As filed with the Securities and Exchange Commission on December 7, 2020.
Registration No. 333250838
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AbCellera Biologics Inc.
(Exact name of registrant as specified in its charter)
British Columbia | 8731 | Not Applicable | ||
(State or other jurisdiction of
incorporation or organization) |
(Primary Standard Industrial
Classification Code Number) |
(I.R.S. Employer
Identification No.) |
2215 Yukon Street
Vancouver, BC V5Y 0A1
(604) 559-9005
(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)
The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, DE 19801
(302) 658-7581
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Sam Zucker
Mitchell S. Bloom James Xu Goodwin Procter LLP 601 Marshall Street Redwood City, CA 94063 (650) 752-3100 |
Joseph Garcia Blake, Cassels & Graydon LLP 595 Burrard Street, Suite 2600 Vancouver, BC V7X 1L3 Canada (604) 631-3300 |
Carl L. G. Hansen, Ph.D. Andrew Booth Tryn T. Stimart AbCellera Biologics Inc. 2215 Yukon Street Vancouver, BC V5Y 0A1 Canada (604) 559-9005 |
Charles S. Kim Kristin VanderPas Divakar Gupta Richard Segal Cooley LLP 4401 Eastgate Mall San Diego, CA 92121 (858) 550-6000 |
Shahir Guindi Trevor Scott Osler, Hoskin & Harcourt LLP Suite 1700, Guinness Tower 1055 West Hastings Street Vancouver, BC V6E 2E9 Canada (778) 785-3000 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act
Large Accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☐ | |||
Emerging growth company | ☒ |
If an emerging growth company, 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. ☐
CALCULATION OF REGISTRATION FEE
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Title of Each Class of
Securities to be Registered |
Amount to be
Registered(1) |
Proposed Maximum
Offering
|
Proposed
Maximum Aggregate Offering Price(3) |
Amount of
Registration fee(4) |
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Common shares, no par value per share |
26,450,000 |
$17.00 |
$449,650,000 | $49,057 | ||||
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(1) |
Includes 3,450,000 shares that the underwriters have the option to purchase. |
(2) |
Estimated solely for the purpose of computing the registration fee in accordance with Rule 457(a) under the Securities Act of 1933, as amended. |
(3) |
Includes the aggregate offering price of 3,450,000 shares that the underwriters have the option to purchase. |
(4) |
Calculated pursuant to Rule 457(a) under the Securities Act of 1933 as amended. $21,820.00 of this registration fee was previously paid by the Registrant in connection with the filing of its Registration Statement on Form S-1 on November 20, 2020. |
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the Securities and Exchange Commission declares our registration statement effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED DECEMBER 7, 2020
PRELIMINARY PROSPECTUS
23,000,000 Shares
Common Shares
This is the initial public offering of common shares of AbCellera Biologics Inc. We are offering 23,000,000 of our common shares. Prior to this offering, there has been no public market for our common shares. We anticipate that the initial public offering price per share of our common shares will be between $14.00 and $17.00 per share. We have applied to list our common shares on the Nasdaq Global Market under the symbol ABCL.
We have granted the underwriters an option for a period of 30 days after the date of this prospectus to purchase up to an additional 3,450,000 common shares from us at the initial public offering price, less underwriting discounts and commissions.
We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, as such, have elected to take advantage of certain reduced public company reporting requirements for this prospectus and future filings. See Prospectus SummaryImplications of Being an Emerging Growth Company.
Investing in our common shares involves risks. See Risk Factors beginning on page 16.
Price to Public |
Underwriting
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Proceeds to
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Per Share |
$ | $ | $ | |||
Total |
$ | $ | $ |
(1) |
See Underwriting for additional disclosure regarding the underwriting discounts and commissions and estimated expenses payable by us. |
One or more funds affiliated with Capital World Investors have indicated an interest in purchasing up to 20% of the common shares offered by us in this offering at the initial public offering price (excluding the underwriters option to purchase additional shares, or up to 4,600,000 shares based on the share number set forth above). However, because these indications of interest are not binding agreements or commitments to purchase, one or more funds affiliated with Capital World Investors could determine to purchase more, less or no shares in this offering or the underwriters could determine to sell more, less or no shares to one or more funds affiliated with Capital World Investors. The underwriters will receive the same discount on any of our common shares purchased by one or more funds affiliated with Capital World Investors as they will from any other common shares sold to the public in this offering.
Neither the Securities and Exchange Commission nor any state securities commission or other regulatory body has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares on or about , 2020.
Credit Suisse | Stifel | Berenberg | SVB Leerink | BMO Capital Markets |
The date of this prospectus is , 2020.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION |
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR U.S. HOLDERS |
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F-1 |
You should rely only on the information contained in this document or to which we have referred you. Neither we nor the underwriters have authorized anyone to provide you with information that is different. This document may only be used where it is legal to sell these securities. The information in this document may only be accurate on the date of this document. Regardless of the time of delivery of this prospectus or of any sale of our common shares, the information in any free writing prospectus that we may provide you in connection with this offering is accurate only as of the date of that free writing prospectus. Our business, financial condition, results of operations and future growth prospects may have changed since those dates.
For investors outside the United States: We have not, and the underwriters have not, done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus applicable to that jurisdiction.
Through and including , (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealers obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
In this prospectus, unless otherwise specified, all monetary amounts are in U.S. dollars. All references in this prospectus to $, US $, dollars and USD mean U.S. dollars. Our consolidated financial statements are presented in U.S. dollars and all references to $ in our consolidated financial statements mean U.S. dollars. All references to Canadian dollars and CAD $ mean Canadian dollars. Transactions in Canadian dollars are translated to U.S. dollars at exchange rates at the date of such transactions. Period end balances of monetary assets and liabilities in Canadian dollars are translated to U.S. dollars using the period end exchange rate.
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This summary highlights information contained in greater detail elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common shares, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes thereto appearing elsewhere in this prospectus. You should also consider, among other things, the information set forth under the sections titled Risk Factors, Special Note Regarding Forward-Looking Statements and Managements Discussion and Analysis of Financial Condition and Results of Operations, in each case appearing elsewhere in this prospectus. In this prospectus, references to AbCellera, the Company, we, us, our and similar references refer to AbCellera Biologics Inc. and its wholly owned subsidiaries.
Overview
We believe that the surest path to a better future is through technological advancement and that the new frontier of technology lies at the interface of computation, engineering and biology. Our mission is to improve health with technologies that transform the way that antibody-based therapies are discovered. We aim to become the centralized operating system for next generation antibody discovery.
Our full-stack, artificial intelligence-, or AI, powered drug discovery platform searches and analyzes the database of natural immune systems to find antibodies that can be developed as drugs. We believe our technology increases the speed and the probability of success of therapeutic antibody discovery, including enabling discovery against targets that may otherwise be intractable. Rather than advancing our own clinical pipeline of drug candidates, we forge partnerships with drug developers of all sizes, from large cap pharmaceutical to small biotechnology companies. We empower them to move quickly, reduce cost and tackle the toughest problems in drug development. As of September 30, 2020, we had 94 discovery programs that are either completed, in progress or under contract with 26 partners. As a recent example, in a collaboration with Eli Lilly and Company, or Lilly, we applied our technology stack to co-develop LY-CoV555, a potential antibody therapy to treat and prevent COVID-19. Starting from a single blood sample obtained from a convalescent patient, we and our partners identified a viable antibody drug candidate within three weeks that advanced into clinical testing 90 days after initiation of the program. Lilly progressed into these clinical trials at a greatly accelerated pace as a result of the Coronavirus Treatment Acceleration Program, which is a special emergency program for possible coronavirus therapies created by the U.S. Food and Drug Administration, or FDA, in 2020 to expedite the development of potentially safe and effective life-saving treatments to combat the COVID-19 pandemic. With respect to other or future product candidates, there is no assurance that any of our partners or collaborators will be able to advance a product candidate into clinical development on this timeframe again in the future, or at all. We initiated our partnering program in 2015 and have only had this one program result in clinical milestone payments to us to date and we have not yet had a program receive marketing approval.
Antibodies, which are proteins generated by natural immune systems to fight infection and disease, are amongst the fastest growing class of drugs and are used across multiple therapeutic areas, including oncology, inflammation, neurodegeneration and many others. In 2019, antibody-based therapeutics accounted for over $140.0 billion in sales worldwide and represented five of the top 10 selling therapeutics. The rise of genomics, high-throughput biology and genetic engineering has greatly expanded the opportunity and the ecosystem of innovators working to advance the development of antibody-based therapeutics. There has been a proliferation of biopharmaceutical companies pursuing innovative drug candidate formats and new targets. As new entrants continue to emerge, we believe the total addressable market will continue to expand.
As the field of antibody therapeutics evolves, finding novel antibodies with desired therapeutic properties has become increasingly competitive and demanding. We believe that there are two fundamental problems hindering the discovery and development of next generation antibody-based therapeutics. The first is the state of technology: because of the limitations of legacy discovery approaches, there are many well-validated targets for
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which suitable antibodies cannot be found. The second is access: most companies are forced to cobble together fragmented solutions and lack the facilities and expertise needed to prosecute their antibody programs. Both of these problems contribute to the rising cost of drug development and delay bringing needed therapies to patients.
Many emerging and established life sciences companies have been built around technologies that focus on one or a limited number of steps in the discovery process, including immune repertoire sequencing, or RepSeq, single-cell analysis, AI, and transgenic rodent platforms. We believe we uniquely integrate proprietary technologies that address each of these steps, creating a complete solution for our partners. Over the last eight years, we have developed and assembled technologies that unlock the database of natural antibodies. We are democratizing the industry by providing our partners of all sizes with access to our centralized operating system.
As depicted in Figure 1 below, our technology stack is a chain of interlocking technologies that is designed to enable the identification of antibodies with desired therapeutic properties.
Figure 1: Our Technology Stack
Some notable technologies within our stack that compound the productivity and efficiency of each step of the discovery process include:
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Source. We combine proprietary immunization with genetically engineered mouse technologies, including the proprietary suite of humanized mice we acquired in November 2020 in connection with our acquisition of Trianni, Inc., or Trianni, to provide a diverse source of human antibodies. |
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Search. Our patented microfluidic single-cell screening technology combines speed, throughput, efficiency, resolution and versatility, enabling rapid and deep searches of natural antibody responses. |
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Find. Following the acquisition of Lineage Biosciences Inc., or Lineage, in March 2017, we integrated high-throughput RepSeq technology with our single-cell screening technology to provide leading capabilities for the comprehensive profiling and functional characterization of antibody diversity. |
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Analyze. Our internally developed platform, Celium, a powerful computational engine for mining, interacting and visualizing the terabytes of data generated during an antibody discovery campaign, combines software, AI and visualization tools to organize, compute and interactively explore large multidimensional data sets. |
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Engineer. We acquired rights to the OrthoMab bispecific technology in June 2020, which is a versatile and clinically-validated protein engineering solution to design and produce bispecific antibodies. |
The marriage of advanced data collection and computation creates a flywheel effect that augments our technology. As we run our partnership business, we are amassing unique, multi-dimensional data sets that link measurements at the level of single immune cells with the properties of the antibodies they make and the DNA sequences that encode their function. A single antibody discovery project can generate millions of DNA sequences and single-cell measurements, as well as thousands of target-specific antibodies, each characterized by hundreds of data points. Every project generates more data about the antibody immune response. This creates a competitive advantage whereby Celium extracts insights from the data that allows us to accelerate wet lab experimentation with in silico computation in a continuously iterative process. Because our computation is grounded on real world data, the output of Celium is not theoretical predications. We find real molecules that have been optimized by nature.
Our business thesis is based on the belief that technological advancement can improve the drug development process and that maximizing the value and impact of our work is best achieved through partnerships. In March 2020, we tested these beliefs as we mobilized our response to the COVID-19 pandemic. Working with our partner Lilly, we were able to progress from initiation of discovery to clinical trials in only 90 days. The first clinical development candidate in this collaboration, LY-CoV555, is undergoing clinical trials as both a monotherapy and in combination with another antibody as potential therapeutics for COVID-19. On September 16, 2020, Lilly released the first interim Phase 2 clinical data for the monotherapy arms of the BLAZE-1 study, which showed that treatments of COVID-19 infected patients with LY-CoV555 resulted in a 72% risk reduction in hospitalization as compared to placebo in a study of 465 patients. BLAZE-1 is a randomized, double-blind, placebo-controlled Phase 2 study conducted by Lilly that is designed to assess the efficacy and safety of LY-CoV555 and an additional Lilly product candidate for the treatment of symptomatic COVID-19 in the outpatient setting. The monotherapy arms of BLAZE-1 enrolled mild-to-moderate recently diagnosed COVID-19 patients and the primary endpoint was met at a 2800 mg dose level. Lilly also announced that LY-CoV555 was well-tolerated, with no drug-related serious adverse events reported. In addition to the BLAZE-1 study described above, LY-CoV555 is being evaluated in three other clinical trials, one of which is a Phase 3 trial for prophylaxis of COVID-19. LY-CoV555 was also evaluated in a Phase 3 trial in hospitalized patients. Based on trial data that suggested that LY-CoV555 is unlikely to help hospitalized COVID-19 patients recover from this advanced stage of their disease, Lilly announced on October 26, 2020 that it has stopped enrolling additional patients for treatment with LY-CoV555 in this study. The other clinical trials of LY-CoV555 referred to above to evaluate LY-CoV555 for treatment of mild to moderate COVID-19 and for prophylaxis remain active.
On October 7, 2020, Lilly submitted a request for an Emergency Use Authorization, or EUA, for the LY-CoV555 monotherapy to the FDA, which was granted on November 9, 2020. On October 28, 2020, Lilly announced an agreement with the U.S. government to supply 300,000 vials of LY-CoV555 for $375.0 million and on December 2, 2020, Lilly announced the purchase by the U.S. government of an additional 650,000 doses of LY-CoV555 for $812.5 million. On October 29, 2020, Lilly also announced a fixed price contract for procurement of LY-CoV555 in the amount of $312.5 million with the U.S. Army Contracting Command. On November 22, 2020, Lilly was granted authorization for the LY-CoV555 monotherapy by Health Canada under the Interim Order Respecting the Importation, Sale and Advertising of Drugs for Use in Relation to COVID-19. On November 24, 2020, Lilly announced an agreement with the Canadian government to supply 26,000 doses of LY-CoV555 for the three month period between December 2020 and February 2021, for $32.5 million. Under our partnership with Lilly, we are entitled to receive a specified percentage of proceeds that Lilly receives from these sales. As proud as we are to have played a role in the global response to COVID-19, we believe it is only an example of how our technology can accelerate drug discovery.
