, if required (or any other stock exchange on which the Common Shares are listed), may not be sought by the Corporation until after the Board decides to implement the Name Change. There can be no assurance that the applicable regulatory approvals for the Name Change will be obtained. The Name Change Resolution authorizes the Board not to proceed with the Name Change, without further approval of the Shareholders, before the issuance by the Registrar of a certificate of amendment or articles in respect of such amendment.
Unless otherwise directed to the contrary, it is the intention of the persons named in the enclosed form of proxy to vote proxies IN FAVOUR of the Name Change Resolution. The Board unanimously recommends that Shareholders vote for the Name Change Resolution.
Consolidation
In order to effect the Transaction on the terms set out in the Amalgamation Agreement, the Shareholders will be asked to approve a special resolution approving a consolidation of the outstanding Common Shares of the Corporation (the “Consolidation”) on the basis of one post-Consolidation Common Share for every eight pre-Consolidation Common Shares that are outstanding prior to the effective date, pursuant to subsection 173(1)(f) of the ABCA.
The Shareholders will be asked to consider and, if deemed appropriate, to pass, with or without variation, a special resolution authorizing the Consolidation (the “Consolidation Resolution”). To be effective, the Consolidation Resolution must be approved by the affirmative vote of not less than two-thirds (2/3) of the votes cast by the holders of Common Shares present in person or by proxy at the Meeting.
Approval of the Consolidation is a condition to the completion of the Transaction. Failure to approve the Consolidation Resolution could impede or prevent the completion of the Transaction. Shareholders are urged to vote in favour of this special resolution.
The text of the Consolidation Resolution is as follows:
“BE IT RESOLVED as a special resolution of the Shareholders that:
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the Corporation be and is hereby authorized to consolidate the issued and outstanding Common Shares on the basis of one Common Share for every eight issued and outstanding Common Shares;
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no fractional Common Shares shall be issued in connection with the Consolidation. Where the Consolidation would otherwise result in a Shareholder being entitled to a fractional Common Share, the number of post-Consolidation Common Shares issued to such Shareholder shall be rounded down to the next whole number of Common Shares. In calculating such fractional interests, all Common Shares held by a beneficial holder shall be aggregated;
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any director or officer of the Corporation is hereby authorized, empowered and instructed, acting for, in the name and on behalf of Corporation, to execute or cause to be executed, under the seal of Corporation or otherwise, and to deliver or to cause to be delivered, all such other documents and to do or to cause to be done all such other acts and things as in such person’s opinion may be necessary or desirable in order to carry out the intent of these resolutions and the matters authorized hereby, such determination to be conclusively evidenced by the execution and delivery of such document or the doing of such act or thing; and
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the directors of the Corporation are hereby authorized and granted with absolute discretion and without further approval of the Shareholders, to revoke and rescind the foregoing resolution before it is acted upon.”
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The requisite regulatory approvals for the Consolidation, including the approvals of the TSXV, if required (or any other stock exchange on which the Common Shares are listed), may not be sought by the Corporation until after the Board decides to implement the Consolidation. There can be no assurance that the applicable regulatory approvals for the Consolidation will be obtained. The Consolidation Resolution authorizes the Board not to proceed with the Consolidation, without further approval of the Shareholders, before it is acted upon.
Unless otherwise directed to the contrary, it is the intention of the persons named in the enclosed form of proxy to vote proxies IN FAVOUR of the Consolidation Resolution. The Board unanimously recommends that Shareholders vote for the Consolidation Resolution.
Effect of Consolidation
The Consolidation will not materially affect any Shareholders’ percentage ownership in the Corporation, although such ownership will be represented by a smaller number of post-Consolidation Common Shares. If the Consolidation is approved and given effect, the number of Common Shares outstanding prior to completion of the Transaction will be approximately 795,130 Common Shares, or such other amount depending on the final Consolidation ratio agreed to by the Board. The Consolidation is expected to lead to an increase in the number of Shareholders who will hold “odd lots”; that is, a number of shares not evenly divisible into board lots (a board lot is either 100, 500 or 1,000 shares, depending on the price of the shares). As a general rule, the cost to Shareholders transferring an odd lot of Common Shares is somewhat higher than the cost of transferring a “board lot”. Nonetheless, the Board believes the Consolidation is in the best interest of the Corporation as the Consolidation is a condition to complete the Transaction despite the potential increased cost to Shareholders in transferring odd lots of post- Consolidation Common Shares.
Fractional Shares
If the Consolidation is implemented, fractional post-Consolidation Common Shares will not be issued to Shareholders. Where the Consolidation would otherwise result in a Shareholder being entitled to a fractional Common Share, the number of post-Consolidation Common Shares issued to such holder of Common Shares shall be rounded down to the next whole number of Common Shares. In calculating such fractional interests, all Common Shares held by a beneficial holder shall be aggregated.
Implementation of Consolidation
Shareholders will be notified as soon as practicable after the Consolidation becomes effective. The Corporation expects that Computershare will act as exchange agent for purposes of implementing the exchange of share certificates.
Following the filing by the Corporation of articles of amendment implementing the Name Change and Consolidation (assuming that the Name Change Resolution and Consolidation Resolution are passed at the Meeting), all Common Shares held by Shareholders will be consolidated without any further action required by Shareholders. Upon completion of the Name Change and Consolidation, the number of Common Shares outstanding will be so adjusted on the Corporation’s register of Common Shares maintained by the Corporation’s transfer agent, and registered Shareholders will receive a share certificate or a statement prepared by such transfer agent pursuant to its direct registration system (a “DRS Advice Statement”) evidencing the post-Consolidation Common Shares to which such Shareholder is entitled. Beneficial Shareholders should note that their intermediaries may have various procedures for processing the Name Change and Consolidation. Beneficial Shareholders will not receive a share certificate or DRS Advice Statement upon completion of the Name Change and Consolidation. If a Beneficial Shareholder has any questions in this regard, the Beneficial Shareholder is encouraged to contact its intermediary.
Approval of Stock Option Plan
The TSXV requires that all listed companies with a 10% rolling stock option plan obtain shareholder approval of the plan on an annual basis. Shareholders will be asked at the Meeting to vote on a resolution to approve, for the ensuing year, the Newton Option Plan as described below.
The Newton Option Plan provides that the Board may from time to time, in its discretion, grant to directors, officers, employees and consultants of the Corporation, or any subsidiary of the Corporation, the option to purchase Common Shares. The purpose of the Newton Option Plan is to develop the interests of directors, officers, employees and consultants of the Corporation and its affiliates in the growth and development of the Corporation and its affiliates by providing them with the opportunity through share options to acquire an increased proprietary interest in the Corporation.
The number of Common Shares issuable upon the exercise of options granted under the Newton Option Plan at any time may not exceed 10% of the total number of issued and outstanding Common Shares (on a non-diluted basis) and the aggregate number of Common Shares issuable to any one individual may not exceed 5% of the total number of issued and outstanding Common Shares. The period during which an option granted under the Newton Option Plan is exercisable may not exceed five years from the date such option is granted. All options are non-assignable and non-transferrable. The price which the Common Shares may be acquired upon exercise of an option may not be less than the price permitted under the rules of any stock exchange on which the Common Shares are listed and the vesting provisions are determined by the Board at the time of grant.
If prior to the exercise of an option, the holder ceases to be a director, officer, employee or consultant of the Corporation for any reason other than death, the option may be exercised within the earlier of up to 90 days after such cessation or the expiry of the option, but only to the extent that the holder was entitled to exercise the option at the date of cessation. In the case of death an optionee, the option may be exercised within the earlier of up to 12 months after such death or the expiry of the option, but only to the extent that the holder was entitled to exercise the option at the date of death.
The Shareholders will be asked to consider and, if deemed appropriate, to pass, with or without variation, an ordinary resolution approving the Newton Option Plan (the “Newton Option Plan Resolution”). To be effective, the Newton Option Plan Resolution must be approved by the affirmative vote of not less than a majority of the votes cast by the holders of Common Shares present in person or by proxy at the Meeting.
The text of the Newton Option Plan Resolution is as follows:
“BE IT RESOLVED as an ordinary resolution of the Shareholders that:
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the Newton Option Plan in the form attached as Appendix “B” to the Circular, be and is hereby approved with such modifications as may be required by the TSXV (or any other stock exchange on which the Common Shares are listed);
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the maximum number of Common Shares of the Corporation which may be issued under the Newton Option Plan shall be equal to ten percent (10%) of the then issued and outstanding Common Shares of the Corporation from time to time; and
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any director or officer of the Corporation is hereby authorized, empowered and instructed, acting for, in the name and on behalf of Corporation, to execute or cause to be executed, under the seal of Corporation or otherwise, and to deliver or to cause to be delivered, all such other documents and to do or to cause to be done all such other acts and things as in such person’s opinion may be necessary or desirable in order to carry out the intent of these resolutions and the matters authorized hereby, such determination to be conclusively evidenced by the execution and delivery of such document or the doing of such act or thing.”
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The requisite regulatory approvals for the Newton Option Plan, including the approvals of the TSXV (or any other stock exchange on which the Common Shares are listed), may not be sought by the Corporation until after the Meeting. There can be no assurance that the applicable regulatory approvals for the Newton Option Plan will be obtained.
It is expected that the Resulting Issuer will adopt a new stock option plan upon completion of the Transaction under which options issued on and after completion of the Transaction will be issued. It is expected that only options existing prior to the Transaction will be governed by the Newton Option Plan until their exercise or expiry.
Unless otherwise directed to the contrary, it is the intention of the persons named in the enclosed form of proxy to vote proxies IN FAVOUR of the Newton Option Plan Resolution.
Listing Transfer to CSE
The Common Shares are currently listed on the NEX under the trading symbol “NTN.H”. In connection with the Transaction, the Corporation intends to (i) apply to the TSXV to voluntarily de-list its Common Shares from the NEX (the “De-listing”), and (ii) apply to list the Common Shares on the facilities of the CSE (together, the “Listing Transfer”). Consequently, the Corporation is seeking the approval of the Shareholders (exclusive of Non Arm’s Length Parties) to proceed with the De-listing.
The Shareholders will be asked to consider and, if deemed appropriate, to pass, with or without variation, a special resolution authorizing the De-listing (the “De-listing Resolution”). To be effective, the De- listing Resolution must be approved by (i) at least a majority of the votes cast on the De-listing Resolution, and (ii) a simple majority of the votes cast on the De-listing Resolution by Shareholders voting in person or by proxy other than votes attaching to Common Shares beneficially owned by Non Arm’s Length Parties.
Approval of the De-listing Resolution is a condition to the completion of the Transaction. Failure to approve the De-listing Resolution could impede or prevent the completion of the Transaction. Shareholders are urged to vote in favour of this ordinary resolution.
The text of the De-listing Resolution is as follows:
“BE IT RESOLVED as an ordinary resolution of the Shareholders that:
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the Corporation is hereby authorized to voluntarily de-list the Common Shares from the NEX Board of the TSXV;
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the Corporation is authorized to prepare such disclosure documents and make such submissions and filings with the TSXV as the Corporation may deem necessary or desirable to obtain TSXV acceptance of the De-listing;
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any director or officer of the Corporation is hereby authorized, empowered and instructed, acting for, in the name and on behalf of Corporation, to execute or cause to be executed, under the seal of Corporation or otherwise, and to deliver or to cause to be delivered, all such other documents and to do or to cause to be done all such other acts and things as in such person’s opinion may be necessary or desirable in order to carry out the intent of these resolutions and the matters authorized hereby, such determination to be conclusively evidenced by the execution and delivery of such document or the doing of such act or thing; and
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the directors of the Corporation are hereby authorized and granted with absolute discretion and without further approval of the Shareholders, to revoke and rescind the foregoing resolution before it is acted upon.”
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The requisite regulatory approvals for the De-listing and the Listing Transfer, including the approvals of the TSXV and CSE, may not be sought by the Corporation until after the Board decides to implement the De-listing and/or the Listing Transfer. The Listing Transfer is conditional upon the Corporation obtaining any necessary regulatory consent, including from the TSXV and CSE. If the CSE conditionally approves the listing of the Common Shares, and subject to the approval of the TSXV and Shareholder approval of the De-listing Resolution, the Corporation intends to de-list the Common Shares from the NEX and commence trading on the CSE in connection with the closing of the Transaction. Unless the CSE conditionally approves the listing of the Common Shares, the Corporation will not de-list the Common Shares from the NEX. There can be no assurance that either the TSXV will approve the De-listing or that the CSE will approve the Listing Transfer. The De-listing Resolution authorizes the Board not to proceed with the De-listing, without further approval of the Shareholders, before it is acted upon.
De-listing will occur following the Corporation’s receipt of the CSE’s conditional approval to list the Common Shares. After the De-listing and until the Common Shares are listed on the CSE or another stock exchange, there will be no marketplace for the trading of the Common Shares.
The Board believes that the CSE has a preferred fee structure for the Corporation which will allow the Corporation to devote a larger portion of its financial resources to executing its business strategy. Additionally, the Board believes that the rules and policies of the CSE are more suitable for the Resulting Issuer and that the CSE will provide a marketplace that is as good as or better than the NEX for the trading of its Common Shares.
Unless otherwise directed to the contrary, it is the intention of the persons named in the enclosed form of proxy to vote proxies IN FAVOUR of the De-listing Resolution. The Board unanimously recommends that Shareholders vote for the De-listing Resolution.
Amendment to By-Laws
General
At the Meeting, Shareholders will be asked to consider, and, if deemed advisable, to pass, with or without variation, an ordinary resolution (the “By-law Amendment Resolution”) approving the adoption of an amended and restated By-law Number 2 (the “Amended and Restated By-law”). The Amended and Restated By-law includes: (i) additions and clarification to the reporting requirements of directors and officers regarding conflicts of interest, (ii) amendments to corporate governance provisions, (iii) amendments to notice requirements for meetings of shareholders, (iv) deletion of references to a unanimous shareholders agreement, which are not applicable given the Corporation is a public company, and (v) modernization of the Amended and Restated By-law to contemplate electronic, book-based or other non-certificated registered positions of Common Shares, the giving of electronic notice or documents, and other minor amendments of an administrative or clerical nature, all as described in further detail below. There have been no other changes other than amendments of a housekeeping nature.
The Amended and Restated By-law was approved by the Board on August 21, 2020, subject to the approval of the By-law Amendment Resolution at the Meeting and completion of the Transaction. Pursuant to the requirements of the ABCA, the adoption of the Amended and Restated By-law must be submitted to Shareholders for confirmation. If approved by ordinary resolution, the Amended and Restated By-law will be in full force and effect following completion of the Transaction. If not, By-law Number 2 will remain effective.
Description of Key Differences Between the Previous By-law and the Amended and Restated By-law
The following summarizes the key differences between By-law Number 2 and the Amended and Restated By-law and is qualified in its entirety by the text of the Amended and Restated By-law, which is attached to the Circular as Appendix “C”. Shareholders should review the Amended and Restated By-law in its entirety. Those changes that are generally of a housekeeping nature are not outlined below.
Conflict of Interest
The Amended and Restated By-law adds the requirement that a director or officer of the Corporation must disclose to the Corporation the nature and extent of any interest they have in a material contract or a material transaction, whether made or proposed. By-law Number 2 previously only required notification regarding any interests a director or officer has in a material contract.
In addition, this notification must be provided in writing or by entering the notification in the minutes of meetings of directors, or of meetings of committees of directors, at the time and in the manner provided in the ABCA. The notification must include the nature and extent of the interest and, if the director or officer: (i) is a party to the contract or transaction, (ii) is a director or an officer, or an individual acting in a similar capacity, of a party to the contract or transaction, or (iii) has a material interest in a party to the contract or transaction.
A contract or transaction for which disclosure is required is not invalid, and the director or officer is not accountable to the Corporation or its shareholders for any profit realized from the contract or transaction, because of the director’s or officer’s interest in the contract or transaction or because the director was present or was counted to determine whether a quorum existed at the meeting of directors or committee of directors that considered the contract or transaction, if the director or officer disclosed his interest in accordance with the provisions of the Act and the contract or transaction was approved by the directors, and it was reasonable and fair to the Corporation when it was approved.
Even if these conditions are not met, a director or officer, acting honestly and in good faith, shall not, by reason only of his office, be accountable to the Corporation or to the Shraeholders for any profit realized from a contract or transaction for which disclosure is required, and the contract or transaction is not invalid by reason only of the interest of the director or officer in the contract or transaction, if the contract or transaction is approved or confirmed by special resolution at a meeting of the Shareholders, disclosure of the interest was made to the Shareholders in a manner sufficient to indicate its nature before the contract or transaction was approved or confirmed, and the contract or transaction was reasonable and fair to the Corporation when it was approved or confirmed.
Corporate Governance
With respect to corporate governance matters, the Amended and Restated By-law:
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clarifies certain provisions including the calling of Board meetings and the calling of special meetings of shareholders;
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removes the concept of a “managing director”, as the Corporation does not have a “managing director”;
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replaces most references to the “president” to the “chief executive officer”
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provides that, unless invited by the chairman of a meeting of Shareholders, only Shareholders entitled to vote thereat, the directors and auditors of the Corporation, and those otherwise entitled or required under any provision of the Act or the Corporation’s articles or by-laws to be present, are entitled to be admitted to a meeting of Shareholders; and
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clarifies the validity of acts of a director or officer where there is an irregularity in their election or appointment, or a defect in their qualification.
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Modernization and Administrative Changes
The Amended and Restated By-law contains a number of additional minor amendments of an administrative or clerical nature, most of which are updates intended to ensure that the Amended and Restated By-law remains consistent with current practice among Canadian public companies. In particular, the Amended and Restated By-law:
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provides for registered securityholders to have their holdings evidenced by an electronic, book- based, direct registration service or other non-certificated entry or position on the register of securityholders to be kept by the Corporation in place of a physical security certificate;
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adds, where applicable, reference to the Securities Transfer Act (Alberta) and the Civil Enforcement Act (Alberta); and
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provides for the giving of notice or a document by electronic means.
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Shareholder Approval
The text of the By-law Amendment Resolution is as follows:
“BE IT RESOLVED as an ordinary resolution of the Shareholders that:
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the Amended and Restated By-law, approved by the Board on August 21, 2020, is hereby authorized and approved as a by-law of the Corporation, subject to completion of the Transaction; and
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any director or officer of the Corporation is hereby authorized, empowered and instructed, acting for, in the name and on behalf of Corporation, to execute or cause to be executed, under the seal of Corporation or otherwise, and to deliver or to cause to be delivered, all such other documents and to do or to cause to be done all such other acts and things as in such person’s opinion may be necessary or desirable in order to carry out the intent of these resolutions and the matters authorized hereby, such determination to be conclusively evidenced by the execution and delivery of such document or the doing of such act or thing.”
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Unless otherwise directed to the contrary, it is the intention of the persons named in the enclosed form of proxy to vote proxies IN FAVOUR of the By-law Amendment Resolution. The Board unanimously recommends that Shareholders vote for the By-law Amendment Resolution.
Continuance
The Corporation is currently governed by the ABCA. Field Trip has notified the Corporation of its expectation that, in the event that the Transaction is completed, the Resulting Issuer will wish to apply for the continuance of the Corporation (the “Continuance”) from the ABCA to the federal jurisdiction of the Canada Business Corporations Act (“CBCA”) pursuant to section 189 of the ABCA and section 187 of the CBCA.
The Shareholders will be asked to consider and, if deemed appropriate, to pass, with or without variation, a special resolution authorizing the Continuance (the “Continuance Resolution”) including the adoption, effective upon the issuance of the Certificate of Continuance, of the by-laws attached as Appendix “D” to this Circular. See “ – Effect of the Continuance”. To be effective, the Continuance Resolution must be approved by the affirmative vote of not less than two-thirds (2/3) of the votes cast by the holders of Common Shares present in person or by proxy at the Meeting.
Approval of the
Continuance Resolution is a not condition to the completion of the Transaction.
The text of the Continuance Resolution is as follows:
“BE IT RESOLVED as a special resolution of the Shareholders that:
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the Corporation be authorized to make application to the Registrar (as defined in the ABCA) for the issuance of a consent to file articles of continuance with the Director (as defined in the CBCA) to continue the Corporation as if it had been incorporated under the CBCA, and to make application to the Registrar of Corporations of Alberta for the issuance of a certificate of discontinuance (“Certificate of Discontinuance”);
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the Corporation be authorized to make application to the Director for a certificate of continuance (the “Certificate of Continuance”) and prepare for the Director, articles of continuance, a notice of directors and a notice of registered office, all in the form that the Director fixes, to continue the Corporation under the CBCA;
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3.
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subject to completion of the Continuance and the issue of the Certificate of Discontinuance and without affecting the validity of the Corporation and existence of the Corporation by or under its articles and of any act done thereunder, its articles are hereby amended to make all changes necessary to conform to the requirements of the CBCA;
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4.
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effective upon the issuance of the Certificate of Continuance, the by-laws attached as Appendix “D” to this Circular are hereby adopted and approved as the only by-laws of the Corporation;
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5.
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effective upon the issuance of the Certificate of Continuance, the Board is hereby authorized to determine, from time to time, the number of directors within the minimum and maximum number provided for in the articles of the Corporation;
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6.
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any director or officer of the Corporation is hereby authorized, empowered and instructed, acting for, in the name and on behalf of Corporation, to execute or cause to be executed, under the seal of Corporation or otherwise, and to deliver or to cause to be delivered, all such other documents and to do or to cause to be done all such other acts and things as in such person’s opinion may be necessary or desirable in order to carry out the intent of these resolutions and the matters authorized hereby, such determination to be conclusively evidenced by the execution and delivery of such document or the doing of such act or thing; and
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7.
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notwithstanding that this special resolution has been duly passed by the Shareholders, the directors of the Corporation be, and they hereby are, authorized and empowered to revoke this special resolution, abandon any application made in connection with the Continuance and to determine not to proceed with the Continuance without further approval of the Shareholders before the issuance by the Director of the Certificate of Continuance.”
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The requisite regulatory approvals for the Continuance, including the approvals of the TSXV (or any other stock exchange on which the Common Shares are listed), may not be sought by the Corporation until after the Board decides to implement the Continuance. There can be no assurance that the applicable regulatory approvals for the Continuance will be obtained. The Continuance Resolution authorizes the Board not to proceed with the Continuance, without further approval of the Shareholders, before the issuance by the Director of the Certificate of Continuance.
Reasons for the Continuance
Field Trip has notified the Corporation of its expectation that, in the event that the Transaction is completed, it may be desirable to continue the Corporation such that it will be governed by the CBCA.
Furthermore, upon completion of the Transaction, the Resulting Issuer intends for its registered office to be outside of the Province of Alberta.
Procedure to Effect Continuance
In order to effect the Continuance, the following steps must be taken:
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1.
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the shareholders must approve the Continuance Resolution at the Meeting, authorizing the Corporation to, among other things, file an application for a certificate of continuance (the “Certificate of Continuance”) with the Director requesting that the Corporation be continued as if it had been incorporated under the CBCA. The application for the Certificate of Continuance requires that the Corporation send to the following documents to the Director: (i) articles of continuance (the “Articles of Continuance”); (ii) a notice of directors; and (iii) a notice of registered office, all in the form that the Director fixes;
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the Registrar must consent to the proposed Continuance (the “Consent”), upon being satisfied that the Continuance is effected in compliance with section 189 of the ABCA;
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3.
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the Corporation must file a notice of continuance with the Registrar satisfying the Registrar that the Corporation has continued under the CBCA. The Registrar will then issue the Certificate of Discontinuance;
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on the date shown on the Certificate of Continuance, (i) the Corporation becomes a Corporation to which the CBCA applies as if it had been incorporated under the CBCA; (ii) the Articles of Continuance are deemed to be the articles of incorporation of the continued Corporation; and (iii) the Certificate of Continuance is deemed to be the certificate of incorporation of the continued Corporation; and
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5.
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on the date shown on the Certificate of Discontinuance, the Corporation becomes an extra- provincial corporation as if it had been incorporated under the laws of the CBCA.
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Effect of the Continuance
If the Continuance is approved by Shareholders and implemented by the Board, the Corporation shall apply to and file all necessary documentation with the Registrar for the Consent. Immediately following the receipt of the Consent, the Corporation shall apply for the Certificate of Continuance and file the Articles of Continuance under the CBCA to continue the Corporation into the federal jurisdiction of Canada. The Articles of Continuance will be deemed to be the articles of incorporation of the continued Corporation under the CBCA and the Certificate of Continuance issued by the Director under the CBCA will be deemed to be the certificate of incorporation of the continued Corporation.
In connection with the Continuance, the existing articles and by-laws of the Corporation will be repealed and the Corporation will adopt articles and by-laws which are suitable for a CBCA corporation. The material differences between the existing by-laws of the Corporation and the proposed post-Continuance by-laws of the Corporation are summarized below. Shareholders are encouraged to read the full text of the post-Continuance by-laws attached hereto as Appendix “D” and the following description of the post-Continuance by-laws is qualified in its entirety by such appendix and by the Amended and Restated By-law and Advance Notice By-law.
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•
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While the Amended and Restated By-law and the proposed post-Continuance by-laws of the Corporation, at sections 8.06 and 65, respectively, allow for the Corporation to apply and enforce a lien on shares of the Corporation for certain debts of shareholders owed to the Corporation, the post-Continuance by-laws do not allow a shareholder to sell the shares subject to such lien until such time as the Corporation makes a demand and delivers a notice in writing stating the amount due and demanding payment. There is no similar restriction in the Amended and Restated By- law.
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•
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Section 10.05 of the Amended and Restated By-law provides that a maximum of 50 days’ notice can be given before a meeting of the shareholders. The proposed post-Continuance by-laws, at section 45, increases the maximum number of days’ notice can be given before a meeting of the shareholders to 60 days.
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Section 10.11 of the Amended and Restated By-law sets a quorum for the transaction of business at any meeting of shareholders at two persons, who are shareholders or duly appointed proxyholders, and representing in the aggregate not less than ten percent (10%) of the outstanding shares of the Corporation carrying voting rights. The proposed post-Continuance by-laws at section 56, reduces the number of voting shares that need to be represented at a shareholders meeting for the transaction of business to five percent (5%).
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The proposed post-Continuance by-law of the Corporation adds certain additional requirements to the advance notice provisions contained in the Advance Notice By-law. Section 85(c) of the proposed post-Continuance by-law requires that, when notice-and-access is used to deliver proxy- related materials to shareholders, and a shareholder (a “Nominating Shareholder”) wishes to propose nominees to the board of directors of the Corporation (a “Proposed Nominee”) for consideration at a shareholders meeting of the Corporation, such notice must be delivered not less than forty (40) days prior to the date of the meeting, provided, however, in the event that the meeting is to be held on a date that is less than fifty (50) days after the date on which the first public announcement of the date of the meeting was made, (i) in the case of an annual meeting, notice by the Nominating Shareholder shall be made not later than the tenth (10th) day following the date of such public announcement, and (ii) in the case of a special meeting, notice by the Nominating Shareholder shall be made not later than the fifteenth (15th) day following the date of such public announcement. Additionally, the proposed post-Continuance by-laws require that a Nominating Shareholder provide the following additional disclosures regarding a Proposed Nominee, which are in addition to the requirements currently contained in the by-laws of the Corporation: (i) the name and principal business of any company which the Proposed Nominee was employed by within the five years preceding the date of the notice; (ii) a description of any relationship, agreement, arrangement or understanding, including financial compensation and indemnity related relationships, agreements, arrangements or understandings, between the Nominating Shareholder and the Proposed Nominee, or any affiliates or associates of, or any person or entity acting jointly or in concert with, the Nominating Shareholder or the Proposed Nominee with respect to the Proposed Nominee’s nomination and election as a director; and (iii) whether the Proposed Nominee is party to any existing or proposed relationship, agreement, arrangement or understanding with any competitor of the Corporation or any other third party which may give rise to a real or perceived conflict of interest between the interests of the Corporation and the interests of the Proposed Nominee.
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The Corporation will not change its business or operations as a result of the Continuance.
As of the effective date of the Continuance, the election, duties, resignations and removal of the Corporation’s directors and officers shall be governed by the CBCA and the Corporation will no longer be subject to the corporate governance provisions of the ABCA.
By operation of law applicable under the CBCA, as of the effective date of the Continuance:
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the property of the Corporation prior to the Continuance continues to be the property of the Corporation;
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the Corporation continues to be liable for its obligations;
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an existing cause of action, claim or liability to prosecution is unaffected;
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a civil, criminal or administrative action or proceeding pending by or against the body corporate may be continued to be prosecuted by or against the corporation; and
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a conviction against, or ruling, order or judgment in favour of or against, the body corporate may be enforced by or against the corporation.
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Certain Corporate Differences between the ABCA and the CBCA
If the Continuance Resolution is approved by the Shareholders and the Continuance is completed, the Corporation will be governed by the CBCA instead of the ABCA. While the rights of shareholders under the CBCA are broadly similar to those under the ABCA, there are a number of variations in the rights afforded to Shareholders under the two pieces of legislation.
The following is a summary of certain similarities and differences between the CBCA and the ABCA on matters pertaining to Shareholder rights. This summary is not exhaustive and is of a general nature only and is not intended to be, and should not be construed to be, legal advice to Shareholders. Accordingly, Shareholders should consult their own legal advisors with respect to the corporate law consequences of the Continuance.
Board of Directors
Under the ABCA, at least one-quarter of a corporation’s directors, and at least one-quarter of the members of any committee of directors, must be resident Canadians. Under the CBCA, at least one- quarter of a corporation’s directors must be resident Canadians; however, there is no similar requirement for committees of directors.
Place of Meetings
The ABCA provides that a meeting may be held outside Alberta where the articles so provide or where all shareholders entitled to vote at such a meeting so agree. The CBCA provides that a meeting of shareholders may be held outside Canada if the place is specified in the articles or where all the shareholders entitled to vote at such a meeting so agree.
Financial Assistance
The ABCA requires disclosure of financial assistance given by a corporation to
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shareholders or directors of the corporation or its affiliates,
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any of their associates, and
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to any person for the purpose of or in connection with the purchase of shares of the corporation or an affiliated corporation.
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The CBCA has no such requirement.
Shareholder Proposals
Both the ABCA and the CBCA provide for shareholder proposals. Under the CBCA, a registered or beneficial owner of shares entitled to be voted at an annual meeting may submit a proposal. To be eligible, the registered or beneficial shareholder must either:
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have owned for six months not less than 1% of the total number of voting shares or voting shares with a fair market value of a least $2,000, or
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have the support of persons who have owned for six months not less than 1% of the total number of voting shares or voting shares with a fair market value of at least $2,000.
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Under the ABCA, a registered holder of shares entitled to vote at an annual meeting of shareholders, or a beneficial owner of shares, may submit a proposal. To be eligible to make a proposal a person must:
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be a registered holder or beneficial owner of at least one percent (1%) of all issued voting shares of the corporation for at least six months with a fair market value of a least $2,000,
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have the support of other registered holders or beneficial owners of shares of at least five percent (5%) of the issued voting shares of the corporation,
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provide to the corporation his or her name and address and the names and addresses of those registered holders or beneficial owners of shares who support the proposal, and
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continue to hold or own the prescribed number of shares up to and including the day of the meeting at which the proposal is to be made.
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Record Date for Voting
The ABCA permits a transferee of common shares after the record date for a shareholder meeting, not later than ten days before the shareholder meeting, to establish a right to vote at the meeting by providing evidence of ownership of common shares and demanding that the transferee’s name be placed on the voting list in place of the transferor. The CBCA does not have an equivalent provision.
Rights of Dissent
Under both the ABCA and the CBCA, shareholders have substantially the same rights of dissent if a corporation resolves to effect certain fundamental changes. Under the CBCA, the corporation must, within ten days of the resolution to which the shareholder dissents being adopted, send notice to the dissenting shareholder. The dissenting shareholder, within 20 days of receiving notice from the corporation or, if such notice was not received, within 20 days after learning that the resolution has been adopted, shall send the corporation notice of his demand for payment of the fair value of his shares, the number and class of shares in respect of which the shareholder dissents and his relevant personal information. Within 30 days of this notice, the dissenting shareholder must send the corporation, or its transfer agent, his share certificates. No more than seven days after the later of the day on which the resolution is effective and the day the corporation receives notice from the dissenting shareholder, the corporation must send to the dissenting shareholder an offer to pay. The corporation or the dissenting shareholder may apply to the court to fix a fair value for the shares of the dissenting shareholder.
Under the ABCA, a dissenting shareholder may send a corporation a written objection to a resolution affecting a fundamental change at or before any meeting of shareholders at which the resolution is to be voted on. Once the resolution is adopted the dissenting shareholder may make application to the court to fix the fair value of his shares. If an application is made to the court, unless the court otherwise orders, the corporation must send an offer to pay to each dissenting shareholder an amount considered by the directors to be the fair value of the shares. Unless the court otherwise orders, the dissenting shareholder may accept the offer to pay from the corporation or wait for an order from the court fixing the fair value of the shares. The dissenting shareholder may accept the offer to pay from the corporation or wait for an order from the court fixing the fair value of the shares. The dissent rights under the ABCA apply to the Continuance Resolution.
Sale of Property
Under both the ABCA and the CBCA, any proposed sale, lease or exchange of all or substantially all of the property of a corporation, other than in the ordinary course of business, must be approved by a special resolution passed by not less than two-thirds of the votes cast by shareholders voting in person or by proxy at a meeting of shareholders. The holder of shares of a class or series of shares of a corporation are entitled to vote separately as a class or series in respect of such a sale, lease or exchange if that class or series is affected by the sale, lease or exchange in a manner different from the shares of another class or series.
Amendments to the Articles of the Corporation
Under both the ABCA and the CBCA, certain fundamental changes to the articles of a corporation, such as an alteration of any restrictions on the business carried on by the corporation, changes in the name of the corporation, increases or decreases in the authorized capital, the creation of any new classes of shares and changes in the jurisdiction of incorporation, must be approved by a special resolution passed by a majority of not less than two-thirds of the votes cast by shareholders voting in person or by proxy at a meeting of the shareholders of the corporation.
Oppression Remedies
Under the ABCA and the CBCA, a registered or beneficial shareholder, former registered or beneficial shareholder, director, former director, officer or former officer of a corporation or any of its affiliates, or any other person who, in the discretion of a court, is a proper person to seek an oppression remedy, may apply to a court to rectify the matters complained of where:
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any act or omission of a corporation or its affiliates effects a result;
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the business or affairs of a corporation or any of its affiliates are or have been carried on or conducted in a manner; or
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the powers of a corporation or any of its affiliates are or have been exercised in a manner;
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that is oppressive or unfairly prejudicial to, or that unfairly disregards the interests of, any securityholder, creditor, director or officer.
Shareholders’ Derivative Action
Under the ABCA and the CBCA, a registered or beneficial shareholder, former registered or beneficial shareholder, director, former director, officer or former officer of a corporation or its affiliates who, in the discretion of the court, is a proper person to do so, may apply for the court’s leave to:
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bring a derivative action in the name and on behalf of a corporation or any of its subsidiaries; or
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intervene in the action to which a corporation or any of its subsidiaries is a party, for the purpose of prosecuting, defending or discontinuing the action on behalf of a corporation or the subsidiary.
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Dissident Proxy Solicitation
Under both the ABCA and the CBCA, in the case of a solicitation by or on behalf of management of a corporation, a person is not entitled to solicit proxies unless a management proxy circular in prescribed form is made available in the prescribed manner to, among others, all of the shareholders whose proxies are solicited. Similarly, a person (other than management or on behalf of management) (a “dissident”) is not entitled to solicit proxies unless a dissident’s proxy circular in prescribed form and stating the purposes of the solicitation is made available in the prescribed manner to, among others, all of the shareholders whose proxies are solicited.
However, under the CBCA, a dissident may solicit proxies without making available a dissident’s proxy circular if the total number of shareholders whose proxies are solicited is 15 or fewer. In contrast, under the ABCA, a dissident is only entitled to solicit proxies without making available a dissident’s proxy circular if the total number of shareholders of the corporation entitled to vote at shareholder meetings is 15 or fewer.
Disclosure Relating to Diversity
Under the CBCA, at each annual meeting of the shareholders, the directors of a distributing corporation must place before the shareholders certain prescribed information respecting the diversity among:
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the chair and vice-chair of the board of directors;
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the president of the corporation;
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the chief executive officer and chief financial officer;
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the vice-president in charge of a principal business unit, division or function; and
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individuals who perform policy-making functions in respect of the corporation.
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The ABCA has no such requirement.
Rights of Dissent to the Continuance
Shareholders are entitled to dissent in respect of the Continuance in accordance with section 191 of the ABCA. Strict compliance with the provisions of section 191 is required in order to exercise the right to dissent. Provided the Continuance becomes effective, each dissenting Shareholder will be entitled to be paid the fair value of its Common Shares in respect of which such Shareholder dissents in accordance with section 191 of the ABCA. Persons who are Beneficial Shareholders who wish to dissent should be aware that only Registered Shareholders are entitled to dissent.
Accordingly, a Beneficial Shareholder desiring to exercise its right to dissent must make arrangements for the Common Shares beneficially owned by such person to be registered in its name, or alternatively, make arrangements for the registered holder of its Common Shares to dissent on its behalf. See Appendix “E” to this Circular for the full text of section 191.
In order to be effective, a written notice of objection to the Continuance Resolution must be received by the Corporation prior to the commencement of the Meeting, or at the Meeting. The registered address of the Corporation for such purpose is c/o Burstall LLP, Suite 1600 Dome Tower, 333 - 7th Avenue SW, Calgary, Alberta T2P 2Z1, Attention: Dale Burstall. The foregoing summary does not purport to provide a comprehensive statement of the procedures to be followed by a dissenting Shareholder who seeks payment of the fair value of its Common Shares. The complete dissent provisions of the ABCA are set forth in Appendix “E” to this Circular. The ABCA requires strict adherence to the procedures established therein and failure to do so may result in the loss of all dissenters’ rights. Accordingly, each Shareholder who might desire to exercise the dissenters’ rights should carefully consider and comply with the provisions of the ABCA and consult such Shareholder’s legal advisor.
The Board may elect not to proceed with the Continuance if any notices of dissent are received.
INDICATION OF OFFICER AND DIRECTORS
All of the directors and executive officers of the Corporation have indicated that they intend to vote their Common Shares in favour of each of the above resolutions. In addition, unless authority to do so is indicated otherwise, the persons named in the enclosed form of proxy intend to vote the Common Shares represented by such proxies in favour of each of the above resolutions.
ADDITIONAL INFORMATION
Additional information relating to the Corporation is on SEDAR at www.sedar.com. Shareholders may also contact Gino DeMichele, President and Chief Executive Officer of the Corporation at 403-680-7898.
Financial information is provided in the Corporation’s comparative financial statements and management discussion and analysis for the fiscal years ended December 31, 2019, 2018 and 2017 and subsequent interim periods, which are filed on SEDAR.
OTHER MATTERS
Management of the Corporation is not aware of any other matter to come before the Meeting other than as set forth in the Notice. If any other matter properly comes before the Meeting, it is the intention of the persons named in the enclosed form of proxy to vote the shares represented thereby in accordance with their best judgment on such matter.
The contents of this Circular and its distribution to Shareholders have been approved by the Board.
DATED August 21, 2020.
BY ORDER OF THE BOARD
(signed) “Gino DeMichele”
Gino DeMichele
Chief Executive Officer and Director
APPENDIX A
Audit Committee Charter
[See attached]
NEWTON ENERGY CORPORATION
(the “Corporation”)
May 27, 2008
AUDIT COMMITTEE CHARTER
OVERALL ROLE AND RESPONSIBILITY
The Audit Committee shall:
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1.1
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assist the Board of Directors in its oversight role with respect to:
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(a)
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the quality and integrity of financial information;
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(b)
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the independent auditor’s performance, qualifications and independence;
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(c)
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the performance of the Corporation’s internal audit function, if applicable; and
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(d)
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the Corporation’s compliance with legal and regulatory requirements and
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1.2
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prepare such reports of the Audit Committee required to be included in the information/proxy circular of the Corporation in accordance with applicable laws or the rules of applicable securities regulatory authorities.
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MEMBERSHIP AND MEETINGS
The Audit Committee shall consist of three (3) or more Directors appointed by the Board of Directors, of which a majority shall not be officers or employees of the Corporation or any of the Corporation’s affiliates. Each of the members of the Audit Committee shall satisfy the applicable independence and experience requirements of the laws governing the Corporation, and applicable securities regulatory authorities.
The Board of Directors shall designate one (1) member of the Audit Committee as the Committee Chair. Each member of the Audit Committee shall be financially literate as such qualification is interpreted by the Board of Directors in its business judgment. The Board of Directors shall determine whether and how many members of the Audit Committee qualify as a financial expert as defined by applicable law.
STRUCTURE AND OPERATIONS
The affirmative vote of a majority of the members of the Audit Committee participating in any meeting of the Audit Committee is necessary for the adoption of any resolution.
The Audit Committee shall meet as often as it determines, but not less frequently than quarterly. The Committee shall report to the Board of Directors on its activities after each of its meetings at which time minutes of the prior Committee meeting shall be tabled for the Board.
The Audit Committee shall review and assess the adequacy of this Charter periodically and, where necessary, will recommend changes to the Board of Directors for its approval.
The Audit Committee is expected to establish and maintain free and open communication with management and the independent auditor and shall periodically meet separately with each of them.
SPECIFIC DUTIES
Oversight of the Independent Auditor
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Make recommendations to the board for the appointment and replacement of the independent auditor.
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Responsibility for the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. The independent auditor shall report directly to the Audit Committee.
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Authority to pre-approve all audit services and permitted non-audit services (including the fees, terms and conditions for the performance of such services) to be performed by the independent auditor.
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Evaluate the qualifications, performance and independence of the independent auditor, including(i) reviewing and evaluating the lead partner on the independent auditor’s engagement with the Corporation, and (ii) considering whether the auditor’s quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditor’s independence.
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Obtain from the independent auditor and review the independent auditor’s report regarding the management internal control report of the Corporation to be included in the Corporation’s annual information/proxy circular, as required by applicable law.
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Ensure the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law (currently at least every 5 years).
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Financial Reporting
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Review and discuss with management and the independent auditor:
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○
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prior to the annual audit the scope, planning and staffing of the annual audit,
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the annual audited financial statements,
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the Corporation’s annual and quarterly disclosures made in management’s discussion and analysis,
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approve any reports for inclusion in the Corporation’s Annual Report, as required by applicable legislation,
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the Corporation’s quarterly financial statements, including the results of the independent auditor’s review of the quarterly financial statements and any matters required to be communicated by the independent auditor under applicable review standards,
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significant financial reporting issues and judgments made in connection with the preparation of the Corporation’s financial statements,
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any significant changes in the Corporation’s selection or application of accounting principles,
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any major issues as to the adequacy of the Corporation’s internal controls and any special steps adopted in light of material control deficiencies, and
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other material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences.
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Discuss with the independent auditor matters relating to the conduct of the audit, including any difficulties encountered in the course of the audit work, any restrictions on the scope of activities or access to requested information and any significant disagreements with management.
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AUDIT COMMITTEE’S ROLE
The Audit Committee has the oversight role set out in this Charter. Management, the Board of Directors, the independent auditor and the internal auditor all play important roles in respect of compliance and the preparation and presentation of financial information. Management is responsible for compliance and the preparation of financial statements and periodic reports. Management is responsible for ensuring the Corporation’s financial statements and disclosures are complete, accurate, in accordance with generally accepted accounting principles and applicable laws. The Board of Directors in its oversight role is responsible for ensuring that management fulfills its responsibilities. The independent auditor, following the completion of its annual audit, opines on the presentation, in all material respects, of the financial position and results of operations of the Corporation in accordance with Canadian generally accepted accounting principles.
FUNDING FOR THE INDEPENDENT AUDITOR AND RETENTION OF OTHER INDEPENDENT ADVISORS
The Corporation shall provide for appropriate funding, as determined by the Audit Committee, for payment of compensation to the independent auditor for the purpose of issuing an audit report and to any advisors retained by the Audit Committee. The Audit Committee shall also have the authority to retain such other independent advisors as it may from time to time deem necessary or advisable for its purposes and the payment of compensation therefore shall also be funded by the Corporation.
APPROVAL OF AUDIT AND REMITTED NON-AUDIT SERVICES PROVIDED BY EXTERNAL AUDITORS
Over the course of any year there will be two levels of approvals that will be provided. The first is the existing annual Audit Committee approval of the audit engagement and identifiable permitted non-audit services for the coming year. The second is in-year Audit Committee pre-approvals of proposed audit and permitted non-audit services as they arise.
Any proposed audit and permitted non-audit services to be provided by the External Auditor to the Corporation or its subsidiaries must receive prior approval from the Audit Committee, in accordance with this protocol. The CFO shall act as the primary contact to receive and assess any proposed engagements from the External Auditor.
Following receipt and initial review for eligibility by the primary contacts, a proposal would then be forwarded to the Audit Committee for review and confirmation that a proposed engagement is permitted.
In the majority of such instances, proposals may be received and considered by the Chair of the Audit Committee (or such other member of the Audit Committee who may be delegated authority to approve audit and permitted non-audit services), for approval of the proposal on behalf of the Audit Committee. The Audit Committee Chair will then inform the Audit Committee of any approvals granted at the next scheduled meeting.
APPENDIX B
Newton Option Plan
[See attached]
B-1
NEWTON ENERGY CORPORATION
OPTION PLAN
Dated and Effective as of October 23, 2012.
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(a)
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The purpose of the Option Plan (the “Plan”) is to assist Newton Energy Corporation. (the “Corporation”) in attracting, retaining and motivating directors, officers, employees and consultants of the Corporation and of its subsidiaries and to closely align the personal interests of such directors, officers, employees and consultants with those of the Shareholders by providing them with the opportunity, through options, to acquire common shares (the “Common Shares”) in the capital of the Corporation.
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(b)
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Capitalized words and phrases used but not defined herein shall have the same meanings herein as ascribed thereto in the Corporate Finance Manual of the TSX Venture Exchange (the “Exchange”) and, in particular, in policies 1.1 and 4.4 of the such Corporate Finance Manual, and Outstanding Common Shares shall mean, at the time of any share issuance or grant of Options, the number of Common Shares that are outstanding immediately prior to the share issuance or grant of Options in question on a non-diluted basis, or such other number as may be determined under applicable rules and regulations of all regulatory authorities to which the Corporation is subject, including the Exchange.
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The grant and exercise of any options under the Plan are subject to compliance with the applicable requirements of the Exchange and each stock exchange on which the shares of the Corporation are or become listed and of any governmental authority or regulatory body to which the Corporation is subject.
The Plan shall be administered by the Board of Directors of the Corporation which shall, without limitation, have full and final authority and discretion, subject to the express provisions of the Plan, to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it and to make all other determinations deemed necessary or advisable for the administration of the Plan. The Board of Directors may delegate any or all of its authority with respect to the administration of the Plan and any or all of the rights, powers and discretions with respect to the Plan granted to it under this Plan to the Compensation and Governance Committee (the “Compensation Committee”) of the Board of Directors or such other committee of directors of the Corporation as the Board of Directors may designate. Upon any such delegation the Compensation Committee or other committee of directors, as the case may be, as well as the Board of Directors, shall be entitled to exercise any or all of such authority, rights, powers and discretions with respect to the Plan. When used in the context of this Plan “Board of Directors” shall be deemed to include the Compensation Committee or other committee of directors acting on behalf of the Board of Directors.
B-2
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4.
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Number of Shares Under Plan
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A maximum number of Common Shares equal to ten percent (10%) (the “Optioned Shares”) of the Outstanding Common Shares, from time to time, shall be reserved, set aside and made available for issue under and in accordance with the Plan by resolution of the Board of Directors; provided that, in no event shall options be granted entitling any single individual to purchase in excess of five percent (5%) of the Outstanding Common Shares in a twelve month period. If option rights granted to an individual under the Plan shall expire or terminate for any reason without having been exercised in respect of certain Optioned Shares, such Optioned Shares may be made available for other options to be granted under the Plan. In addition:
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(a)
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The aggregate number of Common Shares reserved for issuance on exercise of Options, within any twelve month period, granted to any one Consultant of the Corporation may not exceed 2% of the Outstanding Common Shares;
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(b)
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The aggregate number of the Common Shares reserved for issuance on exercise of Options, in any twelve month period, granted to an Employee conducting Investor Relations Activities may not exceed 2% of the Outstanding Common Shares;
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(c)
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The maximum number of Common Shares reserved for issuance pursuant to Options granted to Insiders at any time may not exceed 10% of number of Outstanding Common Shares; and
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(d)
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The maximum number of Common Shares issuable on exercise of Options granted to Insiders in a twelve month period shall not exceed 10% of the number of Outstanding Common Shares.
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Provided that, for the purposes of paragraphs (c) and (d) above, an entitlement granted prior to the grantee becoming an Insider may be excluded in determining the number of Common Shares issuable to Insiders.
Options may be granted under the Plan to such directors, officers, employees or consultants of the Corporation, or of its subsidiaries, as the Board of Directors may from time to time designate as participants (the “Participants”) under the Plan. Subject to the provisions of this Plan, the total number of Optioned Shares to be made available under the Plan and to each Participant, the time or times and price or prices at which options shall be granted, the vesting dates, the time or times at which such options are exercisable, and any conditions or restrictions on the exercise of options, shall be in the full and final discretion of the Board of Directors. By granting Options hereunder to an Employee or Consultant the Board of Directors of the Corporation represents on behalf of the Corporation that the Optionee is a bona fide Employee or Consultant.
All options under the Plan shall be granted upon and subject to the terms and conditions hereinafter set forth.
The exercise price to each Participant for each Optioned Share shall be as determined by the Board of Directors, but shall in no event be less than the closing market price of the Common Shares of the Corporation on the Exchange on the trading day immediately prior to the time of the grant of the option (or, if no trades occurred on such day, then the next previous day on which trading took place) less the maximum discount permitted under the regulations of the Exchange or such other price as may be agreed to by the Corporation and approved by the Exchange. In the event that the Corporation proposes to reduce the exercise price of Options granted to an Optionee who is an Insider of the Corporation at the time of the proposed amendment, such amendment shall not be effective until disinterested shareholder approval has been obtained in respect of the reduction of the exercise price if required by the rules and policies of the Exchange then in effect.
B-3
All options granted under the Plan shall be evidenced by means of an agreement between the Corporation and each Participant (the “Option Agreement”) in a form as may be approved by the Board of Directors, such approval to be conclusively evidenced by the execution of the Option Agreement by any two (2) directors or officers of the Corporation other than the Participant.
All options granted under the Plan shall expire not later than the fifth anniversary of the date such Options were granted and may be exercised by the Participant as to such varying percentages, on a cumulative basis, during the terms thereof as the Board of Directors shall determine.
Notwithstanding the length of grant as set forth in subparagraph 6(c) above, the time or times at which Options are exercisable and vesting dates shall be the dates so fixed by the Board of Directors of the Corporation, the Compensation Committee of the Board of Directors of the Corporation or such other committee of directors as the Board of Directors may designate at the time of the award of the Options, subject to the provisions of subparagraph 6(j) below which provides for automatic vesting of all Options upon the occurrence of certain specified events, but in any event Options issued to Consultants performing Investor Relations Activities must vest in stages over 12 months with no more than one quarter of such Options vesting in any three month period.
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(e)
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Assignability of Options
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An option granted under the Plan shall not be transferable or assignable (whether absolutely or by way of mortgage, pledge or other charge) by a Participant other than by will or other testamentary instrument or the laws of succession and may be exercisable during the lifetime of the Participant only by the Participant.
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(f)
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Right to Postpone Exercise
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Each Participant, upon becoming entitled to exercise an option in respect of any Optioned Shares in accordance with the Option Agreement, shall be entitled to exercise the option to purchase such Optioned Shares at any time prior to the expiration or other termination of the Option Agreement or the option rights granted there under in accordance with such agreement.
Any option granted under the Plan may be exercised by a Participant or the legal representative of a Participant giving written notice to the Corporation specifying the number of shares in respect of which such option is being exercised, accompanied by payment (by cash or cheque payable to the Corporation) of the entire exercise price (determined in accordance with the Option Agreement) for the number of shares specified in the notice. Upon any such exercise of an option by a Participant the Corporation shall cause the transfer agent and registrar of the Common Shares of the Corporation to promptly deliver to such Participant or the legal representative of such Participant, as the case may be, a share certificate in the name of such Participant or the legal representative of such Participant, as the case may be, representing the number of shares specified in the notice.
B-4
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(h)
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Rights of Participants
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The Participants shall have no rights as Shareholders in respect of any of the Optioned Shares (including, without limitation, any right to receive dividends or other distributions there from, voting rights, warrants or rights under any rights offering) other than Optioned Shares in respect of which Participants have exercised their option to purchase and which have been issued by the Corporation.
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(i)
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Alterations in Shares
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In the event of a share dividend, share split, issuance of shares or instruments convertible into Common Shares (other than pursuant to the Plan) for less than market value, share consolidation, share reclassification, exchange of shares, recapitalization, amalgamation, merger, consolidation, corporate arrangement, reorganization, liquidation or the like of or by the Corporation, the Board of Directors may make such adjustment, if any, of the number of Optioned Shares, or of the exercise price, or both, as it shall deem appropriate to give proper effect to such event, including to prevent, to the extent possible, substantial dilution or enlargement of rights granted to Participants under the Plan. In any such event, the maximum number of shares available under the Plan may be appropriately adjusted by the Board of Directors. If because of a proposed merger, amalgamation or other corporate arrangement or reorganization, the exchange or replacement of shares in the Corporation by those in another company is imminent, the Board of Directors may, in a fair and equitable manner, determine the manner in which all unexercised option rights granted under the Plan shall be treated including, for example, requiring the acceleration of the time for the exercise of such rights by the Participants and of the time for the fulfillment of any conditions or restrictions on such exercise. All determinations of the Board of Directors under this paragraph 6(i) shall be full and final.
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(j)
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Time of Exercise and Change of Control
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All Options will be exercisable in whole on the date upon the occurrence of a written proposal by the Corporation or any other person or corporation to implement a transaction that would, if implemented, result in the following:
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(i)
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The acquisition by any person or corporation, or any persons or corporations acting jointly or in concert (as determined by the Securities Act (Alberta)), whether directly or indirectly, of voting securities of the Corporation which, together with all other voting securities of the Corporation held by such persons or corporations, constitutes, in the aggregate, more than 40% of the Common Shares;
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(ii)
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an amalgamation, arrangement or other form of business combination of the Corporation with another corporation which results in the holders of voting securities of that other corporation holding, in the aggregate, more than 40% of all outstanding voting securities of the Corporation resulting from any such business combination; and
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(iii)
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the sale, lease or exchange of all or substantially all of the property of the Corporation to another person or corporation, other than in the ordinary course of business of the Corporation or to a subsidiary.
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B-5
Subject to subparagraphs 7(b), (c), (d) and (e), Options granted under the Plan shall expire on the date provided for in the respective Option Agreement or on such later date as may be permitted by the Board of Directors, which shall be no later than the fifth anniversary of the date on which any such Option is granted.
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(b)
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Retirement or Disability
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Subject to subparagraph 7(c), in the event of the termination of employment or of a consulting agreement of a Participant with the Corporation or any of its subsidiaries due to normal retirement in accordance with the policies of the Corporation or the respective subsidiary, as the case may be, or due to permanent disability of the Participant (as determined by the Board of Directors), the Participant may exercise such part of the Option as is exercisable immediately prior to the time of such termination within a period of 30 days following such termination in the case of a Participant who is engaged in Investor Relations Activities and ceases to be employed to provide Investor Relations Activities and within a period of 90 days following such termination in every other case but in no event later than the normal expiry date of the Option and any such Option not fully exercised at the end of such period shall then terminate.