Our business has historically been both high growth and capital efficient. Revenues have grown at a 109% CAGR since 2014. We have generated positive operating cash flow cumulatively since our inception in 2012 and
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in every year since 2018. Our partnership agreements include: (i) payments for technology access and performance of research, (ii) downstream payments in the form of clinical and commercial milestones and (iii) royalties on net sales of any approved therapeutics. We structure our agreements in a way that is designed to align our partners economic interests with our own. While the vast majority of our historical revenue reflects upfront payments from research programs, we believe the long-term value of our business will be driven by downstream milestone and royalty payments. For the years ended December 31, 2018 and 2019 and the nine months ended September 30, 2019 and 2020, our revenue was $8.8 million, $11.6 million, $8.4 million and $25.2 million, respectively. For the years ended December 31, 2018 and 2019 and the nine months ended September 30, 2019 and 2020, our net income (loss) was $0.3 million, $(2.2) million, $(0.6) million and $1.9 million, respectively. As of September 30, 2020, we have entered into agreements for 94 partnered discovery programs, 71 of which include the potential for milestone and royalty payments from our partners. As of September 30, 2020, we had 174 full-time employees in Canada, the United States and Australia, consisting of 81 scientists, 45 engineers and data scientists and 48 business professionals.
Our Strategy
Our mission is to improve health with technologies that transform the way that antibody-based therapies are discovered. To achieve this mission, we aim to become the operating system for next generation antibody discovery, and to act as an integral part of our partners development efforts.
We seek to expand the industry of antibody therapeutics in two ways. First, we believe our technology can solve discovery problems to unlock new opportunities for therapeutic antibody development. Second, by accessing our teams, technologies and facilities, partners can eliminate the extended delays and costs associated with setting up antibody discovery capabilities. Through our partnership business, we aim to enable our partners to start programs without delay and prosecute them at maximum speed.
Our strategy includes:
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Creating more value with our existing partnerships. |
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Increasing the number of partnerships. |
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Expanding our market by delivering a full solution through forward integration. |
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Scaling our teams and facilities to meet future demand. |
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Increasing our technological differentiation. |
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Leveraging synergy of data and computation. |
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We believe our strategy creates a virtuous cycle, as depicted in Figure 2 below, that will drive our position as the centralized operating system for antibody discovery.
Figure 2: Our Business Strategy
Our Key Competitive Strengths
Our industry position and success are based on the following key competitive strengths:
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Better antibody discovery, from the start. |
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A full-stack technology, accessible to all. |
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An AI platform built on real world data. |
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A unique combination of hardware, software and wetware. |
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Industry-innovating business model. |
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The flywheel of data, partnerships and technology. |
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Strong brand built on performance and third-party recognition. |
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Robust IP portfolio including foundation patents. |
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Founder-led team, custom-built for interdisciplinary technology development. |
Our Market Opportunity
Antibodies are the fastest growing class of drugs and are used across multiple therapeutic areas, including oncology, inflammation, neurodegeneration and many more. In 2019, antibody-based therapeutics accounted for
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over $140 billion in sales and represented five of the top 10 selling therapeutics worldwide. In 2019, antibodies represented 70% of the sales of all biologics, and 36 antibody therapeutics reached blockbuster status with sales higher than $1.0 billion. The antibody-based therapeutics market is expected to reach approximately $260.0 billion in size by 2025, representing a CAGR of approximately 11% for the period from 2019 to 2025. Further, the more nascent cell therapy market is expected to grow from $1.0 billion in 2019 to over $17.0 billion in 2025, reflecting a CAGR of around 60%. Opportunities for accelerating growth of the antibody therapeutics market include improved access to traditionally difficult targets (e.g., G protein-coupled receptors, or GPCRs, and ion channels), the emergence of new therapeutic modalities (e.g., bispecifics, chimeric antigen receptor T cells, or CAR-T, cell therapy and antibody conjugates) and the ever-expanding number of companies entering the space.
Despite the size of the market, significant challenges exist. Looked at from any perspective, drug development fails too often, takes too long and costs too much.
Our Platform
Our platform is an operating system designed to support many antibody modalities; unlock new targets; increase the speed to clinical development for our partners and increase the potential clinical and commercial success for our partners.
Our full-stack, AI-powered technology sources, searches, decodes and analyzes antibody responses with the ultimate goal of engineering new antibody drug candidates for our partners. Our platform incorporates and integrates modern technology tools from engineering, microfluidics, single-cell analysis, high-throughput genomics, machine learning and hyper-scale data science. We have internally developed, in-licensed or acquired our technologies. We deploy our platform to help our partners in their efforts to identify antibodies with better potency and developability.
We believe our approach of integrating modern hardware, software and wetware is unique. We have pioneered nanoliter volume single-cell antibody screening methods using microfluidics. Our workflows incorporate proprietary immunization methods, including proprietary engineered mice from which we can discover fully human antibodies, optimized molecular biology protocols and patented protein engineering technologies. The aggregation of these technologies, coupled with our proprietary processes and team, allows us to provide a differentiated offering to our partners.
The computational engine of our platform, Celium, combines software, AI and visualization tools to mine, organize, compute and interactively explore the immense multidimensional data sets that we produce in each antibody discovery campaign. Unlike many AI-based drug discovery approaches, Celium is continually improved with real world data. We iteratively inform wetlab experimentation with in silico computation, and vice versa. The output of our process is not theoretical predictions. We discover real molecules that have been optimized by nature.
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We believe our competitive advantage is derived from the integration of multiple proprietary technologies and a seamless workflow. Table 1 below provides how each aspect of our end-to-end technology stack addresses challenges in antibody therapeutic discovery.
Table 1: Our Platform and Solution
Our Partnership Business
We forge partnerships with large cap pharmaceutical companies, biotechnology companies of all sizes and non-profit and government organizations. Our partners select a target and define the antibody properties needed for therapeutic development. We provide discovery solutions to partners that have a range of discovery capabilities, from the highly enabled to the less enabled. We enable discovery against targets that have traditionally been intractable, and we accelerate programs against less difficult targets.
Our deals emphasize participation in the success and upside of future antibody therapeutics. Our partnership agreements include near-term payments for technology access, research and intellectual property rights, and downstream payments in the form of clinical and commercial milestones, and royalties on net sales. As of September 30, 2020, we had 94 discovery programs that were either completed, in progress or under contract, including 71 with the potential for milestone and royalty payments. Some of the recent publicly disclosed partnerships, established since 2019, include:
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IgM Biosciences. Multi-target, multi-year partnership focused on oncology and immunology and announced on September 24, 2020. |
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Lilly. Multi-year partnership with 9 targets focused on COVID-19 and additional indications and announced on May 22, 2020. |
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Gilead Sciences. Single target partnership focused on infectious disease and announced on June 13, 2019. |
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Denali. Multi-year partnership with eight targets focused on neurological diseases and announced on February 28, 2019. |
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Novartis. Multi-year partnership with up to 10 targets and announced on February 14, 2019. |
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Government of Canada. Commitment of up to CAD $175.6 million ($125.6 million) to expand efforts related to the discovery of antibodies for use in drugs to treat COVID-19, and to build technology and manufacturing infrastructure and announced on May 3, 2020. |
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Bill & Melinda Gates Foundation. Two-year agreement focused on high-priority infectious diseases including HIV, malaria and tuberculosis and announced on March 14, 2019. |
Trianni Acquisition
In November 2020, we acquired Trianni. Founded in 2008, Trianni develops next-generation transgenic mice that provide a source of fully-human antibodies for the discovery of therapeutic antibody candidates. To our knowledge, there are only two other companies, Regeneron Pharmaceuticals, Inc. and Kymab, Ltd., that engage in the development and use of humanized rodents in antibody discovery programs and against different therapeutic targets. Immunizing Trianni mice allows for the generation of diverse panels of human antibodies with drug-like properties including high affinity, high specificity and the biophysical properties suitable for manufacturing. In addition to the flagship Trianni mouse, we also acquired a suite of humanized rodent platforms engineered to support next-generation antibody therapy discovery and development. We believe the Trianni mouse technology will allow us to generate more high-quality antibodies against difficult targets and improve the speed of our discovery programs. By integrating a suite of transgenic rodent platforms into our stack, we believe we will be able to negotiate for greater downstream value participation, including higher royalty rates, from successful therapeutic development programs.
In addition to the strategic value of Triannis technology, Trianni generates revenues through mouse sales, platform licensing fees and associated downstream milestone payments. Since inception, Trianni has executed over 30 agreements with pharmaceutical companies, biotechnology companies and academic institutions. For 10 of these agreements, Trianni is eligible to receive royalty payments on net sales of therapeutics and diagnostics discovered using the companys proprietary mice. For eight of the 10 agreements that include potential royalty payments, the partner has the option to buyout royalty payments prior to product approval. We believe the addition of the Trianni mouse, and future next generation transgenic mice under development will allow us to expand the diversity of antibody responses to a wide range of targets, leading to improvements in the quality and speed of our discovery programs.
In connection with the Trianni acquisition, our U.S. subsidiary entered into an agreement and plan of merger for an initial purchase price of $90.0 million, subject to certain adjustments for working capital, indebtedness and expenses. Upon consummation of the merger, Trianni became our wholly owned subsidiary. In addition, we will assign to a former stockholder of Trianni most of the amounts received from a license agreement. We paid the purchase price for the acquisition using the proceeds from the issuance of convertible promissory notes to certain investors in an aggregate amount of $90.0 million, or the Convertible Notes. The Convertible Notes will mature on October 30, 2025, unless earlier prepaid or converted, and will bear interest from October 30, 2021 at an annual rate of 5%, payable annually in arrears on October 30 of each year, beginning on October 30, 2022. Interest on the Convertible Notes is payable in cash or in the form of additional non-convertible notes. The Convertible Notes are convertible at the option of the noteholders into our common shares under certain circumstances, including upon the closing of this offering. Convertible Notes converted upon the closing of this offering will convert at a price of 85% of the initial public offering price.
Risks Associated with Our Business
Our business is subject to numerous risks that you should consider before investing in our company. These risks are described more fully the section titled Risk Factors in this prospectus. These risks include, but are not limited to, the following:
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We have incurred losses in certain years since inception and we may not be able to generate sufficient revenue to maintain profitability. |
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Our quarterly and annual operating results have fluctuated significantly in the past and may fluctuate significantly in the future, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations. |
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Our commercial success depends on the quality of our antibody discovery platform and technological capabilities and their acceptance by new and existing partners in our market. |
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If we cannot maintain and expand current partnerships and enter into new partnerships that generate discovery programs for antibodies, our business could be adversely affected. |
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In recent periods, we have depended on a limited number of partners for our revenue, the loss of any of which could have an adverse impact on our business. |
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Biopharmaceutical drug development is inherently uncertain, and it is possible that none of the drug candidates discovered using our platform that are further developed by our partners will receive marketing approval or become viable commercial products, on a timely basis or at all. |
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The failure of our partners to meet their contractual obligations to us could adversely affect our business. |
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We may be unable to manage our current and future growth effectively, which could make it difficult to execute on our business strategy. |
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We have invested, and expect to continue to invest, in research and development efforts that further enhance our antibody discovery platform. Such investments in technology are inherently risky and may affect our operating results. If the return on these investments is lower or develops more slowly than we expect, our revenue and operating results may suffer. |
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Our partners have significant discretion in determining when and whether to make announcements, if any, about the status of our partnerships, including about clinical developments and timelines for advancing collaborative programs, and the price of our common shares may decline as a result of announcements of unexpected results or developments. |
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Our partners may not achieve projected discovery and development milestones and other anticipated key events in the expected timelines or at all, which could have an adverse impact on our business and could cause the price of our common shares to decline. |
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The life sciences and biotech platform technology market is highly competitive, and if we cannot compete successfully with our competitors, we may be unable to increase or sustain our revenue, or sustain profitability. |
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Our success depends on our ability to protect our intellectual property. |
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We have identified a material weakness in our internal control over financial reporting, and we may identify additional material weaknesses in the future or otherwise fail to maintain proper and effective internal controls, which may impair our ability to produce accurate financial statements on a timely basis. |
Corporate Information
We were incorporated in 2012 under the Business Corporations Act (British Columbia), or the BCBCA. Our principal executive offices are located at 2215 Yukon Street Vancouver, British Columbia, V5Y 0A1, Canada and our telephone number is (604) 559-9005. We have six wholly owned subsidiaries, Lineage, a Delaware corporation, Trianni, a California corporation, AbCellera US Holdings Inc., a Delaware corporation, AbCellera Properties Inc., a BCBCA company, AbCellera Properties Columbia Inc., a BCBCA company, and Channel Biologics Pty Ltd., a proprietary company registered in New South Wales, Australia. Our website address is www.abcellera.com. We have included our website address in this prospectus solely as an inactive textual reference. The information contained on or that can be accessed through our website is not incorporated by reference into this prospectus.
AbCellera and other trademarks or service marks of AbCellera, including our subsidiaries appearing in this prospectus are the property of AbCellera. The other trademarks, trade names and service marks appearing in this
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prospectus are the property of their respective owners. Solely for convenience, the trademarks and trade names in this prospectus are referred to without the ® and symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.
Implications of Being an Emerging Growth Company
We qualify as an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, as amended, or JOBS Act, and will remain an emerging growth company until the earlier of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the closing of this offering; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission, or SEC. As long as we remain an emerging growth company, we may take advantage of specified reduced disclosure and other public company reporting requirements. These provisions include:
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being permitted to provide only two years of audited financials in addition to any required unaudited interim financial statements with correspondingly reduced Managements Discussion and Analysis of Financial Condition and Results of Operations disclosure in this prospectus; |
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reduced disclosure about our executive compensation arrangements; |
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not being required to hold advisory votes on executive compensation or to obtain shareholder approval of any golden parachute arrangements not previously approved; |
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an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting; and |
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an exemption from compliance with the requirements of the Public Company Accounting Oversight Board regarding the communication of critical audit matters in the auditors report on the financial statements. |
We may choose to take advantage of some but not all of these exemptions. We have taken advantage of reduced reporting requirements in this prospectus. Accordingly, the information contained herein may be different from the information you receive from other public companies in which you hold shares.
We have elected not to opt out of the exemption for the delayed adoption of certain accounting standards, and, therefore, we will adopt new or revised accounting standards at the time private companies adopt the new or revised accounting standard and will do so until such time that we either (i) irrevocably elect to opt out of such extended transition period or (ii) no longer qualify as an emerging growth company. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies. As a result of this election, the information that we provide in this prospectus may be different than the information you may receive from other public companies in which you hold equity interests.
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The Offering
Common shares offered by us |
23,000,000 shares |
Common shares to be outstanding immediately after this offering |
265,952,096 shares |
Option to purchase additional shares |
The underwriters have an option for a period of 30 days to purchase up to 3,450,000 additional common shares at the public offering price, less the estimated underwriting discounts and commissions. |
Use of proceeds |
We estimate that the net proceeds to us from the sale of our common shares in this offering will be approximately $331.4 million (or approximately $382.1 million if the underwriters exercise their option to purchase additional shares in full), assuming an initial public offering price of $15.50 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We currently intend to use the net proceeds from this offering, together with our existing cash and cash equivalents, to continue making investments in research and development efforts towards deepening our technology and expertise along our technology stack, to continue making investments in building our business development team and marketing our solutions to new and existing partners, as well as for general corporate purposes, including working capital, operating expenses and capital expenditures. We may also use a portion of the net proceeds from this offering for the acquisition of businesses, technologies or other assets that we believe are complementary to our own. See Use of Proceeds for more information. |
Indications of interest |
One or more funds affiliated with Capital World Investors have indicated an interest in purchasing up to 20% of the common shares offered by us in this offering at the initial public offering price (excluding the underwriters option to purchase additional shares, or up to 4,600,000 shares based on the share number set forth on the cover page of this prospectus). However, because these indications of interest are not binding agreements or commitments to purchase, one or more funds affiliated with Capital World Investors could determine to purchase more, less or no shares in this offering or the underwriters could determine to sell more, less or no shares to one or more funds affiliated with Capital World Investors. The underwriters will receive the same discount on any of our common shares purchased by one or more funds affiliated with Capital World Investors as they will from any other common shares sold to the public in this offering. |
Directed share program |
At our request, the underwriters have reserved up to 5.0% of the common shares offered by this prospectus for sale, at the initial public offering price, to directors, officers, employees, business associates and related persons through a directed share program. Any reserved |
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shares purchased by our directors and officers will be subject to the 180-day restricted period described in the Underwriting section of this prospectus. The number of common shares available for sale to the general public will be reduced to the extent these individuals purchase such reserved shares. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered by this prospectus. |
Risk factors |
Investment in our common shares involves substantial risks. You should read this prospectus carefully, including the section titled Risk Factors and the financial statements and the related notes to those statements appearing elsewhere in this prospectus, before investing in our common shares. |
Proposed Nasdaq Global Market symbol |
ABCL |
The number of common shares to be outstanding immediately after this offering is based on 242,952,096 common shares outstanding as of September 30, 2020 (including our convertible preferred shares on an as-converted basis into an aggregate of 81,230,480 common shares, and the conversion of the Convertible Notes into an aggregate of 7,630,352 common shares upon the completion of this offering, based on an assumed initial public offering price of $15.50 per share, which is the midpoint of the price range set forth on the cover of this prospectus), and excludes:
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40,620,500 common shares issuable upon the exercise of share options outstanding as of September 30, 2020, with a weighted-average exercise price of $0.27 per share; |
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13,661,310 common shares issuable upon the exercise of share options granted after September 30, 2020, with a weighted-average price of $2.14 per share; |
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12,911,310 common shares reserved for issuance under our Sixth Amended and Restated Stock Option Plan, or the Current Plan, as of September 30, 2020, which shares will cease to be available for issuance at the time the 2020 Share Option and Incentive Plan, or the 2020 Plan, becomes effective; |
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21,280,000 common shares to be reserved for future issuance under our 2020 Plan, which will become available for issuance upon the effectiveness of the registration statement of which this prospectus is a part, plus any future increases in the number of common shares reserved for issuance; and |
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2,700,000 common shares to be reserved for future issuance under our 2020 Employee Share Purchase Plan, or the 2020 ESPP, which will become available for issuance upon the effectiveness of the registration statement of which this prospectus is a part, plus any future increases in the number of common shares reserved for issuance. |
Except as otherwise specifically indicated, all information in this prospectus assumes or gives effect to the following:
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a one-for-10 forward stock split of our common shares, which was effected on December 4, 2020; |
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no exercise of the underwriters option to purchase up to 3,450,000 additional common shares in this offering; |
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no exercise of the outstanding options described above; |
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the conversion of all of our outstanding convertible preferred shares as of September 30, 2020 into an aggregate of 81,230,480 common shares immediately prior to the completion of this offering; |
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the conversion of the Convertible Notes into an aggregate of 7,630,352 common shares upon the completion of this offering, assuming an assumed initial public offering price of $15.50 per share, which is the midpoint of the price range set forth on the cover of this prospectus; and |
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the filing and effectiveness of our new notice of articles and effectiveness of our new articles, which will occur immediately prior to the completion of this offering. |
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Summary Consolidated Financial Data
The following summary consolidated statements of operations data for the years ended December 31, 2018 and 2019 have been derived from our audited consolidated financial statements appearing elsewhere in this prospectus. The summary consolidated statements of operations data for the nine months ended September 30, 2019 and 2020 and the summary consolidated balance sheet data as of September 30, 2020 have been derived from our unaudited condensed consolidated financial statements appearing elsewhere in this prospectus and have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, on the same basis as the audited consolidated financial statements. In the opinion of management, the unaudited data reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the information in those financial statements. You should read the following summary consolidated financial data together with the Selected Consolidated Financial Data and Managements Discussion and Analysis of Financial Condition and Results of Operations sections of this prospectus and our consolidated financial statements and the related notes appearing elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in any future periods, and results for any interim period are not necessarily indicative of results that should be expected for the full fiscal year ending December 31, 2020 or any other period.
Year Ended
December 31, |
Nine Months Ended
September 30, |
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2018 | 2019 | 2019 | 2020 | |||||||||||||
(unaudited) | ||||||||||||||||
(in thousands, except share and per share data) | ||||||||||||||||
Consolidated Statement of Operations Data: |
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Revenue: |
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Research fees |
$ | 8,831 | $ | 11,612 | $ | 8,409 | $ | 17,247 | ||||||||
Milestone payments |
| | | 8,000 | ||||||||||||
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Total revenue |
8,831 | 11,612 | 8,409 | 25,247 | ||||||||||||
Operating Expenses: |
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Research and development |
5,803 | 10,113 | 6,804 | 20,757 | ||||||||||||
Sales and marketing |
712 | 1,263 | 792 | 1,610 | ||||||||||||
General and administrative |
2,151 | 2,749 | 1,774 | 6,116 | ||||||||||||
Depreciation |
918 | 1,604 | 1,180 | 1,507 | ||||||||||||
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Total operating expenses |
9,583 | 15,729 | 10,550 | 29,990 | ||||||||||||
Loss from operations |
(753 | ) | (4,117 | ) | (2,141) | (4,743 | ) | |||||||||
Other income (expense): |
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Interest income |
(42 | ) | (155 | ) | (111 | ) | (195 | ) | ||||||||
Interest and other expense |
213 | 209 | 127 | 4,896 | ||||||||||||
Foreign exchange (gain) loss |
362 | (186 | ) | (348 | ) | (1,146 | ) | |||||||||
Grants and incentives |
(1,594 | ) | (1,774 | ) | (1,239 | ) | (10,217 | ) | ||||||||
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Total other income |
(1,061 | ) | (1,906 | ) | (1,571 | ) | (6,662 | ) | ||||||||
Net earnings (loss) for the period |
$ | 309 | $ | (2,211 | ) | $ | (570 | ) | $ | 1,918 | ||||||
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Net earnings (loss) per share attributable to common shareholders(1): |
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Basic |
$ | 0.00 | $ | (0.01 | ) | $ | (0.00 | ) | $ | 0.01 | ||||||
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Diluted |
$ | 0.00 | $ | (0.01 | ) | $ | (0.00 | ) | $ | 0.01 | ||||||
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Weighted-average common shares outstanding(1): |
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Basic |
149,436,370 | 151,327,560 | 151,207,340 | 152,413,300 | ||||||||||||
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Diluted |
171,336,110 | 151,327,560 | 151,207,340 | 237,723,530 | ||||||||||||
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Pro forma net loss per share attributable to common shareholders (unaudited)(1): |
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Basic |
$ | (0.01 | ) | $ | 0.01 | |||||||||||
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Diluted |
$ | (0.01 | ) | $ | 0.01 | |||||||||||
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Pro forma weighted-average common shares outstanding (unaudited)(1): |
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Basic |
172,380,200 | 215,414,730 | ||||||||||||||
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Diluted |
172,380,200 | 237,723,530 | ||||||||||||||
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(1) | See Note 5 to our consolidated financial statements and our interim consolidated financial statements, each appearing elsewhere in this prospectus, for details on the calculation of historical and pro forma basic and diluted net loss per share attributable to common shareholders and the weighted-average number of shares used in the computation of the per share amounts. |
As of September 30, 2020 | ||||||||||||
Actual | Pro Forma(2)(5) |
Pro
Forma
As Adjusted(3)(4)(5) |
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(unaudited) |
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(in thousands) | ||||||||||||
Consolidated Balance Sheet Data: | ||||||||||||
Cash and cash equivalents |
$ | 91,082 | $ | 91,082 | $ | 422,531 | ||||||
Working capital(1) |
93,895 | 93,895 | 425,344 | |||||||||
Total assets |
142,385 | 142,385 | 473,834 | |||||||||
Total liabilities |
53,147 | 53,147 | 53,147 | |||||||||
Total preferred shares |
82,208 | | | |||||||||
Total shareholders equity |
89,238 | 179,238 | 510,687 |
(1) | We define working capital as current assets less current liabilities. See our consolidated financial statements and related notes appearing elsewhere in this prospectus for further details regarding our current assets and current liabilities. |
(2) | The pro forma consolidated balance sheet data give effect to (i) the conversion of all of our outstanding convertible preferred shares as of September 30, 2020 into 81,230,480 common shares upon the completion of this offering and (ii) the issuance of the Convertible Notes and receipt of $90.0 million in gross proceeds therefor, and the conversion of the Convertible Notes into an aggregate of 7,630,352 common shares upon the completion of this offering, assuming an assumed initial public offering price of $15.50 per share, which is the midpoint of the price range set forth on the cover of this prospectus. |
(3) | The pro forma as adjusted balance sheet data give further effect to the sale and issuance of common shares in this offering at an assumed initial public offering price of $15.50 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. |
(4) | Each $1.00 increase or decrease in the assumed initial public offering price of $15.50 per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, the pro forma as adjusted amounts of each of our cash and cash equivalents, working capital, total assets, total liabilities and total shareholders equity by approximately $21.8 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase or decrease of 1.0 million shares in the number of shares offered by us at the assumed initial public offering price per share would increase or decrease, as applicable, the pro forma as adjusted amounts of each of our cash and cash equivalents, working capital, total assets, total liabilities and total shareholders equity by approximately $14.7 million, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing. |
(5) | Does not reflect the net payments of $8.0 million to reflect the November 2020 acquisition of Trianni of $98.0 million, less the receipt of the Convertible Notes issuance of $90.0 million. |
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Investing in our common shares involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this prospectus, including our consolidated financial statements and the related notes and Managements Discussion and Analysis of Financial Condition and Results of Operations, before deciding whether to invest in our common shares. The occurrence of any of the events or developments described below could materially harm our business, financial condition, results of operations and prospects. In such an event, the market price of our common shares could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.
Risks Related to Our Business and Strategy
We have incurred losses in certain years since inception and we may not be able to generate sufficient revenue to maintain profitability.
Our plan is to enter a phase of accelerated growth and we will be investing heavily in our business. We expect to experience variability in revenue and in expenses which makes it difficult to evaluate our business or our prospects. As such, we may incur losses that are materially larger than what we have previously incurred. We have incurred losses in certain years since our inception and anticipate that we will continue to incur significant losses for the foreseeable future. For the years ended December 31, 2018 and 2019, we incurred a net income of $0.3 million and net loss of $2.2 million, respectively, and for the nine months ended September 30, 2020, we had net income of $1.9 million. As of September 30, 2020, we had an accumulated deficit of $2.8 million. We expect that our operating expenses will continue to increase significantly, including as we:
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invest in research and development activities to improve our technology and platform; |
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market and sell our solutions to existing and new partners; |
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acquire businesses or technologies to support the growth of our business; |
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attract, hire and retain qualified personnel; |
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maintain, expand, enforce, protect and defend our intellectual property portfolio; |
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prosecute and defend our ongoing and any future litigation; |
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build our new good manufacturing practices, or GMP, manufacturing facility; |
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create additional infrastructure to support our operations, including expanding our sales and marketing organization; |
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add operational, financial and management information systems and personnel to support our operations as a public company; and |
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experience any delays or encounter issues with any of the above. |
Our expenses could increase beyond expectations for a variety of reasons, including as a result of our growth strategy and the increase in our operations. Since our inception, we have financed our operations primarily from revenue from upfront payments generated through our receipt of technology access fees and discovery research fees through the performance of service contracts with our partners, payments from partners upon the satisfaction of clinical milestones, government funding and one off government grants, the incurrence of indebtedness, and from private placements of our common and convertible preferred shares. Given our strategy and plans to invest in enhancing and scaling our business, we will need to generate significant additional revenue to achieve and sustain future profitability. Even though we have achieved profitability, we cannot be sure that we will remain profitable for any sustained period of time. We may not be able to generate sufficient revenue to sustain profitability and our recent and historical growth should not be considered indicative of our future performance.
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Our revenue has fluctuated from period to period, and our revenue for any historical period may not be indicative of results that may be expected for any future period.
For the years ended December 31, 2018 and 2019, and for the nine months ended September 30, 2019 and 2020, a substantial portion of our revenue was generated by upfront technology access and research discovery fees through performing research activities for our partners. During the nine months ended September 30, 2020, we received payments from our partnership contracts generated upon the satisfaction of clinical milestones for the first time. Upfront technology access fees are generated upon execution of our partnership agreements. Research and discovery fees are generated by research activities that we perform for our partners, the timing and nature of which are dictated by the commencement of antibody discovery campaigns selected by our partners. Clinical milestone payments are generated upon the achievement of development milestones by our partners with respect to the antibodies that we deliver. As a result, we currently do not generate significant recurring revenue and, until such time as we establish significant recurring revenue, if at all, we will be prone to regular fluctuations in our revenue dependent on the timing of our entry into partnership agreements, our partners initiating discovery programs, and our partners achieving development milestones or commercial sales with respect to drug candidates utilizing antibodies discovered using our platform. We do not expect to generate significant recurring revenue unless and until such time as we secure additional programs under contract that, in the aggregate, result in regular and continuous execution of new partnership contracts, research discovery activities, achievement of development milestones or commencement of commercial sales. However, we are unable to predict whether and the extent to which the minimum annual payments under our partnership agreements will be exceeded, or the timing of the achievement of any milestones under these agreements, if they are achieved at all. In some cases, the timing and likelihood of payments to us under these agreements is dependent on our partners successful utilization of the antibodies discovered using our platform, which is outside of our control. Because of these factors, our operating results could vary materially from quarter to quarter from our forecasts.