In the event of the death of any Participant prior to the expiry of outstanding Options granted to such Participant, the executors or personal representatives of the Participant shall have the right to exercise any such Option within 180 days of the Participant’s death, but in no event later than the normal expiry date of the Option and for not more than the number of Options for which the Participant could have exercised any such Option immediately prior to the Participant’s death, and any such Option not fully exercised at the end of such period shall then terminate.
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(d)
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Resignation or Termination not for Cause
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Subject to subparagraph 7(e), in the event of the resignation of a Participant from, the termination of employment of a Participant with, or the removal or resignation of a Participant who is a director, officer, employee or consultant of the Corporation or any of its subsidiaries prior to the expiry of all outstanding Options granted to such Participant, the Participant shall have the right to exercise any such Options within a period of 30 days following the effective date of such resignation in the case of a Participant who is engaged in Investor Relations Activities and ceases to be employed to provide Investor Relations Activities and within a period of 90 days following the effective date of such resignation or termination in every other case but in no event later than the normal expiry date of the Options, but for not more than the number of Options for which the Participant could have exercised any such Option immediately prior to such resignation or termination and any such Option not fully exercised at the end of such period shall then terminate.
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(e)
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Termination for Cause
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If a Participant is dismissed or terminated as a director, officer, employee or consultant (as the case may be by the Corporation or by one of its subsidiaries) for cause, all unexercised Options of that Participant under the Plan shall immediately terminate forthwith without further notice to the Participant, notwithstanding the original term or vesting of the Options granted to such Participant under the Plan or Option Agreement.
B-6
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8.
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Amendment and Discontinuance of Plan
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The Board of Directors may from time to time amend or revise the terms of the Plan or may discontinue the Plan at any time, provided that no such action may in any manner adversely affect the rights under any options earlier granted to a Participant under the Plan without the consent of that Participant.
Nothing contained in the Plan nor in any option granted under this Plan shall give any Participant or any other person, any interest or title in or to any Common Shares of the Corporation or any rights as a shareholder of the Corporation or any other legal or equitable right against the Corporation other than as set out in the Plan and pursuant to the exercise of any option, nor shall it confer upon the Participants any right to continue as an employee, officer, consultant or director of the Corporation or of its subsidiaries.
The obligations of the Corporation to sell Common Shares and deliver share certificates under the Plan are subject to such compliance by the Corporation and the Participants as the Corporation deems necessary or advisable with all applicable corporate and securities laws, rules and regulations.
The use of the masculine gender in this Plan shall be deemed to include or be replaced by the feminine gender where appropriate to the particular Participant.
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12.
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Stock Exchange Requirements
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The terms and conditions of the Plan and the implementation thereof shall at all times be subject to the rules and regulations of any stock exchange on which the Shares are listed, and, in the event of any inconsistency between the terms and conditions of the Plan and the rules and regulations of any such exchange, the rules and regulations of such exchange shall prevail.
APPENDIX C
Amended and Restated By-law
[See attached]
BY-LAW NUMBER 2
A by-law relating generally to the transaction
of the business and affairs of the Corporation.
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CONTENTS
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SECTION
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ONE
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INTERPRETATION
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TWO
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ADMINISTRATION
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THREE
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BORROWING
AND SECURITIES
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FOUR
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DIRECTORS
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FIVE
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COMMITTEES
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SIX
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OFFICERS
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SEVEN
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PROTECTION
OF DIRECTORS, OFFICERS AND OTHERS
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EIGHT
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SHARES
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NINE
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DIVIDENDS
AND RIGHTS
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TEN
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MEETINGS
OF SHAREHOLDERS
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ELEVEN
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DIVISIONS
AND DEPARTMENTS
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TWELVE
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INFORMATION
AVAILABLE TO SHAREHOLDERS
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THIRTEEN
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NOTICES
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FOURTEEN
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EFFECTIVE
DATE (AND REPEAL)
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BE IT ENACTED as a by-law of NEWTON ENERGY CORPORATION (hereinafter called the “Corporation”) as follows:
SECTION ONE
INTERPRETATION
1.01 DEFINITIONS. In the by-laws and all resolutions of the Corporation, unless the context otherwise requires:
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(a)
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“Act” means the Business Corporations Act (Alberta) and the regulations made thereunder, as from time to time amended, and in the case of such amendment any reference in the by-laws shall be read as referring to the amended provisions thereof;
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(b)
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“Applicable Securities Laws” means the applicable securities legislation of each relevant province and territory of Canada, as amended from time to time, the written rules, regulations and forms made or promulgated under any such statute, and the published national instruments, multilateral instruments, policies, bulletins and notices of the securities commissions and similar regulatory authorities of each relevant province and territory of Canada;
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(c)
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“appoint” includes “elect” and vice versa;
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(d)
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“articles” means the original or restated articles of incorporation, articles of amendment, articles of amalgamation, articles of continuance, articles of reorganization, articles of arrangement, articles of dissolution and articles of revival and includes an amendment to any of them;
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(e)
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“board” means the board of directors of the Corporation;
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(f)
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“by-laws” means this by-law and all other by-laws of the Corporation from time to time in force and effect;
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(g)
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“corporation” means a body corporate incorporated or continued under the Act and not discontinued under the Act;
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(h)
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“meeting of shareholders” means an annual meeting of shareholders and a special meeting of shareholders;
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(i)
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“non-business day” means Saturday, Sunday and any other day that is a holiday as defined in the Interpretation Act (Alberta) or the Interpretation Act (Canada);
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( j )
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“notice-and-access” has the meaning ascribed thereto in Applicable Securities Laws;
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(k)
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“ordinary resolution” means a resolution
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(i)
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passed by a majority of the votes cast by the shareholders who voted in respect of that resolution, or
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(ii)
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signed by all the shareholders entitled to vote on that resolution;
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(l)
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“recorded address” means, in the case of a shareholder, his address as recorded in the securities register of the Corporation; and, in the case of joint shareholders, the address appearing in the securities register of the Corporation in respect of such joint holding or the first address so appearing if there are more than one; and, in the case of a director, officer, auditor or member of a committee of the board, his latest address as recorded in the records of the Corporation;
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(m)
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“resident Canadian” means an individual who is
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(i)
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a Canadian citizen ordinarily resident in Canada,
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(ii)
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a Canadian citizen not ordinarily resident in Canada who is a member of a prescribed class of persons, or
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(iii)
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a permanent resident within the meaning of the Immigration Act (Canada) and ordinarily resident in Canada;
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(n)
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“signing officer” means, in relation to any instrument, any person authorized to sign the same on behalf of the Corporation by Clause 0 or by a resolution passed pursuant thereto;
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(o)
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“special business” means all business transacted at a special meeting of shareholders and all business transacted at an annual meeting of shareholders, except consideration of the financial statements and auditor’s report, fixing the number of directors for the following year, election of directors and reappointment of the incumbent auditor;
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(p)
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“special meeting of shareholders” means a meeting, other than an annual meeting, of shareholders entitled to vote at an annual meeting of shareholders, and includes a meeting of any class or classes of shareholders acting separately from any other class or classes of shareholders; and
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(q)
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“special resolution” means a resolution passed by a majority of not less than 2/3 of the votes cast by the shareholders who voted in respect of that resolution or signed by all the shareholders entitled to vote on that resolution.
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Save as aforesaid, words and expressions defined in the Act have the same meanings when used herein; and words importing the singular number include the plural and vice versa; words importing gender include the masculine, feminine and neuter genders; and words importing persons include individuals, bodies corporate, partnerships, trusts and unincorporated organizations.
SECTION TWO
ADMINISTRATION
2.01 REGISTERED OFFICE, RECORDS OFFICE AND ADDRESS FOR SERVICE. Until changed in accordance with the Act, the registered office of the Corporation, the designated records office (if separate from the registered office) of the Corporation and the post office box (if any) designated as the address for service upon the Corporation by mail shall initially be at the address or addresses in Alberta specified in the notice thereof filed with the articles and thereafter as the board may from time to time determine.
2.02 CORPORATE SEAL. The corporate seal of the Corporation shall be in the form as determined by the board from time to time.
2.03 FINANCIAL YEAR. The financial year of the Corporation shall be determined by the board from time to time.
2.04 EXECUTION OF INSTRUMENTS. Any officer or any director may sign certificates and similar instruments (other than share certificates) on the Corporation’s behalf with respect to any factual matters relating to the Corporation’s business and affairs, including certificates certifying copies of the articles, by-laws, resolutions and minutes of meetings of the Corporation. Subject to the foregoing:
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(a)
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deeds, transfers, assignments, contracts, obligations and other instruments shall be signed on behalf of the Corporation by one or more persons who hold the office of director, chairman of the board, chief executive officer, president, vice- president, secretary, treasurer, assistant secretary or assistant treasurer, or any other office created by by-law or by resolution of the board. When there is only one director and that director is the only officer of the Corporation, deeds, transfers, assignments, contracts, obligations and other instruments may be signed by that person alone, as director or officer, on behalf of the Corporation; and
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(b)
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security certificates (including share certificates) shall be signed by at least one director or officer of the Corporation or by or on behalf of a registrar, transfer agent or branch transfer agent of the Corporation or by a trustee who certifies it in accordance with a trust indenture. Any signatures required on a security certificate (including share certificates) may be printed or otherwise mechanically reproduced on it.
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In addition, the board may from time to time direct the person or persons by whom any particular instrument or class of instruments may or shall be signed. Any signing officer or director may affix the corporate seal to any instrument requiring the same.
Any resolutions of the directors or shareholders of the Corporation and any documents and other instruments in writing requiring execution on behalf of the Corporation may be executed in separate counterparts, and all such executed counterparts when taken together shall constitute one resolution, document or other instrument in writing as the case may be. The Corporation and the directors and shareholders shall be entitled to rely on delivery of a facsimile or other electronic copy of any executed resolution of the directors or shareholders of the Corporation or any executed document or other instrument in writing and such facsimile or other electronic copy shall be legally effective to create a valid and binding resolution, document or other instrument in writing as the case may be.
2.05 BANKING ARRANGEMENTS. The banking business of the Corporation including, without limitation, the borrowing of money and the giving of security therefor, shall be transacted with such banks, trust companies or other bodies corporate or organizations as may from time to time be designated by or under the authority of the board. Such banking business or any part thereof shall be transacted under such agreements, instructions and delegations of powers as the board may from time to time prescribe or authorize.
2.06 VOTING RIGHTS IN OTHER BODIES CORPORATE. The signing officers of the Corporation may execute and deliver proxies and arrange for the issuance of voting certificates or other evidence of the right to exercise the voting rights attaching to any securities held by the Corporation. Such instruments, certificates or other evidence shall be in favour of such person or persons as may be determined by the officers executing such proxies or arranging for the issuance of voting certificates or such other evidence of the right to exercise such voting rights. In addition, the board, or failing the board, the signing officers of the Corporation, may from time to time direct the manner in which, and the person or persons by whom, any particular voting rights or class of voting rights may or shall be exercised.
SECTION THREE
BORROWING AND SECURITIES
3.01 BORROWING POWER. Without limiting the borrowing powers of the Corporation as set forth in the Act, but subject to the articles, the board may from time to time on behalf of the Corporation, without authorization of the shareholders:
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(a)
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borrow money upon the credit of the Corporation in such amounts and on such terms as may be deemed expedient by obtaining loans or advances or by way of overdraft or otherwise;
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(b)
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issue, reissue, sell or pledge bonds, debentures, notes or other evidences of indebtedness or guarantee of the Corporation, whether secured or unsecured, for such sums and at such prices as may be deemed expedient;
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(c)
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to the extent permitted by the Act, give a guarantee on behalf of the Corporation to secure performance of any present or future indebtedness, liability or obligation of any person;
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(d)
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charge, mortgage, hypothecate, pledge or otherwise create a security interest in all or any present and future property, real and personal, immoveable and moveable, of the Corporation, including its undertakings and rights, to secure any bonds, debentures, notes or other evidences of indebtedness or guarantee or any other indebtedness, liability or obligation of the Corporation, present or future; and
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(e)
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delegate to a committee of the board, a director or an officer of the Corporation all or any of the powers conferred aforesaid or by the Act to such extent and in such manner as the directors may determine.
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Nothing in this section limits or restricts the borrowing of money by the Corporation on bills of exchange or promissory notes made, drawn, accepted or endorsed by or on behalf of the Corporation.
3.02 DELEGATION. The board may from time to time delegate to such one or more of the directors and officers of the Corporation as may be designated by the board all or any of the powers conferred on the board by Clause 3.01 or by the Act to such extent and in such manner as the board shall determine at the time of each such delegation.
SECTION FOUR
DIRECTORS
4.01 NUMBER OF DIRECTORS AND QUORUM. Until changed in accordance with the Act, the board shall consist of not fewer than the minimum number and not more than the maximum number of directors provided in the articles. Subject to Clause 4.08, the quorum for the transaction of business at any meeting of the board shall consist of a majority of the directors or such greater or lesser number of directors as the board may from time to time determine. If a quorum is present at the opening of any meeting of directors, the directors present may proceed with the business of the meeting, notwithstanding that a quorum is not present throughout the meeting. If a quorum is not present at the opening of any meeting of directors, the directors present may adjourn the meeting to a fixed time and place but may not transact any other business other than as provided in these by-laws or in the Act until a quorum is present.
4.02 QUALIFICATION. The following persons are disqualified from being a director of the Corporation:
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(a)
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anyone who is less than 18 years of age;
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(i)
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is a represented adult as defined in the Adult Guardianship and Trustee Act (Alberta) or is the subject of a certificate of incapacity that is in effect under the Public Trustee Act (Alberta),
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(ii)
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is a formal patient as defined in the Mental Health Act (Alberta),
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(iii)
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is the subject of an
order under the Mentally Incapacitated Persons Act (Alberta) appointing a committee of his person or estate or both, or
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(iv)
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has been found to be a person of unsound mind by a court elsewhere than in Alberta;
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(c)
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a person who is not an individual; and
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(d)
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a person who has the status of bankrupt.
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A director need not be a shareholder. At least one-quarter of the directors, or such other number of directors (if any) as may be prescribed by the Act, shall be resident Canadians.
4.03 CONSENT TO ACT. A person who is elected or appointed a director is not a director unless:
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(a)
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he was present at the meeting when he was elected or appointed and did not refuse to act as a director; or
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(b)
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if he was not present at the meeting when he was elected or appointed, he consented to act as a director in writing before his election or appointment or within 10 days after it, or he has acted as a director pursuant to the election or appointment.
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4.04 ELECTION AND TERM. Shareholders of the Corporation shall, by ordinary resolution at the first meeting of shareholders and at each succeeding annual meeting at which an election of directors is required, elect directors to hold office for a term expiring not later than the close of the annual meeting of shareholders following the election. At each annual meeting of shareholders, all directors whose term of office has expired or then expires shall retire but, if qualified, shall be eligible for re-election. A director not elected for an expressly stated term ceases to hold office at the close of the first annual meeting of shareholders following his election. Notwithstanding the foregoing, if directors are not elected at a meeting of shareholders, the incumbent directors continue in office until their successors are elected. The number of directors to be elected at any such meeting shall be the number of directors whose term of office has expired or then expires unless the directors or the shareholders otherwise determine. It is not necessary that all directors elected at a meeting of shareholders hold office for the same term. If the articles so provide, the directors may, between annual meetings of shareholders, appoint one or more additional directors of the Corporation to serve until the next annual meeting of shareholders, but the number of additional directors shall not at any time exceed one-third of the number of directors who held office at the expiration of the last annual meeting of the Corporation.
4.05 REMOVAL OF DIRECTORS. Subject to the Act, the shareholders may, by ordinary resolution passed at a special meeting, remove any director from office and the vacancy created by such removal may be filled at the meeting of the shareholders at which the director was removed or, if not so filled, may be filled by the directors.
4.06 CEASING TO HOLD OFFICE. A director ceases to hold office when he dies, when he is removed from office by the shareholders, when he ceases to be qualified for election as a director, or when his written resignation is sent or delivered to the Corporation, or if a time is specified in such resignation, at the time so specified, whichever is later; provided always that, subject to the Act, the shareholders of the Corporation may by ordinary resolution at a special meeting remove any director or directors from office.
4.07 VACANCIES. Subject to the Act, a quorum of the board may fill a vacancy in the board. In the absence of a quorum of the board, the board shall forthwith call a special meeting of the shareholders to fill the vacancy. If the board fails to call such meeting or if there are no such directors then in office, any shareholder may call the meeting.
4.08 ACTION BY THE BOARD. The board shall manage or supervise the management of the business and affairs of the Corporation. Subject to Clauses 4.09 and 4.100, the powers of the board may be exercised by a meeting at which the quorum is present or by resolution in writing signed by all the directors entitled to vote on that resolution at a meeting of the board. Where there is a vacancy in the board, the remaining directors may exercise all the powers of the board so long as a quorum remains in office. Where the Corporation has only one director, that director may constitute a meeting.
4.09 CANADIAN REPRESENTATION. Subject to the Act, the board shall not transact business at a meeting, other than filling a vacancy in the board, unless at least one- quarter of the directors present are resident Canadians, except where:
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(a)
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a resident Canadian director who is unable to be present approves in writing or by telephone or other communications facilities the business transacted at the meeting; and
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(b)
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the number of resident Canadian directors present at the meeting, together with any resident Canadian director who gives his approval under clause (a), totals at least one-quarter of the directors present at the meeting.
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4.10 PARTICIPATION IN MEETING. A director may participate in a meeting of the board or of a committee of the board by electronic means, telephone or other communication facilities as permit all persons participating in the meeting to hear each other, and a director participating in such a meeting by such means is deemed to be present at the meeting.
4.11 PLACE OF MEETINGS. Subject to the articles, meetings of the board may be held at any place in or outside Canada.
4.12 CALLING OF MEETINGS. Meetings of the board shall be held from time to time at such time and at such place as the board, the chairman of the board, the chief executive officer or any two directors may determine, and the Secretary shall, upon direction of any of the foregoing, convene a meeting of directors; provided always that, should more than one of the above named call a meeting at or for substantially the same time, there shall be held only one meeting and such meeting shall occur at the time and place determined by, in order of priority, the board, the chairman or the chief executive officer.
4.13 NOTICE OF MEETING. Notice of the time and place of each meeting of the board shall be given in the manner provided in Clause 13.01 to each director not less than forty- eight hours before the time when the meeting is to be held. A notice of a meeting of directors need not specify the purpose of or the business to be transacted at the meeting, except where the Act requires such purpose or business to be specified, including any proposal to:
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(a)
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submit to the shareholders any question or matter requiring approval of the shareholders;
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(b)
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fill a vacancy among the directors or in the office of auditor;
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(c)
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appoint additional directors;
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(f)
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purchase, redeem, or otherwise acquire shares of the Corporation;
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(g)
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pay a commission for the sale of shares;
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(h)
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approve a management proxy circular;
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(i)
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approve any annual financial statements; or
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(j)
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adopt, amend or repeal by-laws.
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A director may, in any manner, waive notice of or otherwise consent to a meeting of the board, and attendance of a director at a meeting of directors is a waiver of notice of the meeting, except when a director attends a meeting for the express purpose of objecting to the transaction of business on the grounds that the meeting is not lawfully called.
4.14 FIRST MEETING OF NEW BOARD. Provided a quorum of directors is present, each newly elected board may, without notice, hold its first meeting immediately following the meeting of shareholders at which such board is elected.
4.15 ADJOURNED MEETING. Notice of an adjourned meeting of the board is not required if the time and place of the adjourned meeting is announced at the original meeting.
4.16 REGULAR MEETINGS. The board may appoint a day or days in any month or months for regular meetings of the board at a place and hour to be named. A copy of any resolution of the board fixing the place and time of such regular meetings shall be sent to each director forthwith after being passed, but no other notice shall be required for any such regular meeting except where the Act requires the purpose thereof or the business to be transacted thereat to be specified.
4.17 CHAIRMAN AND SECRETARY. The chairman of the board, or, in his absence, the chief executive officer, or in his absence, a president or vice-president shall be chairman of any meeting of the board. If none of the said officers are present, the directors present shall choose one of their number to be chairman. The secretary of the Corporation shall act as secretary at any meeting of the board, and if the secretary of the Corporation be absent, the chairman of the meeting shall appoint a person, who need not be a director, to act as secretary of the meeting.
4.18 CASTING VOTES. At all meetings of the board every question shall be decided by a majority of the votes cast on the question. In case of an equality of votes the chairman of the meeting shall not be entitled to a second or casting vote.
4.19 CONFLICT OF INTEREST. A director or officer shall not be disqualified by his office, or be required to vacate his office, by reason only that he is a party to, or is a director or officer of, or has a material interest in, any person who is party to, a material contract or material transaction or proposed material contract or material transaction with the Corporation or any subsidiary thereof. Such a director or officer shall, however, disclose to the Corporation and the board, in writing or by requesting to have it entered in the minutes of meetings of directors or of meetings of committees of directors at the time and in the manner provided in the Act, the nature and extent of any interest that he has in any material contract or material transaction, whether made or proposed, with the Corporation, if the director or officer: (a) is a party to the contract or transaction, (b) is a director or an officer, or an individual acting in a similar capacity, of a party to the contract or transaction, or (c) has a material interest in a party to the contract or transaction. Except as provided in the Act, no such director of the Corporation shall vote on any resolution to approve such contract or transaction. A contract or transaction for which disclosure is required is not invalid, and the director or officer is not accountable to the Corporation or its shareholders for any profit realized from the contract or transaction, because of the director’s or officer’s interest in the contract or transaction or because the director was present or was counted to determine whether a quorum existed at the meeting of directors or committee of directors that considered the contract or transaction, if the director or officer disclosed his interest in accordance with the provisions of the Act and the contract or transaction was approved by the directors, and it was reasonable and fair to the Corporation when it was approved.
Even if these conditions are not met, a director or office, acting honestly and in good faith, shall not, by reason only of his office, be accountable to the Corporation or to its shareholders for any profit realized from a contract or transaction for which disclosure is required, and the contract or transaction is not invalid by reason only of the interest of the director or officer in the contract or transaction, if the contract or transaction is approved or confirmed by special resolution at a meeting of the shareholders, disclosure of the interest was made to the shareholders in a manner sufficient to indicate its nature before the contract or transaction was approved or confirmed, and the contract or transaction was reasonable and fair to the Corporation when it was approved or confirmed.
4.20 REMUNERATION AND EXPENSES. The directors shall be paid such remuneration for their services as the board may from time to time determine. The directors shall also be entitled to be reimbursed for traveling and other expenses properly incurred by them in attending meetings of the board or any committee thereof. Nothing herein contained shall preclude any director from serving the Corporation in any other capacity and receiving remuneration therefor.
SECTION FIVE
COMMITTEES
5.01 COMMITTEE OF DIRECTORS. The board may appoint a committee of directors, however designated, or a managing director, who must be a resident Canadian, and delegate to such committee or managing director any of the powers of the board except those which, under the Act, a committee of directors or managing director has no authority to exercise. At least one-quarter of the members of such committee (or such other number of directors, if any, as may be prescribed by the Act from time to time) shall be resident Canadians. A committee may be comprised of one director.
5.02 TRANSACTION OF BUSINESS. Subject to the provisions of these by-laws relating to participation by electronic means or telephone, the powers of a committee of directors may be exercised by a meeting at which a quorum is present or by resolution in writing signed by all the members of such committee who would have been entitled to vote on that resolution at a meeting of the committee. Meetings of any committee may be held at any place in or outside Canada and may be called by any one member of the committee giving notice in accordance with the by-laws governing the calling of directors’ meetings.
5.03 PROCEDURE. Unless otherwise determined herein or by the board, each committee shall have the power to fix its quorum at not less than a majority of its members, to elect its chairman and to regulate its procedure.
SECTION SIX
OFFICERS
6.01 APPOINTMENT OF OFFICERS. The board may from time to time appoint a chairman of the board, a managing director (who shall be a resident Canadian), a chief executive officer, a president, one or more vice-presidents, a secretary, a treasurer and such other officers as the board may determine, including one or more assistants to any of the officers so appointed. The board may specify the duties of and, in accordance with this by-law and subject to the provisions of the Act, delegate to, such officers powers to manage the business and affairs of the Corporation. Except for a managing director and a chairman of the board, an officer may but need not be a director and one person may hold more than one office. The chief executive officer, or if there is no chief executive officer appointed, the president, shall be the chief executive officer of the Corporation.
6.02 CHAIRMAN OF THE BOARD. The board may from time to time appoint a chairman of the board who shall be a director. If appointed, the board may assign to him any of the powers and duties that are, by any provisions of this by-law, assigned to the managing director or to the chief executive officer; and he shall, subject to the provisions of the Act, have such other powers and duties as the board may specify. He shall preside at all meetings of the shareholders at which he is present. During the absence or disability of the chairman of the board, his duties shall be performed and his powers exercised by the managing director, if any, or by the chief executive officer if there is no managing director.
6.03 MANAGING DIRECTOR. The board may from time to time appoint a managing director who shall be a resident Canadian and a director. If appointed, he shall have, subject to the authority of the board, general supervision of the business and affairs of the Corporation, and he shall, subject to the provisions of the Act, have such other powers and duties as the board may specify. During the absence or disability of the chief executive officer, or if no chief executive officer has been appointed, the managing director shall also have the powers and duties of that office.
6.04 CHIEF EXECUTIVE OFFICER. If appointed, the chief executive officer shall, subject to the discretion of the board, subject to the authority of the board, have general supervision of the business of the Corporation, and he shall have such other powers and duties as the board may specify. During the absence or disability of the managing director, or if no managing director has been appointed, the chief executive officer shall also have the powers and duties of that office.
6.05 PRESIDENT AND VICE-PRESIDENT. A president or vice-president, if appointed, shall have such powers and duties as the board or the chief executive officer may specify.
6.06 SECRETARY. The secretary, if appointed, shall attend and be the secretary of all meetings of the board, shareholders and committees of the board and shall enter or cause to be entered in records kept for that purpose minutes of all proceedings thereat. He shall give or cause to be given, as and when instructed, all notices to shareholders, directors, officers, auditors and members of committees of the board, shall be the custodian of the stamp or mechanical device generally used for affixing the corporate seal of the Corporation and of all books, papers, records, documents and instruments belonging to the Corporation, except when some other officer or agent has been appointed for that purpose, and shall have such other powers and duties as the board or the chief executive officer may specify.
6.07 TREASURER. The treasurer, if appointed, shall keep proper accounting records in compliance with the Act and shall be responsible for the deposit of money, the safekeeping of securities and the disbursement of the funds of the Corporation. He shall render to the board, whenever required, an account of all his transactions as treasurer and of the financial position of the Corporation, and he shall have such other powers and duties as the board or the chief executive officer may specify.
6.08 POWERS AND DUTIES OF OTHER OFFICERS. The powers and duties of all other officers shall be such as the terms of their engagement call for or as the board or the chief executive officer may specify. Any of the powers and duties of an officer to whom an assistant has been appointed may be exercised and performed by such assistant, unless the board or the chief executive officer otherwise directs.
6.09 VARIATION OF POWERS AND DUTIES. The board may from time to time and subject to the provisions of the Act, vary, add to or limit the powers and duties of any officer.
6.10 TERM OF OFFICE. The board, in its discretion, may remove any officer of the Corporation, without prejudice to such officer’s rights under any employment contract. Otherwise each officer appointed by the board shall hold office until his successor is appointed.
6.11 TERMS OF EMPLOYMENT AND REMUNERATION. The terms of employment and the remuneration of officers appointed by the board shall be settled by the board from time to time. The fact that any officer is a director or shareholder of the Corporation shall not disqualify him from receiving such remuneration as an officer as may be determined.
6.12 CONFLICT OF INTEREST. An officer shall disclose his interest in any material contract or material transaction or proposed material contract or material transaction with the Corporation in accordance with Clause 4.19.
6.13 AGENTS AND ATTORNEYS. The board shall have power from time to time to appoint agents or attorneys for the Corporation in or outside Canada with such powers of management or otherwise (including the power to sub-delegate) as may be thought fit.
6.14 FIDELITY BONDS. The board may require such officers, employees and agents of the Corporation as the board deems advisable to furnish bonds for the faithful discharge of their powers and duties, in such forms and with such surety as the board may from time to time determine.
SECTION SEVEN
PROTECTION OF DIRECTORS, OFFICERS AND OTHERS
7.01 LIMITATION OF LIABILITY. Every director and officer of the Corporation, in exercising his powers and discharging his duties, shall act honestly and in good faith with a view to the best interests of the Corporation, and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Subject to the foregoing, no director or officer shall be liable for the acts, receipts, neglects or defaults of any other director or officer or employee, or for joining in any receipt or other act for conformity, or for any loss, damage or expense happening to the Corporation through the insufficiency or deficiency of title to any property acquired for or on behalf of the Corporation, or for the insufficiency or deficiency of any security in or upon which any of the moneys of the Corporation shall be invested, or for any loss or damage arising from the bankruptcy, insolvency or tortious acts of any person with whom any of the moneys, securities or effects of the Corporation shall be deposited, or for any loss occasioned by any error of judgment or oversight on his part, or for any other loss, damage or misfortune whatsoever which shall happen in the execution of the duties of his office or in relation thereto, unless the same are occasioned by his own wilful neglect or default; provided that nothing herein shall relieve any director or officer from the duty to act in accordance with the Act and the regulations thereunder or from liability for any breach thereof.
An act of a director or officer is valid notwithstanding an irregularity in the director’s or officer’s election or appointment or a defect in the director’s or officer’s qualifications.
Directors may rely upon the accuracy of any statement or report prepared by the Corporation’s auditors, internal accountants or other responsible officials and shall not be responsible or held liable for any loss or damage resulting from the paying of any dividends or otherwise acting upon such statement or report.
7.02 INDEMNITY. Subject to the limitations contained in the Act, the Corporation shall indemnify a director or officer, a former director or officer, or a person who acts or acted at the Corporation’s request as a director or officer of a body corporate of which the Corporation is or was a shareholder or creditor (or a person who undertakes or has undertaken any liability on behalf of the Corporation or any such body corporate) and his heirs and legal representatives, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him in respect of any civil, criminal or administrative action or proceeding to which he is made a party by reason of being or having been a director or officer of the Corporation or such body corporate, if:
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(a)
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he acted honestly and in good faith with a view to the best interests of the Corporation; and
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(b)
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in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, he had reasonable grounds for believing that his conduct was lawful.
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7.03 INSURANCE.
Subject to the limitations contained in the Act, the Corporation may purchase and
maintain such insurance for the benefit of any person referred to in Clause 7.02 0against any liability incurred by him, as
the board may from time to time determine.
SECTION EIGHT
SHARES
8.01 ALLOTMENT AND ISSUE. The board may, from time to time, allot, or grant options to purchase, the whole or any part of the authorized and unissued shares of the Corporation at such times and to such persons and for such consideration as the board shall determine, provided that no share shall be issued until it is fully paid as prescribed by the Act. Subject to the articles, no holder of any class of share of the capital of the Corporation shall be entitled as of right to subscribe for, purchase or receive any part of any new or additional issue of shares of any class, whether now or hereafter authorized, or any bonds, debentures or other securities convertible into shares of any class.
8.02 COMMISSIONS. The board may from time to time authorize the Corporation to pay a reasonable commission to any person in consideration of his purchasing or agreeing to purchase shares of the Corporation, whether from the Corporation or from any other person, or procuring or agreeing to procure purchasers for any such shares.
8.03 SECURITIES REGISTER. The Corporation shall maintain a securities register in which it records the securities issued by it in registered form, showing with respect to each class or series of securities:
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(a)
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the names, alphabetically arranged, and the latest known address of each person who is or has been a security holder;
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(b)
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the number of securities held by each security holder; and
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(c)
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the date and particulars of the issue and transfer of each security.
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The Corporation shall keep the information entered in the securities register for the period of time prescribed in the regulations to the Act.
8.04 TRANSFER AGENTS AND REGISTRARS. The board may from time to time appoint one or more trust companies registered under The Trust Companies Act (Alberta) as its agent or agents to maintain the central securities register or registers, and an agent or agents to maintain branch securities registers. Such a person may be designated as transfer agent or registrar according to his functions and one person may be appointed both registrar and transfer agent. The board may at any time terminate such appointment.
8.05 REGISTRATION OF TRANSFER. Subject to, and except as otherwise provided in, the Act and the Securities Transfer Act (Alberta), no transfer of shares shall be registered in a securities register except upon presentation of the certificate representing such shares with a transfer endorsed thereon or delivered therewith duly executed by the registered holder or by his attorney or successor duly appointed, together with such reasonable assurance or evidence of signature, identification and authority to transfer as the board may from time to time prescribe, upon payment of all applicable taxes and any fees prescribed by the board; upon compliance with such restrictions on transfer as are authorized by the articles and upon satisfaction of any lien referred to in Clause 8.06.
8.06 LIEN FOR INDEBTEDNESS. If the articles provide that the Corporation shall have a lien on shares registered in the name of a shareholder indebted to the Corporation, such lien may be enforced, subject to any other provision of the articles, by the sale of the shares thereby affected, or by the cancellation by the Corporation of the shares thereby affected and the appropriate corresponding reduction of the stated capital account for said shares, or by any other action, suit, remedy or proceeding authorized or permitted by law or by equity and, pending such enforcement, may refuse to register a transfer of the whole or any part of such shares.
8.07 NON-RECOGNITION OF TRUSTS. Subject to the Act, the Securities Transfer Act (Alberta), the Civil Enforcement Act (Alberta) and this by-law, the Corporation may treat the registered owner of a security as the person exclusively entitled to vote, to receive notices, to receive any interest, dividend or other payments in respect of the security, and otherwise to exercise all the rights and powers of an owner of the security.
8.08 SHARE CERTIFICATES. Every holder of one or more shares of the Corporation shall be entitled, at his option, to a share certificate, or to a non-transferable written acknowledgement of his right to obtain a share certificate, stating the name of the person to whom the certificate or acknowledgment was issued, and the number and class or series of shares held by him as shown on the securities register. Share certificates and acknowledgments of a shareholder’s right to a share certificate, shall, subject to the Act, be in such form as the board shall from time to time approve. Any share certificate shall be signed in accordance with Clause 2.04 and need not be under the corporate seal; provided that, unless the board otherwise determines, certificates representing shares in respect of which a transfer agent and/or registrar has been appointed shall not be valid unless countersigned by or on behalf of such transfer agent and/or registrar. The signature of one of the signing officers or, in the case of share certificates which are not valid unless countersigned by or on behalf of a transfer agent and/or registrar, the signatures of both signing officers, may be printed or mechanically reproduced in facsimile upon share certificates and every such facsimile signature shall for all purposes be deemed to be the signature of the officer whose signature it reproduces and shall be binding upon the Corporation. A share certificate executed as aforesaid shall be valid notwithstanding that one or both of the officers whose facsimile signature appears thereon no longer holds office at the date of issue of the certificate.
8.09 REPLACEMENT OF SHARE CERTIFICATES. The board or any officer or agent designated by the board may in its or his discretion direct the issue of a new share certificate in lieu of and upon cancellation of a share certificate that has been mutilated, or in substitution for a share certificate claimed to have been lost, destroyed or wrongfully taken, on payment of such fee, not exceeding the maximum amount prescribed in the regulations to the Act, for a share certificate issued in respect of a transfer, and on such terms as to indemnity, reimbursement of expenses and evidence of loss and of title as the board may from time to time prescribe, whether generally or in any particular case.
8.10 JOINT SHAREHOLDERS. If two or more persons are registered as joint holders of any share, the Corporation shall not be bound to issue more than one certificate in respect thereof, and delivery of such certificate to one of such persons shall be sufficient delivery to all of them. Any one of such persons may give effectual receipts for the certificates issued in respect thereof or for any dividend, bonus, return of capital or other money payable or warrant issuable in respect of such shares.
8.11 DECEASED SHAREHOLDERS. In the event of the death of a holder, or one of the joint holders, of any share, the Corporation shall not be required to make any entry in the register of shareholders in respect thereof, except on production of all such documents as may be required by law and upon compliance with the reasonable requirements of the Corporation and its transfer agents.
8.12 ELECTRONIC, BOOK-BASED OR OTHER NON-CERTIFICATED REGISTERED POSITIONS. For greater certainty but subject to subsection (1) of section 48 of the Act, a registered securityholder may have his holdings of securities of the Corporation evidenced by an electronic, book-based, direct registration service or other non-certificated entry or position on the register of securityholders to be kept by the Corporation in place of a physical security certificate pursuant to a registration system that may be adopted by the Corporation, in conjunction with its transfer agent (if any). This by-law shall be read such that a registered holder of securities of the Corporation pursuant to any such electronic, book-based, direct registration service or other non-certificated entry or potion shall be entitled to all of the same benefits, rights, entitlements and shall incur the same duties and obligations as a registered holder of securities evidenced by a physical security certificate. The Corporation and its transfer agent may adopt such policies and procedures and require such documents and evidence as they may determine necessary or desirable in order to facilitate the adoption and maintenance of a security registration system by electronic, book-based, direct registration system or other non- certificated means.
SECTION NINE
DIVIDENDS AND RIGHTS
9.01 DIVIDENDS. Subject to the provisions of the Act, the board may, from time to time, declare dividends payable to the shareholders according to their respective rights and interest in the Corporation. Dividends may be paid in money or property or by issuing fully paid shares of the Corporation.
9.02 DIVIDEND CHEQUES. A dividend payable in cash shall be paid by cheque drawn on the Corporation’s bankers or one of them to the order of each registered holder of shares of the class or series in respect of which it has been declared and mailed by prepaid ordinary mail to such registered holder at his recorded address, unless such holder otherwise directs. In the case of joint holders the cheque shall, unless such joint holders otherwise direct, be made payable to the order of all such joint holders and mailed to them at their recorded address. The mailing of such cheque as aforesaid, unless the same is not paid on due presentation, shall satisfy and discharge the liability for the dividend to the extent of the sum represented thereby plus the amount of any tax which the Corporation is required to and does withhold.
9.03 NON-RECEIPT OF CHEQUES. In the event of non-receipt of any dividend cheque by the person to whom it is sent as aforesaid, the Corporation shall issue to such person a replacement cheque for a like amount on such terms as to indemnity, reimbursement of expenses and evidence of non-receipt and of title as the board may from time to time prescribe, whether generally or in any particular case.
9.04 RECORD DATE FOR DIVIDENDS AND RIGHTS. The board may fix in advance a date, preceding by not more than 50 days the date for the payment of any dividend or the date for the issue of any warrant or other evidence of right to subscribe for securities of the Corporation, as a record date for the determination of the persons entitled to receive payment of such dividend or to receive the right to subscribe for such securities, provided that if the Corporation is a distributing corporation, notice of any such record date is given, not less than 7 days before such record date, in the manner provided in the Act. Where no record date is fixed in advance as aforesaid, the record date for the determination of the persons entitled to receive payment of any dividend or to receive the right to subscribe for such securities of the Corporation shall be at the close of business on the day on which the resolution relating to such dividend or right to subscribe is passed by the board.
9.05 UNCLAIMED DIVIDENDS. Any dividend unclaimed after a period of six years from the date on which the same has been declared to be payable shall be forfeited and shall revert to the Corporation.
SECTION TEN
MEETINGS OF SHAREHOLDERS
10.01 ANNUAL MEETINGS. The annual meeting of shareholders shall be held at such time in each year and, subject to the Act and to Clause 10.04, at such place, as the board, the chairman of the board, the managing director or the chief executive officer may, from time to time, determine, for the purpose of considering the financial statements and reports required by the Act to be placed before the annual meeting, electing directors, appointing auditors and for the transaction of such other business as may properly be brought before the meeting.
10.02 SPECIAL MEETINGS. The board may, at any time, call a special meeting of shareholders to be held on such day and at such time and, subject to section 132 of the Act, at such place within Canada (or outside Canada if the place is specified in the articles), as the board may determine.
10.03 SPECIAL BUSINESS. All business transacted at a special meeting of shareholders and all business transacted at an annual meeting of shareholders, except consideration of the financial statements and auditor’s report, fixing the number of directors for the following year, election of directors and reappointment of the incumbent auditors, is deemed to be special business.
10.04 PLACE OF MEETINGS. Meetings of shareholders shall be held at the registered office of the Corporation or elsewhere in the municipality in which the registered office is situate or, if the board shall so determine, at some other place in Alberta or, if all the shareholders entitled to vote at the meeting so agree, at some place outside Alberta. Notwithstanding the foregoing, if the articles of the Corporation so provide, meetings of shareholders may be held outside Alberta.
10.05 NOTICE OF MEETINGS. Notice of the time and place of each meeting of shareholders shall be given in the manner provided in Clause 13.01 not less than 21 days nor more than 50 days before the date of the meeting to each director, to the auditor and to each shareholder who at the close of business on the record date for notice is entered in the securities register as the holder of one or more shares carrying the right to vote at the meeting. Notice of a meeting of shareholders called for any purpose other than consideration of the financial statements and auditor’s report, election of directors and re-appointment of the incumbent auditor shall state the nature of such business in sufficient detail to permit the shareholder to form a reasoned judgment thereon and shall state the text of any special resolution to be submitted to the meeting. A shareholder may in any manner waive notice of or otherwise consent to a meeting of shareholders.
Subject to the Act and Applicable Securities Laws, for so long as the Corporation is a distributing corporation any notice of a meeting of shareholders shall be sufficiently given if given in accordance with the requirements applicable to notice-and-access.
10.06 RECORD DATE FOR NOTICE. The board may fix in advance a date, preceding the date of any meeting of shareholders by not more than 50 days and not less than 21 days, as a record date for the determination of the shareholders entitled to notice of or to vote at the meeting, provided that if the Corporation is a distributing corporation, notice of any such record date shall be given not less than 7 days before such record date in the manner provided in the Act. If no such record date is so fixed, the record date for the determination of the shareholders entitled to receive notice of the meeting shall be at the close of business on the last business day immediately preceding the day on which the notice is sent or, if no notice is sent, shall be the day on which the meeting is held.
10.07 LISTS OF SHAREHOLDERS ENTITLED TO NOTICE AND TO VOTE.
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(a)
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For every meeting of shareholders, the Corporation shall, within the time period prescribed by the Act, prepare a list of shareholders entitled to receive notice of the meeting, arranged in alphabetical order and showing the number of shares held by each shareholder entitled to receive notice of the meeting, as of the record date for notice of the meeting as fixed by the directors, or, if no record date is fixed by the directors, as deemed by the Act.
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(b)
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For every meeting of shareholders, the Corporation shall, within the time period prescribed by the Act, prepare a list of shareholders entitled to vote at the meeting, arranged in alphabetical order and showing the number of shares held by each shareholder entitled to vote at the meeting, as of the record date for voting at the meeting as fixed by the directors, or, if no record date is fixed by the directors, as deemed by the Act.
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10.08 MEETINGS WITHOUT NOTICE. A meeting of shareholders may be held without notice at any time and place permitted by the Act:
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(a)
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if all the shareholders entitled to vote thereat are present in person or represented by proxy and waive notice of or otherwise consent to such meeting being held, and
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(b)
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if the auditors and the directors are present or waive notice of or otherwise consent to such meeting being held,
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so long as such shareholders, auditors or directors present are not attending for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called. At such a meeting any business may be transacted which the Corporation at a meeting of shareholders may transact. If the meeting is held at a place outside Alberta, shareholders not present or represented by proxy, but who have waived notice of or otherwise consented to such meeting, shall also be deemed to have consented to the meeting being held at such place.
10.09 CHAIRMAN AND SECRETARY. The chairman of any meeting of shareholders shall be the chairman, or in his absence, the chief executive officer, or in his absence, a president or vice-president who is a shareholder. If no such officer is present within fifteen minutes from the time fixed for holding the meeting, the persons present and entitled to vote shall choose one of their number to be chairman. If the secretary of the Corporation is absent, the chairman shall appoint some person, who need not be a shareholder, to act as secretary of the meeting.
10.10 PERSONS ENTITLED TO BE PRESENT. The only persons entitled to be present at a meeting of shareholders shall be those entitled to vote thereat, the directors and auditors of the Corporation, and others who, although not entitled to vote, are entitled or required under any provision of the Act or the articles or by-laws to be present at the meeting. Any other person may be admitted only on the invitation of the chairman of the meeting.
10.11 QUORUM. A quorum for the transaction of business at any meeting of shareholders shall be at least two persons present in person, each being a shareholder entitled to vote thereat or a duly appointed proxy or representative for an absent shareholder so entitled, and representing in the aggregate not less than ten percent (10%) of the outstanding shares of the Corporation carrying voting rights at the meeting. If a quorum is present at the opening of any meeting of shareholders, the shareholder(s) present or represented may proceed with the business of the meeting notwithstanding that a quorum is not present throughout the meeting. If a quorum is not present at the opening of any meeting of shareholders, the shareholder(s) present or represented may adjourn the meeting to a fixed time and place but may not transact any other business other than as provided in these By-laws or in the Act until a quorum is present.
10.12 RIGHT TO VOTE. Every person named in the list of shareholders entitled to vote referred to in Clause 10.07 shall be entitled to vote the shares shown thereon opposite his name at the meeting to which such list relates, except to the extent that:
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(a)
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where the Corporation has fixed a record date in respect of such meeting, such person has transferred any of his shares after such record date or, where the Corporation has not fixed a record date in respect of such meeting, such person has transferred any of his shares after the date on which the list of shareholders entitled to notice of the meeting is prepared; and
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(b)
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the transferee, having produced properly endorsed certificates evidencing such shares or having otherwise established that he owns such shares, has demanded not later than 10 days before the meeting that his name be included in such list.
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In any such excepted case, the transferee shall be entitled to vote the transferred shares at such meeting.
10.13 PROXIES AND REPRESENTATIVES. Every shareholder entitled to vote at a meeting of shareholders may appoint a proxyholder, and one or more alternate proxyholders, who need not be shareholders, to attend and act at the meeting in the manner and to the extent authorized and with the authority conferred by the proxy. A proxy shall be in writing executed by the shareholder or his attorney and shall conform with the requirements of the Act. Alternatively, every such shareholder which is a body corporate or association may authorize, by resolution of its directors or governing body, an individual, who need not be a shareholder, to represent it at a meeting of shareholders, and such individual may exercise on the shareholder’s behalf all the powers it could exercise if it were an individual shareholder. The authority of such an individual shall be established by depositing with the Corporation a certified copy of such resolution, or in such other manner as may be satisfactory to the secretary of the Corporation or the chairman of the meeting.
10.14 TIME FOR DEPOSIT OF PROXIES. The board may specify in a notice calling a meeting of shareholders a time, preceding the time of such meeting or an adjournment thereof by not more than 48 hours, exclusive of non-business days, before which proxies to be used at such meeting must be deposited. A proxy shall be acted upon only if, prior to the time so specified, it shall have been deposited with the Corporation or an agent thereof specified in such notice or, if no such time is specified in such notice, it has been received by the secretary of the Corporation or by the chairman of the meeting or any adjournment thereof prior to the time of voting; provided that the chairman of the meeting may, in his sole discretion, at the meeting, elect to waive the requirement that proxies be deposited prior to the time specified in such notice and accept any and all proxies deposited at or before the time of the meeting or any adjournment thereof.
10.15 JOINT SHAREHOLDERS. If two or more persons hold shares jointly, any one of them present in person or represented at a meeting of shareholders may, in the absence of the other or others vote the shares; but if two or more of those persons are present in person or represented and vote, they shall vote as one on the shares jointly held by them.
10.16 VOTES TO GOVERN. At any meeting of shareholders every question shall, unless otherwise required by the articles or by-laws or by law, be determined by the majority of the votes cast on the question. In case of an equality of votes, either upon a show of hands or upon a poll, the chairman of the meeting shall not be entitled to a second or casting vote.
10.17 SHOW OF HANDS. Subject to the provisions of the Act, any question at a meeting of shareholders shall be decided by a show of hands, unless a ballot thereon is required or demanded as hereinafter provided. Upon a show of hands every person who is present and entitled to vote shall have one vote. Whenever a vote by a show of hands shall have been taken upon a question, unless a ballot thereon is so required or demanded, a declaration by the chairman of the meeting that the vote upon the question has been carried or carried by a particular majority or not carried, and an entry to that effect in the minutes of the meeting, shall be prima facie evidence of the fact, without proof of the number or proportion of the votes recorded in favour of or against any resolution or other proceeding in respect of the said question, and the result of the vote so taken shall be the decision of the shareholders upon the said question.
10.18 BALLOTS. On any question proposed for consideration at a meeting of shareholders, any shareholder or proxyholder entitled to vote at the meeting may require or demand a ballot, either before or on the declaration of the result of any vote by show of hands. A ballot so required or demanded shall be taken in such manner as the chairman shall direct. A requirement or demand for a ballot may be withdrawn at any time prior to the taking of the ballot. If a ballot is taken, each person present shall be entitled, in respect of the shares which he is entitled to vote at the meeting upon the question, to that number of votes provided by the Act or the articles, and the result of the ballot so taken shall be the decision of the shareholders upon the said question.
10.19 ADMISSION OR REJECTION OF A VOTE. In case of any dispute as to the admission or rejection of a vote, the chairman shall determine the same and such determination made in good faith shall be final and conclusive.
10.20 ADJOURNMENT. If a meeting of the shareholders is adjourned by one or more adjournments for an aggregate of less than thirty days, it shall not be necessary to give notice of the adjourned meeting, other than by announcement at the time of an adjournment. If a meeting of shareholders is adjourned by one or more adjournments for an aggregate of thirty days or more, notice of the adjourned meeting shall be given as for an original meeting.
10.21 PARTICIPATION IN MEETINGS. Subject to the Act, a shareholder or any other person entitled to attend a meeting of shareholders may participate in the meeting by electronic means, telephone or other communication facilities that permit all persons participating in the meeting to hear or otherwise communicate with each other, and a person participating in such a meeting by those means is deemed to be present at the meeting. If the directors or the shareholders of the Corporation call a meeting of shareholders, the directors or the shareholders, as the case may be, may determine that the meeting shall be held, in accordance with the Act, entirely by electronic means, telephone or other communication facility that permits all participants to communicate adequately with each other during the meeting. Notwithstanding Clause 10.17, a vote at any meeting of shareholders may be held, in accordance with the Act, entirely by electronic means, telephone or other communication facility, if the Corporation makes such a communication facility available. Any person participating in a meeting of shareholders by electronic means, telephone or other communication facilities as provided in this Clause 10.21 and entitled to vote at the meeting may vote, in accordance with the Act, by electronic means, telephone or other communication facility that the Corporation has made available for that purpose.
10.22 RESOLUTION IN WRITING. A resolution in writing signed by all the shareholders entitled to vote on that resolution at a meeting of shareholders is as valid as if it had been passed at a meeting of the shareholders.
10.23 ONLY ONE SHAREHOLDER. Where the Corporation has only one shareholder or only one holder of any class or series of shares, the shareholder present in person or by proxy constitutes a meeting.
SECTION ELEVEN
DIVISIONS AND DEPARTMENTS
11.01 CREATION AND CONSOLIDATION OF DIVISIONS. The board may cause the business and operations of the Corporation or any part thereof to be divided or to be segregated into one or more divisions upon such basis, including character or type of operation, geographical territory, product manufactured or service rendered, as the board may consider appropriate in each case. The board may also cause the business and operations of any such division to be further divided into sub-units and the business and operations of any such divisions or sub-units shall be consolidated upon such basis as the board may consider appropriate in each case.
11.02 NAME OF DIVISION. Subject to law, any division or its sub-units may be designated by such name as the board may from time to time determine and may transact business, enter into contracts, sign cheques and other documents of any kind and do all acts and things under such name. Any such contract, cheque or document shall be binding upon the Corporation as if it had been entered into or signed in the name of the Corporation.
11.03 OFFICERS OF DIVISIONS. From time to time the board or, if authorized by the board, the chief executive officer, may appoint one or more officers for any division, prescribe their powers and duties, and settle their terms of employment and remuneration. The board or, if authorized by the board, the chief executive officer, may remove, at its or his pleasure, any officer so appointed without prejudice to such officer’s rights under any employment contract. Officers of divisions or their sub-units shall not, as such, be officers of the Corporation.
SECTION TWELVE
INFORMATION
AVAILABLE TO SHAREHOLDERS
12.01 DIRECTORS MAY RESTRICT ACCESS. Except as provided by the Act, no shareholder shall be entitled to discovery of any information respecting any details or conduct of the Corporation’s business which, in the opinion of the board, would be inexpedient in the interests of the Corporation to communicate to the public.
12.02 DIRECTORS TO DETERMINE ACCESS. The directors may, from time to time, subject to the rights conferred by the Act, determine whether and to what extent and at what time and place and under what circumstances or regulations the documents, books and registers and accounting records of the Corporation, or any of them, shall be open to inspection of shareholders, and no shareholder shall have any right to inspect any document or book or register or accounting records of the Corporation except as conferred by statute or authorized by the board or by a resolution of the shareholders.
SECTION THIRTEEN
NOTICES
13.01 METHOD OF GIVING NOTICES. Any notice (which term includes any communication or document) to be given (which term includes sent, delivered or served) pursuant to the Act, the articles, the by-laws or otherwise to any shareholder, director or officer shall be delivered personally to, sent by mail addressed to:
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(a)
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the shareholder at the shareholder’s latest address as shown in the records of the Corporation or its transfer agent; and
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(b)
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the director or officer at the director’s or officer’s latest address as shown in the records of the Corporation or in the last notice filed under section 106 or 113 of the Act.
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A notice so delivered shall be deemed to have been given when it is delivered personally or to the recorded address as aforesaid; a notice so mailed shall be deemed to have been given when deposited in a post office or public letter box; and a notice so sent by any means of transmitted or recorded communication shall be deemed to have been given when dispatched or delivered to the appropriate communication company or agency or its representative for dispatch. Subject to subsection (2) of section 134 of the Act, a notice sent in accordance with the foregoing shall be deemed to have been received by the recipient at the time it would be delivered in the ordinary course of mail, unless there are reasonable grounds for believing that the recipient did not receive the notice at that time or at all. The secretary may change or cause to be changed the recorded address of any shareholder, director, or officer in accordance with any information believed by him to be reliable
A notice required to be sent or delivered as noted above in this Clause 13.01 or pursuant to section 256 or section 257 of the Act may be sent by electronic means in accordance with the provisions of the Electronic Transactions Act (Alberta).
Notwithstanding the foregoing, subject to the Act and Applicable Securities Laws, for so long as the Corporation is a distributing corporation, any notice of a meeting of shareholders shall be sufficiently given if given in accordance with the requirements applicable to notice-and-access.
13.02 NOTICE TO JOINT SHAREHOLDERS. If two or more persons are registered as joint holders of any share, any notice shall be addressed to all of such joint holders but notice to one of such persons shall be sufficient notice to all of them.
13.03 COMPUTATION OF TIME. In computing the date when notice must be given under any provision requiring a specified number of days’ notice of any meeting or other event, the date of giving the notice shall be excluded and the date of the meeting or other event shall be included.
13.04 UNDELIVERED
NOTICES. If notices given to a shareholder pursuant to Clause 13.01 are returned on two consecutive occasions because he cannot
be found, the Corporation shall not be required to give any further notices to such shareholder until he informs the Corporation
in writing of his new address.