Our quarterly and annual operating results have fluctuated significantly in the past and may fluctuate significantly in the future, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations.
Our quarterly and annual operating results have fluctuated in the past and may fluctuate in the future, which makes it difficult for us to predict our future operating results. These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to:
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the level of demand for our antibody discovery platform and solutions, which may vary significantly; |
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the timing and cost of, and level of investment in, research, development and commercialization activities relating to our platform and technology, which may change from time to time; |
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the start and completion of programs in which our platform is utilized; |
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the relative reliability and robustness of our platform, including the data generation and computational tools within our technology stack; |
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the introduction of new technologies, platform features or software, by us or others in our industry; |
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expenditures that we may incur to acquire, develop or commercialize additional technologies; |
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expenditures involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including costs related to our intellectual property litigation with Berkeley Lights, and the outcome of this and any other future patent litigation we may be involved in; |
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the degree of competition in our industry and any change in the competitive landscape of our industry, including consolidation among our competitors or future partners; |
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natural disasters, outbreaks of disease or public health crises, such as the COVID-19 pandemic; |
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the timing and nature of any future acquisitions or strategic partnerships; |
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future accounting pronouncements or changes in our accounting policies; and |
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general social, political and economic conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors. |
For example, this is the first year in which we received payments from a partner upon the satisfaction of clinical milestones. The antibody, LY-CoV555 developed by Eli Lilly and Company, or Lilly, has undergone or is currently undergoing a Phase 1 clinical trial, three Phase 2 clinical trials and one Phase 3 clinical trial, and we have received associated clinical milestone payments this year. Lilly progressed into these clinical trials at a greatly accelerated pace as a result of the Coronavirus Treatment Acceleration Program, which is a special emergency program for possible coronavirus therapies created by the FDA in 2020 to expedite the development of potentially safe and effective life-saving treatments to combat the COVID-19 pandemic. With respect to other or future product candidates, there is no assurance that any of our partners or collaborators will be able to advance a product candidate through clinical development on this timeframe again in the future, or at all. We initiated our partnering program in 2015 and have only had this one program result in clinical milestone payments to us to date and we have not yet had a program receive marketing approval.
The effect of one of the factors discussed above, or the cumulative effects of a combination of factors discussed above, could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our future performance.
Even if this offering is successful, we may need to raise additional capital to fund our existing operations, improve our platform or expand our operations. If we are unable to raise additional capital on terms acceptable to us or at all or generate cash flows necessary to maintain or expand our operations, we may not be able to compete successfully, which would harm our business, operations, and financial condition.
Based on our current business plan, we believe the net proceeds from this offering, together with our existing cash and cash equivalents and anticipated cash flows from operations, will be sufficient to meet our working capital and capital expenditure needs over at least the next 24 months following the date of this prospectus. If our available cash resources together with our net proceeds from this offering and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements including because of lower demand for our drug-discovery platform, or the realization of other risks described in this prospectus, we may be required to raise additional capital prior to such time through issuances of equity or convertible debt securities, entrance into a credit facility or another form of third party funding or seek other debt financing. Such additional financing may not be available on terms acceptable to us or at all.
In any event, we may consider raising additional capital in the future to expand our business, to pursue strategic investments, to take advantage of financing opportunities or for other reasons. For example, this may include reasons such as to:
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increase our sales and marketing efforts to drive market recognition of our platform and address competitive developments; |
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fund development and marketing efforts of our current and future programs; |
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expand the capabilities of our platform into adjacent therapeutic modalities, including vaccine development and cell therapy; |
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acquire, license or invest in technologies; |
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acquire or invest in complementary businesses or assets; and |
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finance capital expenditures and general and administrative expenses. |
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Our present and future funding requirements will depend on many factors, including:
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our ability to achieve revenue growth; |
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the cost of expanding our operations, including our sales and marketing efforts; |
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our rate of progress in selling access to our platform and marketing activities associated therewith; |
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our rate of progress in, and cost of research and development activities associated with, antibody discovery; |
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the effect of competing technological and market developments; |
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the continued impact of the COVID-19 pandemic on global social, political and economic conditions; |
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the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including costs related to our intellectual property litigation with Berkeley Lights, and the outcome of this and any other future patent litigation we may be involved in; and |
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costs related to any domestic and international expansion. |
The various ways we could raise additional capital carry potential risks. If we raise funds by issuing equity securities, dilution to our shareholders would result. Any preferred equity securities issued also would likely provide for rights, preferences or privileges senior to those of holders of our common shares. If we raise funds by issuing debt securities, those debt securities would have rights, preferences and privileges senior to those of holders of our common shares. Debt financing and preferred equity financing, if available, may also involve agreements that include covenants restricting our ability to take specific actions, such as incurring additional debt, selling or licensing our assets, making product acquisitions, making capital expenditures, or declaring dividends. For example, our agreement with the Canadian Ministry of Western Economic Diversification, or WD Canada, under the Western Innovation Initiative and the Business Scale-up and Productivity programs, as well as our agreement with the Strategic Innovation Fund, or SIF, requires us to obtain the consent of WD Canada or SIF, as applicable, before being able to engage in certain change of control and asset disposition transactions during the term of the agreement. In particular, our agreement with the SIF requires us to obtain consent in the event that an individual or company (or two or more of them acting in concert) acquires the direct or indirect beneficial ownership of 20% or more of our voting securities. In the event consent is not obtained, the agreement may be terminated and we will be obligated to repay all or a portion of the contribution amounts from WD Canada and SIF.
If we are unable to obtain adequate financing or financing on terms satisfactory to us, if we require it, our ability to continue to pursue our business objectives and to respond to business opportunities, challenges, or unforeseen circumstances could be significantly limited, and could have a material adverse effect on our business, financial condition, results of operations and prospects.
Our commercial success depends on the quality of our antibody discovery platform and technological capabilities and their acceptance by new and existing partners in our market.
We utilize our drug-discovery platform to identify antibodies for further development and potential commercialization by our partners. As a result, the quality and sophistication of our platform and technology is critical to our ability to conduct our research discovery activities and to deliver more promising molecules and to accelerate and lower the costs of discovery as compared to traditional methods for our partnerships. In particular, our business depends, among other things, on:
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our platforms ability to successfully identify therapeutic antibodies on the desired timeframes that can ultimately be used to prevent and treat diseases; |
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our ability to execute on our strategy to enter into new partnerships with new or existing partners and establish a robust internal pipeline of antibody discovery programs; |
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our ability to increase awareness of the capabilities of our technology and solutions; |
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our partners and potential partners willingness to adopt new technologies; |
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whether our platform reliably provides advantages over legacy and other alternative technologies and is perceived by customers to be cost effective; |
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the rate of adoption of our solutions by pharmaceutical companies, biotechnology companies of all sizes, government organizations and non-profit organizations and others; |
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prices we charge for our data packages and the discoveries that we make; |
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the relative reliability and robustness of our platform; |
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our ability to develop new solutions for partners; |
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if competitors develop a platform that performs functional testing of cells at a greater throughput than us; |
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the timing and scope of any approval that may be required by the U.S. Food and Drug Administration, or FDA, or any other regulatory body for drugs that are developed based on antibodies discovered by us; |
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the impact of our investments in innovation and commercial growth; |
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negative publicity regarding our or our competitors technologies resulting from defects or errors; and |
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our ability to further validate our technology through research and accompanying publications. |
There can be no assurance that we will successfully address any of these or other factors that may affect the market acceptance of our platform or our technology. If we are unsuccessful in achieving and maintaining market acceptance of our platform, our business, financial condition, results of operations and prospects could be adversely affected.
If we cannot maintain and expand current partnerships and enter into new partnerships that generate discovery programs for antibodies, our business could be adversely affected.
We do not have our own pipeline of drug candidates, and instead we focus our efforts on the discovery of antibodies for targets that are selected by our partners. Our partners then use the data packages provided by us to develop their own drug candidates without our involvement. As a result, our success depends on our ability to expand the number and scope of our partnerships. Many factors may impact the success of these partnerships, including our ability to perform our obligations, our partners satisfaction with our data packages, our partners ability to successfully develop, secure regulatory approval for and commercialize drug candidates using antibodies discovered using our platform, our partners internal priorities (including fluctuations in research and developments budgets), our partners resource allocation decisions and competitive opportunities, disagreements with partners, the costs required of either party to the partnerships and related financing needs, and operating, legal and other risks in any relevant jurisdiction.
In our partnership programs, we maintain rights to large unique data sets that connect information at the level of single-cell measurements, DNA sequence and protein function. We use this data to create an accelerating flywheel of learning: data generation from our partnership business provides the basis for AI modules that lead to expanded capabilities and faster data generation which supports our partnership business. As a result, in addition to reducing our revenue or delaying the development of our future solutions, the loss of one or more of these relationships may reduce our exposure to such information, thus hindering our efforts to further our technological differentiation and improve our platform.
We engage in conversations with companies regarding potential partnerships on an ongoing basis. These conversations may not result in a commercial agreement. Even if an agreement is reached, the resulting relationship may not be successful, including due to our inability to discover any usable antibodies for the selected targets or the antibodies that we do discover may not be successfully developed or commercialized by our partners. In such circumstances, we would not generate any substantial revenues from such a collaboration in the form of discovery research fees, milestone payments, royalties or otherwise. Speculation in the industry about our existing or potential partnerships can be a catalyst for adverse speculation about us, or our data packages, which can adversely affect our reputation and our business.
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In recent periods, we have depended on a limited number of partners for our revenue, the loss of any of which could have an adverse impact on our business.
In recent periods, a limited number of partnerships accounted for a significant portion of our revenues. For the year ended December 31, 2019, two of our partners accounted for 47% and 15% of our revenue, and 11 partners accounted for the remaining 38% of our revenue. For the nine months ended September 30, 2020, two of our partnerships accounted for 50% and 21% of our revenue, and nine partnerships accounted for the remaining 29% of our revenue. These partnerships cover a large number of programs under contract, and therefore represent a large portion of potential downstream value. In addition, our partnership agreements are typically terminable at will with 90 days notice prior to identification of a target, after which point they may only be terminated for cause. As a result, if we fail to maintain our relationships with our partners or if any of our partners discontinue their programs, our future results of operations could be materially and adversely affected.
Biopharmaceutical drug development is inherently uncertain, and it is possible that none of the drug candidates discovered using our platform that are further developed by our partners will receive marketing approval or become viable commercial products, on a timely basis or at all.
We use our platform to offer antibody drug-discovery programs to partners who are engaged in drug discovery and development. These partners include large cap pharmaceutical companies, biotechnology companies of all sizes and non-profit and government organizations. While we receive upfront payments generated through our receipt of technology access fees and discovery research fees for performing research activities for our partners, we estimate that the vast majority of the economic value of the contracts that we enter into with our partners is in the downstream payments that are payable if certain milestones are met or approved products are sold. As a result, our future growth is dependent on the ability of our partners to successfully develop and commercialize therapies based on antibodies discovered using our platform. Due to our reliance on our partners, the risks relating to product development, regulatory clearance, authorization or approval and commercialization apply to us derivatively through the activities of our partners. While we believe our platform is capable of identifying high quality antibodies, there can be no assurance that our partners will successfully develop, secure marketing approvals for and commercialize any drug candidates based on the antibodies that we discover. As a result, we may not realize the intended benefits of our partnerships. We initiated our partnering program in 2015 and have only had one program result in two clinical milestone payments to us to date and we have not yet had a program receive clinical marketing approval.
Due to the uncertain, time-consuming and costly clinical development and regulatory approval process, our partners may not successfully develop any drug candidates with the antibodies that we discover, or our partners may choose to discontinue the development of these drug candidates for a variety of reasons, including due to safety, risk versus benefit profile, exclusivity, competitive landscape, commercialization potential, production limitations or prioritization of their resources. It is possible that none of these drug candidates will ever receive regulatory approval and, even if approved, such drug candidates may never be successfully commercialized. For example, under our research collaboration agreement with Lilly, we are eligible to receive and have received payments upon the achievement of certain development milestones, and are eligible to receive royalties resulting from sales of both COVID-19 and non-COVID-19 products that incorporate antibodies we discovered. While we have started to receive the first milestone payments from this collaboration, there can be no assurance that we will receive additional milestone payments or any royalties in the future. Furthermore, there can be no assurance that Lilly will be successful in its clinical trials. For example, based on trial data that suggested that LY-CoV555 is unlikely to help hospitalized COVID-19 patients recover from this advanced stage of their disease, Lilly announced on October 26, 2020 that it has stopped enrolling additional patients for treatment with LY-CoV555 in this study. BLAZE-1 is a randomized, double-blind, placebo-controlled Phase 2 study conducted by Lilly that is designed to assess the efficacy and safety of LY-CoV555 and an additional Lilly product candidate for the treatment of symptomatic COVID-19 in the outpatient setting. Across all treatment arms, the trial is designed to enroll an estimated 800 participants. The monotherapy arms of BLAZE-1 enrolled mild-to-moderate recently diagnosed COVID-19 patients across four groups (placebo, LY-CoV555 700 mg, LY-CoV555 2800 mg, and LY-CoV555 7000 mg). The primary outcome measure for the BLAZE-1 monotherapy arms was change from baseline to day 11 in SARS-CoV-2 viral load. Additional endpoints include the percentage of participants who experience COVID-related hospitalization, emergency room visit or death from baseline through day 29, as well as safety. Lilly announced that the primary endpoint,
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change from baseline in viral load at day 11, was met at the 2800 mg dose level, but not the others. Most patients, including those receiving placebo, demonstrated near complete viral clearance by day 11. Additional analyses of viral data demonstrated that LY-CoV555 improved viral clearance at an earlier time point (day 3) and reduced the proportion of patients with persistently high viral load at later time points. Lilly also announced that LY-CoV555 was well-tolerated, with no drug-related serious adverse events reported. Treatment emergent adverse events were similar across all dose groups and comparable to placebo. Viral RNA sequencing revealed putative LY-CoV555-resistance variants in placebo and all treatment arms. The rate of resistance variants was numerically higher in treated patients (8 percent) versus placebo (6 percent). In addition, in October 2020, Lilly submitted a request for an Emergency Use Authorization, or EUA, for the LY-CoV555 monotherapy to the FDA, announced an agreement with the U.S. government to supply 300,000 vials of LY-CoV555 for $375.0 million, on December 2, 2020, Lilly announced the purchase by the U.S. government of an additional 650,000 doses of LY-CoV555 for $812.5 million and announced a fixed price contract for procurement of LY-CoV555 in the amount of $312.5 million with the U.S. Army Contracting Command. Lillys request for EUA was granted by the FDA on November 9, 2020. On November 22, 2020, Lilly was granted authorization for the LY-CoV555 monotherapy by Health Canada under the Interim Order Respecting the Importation, Sale and Advertising of Drugs for Use in Relation to COVID-19. On November 24, 2020, Lilly announced an agreement with the Canadian government to supply 26,000 doses of LY-CoV555 for the three month period between December 2020 and February 2021, for $32.5 million. Under our partnership with Lilly, we are entitled to receive a specified percentage of proceeds that Lilly receives from these sales. The FDA has the authority to grant an EUA to allow unapproved medical products to be used in an emergency to diagnose, treat, or prevent serious or life-threatening diseases or conditions when there are no adequate, approved, and available alternatives. Pursuant to the EUA by the FDA for LY-CoV555, Lilly is able to distribute LY-CoV555 under the conditions set forth in the Emergency Use Authorization prior to FDA approval. Furthermore, the FDA may revoke an EUA where it is determined that the underlying health emergency no longer exists or warrants such authorization, and we cannot predict how long, if ever, an EUA would remain in place. Similarly, in Canada, under the Food and Drugs Act (Canada), the federal Minister of Health may make an Interim Order if the Minister believes that immediate action is required to deal with a significant risk to health, safety or the environment. As is the case with EUAs in the United States, authorizations issued under an Interim Order are not a long-term alternative to obtaining Health Canada licensure for a product. If the EUA or authorization issued under the Interim Order granted to Lilly are subsequently revoked, such revocation could adversely impact our business. There can be no assurance that the agreements with the U.S. government and U.S. Army Contracting Command will be completed.
In addition, even if these drug candidates receive regulatory approval in the United States, our partners may never obtain approval or commercialize such drugs outside of the United States, which would limit their full market potential and therefore our ability to realize their potential downstream value. Furthermore, approved drugs may not achieve broad market acceptance among physicians, patients, the medical community and third-party payors, in which case revenue generated from their sales would be limited. Likewise, our partners have to make decisions about which clinical stage and pre-clinical drug candidates to develop and advance, and our partners may not have the resources to invest in all of the drug candidates that contain antibodies discovered using our platform, or clinical data and other development considerations may not support the advancement of one or more drug candidates. Decision-making about which drug candidates to prioritize involves inherent uncertainty, and our partners development program decision-making and resource prioritization decisions, which are outside of our control, may adversely affect the potential value of those partnerships. Additionally, subject to its contractual obligations to us, if one more of our partners is involved in a business combination, the partner might deemphasize or terminate the development or commercialization of any drug candidate that utilizes an antibody that we have discovered. If one of our strategic partners terminates its agreement with us, we may find it more difficult to attract new partners.
We are also subject to industry-wide FDA and other regulatory risk. The number of new drug applications, or NDAs, and biologics license applications, or BLAs, approved by the FDA varies significantly over time and if there were to be an extended reduction in the number of NDAs and BLAs approved by the FDA, the industry would contract and our business would be materially harmed.
Our partners failure to effectively advance, market and sell suitable drug candidates with the antibodies that we discover could have a material adverse effect on our business, financial condition, results of operations and prospects, and cause the market price of our common shares to decline. In addition to the inherent uncertainty in drug development addresses above, our ability to forecast our future revenues may be limited.
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The failure of our partners to meet their contractual obligations to us could adversely affect our business.
Our reliance on our partners poses a number of additional risks, including the risk that they may not perform their contractual obligations to us to our standards, in compliance with applicable legal or contractual requirements, in a timely manner or at all; they may not maintain the confidentiality of our proprietary information; and disagreements or disputes could arise that could cause delays in, or termination of, the research, development or commercialization of products using our antibodies or result in litigation or arbitration.
In addition, certain of our partners are large, multinational organizations that run many programs concurrently, and we are dependent on their ability to accurately track and make milestone payments to us pursuant to the terms of our agreements with them. Any failure by them to inform us when milestones are reached and make related payments to us could adversely affect our results of operations.
Moreover, some of our partners are located in markets subject to political and social risk, corruption, infrastructure problems and natural disasters, and are often subject to country-specific privacy and data security risk as well as burdensome legal and regulatory requirements. Any of these factors could adversely impact their financial condition and results of operations, which could impair their ability to meet their contractual obligations to us, which may have a material adverse effect on our business, financial condition and results of operations.
We may be unable to manage our current and future growth effectively, which could make it difficult to execute our business strategy.
Since our inception in 2012, we have experienced rapid growth and anticipate further growth in our business operations. This growth requires managing complexities across all aspects of our business, including complexities associated with increased headcount, integration of acquisitions, expansion of international operations, expansion of facilities, including our new GMP facility, execution on new lines of business and implementations of appropriate systems and controls to grow the business. Our growth has required significant time and attention from our management, and placed strains on our operational systems and processes, financial systems and internal controls and other aspects of our business.
We expect to continue to increase headcount and to hire more specialized personnel in the future as we grow our business. We will need to continue to hire, train and manage additional qualified scientists, engineers, laboratory personnel, client and account services personnel and sales and marketing staff and improve and maintain our technology to properly manage our growth. We may also need to hire, train and manage individuals with expertise that is separate, supplemental or different from expertise that we currently have, and accordingly we may not be successful in hiring, training and managing such individuals. For example, if our new hires perform poorly, if we are unsuccessful in hiring, training, managing and integrating these new employees, or if we are not successful in retaining our existing employees, our business may be harmed. Improving our technology and processes have required us to hire and retain additional scientific, engineering, sales and marketing, software, manufacturing, distribution and quality assurance personnel. As a result, we have experienced rapid headcount growth from 59 employees as of September 30, 2018 to 174 employees as of September 30, 2020. We currently serve partners around the world and plan to continue to expand to new international jurisdictions as part of our growth strategy, which will lead to increased dispersion of our employees . Moreover, we expect that we will need to hire additional accounting, finance and other personnel in connection with our becoming, and our efforts to comply with the requirements of being, a public company. Once public, our management and other personnel will need to devote a substantial amount of time towards maintaining compliance with these requirements. A risk associated with maintaining this rate of growth, for example, is that we may face challenges integrating, developing and motivating our rapidly growing and increasingly dispersed employee base.
We may not be able to maintain the quality, reliability or robustness of our platform, or the expected turnaround times of our solutions and support, or to satisfy customer demand as it grows. Our ability to manage our growth properly will require us to continue to improve our operational, financial and management controls, as well as our reporting systems and procedures. If we are unable to manage our growth properly, we may experience future weaknesses in our internal controls, which we may not successfully remediate on a timely basis or at all. For
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example, in connection with the preparation and audits of our financial statements as of and for the years ended December 31, 2018 and 2019, a material weakness was identified in our internal control over financial reporting, as described elsewhere in this Risk Factors section. To effectively manage our growth, we must continue to improve our operational and manufacturing systems and processes, our financial systems and internal controls and other aspects of our business and continue to effectively expand, train and manage our personnel. The time and resources required to improve our existing systems and procedures, implement new systems and procedures and to adequately staff such existing and new systems and procedures is uncertain, and failure to complete this in a timely and efficient manner could adversely affect our operations and negatively impact our business and financial results.
We have invested, and expect to continue to invest, in research and development efforts that further enhance our antibody discovery platform. Such investments in technology are inherently risky and may affect our operating results. If the return on these investments is lower or develops more slowly than we expect, our revenue and operating results may suffer.
We use our technology stack for the discovery of antibodies and, since our inception, we have dedicated a substantial portion of our resources on the development of our platform and the technology that it incorporates to further enhance our antibody discovery platform. These investments may involve significant time, risks, and uncertainties, including the risk that the expenses associated with these investments may affect operating results and that such investments may not generate sufficient technological advantage relative to alternatives in the market which would, in turn, impact revenues to offset liabilities assumed and expenses associated with these new investments. The industry in which we operate changes rapidly as a result of technological and drug developments, which may render our solutions less desirable. We believe that we must continue to invest a significant amount of time and resources in our platform and technology to maintain and improve our competitive position. If we do not achieve the benefits anticipated from these investments, if the achievement of these benefits is delayed, or if our technology stack is not able to accelerate the process of antibody drug discovery as quickly as we anticipate, our revenue and operating results may be adversely affected.
Our partners have significant discretion in determining when and whether to make announcements, if any, about the status of our partnerships, including about clinical developments and timelines for advancing collaborative programs, and the price of our common shares may decline as a result of announcements of unexpected results or developments.
Our partners have significant discretion in determining when and whether to make announcements about the status of our partnerships, including about preclinical and clinical developments and timelines for advancing antibodies discovered using our platform. We do not plan to disclose the development status and progress of individual drug candidates of our partners, unless and until those partners do so first. Our partners may wish to report such information more or less frequently than we intend to or may not wish to report such information at all, in which case we would not report that information either. In addition, if partners choose to announce a collaboration with us, there is no guarantee that we will recognize research discovery fees in that quarter or even the following quarter, as such fees are not payable to us until our partner begins discovery activities. The price of our common shares may decline as a result of the public announcement of unexpected results or developments in our partnerships, or as a result of our partners withholding such information.
Our partners may not achieve projected discovery and development milestones and other anticipated key events in the expected timelines or at all, which could have an adverse impact on our business and could cause the price of our common shares to decline.
From time to time, we may make public statements regarding the expected timing of certain milestones and key events, as well as regarding developments and milestones under our partnerships, to the extent that our partners have publicly disclosed such information or permit us to make such disclosures. Certain of our partners have also made public statements regarding their expectations for the development of programs under partnership with us and they and other partners may in the future make additional statements about their goals and expectations for partnerships with us. The actual timing of these events can vary dramatically due to a number of factors such as delays or failures in our or our current and future partners drug discovery and development
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programs, the amount of time, effort, and resources committed by us and our current and future partners, and the numerous uncertainties inherent in the development of drugs. As a result, there can be no assurance that our partners current and future programs will advance or be completed in the time frames we or they expect. If our partners fail to achieve one or more of these milestones or other key events as planned, our business could be materially adversely affected and the price of our common shares could decline.
The life sciences and biotech platform technology market is highly competitive, and if we cannot compete successfully with our competitors, we may be unable to increase or sustain our revenue, or sustain profitability.
We face significant competition in the life sciences technology market. Our technologies address antibody therapeutic discovery challenges that are addressed by other platform technologies controlled by companies that have a variety of business models, including the development of internal pipelines of therapeutics, technology licensing, and the sale of instruments and devices. Examples of technical competition at different steps of our technology stack include:
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In the field of single-cell screening, companies that provide access to similar technologies such as Berkeley Lights Inc., or Berkeley, HiFiBio Inc., Ligand Pharmaceuticals Inc., and Sphere Fluidics Ltd. |
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In antibody RepSeq, companies that provide access to similar technologies such as 10X Genomics Inc., Adaptive Biotechnologies Corp., Atreca Inc. and Distributed Bio Inc. |
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In bispecific antibody engineering, from companies that provide access to similar technologies such as Abbvie Inc., Genmab A/S, Merus N.V. and Zymeworks Inc. |
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In discovery using genetically engineered rodents, companies that provide access to similar technologies such as Ablexis LLC, Crescendo Biologics Ltd., Harbour Antibodies BV, Kymab Ltd., Ligand Pharmaceuticals Inc. and RenBio Inc. |
We also face direct business competition from companies that provide antibody discovery services using technologies such as hybridoma and display. Companies with discovery business models that include downstream payments include Adimab LLC, Distributed Bio Inc. and WuXi Biologics Inc. In addition, we compete with a variety of fee-for-service contract research organizations that provide services, in most cases using legacy technologies, that compete with one or more steps in our technology stack. In addition, our partners may also elect to develop their workflows on legacy systems rather than rely on our platform.
Our competitors and potential competitors may enjoy a number of competitive advantages over us. For example these may include:
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longer operating histories; |
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larger customer bases; |
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greater brand recognition and market penetration; |
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greater financial resources; |
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greater technological and research and development resources; |
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better system reliability and robustness; |
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greater selling and marketing capabilities; and |
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better established, larger scale and lower cost manufacturing capabilities. |
As a result, our competitors and potential competitors may be able to respond more quickly to changes in customer requirements, devote greater resources to the development, promotion and sale of their platforms or instruments than we can or sell their platforms or instruments, or offer solutions competitive with our platform and solutions at prices designed to win significant levels of market share. In addition, we may encounter challenges in marketing our solutions with our pricing model, which is structured to capture the potential downstream revenues associated with drug candidates that were discovered using our platform. Our partners and potential partners may prefer one or more pricing models employed by our competitors that involve upfront payments rather than downstream revenues. We may not be able to compete effectively against these organizations.
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In addition, competitors may be acquired by, receive investments from or enter into other commercial relationships with larger, well-established and well-financed companies. Certain of our competitors may be able to secure key inputs from vendors on more favorable terms, devote greater resources to marketing and promotional campaigns, adopt more aggressive pricing policies and devote substantially more resources to technology and platform development than we can. If we are unable to compete successfully against current and future competitors, we may be unable to increase market adoption and sales of our platform, which could prevent us from increasing our revenue or sustaining profitability.
Our antibody discovery platform technology may not meet the expectations of our partners, which means our business, financial condition, results of operations and prospects could suffer.
Our success depends on, among other things, the markets confidence that our platform is capable of substantially shortening the amount of time necessary to perform certain research activities as compared to the use of legacy and other alternative technologies, and will enable more efficient or improved pharmaceutical and biotechnology product development. For example, while we have in the past been able to identify a potential drug candidate for human testing within 90 days, there is no assurance that we will be able to do so on this timeframe again in the future, or at all. To date, we have only had one program result in clinical milestone payments to us and we have not yet had a program receive clinical marketing approval, which may reduce our partners confidence in our platform. We also believe that pharmaceutical and biotechnology companies are likely to be particularly sensitive to defects and errors in the use of our platform, including if our platform fails to deliver meaningful acceleration of certain research timelines accompanied by results at least as good as the results generated using legacy or other alternative technologies. There can be no guarantee that our platform will meet the expectations of pharmaceutical and biotechnology companies.