13.05 OMISSIONS AND ERRORS. The accidental omission to give any notice to any shareholder, director, officer, auditor or member of a committee of the board or the non-receipt of any notice by any such person or any error in any notice not affecting the substance thereof shall not invalidate any action taken at any meeting held pursuant to such notice or otherwise founded thereon.
13.06 PERSONS ENTITLED BY DEATH OR OPERATION OF LAW. Every person who, by operation of law, transfer, death of a shareholder or any other means whatsoever, shall become entitled to any share, shall be bound by every notice in respect of such share which shall have been duly given to the shareholder from whom he derives his title to such share prior to his name and address being entered on the securities register (whether such notice was given before or after the happening of the event upon which be became so entitled) and prior to his furnishing to the Corporation the proof of authority or evidence of his entitlement prescribed by the Act.
13.07 WAIVER OF NOTICE. Any shareholder (or his duly appointed proxyholder), director, officer, auditor or member of a committee of the board may at any time waive any notice, or waive or abridge the time for any notice, required to be given to him under any provision of the Act, the regulations thereunder, the articles, the by-laws or otherwise and such waiver or abridgement shall cure any default in the giving or in the time of such notice, as the case may be. Any such waiver or abridgement shall be in writing except a waiver of notice of a meeting of shareholders or of the board which may be given in any manner.
SECTION FOURTEEN
EFFECTIVE DATE (AND REPEAL)
14.01 EFFECTIVE DATE. This by-law shall come into force when made by the board in accordance with the Act.
14.02 REPEAL. All previous by-laws of the Corporation are repealed as of the coming into force of this by-law. Such repeal shall not affect the previous operation of any by-law so repealed or affect the validity of any act done or right, privilege, obligation or liability acquired or incurred under, or the validity of any contract or agreement made pursuant to, or the validity of any articles (as defined in the Act) or predecessor charter documents of the Corporation obtained pursuant to, any such by-law prior to its repeal. All officers and persons acting under any by-law so repealed shall continue to act as if appointed under the provisions of this by-law and all resolutions of the shareholders or the board or a committee of the board with continuing effect passed under any repealed by-law shall continue to be good and valid except to the extent inconsistent with this by-law and until amended or repealed.
MADE
AND ADOPTED by the board of directors the [•] day of July, 2020
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President
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CONFIRMED by the shareholders in accordance with the Act the [20th] day of July, 2020.
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APPENDIX D
Post-Continuance By-laws
[See attached]
FIELD TRIP HEALTH LTD.
BY-LAW NO. 1
KM
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TABLE
OF CONTENTS
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Page
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DEFINITIONS
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1
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1.
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Definitions
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1
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REGISTERED OFFICE
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1
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2.
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Registered Office
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1
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SEAL
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2
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3.
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Seal
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2
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DIRECTORS
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2
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4.
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Number
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2
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5.
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Vacancies
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2
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6.
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Powers
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2
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7.
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Duties
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2
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8.
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Qualification
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2
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9.
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Election/Term of Office
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3
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10.
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Consent to Election
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3
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11.
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Removal
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3
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12.
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Vacancy of Office
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3
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13.
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Validity of Acts
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4
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MEETINGS OF DIRECTORS
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4
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14.
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Regular and Special Purpose Meetings
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4
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15.
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Notice
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4
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16.
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Waiver of Notice
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5
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17.
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Omission of Notice
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5
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18.
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Electronic, Telephone Participation, Etc.
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5
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19.
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Adjournment
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5
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20.
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Quorum and Voting
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5
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21.
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Resolution in Lieu of Meeting
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6
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COMMITTEES OF DIRECTORS
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6
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22.
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General
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6
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23.
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Audit Committee
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7
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REMUNERATION OF DIRECTORS, OFFICERS AND EMPLOYEES
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7
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24.
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Remuneration of Directors, Officers and Employees
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7
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SUBMISSION OF CONTRACTS OR TRANSACTIONS TO SHAREHOLDERS FOR APPROVAL
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8
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25.
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Submission of Contracts or Transactions to Shareholders for Approval
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8
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CONFLICT OF INTEREST
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8
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26.
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Conflict of Interest
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8
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FOR THE PROTECTION OF DIRECTORS AND OFFICERS
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9
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27.
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For the Protection of Directors and Officers
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9
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INDEMNITIES TO DIRECTORS AND OTHERS
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9
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28.
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Indemnities to Directors and Others
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9
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OFFICERS
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10
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29.
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Appointment of Officers
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10
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30.
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Removal of Officers and Vacancy of Office
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10
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TABLE
OF CONTENTS
(continued)
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Page
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31.
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Chair of the Board
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11
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32.
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Chief Executive Officer
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11
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33.
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President
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11
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34.
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Vice-President
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11
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35.
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Secretary
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11
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36.
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Treasurer
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12
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37.
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Managing Director
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12
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38.
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Duties of Officers may be Delegated
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12
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39.
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Agents and Attorneys
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12
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SHAREHOLDERS’ MEETINGS
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12
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40.
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Annual Meeting
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12
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41.
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Special Meetings
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12
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42.
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Meeting on Requisition of Shareholders
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13
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43.
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Participation in Meetings by Electronic Means
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13
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44.
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Meetings held by Electronic Means
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13
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45.
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Notice
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13
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46.
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Waiver of Notice
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13
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47.
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Omission of Notice
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13
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48.
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Record Dates
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14
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49.
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Chair of the Meeting
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14
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50.
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Votes
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14
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51.
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Electronic Voting
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15
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52.
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Right to Vote
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15
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53.
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Proxies
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16
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54.
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Conduct of Meeting
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16
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55.
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Adjournment
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16
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56.
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Quorum
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16
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57.
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Persons Entitled to be Present
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17
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58.
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Resolution in Lieu of Meeting
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17
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SHARES AND TRANSFERS
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17
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59.
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Issuance
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17
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60.
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Security Certificates
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17
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61.
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Agent
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17
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62.
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Dealings with Registered Holder
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18
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63.
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Surrender of Security Certificates
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18
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64.
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Defaced, Destroyed, Stolen or Lost Security Certificates
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18
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65.
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Enforcement of Lien for Indebtedness
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18
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66.
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Electronic, Book-Based or Other Non-Certificated Registered Positions
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19
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DIVIDENDS
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19
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67.
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Dividends
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19
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68.
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Joint Shareholders
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19
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69.
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Dividend Payments
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19
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VOTING SECURITIES IN OTHER BODIES CORPORATE
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20
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70.
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Voting Securities in Other Bodies Corporate
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20
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NOTICES, ETC.
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20
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71.
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Service
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20
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TABLE
OF CONTENTS
(continued)
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Page
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72.
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Failure to Locate Shareholder
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21
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73.
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Notice to Joint Shareholders
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21
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74.
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Persons Becoming Entitled by Operation of Law
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21
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75.
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Signatures upon Notices
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21
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76.
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Computation of Time
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21
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77.
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Proof of Service
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21
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CUSTODY OF SECURITIES
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21
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78.
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Custody of Securities
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21
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EXECUTION OF CONTRACTS, ETC.
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22
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79.
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Execution of Contracts, etc.
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22
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FISCAL PERIOD
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22
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80.
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Fiscal Period
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22
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DELIVERY OF DOCUMENTS
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23
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81.
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Delivery of Documents
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23
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BORROWING MONEY, ETC.
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23
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82.
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Borrowing Money, etc.
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23
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ADVANCED NOTICE PROVISIONS
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23
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83.
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Nomination Procedures
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23
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84.
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Timely Notice
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24
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85.
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Manner of Timely Notice
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24
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86.
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Proper Form of Notice
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25
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87.
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Notice to be Updated
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26
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88.
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Eligibility for Nomination as a Director
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26
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89.
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Delivery of Notice
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27
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90.
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Board Discretion
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27
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D-1
BY-LAW NO. 1
A by-law relating generally to the conduct of the business and affairs of [CORPORATION NAME] (the “Corporation”) is made as follows:
DEFINITIONS
In this by-law and all other by-laws of the Corporation, unless the context otherwise specifies or requires:
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(a)
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“Act” means the Canada Business Corporations Act and the regulations made thereunder, as from time to time amended, and in the case of such amendment any reference in the by-laws shall be read as referring to the amended provisions thereof;
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(b)
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“Applicable Securities Laws” means the applicable securities legislation of each relevant province and territory of Canada, as amended from time to time, the rules, regulations and forms made or promulgated under any such statute and the published national instruments, multilateral instruments, policies, bulletins and notices of the securities commission and similar regulatory authority of each relevant province and territory of Canada;
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(c)
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“board” means the board of directors of the Corporation;
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(d)
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“by-laws” means this by-law and all other by-laws of the Corporation from time to time in force and effect; and
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(e)
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“Chair” or “Chairperson” means chairperson of the board.
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(f)
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“close of business” means 5:00 p.m. (Toronto time) on a business day in Toronto, Ontario.
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(g)
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“public announcement” means disclosure in a press release reported by a national news service in Canada, or in a document publicly filed by the Corporation under its profile on the System for Electronic Document Analysis and Retrieval at www.sedar.com
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All terms used in the by-laws that are defined in the Act and are not otherwise defined in the by-laws shall have the meanings given to such terms in the Act. Words importing the singular number include the plural and vice versa and words importing the use of any gender include all genders, including the neutral gender “it”. The headings used in the by-laws are inserted for reference purposes only and are not to be considered or taken into account in construing the terms or provisions thereof or be deemed in any way to clarify, modify or explain the effect of any such terms or provisions.
REGISTERED OFFICE
The Corporation shall at all times have a registered office in the province in Canada specified in its articles. The board may, in its discretion, change the place and address of the registered office within the province specified in its articles.
SEAL
The directors may by resolution from time to time adopt and change a corporate seal of the Corporation.
DIRECTORS
The number of directors shall be the number fixed by the articles or, where the articles specify a variable number, the board shall be comprised of the number of directors elected by the shareholders at the annual meeting or, subject to subsection 106(8) of the Act, by resolution of the board between annual meetings. At least 25% of the directors of the Corporation, or such other number of directors (if any) as may be prescribed by the Act from time to time, shall be resident Canadians. If the Corporation has less than four directors, at least one director shall be a resident Canadian.
Subject to section 111 of the Act, a quorum of directors may fill a vacancy among the directors, except a vacancy resulting from an increase in the number, or minimum or maximum number, of directors, or from a failure to elect the number, or minimum number of directors, provided for in the articles. If there is not a quorum of directors, or if there has been a failure to elect the number or minimum number of directors provided for in the articles, the directors then in office shall call a special meeting of shareholders to fill the vacancy and, if they fail to call a meeting or if there are no directors then in office, the meeting may be called by any shareholder.
A director appointed or elected to fill a vacancy holds office for the unexpired term of his or her predecessor.
The directors shall manage, or supervise the management of, the business and affairs of the Corporation and may exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, and are not expressly directed or required to be done in some other manner by the Act, the articles, the by-laws, any special resolution of the shareholders of the Corporation or by statute.
Every director and officer of the Corporation, in exercising his or her powers and discharging his or her duties, shall:
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(a)
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act honestly and in good faith with a view to the best interests of the Corporation; and
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(b)
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exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.
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The following persons are disqualified from being a director of the Corporation:
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(a)
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anyone who is less than 18 years of age;
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(b)
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anyone who is incapable;
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(c)
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a person who is not an individual; and
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(d)
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a person who has the status of bankrupt.
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A director of the Corporation is not required to hold shares issued by the Corporation.
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9.
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Election/Term of Office
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Subject to sections 106 and 107 of the Act, the shareholders of the Corporation shall at the first meeting of shareholders and at each succeeding annual meeting at which an election of directors is required, elect directors to hold office for a term expiring not later than the close of the first annual meeting of shareholders following the election. A director not elected for an expressly stated term ceases to hold office at the close of the first annual meeting of shareholders following his or her election but, if qualified, is eligible for re-election. Notwithstanding the foregoing, if directors are not elected at a meeting of shareholders, the incumbent directors continue in office until their successors are elected.
If a meeting of shareholders fails to elect the number or the minimum number of directors required by the articles by reason of the lack of consent, disqualification, incapacity or death of any candidates, the directors elected at that meeting may exercise all the powers of the directors if the number of directors so elected constitutes a quorum.
A person who is elected or appointed as a director is not a director unless such person was present at the meeting when the person was elected or appointed and did not refuse to act as a director, or if the person was not present at the meeting when the person was elected or appointed, the person consented to act as a director in writing before the person’s election or appointment or within 10 days after it, or the person has acted as a director pursuant to the election or appointment.
Subject to subsection 107(g) of the Act, the shareholders of the Corporation may, by ordinary resolution at a special meeting, remove any director from office before the expiration of his or her term of office, and may elect any person in his or her stead for the remainder of the director’s term. Notwithstanding the foregoing sentence, where the holders of any class or series of shares of the Corporation have an exclusive right to elect one or more directors, a director so elected may only be removed by an ordinary resolution at a meeting of the shareholders of that class or series.
A director of the Corporation ceases to hold office when:
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(a)
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the director dies or resigns;
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(b)
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the director is removed from office; or
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(c)
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the director becomes disqualified under Section 105(1) of the Act.
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A resignation of a director becomes effective at the time a written resignation is sent to the Corporation or at the time specified in the resignation, whichever is later.
An act of a director or officer is valid notwithstanding an irregularity in the director’s or officer’s election or appointment or a defect in the director’s or officer’s qualification.
MEETINGS OF DIRECTORS
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14.
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Regular and Special Purpose Meetings
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Unless the articles otherwise provide, meetings of directors and of any committee of directors may be held at any place. A meeting of directors may be convened by the Chair (if any), the Chief Executive Officer (if any) or any director at any time. The Secretary (if any) or any other officer or any director shall, as soon as reasonably practicable following receipt of a direction from any of the foregoing, send a notice of the applicable meeting to the directors.
Notice of the time and place for the holding of any meeting of directors or of any committee of directors shall be sent to each director, or each director who is a member of such committee, as the case may be, not less than 48 hours before the time of the meeting; provided that a meeting of directors or of any committee of directors may be held at any time without notice if all of the directors or members of such committee are present (except where a director attends the meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called) or if all the absent directors waive notice of the meeting. The notice of a meeting of directors shall specify any of the following matters that are to be dealt with at the meeting, but need not otherwise specify the purpose or the business to be transacted at the meeting:
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(a)
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submitting to the shareholders any question or matter requiring the approval of the shareholders;
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(b)
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filling a vacancy among the directors or in the office of auditor, or appointing additional directors;
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(d)
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issuing shares of a series under section 27 of the Act;
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(f)
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purchasing, redeeming or otherwise acquiring shares issued by the Corporation;
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(g)
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paying a commission referred to in section 41 of the Act;
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(h)
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approving a management proxy circular;
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(i)
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approving a take-over bid circular or directors’ circular;
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(j)
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approving any financial statements referred to in section 155 of the Act; or
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(k)
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adopting, amending or repealing by-laws of the Corporation.
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Notice of any meeting of directors or of any committee of directors, or the time for the giving of any such notice or any irregularity in any meeting or in the notice thereof, may be waived by any director in writing or by email or other form of electronic transmission addressed to the Corporation, or in any other manner, and any such waiver may be validly given either before or after the meeting to which such waiver relates. Attendance of a director at any meeting of directors or of any committee of directors is a waiver of notice of such meeting, except when a director attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called.
The accidental omission to give notice of any meeting of directors or of any committee of directors to, or the non-receipt of any notice by, any person shall not invalidate any resolution passed, or any proceeding taken, at such meeting.
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18.
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Electronic, Telephone Participation, Etc.
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If all of the directors of the Corporation consent, a director may participate in a meeting of directors, or of any committee of directors, by means of telephonic, electronic or other communication facility that permits all persons participating in the meeting to communicate adequately with each other during the meeting. A director’s consent shall be effective whether given before or after the meeting to which it relates, and may be given with respect to all meetings of the board or a committee thereof held while the director holds office. A director participating in such a meeting by such means is deemed, for the purposes of the Act and the by-laws, to be present at that meeting.
Any meeting of directors or of any committee of directors may be adjourned from time to time by the chair of the meeting, with the consent of the meeting, to a fixed time and place. Notice of an adjourned meeting of directors, or committee of directors, is not required to be given if the time and place of the adjourned meeting is announced at the original meeting. Any adjourned meeting shall be duly constituted if held in accordance with the terms of the adjournment and a quorum is present thereat. The directors who formed a quorum at the original meeting are not required to form the quorum at the adjourned meeting. If there is no quorum present at the adjourned meeting, the original meeting shall be deemed to have terminated forthwith after its adjournment. Any business may be brought before or dealt with at the adjourned meeting that might have been brought before or dealt with at the original meeting in accordance with the notice calling the same.
A majority of the number of directors then in office constitutes a quorum at any meeting of directors. Notwithstanding any vacancy among the directors, a quorum of directors may exercise all of the powers of the directors. Subject to section 111 of the Act and subsections 114 (3) and (4) of the Act, directors shall not transact business at a meeting of directors unless a quorum is present and at least 25% of the directors present are resident Canadians. Questions arising at any meeting of directors shall be decided by a majority of votes. In the case of an equality of votes, the chair of the meeting in addition to his or her original vote shall not have a second or casting vote.
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21.
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Resolution in Lieu of Meeting
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A resolution in writing, signed by all of the directors entitled to vote on that resolution at a meeting of directors or committee of directors, is as valid as if it had been passed at a meeting of directors or committee of directors. A resolution in writing dealing with all matters required by the Act or the by-laws to be dealt with at a meeting of directors, and signed by all the directors entitled to vote at that meeting, satisfies all the requirements of the Act and the by-laws relating to meetings of directors.
COMMITTEES OF DIRECTORS
The directors may from time to time appoint from their numbers one or more committees of directors, and may delegate any such managing director or committee any of the powers of the directors, except that no committee shall have the authority to:
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(a)
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submit to the shareholders any question or matter requiring the approval of the shareholders;
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(b)
|
fill a vacancy among the directors or in the office of auditor, or appoint additional directors;
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(c)
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issue securities, except as authorized by the directors;
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(d)
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issue shares of a series under section 27 of the Act, except as authorized by the directors;
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(f)
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purchase, redeem or otherwise acquire shares issued by the Corporation;
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(g)
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pay a commission referred to in section 41 of the Act, except as authorized by the directors;
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(h)
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approve a management proxy circular;
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(i)
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approve a take-over bid circular or directors’ circular;
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(j)
|
approve any financial statements referred to in section 155 of the Act;
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(k)
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adopt, amend or repeal by-laws of the Corporation; or
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(l)
|
exercise any other power which, under the Act, a managing director or committee of directors has no authority to exercise.
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Notwithstanding the foregoing, the directors may, by resolution, delegate to a committee of directors, or an officer of the Corporation, the power to:
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(i)
|
borrow money on the credit of the Corporation;
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(ii)
|
issue, reissue, sell, pledge or hypothecate debt obligations of the Corporation;
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(iii)
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give a guarantee on behalf of the Corporation to secure performance of an obligation of any person; and
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(iv)
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mortgage, hypothecate, pledge, or otherwise create a security interest in, all or any property of the Corporation, owned or subsequently acquired, to secure any obligation of the Corporation.
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The directors shall appoint from among their number an audit committee to be composed of not fewer than three directors, a majority of whom are not officers or employees of the Corporation or any of its affiliates and a majority of whom must be independent and financially literate directors as defined in National Instrument 52-110 – Audit Committees (“NI 52-110”). At any time when the Corporation is not a “distributing corporation”, the directors may (but shall not be required to) appoint from among their number an audit committee to be composed of not fewer than three directors, a majority of whom are not officers or employees of the Corporation or any of its affiliates and a majority of whom must be independent and financially literate directors as defined in NI 52-110.
Each member of the audit committee shall be appointed by the board annually, and from time to time to fill vacancies, as required. A committee member may be removed or replaced at any time at the discretion of the board and will cease to be a member of the committee on ceasing to be an independent director.
The audit committee, if appointed, shall have the power to fix its quorum at not less than a majority of its members, and to determine its own rules of procedure, subject to any requirements imposed by the board from time to time and to the following paragraph.
The auditor of the Corporation is entitled to receive notice of every meeting of the audit committee and, at the expense of the Corporation, to attend and be heard thereat, and, if so requested by a member of the audit committee, attend every meeting of the committee held during the term of office of the auditor. The auditor of the Corporation or any member of the audit committee may call a meeting of the audit committee.
The audit committee, if appointed, shall review the financial statements of the Corporation referred to in section 155 of the Act prior to approval thereof by the board, and shall have such other powers and duties as may from time to time by resolution be assigned to it by the board.
REMUNERATION OF DIRECTORS, OFFICERS AND EMPLOYEES
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24.
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Remuneration of Directors, Officers and Employees
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The directors of the Corporation may fix the remuneration of the directors, officers and employees of the Corporation. Any remuneration paid to a director of the Corporation shall be in addition to the salary paid to such director in his or her capacity as an officer or employee of the Corporation. Subject to section 120 of the Act, the directors may also, by resolution, award special remuneration to any director in undertaking any special services on the Corporation’s behalf, other than the routine work ordinarily required of a director of the Corporation. The confirmation of any such resolution by the shareholders shall not be required. The directors, officers and employees of the Corporation shall also be entitled to be paid their travelling and other expenses properly incurred by them in connection with the affairs of the Corporation.
SUBMISSION OF CONTRACTS OR
TRANSACTIONS TO SHAREHOLDERS FOR APPROVAL
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25.
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Submission of Contracts or Transactions to Shareholders for Approval
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The directors, in their discretion, may submit any contract, act or transaction for approval, ratification or confirmation at any annual meeting of the shareholders or at any special meeting of the shareholders called for the purpose of considering the same, and any contract, act or transaction that shall be approved, ratified or confirmed by resolution passed by a majority of the votes cast at any such meeting (unless any different or additional requirement is imposed by the Act or other applicable law or by the Corporation’s articles or any other by-law), shall be as valid and as binding upon the Corporation, and upon all the shareholders, as though it had been approved, ratified and/or confirmed by every shareholder of the Corporation.
CONFLICT OF INTEREST
A director or an officer of the Corporation shall disclose to the Corporation, in writing or by requesting to have it entered in the minutes of meetings of directors or of meetings of committees of directors at the time and in the manner provided in the Act, the nature and extent of any interest that he or she has in any material contract or material transaction, whether made or proposed, with the Corporation, if the director or officer:
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(a)
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is a party to the contract or transaction;
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(b)
|
is a director or an officer, or an individual acting in a similar capacity, of a party to the contract or transaction; or
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(c)
|
has a material interest in a party to the contract or transaction.
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Except as provided in the Act, no such director of the Corporation shall vote on any resolution to approve such contract or transaction. A contract or transaction for which disclosure is required is not invalid, and the director or officer is not accountable to the Corporation or its shareholders for any profit realized from the contract or transaction, because of the director’s or officer’s interest in the contract or transaction, or because the director was present or was counted to determine whether a quorum existed at the meeting of directors or committee of directors that considered the contract or transaction, if:
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(a)
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the director or officer disclosed his or her interest in accordance with the provisions of the Act;
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(b)
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the contract or transaction was approved by the directors; and
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(c)
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it was reasonable and fair to the Corporation when it was approved.
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Even if the foregoing conditions are not met, a director or officer, acting honestly and in good faith, is not accountable to the Corporation or to its shareholders for any profit realized from a contract or transaction for which disclosure is required, and the contract or transaction is not invalid by reason only of the interest of the director or officer in the contract or transaction, if:
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(a)
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the contract or transaction is approved or confirmed by special resolution at a meeting of the shareholders;
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(b)
|
disclosure of the interest was made to the shareholders in a manner sufficient to indicate its nature before the contract or transaction was approved or confirmed; and
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(c)
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the contract or transaction was reasonable and fair to the Corporation when it was approved or confirmed.
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FOR THE PROTECTION OF DIRECTORS AND OFFICERS
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27.
|
For the Protection of Directors and Officers
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No director or officer of the Corporation shall be liable to the Corporation for the acts, receipts, neglects or defaults of any other director, officer or employee of the Corporation, or for joining in any receipt or act for conformity, or for any loss, damage or expense happening to the Corporation through the insufficiency or deficiency of title to any property acquired by the Corporation, or for or on behalf of the Corporation, or for the insufficiency or deficiency of any security in or upon which any of the monies of, or belonging to, the Corporation shall be placed out or invested, or for any loss or damage arising from the bankruptcy, insolvency or tortious act of any person, including any person with whom or which any monies, securities or effects shall be lodged or deposited, or for any loss, conversion, misapplication or misappropriation of or any damage resulting from any dealings with any monies, securities or other assets belonging to the Corporation, or for any other loss, damage or misfortune, whatever that may happen in the execution of the duties of such director’s or officer’s respective office of trust or in relation thereto, unless the same shall happen by or through the director’s or officer’s failure to exercise the powers, and to discharge the duties, of office honestly and in good faith, with a view to the best interests of the Corporation, and in connection therewith to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances, provided that nothing herein contained shall relieve a director or officer from the duty to act in accordance with the Act or relieve such director or officer from liability under the Act. If any director or officer of the Corporation shall be employed by, or shall perform services for, the Corporation, otherwise than as a director or officer, or shall be a member of a firm, or a shareholder, director or officer of a body corporate, which is employed by or performs services for the Corporation, the fact that the director or officer is a shareholder, director or officer of the Corporation, or body corporate or member of the firm, shall not disentitle such director or officer, or such firm or body corporate, as the case may be, from receiving proper remuneration for such services.
INDEMNITIES TO DIRECTORS AND OTHERS
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28.
|
Indemnities to Directors and Others
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|
(a)
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The Corporation shall indemnify a director or officer of the Corporation, a former director or officer of the Corporation, any other individual who acts or acted at the Corporation’s request as a director or officer, any individual acting in a similar capacity of another entity, or any other individual permitted by the Act to be so indemnified, in the manner and to the fullest extent permitted by the Act. Without limiting the generality of the foregoing, the Corporation shall indemnify a director or officer of the Corporation, a former director or officer of the Corporation, any other individual who acts or acted at the Corporation’s request as a director or officer, or any individual acting in a similar capacity of another entity, against all costs, charges and expenses, including costs reasonably incurred in the defence of an action or proceeding and an amount paid to settle an action or satisfy a judgment, reasonably incurred by the individual in respect of any civil, criminal, administrative, investigative or other proceeding in which the individual is involved because of that association with the Corporation or other entity.
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(b)
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The Corporation shall advance moneys to a director, officer or other individual for the costs, charges and expenses of a proceeding referred to in Section 28(a). The individual shall repay the moneys if the individual does not fulfill the conditions of Section 28(c).
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(c)
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The Corporation shall not indemnify an individual under Section 28(a) unless the individual:
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|
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(i)
|
acted honestly and in good faith, with a view to the best interests of the Corporation, or, as the case may be, to the best interests of the other entity for which the individual acted as director or officer or in a similar capacity at the Corporation’s request; and
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(ii)
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in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, had reasonable grounds for believing that the individual’s conduct was lawful.
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(d)
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The Corporation shall, with the approval of a court, indemnify an individual referred to in Section 28(a), or advance moneys under Section 28(b), in respect of an action by or on behalf of the Corporation or other entity to procure a judgment in its favour, to which the individual is made a party because of the individual’s association with the Corporation or other entity as described in Section 28(a), against all costs, charges and expenses reasonably incurred by the individual in connection with such action, if the individual fulfills the conditions set out in Section 28(c).
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(e)
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The Corporation may purchase and maintain insurance for the benefit of any individual referred to in Section 28(a) to the extent permitted by the Act.
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OFFICERS
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29.
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Appointment of Officers
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The directors, annually, or as often as may be required, may appoint from among themselves a Chair (either on a full-time or part-time basis), and may appoint a Chief Executive Officer, a President, one or more Vice-Presidents (to which title may be added words indicating seniority or function), a Secretary, a Treasurer and one or more assistants to any of the officers so appointed. None of such officers except the Chair needs to be a director of the Corporation, although a director may be appointed to any office of the Corporation. Two or more offices of the Corporation may be held by the same person. The directors may, from time to time, appoint such other officers, employees and agents as they shall deem necessary, who shall have such authority and shall perform such functions and duties as may from time to time be prescribed by resolution of the directors. The directors may, from time to time, and subject to the provisions of the Act, vary, add to or limit the duties and powers of any officer, employee or agent of the Corporation.
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30.
|
Removal of Officers and Vacancy of Office
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All officers, employees and agents shall be subject to removal by resolution of the directors at any time, with or without cause.
An officer of the Corporation ceases to hold office when such officer dies, resigns or is removed from office. A resignation of an officer becomes effective at the time a written resignation is sent to the Corporation, or at the time specified in the resignation, whichever is later.
The Chair of the board, if any, shall, if present, preside as chair at all meetings of the board and at all meetings of the shareholders of the Corporation. The Chair shall have such powers and shall perform such duties as may from time to time be assigned to him or her by resolution of the directors, or as are incidental to his or her office.
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32.
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Chief Executive Officer
|
The Chief Executive Officer of the Corporation, if any, shall, unless otherwise determined by resolution of the board, and subject to the direction of the board, exercise general supervision and control over the business and affairs of the Corporation. In the absence of the Chair, if any, and if the Chief Executive Officer is also a director of the Corporation, the Chief Executive Officer shall, when present, preside as chair at all meetings of directors and the shareholders of the Corporation. The Chief Executive Officer shall have such powers and shall perform such duties as may from time to time be assigned to him or her by resolution of the directors or as are incidental to his or her office.
The President of the Corporation, if any, shall be vested with all the powers and shall perform all the duties of the Chief Executive Officer in the absence, or inability or refusal to act, of the Chief Executive Officer, provided, however, that a President who is not a director shall not preside as chair at any meeting of directors or shareholders. The President shall have such powers and shall perform such duties as may from time to time assigned to him or her by resolution of the directors or as are incidental to his or her office.
The Vice-President of the Corporation, if any, or, if more than one, the Vice-Presidents, in order of seniority, shall be vested with all the powers and shall perform all the duties of the President in the absence, or inability or refusal to act, of the President, provided, however, that a Vice-President who is not a director shall not preside as chair at any meeting of directors or shareholders. The Vice-President or, if more than one, the Vice-Presidents shall have such powers and shall perform such duties as may from time to time be assigned to him, her or them by resolution of the directors, or as are incidental to the office of the applicable Vice-President.
Unless another officer has been appointed for that purpose, the Secretary of the Corporation, if any, shall give, or cause to be given, notices for all meetings of directors, any committee of directors and shareholders when directed to do so, and shall maintain the records referred to in subsections 20(1) and (2) of the Act. The Secretary shall have such powers, and shall perform such duties, as may from time to time be assigned to the Secretary by resolution of the directors or as are incidental to the office of the Secretary.
Subject to the provisions of any resolution of the directors, the Treasurer of the Corporation, if any, or such other officer who has been appointed for that purpose shall have the care and custody of all the funds and securities of the Corporation and shall deposit the same in the name of the Corporation in such bank or banks, or with such other depositary or depositaries, as the directors may by resolution direct; provided that the Treasurer may, from time to time, arrange for the temporary deposit of moneys of the Corporation in banks, trust companies or other financial institutions within or outside Canada not so directed by the board for the purpose of facilitating transfer thereof to the credit of the Corporation in a bank, trust company or other financial institution so directed. Unless another officer has been appointed for that purpose, the Treasurer shall prepare and maintain adequate accounting records. The Treasurer shall have such powers and shall perform such duties as may from time to time be assigned to such person by resolution of the directors or as are incident to the office of the Treasurer. The Treasurer may be required to give such bond for the faithful performance of his or her duties as the directors in their sole discretion may require and no director shall be liable for failure to require any such bond or for the insufficiency of any such bond or for any loss by reason of the failure of the Corporation to receive any indemnity thereby provided.
The Managing Director of the Corporation, if any, shall conform to all lawful orders given to him or her by the directors, and shall at all reasonable times give to the directors, or any of them, all information they may require regarding the affairs of the Corporation.
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38.
|
Duties of Officers may be Delegated
|
In case of the absence or inability, or refusal to act, of any officer of the Corporation, or for any other reason that the directors may deem sufficient, the directors may delegate all or any of the powers of such officer to any other officer or to any director for the time being.
The Corporation shall have power, from time to time, to appoint agents or attorneys for the Corporation in or outside Canada with such powers (including the power to sub-delegate) of management, administration or otherwise as may be thought fit.
SHAREHOLDERS’ MEETINGS
Subject to sections 132 and 133 of the Act, the annual meeting of shareholders shall be held at a place within Canada (or outside Canada if the place is specified in the articles or all the shareholders entitled to vote at the meeting agree that the meeting is to be held at that place) determined by the directors on such day in each year and at such time as the directors may determine.
The directors of the Corporation may at any time call a special meeting of shareholders to be held on such day and at such time and, subject to section 132 of the Act, at such place within Canada (or outside Canada if the place is specified in the articles or all the shareholders entitled to vote at the meeting agree that the meeting is to be held at that place) as the directors may determine.
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42.
|
Meeting on Requisition of Shareholders
|
The holders of not less than 5% of the issued shares of the Corporation that carry the right to vote at a meeting sought to be held may requisition the directors to call a meeting of shareholders for the purposes stated in the requisition. The requisition shall state the business to be transacted at the meeting and shall be sent to each director and to the registered office of the Corporation. Subject to subsection 143(3) of the Act, upon receipt of the requisition, the directors shall call a meeting of shareholders to transact the business stated in the requisition (but if the directors are obligated to call a meeting and do not do so within 21 days after receiving the requisition, any shareholder who signed the requisition may call the meeting).
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43.
|
Participation in Meetings by Electronic Means
|
Any person entitled to attend a meeting of shareholders may participate in the meeting, in accordance with the Act, by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting, if the Corporation makes available such a communication facility, and a person participating in a meeting by those means is deemed for the purposes of the Act and the by-laws to be present at the meeting.
|
44.
|
Meetings held by Electronic Means
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If the directors or the shareholders of the Corporation call a meeting of shareholders pursuant to the Act, those directors or shareholders, as the case may be, may determine that the meeting shall be held, in accordance with the Act, entirely by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting.
A notice in writing of a meeting of shareholders stating the day, hour and place of meeting, and, if special business is to be transacted thereat, stating: (a) the nature of that business in sufficient detail to permit the shareholder to form a reasoned judgment on that business and (b) the text of any special resolution to be submitted to the meeting, shall be sent to each shareholder entitled to vote at the meeting, who on the record date for notice is registered on the records of the Corporation or its transfer agent as a shareholder, to each director of the Corporation, and to the auditor of the Corporation, in each case not less than 21 days and not more than 60 days before the date of the meeting.
Notice of any meeting of shareholders or the time for the giving of any such notice, or any irregularity in any meeting or in the notice thereof, may be waived by any shareholder, the duly appointed proxy of any shareholder, any director or the auditor of the Corporation, in writing or by email or other form of electronic transmission addressed to the Corporation, or in any other manner, and the attendance of any such person at a meeting of shareholders is a waiver of notice of the meeting, except where he or she attends the meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called. Any such waiver may be validly given either before or after the meeting to which such waiver relates.
The accidental omission to give notice of any meeting of shareholders to, or the non-receipt of any notice by, any person shall not invalidate any resolution passed or any proceeding taken at any such meeting.
Subject to subsection 134(3) of the Act, the directors may, within the period prescribed by the Act, fix in advance a date as the record date for the determination of shareholders: (a) entitled to receive payment of a dividend, (b) entitled to participate in a liquidation distribution, (c) entitled to receive notice of a meeting of shareholders, (d) entitled to vote at a meeting of shareholders, or (e) for any other purpose.
If no record date is fixed,
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(a)
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the record date for the determination of shareholders entitled to receive notice of a meeting of shareholders shall be:
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(i)
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at the close of business on the business day immediately preceding the day on which the notice is given, or
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(ii)
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if no notice is given, the day on which the meeting is held; and
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(b)
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the record date for the determination of shareholders for any purpose other than to establish a shareholder’s right to receive notice of a meeting or to vote shall be at the close of business on the day on which the directors pass the resolution relating to that purpose.
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The Chair, if any, or, in his or her absence, or in case of his or her inability or refusal or failure to act, such other person as may have been designated by the Chair to exercise such function, shall preside at meetings of shareholders. In the absence of all such persons or, in case of their inability or refusal or failure to act, the persons present entitled to vote shall choose another director as chair, and if no director is present, or if all the directors present refuse to act, then the persons entitled to vote shall choose one of their number to be chair of the meeting.
Votes at meetings of shareholders may be cast either personally or by proxy. Subject to the Act and Section 52, every question submitted to any meeting of shareholders shall be decided on a show of hands, except when a ballot is required by the chair of the meeting or is demanded by a shareholder or proxyholder entitled to vote at the meeting, or is otherwise required by the Act. A shareholder or proxyholder may demand a ballot either before or after any vote by a show of hands. At every meeting at which shareholders are entitled to vote, each shareholder present on his or her own behalf, and every proxyholder present, shall have one vote. Upon any ballot at which shareholders are entitled to vote, each shareholder present on his or her own behalf, or by proxy, shall (subject to the provisions, if any, of the articles) have one vote for every share registered in the name of such shareholder. In the case of an equality of votes under this paragraph, the chair of the meeting shall not have a second or casting vote in addition to the vote or votes to which he or she may be entitled as a shareholder or proxyholder.
At any meeting of shareholders, unless a ballot is demanded, an entry in the minutes for the applicable meeting of shareholders, following a vote on the applicable resolution by a show of hands, to the effect that the chair of the meeting declared a resolution to be carried or defeated is, in the absence of evidence to the contrary, proof of the fact, without proof of the number or proportion of the votes recorded in favour of or against the resolution, although the chair may direct that a record be kept of the number or proportion of votes in favour of or against the resolution for any purpose the chair of the meeting considers appropriate.
If, at any meeting, a ballot is demanded on the election of a chair for the meeting, or on the question of adjournment or termination, the ballot shall be taken forthwith without adjournment. If a ballot is demanded on any other question or as to the election of directors, the ballot shall be taken in such manner and either at once or later at the meeting or after adjournment as the chair of the meeting directs. The result of a ballot shall be deemed to be the resolution of the meeting at which the ballot was demanded. A demand for a ballot may be withdrawn.
Any person participating in a meeting of shareholders by telephonic, electronic or other communication facility under Section 43 or Section 44 and entitled to vote at that meeting may vote, in accordance with the Act, by means of the telephonic, electronic or other communication facility that the Corporation has made available for that purpose. Despite Section 50, any vote referred to in Section 50 may be held, in accordance with the Act, entirely by means of a telephonic, electronic or other communication facility, if the Corporation makes such a communication facility available
Unless the articles otherwise provide, each share of the Corporation entitles the holder of such share to one vote at a meeting of shareholders.
Where a body corporate, or a trust, association or other unincorporated organization, is a shareholder of the Corporation, any individual authorized by a resolution of the directors of the body corporate, or the directors, trustees or other governing body of the association, trust or unincorporated organization, to represent it at meetings of shareholders of the Corporation, shall be recognized as the person entitled to vote at all such meetings of shareholders in respect of the shares held by such body corporate, or by such trust, association or other unincorporated organization, and the chair of the meeting may establish or adopt rules or procedures in relation to the recognition of a person to vote shares held by such body corporate, or by such trust, association or other unincorporated organization.
Where a person holds shares as a personal representative, such person, or his or her proxy, is the person entitled to vote at all meetings of shareholders in respect of the shares so held by him or her, and the chair of the meeting may establish or adopt rules or procedures in relation to the recognition of such person to vote the shares in respect of which such person has been appointed as a personal representative.
Where a person mortgages, pledges or hypothecates his or her shares, such person, or such person’s proxy, is the person entitled to vote at all meetings of shareholders in respect of such shares, so long as such person remains the registered owner of such shares, unless, in the instrument creating the mortgage, pledge or hypothec, the person has expressly empowered the person holding the mortgage, pledge or hypothec to vote in respect of such shares, in which case, subject to the articles, such holder, or such holder’s proxy, is the person entitled to vote in respect of the shares, and the chair of the meeting may establish or adopt rules or procedures in relation to the recognition of the person holding the mortgage, pledge or hypothec as the person entitled to vote in respect of the applicable shares.
Where two or more persons hold shares jointly, one of those holders present at a meeting of shareholders may, in the absence of the others, vote the shares, but if two or more of those persons are present on their own behalf or by proxy, they shall vote as one on the shares jointly held by them, and the chair of the meeting may establish or adopt rules or procedures in that regard.
Every shareholder, including a shareholder that is a body corporate, or a trust, association or other unincorporated organization, entitled to vote at a meeting of shareholders may, by means of a proxy, appoint a proxyholder or one or more alternate proxyholders, who are not required to be shareholders, to attend and act at the meeting in the manner, and to the extent, authorized by the proxy, and with the authority conferred by the proxy.
An instrument appointing a proxyholder shall be in written form executed by the shareholder or by such shareholder’s duly authorized attorney, or be in the form of an electronic document executed as contemplated by the Act by the shareholder or by his, her or its duly authorized attorney, and shall conform with the requirements of the Act, and is valid only at the meeting in respect of which it is given or any adjournment of that meeting. An instrument appointing a proxyholder may be in any form which complies with the requirements of the Act.
The directors may specify in a notice calling a meeting of shareholders a time not exceeding 48 hours, excluding Saturdays and holidays, preceding the meeting or an adjournment of the meeting before which time proxies to be used at the meeting must be deposited with the Corporation or its agent.
The chair of the meeting shall conduct the proceedings at the meeting, and his or her decision in any matter or thing, including, without limitation, any question regarding the validity or invalidity of any instruments of proxy and any question as to the admission or rejection of a vote, shall be conclusive and binding upon the shareholders.
The chair of the meeting may, with the consent of the meeting, adjourn any meeting of shareholders from time to time and place to place to a fixed time and place and, if the meeting is adjourned by one or more adjournments for an aggregate of less than 30 days, it is not necessary to give notice of the adjourned meeting, other than by announcement at the time of an adjournment. If a meeting of shareholders is adjourned by one or more adjournments for an aggregate of 30 days or more, notice of the adjourned meeting shall be given as for an original meeting but, unless the meeting is adjourned by one or more adjournments for an aggregate of more than 90 days, subsection (1) of section 149 of the Act does not apply.
Any adjourned meeting shall be duly constituted if held in accordance with the terms of the adjournment and a quorum is present thereat. The persons who formed a quorum at the original meeting are not required to form the quorum at the adjourned meeting. If there is no quorum present at the adjourned meeting, the original meeting shall be deemed to have terminated forthwith after its adjournment. Any business may be brought before or dealt with at any adjourned meeting that might have been brought before or dealt with at the original meeting in accordance with the notice calling the same.
At all meetings of shareholders, it shall be necessary in order to constitute a quorum for two persons entitled to vote at the meeting to be present, and for not less than 5% of the outstanding shares of the Corporation which may be voted at the meeting to be represented in person or by proxy or by a duly authorized representative of a shareholder. If a quorum is present at the opening of a meeting of shareholders, the shareholders present may proceed with the business of the meeting, notwithstanding that a quorum is not present throughout the meeting. If a quorum is not present at the opening of any meeting of shareholders, the shareholders present may adjourn the meeting to a fixed time and place but may not transact any other business.
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57.
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Persons Entitled to be Present
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The only persons entitled to be present at a meeting of shareholders shall be those entitled to vote thereat, the directors and auditor of the Corporation, and others who, although not entitled to vote, are entitled or required under any provision of the Act or the articles or by-laws to be present at the meeting. Any other person may be admitted only on the invitation of the chair of the meeting or with the consent of the meeting.
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58.
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Resolution in Lieu of Meeting
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A resolution in writing signed by all the shareholders entitled to vote on that resolution is as valid as if it had been passed at a meeting of the shareholders except where a written statement is submitted by a director under subsection (2) of section 110 of the Act or by an auditor under subsection (5) of section 168 of the Act.
SHARES AND TRANSFERS
Subject to the articles and to section 28 of the Act, shares in the Corporation may be issued at the times and to the persons and for the consideration that the directors determine; provided that a share shall not be issued until the consideration for the share is fully paid in money or in property or past service that is not less in value than the fair equivalent of the money that the Corporation would have received if the share had been issued for money.
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60.
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Security Certificates
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Security certificates (if any) shall (subject to compliance with section 49 of the Act) be in such form as the directors may from time to time by resolution approve, and such certificates shall be signed manually, or the signature shall be printed or otherwise mechanically reproduced on the certificate, by at least one director or officer of the Corporation, or by a registrar, transfer agent or branch transfer agent of the Corporation or an individual on their behalf, or by a trustee who certifies it in accordance with a trust indenture, and any additional signatures required on a security certificate may be printed or otherwise mechanically reproduced thereon. If a security certificate contains a printed or mechanically reproduced signature of a person, the Corporation may issue the security certificate, notwithstanding that the person has ceased to be a director or an officer of the Corporation, and the security certificate is as valid as if he or she were a director or an officer at the date of its issue.
The directors may from time to time by resolution appoint or remove an agent to maintain a central securities register and one or more branch securities registers for the Corporation.
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62.
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Dealings with Registered Holder
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Subject to the Act, the Corporation may treat the registered owner of a security as the person exclusively entitled to vote, to receive notices, to receive any interest, dividends or other payments in respect of the security, and otherwise to exercise all the rights and powers of an owner of the security.
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63.
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Surrender of Security Certificates
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Subject to the Act, no transfer of a security issued by the Corporation shall be registered unless or until the security certificate representing the security to be transferred has been presented for registration or, if no security certificate has been issued by the Corporation in respect of such security, unless or until a duly executed transfer in respect thereof has been presented for registration.
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64.
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Defaced, Destroyed, Stolen or Lost Security Certificates
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In case of the defacement, destruction, theft or loss of a security certificate, the fact of such defacement, destruction, theft or loss shall be reported by the owner to the Corporation or to an agent of the Corporation (if any) with a statement verified by oath or statutory declaration as to the defacement, destruction, theft or loss and the circumstances concerning the same, and with a request for the issuance of a new security certificate to replace the one so defaced (together with the surrender of the defaced security certificate), destroyed, stolen or lost. Upon the giving to the Corporation (or if there be an agent, hereinafter in this paragraph referred to as the “Corporation’s agent”, then to the Corporation and the Corporation’s agent) of a bond of a surety company (or other security approved by the directors) in such form as is approved by the directors or by any officer of the Corporation, indemnifying the Corporation (and the Corporation’s agent, if any) against all loss, damage or expense, which the Corporation and/or the Corporation’s agent may suffer or be liable for by reason of the issuance of a new security certificate to such shareholder, and provided the Corporation or the Corporation’s agent does not have notice that the security has been acquired by a bona fide purchaser, a new security certificate may be issued in replacement of the one defaced, destroyed, stolen or lost, if such issuance is ordered and authorized by any officer of the Corporation or by the directors.
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65.
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Enforcement of Lien for Indebtedness
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Subject to subsection 49(8) of the Act, if the articles of the Corporation provide that the Corporation may have a lien on the shares registered in the name of a shareholder or the shareholder’s legal representative for a debt of that shareholder to the Corporation, such lien may be enforced by the sale of the shares thereby affected, or by any other action, suit, remedy or proceeding authorized or permitted by law or by equity, and, pending such enforcement, the Corporation may refuse to register a transfer of the whole or any part of such shares. No sale shall be made until such time as the debt ought to be paid and until a demand and notice in writing stating the amount due and demanding payment and giving notice of intention to sell on default shall have been served on the holder, or such shareholder’s legal representative, of the shares subject to the lien and default shall have been made in payment of such debt for seven days after service of such notice. Upon any such sale, the proceeds shall be applied, firstly, in payment of all costs of such sale, and, secondly, in satisfaction of such debt and the residue (if any) shall be paid to the shareholder or as such shareholder shall direct. Upon any such sale, the directors may enter or cause to be entered the purchaser’s name in the securities register of the Corporation as holder of the shares, and the purchaser shall not be bound to see to the regularity or validity of, or be affected by, any irregularity or invalidity in the proceedings, or be bound to see to the application of the purchase money, and after the purchaser’s name or the name of the purchaser’s legal representative has been entered in the securities register, the validity of the sale shall not be impeached by any person.
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66.
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Electronic, Book-Based or Other Non-Certificated Registered Positions
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Subject to subsection 49(1) of the Act, a registered security holder may have his, her or its holdings of securities of the Corporation evidenced by an electronic, book-based, direct registration service or other non-certificated entry or position on the register of securityholders to be kept by the Corporation or its agent in place of a physical security certificate pursuant to a registration system that may be adopted by the Corporation. The by-laws shall be read such that a registered holder of securities of the Corporation pursuant to any such electronic, book-based, direct registration service or other non-certificated entry or position shall be entitled to all of the same benefits, rights, entitlements and shall incur the same duties and obligations as a registered holder of securities evidenced by a physical security certificate. The Corporation and its transfer agent (if any) may adopt such policies and procedures and require such documents and evidence as they may determine necessary or desirable in order to facilitate the adoption and maintenance of a security registration system by electronic, book-based, direct registration system or other non-certificated means.
DIVIDENDS
The directors may from time to time by resolution declare, and the Corporation may pay, dividends on its issued shares, subject to the provisions (if any) of the Corporation’s articles.
The directors shall not declare, and the Corporation shall not pay, a dividend if there are reasonable grounds for believing that:
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(a)
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the Corporation is, or would after the payment be, unable to pay its liabilities as they become due; or
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(b)
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the realizable value of the Corporation’s assets would thereby be less than the aggregate of its liabilities and stated capital of all classes.
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The Corporation may pay a dividend consisting of fully paid shares of the Corporation and, subject to Section 42 of the Act, the Corporation may pay a dividend in money or other property.
In case several persons are registered as the joint holders of any securities of the Corporation, any one of such persons may give effectual receipts for all dividends and payments on account of dividends, principal, interest and/or redemption payments in respect of such securities.
A dividend payable in money shall be paid by cheque to the order of each registered holder of shares of the class or series in respect of which it has been declared and mailed by prepaid ordinary mail to such registered holder at the recorded address of such registered holder, or paid by electronic funds transfer to the bank account designated by the registered holder, unless such holder otherwise directs. In the case of joint holders, the cheque or payment shall, unless such joint holders otherwise direct, be made payable to the order of all of such joint holders and, if more than one address is recorded in the Corporation’s security register in respect of such joint holding, the cheque shall be mailed to the first address so appearing. The mailing of such cheque as aforesaid, unless the same is not paid on due presentation, or the electronic funds transfer as aforesaid, shall satisfy and discharge the liability for the dividend to the extent of the sum represented thereby plus the amount of any tax which the Corporation is required to and does withhold. In the event of non-receipt of any dividend cheque or payment by the person to whom it is sent as aforesaid, the Corporation shall issue to such person a replacement cheque or payment for a like amount on such terms as to indemnity, reimbursement of expenses and evidence of non-receipt and of title as any officer or the directors may from time to time prescribe, whether generally or in any particular case.
VOTING SECURITIES IN OTHER BODIES CORPORATE
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70.
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Voting Securities in Other Bodies Corporate
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All securities of or other interests held from time to time by the Corporation in a body corporate or a trust, association or other unincorporated organization carrying voting rights that may be exercised by or on behalf of the Corporation, whether as a holder, trustee or otherwise, may be voted at all meetings of shareholders, unitholders, bondholders, debenture holders or holders of such securities or other interests, as the case may be, of such other body corporate or a trust, association or other unincorporated organization, and in such manner and by such person or persons as the directors of the Corporation shall from time to time determine and authorize by resolution. Any officer of the Corporation may also, from time to time, execute and deliver, for and on behalf of the Corporation, proxies and arrange for the issuance of voting certificates or other evidence of the right to vote in such names as such officer may determine, without the necessity of a resolution or other action by the directors.
NOTICES, ETC.
Any notice or document required by the Act, the articles or the by-laws to be sent to any shareholder or director of the Corporation may be delivered personally to or sent by pre-paid mail addressed to:
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(a)
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the shareholder at the shareholder’s latest address as shown in the records of the Corporation or its transfer agent; and
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(b)
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the director at the director’s latest address as shown in the records of the Corporation or in the last notice filed under section 106 or 113 of the Act.
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A notice or document sent by mail as contemplated by this Section 71 to a shareholder or director of the Corporation shall be deemed to have been received by the shareholder or director (as the case may be) at the time it would be delivered in the ordinary course of mail, unless there are reasonable grounds for believing that the shareholder or director (as the case may be) did not receive the notice or document at that time or at all.
Notwithstanding the foregoing, provided that the addressee has consented in writing and has designated an information system for the receipt of electronic documents as contemplated by the Act, the Corporation may satisfy the requirements to send any notice or document referred to above, subject to the Act, by creating an electronic document and providing such electronic document to the applicable specified information system or otherwise posting or making such document available on a generally accessible electronic source, such as a website, and providing written notice of the availability and location of that electronic document, unless otherwise prescribed by the Act. Any such electronic document shall be deemed to have been sent to and received by the addressee when it enters the information system of the addressee or, if posted or otherwise made available through a generally accessible electronic source, when the addressee receives written notice of the availability and location of that electronic document.
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72.
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Failure to Locate Shareholder
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If the Corporation sends a notice or document to a shareholder and the notice or document is returned on two consecutive occasions because the shareholder cannot be found, the Corporation is not required to send any further notices or documents to the shareholder until the shareholder informs the Corporation in writing of the shareholder’s new address.
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73.
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Notice to Joint Shareholders
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All notices or documents shall, with respect to any shares in the capital of the Corporation registered in more than one name, be sent to whichever of such persons is named first in the records of the Corporation and any notice or document so sent shall be sufficient notice of delivery of such document to all the holders of such shares.
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74.
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Persons Becoming Entitled by Operation of Law
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Every person who, by operation of law, transfer or by any other means whatsoever, shall become entitled to any shares in the capital of the Corporation, shall be bound by every notice or document in respect of such shares which, prior to his or her name and address being entered on the records of the Corporation in respect of such shares, shall have been duly sent to the person or persons from whom such person derives his or her title to such shares.
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75.
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Signatures upon Notices
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The signature of any director or officer of the Corporation upon any notice need not be a manual signature.
Where a given number of days’ notice or notice extending over any period is required to be given under any provisions of the articles or the by-laws of the Corporation, the day the notice is sent shall, unless it is otherwise provided by applicable law, be counted in such number of days or other period.
A certificate of any officer of the Corporation in office at the time of the making of the certificate, or of an agent of the Corporation, as to facts in relation to the mailing or delivery or sending of any notice or document to any shareholder, director, officer or auditor of the Corporation or any other person, or publication of any notice or document, shall be conclusive evidence thereof and shall be binding on every shareholder, director, officer or auditor of the Corporation or other person, as the case may be.
CUSTODY OF SECURITIES
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78.
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Custody of Securities
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All securities (including warrants) owned by the Corporation may be lodged (in the name of the Corporation) with a chartered bank, brokerage, or a trust company or in a safety deposit box or with such other depositaries or in such other manner as may be determined from time to time by any officer or director.
All securities (including warrants) belonging to the Corporation may be issued and held in the name of a nominee or nominees of the Corporation (and if issued or held in the names of more than one nominee shall be held in the names of the nominees jointly with right of survivorship), and shall be endorsed in blank with endorsement guaranteed in order to enable transfer thereof to be completed and registration thereof to be effected.
EXECUTION OF CONTRACTS, ETC.
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79.
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Execution of Contracts, etc.
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Contracts, documents or instruments requiring the signature of the Corporation may be signed by any director or officer alone or any person or persons authorized by resolution of the directors, and all contracts, documents or instruments so signed shall be binding upon the Corporation without any further authorization or formality. The directors are authorized from time to time by resolution to appoint any officer or officers or any other person or persons on behalf of the Corporation to sign contracts, documents or instruments generally or to sign specific contracts, documents or instruments.