If we are unable to support demand for our antibody discovery platform, including ensuring that we have adequate teams and facilities to meet increased demand, or if we are unable to successfully manage our anticipated growth, our business could suffer.
We have experienced significant growth in the number of programs under contract in recent periods for which we are conducting research discovery activities. As we secure additional programs under contract and as our partners initiate discovery programs, our operational capacity to execute such research activities may become strained. We are also planning to devote significant resources to vertical integration into our platform. As a result, our strategy requires us to successfully scale our teams and facilities to meet future demand for our solutions. Our ability to grow our capacity will depend on our ability to expand our workforce and our facilities, and increase efficiency through automation and software solutions. We may also need to purchase additional equipment, some of which can take several months or more to procure and set up. There is no assurance that any of these increases in scale, expansion of personnel, equipment, software and computing capacities or process enhancements will be successfully implemented and in a timely manner. For example, we are currently investigating expansion of facilities in Vancouver. As limited facilities with appropriate capabilities are available in Vancouver, such facilities require purpose-built buildings often with rezoning requirements. Such projects are typically long in duration and subject to delays. Failure to manage this growth could result in delays, higher costs, declining quality, and slower responses to competitive challenges. A failure in any one of these areas could make it difficult for us to meet market expectations for our data packages and could damage our reputation and the prospects for our business.
Our management uses certain key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions and such metrics may not accurately reflect all of the aspects of our business needed to make such evaluations and decisions, in particular as our business continues to grow.
In addition to our consolidated financial results, our management regularly reviews a number of operating and financial metrics, including number of programs under contract, the trend of potential downstream revenue terms (milestones and royalties) of the portfolio, the performance of the portfolio in probability of success in achieving clinical milestones as compared to historical averages and the performance of the portfolio in the time taken to achieve clinical milestones, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. We believe that these metrics are
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representative of our current business; however, these metrics may not accurately reflect all aspects of our business and we anticipate that these metrics may change or may be substituted for additional or different metrics as our business grows and as we introduce new solutions. If our management fails to review other relevant information or change or substitute the key business metrics they review as our business grows, their ability to accurately formulate financial projections and make strategic decisions may be compromised and our business, financial results and future growth prospects may be adversely impacted.
The sizes of the markets and forecasts of market growth for the demand of our antibody discovery platform and other of our key performance indicators are based on a number of complex assumptions and estimates, and may be inaccurate.
We estimate annual total addressable markets and forecasts of market growth for our platform, data packages and technologies. We have also developed a standard set of key performance indicators in order to enable us to assess the performance of our business in and across multiple markets, and to forecast future revenue. These estimates, forecasts and key performance indicators are based on a number of complex assumptions, internal and third party estimates and other business data, including assumptions and estimates relating to our ability to generate revenue from the development of new workflows. While we believe our assumptions and the data underlying our estimates and key performance indicators are reasonable, there are inherent challenges in measuring or forecasting such information. As a result, these assumptions and estimates may not be correct and the conditions supporting our assumptions or estimates may change at any time, thereby reducing the predictive accuracy of these underlying factors and indicators. As a result, our estimates of the annual total addressable market and our forecasts of market growth and future revenue from technology access fees, discovery research fees, milestone payments or royalties may prove to be incorrect, and our key business metrics may not reflect our actual performance. For example, if the annual total addressable market or the potential market growth for our platform is smaller than we have estimated or if the key business metrics we utilize to forecast revenue are inaccurate, it may impair our sales growth and have an adverse impact on our business, financial condition, results of operations and prospects.
We must adapt to rapid and significant technological change and respond to introductions of new products and technologies by competitors to remain competitive.
We provide our antibody discovery solution and capabilities in industries that are characterized by significant enhancements and evolving industry standards. As a result, our partners needs are rapidly evolving. If we do not appropriately innovate and invest in new technologies, our platform may become less desirable in the markets we serve, and our partners could move to new technologies offered by our competitors, or engage in antibody discovery themselves. Though we believe partners in our markets display a significant amount of loyalty to their supplier of research or a particular product or service, we also believe that because of the initial time investment required by many of our partners to reach a decision about whether to partner with us, it may be difficult to regain that customer once the customer enters into a partnership or collaboration agreement with a competitor. Without the timely introduction of new solutions and technological enhancements, our offerings will likely become less competitive over time, in which case our competitive position and operating results could suffer. Accordingly, we focus significant efforts and resources on the development and identification of new technologies and markets to further broaden and deepen our capabilities and expertise in antibody drug discovery and development . For example, to the extent we fail to timely introduce new and innovative technologies or solutions, adequately predict our partners needs or fail to obtain desired levels of market acceptance, our business may suffer and our operating results could be adversely affected.
We depend on our information technology systems, and any failure of these systems could harm our business.
We depend on information technology and telecommunications systems for significant elements of our operations, including our laboratory information management system, our computational biology system, our knowledge management system, our customer reporting, our platform, our advanced automation systems, and advanced application software. We have installed, and expect to expand, a number of enterprise software systems that affect a broad range of business processes and functional areas, including for example, systems handling
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human resources, financial controls and reporting, contract management, regulatory compliance and other infrastructure operations. These implementations were expensive and required a significant effort in terms of both time and effort. In addition to the aforementioned business systems, we intend to extend the capabilities of both our preventative and detective security controls by augmenting the monitoring and alerting functions, the network design and the automatic countermeasure operations of our technical systems. These information technology and telecommunications systems support a variety of functions, including manufacturing operations, laboratory operations, data analysis, quality control, customer service and support, billing, research and development activities, scientific and general administrative activities. A significant risk in implementing these systems, for example, is the integration and communication between separate IT systems.
Information technology and telecommunications systems are vulnerable to damage from a variety of sources, including telecommunications or network failures, malicious software, bugs or viruses, human acts and natural disasters. Moreover, despite network security and back-up measures, some of our servers are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems. Any disruption or loss of information technology or telecommunications systems on which critical aspects of our operations depend could have an adverse effect on our business and our reputation, and we may be unable to regain or repair our reputation in the future.
Our sales and marketing organization is currently limited, and if we are unable to expand our marketing and salesforce to reach our existing and potential partners, our business may be adversely affected.
Until 2019, our sales and marketing team has been limited, with only one dedicated business development person supported by two to three marketing staff who are primarily focused on scientific writing. This activity has been complemented with research and development staff attending a variety of scientific conferences which has helped increase the business development pipeline. We will need to expand our commercial organization in order to effectively market our solutions to existing and new partners. Competition for employees capable of negotiating and entering into partnerships with pharmaceutical and biotechnology companies is intense. We may not be able to attract and retain personnel or be able to build an efficient and effective sales organization, which could negatively impact sales and market acceptance of our platform and limit our revenue growth and potential profitability. In addition, the time and cost of establishing a specialized sales, marketing and service force for a particular service may be difficult to justify in light of the revenue generated or projected.
Our expected future growth will impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate additional employees. Our future financial performance and our ability to successfully sell our programs and to compete effectively will depend, in part, on our ability to manage this potential future growth effectively, without compromising quality.
The loss of any member of our senior management team or our inability to attract and retain highly skilled scientists, engineers and salespeople could adversely affect our business.
Our success depends on the skills, experience and performance of key members of our senior management team, including Carl Hansen, Ph.D., our founding Chief Executive Officer, Véronique Lecault, Ph.D., our co-founder and Chief Operating Officer, Andrew Booth, our Chief Financial Officer, Tryn Stimart, our Chief Legal Officer, and Ester Falconer, Ph.D., our Head of Research and Development. The individual and collective efforts of these employees will be important as we continue to develop our platform and our technology, and as we expand our commercial activities. The loss or incapacity of existing members of our executive management team could adversely affect our operations if we experience difficulties in hiring qualified successors. While certain of our executive officers are party to employment contracts with us, we cannot guarantee their retention for any period of time beyond the applicable notice period.
Our research and development programs and laboratory operations depend on our ability to attract and retain highly skilled scientists and engineers. We may not be able to attract or retain qualified scientists and engineers in the future due to the competition for qualified personnel among life science businesses. We also face
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competition from universities and public and private research institutions in recruiting and retaining highly qualified scientific and engineering personnel. We may have difficulties locating, recruiting or retaining qualified salespeople. Recruiting and retention difficulties can limit our ability to support our research and development and sales programs. A key risk in this area, for example, is that certain of our employees are at-will, which means that either we or the employee may terminate their employment at any time.
We have made technology acquisitions and expect to acquire businesses or assets or make investments in other companies or technologies that could negatively affect our operating results, dilute our shareholders ownership, increase our debt or cause us to incur significant expense.
We have made technology acquisitions and expect to pursue acquisitions of businesses and assets in the future. We also may pursue strategic alliances and joint ventures that leverage our technologies and industry experience to expand our offerings or distribution. Although we have acquired other businesses or assets in the past, including our acquisition of Lineage in March 2017, our acquisition of the OrthoMab bispecific platform from Dualogics, LLC in June 2020 and our acquisition of Trianni in November 2020, we may not be able to find suitable partners or acquisition or asset purchase candidates in the future, and we may not be able to complete such transactions on favorable terms, if at all. The competition for partners or acquisition candidates may be intense, and the negotiation process will be time-consuming and complex. If we make any acquisitions, we may not be able to integrate these acquisitions successfully into our existing business, these acquisitions may not strengthen our competitive position, the transactions may be viewed negatively by partners or investors, we may be unable to retain key employees of any acquired business, relationships with key suppliers, manufacturers or partners of any acquired business may be impaired due to changes in management and ownership, and we could assume unknown or contingent liabilities. Any future acquisitions also could result in the incurrence of debt, contingent liabilities or future write-offs of intangible assets or goodwill, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects. We cannot guarantee that we will be able to fully recover the costs of any acquisition. Integration of an acquired company also may disrupt ongoing operations and require management resources that we would otherwise focus on developing our existing business. We may not realize the anticipated benefits of any acquisition, technology license, strategic alliance or joint venture. We also may experience losses related to investments in other companies, which could have a material adverse effect on our business, financial condition, results of operations and prospects. Acquisitions may also expose us to a variety of international and business related risks, including intellectual property, regulatory laws, local laws, tax and accounting.
To finance any acquisitions or asset purchase, we may choose to issue securities as consideration, which would dilute the ownership of our shareholders. Additional funds may not be available on terms that are favorable to us, or at all. If the price of our common shares is low or volatile, we may not be able to acquire companies or assets using our securities as consideration.
Our business could become subject to government regulation and the regulatory approval and maintenance process may be expensive, time-consuming and uncertain both in timing and in outcome.
Our data packages are currently not subject to the clearance or approval of the FDA. However, our business could in future become subject to regulation by the FDA, or comparable international agencies. For example, in May 2020, we announced that we received a commitment from the Government of Canada under Innovation, Science and Economic Developments, or ISED, Strategic Innovation Fund, or SIF, of up to CAD $175.6 million ($125.6 million), the proceeds of which we plan to use to build a GMP facility in Vancouver, British Columbia, which will house our manufacturing and manufacturing support infrastructure. This facility, once completed, will become subject to various regulations, which could include regular inspections, certifications and audits. Such regulatory approval processes or clearances may be expensive, time-consuming and uncertain, and our failure to obtain or comply with such approvals and clearances could have an adverse effect on our business, financial condition and operating results. In addition, changes to the current regulatory framework, including the imposition of additional or new regulations, including regulation of our data packages, could arise at any time,
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which may negatively affect our ability to obtain or maintain FDA or comparable regulatory approval of our data packages or future products, if required.
Our billing and collections processing activities are time-consuming, and any delay in transmitting invoices or failure to comply with applicable billing requirements, could have an adverse effect on our future revenue.
Billing for our data packages can be time-consuming, as many of our partners are large pharmaceutical or biotechnology companies and engage various models for their accounts payable matters, including outsourcing to third parties. We may face increased risk in our collection efforts, including long collection cycles and the risk that we may never collect at all, which could require to write-off significant accounts receivable and recognize bad debt expenses, which could adversely affect our business, financial condition, results of operations and prospects.
If our operating facility becomes damaged or inoperable or we are required to vacate our facility, our ability to conduct and pursue our research and development efforts may be jeopardized.
We currently derive the majority of our revenue based upon scientific and engineering research and development and testing conducted at a single facility located in Vancouver, British Columbia. Our facility and equipment could be harmed or rendered inoperable or inaccessible by natural or man-made disasters or other circumstances beyond our control, including fire, earthquake, power loss, communications failure, war or terrorism, or another catastrophic event, such as a pandemic or similar outbreak or public health crisis, which may render it difficult or impossible for us to support our partners and develop updates, upgrades and other improvements to our technology and platform, advanced automation systems, and advanced application and workflow software for some period of time. The inability to address system issues could develop if our facility is inoperable or suffers a loss of utilization for even a short period of time, may result in the loss of partners or harm to our reputation, and we may be unable to regain those partners or repair our reputation in the future. Furthermore, our facility and the equipment we use to perform our research and development work could be unavailable or costly and time-consuming to repair or replace. It would be difficult, time-consuming and expensive to rebuild our facility, to locate and qualify a new facility or license or transfer our proprietary technology to a third party. Even in the event we are able to find a third party to assist in research and development efforts, we may be unable to negotiate commercially reasonable terms to engage with the third party.
We carry insurance for damage to our property and the disruption of our business, but this insurance may not cover all of the risks associated with damage or disruption to our business, may not provide coverage in amounts sufficient to cover our potential losses and may not continue to be available to us on acceptable terms, if at all.
Our insurance policies are expensive and protect us only from some business risks, which leaves us exposed to significant uninsured liabilities.
We do not carry insurance for all categories of risk that our business may encounter and our policies have limits and significant deductibles. Some of the policies we currently maintain include general liability, property, umbrella and directors and officers insurance.
Any additional insurance coverage we acquire in the future, may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive and in the future we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses. A successful liability claim or series of claims in which judgments exceed our insurance coverage could adversely affect our business, financial condition, results of operations and prospects, including preventing or limiting the use of our platform to discover antibodies.
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We also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers. We do not know, however, if we will be able to maintain existing insurance with adequate levels of coverage. Any significant uninsured liability may require us to pay substantial amounts, which would adversely affect our business, financial condition, results of operations and prospects.
Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation.
In the ordinary course of our business, we generate and store sensitive data, including research data, intellectual property and proprietary business information owned or controlled by ourselves or our employees, partners and other parties. We manage and maintain our applications and data utilizing a combination of on-site systems and cloud-based data centers. We utilize external security and infrastructure vendors to manage parts of our data centers. These applications and data encompass a wide variety of business-critical information, including research and development information, commercial information and business and financial information. We face a number of risks relative to protecting this critical information, including loss of access risk, inappropriate use or disclosure, accidental exposure, unauthorized access, inappropriate modification and the risk of our being unable to adequately monitor and audit and modify our controls over our critical information. This risk extends to the third party vendors and subcontractors we use to manage this sensitive data or otherwise process it on our behalf. Further, to the extent our employees are working at home during the COVID-19 pandemic, additional risks may arise as a result of depending on the networking and security put into place by the employees. The secure processing, storage, maintenance and transmission of this critical information are vital to our operations and business strategy, and we devote significant resources to protecting such information. Although we take reasonable measures to protect sensitive data from unauthorized access, use or disclosure, no security measures can be perfect and our information technology and infrastructure may be vulnerable to attacks by hackers or infections by viruses or other malware or breached due to employee erroneous actions or inactions by our employees or contractors, malfeasance or other malicious or inadvertent disruptions. Any such breach or interruption could compromise our networks and the information stored there could be accessed by unauthorized parties, publicly disclosed, lost or stolen. Any such access, breach, or other loss of information could result in legal claims or proceedings. Unauthorized access, loss or dissemination could also disrupt our operations and damage our reputation, any of which could adversely affect our business.
Additionally, although we maintain cybersecurity insurance coverage, we cannot be certain that such coverage will be adequate for data security liabilities actually incurred, will cover any indemnification claims against us relating to any incident, will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could adversely affect our reputation, business, financial condition and results of operations.
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International expansion of our business exposes us to business, regulatory, political, operational, financial and economic risks associated with doing business outside of Canada and the United States.
We currently have limited operations outside of Canada and the United States, but our business strategy incorporates potentially significant international expansion. We currently maintain relationships with partners outside of Canada and the United States, and may in the future enter into new relationships. We also have a wholly owned subsidiary in Australia. Doing business internationally involves a number of risks, including:
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multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws, export and import restrictions, tariffs, economic sanctions and embargoes, employment laws, regulatory requirements and other governmental approvals, permits and licenses; |
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failure by us or our distributors to obtain approvals to conduct our business in various countries; |
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differing intellectual property rights; |
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complexities and difficulties in obtaining intellectual property protection, enforcing our intellectual property and defending against third party intellectual property claims; |
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difficulties in staffing and managing foreign operations; |
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logistics and regulations associated with shipping systems and parts and components for systems, consumables and reagent kits, as well as transportation delays; |
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travel restrictions that limit the ability of marketing, presales, sales, services and support teams to service partners; |
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financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our data packages, and exposure to foreign currency exchange rate fluctuations; |
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international trade disputes that could result in tariffs and other protective measures; |
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natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; and |
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regulatory and compliance risks that relate to maintaining accurate information and control over sales and distributors activities that may fall within the purview of the Canadian Corruption of Foreign Public Officials Act, or CFPOA, or U.S. Foreign Corrupt Practices Act, or FCPA, its books and records provisions, or its anti-bribery provisions. |
Any of these factors could significantly harm our future international expansion and operations and, consequently, our business, financial condition, results of operations and prospects. In addition, certain international markets are subject to significant political and economic uncertainty, including for example the effect of the withdrawal of the United Kingdom from the European Union. Significant political and economic developments in international markets for which we intend to operate, or the perception that any of them could occur, creates further challenges for operating in these markets in addition to creating instability in global economic conditions.
Our business activities are subject to the FCPA and other anti-bribery and anti-corruption laws of the United States and other countries in which we operate, as well as U.S. and certain foreign export controls and trade sanctions. Violations of such legal requirements could subject us to liability.
We are subject to the FCPA, which among other things prohibits companies and their third-party intermediaries from offering, promising, giving or authorizing others to give anything of value, either directly or indirectly, to non-U.S. government officials for the purpose of obtaining or retaining business or securing any other improper advantage. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of
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internal accounting controls. Companies in the biotechnology and biopharmaceutical field are highly regulated and therefore involve interactions with public officials, including officials of non-U.S. governments. Additionally, in many other countries, hospitals are owned and operated by the government, and doctors and other hospital employees would be considered foreign officials under the FCPA. We are also subject to the Canadian equivalent to the FCPA, the CFPOA. These laws are complex and far-reaching in nature, and, as a result, there is no certainty that all of our employees, agents or contractors will comply with such laws and regulations. Any violations of these laws, or allegations of such violations, could disrupt our operations, involve significant management distraction, involve significant costs and expenses, including legal fees, and could result in a material adverse effect on our business, financial condition, results of operations and prospects. We could also suffer severe penalties, including criminal and civil penalties, disgorgement and other remedial measures.
In addition, our data packages may be subject to U.S. and foreign export controls and trade sanctions. Compliance with applicable regulatory requirements regarding the export of our data packages may create delays in us providing our data packages in international markets or, in some cases, prevent the export thereof to some countries altogether. Furthermore, U.S. export control laws and economic sanctions prohibit the shipment of certain products and services to countries, governments, and persons targeted by U.S. sanctions. If we fail to comply with export regulations and such economic sanctions, penalties could be imposed, including fines and/or denial of certain export privileges. Moreover, any new export restrictions, new legislation or shifting approaches in the enforcement or scope of existing regulations, or in the countries, persons, or products targeted by such regulations, could result in decreased use of our data packages by, or in our decreased ability to export our data packages to, existing or potential customers with international operations. Any decreased use of our data packages or limitation on our ability to export or sell our data packages would likely adversely affect our business.
We use biological and hazardous materials that require considerable expertise and expense for handling, storage and disposal and may result in claims against us.
We work with materials, including chemicals, biological agents and compounds that could be hazardous to human health and safety or the environment. Our operations also produce hazardous and biological waste products. Federal, provincial, state and local laws and regulations govern the use, generation, manufacture, storage, handling and disposal of these materials and wastes. We are subject to periodic inspections by Canadian provincial and federal authorities to ensure compliance with applicable laws. Compliance with applicable environmental laws and regulations is expensive, and current or future environmental laws and regulations may restrict our operations. If we do not comply with applicable regulations, we may be subject to fines and penalties.
In addition, we cannot eliminate the risk of accidental injury or contamination from these materials or wastes, which could cause an interruption of our commercialization efforts, research and development programs and business operations, as well as environmental damage resulting in costly clean-up and liabilities under applicable laws and regulations. In the event of contamination or injury, we could be liable for damages or penalized with fines in an amount exceeding our resources and our operations could be suspended or otherwise adversely affected. Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance.
Once completed, our manufacturing operations will be dependent upon third party suppliers, including single source suppliers, making us vulnerable to supply shortages and price fluctuations, which could harm our business.
We plan to build a GMP facility in Vancouver, British Columbia, to house our manufacturing and manufacturing support infrastructure. We anticipate that some of the suppliers of critical components or materials for our processes may be single or sole source suppliers and the replacement of these suppliers or the identification and qualification of suitable second sources may require significant time, effort and expense, and
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could result in delays in production, which could negatively impact our business operations and revenue. There can be no assurance that our supply of components necessary for the operation of this facility will not be limited, interrupted, or of satisfactory quality or continue to be available at acceptable prices. In addition, loss of any critical component provided by a single source supplier could require us to change the design of our manufacturing process based on the functions, limitations, features and specifications of the replacement components.
In addition, several other non-critical components and materials that comprise our systems are currently manufactured by a single supplier or a limited number of suppliers. In many of these cases, we have not yet qualified alternate suppliers and rely upon purchase orders, rather than long-term supply agreements. A supply interruption or an increase in demand beyond our current suppliers capabilities could harm our ability to manufacture our systems unless and until new sources of supply are identified and qualified. Our reliance on these suppliers subjects us to a number of risks that could harm our business, including:
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interruption of supply resulting from modifications to or discontinuation of a suppliers operations; |
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delays in product shipments resulting from uncorrected defects, reliability issues, or a suppliers variation in a component; |
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a lack of long-term supply arrangements for key components with our suppliers; |
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inability to obtain adequate supply in a timely manner, or to obtain adequate supply on commercially reasonable terms; |
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difficulty and cost associated with locating and qualifying alternative suppliers for our components in a timely manner; |
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a modification or change in a manufacturing process or part that unknowingly or unintentionally negatively impacts the operation of our systems; |
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production delays related to the evaluation and testing of products from alternative suppliers, and corresponding regulatory qualifications; |
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delay in delivery due to our suppliers prioritizing other customer orders over ours; |
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damage to our brand reputation caused by defective components produced by our suppliers; |
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increased cost of our warranty program due to product repair or replacement based upon defects in components produced by our suppliers; and |
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fluctuation in delivery by our suppliers due to changes in demand from us or their other partners. |
Any interruption in the supply of components or materials, or our inability to obtain substitute components or materials from alternate sources at acceptable prices in a timely manner, could impair our ability to meet the demand of our partners, which would have an adverse effect on our business.
Although we expect that the acquisition of Trianni will result in synergies and other benefits to us, we may not realize those benefits because of difficulties related to integration.
In November 2020, we consummated the Trianni acquisition. We expect that the integration process will require significant time and resources, and we may not be able to manage the process successfully. If we are not able to successfully integrate Triannis businesses with ours, the anticipated benefits of the Trianni acquisition may not be realized fully or may take longer than expected to be realized. For instance, in connection with the acquisition, we acquired a suite of transgenic humanized rodent lines currently being validated and available for discovery projects in the near future. There can be no assurance that these rodent lines will ever be validated or available for use by us or our partners. Further, it is possible that we will experience disruption of either companys or both companies ongoing businesses, including as we continue to service Triannis existing
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contracts for the foreseeable future. We may also incur higher than expected costs as a result of the acquisition or experience an overall post-completion process that takes longer than originally anticipated. In addition, at times the attention of certain members of our management and resources may be focused on integration of the businesses of the two companies and diverted from day-to-day business operations, which may disrupt our ongoing business and the business of the combined company. We expect to incur, significant, non-recurring costs in connection with the acquisition of Trianni and integrating our operations with Triannis, including costs to maintain employee morale and to retain key employees. Management cannot ensure that the elimination of duplicative costs or the realization of other efficiencies will offset the transaction and integration costs in the near term or at all. Furthermore, uncertainty about the effect of the Trianni acquisition on our business, employees, customers, third parties with whom we have relationships may have an adverse effect on our business, financial condition, results of operations and prospects. In addition, such challenges in integrating our acquisition of Trianni may be magnified by the ongoing COVID-19 pandemic.
Other potential difficulties we may encounter as part of the integration process include (i) the challenge of integrating complex systems, operating procedures, regulatory compliance programs, technology, networks and other assets of Trianni in a seamless manner that minimizes any adverse impact on our employees, patients, suppliers and other business partners; and (ii) potential unknown liabilities, liabilities that are significantly larger than we currently anticipate and unforeseen increased expenses or delays associated with the acquisition, including costs to integrate Triannis business that may exceed the costs that we currently anticipate. Accordingly, the contemplated benefits of the Trianni acquisition may not be realized fully, or at all, or may take longer to realize than expected.
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain sufficient intellectual property protection for our technology, including our platform and Celium, our proprietary antibody visualization software, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize technologies or a platform similar or identical to ours, and our ability to successfully sell our data packages may be impaired.
We rely on patent protection as well as trademark, copyright, trade secret and other intellectual property rights protection and contractual restrictions to protect our proprietary technologies, all of which provide limited protection and may not adequately protect our rights or permit us to gain or keep a competitive advantage. If we fail to protect our intellectual property, third parties may be able to compete more effectively against us. In addition, we may incur substantial litigation costs in our attempts to recover or restrict the use of our intellectual property.
To the extent our intellectual property offers inadequate protection, or is found to be invalid or unenforceable, we would be exposed to a greater risk of direct competition. If our intellectual property does not provide adequate coverage of our competitors products and services, our competitive position could be adversely affected, as could our business. Both the patent application process and the process of managing patent disputes can be time-consuming and expensive.
Our success depends in large part on our ability to obtain and maintain adequate protection of the intellectual property we may own solely and jointly with others or otherwise have rights to, particularly patents, in the United States, Canada and in other countries with respect to our platform, our software and our technologies, without infringing the intellectual property rights of others.
We strive to protect and enhance the proprietary technologies that we believe are important to our business, including seeking patents intended to cover our platform and related technologies and uses thereof, as we deem appropriate. Our patents and patent applications in the United States, Canada and certain foreign jurisdictions relate to our technology. However, obtaining and enforcing patents in our industry is costly, time-
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consuming and complex, and we may fail to apply for patents on important products and technologies in a timely fashion or at all, or we may fail to apply for patents in potentially relevant jurisdictions. There can be no assurance that the claims of our patents (or any patent application that issues as a patent), will exclude others from making, using or selling our technology or technology that is substantially similar to ours. We also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection. In countries where we have not sought and do not seek patent protection, third parties may be able to manufacture and sell our technology without our permission, and we may not be able to stop them from doing so. We may not be able to file and prosecute all necessary or desirable patent applications, or maintain, enforce and license any patents that may issue from such patent applications, at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. We may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the rights to patents licensed to third parties. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.
As of September 30, 2020, we owned or had exclusive licenses to 38 issued or allowed patents and 40 pending patent applications worldwide, which includes 27 issued or allowed U.S. patents and 15 pending U.S. patent applications. We own registered trademarks and trademark applications for AbCellera and Celium, in the U.S., Canada and Europe. It is possible that none of our pending patent applications will result in issued patents in a timely fashion or at all, and even if patents are granted, they may not provide a basis for intellectual property protection of commercially viable products or services, may not provide us with any competitive advantages, or may be challenged and invalidated by third parties. It is possible that others will design around our current or future patented technologies. As a result, our owned and licensed patents and patent applications comprising our patent portfolio may not provide us with sufficient rights to exclude others from commercializing technology and products similar to any of our technology.
It is possible that in the future some of our patents, licensed patents and patent applications may be challenged at the United States Patent and Trademark Office, or USPTO, or in proceedings before the patent offices of other jurisdictions. We may not be successful in defending any such challenges made against our patents or patent applications. Any successful third party challenge to our patents could result in loss of exclusivity or freedom to operate, patent claims being narrowed, the unenforceability or invalidity of such patents, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products, limit the duration of the patent protection of our technology, and increased competition to our business. We may have to challenge the patents or patent applications of third parties. The outcome of patent litigation or other proceeding can be uncertain, and any attempt by us to enforce our patent rights against others or to challenge the patent rights of others may not be successful, or, if successful, may take substantial time and result in substantial cost, and may divert our efforts and attention from other aspects of our business.