The corporate seal (if any) of the Corporation may be affixed by any director or officer to contracts, documents or instruments signed by such director or officer as aforesaid, or by an officer or officers, person or persons appointed as aforesaid by resolution of the directors.
The term “contracts, documents or instruments” as used in this by-law shall include notices, deeds, mortgages, hypothecs, charges, cheques, drafts, orders for the payment of money, notes, acceptances, bills of exchange, conveyances, transfers and assignments of property, real or personal, immovable or movable, agreements, releases, receipts and discharges for the payment of money or other obligations, conveyances, transfers and assignments of securities and all paper writings.
The signature or signatures of any director or officer or any other person or persons appointed as aforesaid by resolution of the directors may be printed, engraved, lithographed or otherwise mechanically or electronically reproduced upon all contracts, documents or instruments executed or issued by or on behalf of the Corporation, and all contracts, documents or instruments on which the signature or signatures of any of the foregoing persons shall be so reproduced shall be as valid to all intents and purposes as if they had been signed manually, and notwithstanding that the persons whose signature or signatures is or are so reproduced may have ceased to hold office at the date of the delivery or issue of such contracts, documents or instruments.
FISCAL PERIOD
The fiscal period of the Corporation shall terminate on such day in each year as the board may from time to time by resolution determine.
DELIVERY OF DOCUMENTS
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81.
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Delivery of Documents
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The delivery of an executed copy of any and all by-laws, minutes of meetings, resolutions, consents, instruments, or like documents required by the Act to be kept with the records of the Corporation in counterparts, by facsimile, DocuSign or other form of electronic means or transmission shall be deemed to be the equivalent of the delivery of an original executed copy thereof and the counterparts together shall constitute one and the same document.
BORROWING MONEY, ETC.
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82.
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Borrowing Money, etc.
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The directors of the Corporation may from time to time:
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(a)
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borrow money on the credit of the Corporation;
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(b)
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issue, reissue, sell or pledge debt obligations of the Corporation, including bonds, debentures, notes or other evidences of indebtedness or guarantees of the Corporation, whether secured or unsecured;
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(c)
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give a guarantee on behalf of the Corporation to secure performance of an obligation of any person, including any individual, partnership, association, body corporate or personal representative;
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(d)
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mortgage, hypothecate, pledge or otherwise create a security interest in all or any property of the Corporation, owned or subsequently acquired, to secure any obligation of the Corporation; or
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(e)
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delegate to one or more directors, a committee of directors or one or more officers of the Corporation as may be designated by the directors, all or any of the powers conferred by the foregoing clauses of this Paragraph to such extent and in such manner as the directors shall determine at the time of each such delegation.
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ADVANCED NOTICE PROVISIONS
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83.
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Nomination Procedures
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Subject only to the provisions of the Act, Applicable Securities Laws and the articles of the Corporation, only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation. Nominations of persons for election as directors of the Corporation may be made at any annual meeting of shareholders or at any special meeting of shareholders if one of the purposes for which the special meeting was called is the election of directors. Such nominations may be made in the following manner:
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(a)
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by or at the direction of the Board, including pursuant to a notice of meeting;
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(b)
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by or at the direction or request of one or more shareholders pursuant to a proposal made in accordance with the provisions of the Act, or a requisition of a meeting of shareholders by one or more shareholders made in accordance with the provisions of the Act; or
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(c)
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by any person (a “Nominating Shareholder”) who:
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(i)
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complies with the notice procedures set forth below in this by-law; and
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(ii)
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at the close of business on the date of the giving of notice by the Nominating Shareholder in accordance with the notice procedures set forth below in this by- law and on the record date for notice of such meeting, is entered in the securities register of the Corporation as a holder of one or more shares carrying the right to vote at such meeting or who beneficially owns shares that are entitled to be voted at such meeting and provides evidence of such beneficial ownership to the Secretary of the Corporation.
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In addition to any other applicable requirements, for a nomination to be made by a Nominating Shareholder, the Nominating Shareholder must have given timely notice thereof in proper written form to the Secretary of the Corporation in accordance with the procedures set forth below in this by-law.
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85.
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Manner of Timely Notice
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To be timely, a Nominating Shareholder’s notice to the Secretary of the Corporation must be given:
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(a)
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in the case of an annual meeting (including an annual and special meeting) of shareholders, not less than thirty (30) days prior to the date of the meeting; provided, however, in the event that the meeting is to be held on a date that is less than fifty (50) days after the date on which the first public announcement of the date of the meeting was made, notice by the Nominating Shareholder shall be made not later than the close of business on the tenth (10th) day following the date of such public announcement;
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(b)
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in the case of a special meeting (which is not also an annual meeting) of shareholders called for the purpose of electing directors (whether or not also called for other purposes), notice by the Nominating Shareholder shall be made not later than the close of business on the fifteenth (15th) day following the date of such public announcement; and
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(c)
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in the case of an annual meeting of shareholders or a special meeting of shareholders called for the purpose of electing directors (whether or not also called for other purposes) where notice-and-access is used to deliver proxy-related materials to shareholders, not less than forty (40) days prior to the date of the meeting (and, in any event, not prior to the date on which the first public announcement of the date of the meeting was made); provided, however, in the event that the meeting is to be held on a date that is less than fifty (50) days after the date on which the first public announcement of the date of the meeting was made, (i) in the case of an annual meeting of shareholders, notice by the Nominating Shareholder shall be made not later than the close of business on the tenth (10th) day following the date of such public announcement, and (ii) in the case of a special meeting of shareholders, notice by the Nominating Shareholder shall be made not later than the close of business on the fifteenth (15th) day following the date of such public announcement.
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The adjournment or postponement of a meeting of shareholders or the announcement thereof shall commence a new time period for the giving of a Nominating Shareholder’s notice as described above.
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86.
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Proper Form of Notice
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To be in proper written form, a Nominating Shareholder’s notice to the Secretary of the Corporation must set forth or include:
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(a)
|
as to each person whom the Nominating Shareholder proposes to nominate for election as a director of the Corporation (a “Proposed Nominee”):
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(i)
|
the name, age and business and residential address of the Proposed Nominee;
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(ii)
|
the principal occupation, business or employment of the Proposed Nominee and the name and principal business of any company in which such employment is carried on, both present and within the five years preceding the date of the notice;
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(iii)
|
whether the Proposed Nominee is a “resident Canadian” within the meaning of the Act;
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(iv)
|
the number of securities of each class or series of voting securities of the Corporation beneficially owned, or controlled or directed, directly or indirectly, by the Proposed Nominee as of the record date for the meeting of shareholders (if such date shall then have been made publicly available and shall have occurred) and as of the date of such notice;
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(v)
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a description of any relationship, agreement, arrangement or understanding, including financial compensation and indemnity related relationships, agreements, arrangements or understandings, between the Nominating Shareholder and the Proposed Nominee, or any affiliates or associates of, or any person or entity acting jointly or in concert with, the Nominating Shareholder or the Proposed Nominee with respect to the Proposed Nominee’s nomination and election as a director;
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(vi)
|
whether the Proposed Nominee is party to any existing or proposed relationship, agreement, arrangement or understanding with any competitor of the Corporation or any other third party which may give rise to a real or perceived conflict of interest between the interests of the Corporation and the interests of the Proposed Nominee; and
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(vii)
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any other information relating to the Proposed Nominee that would be required to be disclosed in a dissident’s proxy circular or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to the Act or any Applicable Securities Laws.
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(b)
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as to the Nominating Shareholder:
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(i)
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the name and business and residential address of such Nominating Shareholder;
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(ii)
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the number of securities of each class or series of voting securities of the Corporation beneficially owned, or controlled or directed, directly or indirectly, by such Nominating Shareholder, or any other person with whom such Nominating Shareholder is acting jointly or in concert with respect to the Corporation or any of its securities, as of the record date for the meeting of shareholders (if such date shall then have been made publicly available and shall have occurred) and as of the date of such notice;
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(iii)
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any derivatives or other economic or voting interests in the Corporation and any hedges implemented with respect to the nominating shareholders’ interests in the Corporation;
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(iv)
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any proxy, contract, arrangement, understanding or relationship pursuant to which the Nominating Shareholder has the right to vote any shares of the Corporation;
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(v)
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whether such Nominating Shareholder intends to deliver a proxy circular and/or form of proxy to any shareholder of the Corporation in connection with such nomination or otherwise solicit proxies or votes from shareholders of the Corporation in support of such nomination; and
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(vi)
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any other information relating to such Nominating Shareholder that would be required to be disclosed in a dissident’s proxy circular or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to the Act or any Applicable Securities Laws; and
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(c)
|
a written consent duly signed by the Proposed Nominee to being named as a nominee for election to the Board and to serving as a director of the Corporation if elected.
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The Corporation may require any Proposed Nominee to furnish such other information as may be reasonably required by the Corporation to determine, pursuant to Applicable Securities Laws, the independence, or lack thereof, of such proposed nominee, provided that such disclosure request does not go beyond that required of management nominees for election as directors of the Corporation. References to “Nominating Shareholder” in this Section 4 shall be deemed to refer to each shareholder that nominates or proposes to nominate a person for election as a director of the Corporation in the case of a nomination proposal where more than one shareholder is involved in making such nomination proposal. All information provided in a Nominating Shareholders’ notice will be made publicly available to shareholders of the Corporation.
In addition, to be considered timely and in proper written form, a Nominating Shareholder’s notice shall be promptly updated and supplemented, if necessary, so that the information provided or required to be provided in such notice shall be true and correct as of the record date for the meeting.
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88.
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Eligibility for Nomination as a Director
|
No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this by-law. The requirements of this by-law shall apply to any Proposed Nominee to be brought before a meeting by a shareholder whether such Proposed Nominees are to be included in the Corporation’s management information circular under the Act and Applicable Securities Laws or presented to shareholders by means of an independently financed proxy solicitation. The requirements of this by-law are included to provide the Corporation notice of a shareholder’s intention to bring one or more Proposed Nominees before a meeting and shall in no event be construed as (i) imposing upon any shareholder the requirement to seek approval from the Corporation as a condition precedent to nominate such Proposed Nominee before a meeting or (ii) deeming to preclude discussion by a shareholder (as distinct from the nomination of directors) at a meeting of shareholders of any matter in respect of which such shareholder would have been entitled to submit a proposal pursuant to the provisions of the Act. The Chair of the meeting shall have the power and duty to determine whether a nomination was made in accordance with the procedures set forth in this by-law and, if any proposed nomination is determined not to be in compliance with such procedures, to declare that such defective nomination shall be disregarded.
Notwithstanding any other provision of this by-law or any other by-law of the Corporation, notice given to the Secretary of the Corporation pursuant to this by-law may only be given by personal delivery or by electronic mail (at such e-mail address as may be stipulated from time to time by the Secretary of the Corporation for purposes of this notice), and shall be deemed to have been given and made only at the time it is served by personal delivery to the Secretary at the address of the principal executive offices of the Corporation or, in the case of electronic mail, at the time it is sent to the Secretary at the email address as aforesaid; provided that if such delivery or electronic communication is made on a day which is a not a business day or later than 5:00 p.m. (Toronto time) on a day which is a business day, then such delivery or electronic communication shall be deemed to have been made on the next following day that is a business day.
Notwithstanding the foregoing, the Board may, in its sole discretion, waive any requirement in by-laws 82 to 88 (inclusive).
* * * * *
This By-law No. 1 was made by the director[s] of the Corporation on [month] [date], [year] and confirmed by the shareholder[s] of the Corporation on [month] [date], [year].
DATED [month] [date], [year].
APPENDIX E
Section 191 of the Business Corporations Act (Alberta)
Shareholder’s right to dissent
191(1) Subject to sections 192 and 242, a holder of shares of any class of a corporation may dissent if the corporation resolves to
(a) amend its articles under section 173 or 174 to add, change or remove any provisions restricting or constraining the issue or transfer of shares of that class,
(b) amend its articles under section 173 to add, change or remove any restrictions on the business or businesses that the corporation may carry on,
(b.1) amend its articles under section 173 to add or remove an express statement establishing the unlimited liability of shareholders as set out in section 15.2(1),
(c) amalgamate with another corporation, otherwise than under section 184 or 187,
(d) be continued under the laws of another jurisdiction under section 189, or
(e) sell, lease or exchange all or substantially all its property under section 190.
(2) A holder of shares of any class or series of shares entitled to vote under section 176, other than section 176(1)(a), may dissent if the corporation resolves to amend its articles in a manner described in that section.
(3) In addition to any other right the shareholder may have, but subject to subsection (20), a shareholder entitled to dissent under this section and who complies with this section is entitled to be paid by the corporation the fair value of the shares held by the shareholder in respect of which the shareholder dissents, determined as of the close of business on the last business day before the day on which the resolution from which the shareholder dissents was adopted.
(4) A dissenting shareholder may only claim under this section with respect to all the shares of a class held by the shareholder or on behalf of any one beneficial owner and registered in the name of the dissenting shareholder.
(5) A dissenting shareholder shall send to the corporation a written objection to a resolution referred to in subsection (1) or (2)
(a) at or before any meeting of shareholders at which the resolution is to be voted on, or
(b) if the corporation did not send notice to the shareholder of the purpose of the meeting or of the shareholder’s right to dissent, within a reasonable time after the shareholder learns that the resolution was adopted and of the shareholder’s right to dissent.
(6) An application may be made to the Court after the adoption of a resolution referred to in subsection (1) or (2),
(a) by the corporation, or
(b) by a shareholder if the shareholder has sent an objection to the corporation under subsection (5),
to fix the fair value in accordance with subsection (3) of the shares of a shareholder who dissents under this section, or to fix the time at which a shareholder of an unlimited liability corporation who dissents under this section ceases to become liable for any new liability, act or default of the unlimited liability corporation.
(7) If an application is made under subsection (6), the corporation shall, unless the Court otherwise orders, send to each dissenting shareholder a written offer to pay the shareholder an amount considered by the directors to be the fair value of the shares.
(8) Unless the Court otherwise orders, an offer referred to in subsection (7) shall be sent to each dissenting shareholder
(a) at least 10 days before the date on which the application is returnable, if the corporation is the applicant, or
(b) within 10 days after the corporation is served with a copy of the application, if a shareholder is the applicant.
(9) Every offer made under subsection (7) shall
(a) be made on the same terms, and
(b) contain or be accompanied with a statement showing how
the fair value was determined.
(10) A dissenting shareholder may make an agreement with the corporation for the purchase of the shareholder’s shares by the corporation, in the amount of the corporation’s offer under subsection (7) or otherwise, at any time before the Court pronounces an order fixing the fair value of the shares.
(11) A dissenting shareholder
(a) is not required to give security for costs in respect of an application under subsection (6), and
(b) except in special circumstances must not be required to pay the costs of the application or appraisal.
(12) In connection with an application under subsection (6), the Court may give directions for
(a) joining as parties all dissenting shareholders whose shares have not been purchased by the corporation and for the representation of dissenting shareholders who, in the opinion of the Court, are in need of representation,
(b) the trial of issues and interlocutory matters, including pleadings and questioning under Part 5 of the Alberta Rules of Court,
(c) the payment to the shareholder of all or part of the sum offered by the corporation for the shares,
(d) the deposit of the share certificates with the Court or with the corporation or its transfer agent,
(e) the appointment and payment of independent appraisers, and the procedures to be followed by them,
(f) the service of documents, and
(g) the burden of proof on the parties.
(13) On an application under subsection (6), the Court shall make an order
(a) fixing the fair value of the shares in accordance with subsection (3) of all dissenting shareholders who are parties to the application,
(b) giving judgment in that amount against the corporation and in favour of each of those dissenting shareholders,
(c) fixing the time within which the corporation must pay that amount to a shareholder, and
(d) fixing the time at which a dissenting shareholder of an unlimited liability corporation ceases to become liable for any new liability, act or default of the unlimited liability corporation.
(14) On
(a) the action approved by the resolution from which the shareholder dissents becoming effective,
(b) the making of an agreement under subsection (10) between the corporation and the dissenting shareholder as to the payment to be made by the corporation for the shareholder’s shares, whether by the acceptance of the corporation’s offer under subsection (7) or otherwise, or
(c) the
pronouncement of an order under subsection (13), whichever first occurs, the shareholder ceases to have any rights as a shareholder
other than the right to be paid the fair value of the shareholder’s shares in the amount agreed to between the corporation and
the shareholder or in the amount of the judgment, as the case may be.
(15) Subsection (14)(a) does not apply to a shareholder referred to in subsection (5)(b).
(16) Until one of the events mentioned in subsection (14) occurs,
(a) the shareholder
may withdraw the shareholder’s dissent, or
(b)
the corporation may rescind the resolution, and in either event proceedings under this section shall be
discontinued.
(17) The Court may in its discretion allow a reasonable rate of interest on the amount payable to each dissenting shareholder, from the date on which the shareholder ceases to have any rights as a shareholder by reason of subsection (14) until the date of payment.
(18) If subsection (20) applies, the corporation shall, within 10 days after
(a) the pronouncement of an order under subsection (13), or
(b) the
making of an agreement between the shareholder and the corporation as to the payment to be made for the shareholder’s shares,
notify each dissenting shareholder that it is unable lawfully to pay dissenting shareholders for their shares.
(19) Notwithstanding that a judgment has been given in favour of a dissenting shareholder under subsection (13)(b), if subsection (20) applies, the dissenting shareholder, by written notice delivered to the corporation within 30 days after receiving the notice under subsection (18), may withdraw the shareholder’s notice of objection, in which case the corporation is deemed to consent to the withdrawal and the shareholder is reinstated to the shareholder’s full rights as a shareholder, failing which the shareholder retains a status as a claimant against the corporation, to be paid as soon as the corporation is lawfully able to do so or, in a liquidation, to be ranked subordinate to the rights of creditors of the corporation but in priority to its shareholders.
(20) A corporation shall not make a payment to a dissenting shareholder under this section if there are reasonable grounds for believing that
(a) the corporation is or would after the payment be unable to pay its liabilities as they become due, or
(b) the realizable value of the corporation’s assets would by reason of the payment be less than the aggregate of its liabilities.
RSA 2000 cB-9 s191;2005 c40 s7;2009 c53 s30
Exhibit 99.43
Execution Version
AMALGAMATION AGREEMENT
BETWEEN
Newton Energy
Corporation,
Field Trip psychedelics
Inc.
AND
NEWTON ENERGY
SUBCO LIMITED
August 21, 2020
TABLE OF CONTENTS
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Page
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Article 1 INTERPRETATION
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2
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1.1 Interpretation
Not Affected by Headings, etc.
|
2
|
|
1.2 Definitions
|
2
|
|
1.3 Number,
etc.
|
10
|
|
1.4 Date for
Any Action
|
10
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|
1.5 Currency
|
10
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|
1.6 Meanings
|
11
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Article 2 AMALGAMATION
|
11
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2.1 Amalgamation
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11
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2.2 Amalco
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11
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2.3 Resulting
Issuer
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12
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2.4 Effect of
Certificate of Amalgamation
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13
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|
2.5 Manner of
Exchange of Issued Securities
|
14
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|
2.6 Certificates
|
15
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|
2.7 Fractional
Securities
|
15
|
|
2.8 U.S. Securities
Law Restrictive Legend
|
16
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Article 3 COVENANTS
|
17
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3.1 Covenants
of Newton
|
17
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3.2 Further
Covenants of Newton
|
19
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3.3 Covenants
of FTP
|
20
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3.4 Further
Covenants of FTP
|
22
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3.5 Listing
Statement
|
23
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Article 4 REPRESENTATIONS AND WARRANTIES
|
24
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4.1 Representations
and Warranties of Newton
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24
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4.2 Representations
and Warranties of FTP
|
29
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Article 5 CONDITIONS PRECEDENT AND OTHER
MATTERS
|
39
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|
5.1 Conditions
to Obligations of FTP
|
39
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5.2 Conditions
to Obligations of Newton
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41
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5.3 Merger of
Conditions
|
42
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5.4 Alternative
Transactions
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42
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Article 6 NOTICES
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43
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6.1 Notices
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43
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- ii -
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Page
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Article 7 AMENDMENT AND TERMINATION OF
AGREEMENT
|
44
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7.1 Amendment
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44
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7.2 Rights of
Termination
|
45
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|
7.3 Notice of
Unfulfilled Conditions
|
45
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Article 8 GENERAL
|
46
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8.1 Entire
Agreement
|
46
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8.2 Binding
Effect
|
46
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8.3 Waiver and
Modification
|
46
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8.4 No Personal
Liability
|
46
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8.5 Assignment
|
47
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8.6 Confidentiality
|
47
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8.7 Costs
|
47
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8.8 Time of
Essence
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47
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8.9 Survival
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48
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8.10 Governing Law
|
48
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8.11 Severability
|
48
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8.12 Further Assurances
|
48
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8.13 Counterparts and Electronic
Copies
|
48
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SCHEDULE A
|
1
|
AMALGAMATION AGREEMENT
THIS AMALGAMATION AGREEMENT
made as of the 21st day of August, 2020.
BETWEEN:
NEWTON ENERGY CORPORATION., a body corporate
incorporated under the laws of the Province of Alberta (hereinafter called “Newton”)
OF THE FIRST PART
- and -
FIELD TRIP PSYCHEDELICS INC., a body
corporate existing under the laws of Canada (hereinafter called “FTP”)
OF THE SECOND PART
- and -
NEWTON ENERGY SUBCO LIMITED, a body
corporate incorporated under the laws of Canada (hereinafter called “Newton Subco”)
OF THE THIRD PART
WHEREAS FTP and Newton
are parties to a letter of intent dated June 18, 2020, as amended on July 31, 2020 (collectively, the “Letter of Intent”)
whereby the parties set out their intention to complete a business combination;
AND WHEREAS FTP and
Newton have agreed to structure the business combination contemplated in the Letter of Intent by way of a three-cornered amalgamation
in accordance with the provisions of the Canada Business Corporations Act;
AND WHEREAS the parties
have entered into this Agreement to provide for the matters referred to in the foregoing recitals and for other matters relating to the
proposed amalgamation;
NOW THEREFORE THIS AGREEMENT
WITNESSETH that in consideration of the above premises and of the covenants, agreements, representations and warranties hereinafter
contained, the parties hereto agree as follows:
Article 1
INTERPRETATION
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|
1.1
|
Interpretation
Not Affected by Headings, etc.
|
|
|
|
The division of this
Agreement into articles, sections and subsections is for convenience of reference only and
shall not affect the construction or interpretation of this Agreement. The terms “this
Agreement”, “hereof”, “herein”, and “hereunder”
and similar expressions refer to this Agreement and not to any particular article, section
or other portion hereof and include any Agreement or instrument supplementary or ancillary
hereto.
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|
In this Agreement, unless
there is something in the context or subject matter inconsistent therewith, the following
defined terms shall have the meanings hereinafter set forth:
|
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|
“Act”
means the Securities Act (Ontario).
|
|
|
|
“Agreement”,
“this Agreement”, “herein”, “hereby”,
“hereof”, “hereunder” and similar expressions mean
or refer to this agreement (including any schedules hereto) and any amendments hereto from
time to time in accordance with the terms hereof.
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“Amalco”
means the amalgamated corporation to be formed by the amalgamation of FTP and Newton Subco,
to be named “Field Trip Psychedelics Inc.”.
|
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|
“Amalco Shares”
means the common shares in the capital of Amalco.
|
|
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|
“Amalgamation”
means the amalgamation of FTP and Newton Subco pursuant to Section 181 of the CBCA provided
for herein to form Amalco to be effective at the Effective Time.
|
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“Anti-Money
Laundering Laws” has the meaning ascribed thereto in Section 4.1(x)
|
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|
“Assessment”
has the meaning ascribed thereto in Section 3.2(g).
|
|
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|
“Assets and
Properties” with respect to any Person means all assets and properties of every
kind, nature, character and description (whether real, personal or mixed, tangible or intangible,
choate or inchoate, absolute, accrued, contingent, fixed or otherwise, and, in each case,
wherever situated), including the goodwill related thereto, operated, owned or leased by
or in the possession of such Person.
|
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|
“associate”
and “affiliate” have the respective meanings ascribed thereto in the Act.
|
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|
“Auditors”
means such firm of independent public accountants as a Person may from time to time appoint
as auditors of such Person.
|
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|
“Authorizations”
means any approval, consent, exemption, ruling, authorization, notice, permit, including
an import permit or export permit, or acknowledgement that may be required from any Governmental
Entity pursuant to applicable Laws, or which is otherwise required under applicable Laws
for the parties to perform their obligations under this Agreement or in relation to the FTP
Business, including any ethical review board approval or other authorization for a study,
including authorizations related to medical clinics, authorizations necessary to administer
ketamine to patients or other authorizations related to the FTP Business.
|
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“Business Day”
means any day other than a Saturday or Sunday or a day when banks in the City of Toronto
or Calgary are not generally open for business.
|
|
|
|
“CBCA”
means the Canada Business Corporations Act, as from time to time amended or re-enacted
and includes any regulations heretofore or hereafter made pursuant thereto.
|
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|
“CDS”
means CDS Clearing & Depository Services Inc.
|
|
|
|
“CDSA”
means the Controlled Drugs and Substances Act (Canada).
|
|
|
|
“Certificate
of Amalgamation” means the certificate of amalgamation for the Amalgamation issued
pursuant to Section 185 of the CBCA.
|
|
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|
“Closing”
means the completion of the Amalgamation.
|
|
|
|
“Closing Date”
means the date of the Closing, which shall be the date of the Certificate of Amalgamation,
and shall be within three (3) Business Days following the later of the satisfaction or waiver
of all conditions precedent to the Amalgamation or such other date as FTP and Newton may
collectively agree, acting reasonably, and in any event not later than October 2, 2020.
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|
“Confidential
Information” means any information concerning a party to this Agreement (the “Disclosing
Party”) or its business, properties and assets made available to another party
or its representatives (the “Receiving Party”); provided that it does
not include information which (a) is generally available to or known by the public other
than as a result of improper disclosure by the Receiving Party, or (b) is obtained by the
Receiving Party from a source other than the Disclosing Party, provided that (to the reasonable
knowledge of the Receiving Party) such source was not bound by a duty of confidentiality
to the Disclosing Party or another party with respect to such information.
|
|
|
|
“Consolidation”
means a consolidation of the Newton Common Shares on the basis of one (1) post-consolidation
Newton Common Share for every eight (8) pre-consolidation Newton Common Shares, which Consolidation
shall occur prior to completion of the Amalgamation.
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|
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“Contract”
means any agreement, contract, instrument or commitment of any nature, written or oral, including,
for greater certainty and without limitation, a lease, purchase agreement, manufacturing,
supply or distribution agreement, joint venture, strategic relationship or collaboration
agreement, grant or funding agreement from a Governmental Entity, mortgage, loan document,
Debt Instrument or security document.
|
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|
“controlled
substance” has the meaning ascribed thereto in section 2(1) of the CDSA.
|
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|
“CSE”
means the Canadian Securities Exchange.
|
|
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|
“CPSO”
means the College of Physicians and Surgeons of Ontario.
|
|
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|
“Criminal Code”
means the Criminal Code (Canada).
|
|
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|
“Debt Instrument”
means any note, loan, bond, debenture, indenture, promissory note, credit facility or other
instrument evidencing indebtedness (demand or otherwise) for borrowed money.
|
|
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|
“Disclosing
Party” has the meaning ascribed thereto in the definition of “Confidential
Information”.
|
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|
|
“Drug Product”
means any drug product regulated for sale or use under supervision of a health care practitioner
and that includes an active pharmaceutical ingredient that is ketamine, psilocin, psilocybin,
and other restricted drugs or controlled substances in the jurisdictions in which FTP and
the FTP Subsidiaries operates.
|
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|
“Effective Time”
means 12:01 a.m. (Toronto time) on the Closing Date or such other time as the parties determine.
|
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|
“Environmental
Laws” means all applicable Laws relating to the environment or environmental issues
(including air, surface, water and stratospheric matters), pollution or protection of human
health and safety, including without limitation relating to the release, threatened release,
manufacture, processing, blending, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials.
|
|
|
|
“FDA”
mean the Food and Drugs Act (Canada).
|
|
|
|
“FDR-J”
means part J of the Food and Drugs Regulations (Canada) of the CDSA.
|
|
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|
“FTP”
has the meaning ascribed thereto in the recitals to this Agreement.
|
|
|
|
“FTP B Shares”
means the class B shares in the capital of FTP.
|
|
|
|
“FTP Business”
means the business of delivery of Drug Products, or other drug substances for therapeutic
purposes, including the development, formulation and compounding of Drug Products or other
drug substances, in the jurisdictions in which FTP operates, including in the context of
clinical trials, research, development, service delivery or other contexts, and the business
of developing, cultivating fungal inputs for, and manufacturing, natural health products,
and the operation of clinics for physicians engaged in any of the foregoing activities.
|
|
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|
“FTP Business
Assets” means all tangible and intangible property and assets owned (either directly
or indirectly), leased, licensed, loaned, operated or used, including all real property,
fixed assets, facilities, equipment, inventories and accounts receivable, by the FTP and
the FTP Subsidiaries in connection with the FTP Business.
|
|
|
|
“FTP C
Shares” means the class C shares in the capital of FTP.
|
|
|
|
“FTP Common
Shares” means the class A shares in the capital of FTP.
|
|
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|
“FTP Financial
Statements” means the audited annual financial statements of FTP as at and for
the financial year ended March 31, 2020, prepared in accordance with IFRS, together with
such other financial statements of FTP (if any) as may be required to be included in the
Listing Statement.
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“FTP Material
Agreements” means any and all contracts, commitments, agreements (written or oral),
instruments, leases or other documents, including licences, sub licences, supply agreements,
manufacturing agreements, distribution agreements, sales agreements, or any other similar
type agreements, to which FTP or any of the FTP Subsidiaries is a party or to which their
FTP Business Assets are otherwise bound, and which is material to the FTP and the FTP Subsidiaries
on a consolidated basis.
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“FTP Option
In-The-Money Amount” in respect of a FTP Option means the amount, if any, by which
the total fair market value (determined immediately before the Amalgamation) of the FTP Common
Shares that a holder is entitled to acquire on exercise of the FTP Option immediately before
the Amalgamation exceeds the amount payable to acquire such FTP Common Shares.
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“FTP Options”
means the issued and outstanding options of FTP granted under the FTP Stock Option Plan.
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“FTP Private
Placement” means the brokered private placement by FTP of 5,516,724 FTP Common
Shares for gross proceeds of $11,033,448.
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“FTP Presentation”
means the investor presentation of FTP dated May, 2020 and the amended and restated investor
presentation dated August 2020.
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“FTP Shareholders
Agreement” means the unanimous shareholders’ agreement among FTP and its
shareholders dated April 2, 2019.
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“FTP Shareholders’
Approval” means the approval of the Amalgamation and this Agreement by the holders
of FTP Shares.
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“FTP Shares”
means the FTP Common Shares, FTP B Shares and FTP C Shares.
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“FTP Stock Option
Plan” means the stock option plan of FTP dated effective August 1, 2019.
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“FTP Subsidiaries”
means the subsidiaries of FTP, being Field Trip Health Inc., Field Trip Health USA Inc.,
Field Trip Natural Products Limited, Field Trip Digital LLC and Field Trip Health B.V.
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“FTP Warrants”
means the issued and outstanding warrants of FTP, issued in connection with the FTP Private
Placement exercisable to purchase 299,753 FTP Common Shares at an exercise price equal to
$2.00 until the date that is twenty-four (24) months following the closing of the FTP Private
Placement.
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“FTP Termination
Notice” has the meaning ascribed thereto in Section 5.4.
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“FTP’s
Auditors” means MNP LLP or such other firm of independent public accountants as
FTP may from time to time appoint as Auditors of FTP.
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“FTP’s
Knowledge” or “Knowledge of FTP” means the actual knowledge
of Joseph del Moral and Ronan Levy after having made due inquiry.
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“Governmental
Entity” means and includes any domestic or foreign federal, provincial, territorial,
regional, state, municipal or other government, governmental department, agency, authority
or body (whether administrative, legislative, executive or otherwise), court, tribunal, commission
or commissioner, bureau, minister or ministry, board or agency, or other regulatory authority,
including any securities regulatory authorities and any applicable stock exchange.
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“Government
Official” means (a) any official, officer, employee, or representative of, or any
person acting in an official capacity for or on behalf of, any Governmental Entity, (b) any
salaried political party official, elected member of political office or candidate for political
office, or (c) any company, business, enterprise or other entity owned or controlled by any
person described in the foregoing clauses.
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“Hazardous Materials”
means chemicals, fluids, pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products.
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“IFRS”
means International Financial Reporting Standards as issued by the International Accounting
Standards Board, as applicable in Canada.
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“Indebtedness”
of any Person means all obligations of such Person:
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(b)
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evidenced by notes, bonds, debentures
or similar instruments, including Debt Instruments;
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(c)
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for the deferred purchase price of goods
or services (other than trade payables or accruals incurred in the ordinary course of business
consistent with past practice);
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(d)
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under capital and operating leases;
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(e)
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under “vendor take-back” financing
or deferred payments in connection with any acquisition; or
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(f)
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which are guarantees of the obligations
described in any of clauses (a) through (e) above of any other Person if secured by any or
all of the Assets and Properties of the guarantor.
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“Intellectual
Property Rights” means all industrial and other intellectual property rights comprising or relating to (a) trademarks, trade
dress, trade and business names, branding, brand names, logos, design rights, corporate names and domain names and other similar designations
of source, sponsorship, association or origin, together with the goodwill symbolized by any of the foregoing; (b) internet domain names
registered by any authorized private registrar or Governmental Authority, web addresses, web pages, website and URLs; (c) works of authorship,
expressions, designs and industrial design registrations, whether or not copyrightable, including copyrights and copyrightable works,
software and firmware, data, data files, and databases and other specifications and documentation; (d) inventions, discoveries, trade
secrets, business and technical information, know-how, databases, data collections, patent disclosures and other confidential or proprietary
information; (e) plant or fungal varieties, strains or cultivars; and (f) all industrial and other intellectual property rights, and
all rights, interests and protections that are associated with, equivalent or similar to, or required for the exercise of, any of the
foregoing, however arising, in each case whether registered or unregistered, such registered rights including patent, registered plant
breeders’ rights, trademark, industrial design, copyright and including all registrations and applications for, and renewals or
extensions of, such rights or forms of protection under the applicable Law of any jurisdiction which FTP operates.
“ketamine”
means 2-(2-chlorophenyl)-2-(methylamino)cyclohexanone.
“Laws”
means any law (including common law), statute, regulation, treaty, order-in-council, ministerial order, code, by-law, ordinance, rule,
court order, judgement, decree, immunity or writ having the force of law.
“Liens”
means any encumbrance or title defect of whatever kind or nature, regardless of form, whether or not registered or registrable and whether
or not consensual or arising by law (statutory or otherwise), including any mortgage, lien, charge, pledge or security interest, whether
fixed or floating, or any assignment, lease, option, right of pre emption, privilege, easement, servitude, right of way, restrictive
covenant, right of use or any other right or claim of any kind or nature whatever which affects ownership or possession of, or title
to, any interest in, or right to use or occupy such property or assets.
“Letter
of Intent” has the meaning ascribed thereto in the first recital of this Agreement.
“Listing
Statement” means the listing statement of the Resulting Issuer in the form prescribed by the CSE pertaining to the listing
of the Resulting Issuer Common Shares on the CSE.
“Material
Adverse Change” or “Material Adverse Effect” with respect to Newton or FTP, as the case may be, means any
fact, effect, change, event, occurrence, or any development involving a change, that either individually or in the aggregate is or is
reasonably likely to be materially adverse to the results of operations, financial condition, assets, properties, business, prospects,
capital, liabilities (contingent or otherwise), cash flows, income, obligations (whether absolute, accrued, conditional or otherwise)
or business operations of Newton or FTP, as the case may be, taken as a whole and as a going concern or that is, or would reasonably
be expected to, prevent or materially delay the ability of Newton or FTP, as the case may be, to consummate the transactions contemplated
hereby other than facts, effects, changes, events, occurrences, or any development involving a change resulting from: (a) a change in
the market price of the Newton Common Shares following the public announcement of the execution of this Agreement and the transactions
contemplated hereby; (b) general economic, financial, currency exchange, securities or commodity market conditions; (c) any change in
applicable Laws or in the interpretation thereof by any Governmental Entity occurring after the date hereof; (d) the commencement, occurrence
or continuation of any war, armed hostilities or acts of terrorism; (e) any natural disaster, or (f) any prohibitions or restrictions
imposed by Law by any Governmental Entity in connection with any pandemic or endemic health crisis, including but not limited to COVID-19,
provided, however, that with respect to clauses (b) through (f), such changes do not have a disproportionate effect on Newton or FTP,
as applicable, taken as a whole, compared to other companies of similar size, and provided further that references to dollar amounts
in this Agreement are not intended to be, and shall not be deemed to be, illustrative or interpretative for purposes of determining whether
a Material Adverse Change or Material Adverse Effect has occurred.
“Newton”
has the meaning ascribed thereto in the recitals to this Agreement.
“Newton
Common Shares” means the issued and outstanding common shares in the capital of Newton.
“Newton
Information Circular” means the information circular of Newton with respect to the Newton Meeting.
“Newton
Meeting” means the annual and special meeting of holders of Newton Common Shares to be held to approve, among other things,
the Newton Meeting Matters.
“Newton
Meeting Matters” means the following matters: (a) the election of the directors set out in Section 2.3(c); (b) the authorization
to amend the articles of Newton to change its name to “Field Trip Health Ltd.” or such similar name as may be accepted by
the relevant regulatory authorities and approved by the board of directors of Newton; (c) the authorization to amend the articles of
Newton to effect the Consolidation; (d) the authorization to apply to de-list the Newton Common Shares from the facilities of the TSX
Venture; (e) the adoption of certain amendments to the by-laws of Newton; and (f) such other special business as may be properly brought
before the Newton Meeting or any postponement or adjournment thereof.
“Newton
Options” means the issued and outstanding options of Newton currently exercisable into 595,621 Newton Common Shares.
“Newton
Shareholders’ Approval” means the approval of the Newton Meeting Matters by the holders of Newton Common Shares.
“Newton
Subco” has the meaning ascribed thereto in the recitals to this Agreement.
“Newton
Subco Shares” means the issued and outstanding common shares in the capital of Newton Subco.
“Newton
Termination Notice” has the meaning ascribed thereto in Section 5.4.
“Newton’s
Knowledge” or “Knowledge of Newton” means the actual knowledge of Gino DeMichele, after having made due
inquiry.
“NI 51 102”
means National Instrument 51 102 – Continuous Disclosure Obligations.
“Permitted
Issuance” has the meaning ascribed thereto in Section 3.3(f)(i).
“Person”
shall be broadly interpreted and shall include any individual, corporation, partnership, joint venture, association, trust or other legal
entity.
“Principals”
means Joseph del Moral, Ronan Levy, Hannan Fleiman, Ryan Yermus and Mujeeb Jafferi.
“psilocin”
means 3–2–(dimethylamino)ethyl–4–hydroxyindole and any salt thereof.
“psilocybin”
means 3–2–(dimethylamino)ethyl–4–phosphoryloxyindole and any salt thereof.
“Regulation
D” means Regulation D under the U.S. Securities Act.
“Receiving
Party” has the meaning ascribed thereto in the definition of “Confidential Information”.
“Repayment
Event” means any event or condition which gives the holder of any Debt Instrument (or any person acting on such holder’s
behalf) the right to require the repurchase, redemption or repayment of all or a material portion of such indebtedness.
“Resulting
Issuer” means Newton as it exists upon the Closing, to be known as “Field Trip Health Ltd.”, or such similar name
as may be accepted by the relevant regulatory authorities and approved by the board of directors of Newton and FTP.
“Resulting
Issuer Common Shares” means common shares of the Resulting Issuer including those issued upon the Amalgamation.
“Resulting
Issuer Option In-The-Money Amount” in respect of a Resulting Issuer Option means the amount, if any, by which the total fair
market value (determined immediately after the Amalgamation) of the Resulting Issuer Common Shares that a holder is entitled to acquire
on exercise of the Resulting Issuer Option at and from the Amalgamation exceeds the amount payable to acquire such Resulting Issuer Common
Shares.
“Resulting
Issuer Options” means options of the Resulting Issuer, issued in exchange for FTP Options, to purchase Resulting Issuer Common
Shares, all of which options are to be issued pursuant to Section 2.5(a) of this Agreement.
“Resulting
Issuer Registrar and Transfer Agent” means Odyssey Trust Company or any other Person which may be appointed as registrar and
transfer agent of the Resulting Issuer from time to time.
“Resulting
Issuer Warrants” means warrants of the Resulting Issuer that provide the holder with the right to buy 299,753 Resulting Issuer
Common Shares, all of which warrants are to be issued pursuant to Section 2.5(c) of this Agreement.
“Target
Support Agreement” has the meaning ascribed thereto in Section 5.2(f).
“Tax Act”
means the Income Tax Act (Canada) as from time to time amended or re-enacted and includes any regulations heretofore or hereafter
made pursuant thereto.
“Taxes”
means all taxes (including income tax, sales tax, value added tax, capital tax, payroll taxes, employer health tax, workers’ compensation
payments, property taxes and land transfer taxes), duties, royalties, levies, imposts, assessments, deductions, withholdings or any other
similar charges and all liabilities with respect thereto, including any penalty and interest payable with respect thereto.
“Termination
Date” means October 31, 2020 or such other date as the parties may agree upon in writing.
“TSX Venture”
means the TSX Venture Exchange Inc.
“United
States” means the United States of America, its territories and possessions, any State of the United States and the District
of Columbia.
“U.S. Person”
means a U.S. person as defined in Rule 902(k) of Regulation S under the U.S. Securities Act.
“U.S. Securities
Act” means the United States Securities Act of 1933, as amended.
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Words importing the singular
number shall include the plural and vice versa, words importing the use of any gender shall
include all genders and words importing persons shall include firms and corporations and
vice versa.
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In the event that any
date on which any action is required to be taken hereunder by any of the parties is not a
Business Day such action shall be required to be taken on the next succeeding day which is
a Business Day.
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References to “$”
in this Agreement refer to lawful money of Canada, unless otherwise indicated.
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Words and phrases defined
in the CBCA shall have the same meaning herein as in the CBCA, unless otherwise defined herein
or the context otherwise requires. Unless otherwise specifically indicated or the context
otherwise requires “include”, “includes” and “including”
shall be deemed to be followed by the words “without limitation”.
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Article 2
AMALGAMATION
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On or before the Closing
Date, subject to the terms and conditions of this Agreement and receipt of necessary approvals,
each of Newton, FTP and Newton Subco shall take all steps required of it to complete the
Amalgamation and, without limitation, use commercially reasonable efforts to obtain the Newton
Shareholders’ Approval and FTP Shareholders’ Approval, as applicable, and to
apply for and obtain all consents, orders or approvals as are necessary or desirable for
the implementation of the Amalgamation and the filing of the articles of amalgamation with
the registrar pursuant to the CBCA.
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(a)
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Name. The name of Amalco shall
be “Field Trip Psychedelics Inc.”
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(b)
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Registered Office. The registered
office of Amalco shall be situated at 100 King St W Suite 3400, Toronto, ON M5X 1A4.
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(c)
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Authorized Capital. Amalco shall
be authorized to issue an unlimited number of Amalco Shares.
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(d)
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Restrictions on Share Transfer:
The transfer of shares of Amalco shall not be subject to any restrictions.
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(e)
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Number of Directors. The minimum
number of directors of Amalco shall be one and the maximum number of directors of Amalco
shall be ten.
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(f)
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First Directors. The initial number
of directors of Amalco shall be two. The first directors of Amalco shall be:
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Name
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Address
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Ronan Levy
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[*****]
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Joseph Del Moral
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[*****]
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(g)
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Officers. The officers of Amalco,
until changed or added to by the board of directors of Amalco, shall be as follows:
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Name
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Office
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Joseph Del Moral
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Chief Executive Officer
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(h)
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First Auditors. The Auditors of
Amalco shall be MNP LLP. The Auditors of Amalco shall hold office until the first annual
meeting of shareholders of Amalco following the Amalgamation, or until their successor is
appointed.
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(i)
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Fiscal Year. The fiscal year end
of Amalco shall be March 31.
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(j)
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Restrictions on Business. There
shall be no restrictions on the business that Amalco may carry on.
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(k)
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By-laws. The by-laws of Amalco
shall be the current by-laws of FTP. A copy of such by-laws may be examined at the current
address of FTP set out in Section 6.1 hereof.
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(a)
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Name. The name of the Resulting
Issuer shall be “Field Trip Health Ltd.”.
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(b)
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Registered Office. The registered
office of the Resulting Issuer shall be situated at 4500 Bankers Hall East, 855 2 Street
SW, Calgary, AB T2P 4K7.
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(c)
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First Directors. The number of
first directors of the Resulting Issuer shall be seven. Subject to the receipt of all necessary
approvals, the first directors of the Resulting Issuer shall be:
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Name
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Address
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Joseph del Moral
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[*****]
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Ronan Levy
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[*****]
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Hannan Fleiman
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[*****]
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Mujeeb Jafferi
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[*****]
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Ryan Yermus
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[*****]
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Helen Boudreau
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[*****]
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Dieter Weinand
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[*****]
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The first directors shall
hold office until the first annual meeting of the shareholders of the Resulting Issuer, or
until their successors are duly appointed or elected.
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(d)
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Officers. The officers of the Resulting
Issuer, until changed or added to by the board of directors of the Resulting Issuer, shall
be as follows:
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Name
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Office
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Joseph del Moral
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Chief Executive Officer
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Ronan Levy
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Executive Chairman & Corporate Secretary
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Hannan Fleiman
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President of Healthcare Practice
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Mujeeb Jafferi
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President
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Ryan Yermus
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Chief Clinical Officer
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Tyler Dyck
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Interim Chief Financial Officer
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(e)
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First Auditors. The Auditors of
the Resulting Issuer shall be MNP LLP. The Auditors of the Resulting Issuer shall hold office
until the first annual meeting of shareholders of the Resulting Issuer following the Amalgamation
or until their successor is appointed.
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(f)
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Fiscal Year. The fiscal year end
of the Resulting Issuer shall be March 31.
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2.4
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Effect of Certificate of Amalgamation
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Upon the issuance of the Certificate
of Amalgamation:
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(a)
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the Amalgamation of FTP and Newton Subco
and their continuation as one corporation becomes effective;
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(b)
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the property of each of FTP and Newton
Subco shall continue to be the property of Amalco;
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(c)
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Amalco shall continue to be liable for
the obligations of FTP and Newton Subco;
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(d)
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any existing cause of action, claim, or
liability to prosecution against FTP or Newton Subco shall be unaffected;
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(e)
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a civil, criminal or administrative action
or proceeding pending by or against FTP or Newton Subco may be continued to be prosecuted
by or against Amalco;
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(f)
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a conviction against, or ruling, order
or judgment in favour of or against, FTP or Newton Subco may be enforced by or against Amalco;
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(g)
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the articles of amalgamation are deemed
to be the articles of incorporation of Amalco and the Certificate of Amalgamation is deemed
to be the certificate of incorporation of Amalco;
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(h)
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Amalco shall be a wholly-owned subsidiary
of Newton;
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(i)
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the stated capital in respect of the Amalco
Shares will be equal to the aggregate of (i) the “paid-up capital” (as defined
in the Tax Act) of the Newton Subco Shares immediately prior to Closing and (ii) the “paid-up
capital” (as defined in the Tax Act) of the FTP Common Shares immediately prior to
Closing; and
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(j)
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the
Resulting Issuer shall add to the stated capital account maintained in respect of the Resulting
Issuer Common Shares an amount equal to the “paid-up capital” (as defined in
the Tax Act) of the FTP Common Shares as determined immediately prior to Closing.
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2.5
Manner of Exchange of Issued Securities
Upon the terms and subject to the conditions
set forth herein, at the time of the Amalgamation,
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(a)
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each
FTP Common Share outstanding immediately prior to the Amalgamation (except for FTP Common
Shares held by holders that have validly exercised their dissent rights in accordance with
the CBCA in connection with the FTP Shareholders’ Approval) shall be cancelled and,
in consideration therefor, the holder of such FTP Common Share shall receive one fully paid
and non-assessable Resulting Issuer Common Share issued by Resulting Issuer;
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(b)
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each
FTP Option outstanding immediately prior to the Amalgamation (whether vested or unvested)
will be exchanged for one Resulting Issuer Option to acquire from the Resulting Issuer such
number of Resulting Issuer Common Shares as is equal to: the number of FTP Common Shares
that were issuable upon exercise of such FTP Option immediately prior to the Amalgamation
at the exercise price per FTP Common Share at which such FTP Option was exercisable immediately
prior to the Amalgamation. The terms of each Resulting Issuer Option shall be the same as
the terms of the FTP Option exchanged therefor pursuant to the FTP Stock Option Plan and
any agreement evidencing the grant thereof prior to the Amalgamation. It is intended that
the provisions of subsection 7(1.4) of the Tax Act apply to any such exchange. Therefore,
in the event that the Resulting Issuer Option In-The-Money Amount in respect of a FTP Option
would otherwise exceed the FTP Option In-The-Money Amount in respect of the Resulting Issuer
Option, the number of Resulting Issuer Common Shares which may be acquired on exercise of
the Resulting Issuer Option at and after the Amalgamation will be adjusted accordingly with
effect at and from the Amalgamation to ensure that the Resulting Issuer Option In-The-Money
Amount in respect of the Resulting Issuer Option does not exceed the FTP Option In-The-Money
Amount in respect of the FTP Option and the ratio of the amount payable to acquire such shares
to the value of such shares to be acquired shall be unchanged;
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(c)
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each
outstanding FTP Warrant shall be exchanged for one Resulting Issuer Warrant;
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(d)
|
each
outstanding Newton Subco Share shall be cancelled and, in consideration therefor, Amalco
shall issue one Amalco Share to the Resulting Issuer; and
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(e)
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as
consideration for the issuance of the Resulting Issuer Common Shares in connection with the
Amalgamation, Amalco shall issue to the Resulting Issuer one Amalco Share for each such Resulting
Issuer Common Share so issued.
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FTP Shares held by holders who have
validly exercised their dissent rights in accordance with the CBCA in connection with the FTP Shareholders’ Approval will not be
exchanged pursuant to this Section 2.5 and will be entitled to compensation in accordance with the CBCA. However, if any such dissenting
holder fails to perfect or effectively withdraws its claim pursuant to applicable Laws, or forfeits its right to make a claim under applicable
Laws, or if its rights as a shareholder of FTP are otherwise reinstated, the FTP Shares held by such holder shall thereupon be deemed
to have been exchanged as of the Effective Time in accordance with this Section 2.5.
2.6 Certificates
At the Effective Time:
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(a)
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subject
to Section 2.6(b): (i) the registered holders of FTP Shares shall cease to be holders of
FTP Shares, and shall be deemed to be registered holders of the Resulting Issuer Common Shares
to which they are entitled in accordance with Section 2.5 hereof, (ii) all certificates evidencing
FTP Shares shall be null and void without further act or formality and (iii) on or after
the Effective Time, subject to Section 2.8 hereof, the Resulting Issuer shall provide instructions
to the Resulting Issuer Registrar and Transfer Agent to deliver such certificates or other
evidence of ownership representing the number of Resulting Issuer Common Shares to which
they are so entitled and/or register such Resulting Issuer Common Shares in book-entry only
format in CDS’ name, provided that any holder of FTP Shares immediately prior to the
Amalgamation that is outside of Canada will not be entitled to receive delivery of any Resulting
Issuer Common Shares unless and until such holder provides any and all such representations,
warranties, covenants or agreements as may be required by the Resulting Issuer, in its sole
discretion, in order to establish the availability of an exemption from any registration
requirements of the U.S. Securities Act and any applicable securities laws in connection
with the distribution of the Resulting Issuer Common Shares to such holder; and
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(b)
|
notwithstanding
the foregoing, all certificates representing FTP Shares held by Persons who have validly
exercised their dissent rights in accordance with the CBCA in connection with the FTP Shareholders’
Approval shall represent only the right to receive fair value of the FTP Shares formerly
represented by such certificates in accordance with the CBCA.
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2.7
Fractional Securities
No fractional securities of the Resulting
Issuer will be issued. If a securityholder of FTP would otherwise be entitled to a fractional security upon the Amalgamation, the number
of securities of the Resulting Issuer issued to such securityholder shall be rounded down to the next lesser whole number of such security,
and such securityholder shall not receive or be entitled to any compensation or payment in lieu of such fractional security. In calculating
such fractional interests, all securities of the Resulting Issuer, as the case may be, registered in the name of a Resulting Issuer securityholder
or their nominee shall be aggregated.
2.8
U.S. Securities Law Restrictive Legend
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(a)
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The
Resulting Issuer Common Shares issuable to holders of FTP Common Shares, as well as the Resulting
Issuer Options issuable to holders of FTP Options and the Resulting Issuer Warrants issuable
to holders of FTP Warrants who are in the United States or are U.S. Persons (i) have not
been and will not be registered under the U.S. Securities Act or any state securities laws,
(ii) are being or will be issued to such holders in reliance on the exemption from the registration
requirements of the U.S. Securities Act provided by Rule 506(b) of Regulation D and in reliance
upon similar exemptions from applicable state securities laws, and (iii) the Resulting Issuer
Common Shares, the Resulting Issuer Options and the Resulting Issuer Warrants are “restricted
securities” and may not be offered or sold in the United States, nor may hedging transactions
involving such securities be conducted, unless such securities are registered under the U.S.
Securities Act and any applicable state securities law, an exemption from such registration
is available or such registration is otherwise not required.
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(b)
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Notwithstanding
anything to the contrary in this Agreement, no Resulting Issuer Common Shares, Resulting
Issuer Options or Resulting Issuer Warrants shall be delivered to any person in the United
States or to any U.S. Person if the Resulting Issuer determines, in its sole discretion,
that doing so may result in any contravention of the U.S. Securities Act or any applicable
state securities laws and the Resulting Issuer may instead, in the case of Resulting Issuer
Common Shares, appoint an agent to sell the Resulting Issuer Common Shares of such person
on behalf of that person and deliver an amount of cash representing the proceeds of the sale
of such Resulting Issuer Common Shares, net of expenses of sale, or, in the cases of Resulting
Issuer Options or Resulting Issuer Warrants, may deliver an amount of cash representing the
fair market value of the Resulting Issuer Options or Resulting Warrants, as applicable.
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(c)
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The
parties acknowledge and agree that, in addition to any other legends that may be affixed
to the securities issued in connection with the Amalgamation, upon the original issuance
of the Resulting Issuer Common Shares, the Resulting Issuer Options and the Resulting Issuer
Warrants to persons in the United States or U.S. Persons who are holders of FTP Common Shares,
FTP Options or FTP Warrants, as applicable, in connection with the Amalgamation, and until
such time as the same is no longer required under applicable requirements of the U.S. Securities
Act or applicable state securities laws, certificates representing such securities and all
certificates issued in exchange therefor or in substitution thereof, shall bear or be deemed
to bear the following legend:
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“THE SECURITIES REPRESENTED
HEREBY [for Resulting Issuer Options and Resulting Issuer Warrants include: AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF]
HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”),
OR ANY STATE SECURITIES LAWS. THE HOLDER HEREOF, BY ACQUIRING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE ISSUER (THE “CORPORATION”)
THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE CORPORATION; (B) OUTSIDE THE UNITED STATES
IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND REGULATIONS;
(C) IN ACCORDANCE WITH THE EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT PROVIDED BY (i) RULE 144 OR (ii) RULE 144A THEREUNDER,
IF AVAILABLE AND IN COMPLIANCE WITH STATE SECURITIES LAWS OR (D) WITHIN THE UNITED STATES PURSUANT TO ANY OTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE U.S. SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, PROVIDED, IN THE CASE OF AN OFFER, SALE, ASSIGNMENT, PLEDGE,
ENCUMBRANCE OR OTHER TRANSFER PURSUANT TO (C)(i) or (D), THE HOLDER SHALL HAVE PROVIDED TO THE CORPORATION AN OPINION OF COUNSEL TO THE
EFFECT THAT THE PROPOSED TRANSFER MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE U.S. SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS, WHICH OPINION AND COUNSEL MUST BE REASONABLY SATISFACTORY TO THE CORPORATION. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE “GOOD
DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA OR ELSEWHERE.
[for Resulting Issuer Options and
Resulting Issuer Warrants, add: “THESE SECURITIES MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR FOR THE ACCOUNT OR BENEFIT
OF A U.S. PERSON OR A PERSON IN THE UNITED STATES UNLESS THESE SECURITIES AND THE UNDERLYING SECURITIES HAVE BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE.
“UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE U.S. SECURITIES ACT.”]
Article 3
COVENANTS
3.1
Covenants of Newton
Newton covenants and agrees with FTP
from the date of execution hereof to and including the Closing:
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(a)
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not
to, directly or indirectly, solicit, initiate, knowingly encourage, co-operate with or facilitate
(including by way of furnishing any non-public information or entering into any form of agreement,
arrangement or understanding) the submission, initiation or continuation of any oral or written
inquiries or proposals or expressions of interest regarding, constituting or that may reasonably
be expected to lead to any activity, arrangement or transaction, or propose any activities
or solicitations, in opposition to or in competition with the Amalgamation, and without limiting
the generality of the foregoing, not to induce or attempt to induce any other Person to initiate
any shareholder proposal or “takeover bid”, exempt or otherwise, within the meaning
of the Act for securities or assets of Newton, nor to undertake or enter into any transaction
or negotiate any transaction which would be or potentially could be in conflict with the
Amalgamation, including, without limitation, allowing access to any third party (other than
FTP’s representatives) to conduct due diligence, nor to permit any of its officers
or directors to authorize such access except as required by statutory or fiduciary obligations
or in respect of which the Newton board of directors determines in its good faith judgement,
after receiving advice from its legal advisors, that failure to recommend such alternative
transaction to its shareholders would reasonably be expected to be a breach of its fiduciary
duties under applicable Laws. In the event Newton or any of its affiliates or associates,
including any of their respective officers or directors, receives any form of offer or inquiry
in respect of the foregoing, Newton shall forthwith (in any event within one Business Day
following receipt) notify FTP of such offer or inquiry and provide FTP with such details
in respect thereof that Newton has as FTP may request;
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(b)
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to
co-operate with FTP and to use all commercially reasonable efforts to assist FTP in its efforts
to complete the Amalgamation, including the negotiation, execution and delivery of any other
agreements that are customary, appropriate, and/or required to complete the Amalgamation,
unless such co-operation and/or efforts would subject Newton to liability or would be in
breach of applicable statutory or regulatory requirements;
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(c)
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not
to conduct any active business operations; and
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(d)
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not
to, without FTP’s prior written consent (such consent not to be unreasonably withheld,
conditioned or delayed):
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(i)
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issue
any debt, equity or other securities, except in connection with the issuance of Newton Common
Shares (or securities to acquire Newton Common Shares) pursuant to the Amalgamation or pursuant
to the exercise of any securities exercisable to acquire Newton Common Shares outstanding
as of the date hereof;
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(ii)
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borrow
money or incur any Indebtedness for money borrowed;
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(iii)
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make
any loans, advances or other payments other than payment of professional fees or expenses
in connection with or ancillary to the Amalgamation or in the ordinary course;
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(iv)
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declare
or pay any dividends or distribute any properties or assets of Newton to shareholders or
otherwise dispose of any such properties or assets;
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(v)
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alter
or amend the articles or by-laws of Newton in any manner which may adversely affect the success
of the Amalgamation, except as required to give effect to the matters contemplated herein,
including the Consolidation and other applicable Newton Meeting Matters; or
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(vi)
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except
as otherwise permitted or contemplated herein, enter into any transaction or material Contract
which is not in the ordinary course of business or engage in any business enterprise or activity
materially different from that carried on by Newton as at the date hereof.
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3.2 Further
Covenants of Newton
Newton covenants and agrees with FTP
that Newton will from the date of execution hereof to and including the Closing:
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(a)
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use
all commercially reasonable efforts to obtain all necessary consents, assignments or waivers
from third parties and amendments or terminations to any instrument or agreement, to provide
all notices required in connection with the Amalgamation, and to take such other measures
as may be necessary to fulfil its obligations under and to carry out the transactions contemplated
by this Agreement;
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(b)
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circulate
to its shareholders materials required in connection with the Newton Meeting in accordance
with its constating documents and applicable Laws as soon as reasonably practicable and use
its commercially reasonable efforts to hold the Newton Meeting by September 30, 2020;
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(c)
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make
all necessary filings and applications under applicable Laws required on the part of it in
connection with the transactions contemplated herein, and take all reasonable action necessary
to be in compliance with such Laws;
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(d)
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use
all commercially reasonable efforts to conduct its affairs so that Newton’s representations
and warranties contained herein shall be true and correct on and as of the Closing as if
made on the Closing, except to the extent that such representations and warranties require
modification to give effect to the transactions contemplated herein;
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(e)
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promptly
notify FTP of any legal or governmental action, suit, judgment, investigation, injunction,
complaint, motion, regulatory investigation, regulatory proceeding or similar proceeding
by any Person, Governmental Entity or other regulatory body, whether actual or threatened,
with respect to the Amalgamation or which could otherwise reasonably be expected to delay
or impede the transactions contemplated hereby or result in a Material Adverse Effect;
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(f)
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notify
FTP promptly upon becoming aware that any of the representations and warranties of Newton
contained herein are no longer true and correct in any material respect;
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(g)
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promptly
upon receipt of any written audit inquiry, assessment, reassessment, confirmation or variation
of an assessment, indication that an assessment is being considered, request for filing of
a waiver or extension of time or any other notice in writing relating to Taxes (an “Assessment”)
relating to Newton or any affiliate thereof, deliver to FTP a copy thereof together with
a statement setting out, to the extent then determinable, an estimate of the obligations,
if any, of Newton or such affiliate on the assumption that such Assessment is valid and binding;
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(h)
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use
all commercially reasonable efforts to cause each of the conditions precedent set forth in
Section 5.1 hereof to be complied with;
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(i)
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advise
FTP if there are any circumstances, individually or in the aggregate, that could reasonably
be expected to materially and adversely affect the transactions contemplated by this Agreement
or that could result in a Material Adverse Effect; and
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(j)
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subject
to the satisfaction of the conditions precedent in Section 5.2 hereof, cause Newton Subco,
together with FTP, to file with the registrar under the CBCA the articles of amalgamation
and such other documents as may be required to give effect to the Amalgamation on or before
the Termination Date.
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3.3
Covenants of FTP
FTP covenants and agrees with Newton
from the date of execution hereof to and including the Closing:
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(a)
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not
to, directly or indirectly, solicit, initiate, knowingly encourage, co-operate with or facilitate
(including by way of furnishing any non-public information or entering into any form of agreement,
arrangement or understanding) the submission, initiation or continuation of any oral or written
inquiries or proposals or expressions of interest regarding, constituting or that may reasonably
be expected to lead to any activity, arrangement or transaction, or propose any activities
or solicitations, in opposition to or in competition with the Amalgamation, and without limiting
the generality of the foregoing, not to induce or attempt to induce any other Person to initiate
any shareholder proposal or “takeover bid”, exempt or otherwise, within the meaning
of the Act, for securities or assets of FTP, nor to undertake or enter into any transaction
or negotiate any transaction which would be or potentially could be in conflict with the
Amalgamation, including, without limitation, allowing access to any third party (other than
Newton’s representatives) to conduct due diligence, nor to permit any of its officers
or directors to authorize such access except as required by statutory or fiduciary obligations
or in respect of which the FTP board of directors determines in its good faith judgement,
after receiving advice from its legal advisors, that failure to recommend such alternative
transaction to its shareholders would reasonably be expected to be a breach of its fiduciary
duties under applicable Laws. In the event FTP or any of its affiliates or associates, including
any of their respective officers or directors, receives any form of offer or inquiry in respect
of the foregoing, FTP shall forthwith (in any event within one Business Day following receipt)
notify Newton of such offer or inquiry and provide Newton with such details in respect thereof
that FTP has as Newton may request;
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(b)
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to
co-operate with Newton and to use all reasonable commercial efforts to assist Newton in its
efforts to complete the Amalgamation, including the negotiation, execution and delivery of
any other agreements that are customary, appropriate, and/or required to complete the Amalgamation,
unless such co-operation and efforts would subject FTP to liability or would be in breach
of applicable statutory or regulatory requirements;
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(c)
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to
operate its business in a prudent and business-like manner in the ordinary course and in
a manner consistent with past practice;
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(d)
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to
use its commercially reasonable efforts to prepare the FTP Financial Statements to satisfy
the financial statement requirements prescribed by the CSE and applicable securities legislation;
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(e)
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to
not issue any FTP B Shares or FTP C Shares or securities convertible or exchangeable for
such classes of shares; and
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(f)
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not
to, without Newton’s prior written consent (such consent not to be unreasonably withheld,
conditioned or delayed):
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(i)
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issue
any debt, equity or other securities, except indebtedness and securities issued by FTP in
connection with (1) the conversion of the FTP Warrants; (2) the grant or exercise of FTP
Options under the FTP Stock Option Plan, in the ordinary course; (3) the issuance of up to
1,983,276 FTP Common Shares in a second tranche of and on the same terms as the FT Private
Placement; and (4) the issuance of 1,200,000 FTP Common Shares under the share purchase agreement
dated June 3, 2020 among Darwin Inc., FTP and Field Trip Natural Products Limited (each a
“Permitted Issuance”);
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(ii)
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borrow
money or incur any Indebtedness for money borrowed;
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(iii)
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make
loans or advances, excluding loans or advances to the FTP Subsidiaries or salaries and bonuses
at current rates and routine advances to employees of FTP for expenses incurred in the ordinary
course;
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(iv)
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declare
or pay any dividends or distribute any properties or assets of FTP to shareholders or otherwise
dispose of any of such properties or assets;
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(v)
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alter
or amend the articles or by-laws of FTP in any manner which may adversely affect the success
of the Amalgamation, except as required to give effect to the matters contemplated herein;
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(vi)
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except
as otherwise permitted or contemplated herein, enter into any transaction which is not in
the ordinary course of business or engage in any business enterprise or activity materially
different from that carried on by FTP as at the date hereof;
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(vii)
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except
as otherwise permitted or contemplated herein, enter into any transaction or material contract
which is not in the ordinary course of business or engage in any business enterprise or activity
materially different from that carried on by FTP as of the date hereof; or
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(viii)
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make
capital expenditures out of the ordinary course of business except as may be reasonably required
in connection with facilities and leasehold improvements.
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3.4
Further Covenants of FTP
FTP covenants and agrees with Newton
that it will from the date of execution hereof to and including the Closing:
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(a)
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use
all commercially reasonable efforts to obtain all necessary consents, assignments or waivers
from third parties and amendments or terminations to any instrument or agreement, to provide
all notices required in connection with the Amalgamation and take such other measures as
may be necessary to fulfil its obligations under and to carry out the transactions contemplated
by this Agreement;
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(b)
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use
its commercially reasonable efforts to obtain the FTP Shareholders’ Approval by September
30, 2020;
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(c)
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promptly
advise Newton of any written notice of dissent or purported exercise by any FTP shareholder
of dissent rights under applicable Laws received by FTP in relation to the Amalgamation and
any withdrawal of dissent rights received by FTP and, subject to applicable Laws, any written
communications sent by or on behalf of FTP to any FTP shareholder exercising or purporting
to exercise dissent rights in relation to the Amalgamation;
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(d)
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make
necessary filings and applications under applicable Laws required on the part of FTP in connection
with the transactions contemplated herein, and take all reasonable action necessary to be
in compliance with such Laws;
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(e)
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use
all commercially reasonable efforts to conduct its affairs so that FTP’s representations
and warranties contained herein shall be true and correct on and as of the Closing as if
made on the Closing, except to the extent that such representations and warranties require
modification to give effect to the transactions contemplated herein;
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(f)
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promptly
notify Newton of any legal or governmental actions, suits, judgments, investigations, injunction,
complaint, motion, regulatory investigation, regulatory proceeding or similar proceeding
by any Person, Governmental Entity or other regulatory body, whether actual or threatened,
with respect to the Amalgamation or which could otherwise delay or impede the transactions
contemplated hereby or result in a Material Adverse Effect;
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(g)
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notify
Newton promptly upon becoming aware that any of the representations and warranties of FTP
contained herein are no longer true and correct in any material respect;
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(h)
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promptly
upon receipt of any Assessment relating to FTP or any affiliate thereof, deliver to Newton
a copy thereof together with a statement setting out, to the extent then determinable, an
estimate of the obligations, if any, of FTP or such affiliate on the assumption that such
Assessment is valid and binding;
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(i)
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use
all commercially reasonable efforts to cause each of the conditions precedent set forth in
Section 5.2 hereof to be complied with;
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(j)
|
advise
Newton if there are any circumstances, individually or in the aggregate, that may materially
and adversely affect the transactions contemplated by this Agreement or that could result
in a Material Adverse Effect; and
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(k)
|
subject
to the satisfaction of the conditions precedent in Section 5.1 hereof, file, together with
Newton Subco, with the registrar under the CBCA the articles of amalgamation and such other
documents as may be required to give effect to the Amalgamation on or before the Termination
Date.
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3.5
Listing Statement
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(a)
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Each
party shall furnish to the other parties all such information as may be reasonably required
by a party in the preparation of the Listing Statement and the Newton Information Circular
and other documents related thereto, and the party supplying such information shall ensure
that it does not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein in order to make any information so furnished not misleading
in light of the circumstances in which it is disclosed.
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(b)
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Each
party shall indemnify and save harmless the other parties and their respective directors,
officers, employees, agents, advisors and representatives from and against any and all respective
liabilities, claims, demands, losses, costs, damages and expenses to which a party or their
respective directors, officers, employees, agents, advisors or representatives may be subject
or may suffer, in any way caused by, or arising, directly or indirectly, from or in consequence
of:
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(i)
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any
misrepresentation in any information included in the Listing Statement or Newton Information
Circular that is provided by a party for inclusion therein; and
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(ii)
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any
order made, or any inquiry, investigation or proceeding by any securities regulatory authority
or other Governmental Entity, to the extent based on any misrepresentation or any alleged
misrepresentation in any information related to a party and provided for inclusion in the
Listing Statement or Newton Information Circular.
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(c)
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Each
party shall promptly notify the other parties if, at any time before the Closing, a party
becomes aware that the Listing Statement or Newton Information Circular contains an untrue
statement of a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements contained therein not misleading in light of the circumstances
in which they are made, or that otherwise requires an amendment or supplement to the Listing
Statement or Newton Information Circular and the parties shall co-operate in the preparation
of any amendment or supplement as required or as appropriate.
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Article 4
REPRESENTATIONS AND WARRANTIES
4.1 Representations
and Warranties of Newton
Newton represents and warrants to and
in favour of FTP as follows, and acknowledges that FTP is relying upon such representations and warranties in connection with the completion
of the transactions contemplated herein:
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(a)
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Other
than as disclosed to FTP, Newton (i) is a corporation existing under the laws of Alberta
and is and will at Closing be current and up-to-date with all material filings required
to be made and in good standing under the Business Corporations Act (Alberta), and
(ii) has, and at the Closing will have, all requisite corporate power and authority to enter
into and carry out its obligations under this Agreement.
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(b)
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Newton Subco (i) is
a corporation existing under the laws of Canada and is and will at Closing be current and
up-to-date with all material filings required to be made and in good standing under
the CBCA, and (ii) has, and at the Closing will have, all requisite corporate power and authority
to enter into and carry out its obligations under this Agreement.
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(c)
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Other
than Newton Subco, Newton has no subsidiaries.
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(d)
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The
authorized and issued share capital of Newton consists of an unlimited number of Newton Common
Shares and an unlimited number of preferred shares, of which 6,361,047 Newton Common Shares
and nil preferred shares were issued and outstanding as at the date of this Agreement, on
a pre-Consolidation basis. Newton is not party to any agreement, nor is Newton aware of any
agreement, which in any manner affects the voting control of any securities of Newton.
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(e)
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The
authorized and issued share capital of Newton Subco consists of an unlimited number of common
shares, of which one common share was issued and outstanding as at the close of business
on the date hereof.
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(f)
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No
act or proceeding has been taken by or against Newton or Newton Subco in connection with
their liquidation, winding-up or bankruptcy, nor, to Newton’s Knowledge, is any
such act or proceeding pending.
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(g)
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As
of the date hereof, other than the Newton Options, no person has any existing right, agreement
or option, present or future, contingent or absolute, or any right capable of becoming a
right, agreement or option, for the issue or allotment of any unissued shares of Newton or
any other agreement or option, for the issue or allotment of any unissued shares of Newton
or any other security convertible into or exchangeable for any such shares or to require
Newton to purchase, redeem or otherwise acquire any of the issued and outstanding shares
of Newton.
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(h)
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Each
of the execution and delivery of this Agreement and the performance of the transactions contemplated
hereby have been authorized by all necessary corporate action of Newton and Newton Subco
and upon the execution and delivery hereof, this Agreement shall constitute a valid and binding
obligation of Newton and Newton Subco, enforceable against Newton and Newton Subco in accordance
with its terms, provided that enforcement thereof may be limited by laws affecting creditors’
rights generally, that specific performance and other equitable remedies may only be granted
in the discretion of a court of competent jurisdiction and that the provisions relating to
indemnity, contribution and waiver of contribution may be unenforceable.
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(i)
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The
execution and delivery of this Agreement by Newton, the performance by Newton of its obligations
hereunder and the consummation of the transactions contemplated hereby, do not and will not
require the consent, approval, authorization, registration or qualification of or with any
Governmental Entity, stock exchange or other third party (including under the terms of any
Debt Instrument or material Contract) as applicable other than (i) the Newton Shareholders’
Approval; (ii) the approval of the Amalgamation and the listing of the Resulting Issuer Common
Shares by the CSE; (iii) the delisting of the Newton Common Shares from the TSX Venture;
(iv) the filing of Articles of Amendment to effect the applicable Newton Meeting Matters;
(v) the filing of the articles of amalgamation under the CBCA and the issuance of a certificate
in respect thereof; (vi) such filings and other actions required under applicable Securities
Laws as are contemplated by this Agreement and registrations and applications required as
a result of the formation of a new corporation on the Amalgamation; and (vii) any filings
with the registrar under the CBCA.
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(j)
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The
audited financial statements of Newton as at and for the years ended December 31, 2018 and
2019 including the notes thereto and interim financial statements of Newton as at and for
the three months ended March 31, 2020 have been prepared in accordance with IFRS and present
fairly, in all material respects, the financial position (including the assets and liabilities,
whether absolute, contingent or otherwise as required by IFRS) of Newton as at such dates
and the results of its operations and its cash flows for the period then ended and contain
and reflect adequate provisions for all reasonably anticipated liabilities, expenses and
losses of Newton in accordance with IFRS and there has been no change in accounting policies
or practices of Newton since December 31, 2019.
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(k)
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Neither
Newton nor Newton Subco has any liabilities, obligations, indebtedness or commitments, whether
accrued, absolute, contingent or otherwise, other than liabilities, obligations, or indebtedness
or commitments: (i) incurred in the normal course of business; or (ii) which would
not, individually or in the aggregate, have a Material Adverse Effect.
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(l)
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Newton’s
current auditors are independent with respect to Newton within the meaning of the rules of
professional conduct applicable to auditors in Canada and there has never been a “reportable
event” (within the meaning of NI 51-102) with the current auditors of Newton.
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(m)
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Except
for the transactions contemplated by this Agreement, neither Newton nor Newton Subco has
approved, entered into any agreement in respect of, or has any knowledge, as the case may
be, of:
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(i)
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the
sale, transfer or other disposition of any of the assets of Newton or any interest therein
currently owned, directly or indirectly, by Newton or Newton Subco whether by asset sale,
transfer of shares, or otherwise;
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(ii)
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a
transaction which would result in the change of control by sale or transfer of Newton Common
Shares or sale of all or substantially all of the assets of Newton or Newton Subco; or
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(iii)
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a
proposed or planned disposition of Newton Common Shares by any shareholder who owns, directly
or indirectly, 10% or more of the outstanding Newton Common Shares.
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(n)
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To
Newton’s Knowledge, Newton is currently in compliance, in all material respects, with
all Environmental Laws, and there are no pending or, to the Knowledge of Newton, any threatened,
administrative, regulatory or judicial actions, suits, demands, claims, liens, notices of
non-compliance or violation, investigation or proceedings relating to any Environmental
Laws. To Newton’s Knowledge, there are no permits required under Environmental Laws
for the conduct of Newton’s business. The operations of Newton are currently being
conducted, and to the Knowledge of Newton have been conducted, in all material respects in
accordance with all applicable workers’ compensation and health and safety and workplace
laws, regulations and policies.
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(o)
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There
has been no material change in the assets, liabilities, obligations (absolute, accrued, contingent
or otherwise) business, condition (financial or otherwise), properties, capital or results
of operations of Newton or Newton Subco since March 31, 2020 or July 24, 2020, respectively,
and (ii) there have been no transactions entered into by Newton or Newton Subco, other
than those in the ordinary course of business, which are material with respect to Newton
and Newton Subco since March 31, 2020 or July 24, 2020 respectively.
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(p)
|
There
is no action, suit, proceeding, inquiry or investigation before or brought by any Governmental
Entity, domestic or foreign, now pending or, to the Knowledge of Newton, threatened against
or affecting Newton or Newton Subco which would have a Material Adverse Effect, or would
materially and adversely affect the consummation of the transactions contemplated in this
Agreement or the performance by Newton of its obligations hereunder.
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(q)
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Neither
Newton nor Newton Subco is in material violation, default or breach of, and the execution,
delivery and performance of this Agreement and the consummation of the transactions and compliance
by Newton and Newton Subco with its obligations hereunder do not and will not, whether with
or without the giving of notice or passage of time or both, result in a material violation,
default or breach of, or conflict with, or result in a Repayment Event or the creation or
imposition of any Lien upon any property or assets of Newton or Newton Subco under the terms
or provisions of (i) any Newton material Contract or Debt Instruments, (ii) the
articles or by-laws or other constating documents or resolutions of the directors or
shareholders of Newton or Newton Subco, (iii) to the Knowledge of Newton, any existing
applicable Laws, including applicable securities laws, or (iv) to the Knowledge of Newton,
any judgment, order, writ or decree of any Governmental Entity.
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(r)
|
All
tax returns, reports, elections, remittances and payments of Newton and Newton Subco required
by applicable Law to have been filed or made in any applicable jurisdiction, have been filed
or made (as the case may be) and are true, complete and correct except where the failure
to make such filing, election, or remittance and payment would not constitute a Material
Adverse Effect on Newton taken as a whole, and all Taxes of Newton and of Newton Subco have
been paid or accrued (except as any extension may have been requested or granted and in any
case in which the failure to file, pay or accrue such Taxes would not result in a Material
Adverse Effect). To the Knowledge of Newton, there are no examinations of any tax return
of Newton or Newton Subco currently in progress and there are no disputes outstanding with
any Governmental Entity respecting any Taxes that have been paid, or may be payable, by Newton
or the Newton Subco.
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(s)
|
Neither
Newton, Newton Subco nor to the Knowledge of Newton, any director, officer, employee, consultant,
representative or agent of the forgoing, has (i) violated any anti-bribery or anti-corruption
laws applicable to Newton and Newton Subco, including Canada’s Corruption of Foreign
Public Officials Act, or (ii) offered, paid, promised to pay, or authorized the payment
of any money, or offered, given, promised to give, or authorized the giving of anything of
value, that goes beyond what is reasonable and customary and/or of modest value: (A) to any
Government Official, whether directly or through any other person, for the purpose of influencing
any act or decision of a Government Official in his or her official capacity; inducing a
Government Official to do or omit to do any act in violation of his or her lawful duties;
securing any improper advantage; inducing a Government Official to influence or affect any
act or decision of any Governmental Entity; or assisting any representative of Newton or
Newton Subco in obtaining or retaining business for or with, or directing business to, any
person; or (B) to any person in a manner which would constitute or have the purpose or effect
of public or commercial bribery, or the acceptance of or acquiescence in extortion, kickbacks,
or other unlawful or improper means of obtaining business or any improper advantage. Neither
Newton, Newton Subco nor to the Knowledge of Newton, any director, officer, employee, consultant,
representative or agent of foregoing, has (i) conducted or initiated any review, audit,
or internal investigation that concluded Newton, Newton Subco, or any director, officer,
employee, consultant, representative or agent of Newton violated such laws or committed any
material wrongdoing, or (ii) made a voluntary, directed, or involuntary disclosure to
any Governmental Entity responsible for enforcing anti-bribery or anti-corruption
laws, in each case with respect to any alleged act or omission arising under or relating
to non-compliance with any such laws, or received any notice, request, or citation from
any person alleging non-compliance with any such laws.
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(t)
|
Other
than the Amalgamation, no proposed acquisition by or of Newton or Newton Subco has progressed
to a state where a reasonable person would believe that the likelihood of Newton or Newton
Subco completing the acquisition or being acquired is high.
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(u)
|
Neither
Newton nor Newton Subco has made any material loans to or guaranteed the material obligations
of any person since March 31, 2020.
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(v)
|
The
minute books and records of Newton and Newton Subco made available to counsel for FTP in
connection with their due diligence investigation of Newton for the periods requested to
the date hereof are all of the minute books and material records of Newton and Newton Subco
and contain copies of all material proceedings (or certified copies thereof or drafts thereof
pending approval) of the shareholders, the directors and all committees of directors of Newton
and Newton Subco, as the case may be, to the date of review of such corporate records and
minute books and there have been no other meetings, resolutions or proceedings of the shareholders,
directors or any committees of the directors of Newton and Newton Subco to the date hereof
not reflected in such minute books and other records, other than those which have been disclosed
to FTP or which are not material in the context of Newton and Newton Subco.
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(w)
|
During
the previous 12 months, Newton has not, directly or indirectly, declared or paid any dividend
or declared or made any other distribution on any of its shares or securities of any class,
or, directly or indirectly, redeemed, purchased or otherwise acquired any of the Newton Common
Shares or securities or agreed to do any of the foregoing. There are no restrictions upon
the declaration or payment of dividends by the directors of Newton or the payment of dividends
by Newton in the constating documents or in any material Contract or Debt Instruments.
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(x)
|
The
operations of Newton and Newton Subco (or any related party thereof) is and has been conducted
at all times in material compliance with the Proceeds of Crime (Money Laundering) and Terrorist
Financing Act, all applicable financial recordkeeping and reporting requirements, the applicable
anti-money laundering statutes of jurisdictions where Newton and Newton Subco (or any related
party thereof) conduct business, the rules and regulations thereunder and any related or
similar rules or regulations, issued, administered or enforced by any governmental agency
applicable to Newton and Newton Subco (or any related party thereof) (collectively, the “Anti-Money
Laundering Laws”), and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving Newton and Newton Subco
(or any related party thereof) with respect to the Anti-Money Laundering Laws is, to the
Knowledge of Newton, pending or threatened.
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4.2
Representations and Warranties of FTP
FTP represents and warrants to and
in favour of Newton and Newton Subco as follows, and acknowledges that Newton and Newton Subco are relying upon such representations
and warranties in connection with the completion of the transactions contemplated herein:
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|
(a)
|
FTP
(i) is a corporation existing under the laws of Canada and is and will at Closing be current
and up to date with all material filings required to be made and in good standing under the
CBCA, (ii) has all requisite corporate power and capacity to own, lease and operate its properties
and assets, including the FTP Business Assets, and to conduct the FTP Business as now carried
on by it, and (iii) has, and at the Closing will have, all requisite corporate power and
authority to enter into and carry out its obligations under this Agreement.
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|
|
(b)
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FTP’s
only subsidiaries are the FTP Subsidiaries. Each of the FTP Subsidiaries is formed, organized
and existing under the laws of the applicable jurisdiction, is current and up to date with
all material filings required to be made and has all requisite corporate power and capacity
to own, lease and operate its properties and assets, including its business assets, and to
conduct its business as is now carried on by it, and is duly qualified to transact business
and is in good standing in each jurisdiction in which such qualification is required in all
material respects. All of the issued and outstanding shares in the capital of the FTP Subsidiaries
have been duly authorized and validly issued, are fully paid and are directly or indirectly
beneficially owned by FTP. All of the issued and outstanding shares in the capital of the
FTP Subsidiaries owned by FTP are owned free and clear of any Liens, and none of the outstanding
securities of the FTP Subsidiaries were issued in violation of the pre emptive or similar
rights of any security holder of the FTP Subsidiaries. There exist no options, warrants,
purchase rights, or other contracts or commitments that could require FTP to sell, transfer
or otherwise dispose of any securities of the FTP Subsidiaries.
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(c)
|
No
act or proceeding has been taken by or against FTP or the FTP Subsidiaries in connection
with their liquidation, winding up or bankruptcy, or, to FTP’s Knowledge, is pending.
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|
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(d)
|
The
authorized and issued share capital of FTP consists of an unlimited number of FTP Common
Shares, an unlimited number of FTP B Shares and an unlimited number of FTP C Shares, of which
35,590,954 FTP Common Shares, nil FTP B Shares and nil FTP C Shares are issued and outstanding
as at the date hereof. Other than the FTP Shareholders Agreement, neither FTP nor the FTP
Subsidiaries are party to any agreement, nor is FTP aware of any agreement, which in any
manner affects the voting control of any securities of FTP or the FTP Subsidiaries. All of
the issued and outstanding shares in the capital of FTP have been duly authorized and validly
issued, are fully paid and are owned free and clear of any Liens. None of the outstanding
securities of FTP were issued in violation of any applicable Law or the pre-emptive or similar
rights of any security holder of FTP. Other than the FTP Shareholders Agreement, there exist
no options, warrants, purchase rights, or other contracts or commitments that could require
the shareholders of FTP to sell, transfer or otherwise dispose of any securities of FTP.
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|
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(e)
|
The
authorized and issued share capital of the FTP Subsidiaries as set forth in Schedule A hereto
is true and correct.
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|
(f)
|
Odyssey
Trust Company at its principal office in Calgary, Alberta has been duly appointed as transfer
agent and registrar for the FTP Common Shares.
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|
|
(g)
|
As
of the date hereof, except for the rights set out in Section 4.4 of the FTP Shareholders
Agreement, no person has any existing right, agreement or option, present or future, contingent
or absolute, or any right capable of becoming a right, agreement or option, for the issue
or allotment of any unissued shares of FTP or any other agreement or option, for the issue
or allotment of any unissued shares of FTP or any other security convertible into or exchangeable
for any such shares or to require FTP to purchase, redeem or otherwise acquire any of the
issued and outstanding shares of FTP, other than pursuant to outstanding FTP Options, FTP
Warrants and the share purchase agreement among FTP, Field Trip Natural Products Limited
and Darwin Inc. dated June 3, 2020.
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|
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(h)
|
Each
of the execution and delivery of this Agreement and the performance of the transactions contemplated
hereby have been authorized by all necessary corporate action of FTP and upon the execution
and delivery hereof, this Agreement shall constitute a valid and binding obligation of FTP,
enforceable against FTP in accordance with its terms, provided that enforcement thereof may
be limited by laws affecting creditors’ rights generally, that specific performance
and other equitable remedies may only be granted in the discretion of a court of competent
jurisdiction and that the provisions relating to indemnity, contribution and waiver of contribution
may be unenforceable.
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|
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(i)
|
The
execution and delivery of this Agreement by FTP, the performance by FTP of its obligations
hereunder and the consummation of the transactions contemplated hereby, do not and will not
require any Authorization of or registration or qualification of or with any Governmental
Entity, stock exchange or other third party (including under the terms of any Debt Instrument
or material Contract), except: (i) those which may be required and shall be obtained prior
to the Closing under applicable securities laws, and (ii) such customary post closing notices
or filings required to be submitted within the applicable time frame pursuant to applicable
securities laws, as may be required in connection with the Amalgamation.
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|
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(j)
|
The
FTP Financial Statements:
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|
|
(i)
|
present
fairly, in all material respects, the financial position of FTP on a consolidated basis and
the statements of operations, retained earnings, cash flow from operations and changes in
financial information of FTP on a consolidated basis for the periods specified in such FTP
Financial Statements;
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|
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(ii)
|
have
been prepared in accordance with IFRS, applied on a consistent basis throughout the periods
involved; and
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|
|
(iii)
|
do
not contain any misrepresentations, with respect to the period covered by the Financial Statements.
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|
(k)
|
The
FTP Presentation:
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|
|
(i)
|
(A)
does not as of the date of this Agreement contain any misrepresentation; (B) disclosed all
relevant material assumptions; and (C) to the extent the Presentation contained any estimates
of the prospects of the FTP Business, such estimates were reasonable;
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(ii)
|
complies
in all material respects with applicable securities laws; and
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|
(iii)
|
contains
forward looking information that reflects the currently available estimates and good faith
judgments of the management of FTP as to the matters covered thereby and FTP has a reasonable
basis for disclosing any forward-looking information contained in the FTP Presentation, subject
to the risk factors and disclaimers set forth in the FTP Presentation, and is not, as of
the date hereof, required to update any such forward looking information pursuant to NI 51-102.
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|
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(l)
|
There
are no off balance sheet transactions, arrangements, obligations or liabilities of FTP or
the FTP Subsidiaries, whether direct, indirect, absolute, contingent or otherwise.
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(m)
|
There
has been no change in accounting policies or practices of FTP or the FTP Subsidiaries other
than as disclosed in the FTP Financial Statements
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(n)
|
Neither
FTP nor the FTP Subsidiaries have any liabilities, obligations, indebtedness or commitments,
whether accrued, absolute, contingent or otherwise, which are not disclosed in the FTP Financial
Statements, other than liabilities, obligations, or indebtedness or commitments: (i) incurred
in the normal course of business; or (ii) which would not, individually or in the aggregate,
have a Material Adverse Effect.
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|
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(o)
|
FTP’s
current auditors are independent with respect to FTP within the meaning of the rules of professional
conduct applicable to auditors in Canada and there has never been a “reportable event”
(within the meaning of NI 51 102) with the current auditors of FTP.
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(p)
|
FTP
maintains a system of internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with IFRS and to maintain asset accountability, (iii) access to
monies and investments is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with respect
to any differences.
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(q)
|
Except
for the transactions contemplated by this Agreement, neither FTP nor any of the FTP Subsidiaries
has approved, has entered into any agreement in respect of, or has any knowledge, as the
case may be, of:
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|
|
(i)
|
the
sale, transfer or other disposition of any FTP Business Assets or any interest therein currently
owned, directly or indirectly, by FTP or any FTP Subsidiaries whether by asset sale, transfer
of shares, or otherwise;
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(ii)
|
a
transaction which would result in the change of control (by sale or transfer of FTP Common
Shares or sale of all or substantially all of the Business Assets) of FTP or any of the FTP
Subsidiaries; or
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(iii)
|
a
proposed or planned disposition of FTP Common Shares by any shareholder who owns, directly
or indirectly, 10% or more of the outstanding FTP Common Shares.
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(r)
|
FTP
and the FTP Subsidiaries have good, valid and marketable title to and have all necessary
rights in respect of all of the FTP Business Assets as owned, leased, licensed, loaned, operated
or used by them or over which they have rights, free and clear of Liens and, except as set
out in the FTP Presentation, no other rights or FTP Business Assets are necessary for the
conduct of the FTP Business as currently conducted. FTP knows of no claim or basis for any
claim that would reasonably be likely to result in a Material Adverse Effect on the rights
of FTP or the FTP Subsidiaries to use, transfer, lease, licence, operate, sell or otherwise
exploit such FTP Business Assets and neither FTP nor any of the FTP Subsidiaries has any
obligation to pay any commission, licence fee or similar payment to any person in respect
thereof and there are no outstanding rights of first refusal or other pre emptive rights
of purchase which entitle any person to acquire any of the rights, title or interests in
such FTP Business Assets.
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(s)
|
All
research and development activities, including quality assurance, quality control, testing,
and research and analysis activities, conducted or contemplated by FTP and the FTP Subsidiaries
in connection with the FTP Business are being or will be conducted in compliance, in all
material respects, with all applicable Laws industry, laboratory safety, management and training
standards in the jurisdiction where such activities take place which are applicable to the
FTP Business and all such processes, procedures and practices required in connection with
such activities are or will be in place as necessary at the applicable time, and are or will
be being complied with in all material respects.
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(t)
|
All
agreements with third parties in connection with the FTP Business have been entered into
and are being performed by FTP and the FTP Subsidiaries and, to the Knowledge of FTP, by
all other third parties thereto, in compliance with their terms in all material respects.
FTP has provided Newton, or its counsel, with copies of or access to a virtual data room
which contains copies of all of the FTP Material Agreements as of the date hereof. There
exists no actual or, to the Knowledge of FTP, threatened termination, cancellation or limitation
of, or any material adverse modification or material change in, the business relationship
of FTP or the FTP Subsidiaries, with any supplier or customer, or any group of suppliers
or customers whose business with or whose purchases or inventories/components provided to
the FTP Business are, individually or in the aggregate, material to the assets, FTP Business,
properties, operations or financial condition of FTP or the FTP Subsidiaries, or any FTP
Material Agreements.
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(u)
|
Each
of FTP and the FTP Subsidiaries has complied, in all material respects, with all applicable
privacy and consumer protection legislation and neither FTP nor the FTP Subsidiaries has
collected, received, stored, disclosed, transferred, used, misused or permitted unauthorized
access to any information protected by privacy laws, whether collected directly or from third
parties, in an unlawful manner.
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|
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(v)
|
FTP
and the FTP Subsidiaries, as applicable, own or possess the right to use all material Intellectual
Property Rights necessary for the conduct of the FTP Business, and FTP is not aware of any
bona fide claim to the contrary or any challenge by any other person to the rights of FTP
and the FTP Subsidiaries with respect to the foregoing. To the Knowledge of FTP, the FTP
Business, including that of the FTP Subsidiaries, as now conducted does not infringe any
Intellectual Property Rights of any person. FTP has not received notice of any bona fide
claim made against FTP or the FTP Subsidiaries alleging the infringement by FTP or the FTP
Subsidiaries of any Intellectual Property Rights of any person.
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|
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(w)
|
To
FTP’s Knowledge, each of FTP and the FTP Subsidiaries is currently in compliance, in
all material respects, with all Environmental Laws, and there are no pending or, to the Knowledge
of FTP, any threatened, administrative, regulatory or judicial actions, suits, demands, claims,
liens, notices of non compliance or violation, investigation or proceedings relating to any
Environmental Laws. Neither FTP nor the FTP Subsidiaries have ever received any notice of
any non-compliance in respect of Environmental Laws, there are no events or circumstances
that might reasonably be expected to form the basis of an order for clean up or remediation
under Environmental Laws or relating to any Hazardous Materials, and there are no permits
required under Environmental Laws for the conduct of the FTP Business. The facilities and
operations of FTP and the FTP Subsidiaries are currently being conducted, and to the Knowledge
of FTP have been conducted, in all material respects in accordance with all applicable workers’
compensation and health and safety and workplace laws, regulations and policies.
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|
|
(x)
|
FTP
and the FTP Subsidiaries maintain in good standing insurance, or where insurance has not
yet been obtained, shall use commercially reasonable efforts to obtain and maintain insurance,
by insurers of recognized financial responsibility, against such losses, risks and damages
to the FTP Business Assets in such amounts that are customary for the business in which they
are engaged and on a basis consistent with reasonably prudent persons in comparable businesses.
Each of FTP and the FTP Subsidiaries has complied with the terms of such policies and instruments
in all material respects and there are no material claims by FTP or the FTP Subsidiaries
under any such policy or instrument as to which any insurance company is denying liability
or defending under a reservation of rights clause. FTP has
no reason to believe that it will not be able to renew such existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue the FTP Business at a cost that would not have a Material Adverse
Effect, and neither FTP nor the FTP Subsidiaries have failed to promptly give any notice
of any material claim thereunder.
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|
|
(y)
|
Each
FTP Material Agreement and Debt Instrument is valid, subsisting, in good standing in all
material respects and in full force and effect, enforceable in accordance with the terms
thereof, subject to bankruptcy, insolvency and other laws affecting the rights of creditors
generally, and subject to other standard assumptions and qualifications, including the qualifications
that equitable remedies may be granted in the discretion of a court of competent jurisdiction
and that enforcement of rights to indemnity, contribution and waiver of contribution set
out in such agreements may be limited by applicable Law. FTP and the FTP Subsidiaries have,
in all material respects, performed all obligations in a timely manner under, and are in
compliance, in all material respects, with all terms and conditions (including any financial
covenants) contained in, each FTP Material Agreement and Debt Instrument.
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|
|
(z)
|
Since March 31, 2020 (i) there has been
no material change in the assets, liabilities, obligations (absolute, accrued, contingent
or otherwise) business, condition (financial or otherwise), properties, capital or results
of operations of FTP and the FTP Subsidiaries considered as one enterprise, and (ii) there
have been no transactions entered into by FTP or the FTP Subsidiaries, other than those in
the ordinary course of business, which are material with respect to FTP and the FTP Subsidiaries
considered as one enterprise.
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|
|
(aa)
|
There is no action, suit, proceeding,
inquiry or investigation before or brought by any Governmental Entity, domestic or foreign,
now pending or, to the Knowledge of FTP, threatened against or affecting FTP, any of the
FTP Subsidiaries or the FTP Business Assets (including in respect of any product liability
claims) which would have a Material Adverse Effect, or would materially and adversely affect
the consummation of the transactions contemplated in this Agreement or the performance by
FTP of its obligations hereunder. The aggregate of all pending legal or governmental proceedings
to which FTP or the FTP Subsidiaries is a party or of which any of their respective property
or assets is subject would not reasonably be expected to result in a Material Adverse Effect.
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|
|
(bb)
|
Neither FTP nor any of the FTP Subsidiaries
is in material violation, default or breach of, and the execution, delivery and performance
of this Agreement and the consummation of the transactions and compliance by FTP with its
obligations hereunder do not and will not, whether with or without the giving of notice or
passage of time or both, result in a material violation, default or breach of, or conflict
with, or result in a Repayment Event or the creation or imposition of any Lien upon any property
or assets of FTP, including the FTP Business Assets, or the FTP Subsidiaries under the terms
or provisions of (i) any Contract or Debt Instruments, (ii) the articles or by laws or other
constating documents or resolutions of the directors or shareholders of FTP or the FTP Subsidiaries,
(iii) to the Knowledge of FTP, any existing applicable Law, including applicable securities
laws, or (iv) to the Knowledge of FTP, any judgment, order, writ or decree of any Governmental
Entity.
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|
|
(cc)
|
No material work stoppage, strike, lock
out, labour disruption, dispute, grievance, arbitration, proceeding or other conflict with
the employees of FTP or the FTP Subsidiaries currently exists or, to the Knowledge of FTP,
is imminent or pending and FTP and the FTP Subsidiaries are in material compliance with all
applicable Law respecting employment and employment practices, terms and conditions of employment
and wages and hours.
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|
|
(dd)
|
To the Knowledge of FTP, there are no
material complaints against FTP or the FTP Subsidiaries before any employment standards branch
or tribunal or human rights tribunal, nor any complaints or any occurrence which would reasonably
be expected to lead to a complaint under any human rights legislation or employment standards
legislation that would be material to FTP. There are no outstanding decisions or settlements
or pending settlements under applicable employment standards legislation, which place any
material obligation upon FTP or the FTP Subsidiaries to do or refrain from doing any act.
FTP and FTP Subsidiaries are currently in material compliance with all workers’ compensation,
occupational health and safety and similar legislation, including payment in full of all
amounts owing thereunder, and there are no pending claims or outstanding orders of a material
nature against either of them under applicable workers’ compensation legislation, occupational
health and safety or similar legislation nor has any event occurred which may give rise to
any such material claim.
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|
|
(ee)
|
Neither FTP nor any of the FTP Subsidiaries
is party to any collective bargaining agreements with unionized employees. To the Knowledge
of FTP, no action has been taken or is being contemplated to organize or unionize any employees
of FTP or any of the FTP Subsidiaries that would have a Material Adverse Effect.
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|
|
(ff)
|
Each material plan for retirement, bonus,
stock purchase, profit sharing, stock option, deferred compensation, severance or termination
pay, insurance, medical, hospital, dental, vision care, drug, sick leave, disability, salary
continuation, legal benefits, unemployment benefits, vacation, incentive or other benefits
contributed to, or required to be contributed to, by FTP for the benefit of any current or
former director, officer, employee or consultant of FTP has been maintained in all material
respects with its terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations that are applicable to such employee plans.
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|
|
(gg)
|
All tax returns, reports, elections,
remittances and payments of FTP and the FTP Subsidiaries required by applicable Law to have
been filed or made in any applicable jurisdiction, have been filed or made (as the case may
be) and are true, complete and correct except where the failure to make such filing, election,
or remittance and payment would not constitute a Material Adverse Effect on FTP taken as
a whole, and all Taxes of FTP and of the FTP Subsidiaries have been paid or accrued in the
FTP Financial Statements (except as any extension may have been requested or granted and
in any case in which the failure to file, pay or accrue such Taxes would not result in a
Material Adverse Effect). To the Knowledge of FTP, there are no examinations of any tax return
of FTP or the FTP Subsidiaries currently in progress and there are no disputes outstanding
with any Governmental Entity respecting any Taxes that have been paid, or may be payable,
by FTP or the FTP Subsidiaries.
|
|
|
(hh)
|
Neither FTP nor any of the FTP Subsidiaries
nor, to the Knowledge of FTP, any director, officer, employee, consultant, representative
or agent of the foregoing, has (i) violated any anti bribery or anti corruption laws applicable
to FTP and the FTP Subsidiaries, including Canada’s Corruption of Foreign Public Officials
Act, or (ii) offered, paid, promised to pay, or authorized the payment of any money, or offered,
given, promised to give, or authorized the giving of anything of value, that goes beyond
what is reasonable and customary and/or of modest value: (A) to any Government Official,
whether directly or through any other person, for the purpose of influencing any act or decision
of a Government Official in his or her official capacity; inducing a Government Official
to do or omit to do any act in violation of his or her lawful duties; securing any improper
advantage; inducing a Government Official to influence or affect any act or decision of any
Governmental Entity; or assisting any representative of FTP or the FTP Subsidiaries in obtaining
or retaining business for or with, or directing business to, any person; or (B) to any person
in a manner which would constitute or have the purpose or effect of public or commercial
bribery, or the acceptance of or acquiescence in extortion, kickbacks, or other unlawful
or improper means of obtaining business or any improper advantage. Neither FTP nor the FTP
Subsidiaries nor to the Knowledge of FTP, any director, officer, employee, consultant, representative
or agent of foregoing, has (i) conducted or initiated any review, audit, or internal investigation
that concluded FTP, any of the FTP Subsidiaries or any director, officer, employee, consultant,
representative or agent of the foregoing violated such laws or committed any material wrongdoing,
or (ii) made a voluntary, directed, or involuntary disclosure to any Governmental Entity
responsible for enforcing anti bribery or anti corruption laws, in each case with respect
to any alleged act or omission arising under or relating to non compliance with any such
laws, or received any notice, request, or citation from any person alleging non compliance
with any such laws.
|
|
|
(ii)
|
Other than the Amalgamation, no proposed
acquisition by FTP or any of the FTP Subsidiaries has progressed to a state where a reasonable
person would believe that the likelihood of FTP or any of the FTP Subsidiaries completing
the acquisition is high.
|
|
|
(jj)
|
The FTP Business is in compliance with
all restrictions, requirements and prohibitions under applicable Law in force (including
the CDSA, the FDA, the FDR-J, the Criminal Code, and provincial, territorial and municipal
laws relating to controlled substances, the Controlled Substances Act, the Racketeering
and Influenced and Corrupt Practices Act, the Secure Air Travel Act, the Bank
Secrecy Act, the Agricultural Improvement Act of 2018, any applicable state corporate
practice of medicine statues or any applicable anti-money laundering or anti-kick back statute).
FTP and the FTP Subsidiaries have obtained all necessary Authorizations, and have been and
are currently operating their business in compliance in all material respects with, all applicable
Law. All Authorizations issued to date are valid and in full force and effect and neither
FTP nor any of the FTP Subsidiaries has received any correspondence or notice from the Office
of Controlled Substances, other offices of Health Canada, the CPSO, the New York State Medical
Board, the California Medical Board or any Governmental Authority alleging or asserting material
non compliance with any applicable Law or Authorization. Neither FTP nor any of the FTP Subsidiaries
have received any notice of proceedings or actions relating to the revocation, suspension,
limitation or modification of any Authorizations or any notice advising of the refusal to
grant any Authorization that has been applied for or is in process of being granted under
applicable Law including the FDA, the FDR-J or the Out of Hospital Premise Program of the
CPSO, and has no knowledge or reason to believe that any such Governmental Authority is considering
taking or would have reasonable ground to take any such action.
|
|
|
(kk)
|
Neither FTP nor any of the FTP Subsidiaries
has made any material loans to or guaranteed the material obligations of any person.
|
|
|
(ll)
|
To the Knowledge of FTP, none of the
directors or officers of FTP are now, or have been, subject to an order or ruling of any
securities regulatory authority or stock exchange prohibiting such individual from acting
as a director or officer of a public company or of a company listed on a particular stock
exchange.
|
|
|
(mm)
|
The minute books and records of FTP and
the FTP Subsidiaries made available to counsel for Newton in connection with their due diligence
investigation of FTP for the periods requested to the date hereof are all of the minute books
and material records of FTP and the FTP Subsidiaries and contain copies of all material proceedings
(or certified copies thereof or drafts thereof pending approval) of the shareholders, the
directors and all committees of directors of FTP and the FTP Subsidiaries, as the case may
be, to the date of review of such corporate records and minute books and there have been
no other meetings, resolutions or proceedings of the shareholders, directors or any committees
of the directors of FTP and the FTP Subsidiaries to the date hereof not reflected in such
minute books and other records, other than those which have been disclosed to Newton or which
are not material in the context of FTP and the FTP Subsidiaries.
|
|
|
(nn)
|
During the previous 12 months, FTP has
not, directly or indirectly, declared or paid any dividend or declared or made any other
distribution on any of its shares or securities of any class, or, directly or indirectly,
redeemed, purchased or otherwise acquired any of the FTP Common Shares or other securities
or agreed to do any of the foregoing. There are no restrictions upon the declaration or payment
of dividends by the directors of FTP or the payment of dividends by FTP in the constating
documents or in any material Contract or Debt Instruments.
|
|
|
(oo)
|
Except as disclosed in the FTP Financial
Statements, none of the directors, officers or employees of FTP, any known holder of more
than 10% of any class of securities of FTP or securities of any person exchangeable for more
than 10% of any class of securities of FTP, or any known associate or affiliate of any of
the foregoing persons or companies (as such terms are defined in the Act), has had any material
interest, direct or indirect, in any material transaction with FTP since the incorporation
of FTP, or any proposed material transaction which, as the case may be, materially affected
or is reasonably expected to materially affect FTP and any of the FTP Subsidiaries, on a
consolidated basis. All agreements governing such transactions have been made available to
Newton in the virtual data room. Neither FTP nor any of the FTP Subsidiaries has any material
loans or other indebtedness outstanding which has been made to any of its shareholders, officers,
directors or employees, past or present, or any person not dealing at “arm’s
length” (within the meaning of the Tax Act) with them.
|
|
|
(pp)
|
The operations of FTP and the FTP Subsidiaries
(or any related party thereof) are and have been conducted at all times in compliance with
the Anti-Money Laundering Laws, and no action, suit or proceeding by or before any court
or governmental agency, authority or body or any arbitrator involving FTP and the FTP Subsidiaries
(or any related party thereof) with respect to the Anti-Money Laundering Laws is, to the
Knowledge of FTP, pending or threatened.
|
|
|
(qq)
|
FTP acknowledges and agrees that the
Resulting Issuer Common Shares issuable to holders of FTP Common Shares, as well as the Resulting
Issuer Options issuable to holders of FTP Options and the Resulting Issuer Warrants issuable
to holders of FTP Warrants in the United States or who are U.S. Persons (i) have not been
and will not be registered under the U.S. Securities Act or any state securities laws, (ii)
are being or will be issued to such holders who are “accredited investors” within
the meaning of Rule 501(a) of Regulation D in reliance on the exemption from the registration
requirements of the U.S. Securities Act provided by Rule 506(b) of Regulation D and in reliance
upon similar exemptions from applicable state securities laws, and (iii) the Resulting Issuer
Common Shares, the Resulting Issuer Options and the Resulting Issuer Warrants will be “restricted
securities” and may not be offered or sold in the United States, nor may hedging transactions
involving such securities be conducted, unless such securities are registered under the U.S.
Securities Act and any applicable state securities law, an exemption from such registration
is available or such registration is otherwise not required.
|
|
|
(rr)
|
FTP acknowledges and agrees that no Resulting
Issuer Common Shares, Resulting Issuer Options or Resulting Issuer Warrants shall be delivered
to any person in the United States or to any U.S. Person if the Resulting Issuer determines,
in its sole discretion, that doing so may result in any contravention of the U.S. Securities
Act or any applicable state securities laws, including, but not limited to, if any of the
holders of FTP Common Shares, FTP Options or FTP Warrants are not an “accredited investor”
within the meaning of Rule 501(a) of Regulation D, and the Resulting Issuer may instead,
in the case of Resulting Issuer Common Shares, appoint an agent to sell the Resulting Issuer
Common Shares of such person on behalf of that person and deliver an amount of cash representing
the proceeds of the sale of such Resulting Issuer Common Shares, net of expenses of sale,
or, in the cases of Resulting Issuer Options or Resulting Issuer Warrants, may deliver an
amount of cash representing the fair market value of the Resulting Issuer Options or Resulting
Warrants, as applicable.
|
Article 5
CONDITIONS PRECEDENT AND OTHER MATTERS
|
5.1
|
Conditions to Obligations of FTP
|
The obligation of FTP to consummate
the transactions contemplated herein is subject to the satisfaction, on or before the Closing Date, of the following conditions:
|
|
(a)
|
except as affected by the transactions
contemplated herein, the representations and warranties of Newton contained in Section 4.1
hereof shall be true in all material respects on the Closing, with the same effect as though
such representations and warranties had been made at and as of such time, other than in respect
of representations and warranties qualified by materiality which representations and warranties
shall be true and correct, and FTP shall have received a certificate to that effect, dated
the Closing Date, from a senior officer or director of Newton acceptable to FTP, to the best
of his or her knowledge, having made reasonable inquiry;
|
|
|
(b)
|
Newton and Newton Subco shall have performed,
fulfilled or complied with, in all material respects, all of their obligations, covenants
and agreements contained in this Agreement to be fulfilled or complied with by them at or
prior to the Closing and FTP shall have received a certificate of a senior officer or director
of Newton to such effect;
|
|
|
(c)
|
Newton shall have furnished FTP with:
|
|
|
(i)
|
a certified copy of the special resolution
of the sole shareholder of Newton Subco authorizing and approving the Amalgamation;
|
|
|
(ii)
|
a certified copy of the resolutions of
the shareholders of Newton approving the Newton Meeting Matters; and
|
|
|
(iii)
|
a certificate of the transfer agent of
Newton setting forth the number and class of issued and outstanding Newton Common Shares
and Newton securities immediately prior to the Amalgamation;
|
|
|
(d)
|
receipt of all regulatory and third party
approvals, authorizations and consents as are required to be obtained by Newton or FTP in
connection with the Amalgamation, including the approval of the TSX Venture and the CSE and
any other applicable regulatory authorities;
|
|
|
(e)
|
the Resulting Issuer Common Shares that
are issued as consideration for the FTP Shares (i) shall be issued as fully paid and non-assessable
Resulting Issuer Common Shares in the capital of Newton; and (ii) shall have been conditionally
approved for listing on the CSE;
|
|
|
(f)
|
the Consolidation shall have been implemented;
|
|
|
(g)
|
the shareholders of Newton shall have
approved, among other matters and subject to completion of the Amalgamation, the Newton Meeting
Matters;
|
|
|
(h)
|
the shareholders of FTP shall have approved
the Amalgamation and this Agreement;
|
|
|
(i)
|
completion of the FTP Private Placement;
|
|
|
(j)
|
each of the directors and officers of
Newton shall have delivered resignations and mutual releases, in form satisfactory to FTP
acting reasonably;
|
|
|
(k)
|
there being no legal proceeding or regulatory
actions or proceedings against any Person to enjoin, restrict or prohibit the Amalgamation
or which could reasonably be expected to result in a Material Adverse Effect on Newton; and
|
|
|
(l)
|
there being no prohibition at law against
completion of the transactions contemplated hereby.
|
The conditions described above are
for the exclusive benefit of FTP and may be asserted by FTP regardless of the circumstances, or may be waived by FTP, in its sole discretion,
in whole or in part, at any time and from time to time prior to the Amalgamation without prejudice to any other rights which FTP may
have hereunder or at law and notwithstanding the approval of this Agreement by the shareholders of FTP and/or Newton Subco.
|
5.2
|
Conditions to Obligations of Newton
|
The obligations of Newton and Newton
Subco to consummate the transactions contemplated herein are subject to the satisfaction, on or before the Closing Date, of the following
conditions:
|
|
(a)
|
except as affected by the transactions
contemplated herein, the representations and warranties of FTP contained in Section 4.2 hereof
shall be true in all material respects on the Closing Date with the same effect as though
such representations and warranties had been made at and as of such time, other than in respect
of representations and warranties qualified by materiality which representations and warranties
shall be true and correct, and Newton shall have received a certificate to such effect, dated
the Closing Date, of a senior officer or director of FTP to the best of his knowledge having
made reasonable inquiry;
|
|
|
(b)
|
FTP shall have performed, fulfilled or
complied with, in all material respects, all of its obligations, covenants and agreements
contained in this Agreement to be fulfilled or complied with by it at or prior to the time
of the Closing and Newton shall have received a certificate of a senior officer or director
of FTP to such effect;
|
|
|
(c)
|
FTP shall have furnished Newton with:
|
|
|
(i)
|
certified copies of the special resolution
of the shareholders of FTP authorizing and approving the Amalgamation; and
|
|
|
(ii)
|
a certificate of FTP setting forth the
number and class of issued and outstanding FTP Shares and FTP securities immediately prior
to the Amalgamation;
|
|
|
(d)
|
receipt of all regulatory or third party
approvals, authorizations and consents as are required to be obtained by Newton or FTP in
connection with the Amalgamation, including the approval of the TSX Venture, the CSE and
any other applicable regulatory authorities;
|
|
|
(e)
|
no Material Adverse Change shall have
occurred in the business, results of operations, assets, liabilities, prospects, financial
condition or affairs of FTP since the date of this Agreement and Newton shall have received
a certificate to that effect signed by the Chief Executive Officer and Chief Financial Officer
of FTP and addressed to Newton;
|
|
|
(f)
|
each of the Principals contemporaneously
with the execution of this Agreement, shall have entered into a voting support agreement
with Newton (the “Target Support Agreement”) in form and substance as
set out in the Letter of Intent and such agreement shall be in full force and effect on the
Closing Date and no FTP Shareholder that is party to a Target Support Agreement shall be
in material default or breach of any term thereof;
|
|
|
(g)
|
the shareholders of Newton shall have
approved the Newton Meeting Matters;
|
|
|
(h)
|
the shareholders of FTP shall have approved
the Amalgamation and this Agreement;
|
|
|
(i)
|
FTP shall have no outstanding securities
other than 35,590,954 FTP Common Shares, and securities issued or issuable pursuant to a
Permitted Issuance;
|
|
|
(j)
|
there being no legal proceeding or regulatory
actions or proceedings against any Person to enjoin, restrict or prohibit the Amalgamation
or which could reasonably be expected to result in a Material Adverse Effect on FTP;
|
|
|
(k)
|
there being no prohibition at law against
the completion of the transactions contemplated hereby; and
|
|
|
(l)
|
Newton shall have received conditional
approval for listing of the Resulting Issuer Common Shares on the CSE.
|
The conditions described above are
for the exclusive benefit of Newton and Newton Subco and may be asserted by Newton and Newton Subco, regardless of the circumstances,
or may be waived by Newton and Newton Subco, in their sole discretion, in whole or in part, at any time and from time to time prior to
the Amalgamation without prejudice to any other rights which Newton and Newton Subco may have hereunder or at law and notwithstanding
the approval of this Agreement by the shareholders of Newton and/or FTP.
The conditions set out in Sections
5.1 and 5.2 hereof shall be conclusively deemed to have been satisfied, waived or released on the filing by FTP and Newton Subco of the
articles of amalgamation with the registrar under the CBCA.
|
5.4
|
Alternative Transactions
|
|
|
(a)
|
In the event that FTP breaches or violates
Section 3.3(a) or any Principal commits a breach of violation of the terms of a Target Support
Agreement, Newton may terminate this Agreement upon written notice to FTP (the “Newton
Termination Notice”) and FTP shall, within ten (10) Business Days of the date of
the Newton Termination Notice, make a cash payment to Newton (or as Newton may direct) in
the amount of $150,000, which payment shall constitute full and final compensation and remedy
to Newton for any breach, violation or the non-performance of this Agreement and any and
all fees and expenses associated therewith.
|
|
|
(b)
|
In the event that Newton breaches or violates
Section 3.1(a), FTP may terminate this Agreement upon written notice to Newton (the “FTP
Termination Notice”) and Newton shall, within three (3) business days of the date
of the FTP Termination Notice, make a cash payment to FTP in the amount of $150,000, which
payment shall constitute full and final compensation and remedy to FTP for any breach, violation
or the non-performance of this Agreement and any and all fees and expenses associated therewith.
|
Article 6
NOTICES
All notices, requests and demands hereunder,
which may or are required to be given pursuant to any provision of this Agreement, shall be given or made in writing and shall be delivered
by courier, mail, e-mail, or other similar means of electronic communication addressed as follows:
|
|
(a)
|
to Newton or Newton Subco, addressed to:
|
Newton Energy Corporation
1600, 333-7 Avenue SW
Calgary, AB T2P 2Z1
Canada
Attn: Gino DeMichele
Email: gd@a2capital.com
with a copy to
(such copy shall not constitute notice):
Fasken Martineau DuMoulin LLP
333 Bay Street
Suite 2400, Bay Adelaide Centre
Toronto, ON M5H 2T6
Canada
Attn: Rubin Rapuch
Email: rrapuch@fasken.com
|
|
(b)
|
to FTP, addressed to:
|
Field Trip Psychedelics Inc.
30 Duncan Street, Suite 401
Toronto, ON M5V 2C3
Canada
Attn: Joseph del Moral
Email: joseph@fieldtriphealth.com
with a copy to
(such copy shall not constitute notice):
Bennett Jones LLP
First Canadian Place
100 King Street West, Suite 3400
Toronto, ON M5X 1A4
Canada
Attn: Aaron Sonshine
Email: sonshinea@bennettjones.com
or to such other addresses or e-mail
addresses as the parties may, from time to time, advise to the other parties hereto by notice in writing. All notices, requests and demands
hereunder shall be deemed to have been received, if delivered personally or by prepaid courier on the date of delivery and if sent by
e-mail, on the next Business Day after the e-mail was sent.
Article 7
AMENDMENT AND TERMINATION OF AGREEMENT
This Agreement may, at any time and
from time to time before or after the holding of the Newton Meeting or FTP Meeting, be amended by written agreement of the parties hereto
without, subject to applicable law, further notice to or authorization on the part of their respective shareholders, and any such amendment
may, without limitation:
|
|
(a)
|
change the time for performance of any
of the obligations or acts of the parties hereto;
|
|
|
(b)
|
waive any inaccuracies or modify any representation
or warranty contained herein or in any document delivered pursuant hereto;
|
|
|
(c)
|
waive compliance with or modify any of
the covenants herein contained and waive or modify performance of any of the obligations
of the parties hereto; and
|
|
|
(d)
|
waive compliance with or modify any other
conditions precedent contained herein.
|
|
7.2
|
Rights of Termination
|
This Agreement may be terminated:
|
|
(a)
|
by mutual agreement of the parties hereto
in writing;
|
|
|
(b)
|
by Newton, upon provision of a Newton
Termination Notice in accordance with Section 5.4(a);
|
|
|
(c)
|
by FTP, upon provision of an FTP Termination
Notice in accordance with Section 5.4(b);
|
|
|
(d)
|
by FTP (i) by notice to Newton if any
of the conditions contained in Section 5.1 hereof shall not be fulfilled or performed
by the Termination Date or (ii) upon a breach by Newton that could reasonably result in a
condition set forth in Section 5.1 (that has not been waived) being incapable of being satisfied
on or before the Termination Date;
|
|
|
(e)
|
by Newton (i) by notice to FTP if any
of the conditions contained in Section 5.2 hereof shall not be fulfilled or performed
by the Termination Date, or (ii) upon a breach by FTP that could reasonably result in a condition
set forth in Section 5.2 (that has not been waived) being incapable of being satisfied on
or before the Termination Date;
|
|
|
(f)
|
by either party if the Amalgamation is
not completed by the Termination Date; or
|
|
|
(g)
|
by either party if any applicable Governmental
Entity has notified any of Newton, Newton Subco or FTP that it will not permit the Amalgamation
to proceed, in whole or in part.
|
If this Agreement is terminated as
aforesaid by either Newton or FTP, as the case may be, the party terminating this Agreement shall be released from all obligations under
this Agreement, other than the obligations that by their terms survive the termination of this Agreement (including under this Section
7.2 and Sections 3.5(b), 5.4, 8.6 and 8.7), all rights of specific performance against such party shall terminate and, unless such party
can show that the condition or conditions the non-performance of which has caused such party to terminate this Agreement were reasonably
capable of being performed by the other party, then the other party shall also be released from all obligations hereunder, other than
the obligations that by their terms survive the termination of this Agreement (as set out above); and further provided that any of such
conditions may be waived in full or in part by either of the parties without prejudice to its rights of termination in the event of the
non-fulfilment or non-performance of any other condition.
|
7.3
|
Notice of Unfulfilled Conditions
|
If either of FTP or Newton shall determine
at any time prior to the Closing that it may be unwilling to consummate the Amalgamation or any of the other transactions contemplated
hereby because of any unfulfilled or unperformed condition contained in this Agreement on the part of the other of them to be fulfilled
or performed, FTP or Newton, as the case may be, shall so notify the other party forthwith upon making such determination in order that
such other party shall have the right and opportunity to take such steps, at its own expense, as may be necessary for the purpose of
fulfilling or performing such condition within a reasonable period of time, but in no event later than the Termination Date.
Article 8
GENERAL
The terms and provisions herein contained
constitute the entire agreement between the parties with respect to the subject matter herein and shall supersede all previous oral or
written communications, representations, undertakings and agreements with respect to such subject matter, including the Letter of Intent.
This Agreement shall be binding upon
and enure to the benefit of the parties hereto.
|
8.3
|
Waiver and Modification
|
Newton and FTP may waive or consent
to the modification of, in whole or in part, any inaccuracy of any representation or warranty made to them hereunder or in any document
to be delivered pursuant hereto, and may waive or consent to the modification of any of the covenants or agreements herein contained
for their respective benefit or waive or consent to the modification of any of the obligations of the other parties hereto. No waiver
or consent to the modification of any inaccuracy of any provision of this Agreement constitutes a waiver of or consent to any proceeding,
continuing or succeeding inaccuracy of such provision or of any other provision of this Agreement. Any waiver or consent to the modification
of any of the provisions of this Agreement, to be effective, must be in writing executed by the party granting such waiver or consent.
|
8.4
|
No Personal Liability
|
|
|
(a)
|
No director, officer, employee or agent
of FTP or the FTP Subsidiaries shall have any personal liability whatsoever to Newton or
Newton Subco under this Agreement, or under any other document delivered in connection with
the Amalgamation on behalf of FTP.
|
|
|
(b)
|
No director, officer, employee or agent
of either Newton or Newton Subco shall have any personal liability whatsoever to FTP under
this Agreement, or under any other document delivered in connection with the Amalgamation
on behalf of Newton or Newton Subco.
|
No party to this Agreement may assign
any of its rights or obligations under this Agreement without the prior written consent of the other party hereto.
|
|
(a)
|
No disclosure or announcement, public
or otherwise, in respect of this Agreement or the transactions contemplated hereby will be
made by Newton, Newton Subco, FTP or their representatives without the prior agreement of
the other parties hereto as to timing, content and method, provided that the obligations
herein will not prevent a party from making, after consultation with the other parties, such
disclosure as its counsel advises is required by applicable law or the rules and policies
of the TSX Venture or the CSE.
|
|
|
(b)
|
Except as and only to the extent required
by applicable law, a Receiving Party will not disclose or use, and it will cause its representatives
not to disclose or use, any Confidential Information furnished, or to be furnished, by a
Disclosing Party or its representatives to the Receiving Party or its representatives at
any time or in any manner other than for purposes of evaluating the transactions proposed
in this Agreement.
|
|
|
(c)
|
If this Agreement is terminated pursuant
to Article 7, each Receiving Party will promptly return to the Disclosing Party or destroy
any Confidential Information and any work product produced from such Confidential Information
in its possession or in the possession of any of its representatives.
|
Each of the parties hereto shall be
responsible for their own costs and charges incurred with respect to the transactions contemplated herein including, without limitation,
all costs and charges incurred prior to the date of this Agreement and all legal and accounting fees and disbursements relating to preparing
the documents relating to the transactions contemplated herein or otherwise relating to the transactions contemplated herein. For the
purposes of clarity, FTP shall be responsible for paying the costs and fees payable to the TSX Venture and the CSE regarding their review
of the Amalgamation and the personal information forms to be submitted by the proposed executive officers, directors and promoters and
insiders of the Resulting Issuer following completion of the Amalgamation and all listing fees payable in connection with any securities
issued pursuant to the Amalgamation and/or any application fees payable to the TSX Venture or the CSE in connection with the transactions
contemplated herein.
Time shall be of the essence of this
Agreement.
The representations and warranties
of each of FTP, Newton and Newton Subco contained herein shall survive the execution and delivery of this Agreement and shall terminate
on the earlier of the termination of this Agreement in accordance with its terms and the Closing.
This Agreement shall be governed by
and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein, without giving
effect to the principles of conflicts of laws thereof, and the parties hereto irrevocably attorn to the non-exclusive jurisdiction of
the courts of the Province of Ontario in respect of any matter arising hereunder or in connection herewith.
In the event that any provisions contained
in this Agreement shall be declared invalid, illegal or unenforceable by a court or other lawful authority of competent jurisdiction,
this Agreement shall continue in force with respect to the enforceable provisions and all rights and remedies accrued under the enforceable
provisions shall survive any such declaration, and any non-enforceable provision shall, to the extent permitted by law, be replaced by
a provision which, being valid, comes closest to the intention underlying the invalid, illegal or unenforceable provision.
Each party hereto shall, from time
to time, and at all times hereafter, at the request of the other parties hereto, but without further consideration, do all such further
acts and execute and deliver all such further documents and instruments as shall be reasonably required in order to fully perform and
carry out the terms and intent hereof.
|
8.13
|
Counterparts and Electronic Copies
|
This Agreement may be executed in separate
counterparts, and all such counterparts when taken together shall constitute one (1) agreement. The parties shall be entitled to rely
on delivery of a facsimile, email in pdf, DocuSign or other electronic copy of the executed Agreement and such copy shall be legally
effective to create a valid and binding Agreement.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF the parties have executed this
Agreement as of the date first above written.
|
|
|
|
|
NEWTON
ENERGY CORPORATION
|
FIELD
TRIP PSYCHEDELICS INC.
|
|
Per: “Gino DeMichele”
|
Per: “Joseph
del Moral”
|
|
|
Name:
Gino DeMichele
|
|
|
Name:
Joseph del Moral
|
|
|
Title: Authorized Signatory
|
|
|
Title: Authorized Signatory
|
|
NEWTON
ENERGY SUBCO LIMITED
|
|
|
|
Per: “Gino DeMichele”
|
|
|
|
|
Name:
Gino DeMichele
|
|
|
|
|
Title: Authorized Signatory
|
|
|
SCHEDULE A
Issued and Outstanding
Shares of FTP Subsidiaries
Field Trip Health Inc.
|
|
·
|
Existing
under the laws of Canada.
|
|
|
·
|
Wholly-owned
subsidiary of FTP.
|
|
|
·
|
The
authorized and issued share capital consists of an unlimited number of common shares, of
which 100 common shares are outstanding
|
Field Trip Health USA Inc.
|
|
·
|
Existing
under the laws of Delaware.
|
|
|
·
|
Wholly-owned
subsidiary of FTP.
|
|
|
·
|
The
authorized and issued share capital consists of 5,000 shares of common stock, with a par
value of US$0.01 per share and an unlimited number of preferred shares, of which 1,000 shares
of common stock are outstanding
|
Field Trip Natural Products Limited
|
|
·
|
Existing
under the laws of Jamaica.
|
|
|
·
|
Wholly-owned
subsidiary of FTP.
|
|
|
·
|
The
authorized and issued share capital consists of 1,000,000 ordinary shares, of which 600 ordinary
shares are outstanding
|
Field Trip Digital LLC
|
|
·
|
Existing
under the laws of Delaware.
|
|
|
·
|
Wholly-owned
subsidiary of FTP.
|
|
|
·
|
FTP
is the sole member.
|
Field Trip Health B.V.
|
|
·
|
Existing
under the laws the Netherlands.
|
|
|
·
|
Wholly-owned
subsidiary of FTP.
|
|
|
·
|
The
issued share capital consists of 1 shares, with issued capital of €1.00.
|
Exhibit 99.44
FORM 51-102F3
MATERIAL CHANGE REPORT
Item 1 – Name and Address of Company:
Newton Energy Corporation
1600, 333 - 7 Avenue SW
Calgary, AB
T2P 2Z1
Item 2 - Date of Material Change:
August 21, 2020
Item 3 – News Release:
A news release dated August 21, 2020 was disseminated via
CNW Group. A copy of the news release has been filed on SEDAR and is available at www.sedar.com.
Item 4 – Summary of Material Change:
Newton Energy Corporation (“Newton”)
announced that it has entered into an amalgamation agreement with Field Trip Psychedelics Inc. (“Field Trip”) and Newton
Energy Subco Limited, a wholly-owned subsidiary of Newton, to complete a going-public transaction in Canada for Field Trip.
Item 5 – Full Description of Material Change:
|
5.1
|
Full Description of Material Change
|
On April 21, 2020, Newton announced that
it has entered into a definitive agreement dated August 21, 2020 (the “Amalgamation Agreement”) with Field Trip and
Newton’s wholly-owned subsidiary, Newton Energy Subco Limited (“Newton Subco”), pursuant to which the parties
intend to complete a going-public transaction for Field Trip (the “Transaction”). The Transaction is structured as
a three-cornered amalgamation, which will result in Field Trip becoming a wholly-owned subsidiary of Newton by amalgamating with Newton
Subco, and the security holders of Field Trip becoming security holders of Newton. In connection with the completion of the Transaction,
it is intended that Newton will change its name to “Field Trip Health Ltd.” (the “Resulting Issuer”). The
Amalgamation Agreement will be made available on SEDAR at www.sedar.com.
Field Trip and Newton anticipate the
closing of the Transaction (the "Closing") will occur on or about September 29, 2020. The Transaction is subject to the
receipt of all necessary regulatory and shareholder approvals as well as the satisfaction of conditions to the Closing as set out in the
Amalgamation Agreement.
About Field Trip
Field Trip was incorporated pursuant to the provisions
of the Canada Business Corporations Act on April 2, 2019. Field Trip is redefining mental health and wellness with ground-breaking
work in psychedelics and psychedelic therapies. Through its Field Trip Health centres opening across North America, that provide best-in-class
psychedelic-therapies, and drug development and advanced research on plant-based psychedelics through Field Trip Discovery, its newly
formed drug development division, Field Trip's goal is to help those in treatment and those seeking accelerated personal growth with a
simple, evidence-based way to heal and heighten engagement with the world.
Field Trip Financing
On August 14, 2020, Field Trip completed brokered
and non-brokered private placements of an aggregate of 5,516,724 class A shares in the capital of Field Trip (each, a "Field Trip
Share"), at a price of $2.00 per Field Trip Share, for aggregate gross proceeds of $11,033,448 (the “Private Placement”).
Canaccord Genuity Corp. and Stifel Nicolaus Canada
Inc. jointly acted as lead agents in connection with the brokered portion of the Private Placement, for which they were paid a cash commission
of $391,082, and were issued 55,167 class A shares and 299,753 compensation warrants, with each warrant exercisable into one class A share
of Field Trip at a price of $2.00 per share until August 14, 2022.
Principal Purposes of Funds
The funds to be available to the Resulting Issuer
upon the Closing are expected to be approximately $14,000,000 which includes the net proceeds of the Private Placement. These funds are
anticipated to be principally used for the continued expansion and development of the Field Trip clinics, costs associated with Field
Trip's research, drug discovery and development initiatives, for technology innovation and for general corporate purposes. While the Resulting
Issuer intends to spend the funds available to it as stated herein, there may be circumstances where management reasonably determines
that a reallocation of funds is necessary.
About the Transaction
Newton will hold an annual and special
meeting of its shareholders on September 23, 2020, subject to adjournment or postponement (the “Newton Meeting”),
to approve, among other things: (a) the election of the directors of the Resulting Issuer in connection with the Closing; (b) the
authorization to amend the articles of Newton to change its name to “Field Trip Health Ltd.” or such similar name as may
be accepted by the relevant regulatory authorities and approved by the board of directors of Newton; (c) the consolidation (the
“Consolidation”) of the issued and outstanding common shares of Newton (each a “Newton Share”)
prior to the Closing on the basis of one (1) post -Consolidation Newton Share for every eight (8) pre-Consolidation Newton Shares;
(d) the authorization to apply to de-list the Newton Shares from the facilities of the TSX Venture Exchange (the
“TSXV”) and apply to list the Newton Shares on the facilities of the Canadian Securities Exchange (the
“CSE”); (e) the adoption of certain amendments to the by-laws of Newton; and (f) such other special business as
may be properly brought before the Newton Meeting or any postponement or adjournment thereof.
Upon completion of the Consolidation,
it is anticipated that the 6,361,047 currently issued and outstanding Newton Shares will be consolidated into 795,131 post-Consolidation
Newton Shares.
Details regarding the Newton Meeting are
available in a management information circular dated August 21, 2020 that has been mailed to shareholders of Newton. The Transaction will
be approved by the sole shareholder of Newton Subco and by the shareholders of Field Trip prior to the Closing.
Under the terms of the Amalgamation Agreement,
at the effective time of the Transaction, among other things:
|
|
(a)
|
each issued and outstanding Field Trip Share (other than Field
Trip Shares held by holders that have validly exercised their dissent rights) will be cancelled, and the holder thereof will receive
one fully paid and non-assessable common share of the Resulting Issuer (each, a “Resulting Issuer Share”) (on a post-Consolidation
basis) in exchange for such Field Trip Share; and
|
|
|
(b)
|
each outstanding Field Trip stock option and warrant (of which
approximately 3,466,806 stock options and 299,753 warrants are outstanding as at the date hereof) will be cancelled and its holder will
receive in exchange therefor an option or warrant, as applicable of the Resulting Issuer to purchase a Resulting Issuer Share which convertible
securities shall have all of the terms and conditions, including the exercise price, term to expiry, vesting conditions and manner of
exercising, as the Field Trip option or warrant for which it was exchanged. In connection with the Closing, an aggregate of 35,590,954
Resulting Issuer Shares will be issued to holders of Field Trip Shares. Immediately after the Closing, and after giving effect to the
Consolidation, the shareholders of Newton will own approximately 2.2% of the Resulting Issuer Shares and the former shareholders of Field
Trip will own approximately 97.8% of the Resulting Issuer Shares, each on an undiluted basis.
|
In connection with the Transaction, and subject
to the receipt of all necessary shareholder and regulatory approvals, Newton intends to voluntarily de-list the Newton Shares from the
NEX board of the TSXV. It is a condition of the Closing that Newton has obtained the conditional approval of the CSE for listing of the
Resulting Issuer Shares on the CSE. As a result, it is anticipated that the Transaction will be governed by the policies of the CSE.
Completion of the Transaction will be
subject to the closing conditions set forth in the Amalgamation Agreement, which include the approval of the listing of Resulting
Issuer Shares on the CSE, the approval of the Transaction by shareholders of Field Trip, approval of matters ancillary to the
Transaction by shareholders of Newton at the Newton Meeting, and certain standard closing conditions, including there being no
material adverse change in the business of Newton or Field Trip prior to completion of the Transaction. The Transaction itself is
not subject to shareholder approval of Newton. The proposed de-listing of the Newton Shares from the TSXV is subject to the approval
of a majority of the minority shareholders of Newton.
|
|
The Transaction is an arm’s length transaction.
|
|
5.2
|
Disclosure for Restructuring Transactions
|
Item 6 – Reliance on subsection 7.1(2) of National Instrument
51-102:
Item 7 - Omitted Information:
Item 8 – Executive Officer:
|
|
Gino DeMichele
|
|
|
Chief Executive Officer
|
|
|
Tel: 403.680.7898
|
Item 9 – Date of Report:
SCHEDULE “A”
Newton Energy
Corporation Announces Definitive Agreement with Field Trip Psychedelics Inc.
Calgary, Alberta -- (Marketwired - August 21, 2020)
NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES
OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAW.
Newton Energy Corporation (“Newton”)
(TSXV: NTN.H) is pleased to announce that, further to its news release of June 18, 2020, it has entered into a definitive agreement dated
August 21, 2020 (the “Amalgamation Agreement”) with Field Trip Psychedelics Inc. (“Field Trip”)
(www.fieldtriphealth.com) and Newton’s wholly-owned subsidiary, Newton Energy Subco Limited (“Newton Subco”),
pursuant to which the parties intend to complete a going-public transaction for Field Trip (the “Transaction”) . The
Transaction is structured as a three- cornered amalgamation, which will result in Field Trip becoming a wholly-owned subsidiary of Newton
by amalgamating with Newton Subco, and the security holders of Field Trip becoming security holders of Newton. In connection with the
completion of the Transaction, it is intended that Newton will change its name to “Field Trip Health Ltd.” (the “Resulting
Issuer”). The Amalgamation Agreement will be made available on SEDAR at www.sedar.com.
Field Trip and Newton anticipate the closing of
the Transaction (the "Closing") will occur on or about September 29, 2020. The Transaction is subject to the receipt
of all necessary regulatory and shareholder approvals as well as the satisfaction of conditions to the Closing as set out in the Amalgamation
Agreement.
About Field Trip
Field Trip was incorporated pursuant to the provisions
of the Canada Business Corporations Act on April 2, 2019. Field Trip is redefining mental health and wellness with ground-breaking
work in psychedelics and psychedelic therapies. Through its Field Trip Health centres opening across North America, that provide best-in-class
psychedelic-therapies, and drug development and advanced research on plant- based psychedelics through Field Trip Discovery, its newly
formed drug development division, Field Trip's goal is to help those in treatment and those seeking accelerated personal growth with a
simple, evidence-based way to heal and heighten engagement with the world.
Select Audited Financial Information
Audited Financial Information for Period from
Incorporation on April 2, 2019 to March 31, 2020
|
|
Total Assets
|
|
$
|
12,541,095
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
$
|
2,121,083
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,000
|
|
|
|
|
|
|
|
|
Net Losses
|
|
$
|
2,678,365
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
9,690,758
|
|
Field Trip Financing
On August 14, 2020, Field Trip completed brokered
and non-brokered private placements of an aggregate of 5,516,724 class A shares in the capital of Field Trip (each, a "Field Trip
Share"), at a price of $2.00 per Field Trip Share, for aggregate gross proceeds of $11,033,448 (the “Private Placement”).
Canaccord Genuity Corp. and Stifel Nicolaus Canada
Inc. jointly acted as lead agents in connection with the brokered portion of the Private Placement, for which they were paid a cash commission
of $391,082, and were issued 55,167 class A shares and 299,753 compensation warrants, with each warrant exercisable into one class
A share of Field Trip at a price of $2.00 per share until August 14, 2022.
Principal Purposes of Funds
The funds to be available to the Resulting Issuer
upon the Closing are expected to be approximately $14,000,000 which includes the net proceeds of the Private Placement. These funds are
anticipated to be principally used for the continued expansion and development of the Field Trip clinics, costs associated with Field
Trip's research, drug discovery and development initiatives, for technology innovation and for general corporate purposes. While the Resulting
Issuer intends to spend the funds available to it as stated herein, there may be circumstances where management reasonably determines
that a reallocation of funds is necessary.
About the Transaction
Newton will hold an annual and special meeting
of its shareholders on September 24, 2020, subject to adjournment or postponement (the “Newton Meeting”), to approve,
among other things: (a) the election of the directors of the Resulting Issuer in connection with the Closing; (b) the authorization to
amend the articles of Newton to change its name to “Field Trip Health Ltd.” or such similar name as may be accepted by the
relevant regulatory authorities and approved by the board of directors of Newton; (c) the consolidation (the “Consolidation”)
of the issued and outstanding common shares of Newton (each a “ Newton Share”) prior to the Closing on the basis of
one (1) post-Consolidation Newton Share for every eight (8) pre-Consolidation Newton Shares; (d) the authorization to apply to de-list
the Newton Shares from the facilities of the TSX Venture Exchange (the “TSXV”) and apply to list the Newton Shares
on the facilities of the Canadian Securities Exchange (the “CSE”); (e) the adoption of certain amendments to the by-laws
of Newton; and (f) such other special business as may be properly brought before the Newton Meeting or any postponement or adjournment
thereof.
Upon completion of the Consolidation, it is anticipated
that the 6,361,047 currently issued and outstanding Newton Shares will be consolidated into 795,131 post-Consolidation Newton Shares.
Details regarding the Newton Meeting are available
in a management information circular dated August 21, 2020 that has been mailed to shareholders of Newton. The Transaction will be approved
by the sole shareholder of Newton Subco and by the shareholders of Field Trip prior to the Closing.
Under the terms of the Amalgamation Agreement, at the effective time
of the Transaction, among other things:
|
|
(c)
|
each issued and outstanding Field Trip Share (other than Field
Trip Shares held by holders that have validly exercised their dissent rights) will be cancelled, and the holder thereof will receive
one fully paid and non-assessable common share of the Resulting Issuer (each, a “Resulting Issuer Share”) (on a post-Consolidation
basis) in exchange for such Field Trip Share; and
|
|
|
(d)
|
each outstanding Field Trip stock option and warrant (of which
approximately 3,466,806 stock options and 299,753 warrants are outstanding as at the date hereof) will be cancelled and its holder will
receive in exchange therefor an option or warrant, as applicable of the Resulting Issuer to purchase a Resulting Issuer Share which convertible
securities shall have all of the terms and conditions, including the exercise price, term to expiry, vesting conditions and manner of
exercising, as the Field Trip option or warrant for which it was exchanged.
|
In connection with the Closing, an aggregate of
35,590,954 Resulting Issuer Shares will be issued to holders of Field Trip Shares. Immediately after the Closing, and after giving effect
to the Consolidation, the shareholders of Newton will own approximately 2.2% of the Resulting Issuer Shares and the former shareholders
of Field Trip will own approximately 97.8% of the Resulting Issuer Shares, each on an undiluted basis.
In connection with the Transaction, and subject
to the receipt of all necessary shareholder and regulatory approvals, Newton intends to voluntarily de-list the Newton Shares from the
NEX board of the TSXV. It is a condition of the Closing that Newton has obtained the conditional approval of the CSE for listing of the
Resulting Issuer Shares on the CSE. As a result, it is anticipated that the Transaction will be governed by the policies of the CSE.
Completion of the Transaction will be subject
to the closing conditions set forth in the Amalgamation Agreement, which include the approval of the listing of Resulting Issuer Shares
on the CSE, the approval of the Transaction by shareholders of Field Trip, approval of matters ancillary to the Transaction by shareholders
of Newton at the Newton Meeting, and certain standard closing conditions, including there being no material adverse change in the business
of Newton or Field Trip prior to completion of the Transaction. The Transaction itself is not subject to shareholder approval of Newton.
The proposed de-listing of the Newton Shares from the TSXV is subject to the approval of a majority of the minority shareholders of Newton.
Arm’s Length Transaction
The Transaction is an arm’s length transaction.
Proposed Management and Board of Directors of the Resulting Issuer
Upon completion of the Transaction, it is anticipated
that the persons identified below will serve as directors and officers of the Resulting Issuer.
Joseph del Moral, Director & Chief Executive Officer
Mr. del Moral is an experienced
entrepreneur and a founder of Field Trip. In 2014, he was the founder and CEO of CanvasRx Inc. and Canadian Cannabis Clinics, which grew
to be the largest cannabis clinic company in Canada. In 2016, CanvasRx was acquired by Aurora Cannabis Inc. (NYSE: ACB) (“Aurora”)
and he joined Aurora’s board of directors. During his time at Aurora, Mr. del Moral ensured that CanvasRx continued to grow and
achieve its milestones as well as assisted in corporate development, M&A and strategy. After leaving Aurora in 2018, Mr. del Moral
assumed the role of CEO of Trait Biosciences Inc., a leading biotech company in the hemp and cannabis industries. Prior to his time in
the cannabis industry, Mr. del Moral co-founded Newten Home Comfort, a fast growing home services company acquired by Just Energy Inc.
in 2009. Mr. del Moral is also on the board of directors of Felix Health, an innovative direct to consumer healthcare company that is
changing how Canadians access prescription drugs. Mr. del Moral holds a Bachelor of Commerce Degree (Finance and Entrepreneurship) from
McGill University.
Ronan Levy, Director & Executive Chairman & Corporate
Secretary
Mr. Levy is an entrepreneur and
is a co-founder and Executive Chairman of Field Trip. He is also a partner at Grassfed Ventures, a venture capital and advisory firm focused
on the cannabis and biotech industries, and a member of the board of directors of Trait Biosciences Inc., a leading biotech company in
the hemp and cannabis industries. Prior to his current roles, Mr. Levy co- founded Canadian Cannabis Clinics and CanvasRx Inc., which
was acquired by Aurora in 2016, after which he served as Senior Vice President, Business and Corporate Affairs, for Aurora. A lawyer by
training, Mr. Levy started his career as a corporate lawyer at Blake, Cassels and Graydon LLP and as legal counsel at CTVglobemedia Inc.
(now Bell Media Inc.). Mr. Levy holds a Juris Doctor and a Bachelor of Commerce degree, both from the University of Toronto.
Hannan Fleiman, Director & President of Healthcare
Mr. Fleiman is a serial entrepreneur and has co-founded
and operated several companies, including Field Trip., CanvasRx Inc., Canadian Cannabis Clinic and
Dominion Home Insulation. Prior to founding these companies, Mr. Fleiman managed the hospital department, animal health and OTC divisions
at Teva Canada. Mr. Fleiman is a board member of MedicNL, a contract research organization, and was a board member of Abacus Health, where
he headed the audit and compensation committees before the successful sale to Charlotte’s Web Holdings, Inc. (CSE: CWEB). Mr. Fleiman
earned his MBA from McMaster University and his BSc from University of Guelph.
Mujeeb Jafferi, Director & President
Mr. Jafferi is an experienced management
executive and a founder of Field Trip. Prior to joining Field Trip, Mr. Jafferi spent over a decade in the retail and renewable
energy sectors in a variety of leadership roles. Between 2016 and 2019, Mr. Jafferi served as the Vice President of Sales Operations
and Strategy at Just Energy Inc. (TSX: JE) and the President of Just Energy Solar. In 2015, Mr. Jafferi served as a Partner at a
renewable energy technology startup, LightWing Partners, leading its business development efforts across the US market. LightWing
Partners was subsequently acquired by SunEdison. Between 2009 and 2015, Mr. Jafferi held several progressive and diverse leadership
roles at Just Energy, including Director of Corporate Planning and Financial Analysis, and Asst. Regional General Manager for US
Northeast Region. He holds a BA in Information Technology from York University and a Global Professional Master of Laws from
University of Toronto.
Dr. Ryan Yermus, Director & Chief Clinical Officer
Dr. Yermus is a physician who completed his medical
training at the University of Ottawa in 2007 and his residency at the University of Toronto in 2009. As a pioneer in the Canadian medical
cannabis industry, he was responsible for the development of a clinical protocol that led to the treatment of thousands of medical cannabis
patients. In 2014, Dr. Yermus founded Medical Marijuana Clinics of Canada (MMCC), the first fully compliant cannabis clinic in Ontario.
MMCC went on to be acquired by Canadian Cannabis Clinics, which grew to become the nation’s largest cannabis clinic network and
was acquired by Aurora Cannabis Inc. in 2016. For the past decade, Dr. Yermus has also worked as a clinician helping patients suffering
from addictions.
Tyler Dyck, Interim Chief Financial Officer
Mr. Dyck is a CPA, CA comfortable working across all functions
of an organization in high-growth environments. Most recently, Mr. Dyck was Finance employee #1 at HelloFresh Canada, where starting from
a 100% outsourced model, he grew the Finance and Accounting function to a team of 8 over 30 months. While at HelloFresh he also led the
due diligence, financial analysis, and business planning relating to the acquisition of Chefs Plate. Mr. Dyck started his career in KPMG’s
audit practice after obtaining an Honours BBA from Wilfrid Laurier University.
Helen M. Boudreau, Director
Ms. Boudreau is a retired senior executive with
30 years experience across biotech, pharmaceuticals, consulting, and banking industries. She was most recently COO of the Bill & Melinda
Gates Medical Research Institute, a non-profit biotech focused on diseases that cause mortality, poverty, and inequality in low and middle-income
countries. Previously, she served as CFO for public and private biotechs, Proteostasis Therapeutics and FORMA Therapeutics. Helen spent
16 years at Novartis and Pfizer, serving in strategy and senior finance roles, including global CFO Oncology business unit, CFO US Corporate,
VP Investor Relations, VP Finance, Customer Business Unit and Commercial Operations, and VP Finance Global R&D. Helen started her
career in banking and was an engagement manager at McKinsey & Company, a strategic consulting firm. Helen is currently a member of
the board of Premier, Inc. (NASDAQ: PINC), a healthcare improvement company, and is also on the boards of two private biotech companies.
Helen earned a BA in Economics, summa cum laude, from the University of Maryland, and an MBA from the Darden Graduate School of
Business at the University of Virginia.
Dieter Weinand, Director
Mr. Weinand is an experienced executive with
over 30 years’ of experience in the pharmaceuticals and biotech industries. Mr. Weinand presently serves as the chairman of
the board of directors of Replimune Group Inc. (NASDAQ: REPL). Previously, Mr. Weinand served as the Executive Vice President of
Primary Care and was a member of the Executive Committee at Sanofi from November 2018 to February 2020. Before moving to Sanofi, Mr.
Weinand was CEO and Chairman of the Board of Management of Bayer Pharma AG and member of the Management Board at Bayer AG. Prior to
his work at Sanofi and Bayer, Mr. Weinand has held various positions in commercial, operational, and strategic areas of the
pharmaceutical industry. These included responsibilities spanning various therapeutic areas and geographies for companies such as
Pfizer, Bristol Myers Squibb, and Otsuka. Mr. Weinand earned an MS in Pharmacology and Toxicology from Long Island University, New
York, and a BA in Biology from Concordia College, New York. Mr. Weinand is a former board member of the Pharmaceutical Research and
Manufacturers of America (PhRMA), the European Federation of Pharmaceutical Industries & Associations (EFPIA), and the
International Federation of Pharmaceutical Manufacturers (IFPMA), and served as a member of the Board of Directors of HealthPrize
Technologies.
This press release does not constitute an offer
to sell or the solicitation of an offer to buy any securities in any jurisdiction.
ANY SECURITIES REFERRED TO HEREIN WILL NOT BE
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), AND MAY NOT BE OFFERED OR SOLD IN THE
UNITED STATES OR TO A U.S. PERSON IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT.
The information contained or referred to in
this press release relating to Field Trip has been furnished by Field Trip. Although Newton has no knowledge that would indicate that
any statement contained herein concerning Field Trip is untrue or incomplete, neither Newton nor any of its respective directors or officers
assumes any responsibility for the accuracy or completeness of such information.
Completion of the transaction is subject to
a number of conditions, including, if applicable, TSXV acceptance and, majority of the minority shareholder approval of the delisting
of the Newton Shares from the TSXV. Where applicable, the Transaction cannot close until the required shareholder approval is obtained.
There can be no assurance that the Transaction will be completed as proposed or at all.
Investors are cautioned that, except as disclosed
in the management information circular or listing statement to be prepared in connection with the Transaction, any information released
or received with respect to the Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of
Newton should be considered highly speculative.
The TSXV has in no way passed upon the merits
of the Transaction and has neither approved nor disapproved the contents of this news release.
Notice regarding forward-looking statements:
This press release includes forward-looking
statements regarding Newton, Field Trip, and their respective businesses, which may include, but is not limited to, statements with respect
to the completion of the Transaction, the terms on which the Transaction is intended to be completed, the expected use of the net proceeds
from the Private Placement, the ability to obtain regulatory and shareholder approvals, the proposed business plan of Field Trip and
other factors. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “is
expected”, “expects”, “scheduled”, “intends”, “contemplates”, “anticipates”,
“believes”, “proposes” or variations (including negative variations) of such words and phrases, or state that
certain actions, events or results “may”, “could”, “would”, “might” or “will”
be taken, occur or be achieved. Such statements are based on the current expectations of the management of each entity. The forward-looking
events and circumstances discussed in this press release, including completion of the Transaction, may not occur by certain specified
dates or at all and could differ materially as a result of known and unknown risk factors and uncertainties affecting the companies,
including risks regarding the industry, failure to obtain regulatory or shareholder approvals, economic factors, the equity markets generally
and risks associated with growth and competition. Although Newton and Field Trip have attempted to identify important factors that could
cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors
that cause actions, events or results to differ from those anticipated, estimated or intended. No forward-looking statement can be guaranteed.
Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and Newton
and Field Trip undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information,
future events, or otherwise.
For further information:
Newton Energy Corporation: Gino DeMichele, (403) 680-7898
Field Trip Psychedelics Inc.: Joseph del Moral,
Chief Executive Officer, (437) 688-6148, www.fieldtriphealth.com
Exhibit 99.45
NEWTON ENERGY CORPORATION
Management’s Discussion
and Analysis
For the six-month period ended
June 30, 2020
MANAGEMENT’S DISCUSSION
AND ANALYSIS
The following management’s
discussion and analysis (“MD&A”) reviews Newton Energy Corporation’s (“Newton” or the “Corporation”)
activities and results for the six-month period ended June 30, 2020. It should be read in conjunction with the unaudited Condensed Interim
Financial Statements for the six-month period ended June 30, 2020, together with the accompanying notes, included in that report. The
Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued
by the International Accounting Standards Board (“IASB”).
In the MD&A, unless otherwise
indicated, all dollar amounts are expressed in Canadian dollars. Additional information relating to the Corporation’s activities
can be found on SEDAR at www.sedar.com.
Date of Report
This MD&A is dated August 27, 2020
and presents material information up to this date.
Forward-Looking Information
This discussion offers management’s
analysis of the financial and operating results of the Corporation and contains certain forward-looking statements. Forward-looking information
typically contains statements with words such as “anticipate”, “estimate”, “expect”, “potential”,
“could”, or similar words suggesting future outcomes. The Corporation cautions readers and prospective investors in the Corporation’s
securities to not place undue reliance on forward-looking information as by its nature, it is based on current expectations regarding
future events that involve a number of assumptions, inherent risks and uncertainties, which could cause actual results to differ materially
from those anticipated by the Corporation.
Forward looking information is
based on management's current expectations and assumptions regarding, among other things, future capital and other expenditures (including
the amount, nature and sources of funding thereof), future economic conditions, future currency and exchange rates. Although the Corporation
believes the expectations and assumptions reflected in such forward- looking information are reasonable, they may prove to be incorrect.
Forward-looking information involves significant known and unknown risks and uncertainties.
See the Risk Factors section of
this MD&A for a further description of these risks. The forward- looking information included in this report is expressly qualified
in its entirety by this cautionary statement. The Corporation assumes no obligation to update or revise any forward-looking information
to reflect new events or circumstances, except as required by law. For additional information relating to the risks and uncertainties
facing the Corporation, see “Risk Factors.”
Description of Business
The Corporation is a publicly traded,
Calgary-based Corporation that is listed under the symbol “NTN” on NEX of the TSX Venture Exchange (“TSXV”). The
year 2014 was a transition for the Corporation as it exited the oil and gas sector with the sale of 100% of its oil and gas assets. The
Corporation has embarked on a new direction and is exploring new projects and ventures. The Corporation is considering business structures
including acquisitions, mergers, joint ventures, reverse takeovers or other corporate arrangements acceptable to regulatory authorities.
Agreement with Field Trip Psychedelics
Inc.
Newton entered into a definitive
agreement dated August 21, 2020 (the “Amalgamation Agreement”) with Field Trip Psychedelics Inc. (“Field Trip”)
(www.fieldtriphealth.com) and Newton’s wholly- owned subsidiary, Newton Energy Subco Limited (“Newton Subco”), pursuant
to which the parties intend to complete a going-public transaction for Field Trip (the “Transaction”). The Transaction is
structured as a three-cornered amalgamation, which will result in Field Trip becoming a wholly- owned subsidiary of Newton by amalgamating
with Newton Subco, and the security holders of Field Trip becoming security holders of Newton. In connection with the completion of the
Transaction, it is intended that Newton will change its name to “Field Trip Health Ltd.” (the “Resulting Issuer”).
The Amalgamation Agreement will be made available on SEDAR at www.sedar.com.
Field Trip and Newton anticipate
the closing of the Transaction (the "Closing") will occur on or about September 29, 2020. The Transaction is subject to the
receipt of all necessary regulatory and shareholder approvals as well as the satisfaction of conditions to the Closing as set out in the
Amalgamation Agreement.
Field Trip was incorporated pursuant
to the provisions of the Canada Business Corporations Act on April 2, 2019. Field Trip is redefining mental health and wellness with ground-breaking
work in psychedelics and psychedelic therapies. Through its Field Trip Health centres opening across North America, that provide best-in-class
psychedelic-therapies, and drug development and advanced research on plant-based psychedelics through Field Trip Discovery, its newly
formed drug development division, Field Trip's goal is to help those in treatment and those seeking accelerated personal growth with a
simple, evidence-based way to heal and heighten engagement with the world.
Audited Financial Information for Period from
Incorporation on April 2, 2019 to March 31, 2020
|
|
Total Assets
|
|
$
|
12,541,095
|
|
|
Total Liabilities
|
|
$
|
2,121,083
|
|
|
Revenues
|
|
$
|
1,000
|
|
|
Net Losses
|
|
$
|
2,678,365
|
|
|
Cash
|
|
$
|
9,690,758
|
|
On August 14, 2020, Field Trip
completed brokered and non-brokered private placements of an aggregate of 5,516,724 class A shares in the capital of Field Trip (each,
a "Field Trip Share"), at a price of $2.00 per Field Trip Share, for aggregate gross proceeds of $11,033,448 (the “Private
Placement”). Canaccord Genuity Corp. and Stifel Nicolaus Canada Inc. jointly acted as lead agents in connection with the brokered
portion of the Private Placement, for which they were paid a cash commission of $391,082, and were issued 55,167 class A shares and 299,753
compensation warrants, with each warrant exercisable into one class A share of Field Trip at a price of $2.00 per share until August 14,
2022. The funds to be available to the Resulting Issuer upon the Closing are expected to be approximately $14,000,000 which includes the
net proceeds of the Private Placement. These funds are anticipated to be principally used for the continued expansion and development
of the Field Trip clinics, costs associated with Field Trip's research, drug discovery and development initiatives, for technology innovation
and for general corporate purposes. While the Resulting Issuer intends to spend the funds available to it as stated herein, there may
be circumstances where management reasonably determines that a reallocation of funds is necessary.
Newton will hold an annual
and special meeting of its shareholders on September 24, 2020, subject to adjournment or postponement (the “Newton
Meeting”), to approve, among other things: (a) the election of the directors of the Resulting Issuer in connection with the
Closing; (b) the authorization to amend the articles of Newton to change its name to “Field Trip Health Ltd.” or such
similar name as may be accepted by the relevant regulatory authorities and approved by the board of directors of Newton; (c) the
consolidation (the “Consolidation”) of the issued and outstanding common shares of Newton (each a “Newton
Share”) prior to the Closing on the basis of one (1) post-Consolidation Newton Share for every eight (8) pre-Consolidation
Newton Shares; (d) the authorization to apply to de-list the Newton Shares from the facilities of the TSX Venture Exchange (the
“TSXV”) and apply to list the Newton Shares on the facilities of the Canadian Securities Exchange (the
“CSE”); (e) the adoption of certain amendments to the bylaws of Newton; and (f) such other special business as may be
properly brought before the Newton Meeting or any postponement or adjournment thereof. Upon completion of the Consolidation, it is
anticipated that the 6,361,047 currently issued and outstanding Newton Shares will be consolidated into 795,131 post-Consolidation
Newton Shares. Details regarding the Newton Meeting are available in a management information circular dated August 21, 2020 that
has been mailed to shareholders of Newton. The Transaction will be approved by the sole shareholder of Newton Subco and by the
shareholders of Field Trip prior to the Closing. Under the terms of the Amalgamation Agreement, at the effective time of the
Transaction, among other things: (a) each issued and
outstanding Field Trip Share (other than Field Trip Shares held by holders that have validly exercised their dissent rights) will be
cancelled, and the holder thereof will receive one fully paid and non-assessable common share of the Resulting Issuer (each, a
“Resulting Issuer Share”) (on a post-Consolidation basis) in exchange for such Field Trip Share; and (b) each
outstanding Field Trip stock option and warrant (of which approximately 3,466,806 stock options and 299,753 warrants are outstanding
as at the date hereof) will be cancelled and its holder will receive in exchange therefor an option or warrant, as applicable of the
Resulting Issuer to purchase a Resulting Issuer Share which convertible securities shall have all of the terms and conditions,
including the exercise price, term to expiry, vesting conditions and manner of exercising, as the Field Trip option or warrant for
which it was exchanged. In connection with the Closing, an aggregate of 35,590,954 Resulting Issuer Shares will be issued to holders
of Field Trip Shares. Immediately after the Closing, and after giving effect to the Consolidation, the shareholders of Newton will
own approximately 2.2% of the Resulting Issuer Shares and the former shareholders of Field Trip will own approximately 97.8% of the
Resulting Issuer Shares, each on an undiluted basis.
In connection with the Transaction,
and subject to the receipt of all necessary shareholder and regulatory approvals, Newton intends to voluntarily de-list the Newton Shares
from the NEX board of the TSXV. It is a condition of the Closing that Newton has obtained the conditional approval of the CSE for listing
of the Resulting Issuer Shares on the CSE. As a result, it is anticipated that the Transaction will be governed by the policies of the
CSE. Completion of the Transaction will be subject to the closing conditions set forth in the Amalgamation Agreement, which include the
approval of the listing of Resulting Issuer Shares on the CSE, the approval of the Transaction by shareholders of Field Trip, approval
of matters ancillary to the Transaction by shareholders of Newton at the Newton Meeting, and certain standard closing conditions, including
there being no material adverse change in the business of Newton or Field Trip prior to completion of the Transaction. The Transaction
itself is not subject to shareholder approval of Newton. The proposed de-listing of the Newton Shares from the TSXV is subject to the
approval of a majority of the minority shareholders of Newton.
The Transaction is an arm’s length
transaction.
Upon completion of the Transaction, it is anticipated that
the following persons identified will serve as directors and officers of the Resulting Issuer:
Joseph del Moral, Director & Chief
Executive Officer
Ronan Levy, Director & Executive Chairman &
Corporate Secretary Hannan Fleiman, Director & President of Healthcare
Mujeeb Jafferi, Director & President
Dr. Ryan Yermus, Director & Chief Clinical Officer
Tyler Dyck, Interim Chief Financial Officer
Helen M. Boudreau, Director Dieter Weinand, Director
Financial Highlights
As at June 30, 2020, the Corporation
had $472,456 in cash (June 30, 2019 - $616,464). The Corporation had a total comprehensive loss of $59,633 for the six months ended June
30, 2020 (June 30, 2018 - $141,204) and $33,875 for the three months ended June 30, 2020 (June 30, 2019 -
$117,428). This loss is comprised of
operating costs and expenses.
Selected Financial Information
The following table summarizes key financial information
on a quarterly basis for the previous two years:
|
|
|
June 30
2020
|
|
|
March 31
2020
|
|
|
December 31
2019
|
|
|
September 30
2019
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Total revenue
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,750
|
|
|
Net income
|
|
|
(33,875
|
)
|
|
|
(25,758
|
)
|
|
|
(64,202
|
)
|
|
|
(33,567
|
)
|
|
Basic and diluted loss per share
|
|
|
(0.01
|
)
|
|
|
(0.00
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
Total assets
|
|
|
479,261
|
|
|
|
509,065
|
|
|
|
542,317
|
|
|
|
582,160
|
|
|
Total liabilities
|
|
|
21,676
|
|
|
|
17,605
|
|
|
|
25,101
|
|
|
|
6,904
|
|
|
|
|
June
30
2019
|
|
|
March
31
2019
|
|
|
December
31
2018
|
|
|
September
30
2018
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Total revenue
|
|
|
4
|
|
|
|
-
|
|
|
|
3,559
|
|
|
|
54
|
|
|
Net income
|
|
|
(117,428
|
)
|
|
|
(23,776
|
)
|
|
|
(79,841
|
)
|
|
|
(70,293
|
)
|
|
Basic and diluted loss per share
|
|
|
(0.02
|
)
|
|
|
(0.00
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
Total assets
|
|
|
624,127
|
|
|
|
656,696
|
|
|
|
700,331
|
|
|
|
760,312
|
|
|
Total liabilities
|
|
|
15,304
|
|
|
|
10,605
|
|
|
|
30,464
|
|
|
|
10,604
|
|
For the six-month period ended
June 30, 2020, the Corporation reported no discontinued operations and did not declare any cash dividends. The Corporation’s revenue
is comprised entirely of interest earned on cash and cash equivalent balances. Office and administration expenses represent the Corporation’s
costs associated with its activities for the respective periods.
Operating Costs and Expenses
For the six-month period ended June
30, 2020, operating cost and expenses decreased to $59,633 compared to $141,208 for the same period in 2019. For the three months ended
June 30, 2020, operating costs and expenses decreased to $33,875 compared to $117,432 for the same period in 2019. No expenses were capitalized
during the six-month periods ended in 2020 and 2019.
Breakdown of Operating Costs and
Expenses
|
|
|
For the three months ended June 30, 2020
|
|
|
For the three months ended June 30, 2019
|
|
|
For the six months ended June 30, 2020
|
|
|
For the six months ended June 30, 2019
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Accounting and legal
|
|
|
8,894
|
|
|
|
6,992
|
|
|
|
13,718
|
|
|
|
8,681
|
|
|
Advertising and promotion
|
|
|
-
|
|
|
|
165
|
|
|
|
-
|
|
|
|
1,855
|
|
|
Consulting and director’s fees
|
|
|
14,000
|
|
|
|
12,500
|
|
|
|
26,000
|
|
|
|
18,500
|
|
|
Insurance
|
|
|
2,035
|
|
|
|
1,850
|
|
|
|
3,947
|
|
|
|
3,592
|
|
|
Office and miscellaneous
|
|
|
4,060
|
|
|
|
3,477
|
|
|
|
8,293
|
|
|
|
4,045
|
|
|
Share-based payments
|
|
|
-
|
|
|
|
80,160
|
|
|
|
-
|
|
|
|
80,160
|
|
|
Travel and business development
|
|
|
-
|
|
|
|
7,344
|
|
|
|
-
|
|
|
|
16,145
|
|
|
Regulatory and filing fees
|
|
|
4,886
|
|
|
|
4,944
|
|
|
|
7,675
|
|
|
|
8,230
|
|
Accounting and legal were $13,718
for the six-month period and $8,894 for the three-month period ended June 30, 2020 compared to $8,681 for the six-month period and $6,992
for the three-month period ended June 30, 2019.
Advertising and promotion were
$nil for the six-month period and $nil for the three-month period ended June 30, 2020 compared to $1,855 for the six-month period and
$165 for the three-month period ended June 30, 2019.
Consulting and directors’
fees were $26,000 for the six-month period and $14,000 for the three-month period ended June 30, 2020 compared to $18,500 for the six-month
period and $12,500 for the three- month period ended June 30, 2019.
Office and miscellaneous were
$8,293 for the six-month period and $4,060 for the three-month period ended June 30, 2020 compared to $4,045 for the six-month period
and $3,477 for the three-month period ended June 30, 2019.
Travel and business development
were $nil for the six-month period and $nil for the three-month period ended June 30, 2020 compared to $16,145 for the six-month period
and $7,344 for the three- month period ended June 30, 2019.
Regulatory and filling fees were
$7,675 for the six-month period and $4,886 for the three-month period ended June 30, 2020 compared to $8,230 for the six-month period
and $4,944 for the three- month period ended June 30, 2019.
Certain operating costs and expenses
(including advertising and promotion, travel and business development, and regulatory and filing fees) decreased due to the efforts by
management to reduce overhead expenses for the Corporation. Accounting and legal and office and miscellaneous expenses increased for the
six-month period in 2020 over the same period in 2019.
The Corporation’s revenue
is comprised entirely of interest earned on cash and cash equivalents, short-term investment balances. There was no interest earned for
the six-month period ended June 30, 2020.
For the six-month period ended June
30, 2020, share-based payments expense was $nil compared to
$80,160 for the six-month period
ended June 20, 2019 as there were no share options granted during the six-month period ended June 30, 2020.
Liquidity and Capital Resources
The Corporation currently has
no operational cash flow and has no outstanding bank debt or other interest-bearing indebtedness as at June 30, 2020.
|
|
a)
|
The Corporation had $472,456 in cash and working capital of $457,585 as at June
30, 2020. These balances will be used to fund operating costs and expenses and working capital requirements.
|
|
|
b)
|
The Corporation assesses its financing requirements and its ability to access debt
or equity markets on an ongoing basis. Given the current conditions in the financial markets, the Corporation will seek to maintain financial
flexibility and will monitor and assess its financing requirements. The Corporation’s ability to access the equity or debt markets
in the future may be affected by prolonged market instability. The inability to access the equity or debt markets for sufficient capital,
at acceptable terms, and within required timeframes, could have a material adverse effect on the Corporation’s financial condition,
results of operations and prospects. Further discussion on these risks can be found in the “Risk Factors” section of the MD&A.
|
Investor Relations
The Corporation has no investor relations’
agreements.
Changes in Internal Controls over
Financial Reporting
There have been no changes in
the Corporation’s internal control over financial reporting during the six-month period ended June 30, 2020 that have materially
affected, or are reasonably likely to materially affect, its internal control over financial reporting.
Financing
The Corporation does not currently
have any operations generating cash to fund any projects or ventures and associated overhead costs. The Corporation is therefore dependent
upon debt and equity financing to carry out business plans. There can be no assurance that such financing will be available to the Corporation.
Significant Accounting Judgments,
Estimates and Assumptions
A detailed summary of all the Corporation’s
significant accounting policies is included in Note 3 of the June 30, 2020 financial statements.
Related Party Transactions
A detailed summary of all related
party transactions is included in Note 5 of the June 30, 2020 financial statements.
Off Balance Sheet Arrangements
The Corporation has no off-balance
sheet arrangements.
Outstanding Share Data and Stock
Options
The Corporation is authorized to
issue an unlimited number of common shares and an unlimited number of preferred shares. As at August 27, 2020, there were 6,361,047 common
shares and nil preferred shares issued and outstanding.
The Corporation has a stock option
plan. On May 10, 2019, the Corporation granted 400,000 stock options to directors and officers at an exercise price of $0.22 per share
for a term of five years. As at August 27, 2020, there were 595,621 stock options outstanding.
The Corporation has no share purchase
warrants outstanding as at August 27, 2020.
Risk Factors
Investment in the Corporation must
be considered highly speculative due to the nature of the Corporation's business, its formative stage of development, its current financial
position and its lack of earnings record. The following is a summary of the risk factors to be considered:
Sale
The Corporation has sold all of
its oil and gas assets and is now seeking to identify and acquire or merge with an operating entity in the sector. Investment in the common
shares of the Corporation is highly speculative given the unknown nature of the Corporation’s business and its present stage. There
can be no assurance that an active and liquid market for the Corporation’s common shares will develop and an investor may find it
difficult to resell the common shares.
Potential Transaction
Until identification and acquisition
or merger with an operating entity, the Corporation is not anticipated to generate any cash flow to meet its operating costs. The Corporation
has only limited funds with which to identify and evaluate potential targets and there can be no assurance that the Corporation will be
able to identify a suitable target. Even if a proposed target is identified, there can be no assurance that the Corporation will be able
to successfully complete the transaction. Completion of a target is subject to a number of conditions including acceptance by the TSXV
and, in the case of a non-arm’s length transaction, the majority of the minority approval of the shareholders of the Corporation.
Upon public announcement of a proposed target, trading in the common shares of the Corporation may be halted and may remain halted for
an indefinite period of time. The common shares of the Corporation will not be reinstated to trading before the TSXV has reviewed the
transaction. Reinstatement to trading provides no assurance with respect to the merits of the transaction or the likelihood of the Corporation
completing the proposed transaction.
Price Volatility of Publicly
Traded Securities
In recent years, the securities
markets in Canada and the United States have experienced a high level of price and volume volatility, and the market price of securities
of many companies, particularly those considered to be development stage companies, have experienced wide fluctuations in price which
have not necessarily been related to the operating performance, underlying asset values or prospects of such companies.
Management of Growth
The Corporation may be subject
to growth-related risks, including capacity constraints and pressure on its internal systems and controls. The ability of the Corporation
to manage growth effectively will require it to continue to implement and improve its operational and financial systems and to expand,
train and manage its employee base. The inability of the Corporation to deal with this growth could have a material adverse impact on
its business, operations and prospects.
Reliance on Key Personnel
The Corporation's success depends
in large measure on certain key personnel. The loss of the services of such key personnel could have a material adverse effect on the
Corporation. The Corporation does not have any key person insurance in effect for management. The contributions of the existing management
team to the immediate and near term operations of the Corporation are likely to be of central importance. In addition, the competition
for qualified personnel in various industries can be intense and there can be no assurance that the Corporation will be able to continue
to attract and retain all personnel necessary for the development and operation of its business. Investors must rely upon the ability,
expertise, judgment, discretion, integrity and good faith of the management of the Corporation.
Substantial Capital Requirements
The Corporation may be required
to make substantial capital expenditures for the acquisition and development of ventures and projects. The Corporation’s ability
to access the equity or debt markets in the future may be affected by any prolonged market instability. There can be no assurance that
debt or equity financing, or future cash (if any) generated by operations, would be available or sufficient to meet these requirements
or for other corporate purposes or, if debt or equity financing is available, that it will be on terms acceptable to the Corporation.
These funding arrangements are not yet in place. There is no assurance that the initiatives undertaken by management will be successful.
The inability of the Corporation to access sufficient capital for its operations could have a material adverse effect on the Corporation's
financial condition, results of operations and prospects.
Dilution
The Corporation may make future
acquisitions or enter into financings or other transactions involving the issuance of securities of the Corporation, which may be substantially
dilutive to existing shareholders and which may also result in a change of control of the Corporation.
Issuance of Debt
The Corporation may enter into
transactions to acquire assets or the shares of other organizations. These transactions may be financed in whole or in part with debt,
which may increase the Corporation's debt levels above industry standards for companies of similar size. Depending on future plans, the
Corporation may require additional equity and/or debt financing that may not be available or, if available, may not be available on favourable
terms. Neither the Corporation's articles nor its by-laws limit the amount of indebtedness the Corporation may incur. The level of the
Corporation's indebtedness from time to time could impair the Corporation's ability to obtain additional financing on a timely basis to
take advantage of business opportunities that may arise.
Dividends
To date, the Corporation has not
declared or paid any dividends on its outstanding shares. Any decision to pay dividends on the shares will be made by the board of directors
of the Corporation on the basis of its earnings, financial requirements and other conditions existing at such future time. At present,
the Corporation does not anticipate declaring and paying any dividends in the foreseeable future.
Conflicts of Interest
Certain directors of the Corporation
are also directors of other companies and as such may, in certain circumstances, have a conflict of interest requiring them to abstain
from certain decisions. Conflicts, if any, will be subject to the procedures and remedies of the Business Corporations Act (Alberta).
Financial Instruments
The Corporation considers its risks
in relation to financial instruments in the following categories:
Credit Risk
Credit risk is the risk that counterparty
to a financial instrument will not discharge its obligations, resulting in a financial loss to the Corporation. The Corporation has policies
and procedures in place that govern the credit risk it will assume. The Corporation evaluates credit risks on an ongoing basis including
an evaluation of counterparty credit rating and counterparty concentrations measured by amount and percentage. The Corporation's objective
is to have no credit losses. The primary sources of credit risk for the Corporation arise from the following financial assets: (1) cash
and cash equivalents and (2) accounts receivable. The Corporation has not had any credit losses in the past and the risk of financial
loss is considered to be low. As at June 30, 2020, the Corporation has no financial assets that are past due or impaired due to credit
risk related defaults.
Liquidity Risk
Liquidity risk is the risk that
the Corporation will not be able to meet obligations associated with financial liabilities. The Corporation's financial liabilities are
comprised of accounts payable and accrued liabilities. The Corporation frequently assesses its liquidity position and obligations under
its financial liabilities by preparing regular financial forecasts. The Corporation mitigates liquidity risk by maintaining a sufficient
cash balance as well as maintaining sufficient current and projected liquidity to meet expected future payments.
Market Risk
Market risk is the risk that
the fair value (for assets or liabilities considered to be held for trading and available for sale) or future cash flows (for assets
or liabilities considered to be held-to-maturity, other financial liabilities, and loans and receivables) of a financial instrument will
fluctuate because of changes in market prices. The Corporation evaluates market risk on an ongoing basis. At June 30, 2020, all of the
Corporation's financial instruments were assessed to have little or no market risk.
Exhibit 99.46
NEWTON
ENERGY CORPORATION
INTERIM
FINANCIAL STATEMENTS
For
the Six Months Ended June 30, 2020 and 2019
(Unaudited
– Expressed in Canadian Dollars)
Notice of No Auditor Review
These unaudited interim financial
statements of Newton Energy Corporation (the “Corporation”) have not been reviewed by the auditors of the Corporation. This
notice is being provided in accordance with Section 4.3(3)(a) of National Instrument 51-102 - Continuous Disclosure Obligations.
NEWTON ENERGY CORPORATION
Interim Statements of
Financial Position As at June 30, 2020
(Unaudited – Expressed
in Canadian Dollars)
|
|
|
June 30, 2020
|
|
|
December 31, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
472,456
|
|
|
|
533,576
|
|
|
GST receivable
|
|
|
1,379
|
|
|
|
2,260
|
|
|
Prepaid expenses and deposits
|
|
|
5,426
|
|
|
|
6,483
|
|
|
Total Assets
|
|
|
479,261
|
|
|
|
542,319
|
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
21,676
|
|
|
|
25,101
|
|
|
Total Liabilities
|
|
|
21,676
|
|
|
|
25,101
|
|
|
Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
6,414,127
|
|
|
|
6,414,127
|
|
|
Reserves
|
|
|
989,124
|
|
|
|
989,124
|
|
|
Deficit
|
|
|
(6,945,666
|
)
|
|
|
(6,886,033
|
)
|
|
Total Equity
|
|
|
457,585
|
|
|
|
517,218
|
|
|
Total Liabilities and Equity
|
|
|
479,261
|
|
|
|
542,319
|
|
|
See accompanying notes to the financial statements
|
|
|
Nature and continuance of operations (Note 1)
Basis
of Preparation (Note 2)
Approved by the Board of Directors and authorized for issue
on August 27, 2020.
|
“Gino DeMichele”
|
|
“Fram Moos”
|
|
Gino DeMichele, Director
|
|
Fram Moos, Director
|
NEWTON ENERGY CORPORATION
Interim Statements of Loss and Comprehensive Loss
For the six months period ended of June 30, 2020 and 2019
(Unaudited – Expressed in Canadian Dollars)
|
|
|
For the three
months ended
June 30, 2020
|
|
|
For the three
months ended
June 30, 2019
|
|
|
For the six
months ended
June 30, 2020
|
|
|
For the six
months ended
June 30, 2019
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounting and legal
|
|
|
8,894
|
|
|
|
6,992
|
|
|
|
13,718
|
|
|
|
8,681
|
|
|
Advertising and promotion
|
|
|
-
|
|
|
|
165
|
|
|
|
-
|
|
|
|
1,855
|
|
|
Consulting and directors’ fees
|
|
|
14,000
|
|
|
|
12,500
|
|
|
|
26,000
|
|
|
|
18,500
|
|
|
Insurance
|
|
|
2,035
|
|
|
|
1,850
|
|
|
|
3,947
|
|
|
|
3,592
|
|
|
Office and miscellaneous
|
|
|
4,060
|
|
|
|
3,477
|
|
|
|
8,293
|
|
|
|
4,045
|
|
|
Share-based payments
|
|
|
-
|
|
|
|
80,160
|
|
|
|
-
|
|
|
|
80,160
|
|
|
Travel and business development
|
|
|
-
|
|
|
|
7,344
|
|
|
|
-
|
|
|
|
16,145
|
|
|
Regulatory and filing fees
|
|
|
4,886
|
|
|
|
4,944
|
|
|
|
7,675
|
|
|
|
8,230
|
|
|
Loss before other item
|
|
|
(33,875
|
)
|
|
|
(117,432
|
)
|
|
|
(59,633
|
)
|
|
|
(141,208
|
)
|
|
Interest income
|
|
|
-
|
|
|
|
4
|
|
|
|
-
|
|
|
|
4
|
|
|
Net and comprehensive loss for the
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
period
|
|
|
(33,875
|
)
|
|
|
(117,428
|
)
|
|
|
(59,633
|
)
|
|
|
(141,204
|
)
|
|
Weighted average of common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
outstanding
|
|
|
6,361,047
|
|
|
|
6,361,047
|
|
|
|
6,361,047
|
|
|
|
6,361,047
|
|
|
Basic and diluted loss per share
|
|
|
(0.01
|
)
|
|
|
(0.02
|
)
|
|
|
(0.01
|
)
|
|
|
(0.02
|
)
|
|
See accompanying notes to the financial statements
|
|
|
NEWTON ENERGY CORPORATION
Interim Statements of Changes in Equity
(Unaudited – Expressed in Canadian Dollars)
|
|
|
Number of
|
|
|
Share
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
Shares
|
|
|
Capital
|
|
|
Reserves
|
|
|
Deficit
|
|
|
Equity
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Balance at January 1, 2019
|
|
|
6,361,047
|
|
|
|
6,414,127
|
|
|
|
902,030
|
|
|
|
(6,646,290
|
)
|
|
|
669,867
|
|
|
Comprehensive loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(141,204
|
)
|
|
|
(141,204
|
)
|
|
Share-based payments
|
|
|
-
|
|
|
|
-
|
|
|
|
80,160
|
|
|
|
-
|
|
|
|
80,160
|
|
|
Balance at June 30, 2019
|
|
|
6,361,047
|
|
|
|
6,414,127
|
|
|
|
982,190
|
|
|
|
(6,787,494
|
)
|
|
|
608,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2020
|
|
|
6,361,047
|
|
|
|
6,414,127
|
|
|
|
989,124
|
|
|
|
(6,886,033
|
)
|
|
|
517,218
|
|
|
Comprehensive loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(59,633
|
)
|
|
|
(59,633
|
)
|
|
Balance at June 30, 2020
|
|
|
6,361,047
|
|
|
|
6,414,127
|
|
|
|
989,124
|
|
|
|
(6,945,666
|
)
|
|
|
457,585
|
|
|
See accompanying notes to the financial statements
|
|
|
|
NEWTON
ENERGY CORPORATION
Interim
Statements of Cash Flows
(Unaudited – Expressed in Canadian Dollars)
|
|
|
|
For the six
months ended
June 30, 2020
|
|
|
For the six
months ended
June 30, 2019
|
|
|
Cash provided by (used for)
|
|
$
|
|
|
$
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
|
(59,633
|
)
|
|
|
(141,204
|
)
|
|
Items not involving the use of cash:
|
|
|
|
|
|
|
|
|
|
Share-based payments
|
|
|
-
|
|
|
|
80,160
|
|
|
|
|
|
(59,633
|
)
|
|
|
(61,044
|
)
|
|
Change in non-cash working capital:
|
|
|
|
|
|
|
|
|
|
GST receivable
|
|
|
881
|
|
|
|
2,618
|
|
|
Prepaid expenses and deposits
|
|
|
1,057
|
|
|
|
(2,808
|
)
|
|
Accounts payable and accrued liabilities
|
|
|
(3,425
|
)
|
|
|
(15,160
|
)
|
|
|
|
|
(61,120
|
)
|
|
|
(76,394
|
)
|
|
Decrease in cash
|
|
|
(61,120
|
)
|
|
|
(76,394
|
)
|
|
Cash, beginning of the period
|
|
|
533,576
|
|
|
|
692,858
|
|
|
Cash, end of the period
|
|
|
472,456
|
|
|
|
616,464
|
|
|
Supplementary cash flow information
|
|
|
|
|
|
|
|
|
|
Interest received
|
|
|
-
|
|
|
|
4
|
|
|
See accompanying notes to financial statements
|
|
|
NEWTON ENERGY CORPORATION
Notes to the Interim Financial Statements
As at and for the six months ended June 30, 2020 and 2019
(Unaudited – Expressed in Canadian Dollars)
|
|
1.
|
NATURE AND CONTINUANCE OF OPERATIONS
|
Newton Energy Corporation (“Newton”,
the “Corporation” or the “Company”) is domiciled and incorporated in Canada. The Corporation’s
financial year-end is December 31. The address of the Corporation’s registered office is 1600, 333 - 7 Avenue SW, Calgary, Alberta,
Canada T2P 2Z1. Newton trades on the NEX of the TSX Venture Exchange under the symbol “NTN”.
The Corporation is currently inactive
and is looking for a suitable acquisition to begin operations. The Company is seeking acquisitions or opportunities and is currently evaluating
acquisition targets. To date, the Corporation has not generated revenues from operations.
These interim financial statements
were approved and authorized for issuance by the Board of Directors on August 27, 2020.
These interim financial statements
have been prepared in accordance with International Financial Reporting Standards (“IFRS”) applicable to the preparation of
interim financial statements, including International Accounting Standards (“IAS”) 34, Interim Financial Reporting. These
interim financial statements do not include all of the information required for full annual financial statements and should be read in
conjunction with the Corporation’s audited annual financial statements for the year ended December 31, 2019, which have been prepared
in accordance with IFRS.
These interim financial statements
were prepared on the basis that the Corporation will continue to meet its commitments, continue operations and realize its assets and
discharge its liabilities in the normal course of business for the foreseeable future. Newton has no operating revenues, working capital
of $457,585 as at June 30, 2020, a net loss of $59,633 and negative cash flow from operating activities of $61,120 for the six month period
ended June 30, 2020.
The Corporation’s continuing
operations as intended is dependent upon its ability to raise sufficient funds in order to finance any acquisition and administrative
expenses. The Corporation has no assurance that such financing will be available or be available on favorable terms. Factors that could
affect the availability of financing include the Corporation’s performance (as measured by numerous factors including the progress
and results of its projects), the state of international debt and equity markets, investor perceptions and expectations and the global
financial and energy markets. If successful, the Corporation would obtain additional financing through, but not limited to, the issuance
of additional equity.
|
|
3.
|
SIGNIFICANT ACCOUNTING POLICIES
|
The significant accounting policies
that have been used in the preparation of these interim financial statements are summarized in the audited financial statements of the
Corporation for the year ended December 31, 2019. These interim financial statements should be read in conjunction with the audited financial
statements for the year ended December 31, 2019.
NEWTON ENERGY CORPORATION
Notes to the Interim Financial Statements
As at and for the six months ended June 30, 2020 and
2019 (Unaudited – Expressed in Canadian Dollars)
|
|
3.
|
SIGNIFICANT ACCOUNTING POLICIES, continued
|
|
|
a)
|
Significant accounting judgments, estimates and assumptions
|
The preparation of the Corporation’s
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 and contingent liabilities at the date of the interim
financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continuously
evaluated and are based on management’s experience and other factors, including expectations of future events that are believed
to be reasonable under the circumstances. However, actual outcomes can differ from these estimates. Revisions to accounting estimates
are recognized in the period in which the estimates are revised and in any future periods affected. The most significant judgement applying
to the Corporation’s financial statements is the assessment of the Corporation’s ability to continue as a going concern and
whether there are events or conditions that may give rise to significant uncertainty.
|
|
b)
|
New accounting standards and recent pronouncements
|
The Company does not expect that the changes to IFRS
that are effective as of January 1, 2020 will have a significant impact on the Company’s results of operations of financial positions.
Unlimited number of common voting shares
Unlimited number of preferred shares
issuable in series
|
|
b)
|
Issued and outstanding Common Shares
|
|
|
|
Number of
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Issued and outstanding as at December 31, 2018
|
|
|
6,361,047
|
|
|
$
|
6,414,127
|
|
|
Issued and outstanding as at June 30, 2020 and
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
6,361,047
|
|
|
$
|
6,414,127
|
|
|
|
c)
|
Share-based Compensation
|
|
Reserves
|
|
$
|
|
|
Balance at December 31, 2019
|
|
|
989,124
|
|
|
Options granted to directors, officers and consultants during the period
|
|
|
-
|
|
|
Balance at June 30, 2020
|
|
|
989,124
|
|
NEWTON ENERGY CORPORATION
Notes to the Interim Financial Statements
As at and for the six months ended June 30, 2020 and
2019 (Unaudited – Expressed in Canadian Dollars)
|
|
4.
|
SHARE CAPITAL, continued
|
The Corporation’s
Stock Option Plan, approved on September 7, 2016 at a Special Annual General Meeting of shareholders, provides for issuance of stock options
to directors, officers, employees and consultants. The options can be granted for a maximum length of five years and vesting terms are
at the discretion of the Board of Directors.
The continuity of stock options is as
follows:
|
|
|
2020
|
|
|
2019
|
|
|
|
|
Number of Options
|
|
|
Weighted Average Exercise
Price
|
|
|
Number of Options
|
|
|
Weighted Average Exercise
Price
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
Balance, beginning of the year
|
|
|
633,121
|
|
|
|
0.28
|
|
|
|
233,131
|
|
|
|
0.37
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
400,000
|
|
|
|
0.22
|
|
|
Expired
|
|
|
37,500
|
|
|
|
1.00
|
|
|
|
|
|
|
|
|
|
|
Balance, end of the year
|
|
|
595,621
|
|
|
|
0.23
|
|
|
|
633,121
|
|
|
|
0.28
|
|
As at June
30, 2020, the Corporation had stock options issued to directors, officers, employee and consultants of the Corporation outstanding as
follows:
|
|
Number of Options
|
|
Exercise Price
|
|
|
Expiry Date
|
|
January 4, 2018
|
|
|
195,621
|
|
|
$
|
0.25
|
|
|
January 4, 2023
|
|
May 10, 2019
|
|
|
400,000
|
|
|
$
|
0.22
|
|
|
May 10, 2024
|
|
Total
|
|
|
595,621
|
|
|
|
|
|
|
|
|
|
5.
|
RELATED PARTY TRANSACTIONS
|
Remuneration of key management (includes
the Corporation’s directors and executive team):
|
Expense by nature
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
Directors’ fees
|
|
|
2,000
|
|
|
|
2,500
|
|
|
Legal fees
|
|
|
11,618
|
|
|
|
4,681
|
|
|
Consulting fees
|
|
|
24,000
|
|
|
|
16,000
|
|
|
Total
|
|
|
37,618
|
|
|
|
23,181
|
|
All transactions with related
parties have occurred in the normal course of operations and are measured at their fair value as determined by management. Other than
as described above, the Corporation has not acquired any assets or services or provided any assets or services in any transaction with
any non-arm’s length party within the six month periods ended June 30, 2020 and 2019.
NEWTON ENERGY CORPORATION
Notes to the Interim Financial Statements
As at and for the six months ended June 30, 2020 and 2019
(Unaudited – Expressed in Canadian Dollars)
Financial instruments consist
of recorded amounts of cash and trade and other payables which will result in future cash outlays. In management’s opinion, carrying
amounts approximate fair values due to the short-term maturities of these items.
The Corporation classifies the
fair value of these financial instruments accordingly to the following hierarchy based on the amount of observable inputs used to value
the instrument.
Level 1 – Quoted prices
are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions
occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Cash is classified under Level 1.
Level 2 – Pricing inputs
are other than quoted prices in active markets included in Level 1. Prices in Level 2 are either directly (i.e. as prices) or indirectly
(i.e. derived from prices) as of the reporting date. The Corporation does not have any financial instruments classified under Level 2.
Level 3 – Valuations in
the level are those with inputs for the asset or liability that are not based on observable market data. The Corporation does not have
any financial instruments under Level 3.
The Corporation has exposure to the
following risks:
Management believes that the
Corporation is not exposed to any significant credit risk on its financial assets. Cash includes money market accounts for which management
believes the risk of loss to be remote. As at June 30, 2020 and December 31, 2019, the Corporation had no financial assets that were either
past due or impaired.
The Corporation manages the risk
of not meeting its financial obligations as they come due through management of its capital, annual budgeting of its expenditures and
cash flows, and cash flow forecasting.
The Corporation has cash balances
and non-interest bearing obligations. The Corporation manages its exposure to interest rate risk through fixed rate investments with no
early withdrawal penalties. It is the Corporation’s policy to invest its cash reserves in low risk investments in either short term
deposits in primary Canadian banking institutions or overnight money market accounts. The Corporation monitors interest rate markets to
ensure that appropriate steps can be taken considering interest rate volatility.
|
|
ii)
|
Foreign currency risk
|
The Corporation’s functional and reporting currency
is the Canadian dollar as expenditures and costs are made in Canada. The Corporation does not hedge foreign currency transactions.
NEWTON ENERGY CORPORATION
Notes to the Interim Financial Statements
As at and for the six months ended June 30, 2020 and
2019 (Unaudited – Expressed in Canadian Dollars)
The Corporation manages its capital
structure and makes adjustments to it, based on the funds available to the Corporation in order to support any acquisition or merger with
potential candidates and to maintain the Corporation in good standing with the various regulatory authorities. The Board of Directors
does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Corporation's management
to sustain future development of the Corporation. The Corporation has no debt and is not subject to externally imposed capital requirements.
There were no changes in the Corporation’s management of capital during the period ended June 30, 2020.
The Corporation may make adjustments
to its capital structure in light of changes in economic and market conditions which may include adjusting capital spending to manage
projected financial resources, issuing new shares through public offering or private placement, and/or completing a business combination.
As at June 30, 2020, the Corporation
has total capital of $457,585 (December 31, 2019,
$517,218).
Basic loss per share is calculated
using the weighted average number of shares outstanding during the period. Diluted loss per share is calculated to reflect the dilutive
effect of stock options outstanding. Loss per share is calculated as follows:
|
|
|
Weighted average
|
|
|
|
|
|
Loss per share –
|
|
|
|
|
number of shares
|
|
|
Net loss
|
|
|
basic and diluted
|
|
|
Three months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
|
6,361,047
|
|
|
|
(33,875
|
)
|
|
|
(0.01
|
)
|
|
Three months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
|
6,361,047
|
|
|
|
(117,428
|
)
|
|
|
(0.02
|
)
|
|
Six months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
|
6,361,047
|
|
|
|
(59,633
|
)
|
|
|
(0.01
|
)
|
|
Six months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
|
6,361,047
|
|
|
|
(141,204
|
)
|
|
|
(0.02
|
)
|
Outstanding options were anti-dilutive
instruments for the six months ended June 30, 2020 and 2019 because the Corporation realized a net loss.
|
|
9.
|
AGREEMENT WITH FIELD TRIP PSYCHEDELICS INC.
|
On August
21, 2020, Newton entered into a definitive agreement dated August 21, 2020 with Field Trip Psychedelics Inc. (“Field Trip”),
a North American mental health and wellness company with ground-breaking work in psychedelics and psychedelic therapies, to complete a
going-public transaction in Canada for Field Trip and the listing for trading of the securities of the resulting issuer on the Canadian
Securities Exchange.
Exhibit
99.48
FORM
51-102F3
MATERIAL
CHANGE REPORT
Item
1 – Name and Address of Company:
Newton
Energy Corporation
1600,
333 - 7 Avenue SW
Calgary,
AB
T2P
2Z1
Item
2 - Date of Material Change:
June
18, 2020
Item
3 – News Release:
A
news release dated June 18, 2020 was disseminated via CNW Group. A copy of the news release has been filed on SEDAR and is available
at www.sedar.com.
Item
4 – Summary of Material Change:
On
June 18, 2020, Newton Energy Corporation (“Newton”) announced that it has entered into a letter of intent dated June
18, 2020 with Field Trip Psychedelics Inc. (“Field Trip”) to complete a going-public transaction in Canada for Field
Trip.
Item
5 – Full Description of Material Change:
|
5.1
|
Full
Description of Material Change
|
On
June 18, 2020, Newton announced that it has entered into a letter of intent dated June 18, 2020 with Field Trip to complete a going-public
transaction in Canada for Field Trip (the “Proposed Transaction”). For convenience, Newton, as it will exist after
completion of the Proposed Transaction, is sometimes referred to herein as the “Resulting Issuer”.
Field
Trip is redefining mental health and wellness with ground-breaking work in psychedelics and psychedelic therapies. Through its Field
Trip Health centres that provide best-in-class psychedelic-therapies opening across North America, and drug development and advanced
research on plant-based psychedelics through Field Trip Discovery, the company's newly formed drug development division, Field Trip helps
people, from those in treatment to those seeking accelerated personal growth, with a simple, evidence-based way to heal and heighten
engagement with the world.
If
the Proposed Transaction is completed, it is anticipated that the board of directors of the Resulting Issuer (the “New Directors”)
will consist of no fewer than five (5) directors, each of whom will be nominated by Field Trip. The executive officers of the Resulting
Issuer will be appointed by Field Trip and are expected to include Field Trip’s current CEO, Joseph del Moral, Executive Chairman,
Ronan Levy, President of Field Trip Health, Hannan Fleiman, President of Field Trip Natural Products Ltd., Mujeeb Jafferi, and Chief
Clinical Officer, Dr. Ryan Yermus. The New Directors will be put forth and nominated at a meeting of Newton’s shareholders to be
held prior to the completion of the Proposed Transaction.
In
conjunction with, and prior to the closing of the Proposed Transaction, Field Trip intends to complete a brokered private placement of
common shares at a price of $2.00 per common share for gross proceeds of up to $14.0 million, with an option to be granted to the agents
to increase the size of the private placement by up to $1.0 million for total gross proceeds of up to $15 million, co-led by Canaccord
Genuity Corp. and Stifel Nicolaus Canada Inc. (the “Private Placement”). Common shares issued in the Private Placement
will be exchanged for common shares of the Resulting Issuer at the Exchange Ratio (as defined herein) upon completion of the Proposed
Transaction.
For
the purposes of the Proposed Transaction, the deemed value of each outstanding common share of Newton will be $0.25 (on a pre-consolidation
basis). Pursuant to the Proposed Transaction it is currently intended that: (i) the outstanding common shares of Newton will be consolidated
at a consolidation ratio to be determined by the parties based on the price per share of the Private Placement (the “Consolidation”);
and (ii) the holders of Field Trip shares (including those investors in the Private Placement) will receive one (1) common share of the
Resulting Issuer in exchange for each outstanding Field Trip common share (on a post Consolidation basis) (the “Exchange Ratio”).
The outstanding options of Newton will be adjusted accordingly to reflect the Consolidation and Exchange Ratio. Following the completion
of the Proposed Transaction, the securityholders of Field Trip (including those investors under the Private Placement) will hold a significant
majority of the outstanding common shares of the Resulting Issuer.
It
is intended that the Proposed Transaction will proceed by way of a “three-cornered” amalgamation of Field Trip with a wholly-owned
subsidiary of Newton (“Newton Subco”) pursuant to the terms of a definitive agreement to be entered into by Newton,
Newton Subco and Field Trip (the “Definitive Agreement”). The Proposed Transaction will be an arm’s length transaction.
In
connection with the Proposed Transaction and subject to any requisite shareholder approval, Newton intends to voluntarily de-list the
common shares of Newton from the facilities of the NEX board of the TSXV prior to the completion of the Proposed Transaction. It will
be a condition of closing that the Resulting Issuer obtains a listing of its common shares on the facilities of the Canadian Securities
Exchange (“CSE”). Subject to meeting the CSE listing requirements, it is anticipated that the Proposed Transaction
will be governed by the policies of the CSE.
Completion
of the Proposed Transaction is subject to a number of conditions including, but not limited to: completion of satisfactory due diligence;
execution of the Definitive Agreement; receipt of regulatory approvals; meeting all CSE listing requirements, majority of minority shareholders’
approval from Newton for the delisting of the common shares of Newton from the NEX board of the TSXV, as applicable, approval of the
TSXV to delist the common shares of Newton from its facilities, receipt of approval for the listing of the common shares of the Resulting
Issuer on the CSE; shareholders of Field Trip approving the Proposed Transaction and such other matters necessary to complete the Proposed
Transaction; and shareholders of Newton approving certain matters ancillary to the Proposed Transaction, including the appointment of
the New Directors, subject to the completion of the Proposed Transaction. Subject to the foregoing conditions, the parties intend to
enter into a definitive agreement by July 31, 2020 and complete the Proposed Transaction by September 15, 2020. There can, however, be
no assurance that the Proposed Transaction will be completed as proposed or at all.
Investors
are cautioned that, except as disclosed in the listing statement to be prepared in connection with the Proposed Transaction, any information
released or received with respect to the Proposed Transaction may not be accurate or complete and should not be relied upon. Trading
in the securities of Newton should be considered highly speculative. Shares of Newton are currently halted from trading on NEX, and trading
is not expected to resume on NEX or the TSXV.
|
5.2
|
Disclosure
for Restructuring Transactions
|
Not
applicable.
Item 6 – Reliance on subsection 7.1(2) of National Instrument 51-102:
Not
applicable.
Item 7 - Omitted Information:
Not
applicable.
Item 8 – Executive Officer:
Gino
DeMichele
Chief
Executive Officer
Tel:
403.680.7898
Item
9 – Date of Report:
June
25, 2020
Notice
on forward-looking statements:
This
material change report includes forward-looking information within the meaning of Canadian securities laws regarding Newton, Field Trip
and their respective businesses, which may include, but are not limited to, statements with respect to the completion of the Proposed
Transaction, the terms on which the Proposed Transaction is intended to be completed, the ability to obtain regulatory and shareholder
approvals and other factors. Often but not always, forward-looking information can be identified by the use of words such as “expect”,
“intends”, “anticipated”, “believes” or variations (including negative variations) of such words
and phrases, or state that certain actions, events or results “may”, “could”, “would” or “will”
be taken, occur or be achieved. Such statements are based on the current expectations and views of future events of the management of
each entity, and are based on assumptions and subject to risks and uncertainties. Although the management of each entity believes that
the assumptions underlying these statements are reasonable, they may prove to be incorrect. The forward -looking events and circumstances
discussed in this material change report, including completion of the Proposed Transaction (and the proposed terms upon which the Proposed
Transaction is proposed to be completed), may not occur and could differ materially as a result of known and unknown risk factors and
uncertainties affecting the companies, including risks regarding the industry, market conditions, economic factors, management’s
ability to manage and to operate the business of the Resulting Issuer and the equity markets generally. Although Newton and Field Trip
have attempted to identify important factors that could cause actual actions, events or results to differ materially from those described
in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated
or intended. Accordingly, readers should not place undue reliance on any forward-looking statements or information. No forward-looking
statement can be guaranteed. Except as required by applicable securities laws, forward-looking statements speak only as of the date on
which they are made and neither Newton nor Field Trip undertake any obligation to publicly update or revise any forward-looking statement,
whether as a result of new information, future events, or otherwise.
Exhibit 99.49
NEWTON
ENERGY CORPORATION
Management’s Discussion
and Analysis
For the three-month period ended
March 31, 2020
MANAGEMENT’S DISCUSSION
AND ANALYSIS
The following management’s
discussion and analysis (“MD&A”) reviews Newton Energy Corporation’s (“Newton” or the “Corporation”)
activities and results for the three-month period ended March 31, 2020. It should be read in conjunction with the unaudited interim financial
statements for the three-month period ended March 31, 2020, together with the accompanying notes, included in that report. The Financial
Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International
Accounting Standards Board (“IASB”).
In the MD&A, unless otherwise
indicated, all dollar amounts are expressed in Canadian dollars. Additional information relating to the Corporation’s activities
can be found on SEDAR at www.sedar.com.
Date of Report
This MD&A is dated May 25, 2020
and presents material information up to this date.
Forward-Looking Information
This discussion offers management’s
analysis of the financial and operating results of the Corporation and contains certain forward-looking statements. Forward-looking information
typically contains statements with words such as “anticipate”, “estimate”, “expect”, “potential”,
“could”, or similar words suggesting future outcomes. The Corporation cautions readers and prospective investors in the Corporation’s
securities not to place undue reliance on forward-looking information as by its nature, it is based on current expectations regarding
future events that involve a number of assumptions, inherent risks and uncertainties, which could cause actual results to differ materially
from those anticipated by the Corporation.
Forward looking information is
based on management's current expectations and assumptions regarding, among other things, future capital and other expenditures (including
the amount, nature and sources of funding thereof), future economic conditions, future currency and exchange rates. Although the Corporation
believes the expectations and assumptions reflected in such forward- looking information are reasonable, they may prove to be incorrect.
Forward-looking information involves significant known and unknown risks and uncertainties.
See the Risk Factors section of
this MD&A for a further description of these risks. The forward- looking information included in this report is expressly qualified
in its entirety by this cautionary statement. The Corporation assumes no obligation to update or revise any forward-looking information
to reflect new events or circumstances, except as required by law. For additional information relating to the risks and uncertainties
facing the Corporation, see “Risk Factors.”
Description of Business
The Corporation is a publicly traded,
Calgary-based corporation that is listed under the symbol “NTN” on NEX of the TSX Venture Exchange (“TSXV”). The
year 2014 was a transition for the Corporation as Newton exited the oil and gas sector with the sale of 100% of its oil and gas assets.
The Corporation has embarked on a new direction and is exploring new projects and ventures. The Corporation is currently considering business
structures including acquisitions, mergers, joint ventures, reverse takeovers or other corporate arrangements acceptable to regulatory
authorities.
Letter of Intent with Franchise
Cannabis Corp.
The Corporation entered into an
arm’s length non-binding letter of intent accepted June 7, 2019 with Franchise Cannabis Corp. (“Franchise”), a global,
fully integrated, seed-to-sale medical cannabis company, pursuant to which the Corporation and Franchise would effect a business combination
that would result in a reverse takeover of the Corporation by the securityholders of Franchise and the listing for trading of the securities
of the resulting issuer on the Canadian Securities Exchange. The letter of intent has expired and has not been extended.
Financial Highlights
As at March 31, 2020, the Corporation
had $498,552 in cash (March 31, 2019 - $642,748). The Corporation had a total comprehensive loss of $25,758 for the three months ended
March 31, 2020 (March 31, 2019 - $23,776). This loss is comprised of operating costs and expenses.
Selected Financial Information
The following table summarizes
key financial information on a quarterly basis for the previous two years:
|
|
|
March
31
2020
|
|
|
December
31
2019
|
|
|
September
30
2019
|
|
|
June
30
2019
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Total revenue
|
|
|
-
|
|
|
|
-
|
|
|
|
1,750
|
|
|
|
4
|
|
|
Net income
|
|
|
(25,758
|
)
|
|
|
(64,202
|
)
|
|
|
(34,337
|
)
|
|
|
(117,428
|
)
|
|
Basic and diluted loss per share
|
|
|
(0.00
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
(0.02
|
)
|
|
Total assets
|
|
|
509,065
|
|
|
|
542,319
|
|
|
|
582,160
|
|
|
|
624,127
|
|
|
Total liabilities
|
|
|
17,605
|
|
|
|
25,101
|
|
|
|
6,904
|
|
|
|
15,304
|
|
|
|
|
March
31
2019
|
|
|
December
31
2018
|
|
|
September
30
2018
|
|
|
June
30
2018
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Total revenue
|
|
|
-
|
|
|
|
3,559
|
|
|
|
54
|
|
|
|
-
|
|
|
Net income
|
|
|
(23,776
|
)
|
|
|
(79,841
|
)
|
|
|
(70,293
|
)
|
|
|
(25,269
|
)
|
|
Basic and diluted loss per share
|
|
|
(0.01
|
)
|
|
|
(0.02
|
)
|
|
|
(0.03
|
)
|
|
|
(0.01
|
)
|
|
Total assets
|
|
|
656,696
|
|
|
|
700,331
|
|
|
|
760,312
|
|
|
|
334,396
|
|
|
Total liabilities
|
|
|
10,605
|
|
|
|
30,464
|
|
|
|
10,604
|
|
|
|
21,928
|
|
For the three-month period ended
March 31, 2020, the Corporation reported no discontinued operations and did not declare any cash dividends. The Corporation’s revenue
is comprised entirely of interest earned on cash and cash equivalent balances. Office and administration expenses represent the Corporation’s
costs associated with its activities for the respective periods.
Operating Costs and Expenses
For the three-month period ended
March 31, 2020 operating cost and expenses increased to $25,758 compared to $23,776, for the same period in 2019. No expenses were capitalized
during the three- month periods ended in 2020 and 2019.
Breakdown of Operating Costs and
Expenses
|
|
|
For
the three
months ended
March 31,
2020
|
|
|
For the three
months ended
March 31,
2019
|
|
|
|
|
$
|
|
|
|
$
|
|
|
Accounting and legal
|
|
4,825
|
|
|
|
1,688
|
|
|
Advertising and promotion
|
|
-
|
|
|
|
1,690
|
|
|
Consulting and directors’ fees
|
|
12,000
|
|
|
|
6,000
|
|
|
Insurance
|
|
1,912
|
|
|
|
1,742
|
|
|
Office and miscellaneous
|
|
4,233
|
|
|
|
799
|
|
|
Travel and business development
|
|
-
|
|
|
|
8,571
|
|
|
Regulatory and filing fees
|
|
2,788
|
|
|
|
3,286
|
|
Accounting and legal were $4,825 for
the three-month period ended March 31, 2020 compared to $1,688 for the three-month period ended March 31, 2019.
Advertising and promotion were $nil
for the three-month period ended March 31, 2020 compared to $1,690 for the three-month period ended March 31, 2019.
Consulting and directors’ fees
were $12,000 for the three-month period ended March 31, 2020 compared to $6,000 for the three-month period ended March 31, 2019.
Insurance were $1,912 for the three-month
period ended March 31, 2020 compared to $1,742 for the three-month period ended March 31, 2019.
Office and miscellaneous were
$4,233 for the three-month period ended March 31, 2020 compared to $799 for the three-month period ended March 31, 2019.
Travel and business development
were $nil for the three-month period ended March 31, 2020 compared to $8,571 for the three-month period ended March 31, 2019.
Regulatory and filling fees were
$2,788 for the three-month period ended March 31, 2020 compared to $3,286 for the three-month period ended March 31, 2019.
Certain operating costs and expenses
(including regulatory and filing fees, advertising and promotion, and travel and development) decreased due to the efforts by management
to reduce overhead expenses for the Corporation. Accounting and legal, consulting and directors’ fees and office and miscellaneous
expenses increased for the three-month period in 2020 over the same period in 2019.
Liquidity and Capital Resources
The Corporation currently has
no operational cash flow and has no outstanding bank debt or other interest-bearing indebtedness as at March 31, 2020.
|
|
a)
|
The Corporation had $498,552 in cash and working capital of $491,460 as at March
31, 2020. These balances will be used to fund operating costs and expenses and working capital requirements.
|
|
|
b)
|
The Corporation assesses its financing requirements and its ability to access debt
or equity markets on an ongoing basis. Given the current conditions in the financial markets, the Corporation will seek to maintain financial
flexibility and will monitor and assess its financing requirements. The Corporation’s ability to access the equity or debt markets
in the future may be affected by prolonged market instability. The inability to access the equity or debt markets for sufficient capital,
at acceptable terms, and within required timeframes, could have a material adverse effect on the Corporation’s financial condition,
results of operations and prospects. Further discussion on these risks can be found in the “Risk Factors” section of the MD&A.
|
Investor Relations
The Corporation has no investor relations’
agreements.
Changes in Internal Controls over
Financial Reporting
There have been no changes in
the Corporation’s internal control over financial reporting during the three-month period ended March 31, 2020 that have materially
affected, or are reasonably likely to materially affect, its internal control over financial reporting.
Financing
The Corporation does not currently
have any operations generating cash to fund any projects or ventures and associated overhead costs. The Corporation is therefore dependent
upon debt and equity financing to carry out business plans. There can be no assurance that such financing will be available to the Corporation.
Significant Accounting Judgments,
Estimates and Assumptions
A detailed summary of all the Corporation’s
significant accounting policies is included in Note 3 of the March 31, 2020 financial statements.
Related Party Transactions
A detailed summary of all the
Corporation’s related party transactions is included in Note 5 of the March 31, 2020 financial statements.
Off Balance Sheet Arrangements
The Corporation has no off-balance
sheet arrangements.
Outstanding Share Data and Stock
Options
The Corporation is authorized
to issue an unlimited number of common shares and an unlimited number of preferred shares. As at May 25, 2020, there were 6,361,047 common
shares and nil preferred shares issued and outstanding.
The Corporation has a stock option
plan. On May 10, 2019, the Corporation granted 400,000 stock options to directors and officers at an exercise price of $0.22 per share
for a term of five years. As at May 25, 2020, there were 595,621 stock options outstanding.
The Corporation has no share purchase
warrants outstanding as at May 25, 2020.
Risk Factors
Investment in the Corporation
must be considered highly speculative due to the nature of its business, formative stage of development, current financial position and
lack of earnings record. The following is a summary of the risk factors to be considered:
Sale
The Corporation has sold all of
its oil and gas assets and is now seeking to identify and acquire or merge with an operating entity. Investment in the common shares of
the Corporation is highly speculative given the unknown nature of its business and present stage. There can be no assurance that an active
and liquid market for the Corporation’s common shares will develop and an investor may find it difficult to resell the common shares.
Potential Transaction
Until identification and
acquisition or merger with an operating entity, the Corporation is not anticipated to generate any cash flow to meet its operating
costs. The Corporation has only limited funds with which to identify and evaluate potential targets and there can be no assurance
that the Corporation will be able to identify a suitable target. Even if a proposed target is identified, there can be no assurance
that the Corporation will be able to successfully complete the transaction. Completion of a target is subject to a number of
conditions including acceptance by the TSXV and in the case of a non-arm’s length transaction, the majority of the minority
approval of the shareholders of the Corporation. Upon public announcement of a proposed target, trading in the common shares of the
Corporation may be halted and may remain halted for an indefinite period of time. The common shares of the Corporation will not be
reinstated to trading before the TSXV has reviewed the transaction. Reinstatement to trading provides no assurance with respect to
the merits of the transaction or the likelihood of the Corporation completing the proposed transaction.
Price Volatility of Publicly
Traded Securities
In recent years, the securities
markets in Canada and the United States have experienced a high level of price and volume volatility, and the market price of securities
of many companies, particularly those considered to be development stage companies, have experienced wide fluctuations in price which
have not necessarily been related to the operating performance, underlying asset values or prospects of such companies.
Management of Growth
The Corporation may be subject
to growth-related risks, including capacity constraints and pressure on its internal systems and controls. The ability of the Corporation
to manage growth effectively will require it to continue to implement and improve its operational and financial systems and to expand,
train and manage its employee base. The inability of the Corporation to deal with this growth could have a material adverse impact on
its business, operations and prospects.
Reliance on Key Personnel
The Corporation 's success depends
in large measure on certain key personnel. The loss of the services of such key personnel could have a material adverse effect on the
Corporation. The Corporation does not have any key person insurance in effect for management. The contributions of the existing management
team to the immediate and near-term operations of the Corporation are likely to be of central importance. In addition, the competition
for qualified personnel in various industries can be intense and there can be no assurance that the Corporation will be able to continue
to attract and retain all personnel necessary for the development and operation of its business. Investors must rely upon the ability,
expertise, judgment, discretion, integrity and good faith of the management of the Corporation.
Substantial Capital Requirements
The Corporation may be required
to make substantial capital expenditures for the acquisition and development of ventures and projects. The Corporation’s ability
to access the equity or debt markets in the future may be affected by any prolonged market instability. There can be no assurance that
debt or equity financing, or future cash (if any) generated by operations, would be available or sufficient to meet these requirements
or for other corporate purposes or, if debt or equity financing is available, that it will be on terms acceptable to the Corporation.
These funding arrangements are not yet in place. There is no assurance that the initiatives undertaken by management will be successful.
The inability of the Corporation to access sufficient capital for its operations could have a material adverse effect on the Corporation's
financial condition, results of operations and prospects.
Dilution
The Corporation may make future
acquisitions or enter into financings or other transactions involving the issuance of securities of the Corporation, which may be substantially
dilutive to existing shareholders and which may also result in a change of control of the Corporation.
Issuance of Debt
The Corporation may enter into
transactions to acquire assets or the shares of other organizations. These transactions may be financed in whole or in part with debt,
which may increase the Corporation's debt levels above industry standards for companies of similar size. Depending on future plans, the
Corporation may require additional equity and/or debt financing that may not be available or, if available, may not be available on favourable
terms. Neither the Corporation's articles nor its by-laws limit the amount of indebtedness the Corporation may incur. The level of the
Corporation's indebtedness from time to time could impair the Corporation's ability to obtain additional financing on a timely basis to
take advantage of business opportunities that may arise.
Dividends
To date, the Corporation has not
declared or paid any dividends on its outstanding shares. Any decision to pay dividends on the outstanding shares will be made by the
board of directors of the Corporation on the basis of the Corporation's earnings, financial requirements and other conditions existing
at such future time. At present, the Corporation does not anticipate declaring and paying any dividends in the foreseeable future.
Conflicts of Interest
Certain directors of the Corporation
are also directors of other companies and as such may, in certain circumstances, have a conflict of interest requiring them to abstain
from certain decisions. Conflicts, if any, will be subject to the procedures and remedies of the Business Corporations Act (Alberta).
Financial Instruments
The Corporation considers its risks
in relation to financial instruments in the following categories:
Credit Risk
Credit risk is the risk that counterparty
to a financial instrument will not discharge its obligations, resulting in a financial loss to the Corporation. The Corporation has policies
and procedures in place that govern the credit risk it will assume. The Corporation evaluates credit risks on an ongoing basis including
an evaluation of counterparty credit rating and counterparty concentrations measured by amount and percentage. The Corporation's objective
is to have no credit losses. The primary sources of credit risk for the Corporation arise from the following financial assets: (1) cash
and cash equivalents and (2) accounts receivable. The Corporation has not had any credit losses in the past and the risk of financial
loss is considered to be low. As at March 31, 2020, the Corporation has no financial assets that are past due or impaired due to credit
risk related defaults.
Liquidity Risk
Liquidity risk is the risk that
the Corporation will not be able to meet obligations associated with financial liabilities. The Corporation's financial liabilities are
comprised of accounts payable and accrued liabilities. The Corporation frequently assesses its liquidity position and obligations under
its financial liabilities by preparing regular financial forecasts. The Corporation mitigates liquidity risk by maintaining a sufficient
cash balance as well as maintaining sufficient current and projected liquidity to meet expected future payments.
Market Risk
Market risk is the risk that the
fair value (for assets or liabilities considered to be held for trading and available for sale) or future cash flows (for assets or liabilities
considered to be held-to-maturity, other financial liabilities, and loans and receivables) of a financial instrument will fluctuate because
of changes in market prices. The Corporation evaluates market risk on an ongoing basis. At March 31 2020, all of the Corporation's financial
instruments were assessed to have little or no market risk.
Exhibit 99.50
NEWTON ENERGY CORPORATION
INTERIM FINANCIAL STATEMENTS
For the Three Months Ended March
31, 2020 and 2019
(Unaudited – Expressed in
Canadian Dollars)
Notice of No Auditor Review
These unaudited interim financial
statements of Newton Energy Corporation (the “Corporation”) have not been reviewed by the auditors of the Corporation. This
notice is being provided in accordance with Section 4.3(3)(a) of National Instrument 51-102 - Continuous Disclosure Obligations.
NEWTON ENERGY CORPORATION
Interim Statements of Financial Position
As at March
31, 2020
(Unaudited – Expressed in Canadian Dollars)
|
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
498,552
|
|
|
|
533,576
|
|
|
GST receivable
|
|
|
1,801
|
|
|
|
2,260
|
|
|
Prepaid expenses and deposits
|
|
|
8,712
|
|
|
|
6,483
|
|
|
Total Assets
|
|
|
509,065
|
|
|
|
542,319
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
17,605
|
|
|
|
25,101
|
|
|
Total Liabilities
|
|
|
17,605
|
|
|
|
25,101
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
6,414,127
|
|
|
|
6,414,127
|
|
|
Reserves
|
|
|
989,124
|
|
|
|
989,124
|
|
|
Deficit
|
|
|
(6,911,791
|
)
|
|
|
(6,886,033
|
)
|
|
Total Equity
|
|
|
491,460
|
|
|
|
517,218
|
|
|
Total Liabilities and Equity
|
|
|
509,065
|
|
|
|
542,319
|
|
See
accompanying notes to the financial statements
Nature and continuance of operations (Note 1)
Basis
of Preparation (Note 2)
Approved by the Board of Directors and authorized for issue
on May 25, 2020.
|
“Gino DeMichele”
|
|
“Fram Moos”
|
|
Gino DeMichele, Director
|
|
Fram Moos, Director
|
NEWTON ENERGY CORPORATION
Interim Statements of Loss and Comprehensive Loss
For the three month periods ended March 31, 2020
and 2019
(Unaudited – Expressed in Canadian Dollars)
|
|
|
For the three
months ended
March 31, 2020
|
|
|
For the three
months ended
March 31, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
Accounting and legal
|
|
|
4,825
|
|
|
|
1,688
|
|
|
Advertising and promotion
|
|
|
-
|
|
|
|
1,690
|
|
|
Consulting and directors’ fees
|
|
|
12,000
|
|
|
|
6,000
|
|
|
Insurance
|
|
|
1,912
|
|
|
|
1,742
|
|
|
Office and miscellaneous
|
|
|
4,233
|
|
|
|
799
|
|
|
Travel and business development
|
|
|
-
|
|
|
|
8,571
|
|
|
Regulatory and filing fees
|
|
|
2,788
|
|
|
|
3,286
|
|
|
Net and comprehensive loss for the period
|
|
|
25,758
|
|
|
|
23,776
|
|
|
Weighted average of common shares outstanding
|
|
|
6,361,047
|
|
|
|
6,361,047
|
|
|
Basic and diluted loss per share
|
|
|
0.00
|
|
|
|
0.00
|
|
|
See accompanying notes to the financial statements
|
|
|
|
|
|
|
|
|
NEWTON ENERGY CORPORATION
Interim Statements of Changes in Equity
For the three month periods ended March 31, 2020
and 2019
(Unaudited – Expressed in Canadian Dollars)
|
|
|
Number of
|
|
|
Share
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
Shares
|
|
|
Capital
|
|
|
Reserves
|
|
|
Deficit
|
|
|
Equity
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Balance at January 1, 2019
|
|
|
6,361,047
|
|
|
|
6,414,127
|
|
|
|
902,030
|
|
|
|
(6,646,290
|
)
|
|
|
669,867
|
|
|
Comprehensive loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(23,776
|
)
|
|
|
(23,776
|
)
|
|
Balance at March 31, 2019
|
|
|
6,361,047
|
|
|
|
6,414,127
|
|
|
|
902,030
|
|
|
|
(6,670,066
|
)
|
|
|
646,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2020
|
|
|
6,361,047
|
|
|
|
6,414,127
|
|
|
|
989,124
|
|
|
|
(6,886,033
|
)
|
|
|
517,218
|
|
|
Comprehensive loss for the period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(25,758
|
)
|
|
|
(25,758
|
)
|
|
Balance at March 31, 2020
|
|
|
6,361,047
|
|
|
|
6,414,127
|
|
|
|
989,124
|
|
|
|
(6,911,791
|
)
|
|
|
491,460
|
|
See accompanying notes to the financial statements
NEWTON ENERGY CORPORATION
Interim Statements of Cash Flows
For the three month periods ended March 31, 2020
and 2019
(Unaudited – Expressed in Canadian Dollars)
|
|
|
For the three
months ended
March 31, 2019
|
|
|
For the three
months ended
March 31, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
Cash provided by (used for)
|
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
|
(25,758
|
)
|
|
|
(23,776
|
)
|
|
|
|
|
(25,758
|
)
|
|
|
(23,776
|
)
|
|
Change in non-cash working capital:
|
|
|
|
|
|
|
|
|
|
GST receivable
|
|
|
459
|
|
|
|
(817
|
)
|
|
Prepaid expenses
|
|
|
(2,229
|
)
|
|
|
(5,658
|
)
|
|
Accounts payable and accrued liabilities
|
|
|
(7,496
|
)
|
|
|
(19,859
|
)
|
|
Net cash used in operating activities
|
|
|
(35,024
|
)
|
|
|
(50,110
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash
|
|
|
(35,024
|
)
|
|
|
(50,110
|
)
|
|
Cash, beginning of the period
|
|
|
533,576
|
|
|
|
692,748
|
|
|
Cash, end of the period
|
|
|
498,552
|
|
|
|
642,748
|
|
|
See accompanying notes to financial statements
|
|
|
|
|
|
|
|
|
NEWTON ENERGY CORPORATION
Notes to the Interim Financial Statements
As at and for the three months ended March 31, 2020 and 2019
(Unaudited – Expressed in Canadian Dollars)
|
|
1.
|
NATURE AND CONTINUANCE OF OPERATIONS
|
|
|
Newton
Energy Corporation (“Newton”, the “Corporation” or the “Company”) is domiciled and incorporated
in Canada. The Corporation’s financial year-end is December 31. The address of the Corporation’s registered office is
1600, 333 - 7 Avenue SW, Calgary, Alberta, Canada T2P 2Z1. Newton trades on the NEX of the TSX Venture Exchange under the symbol
“NTN”.
|
|
|
The Corporation is currently inactive and is looking for a suitable acquisition to begin operations. The Company is seeking acquisitions or opportunities and is currently evaluating acquisition targets. To date, the Corporation has not generated revenues from operations.
|
|
|
|
|
|
These interim financial statements were approved and authorized for issuance by the Board of Directors on May 25, 2020.
|
|
|
These interim financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) applicable to the preparation of interim financial statements, including International Accounting Standards (“IAS”) 34, Interim Financial Reporting. These interim financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the Corporation’s audited annual financial statements for the year ended December 31, 2019, which have been prepared in accordance with IFRS.
|
|
|
|
|
|
These interim financial statements were prepared on the basis that the Corporation will continue to meet its commitments, continue operations and realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. Newton has no operating revenues, working capital of $491,460 as at March 31, 2020, a net loss of $25,758 and negative cash flow from operating activities of $35,024 for the three month period ended March 31, 2020.
|
|
|
|
|
|
The Corporation’s continuing operations as intended is dependent upon its ability to raise sufficient funds in order to finance any acquisition and administrative expenses. The Corporation has no assurance that such financing will be available or be available on favorable terms. Factors that could affect the availability of financing include the Corporation’s performance (as measured by numerous factors including the progress and results of its projects), the state of international debt and equity markets, investor perceptions and expectations and the global financial and energy markets. If successful, the Corporation would obtain additional financing through, but not limited to, the issuance of additional equity.
|
|
|
3.
|
SIGNIFICANT ACCOUNTING POLICIES
|
|
|
The significant accounting policies that have been used in the preparation of these interim financial statements are summarized in the audited financial statements of the Corporation for the year ended December 31, 2019. These interim financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2019.
|
|
|
a)
|
Significant accounting judgments, estimates and assumptions
|
|
|
The preparation of the Corporation’s 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 and contingent liabilities at the date of the interim financial statements and reported amounts of revenues and expenses during
|
NEWTON ENERGY CORPORATION
Notes to the Interim Financial Statements
As at and for the three months ended March 31, 2020 and 2019
(Unaudited – Expressed in Canadian Dollars)
|
|
3.
|
SIGNIFICANT ACCOUNTING POLICIES, continued
|
|
|
a)
|
Significant accounting judgments, estimates and assumptions, continued
|
|
|
the reporting period. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. The most significant judgement applying to the Corporation’s financial statements is the assessment of the Corporation’s ability to continue as a going concern and whether there are events or conditions that may give rise to significant uncertainty.
|
|
|
b)
|
New accounting standards and recent pronouncements
|
|
|
The Company does not expect that the changes to IFRS that are effective as of January 1, 2020 will have a significant impact on the Company’s results of operations or financial positions.
|
|
|
Unlimited number of common voting shares
|
|
|
Unlimited number of preferred shares issuable in series
|
|
|
b)
|
Issued and outstanding Common Shares
|
|
|
|
Number of
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Issued and outstanding as at March 31, 2019 and
December 31, 2019
|
|
|
6,361,047
|
|
|
$
|
6,414,127
|
|
|
|
c)
|
Share-based Compensation
|
|
Reserves
|
|
Amount
|
|
|
Balance as at March 31, 2020 and December 31, 2019
|
|
$
|
989,124
|
|
|
|
The Corporation’s Stock Option Plan, approved on September 7, 2016 at a Special Annual General Meeting of shareholders, provides for issuance of stock options to directors, officers, employees and consultants. The options can be granted for a maximum length of five years and vesting terms are at the discretion of the Board of Directors.
|
|
|
|
NEWTON ENERGY CORPORATION
Notes to the Interim Financial Statements
As at and for the three months ended March 31, 2020 and 2019
(Unaudited – Expressed in Canadian Dollars)
|
|
4.
|
SHARE CAPITAL, continued
|
|
|
d)
|
Stock Option Plan, continued
|
|
|
As at March 31, 2020, the Corporation had stock options issued to directors, officers, employees and consultants of the Corporation outstanding as follows:
|
|
|
|
Number of Options
|
|
|
Exercise Price
|
|
|
Expiry Date
|
|
May 4, 2015
|
|
|
10,000
|
*
|
|
$
|
1.00
|
|
|
May 4, 2020
|
|
May 20, 2015
|
|
|
27,500
|
*
|
|
$
|
1.00
|
|
|
May 20, 2020
|
|
January 4, 2018
|
|
|
195,621
|
|
|
$
|
0.25
|
|
|
January 4, 2023
|
|
May 10, 2019
|
|
|
400,000
|
|
|
$
|
0.22
|
|
|
May 10, 2024
|
|
Total
|
|
|
633,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Subsequently expired unexercised
|
|
|
|
|
|
|
|
|
|
|
|
|
5.
|
RELATED PARTY TRANSACTIONS
|
|
|
Remuneration of key management (includes the Corporation’s directors and executive team):
|
|
Expense by nature
|
|
March 31, 2020
|
|
|
March 31, 2019
|
|
|
|
|
$
|
|
|
$
|
|
|
Legal fees
|
|
|
3,325
|
|
|
|
1,688
|
|
|
Consulting fees
|
|
|
12,000
|
|
|
|
6,000
|
|
|
Total
|
|
|
15,325
|
|
|
|
7,688
|
|
|
|
All transactions with related parties have occurred in the normal course of operations and are measured at their fair value as determined by management. Other than as described above, the Corporation has not acquired any assets or services or provided any assets or services in any transaction with any non-arm’s length party within the three month periods ended March 31, 2020 and 2019.
|
|
|
Financial instruments consist of recorded amounts of cash and accounts payable and accrued liabilities which will result in future cash outlays. In management’s opinion, carrying amounts approximate fair values due to the short-term maturities of these items.
|
|
|
|
|
|
The Corporation classifies the fair value of these financial instruments accordingly to the following hierarchy based on the amount of observable inputs used to value the instrument.
|
|
|
|
|
|
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Cash is classified under Level 1.
|
|
|
|
|
|
Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1. Prices in Level 2 are either directly (i.e. as prices) or indirectly (i.e. derived from prices) as of the reporting date. The Corporation does not have any financial instruments classified under Level 2.
|
NEWTON ENERGY CORPORATION
Notes to the Interim Financial Statements
As at and for the three months ended March 31, 2020 and 2019
(Unaudited – Expressed in Canadian Dollars)
|
|
6.
|
FINANCIAL INSTRUMENTS, continued
|
|
|
Level 3 – Valuations in the level are those with inputs for the asset or liability that are not based on observable market data. The Corporation does not have any financial instruments under Level 3.
|
|
|
|
|
|
The Corporation has exposure to the following risks:
|
|
|
Management believes that the Corporation is not exposed to any significant credit risk on its financial assets. Cash includes money market accounts for which management believes the risk of loss to be remote. As at March 31, 2020 and December 31, 2019, the Corporation had no financial assets that were either past due or impaired.
|
|
|
The Corporation manages the risk of not meeting its financial obligations as they come due through management of its capital, annual budgeting of its expenditures and cash flows, and cash flow forecasting.
|
|
|
The Corporation has cash balances and non-interest bearing obligations. The Corporation manages its exposure to interest rate risk through fixed rate investments with no early withdrawal penalties. It is the Corporation’s policy to invest its cash reserves in low risk investments in either short term deposits in primary Canadian banking institutions or overnight money market accounts. The Corporation monitors interest rate markets to ensure that appropriate steps can be taken considering interest rate volatility.
|
|
|
ii)
|
Foreign currency risk
|
|
|
The Corporation’s functional and reporting currency is the Canadian dollar as expenditures and costs are made in Canada. The Corporation does not hedge foreign currency transactions.
|
|
|
The Corporation manages its capital structure and makes adjustments to it, based on the funds available to the Corporation in order to support any acquisition or merger with potential candidates and to maintain the Corporation in good standing with the various regulatory authorities. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Corporation's management to sustain future development of the Corporation. The Corporation has no debt and is not subject to externally imposed capital requirements. There were no changes in the Corporation’s management of capital during the period ended March 31, 2020.
|
NEWTON ENERGY CORPORATION
Notes to the Interim Financial Statements
As at and for the three months ended March 31, 2020 and 2019
(Unaudited – Expressed in Canadian Dollars)
|
|
7.
|
CAPITAL MANAGEMENT, continued
|
|
|
The Corporation may make adjustments to its capital structure in light of changes in economic and market conditions which may include adjusting capital spending to manage projected financial resources, issuing new shares through public offering or private placement, and/or completing a business combination.
|
|
|
|
|
|
As at March 31, 2020, the Corporation has total capital of $491,460 (December 31, 2019, $517,218).
|
|
|
Basic loss per share is calculated using the weighted average number of shares outstanding during the period. Diluted loss per share is calculated to reflect the dilutive effect of stock options outstanding. Loss per share is calculated as follows:
|
|
|
|
Weighted average
|
|
|
|
|
|
Loss per share –
|
|
|
|
|
number of shares
|
|
|
Net loss
|
|
|
basic and diluted
|
|
|
Three months ended March 31, 2020
|
|
|
6,361,047
|
|
|
|
(25,758
|
)
|
|
|
(0.00
|
)
|
|
Three months ended March 31, 2019
|
|
|
6,361,047
|
|
|
|
(23,776
|
)
|
|
|
(0.00
|
)
|
|
|
Outstanding options were anti-dilutive instruments for the three months ended March 31, 2020 and 2019 because the Corporation realized a net loss.
|
Exhibit 99.51
NEWTON ENERGY CORPORATION
Management’s Discussion
and Analysis
December 31, 2019
(Expressed in Canadian Dollars)
MANAGEMENT’S DISCUSSION AND
ANALYSIS
The following management’s discussion
and analysis (“MD&A”) reviews Newton Energy Corporation’s (“Newton” or the “Company”) activities
and results for the year ended December 31, 2019. It should be read in conjunction with the Audited Financial Statements, together with
the accompanying notes, included in this report. The Financial Statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).
In the MD&A, unless otherwise
indicated, all dollar amounts are expressed in Canadian dollars. Additional information relating to the Company’s activities can
be found on SEDAR at www.sedar.com.
Date of Report
This MD&A is dated April 27, 2020
and presents material information up to this date.
Forward-Looking Information
This discussion offers management’s
analysis of the financial and operating results of Newton and contains certain forward-looking statements. Forward-looking information
typically contains statements with words such as “anticipate”, “estimate”, “expect”, “potential”,
“could”, or similar words suggesting future outcomes. The Company cautions readers and prospective investors in the Company’s
securities to not place undue reliance on forward-looking information as by its nature, it is based on current expectations regarding
future events that involve a number of assumptions, inherent risks and uncertainties, which could cause actual results to differ materially
from those anticipated by Newton.
Forward looking information is based
on management's current expectations and assumptions regarding, among other things, future capital and other expenditures (including the
amount, nature and sources of funding thereof), future economic conditions, future currency and exchange rates. Although the Company believes
the expectations and assumptions reflected in such forward-looking information are reasonable, they may prove to be incorrect. Forward-looking
information involves significant known and unknown risks and uncertainties.
See the Risk Factors section of this
MD&A for a further description of these risks. The forward looking information included in this report is expressly qualified in its
entirety by this cautionary statement. Newton assumes no obligation to update or revise any forward-looking information to reflect new
events or circumstances, except as required by law. For additional information relating to the risks and uncertainties facing Newton,
see “Risk Factors”.
Description of Business
Newton is a publicly traded, Calgary-based
company that is listed under the symbol “NTN” on NEX of the TSX Venture Exchange (“TSXV”). The year 2014 was a
transition for the Company as Newton exited the oil and gas sector with the sale of 100% of its oil and gas assets. The Company has embarked
on a new direction and is exploring projects and ventures in other sectors. The Company is considering business structures including acquisitions,
mergers, joint ventures, reverse takeovers or other corporate arrangements acceptable to regulatory authorities.
Private Placement
On July 4, 2018, the Company completed
a second non-brokered private placement comprised of 3,333,333 common shares at a purchase price of $0.15 per common share for gross proceeds
of $500,000. The gross proceeds from the private placements will be used by the Company towards the reduction of accounts payable and
for general working capital.
Letter of Intent with Franchise Cannabis
Corp.
Newton entered into an arm’s
length non-binding letter of intent accepted June 7, 2019 with Franchise Cannabis Corp. (“Franchise”), a global, fully integrated,
seed-to-sale medical cannabis company, pursuant to which the Company and Franchise would effect a business combination that would result
in a reverse takeover of the Company by the securityholders of Franchise and the listing for trading of the securities of the resulting
issuer on the Canadian Securities Exchange. The letter of intent has expired and has not been extended.
Financial Highlights
As at December 31, 2019, Newton has
$533,576 in cash and cash equivalents (2018 – $692,858). Newton had a comprehensive loss of $239,743 for the year ended December
31, 2019 (2018 – $251,097) and a net loss of $64,202 for the three months ended December 31, 2019 (2018 – $79,841).
Selected Annual Information
The following table sets forth selected
audited financial information of the Company for the last three completed financial years:
|
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
|
December 31,
2017
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Revenue
|
|
|
1,754
|
|
|
|
3,772
|
|
|
|
13,366
|
|
|
Net comprehensive loss
|
|
|
239,743
|
|
|
|
251,097
|
|
|
|
468,463
|
|
|
Basic and diluted loss per share
|
|
|
0.04
|
|
|
|
0.05
|
|
|
|
0.29
|
|
|
Weighted average number of shares*
|
|
|
6,361,047
|
|
|
|
4,680,682
|
|
|
|
1,602,991
|
|
|
Total assets
|
|
|
542,319
|
|
|
|
700,331
|
|
|
|
413,045
|
|
|
Dividend
|
|
|
Nil
|
|
|
|
Nil
|
|
|
|
Nil
|
|
*On December 7, 2017, the Company
consolidated the share capital of the Company on a basis of 20 pre-consolidation common shares for one (1) post consolidation share. All
figures have been restated to reflect this consolidation.
For the year ended December 31, 2019,
the Company reported no discontinued operations and did not declare any cash dividends.
The Company’s revenue is comprised
entirely of interest earned on cash and cash equivalent balances. Capital expenditures and certain office and administration expenses
represent Newton’s costs associated with its activities for the respective periods.
Operating Costs and Expenses
For the year ended December 31, 2019
(“2019”), operating costs and expenses decreased to $241,497 compared to $254,869 for the year ended December 31, 2018 (“2018”).
No expenses were capitalized during 2019 or 2018. Accounting and legal were $36,920 in 2019 compared to $55,083 in 2018. Consulting and
directors’ fees were $44,500 in 2019 compared to $103,000 in 2018. Office and miscellaneous were $17,960 in 2019 compared to $11,977
in 2018. Travel and business development were $32,250 in 2019 compared to
$14,493 in 2018.
Certain operating costs and expenses
decreased due to the efforts by management to reduce overhead expenses for the Company.
Share-based payments expense was $87,094
for 2019 compared to $42,939 in 2018.
Newton’s revenue is comprised
entirely of interest earned on cash and cash equivalents. Interest of $1,754 was earned in 2019 compared to $3,772 in 2018.
Summary of Quarterly Results
The flowing table summarizes key financial
information on a quarterly basis for the previous two years:
|
|
December 31,
2019
|
|
September 30,
2019
|
|
|
June 30,
2019
|
|
|
March 31,
2019
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Revenue
|
|
|
-
|
|
|
|
1,750
|
|
|
|
4
|
|
|
|
-
|
|
|
Net loss
|
|
|
(64,202
|
)
|
|
|
(34,337
|
)
|
|
|
(117,428
|
)
|
|
|
(23,776
|
)
|
|
Basic and diluted loss per share
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
(0.02
|
)
|
|
|
(0.01
|
)
|
|
Total assets
|
|
|
542,319
|
|
|
|
582,160
|
|
|
|
624,127
|
|
|
|
656,696
|
|
|
Total liabilities
|
|
|
25,101
|
|
|
|
6,904
|
|
|
|
15,304
|
|
|
|
10,605
|
|
|
|
December 31,
2018
|
|
September 30,
2018
|
|
|
June 30,
2018
|
|
|
March 31,
2018
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Revenue
|
|
|
3,559
|
|
|
|
54
|
|
|
|
-
|
|
|
|
159
|
|
|
Net loss
|
|
|
(79,841
|
)
|
|
|
(70,293
|
)
|
|
|
(25,269
|
)
|
|
|
(75,694
|
)
|
|
Basic and diluted loss per share
|
|
|
(0.02
|
)
|
|
|
(0.03
|
)
|
|
|
(0.01
|
)
|
|
|
(0.03
|
)
|
|
Total assets
|
|
|
700,331
|
|
|
|
760,312
|
|
|
|
344,396
|
|
|
|
358,996
|
|
|
Total liabilities
|
|
|
30,464
|
|
|
|
10,604
|
|
|
|
21,928
|
|
|
|
11,259
|
|
Fourth Quarter
In the fourth quarter of 2019, Newton
had a net loss of $64,202 compared to a net loss of $79,841 in the fourth quarter of 2018.
Operating costs and expenses for
the quarter ended December 31, 2019 were $64,202 compared to $83,400 for the quarter ended December 31, 2018. Accounting and legal
were $16,986 for the quarter ended December 31, 2019 compared to $17,664 for the quarter ended December 31, 2018. Consulting and
director’s fees were $13,000 for the quarter ended December 31, 2019 and $37,000 for the quarter ended December 31, 2018.
Travel and business development were $16,499 for the quarter ended December 31, 2019 compared to $14,366 for the quarter ended
December 31, 2018. Office and miscellaneous were $6,233 for the quarter ended December 31, 2019 compared to $9,144 for the quarter
ended December 31, 2018. The decreases in certain expenses were a result of management’s ongoing effort to reduce overhead
expenses for the Company.
Liquidity and Capital Resources
Newton currently has no operational
cash flow. Newton’s revenue is comprised entirely of interest earned on cash and cash equivalent balances. Newton has no outstanding
bank debt or other interest-bearing indebtedness as at December 31, 2019.
|
•
|
Newton has $533,576 in cash and cash equivalents and working capital of $517,218. These balances will
be used to fund office and administrative expenditures and working capital requirements.
|
|
•
|
Newton assesses its financing requirements and its ability to access debt or equity
markets on an ongoing basis. Given the current conditions in the financial markets, Newton will seek to maintain financial flexibility
and will monitor and assess its financing requirements. Newton’s ability to access the equity or debt markets in the future may
be affected by prolonged market instability. The inability to access the equity or debt markets for sufficient capital, at acceptable
terms, and within required timeframes, could have a material adverse effect on Newton’s financial condition, results of operations
and prospects. Further discussion on these risks can be found in the “Risk Factors” section of the MD&A.
|
Investor Relations
The Company has no investor relation’s
agreements.
Changes in Internal Controls over
Financial Reporting
There have been no changes in the
Company’s internal control over financial reporting during the year ended December 31, 2019 that have materially affected, or are
reasonably likely to materially affect, its internal control over financial reporting.
Financing
The Company does not currently have
any operations generating cash to any projects or ventures and associated overhead costs. The Company is therefore dependent upon debt
and equity financing to carry out its business plans. There can be no assurance that such financing will be available to the Company.
Significant Accounting Judgments,
Estimates and Assumptions
A detailed summary of all the Company’s
significant accounting policies is included in Note 3 of the Company's December 31, 2019 financial statements.
Related Party Transactions
A detailed summary of all the Company’s
related party transactions is included in Note 6 of the Company's December 31, 2019 financial statements.
Off Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
Outstanding Share Data
The Company is authorized to issue
an unlimited number of common shares and an unlimited number of preferred shares. As at April 27, 2020, there were 6,361,047 common shares
and nil preferred shares issued and outstanding.
As at April 27, 2020, there were 633,121
stock options outstanding.
The Company had no share purchase warrants
outstanding as at April 27, 2020.
Subsequent Events
There have been no subsequent events.
Risk Factors
Investment in the Company must be
considered highly speculative due to the nature of the Company's business, its formative stage of development, its current financial position
and its lack of earnings record. The following is a summary of the risk factors to be considered:
Sale
The Company has sold all of its oil
and gas assets and is now seeking to identify and acquire or merge with an operating entity. Investment in the common shares of the Company
is highly speculative given the unknown nature of the Company’s business and its present stage. There can be no assurance that an
active and liquid market for the Company’s common shares will develop and an investor may find it difficult to resell the common
shares.
Potential Transaction
Until identification and acquisition
or merger with an operating entity, the Company is not anticipated to generate any cash flow to meet its operating costs. The Company
has only limited funds with which to identify and evaluate potential targets and there can be no assurance that the Company will be able
to identify a suitable target. Even if a proposed target is identified, there can be no assurance that the Company will be able to successfully
complete the transaction. Completion of a target is subject to a number of conditions including acceptance by the TSXV. Upon public announcement
of a proposed target, trading in the common shares of the Company may be halted and may remain halted for an indefinite period of time.
The common shares of the Company will not be reinstated to trading before the TSXV has reviewed the transaction. Reinstatement to trading
provides no assurance with respect to the merits of the transaction or the likelihood of the Company completing the proposed transaction.
Price Volatility of Publicly
Traded Securities
In
recent years, the securities markets in Canada and the United States have experienced a high level of price and volume volatility,
and the market price of securities of many companies, particularly those considered to be development stage companies, have
experienced wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset values
or prospects of such companies.
Management of Growth
Newton may be subject to growth-related
risks, including capacity constraints and pressure on its internal systems and controls. The ability of Newton to manage growth effectively
will require it to continue to implement and improve its operational and financial systems and to expand, train and manage its employee
base. The inability of Newton to deal with this growth could have a material adverse impact on its business, operations and prospects.
Reliance on Key Personnel
Newton's success depends in large
measure on certain key personnel. The loss of the services of such key personnel could have a material adverse effect on Newton. The Company
does not have any key person insurance in effect for management. The contributions of the existing management team to the immediate and
near term operations of Newton are likely to be of central importance. In addition, the competition for qualified personnel in the technology
industry can be intense and there can be no assurance that Newton will be able to continue to attract and retain all personnel necessary
for the development and operation of its business. Investors must rely upon the ability, expertise, judgment, discretion, integrity and
good faith of the management of Newton.
Substantial Capital Requirements
Newton may be required to make substantial
capital expenditures for the acquisition and development of new ventures or projects. Newton’s ability to access the equity or debt
markets in the future may be affected by any prolonged market instability. There can be no assurance that debt or equity financing, or
future cash (if any) generated by operations, would be available or sufficient to meet these requirements or for other corporate purposes
or, if debt or equity financing is available, that it will be on terms acceptable to Newton. These funding arrangements are not yet in
place. There is no assurance that the initiatives undertaken by management will be successful. The inability of Newton to access sufficient
capital for its operations could have a material adverse effect on Newton's financial condition, results of operations and prospects.
Dilution
Newton may make future acquisitions
or enter into financings or other transactions involving the issuance of securities of Newton, which may be substantially dilutive to
existing shareholders and which may also result in a change of control of the Company.
Issuance of Debt
Newton may enter into transactions
to acquire assets or the shares of other organizations. These transactions may be financed in whole or in part with debt, which may increase
Newton's debt levels above industry standards for companies of similar size. Depending on future plans, Newton may require additional
equity and/or debt financing that may not be available or, if available, may not be available on favourable terms. Neither Newton's articles
nor its by-laws limit the amount of indebtedness Newton may incur. The level of Newton's indebtedness from time to time could impair Newton's
ability to obtain additional financing on a timely basis to take advantage of business opportunities that may arise.
Dividends
To date, Newton has not declared or
paid any dividends on the outstanding Newton shares. Any decision to pay dividends on the Newton shares will be made by the board of directors
of Newton on the basis of Newton's earnings, financial requirements and other conditions existing at such future time. At present, Newton
does not anticipate declaring and paying any dividends in the foreseeable future.
Conflicts of Interest
Certain directors of Newton are also
directors of other technology companies and as such may, in certain circumstances, have a conflict of interest requiring them to abstain
from certain decisions. Conflicts, if any, will be subject to the procedures and remedies of the Business Corporations Act (Alberta).
Financial Instruments
The Company considers its risks in relation
to financial instruments in the following categories:
Credit Risk
Credit risk is the risk that a counterparty
to a financial instrument will not discharge its obligations, resulting in a financial loss to the Company. The Company has policies and
procedures in place that govern the credit risks it will assume. The Company evaluates credit risks on an ongoing basis including an evaluation
of counterparty credit rating and counterparty concentrations measured by amount and percentage. The Company's objective is to have no
credit losses. The primary sources of credit risk for the Company arise from the following financial assets: (1) cash and cash equivalents
and (2) accounts receivable. The Company has not had any credit losses in the past and the risk of financial loss is considered to be
low. As at December 31, 2019, the Company has no financial assets that are past due or impaired due to credit risk related defaults.
Liquidity Risk
Liquidity risk is the risk that the
Company will not be able to meet obligations associated with financial liabilities. The Company's financial liabilities are comprised
of accounts payable and accrued liabilities. The Company frequently assesses its liquidity position and obligations under its financial
liabilities by preparing regular financial forecasts. The Company mitigates liquidity risk by maintaining a sufficient cash balance as
well as maintaining sufficient current and projected liquidity to meet expected future payments.
Market Risk
Market risk is the risk that the
fair value (for assets or liabilities considered to be fair value through profit or loss) or future cash flows (for assets or liabilities
considered to be subsequently measured at amortized cost) of a financial instrument will fluctuate because of changes in market prices.
The Company evaluates market risk on an ongoing basis. At December 31, 2019, all of the Company's financial instruments were assessed
to have little or no market risk.
Exhibit 99.52
NEWTON ENERGY CORPORATION
Financial Statements
December 31, 2019
and
December 31, 2018
(Expressed in Canadian Dollars)
INDEPENDENT AUDITOR’S
REPORT
To the Shareholders of Newton
Energy Corporation
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements
of Newton Energy Corporation, which comprise the statements of financial position as at December 31, 2019 and 2018 and the statements
of comprehensive loss, changes in equity and cash flows for the years then ended, and notes to the financial statements, including a summary
of significant accounting policies.
In our opinion, the accompanying
financial statements present fairly, in all material respects, the financial position of Newton Energy Corporation as at December 31,
2019 and 2018 and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting
Standards (“IFRS”).
Basis for Opinion
We conducted our audit in accordance
with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's
Responsibilities for the Audit of the Financial Statements section of our report. We are independent Newton Energy Corporation in accordance
with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Other Information
Management is responsible for the
other information. The other information comprises the information included in "Management's Discussion and Analysis" but does
not include the financial statements and our auditor's report thereon.
Our opinion on the financial statements
does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of
the financial statements, our responsibility is to read the other information, and in doing so, consider whether the other information
is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of Management
and Those Charged with Governance for the Financial Statements
Management is responsible for
the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal control as management
determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the financial statements,
management is responsible for assessing Newton Energy Corporation’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate Newton
Energy Corporation or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible
for overseeing Newton Energy Corporation’s financial reporting process.
Auditor's Responsibilities for the
Audit of the Financial Statements
Our objectives are to obtain reasonable
assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to
issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance
with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout
the audit. We also:
|
|
·
|
Identify and assess the risks of material misstatement of the financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than
for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
|
|
|
·
|
Obtain an understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Newton Energy Corporation’s internal control.
|
|
|
·
|
Evaluate the appropriateness of accounting policies used and the reasonableness
of accounting estimates and related disclosures made by management.
|
|
|
·
|
Conclude on the appropriateness of management's use of the going concern basis
of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may
cast significant doubt on Newton Energy Corporation’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report.
However, future events or conditions may cause Newton Energy Corporation to cease to continue as a going concern.
|
|
|
·
|
Evaluate the overall presentation, structure, and content of the financial statements,
including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves
fair presentation.
|
We communicate with those charged
with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify during our audit.
We also provide those charged
with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with
them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit
resulting in this independent auditor’s report is James D. Gray.
Chartered Professional Accountants
Vancouver, BC, Canada
April 27, 2020
NEWTON ENERGY CORPORATION
Statements of Financial
Position
As at December 31, 2019 and 2018
(Expressed in Canadian
Dollars)
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
533,576
|
|
|
|
692,858
|
|
|
GST receivable
|
|
|
2,260
|
|
|
|
5,348
|
|
|
Prepaid expenses and deposits
|
|
|
6,483
|
|
|
|
2,125
|
|
|
Total Assets
|
|
|
542,319
|
|
|
|
700,331
|
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities (Note 5)
|
|
|
25,101
|
|
|
|
30,464
|
|
|
Total Liabilities
|
|
|
25,101
|
|
|
|
30,464
|
|
|
Shareholders’ equity
|
|
|
|
|
|
|
|
|
|
Share capital (Note 7(a))
|
|
|
6,414,127
|
|
|
|
6,414,127
|
|
|
Reserves
|
|
|
989,124
|
|
|
|
902,030
|
|
|
Deficit
|
|
|
(6,886,033
|
)
|
|
|
(6,646,290
|
)
|
|
Total Equity
|
|
|
517,218
|
|
|
|
669,867
|
|
|
Total Liabilities and Equity
|
|
|
542,319
|
|
|
|
700,331
|
|
See accompanying notes to the financial statements
Nature and continuance of operations (Note 1)
Approved by the Board of Directors and authorized for issue
on April 27, 2020.
|
“Gino DeMichele”
|
|
“Fram Moos”
|
|
Gino DeMichele, Director
|
|
Fram Moos, Director
|
NEWTON ENERGY CORPORATION
Statements
of Comprehensive Loss
For the years ended December 31, 2019 and 2018
(Expressed in Canadian Dollars)
|
|
|
2019
|
|
|
2018
|
|
|
|
|
$
|
|
|
$
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
Accounting and legal
|
|
|
36,920
|
|
|
|
55,083
|
|
|
Advertising and promotion
|
|
|
2,437
|
|
|
|
4,290
|
|
|
Consulting and director’s fees
|
|
|
44,500
|
|
|
|
103,000
|
|
|
Insurance
|
|
|
7,292
|
|
|
|
6,741
|
|
|
Interest income
|
|
|
(1,754
|
)
|
|
|
(3,772
|
)
|
|
Office and miscellaneous
|
|
|
17,960
|
|
|
|
11,977
|
|
|
Share-based payments
|
|
|
87,094
|
|
|
|
42,939
|
|
|
Travel and business development
|
|
|
32,250
|
|
|
|
14,493
|
|
|
Regulatory and filing fees
|
|
|
13,044
|
|
|
|
16,346
|
|
|
Net and comprehensive loss for the year
|
|
|
239,743
|
|
|
|
251,097
|
|
|
Weighted average number of common shares outstanding
|
|
|
6,361,047
|
|
|
|
4,680,682
|
|
|
Basic and diluted loss per share
|
|
$
|
0.04
|
|
|
$
|
0.05
|
|
See accompanying notes to the financial statements
NEWTON ENERGY CORPORATION
Statements of Cash Flows
For the years ended December 31, 2019 and 2018
(Expressed in Canadian dollars)
|
|
|
2019
|
|
|
2018
|
|
|
|
|
$
|
|
|
$
|
|
|
Cash provided by (used for):
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
Net loss for the year
|
|
|
(239,743
|
)
|
|
|
(251,097
|
)
|
|
Items not involving the use of cash:
|
|
|
|
|
|
|
|
|
|
Share-based payments
|
|
|
87,094
|
|
|
|
42,939
|
|
|
|
|
|
(152,649
|
)
|
|
|
(208,158
|
)
|
|
Change in non-cash working capital:
|
|
|
|
|
|
|
|
|
|
GST receivable
|
|
|
3,088
|
|
|
|
(2,853
|
)
|
|
Prepaid expenses and deposits
|
|
|
(4,358
|
)
|
|
|
6,866
|
|
|
Accounts payable and accrued liabilities
|
|
|
(5,363
|
)
|
|
|
(2,089
|
)
|
|
Net cash used in operating activities
|
|
|
(159,282
|
)
|
|
|
(206,234
|
)
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
Proceeds from private placement
|
|
|
-
|
|
|
|
500,000
|
|
|
Cash share issue cost
|
|
|
-
|
|
|
|
(2,467
|
)
|
|
Net cash from financing activities
|
|
|
-
|
|
|
|
497,533
|
|
|
Increase (decrease) in cash
|
|
|
(159,282
|
)
|
|
|
291,299
|
|
|
Cash, beginning of the year
|
|
|
692,858
|
|
|
|
401,559
|
|
|
Cash, end of the year
|
|
|
533,576
|
|
|
|
692,858
|
|
|
Supplementary cash flow information
|
|
|
|
|
|
|
|
|
|
Interest received
|
|
|
1,754
|
|
|
|
3,772
|
|
See accompanying notes to the financial statements
NEWTON ENERGY CORPORATION
Statements
of Changes in Equity
(Expressed in Canadian dollars)
|
|
|
Number
of
Shares
|
|
|
Share
Capital
|
|
|
Reserves
|
|
|
Deficit
|
|
|
Total
Equity
|
|
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
December 31, 2017
|
|
|
3,027,714
|
|
|
|
5,916,594
|
|
|
|
859,091
|
|
|
|
(6,395,193
|
)
|
|
|
380,492
|
|
|
Issued for cash
|
|
|
3,333,333
|
|
|
|
500,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
500,000
|
|
|
Share issue costs – cash
|
|
|
-
|
|
|
|
(2,467
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,467
|
)
|
|
Share-based payments
|
|
|
-
|
|
|
|
-
|
|
|
|
42,939
|
|
|
|
-
|
|
|
|
42,939
|
|
|
Net loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(251,097
|
)
|
|
|
(251,097
|
)
|
|
December 31, 2018
|
|
|
6,361,047
|
|
|
|
6,414,127
|
|
|
|
902,030
|
|
|
|
(6,646,290
|
)
|
|
|
669,867
|
|
|
Share-based payments
|
|
|
-
|
|
|
|
-
|
|
|
|
87,094
|
|
|
|
-
|
|
|
|
87,094
|
|
|
Net loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(239,743
|
)
|
|
|
(239,743
|
)
|
|
December 31, 2019
|
|
|
6,361,047
|
|
|
|
6,414,127
|
|
|
|
989,124
|
|
|
|
(6,886,033
|
)
|
|
|
517,218
|
|
See accompanying notes to the financial statements
NEWTON ENERGY CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian dollars)
Newton Energy Corporation (“Newton”
or the “Company”) is domiciled and incorporated in Canada. The Company’s financial year-end is December 31. The
address of the Company’s registered office is 1600, 333-7 Avenue SW, Calgary, Alberta, Canada T2P 2Z1. Newton trades on NEX of the
TSX Venture Exchange under the symbol “NTN”.
The Company is inactive and is
looking for a suitable acquisition or opportunity to begin operations. The Company is currently evaluating acquisition targets, and to
date, the Company has not generated revenue from operations.
These financial statements have
been prepared on the basis that the Company will continue to meet its commitments, continue operations and realize its assets and discharge
its liabilities in the normal course of business for the foreseeable future. Newton has no recurring source of revenue and has an accumulated
deficit of $6,886,033 at December 31, 2019 (2018 - $6,646,290).
The Company’s continuing
operations as intended are dependent upon its ability to raise sufficient funds in order to finance any acquisition and administrative
expenses. The Company has no assurance that such financing will be available or be available on favorable terms. Factors that could affect
the availability of financing include the Company’s performance (as measured by numerous factors including the progress and results
of its projects), the state of international debt and equity markets, investor perceptions and expectations and the global financial and
energy markets. If successful, the Company would obtain additional financing through, but not limited to, the issuance of additional equity.
These financial statements were approved
and authorized for issuance by the Board of Directors on April 27, 2020.
These financial statements have
been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting
Standards Board (“IASB”).
|
|
3)
|
SIGNIFICANT ACCOUNTING POLICIES
|
Basis of measurement
These financial statements have
been prepared using the accrual basis of accounting, except for cash flow information. Furthermore, these financial statements are presented
in Canadian dollars which is the functional currency of the Company and all values are rounded to the nearest dollar. These financial
statements have, in management’s opinion, been properly prepared within the framework of the accounting policies summarized below:
Critical accounting estimates
and judgments
The preparation of these financial
statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies
and reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses
during the reporting period. The effect of changes in such estimates on the financial statements in future periods could be significant.
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.
NEWTON ENERGY CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian dollars)
3) SIGNIFICANT ACCOUNTING POLICIES (continued)
Critical accounting estimates
and judgements (continued)
In particular, information about
significant areas of estimation uncertainty considered by management in preparing the financial statements is described below:
Going concern assumption
Management has applied judgments
in the assessment of the Company’s ability to continue as a going concern when preparing its financial statements for the year ended
December 31, 2019. Management prepares the financial statements on a going concern basis unless management either intends to liquidate
the entity or to cease trading, or has no realistic alternative but to do so. In assessing whether the going concern assumption is appropriate,
management takes into account all available information about the future, which is at least, but is not limited to, twelve months from
the end of the reporting period. Management considered a wide range of factors relating to current and expected profitability, debt repayment
schedules and potential sources of replacement financing. As a result of the assessment, the Company concluded that its liquidity is sufficient
based on existing capital resources.
Cash and cash equivalents
Cash and cash equivalents in the
statement of financial position comprise of cash at banks and highly liquid investments with an original maturity of three months or less,
which are readily convertible into a known amount of cash.
Deferred tax
Deferred tax is recognized on
differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in
the computation of taxable profit, and is accounted for using the liability method. Deferred tax liabilities are generally recognized
for all taxable temporary differences, and deferred tax assets are generally recognized for all deductible temporary differences to the
extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.
Such assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other
than in business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting
profit.
Fair value of share-based compensation
The Company accounts for stock
options using the fair value method of accounting. Accordingly, the fair value of the options is determined using the Black-Scholes option
pricing model. The fair value of options is charged to operations in a manner to reflect the number of awards for which the related services
are expected to be met, including share issue costs in the case of options issued in relation to share issuances, with an offsetting credit
to share-based payment reserve. If and when the stock options are exercised, the applicable amount of share-based payment reserve is transferred
to share capital.
Earnings per share
Basic per share information is
computed using the weighted average number of common shares outstanding during the period. Diluted per share information is calculated
using the treasury stock method, which assumes that any proceeds from the exercise of “in-the-money” stock options plus the
unamortized share-based compensation expense amounts, would be used to purchase common shares at the average market price during the period.
No adjustment to basic earnings per share is made if the result of these calculations is anti-dilutive.
NEWTON ENERGY CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian dollars)
|
|
3)
|
SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Impairment
Impairment of financial assets
Financial assets are assessed at
each reporting date to determine whether there is any objective evidence that they are impaired. A financial asset is considered to be
impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that
asset. An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying
amount and the present value of the estimated future cash flows, discounted at the financial asset’s original effective interest
rate.
Significant financial assets are
tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit
risk characteristics. Impairment losses are recognized in profit or loss. An impairment loss is reversed if the reversal can be related
objectively to an event occurring after the impairment loss was recognized.
|
|
4)
|
NEW ACCOUNTING STANDARDS AND RECENT PRONOUNCEMENTS
|
The Company does not expect that
the changes to IFRS that are effective as of January 1, 2020 will have a significant impact on the Company’s results of operations
or financial position.
|
|
5)
|
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
|
Accounts payable and accrued liabilities
are comprised of the following:
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
Accounts payable
|
|
|
12,711
|
|
|
|
19,974
|
|
|
Accrued liabilities
|
|
|
12,390
|
|
|
|
10,490
|
|
|
|
|
|
25,101
|
|
|
|
30,464
|
|
Accrued liabilities include $490 due
to related parties as at December 31, 2019
|
|
6)
|
RELATED PARTY TRANSACTIONS
Compensation of key management personnel
|
The remuneration of directors and
other members of key management personnel during the years ended December 31, 2019 and 2018 were as follows:
|
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
Director’s fees
|
|
|
4,500
|
|
|
|
4,000
|
|
|
Legal fees
|
|
|
20,019
|
|
|
|
37,584
|
|
|
Consulting fees
|
|
|
40,000
|
|
|
|
24,000
|
|
|
Share-based payments
|
|
|
87,094
|
|
|
|
42,939
|
|
|
Total management compensation
|
|
|
151,613
|
|
|
|
108,523
|
|
NEWTON ENERGY CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed in Canadian dollars)
|
|
6)
|
RELATED PARTY TRANSACTIONS (continued)
|
All transactions with related parties have occurred in the
normal course of operations and management represents that they have occurred on a basis consistent with those involving unrelated parties,
and accordingly that they are measured at fair value.
Other than as described above, the Company has not acquired
any assets or services, or provided any assets or services in any transaction with any non-arm’s length party during the years ended
December 31, 2019 and December 31, 2018.
|
|
a)
|
The authorized share capital of the Company consists of an unlimited number of common shares.
|
During the year ended December 31, 2019,
the Company did not issue any common shares.
On July 4, 2018, the Company completed a non-brokered private
placement comprised of 3,333,333 common shares at a purchase price of $0.15 per common share for gross proceeds of $500,000. The Company
paid cash share issue costs of $2,467.
|
|
b)
|
Share-based compensation and share purchase options
|
Option pricing models require the
input of highly subjective assumptions, particularly as to the expected price volatility of the shares and the expected life of the option.
Changes in these assumptions can materially affect the fair value estimate and therefore it is management’s view that the existing
models do not necessarily provide a single reliable measure of the fair value of the Company’s stock option grants and warrant issuances.
The continuity of stock options is as
follows:
|
|
|
2019
|
|
|
2018
|
|
|
|
|
Number of Options
|
|
|
Weighted Average Exercise Price
|
|
|
Number of Options
|
|
|
Weighted Average Exercise Price
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
Balance, beginning of the year
|
|
|
233,121
|
|
|
|
0.37
|
|
|
|
37,500
|
|
|
|
1.00
|
|
|
Granted
|
|
|
400,000
|
|
|
|
0.22
|
|
|
|
195,621
|
|
|
|
0.25
|
|
|
Balance, end of the year
|
|
|
633,121
|
|
|
|
0.28
|
|
|
|
233,121
|
|
|
|
0.37
|
|
The following stock options were outstanding
and exercisable as at December 31, 2019:
|
Expiry Date
|
|
Exercise
Price
|
|
|
Number of Options
|
|
|
Remaining Contractual Life (Years)
|
|
|
May 4, 2020
|
|
$
|
1.00
|
|
|
|
10,000
|
|
|
|
0.34
|
|
|
May 20, 2020
|
|
$
|
1.00
|
|
|
|
27,500
|
|
|
|
0.39
|
|
|
January 4, 2023
|
|
$
|
0.25
|
|
|
|
195,621
|
|
|
|
3.01
|
|
|
May 10, 2024
|
|
$
|
0.22
|
|
|
|
400,000
|
|
|
|
4.36
|
|
|
Total
|
|
|
|
|
|
|
633,121
|
|
|
|
|
|
|
Weighted average years to expiry
|
|
|
|
|
|
|
|
|
|
|
3.71
|
|
On May 10, 2019, the Company granted
400,000 stock options to directors, officer and consultants at an exercise price of $0.22 per share for a term of five years.
On January 4, 2018, the Company granted 195,621 stock
options to directors, officer and consultants at an exercise price of $0.25 per share for a term of five years.
NEWTON ENERGY CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed
in Canadian dollars)
|
7)
|
SHARE CAPITAL (continued)
|
The Company employed the Black-Scholes option-pricing model
using the following assumptions:
|
|
|
2019
|
|
|
2018
|
|
|
Risk free interest rate
|
|
|
1.61
|
%
|
|
|
1.89
|
%
|
|
Expected life of options in years
|
|
|
5 years
|
|
|
|
3-5 years
|
|
|
Expected volatility
|
|
|
228.24
|
%
|
|
|
272.85
|
%
|
|
Dividend per share
|
|
|
-
|
|
|
|
-
|
|
|
Forfeiture rate
|
|
|
-
|
|
|
|
-
|
|
During the year ended December 31, 2019, compensation
expense of $87,094 (2018 - $42,939) was recognized for options granted and vested during the year.
|
|
c)
|
Share purchase warrants
|
There were no outstanding warrants as at December 31, 2019
and December 31, 2018.
|
8)
|
FINANCIAL INSTRUMENT RISKS
|
Level 1 – Quoted prices
are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions
occur in sufficient frequency and volume to provide pricing information on an ongoing basis. The Company does not have any financial instruments
classified under Level 1.
Level 2 – Pricing inputs
are other than quoted prices in active markets included in Level 1. Prices in Level 2 are either directly (i.e. as prices) or indirectly
(i.e. derived from prices) as of the reporting date. The Company does not have any financial instruments classified under Level 2.
Level 3 – Valuations in
Level 3 are those with inputs for the asset or liability that are not based on observable market data. The Company does not have any financial
instruments under Level 3.
The Company has exposure to the following
risks:
Management believes that the Company is not exposed to
any significant credit risk on its financial assets. As at December 31, 2019 and December 31, 2018, the Company had no financial assets
that were either past due or impaired.
The Company manages the risk of not meeting its financial
obligations as they come due through management of its capital, annual budgeting of its expenditures and cash flows, and cash flow forecasting.
NEWTON ENERGY CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed
in Canadian dollars)
|
8)
|
FINANCIAL INSTRUMENT RISKS (Continued)
|
The Company has cash balances and
non-interest bearing obligations. The Company manages its exposure to interest rate risk through fixed rate investments with no early
withdrawal penalties. It is the Company’s policy to invest its cash reserves in low risk investments in either short term deposits
in primary Canadian banking institutions or overnight money market accounts. The Company monitors interest rate markets to ensure that
appropriate steps can be taken considering interest rate volatility.
|
|
ii)
|
Foreign currency risk
|
The Company’s functional and
reporting currency is the Canadian dollar as expenditures and costs are made in Canada. The Company does not hedge foreign currency transactions.
The Company manages its capital
structure and makes adjustments to it, based on the funds available to the Company in order to maintain the Company in good standing with
the various regulatory authorities. The Board of Directors does not establish quantitative return on capital criteria for management,
but rather relies on the expertise of the Company's management to sustain future development of the Company. The Company has no debt and
is not subject to externally imposed capital requirements. There were no changes in the Company’s management of capital during the
year ended December 31, 2019.
The Company may make adjustments
to its capital structure in light of changes in economic and market conditions which may include adjusting capital spending to manage
projected financial resources, issuing new shares through public offering or private placement, and/or completing a business combination.
As at December 31, 2019, the Company
has a total capital of $517,218 (2018 - $669,867).
A reconciliation of income taxes at
statutory rates is as follows:
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
Net loss for the year before tax
|
|
|
(239,743
|
)
|
|
|
(251,097
|
)
|
|
Expected income recovery
|
|
|
(64,731
|
)
|
|
|
(67,796
|
)
|
|
Net adjustment for non-tax items
|
|
|
24,091
|
|
|
|
10,916
|
|
|
Unrecognized benefit of current non-capital loss
|
|
|
40,640
|
|
|
|
56,880
|
|
|
Total income tax expense (recovery)
|
|
|
-
|
|
|
|
-
|
|
NEWTON ENERGY CORPORATION
Notes to the Financial Statements
For the years ended December 31, 2019 and 2018
(Expressed
in Canadian dollars)
|
10)
|
INCOME TAXES (Continued)
|
Deductible temporary differences, unused tax losses and
unused tax credits for which no deferred tax assets/(liabilities) have been recognized are attributable to the following:
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
Non-capital loss carryforwards
|
|
|
4,429,000
|
|
|
|
4,273,000
|
|
|
Capital loss carryforwards
|
|
|
3,599,000
|
|
|
|
3,929,000
|
|
|
Capital and share issue costs
|
|
|
19,000
|
|
|
|
23,000
|
|
|
|
|
|
8,047,000
|
|
|
|
8,225,000
|
|
As at December 31, 2019, the Company has Canadian
non-capital losses carried forward of approximately $4,429,000 (2018 – $4,273,000). The Company has Canadian capital losses of
$3.6 million to reduce future capital gains.
The non-capital losses are available to be utilized
as deductions against future year’s Canadian taxable income from Canadian operations and, if not utilized, will expire as follows:
|
|
|
$
|
|
2025
|
|
134,000
|
|
2026
|
|
141,000
|
|
2027
|
|
342,000
|
|
2028
|
|
202,000
|
|
2029
|
|
541,000
|
|
2030
|
|
454,000
|
|
2031
|
|
329,000
|
|
2032
|
|
603,000
|
|
2033
|
|
296,000
|
|
2034
|
|
434,000
|
|
2035
|
|
251,000
|
|
2036
|
|
212,000
|
|
2037
|
|
125,000
|
|
2038
|
|
211,000
|
|
2039
|
|
154,000
|
|
|
|
4,429,000
|
Exhibit
99.53
Consent of Independent
Registered Public Accounting Firm
July 19, 2021
The Board of Directors
Field Trip Health Ltd.
We, DeVisser Gray LLP,
consent to the use of our reports, dated April 27, 2020, April 24, 2019 and April 20, 2018 with respect to the consolidated financial
statements of Field Trip Health Ltd. for the years ended December 31, 2019, December 31, 2018 and December 31, 2017, incorporated by reference
in this Registration Statement on Form 40-F.
/s/
DeVisser Gray LLP
|
DeVisser Gray LLP
|
|
|
Chartered Professional Accountants, Licensed Public Accountants
|
|
|
Vancouver, Canada
|
|
|
|
|
Exhibit 99.54
Consent of Independent Registered Public Accounting Firm
July 19, 2021
We, MNP LLP, consent to the use of our report, dated June
24, 2021, with respect to the consolidated financial statements of Field Trip Health Ltd. for the year ending March 31, 2021 and for the
period from April 2, 2019 (date of incorporation) to March 31, 2020, incorporated by reference in this Registration Statement on Form
40-F.
|
/s/
MNP LLP
|
|
|
|
|
|
MNP
LLP
|
|
|
Chartered
Professional Accountants, Licensed Public Accountants
|
|
|
Waterloo,
Canada
|
|
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![[MISSING IMAGE: LG_FIELDTRIP-4C.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093537_LG_FIELDTRIP-4C.JPG)
![[MISSING IMAGE: LG_MNPLLP-4CLR.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093537_LG_MNPLLP-4CLR.JPG){kind=small}
![[MISSING IMAGE: SG_MNPLLP-BW.JPG]](https://content.edgar-online.com/edgar_conv_img/2021/07/19/0001104659-21-093537_SG_MNPLLP-BW.JPG){kind=small}