Any changes we make to our technology, including changes that may be required for commercialization or that cause them to have what we view as more advantageous properties may not be covered by our existing patent portfolio, and we may be required to file new applications and/or seek other forms of protection for any such alterations to our technology. There can be no assurance that we would be able to secure patent protection that would adequately cover an alternative to our technology.
The patent positions of life sciences companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in such companies patents has emerged to date in the United States or elsewhere. Courts frequently render opinions in the biotechnology field that may affect the patentability of certain inventions or discoveries.
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Changes in patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our technology.
Changes in either the patent laws or in interpretations of patent laws in the United States or other countries or regions may diminish the value of our intellectual property. We cannot predict the breadth of claims that may be allowed or enforced in our patents or in third party patents. We may not develop additional proprietary platforms, methods and technologies that are patentable.
Assuming that other requirements for patentability are met, prior to March 16, 2013, in the United States, the first to invent the claimed invention was entitled to the patent, while outside the United States, the first to file a patent application was entitled to the patent. On or after March 16, 2013, under the Leahy-Smith America Invents Act, or the America Invents Act, enacted in September 16, 2011, the United States transitioned to a first inventor to file system in which, assuming that other requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. A third party that files a patent application in the USPTO on or after March 16, 2013, but before us could therefore be awarded a patent covering an invention of ours even if we had made the invention before it was made by such third party. This will require us to be cognizant of the time from invention to filing of a patent application. Since patent applications in the United States and most other countries are confidential for a period of time after filing or until issuance, we cannot be certain that we or our licensors were the first to either (i) file any patent application related to our technology or (ii) invent any of the inventions claimed in our or our licensors patents or patent applications.
The America Invents Act also includes a number of significant changes that affect the way patent applications will be prosecuted and also may affect patent litigation. These include allowing third party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including post-grant review, inter partes review and derivation proceedings. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in United States federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. Therefore, the America Invents Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our owned or in-licensed patent applications and the enforcement or defense of our owned or in-licensed issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.
In addition, the patent position of companies in the biotechnology field is particularly uncertain. Various courts, including the United States Supreme Court have rendered decisions that affect the scope of patentability of certain inventions or discoveries relating to biotechnology. These decisions state, among other things, that a patent claim that recites an abstract idea, natural phenomenon or law of nature (for example, the relationship between particular genetic variants and cancer) are not themselves patentable. Precisely what constitutes a law of nature or abstract idea is uncertain, and it is possible that certain aspects of our technology could be considered natural laws. Accordingly, the evolving case law in the United States may adversely affect our and our licensors ability to obtain new patents or to enforce existing patents and may facilitate third party challenges to any owned or licensed patents.
Issued patents covering our platform and technology could be found invalid or unenforceable if challenged.
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability. Some of our patents or patent applications (including licensed patents) may be challenged at a future point in time in opposition, derivation, reexamination, inter partes review, post-grant review or interference. Any successful third
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party challenge to our patents in this or any other proceeding could result in the unenforceability or invalidity of such patents or amendment to our patents in such a way that they no longer cover our platform and our technology, which may lead to increased competition to our business, which could harm our business. In addition, in patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. The outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on certain aspects of our platform technologies. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, regardless of the outcome, it could dissuade companies from collaborating with us to license, develop or commercialize current or future products.
We may not be aware of all third party intellectual property rights potentially relating to our platform or technology. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until approximately 18 months after filing or, in some cases, not until such patent applications issue as patents. We or our licensors might not have been the first to make the inventions covered by each of our pending patent applications and we or our licensors might not have been the first to file patent applications for these inventions. There is also no assurance that all of the potentially relevant prior art relating to our patents and patent applications or licensed patents and patent applications has been found, which could be used by a third party to challenge their validity, or prevent a patent from issuing from a pending patent application.
To determine the priority of these inventions, we may have to participate in interference proceedings, derivation proceedings or other post-grant proceedings declared by the USPTO that could result in substantial cost to us. The outcome of such proceedings is uncertain. No assurance can be given that other patent applications will not have priority over our patent applications. In addition, changes to the patent laws of the United States allow for various post-grant opposition proceedings that have not been extensively tested, and their outcome is therefore uncertain. Furthermore, if third parties bring these proceedings against our patents, we could experience significant costs and management distraction.
We rely on in-licenses from third parties. If we lose these rights, our business may be materially adversely affected, our ability to develop improvements to our technology stack and drug-discovery platform may be negatively and substantially impacted, and if disputes arise, we may be subjected to future litigation as well as the potential loss of or limitations on our ability to incorporate the technology covered by these license agreements.
We are party to a royalty-bearing license agreement with the University of British Columbia that grants us exclusive rights to exploit certain patent rights that are related to our systems. Through our acquisition of Lineage, we obtained an exclusive license from Stanford University to patents and patent applications directed toward immune repertoire sequencing. We may need to obtain additional licenses from others to advance our research, development and commercialization activities. Some of our license agreements impose, and we expect that any future exclusive in-license agreements will impose, various development, diligence, commercialization and other obligations on us. We may enter into engagements in the future, with other licensors under which we obtain certain intellectual property rights relating to our platform and technology. These engagements take the form of exclusive license or of actual ownership of intellectual property rights or technology from third parties. Our rights to use the technology we license are subject to the continuation of and compliance with the terms of those agreements. In some cases, we may not control the prosecution, maintenance or filing of the patents to which we hold licenses, or the enforcement of those patents against third parties.
Moreover, disputes may arise with respect to our licensing or other upstream agreements, including:
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the scope of rights granted under the agreements and other interpretation-related issues; |
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the extent to which our systems and consumables, technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; |
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the sublicensing of patent and other rights under our collaborative development relationships; |
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our diligence obligations under the license agreements and what activities satisfy those diligence obligations; |
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the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and |
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the priority of invention of patented technology. |
In spite of our efforts to comply with our obligations under our in-license agreements, our licensors might conclude that we have materially breached our obligations under our license agreements and might therefore, including in connection with any aforementioned disputes, terminate the relevant license agreement, thereby removing or limiting our ability to develop and commercialize technology covered by these license agreements. If any such in-license is terminated, or if the licensed patents fail to provide the intended exclusivity, competitors or other third parties might have the freedom to market or develop technologies similar to ours. In addition, absent the rights granted to us under such license agreements, we may infringe the intellectual property rights that are the subject of those agreements, we may be subject to litigation by the licensor, and if such litigation by the licensor is successful we may be required to pay damages to our licensor, or we may be required to cease our development and commercialization activities which are deemed infringing, and in such event we may ultimately need to modify our activities or technologies to design around such infringement, which may be time- and resource-consuming, and which may not be ultimately successful. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.
In addition, our rights to certain components of our technology stack, are licensed to us on a non-exclusive basis. The owners of these non-exclusively licensed technologies are therefore free to license them to third parties, including our competitors, on terms that may be superior to those offered to us, which could place us at a competitive disadvantage. Moreover, our licensors may own or control intellectual property that has not been licensed to us and, as a result, we may be subject to claims, regardless of their merit, that we are infringing or otherwise violating the licensors rights. In addition, certain of our agreements with third parties may provide that intellectual property arising under these agreements, such as data that could be valuable to our business, will be owned by the counterparty, in which case, we may not have adequate rights to use such data or have exclusivity with respect to the use of such data, which could result in third parties, including our competitors, being able to use such data to compete with us.
If we cannot acquire or license rights to use technologies on reasonable terms or if we fail to comply with our obligations under such agreements, we may not be able to commercialize new technologies or services in the future and our business could be harmed.
In the future, we may identify third party intellectual property and technology we may need to license in order to engage in our business, including to develop or commercialize new technologies or services, and the growth of our business may depend in part on our ability to acquire, in-license or use this technology. However, such licenses may not be available to us on acceptable terms or at all. The licensing or acquisition of third party intellectual property rights is a competitive area, and several more established companies may pursue strategies to license or acquire third party intellectual property rights that we may consider attractive or necessary. These established companies may have a competitive advantage over us due to their size, capital resources and greater development or commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. Even if such licenses are available, we may be required to pay the licensor in return for the use of such licensors technology, lump-sum payments, payments based on certain milestones such as sales volumes, or royalties based on sales of our platform. In addition, such licenses may be non-exclusive, which could give our competitors access to the same intellectual property licensed to us. We may also need to acquire or negotiate licenses to patents or patent applications before or after introducing a new service. The acquisition and licensing of third party patent rights is a competitive area, and other companies may
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also be pursuing strategies to acquire or license third party patent rights that we may consider attractive. We may not be able to acquire or obtain necessary licenses to patents or patent applications. Even if we are able to obtain a license to patent rights of interest, we may not be able to secure exclusive rights, in which case others could use the same rights and compete with us.
In spite of our best efforts, our licensors might conclude that we have materially breached our license agreements and might therefore terminate the license agreements, thereby removing our ability to develop and commercialize technology covered by these license agreements. If these licenses are terminated, or if the underlying intellectual property fails to provide the intended exclusivity, competitors would have the freedom to seek regulatory approval of, and to market, technologies identical to ours. This could have a material adverse effect on our competitive position, business, financial condition, results of operations and prospects. Additionally, termination of these agreements or reduction or elimination of our rights under these agreements, or restrictions on our ability to freely assign or sublicense our rights under such agreements when it is in the interest of our business to do so, may result in our having to negotiate new or reinstated agreements with less favorable terms, or cause us to lose our rights under these agreements, including our rights to important intellectual property or technology or impede, or delay or prohibit the further development or commercialization of one or more technologies that rely on such agreements.
While we still face all of the risks described herein with respect to those agreements, we cannot prevent third parties from also accessing those technologies. In addition, our licenses may place restrictions on our future business opportunities.
In addition to the above risks, intellectual property rights that we license in the future may include sublicenses under intellectual property owned by third parties, in some cases through multiple tiers. The actions of our licensors may therefore affect our rights to use our sublicensed intellectual property, even if we are in compliance with all of the obligations under our license agreements. Should our licensors or any of the upstream licensors fail to comply with their obligations under the agreements pursuant to which they obtain the rights that are sublicensed to us, or should such agreements be terminated or amended, our ability to further commercialize our technology may be materially harmed.
Further, we may not have the right to control the prosecution, maintenance and enforcement of all of our licensed and sublicensed intellectual property, and even when we do have such rights, we may require the cooperation of our licensors and upstream licensors, which may not be forthcoming. Our business could be adversely affected if we or our licensors are unable to prosecute, maintain and enforce our licensed and sublicensed intellectual property effectively.
Our licensors may have relied on third-party consultants or collaborators or on funds from third parties such that our licensors are not the sole and exclusive owners of the patents and patent applications we in-license. If other third parties have ownership rights to patents or patent applications we in-license, they may be able to license such patents to our competitors, and our competitors could market competing products and technology. This could have a material adverse effect on our competitive position, business, financial conditions, results of operations and prospects.
Our business, financial condition, results of operations and prospects could be materially and adversely affected if we are unable to enter into necessary agreements on acceptable terms or at all, if any necessary licenses are subsequently terminated, if the licensors fail to abide by the terms of the licenses or fail to prevent infringement by third parties, or if the acquired or licensed patents or other rights are found to be invalid or unenforceable. Moreover, we could encounter delays in the introduction of services while we attempt to develop alternatives. Defense of any lawsuit or failure to obtain any of these licenses on favorable terms could prevent us from commercializing products, which could harm our business, financial condition, results of operations and prospects.
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We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting and defending patents on our platform, software, systems, workflows and processes in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States and Canada can be less extensive than those in the United States and Canada. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States and Canada, and even where such protection is nominally available, judicial and governmental enforcement of such intellectual property rights may be lacking. Whether filed in the United States or abroad, our patent applications may be challenged or may fail to result in issued patents. Further, we may encounter difficulties in protecting and defending such rights in foreign jurisdictions. Consequently, we may not be able to prevent third parties from practicing our inventions in some or all countries outside the United States and Canada, or from selling or importing products made using our inventions in and into the United States, Canada or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own platform or technologies and may also sell their products or services to territories where we have patent protection, but enforcement is not as strong as that in the United States and Canada. These platforms and technologies may compete with ours. Our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. In addition, certain countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to other parties. Furthermore, many countries limit the enforceability of patents against other parties, including government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of any patents. In many foreign countries, patent applications and/or issued patents, or parts thereof, must be translated into the native language. If our patent applications or issued patents are translated incorrectly, they may not adequately cover our technologies; in some countries, it may not be possible to rectify an incorrect translation, which may result in patent protection that does not adequately cover our technologies in those countries.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of many other countries do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biotechnology, which could make it difficult for us to stop the misappropriation or other violations of our intellectual property rights including infringement of our patents in such countries. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, or that are initiated against us, and the damages or other remedies awarded, if any, may not be commercially meaningful. In addition, changes in the law and legal decisions by courts in the United States and Canada and foreign countries may affect our ability to obtain adequate protection for our technologies and the enforcement of intellectual property. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage. For example:
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others may be able to make products that are similar to any product candidates we may develop or utilize similar technology but that are not covered by the claims of the patents that we license or may own in the future; |
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we, or our current or future collaborators, might not have been the first to make the inventions covered by the issued patents and pending patent applications that we license or may own in the future; |
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we, or our current or future collaborators, might not have been the first to file patent applications covering certain of our or their inventions; |
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others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our owned or licensed intellectual property rights; |
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it is possible that our pending patent applications or those that we may own in the future will not lead to issued patents; |
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issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors; |
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our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; |
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we cannot ensure that any patents issued to us or our licensors will provide a basis for an exclusive market for our commercially viable product candidates or will provide us with any competitive advantages; |
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we cannot ensure that our commercial activities or product candidates will not infringe upon the patents of others; |
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we cannot ensure that we will be able to further commercialize our technology on a substantial scale, if approved, before the relevant patents that we own or license expire; |
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we cannot ensure that any of our patents, or any of our pending patent applications, if issued, or those of our licensors, will include claims having a scope sufficient to protect our technology; |
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we may not develop additional proprietary technologies that are patentable; |
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the patents or intellectual property rights of others may harm our business; and |
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we may choose not to file a patent application in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property. |
Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of operations and prospects.
If we are unable to protect the confidentiality of our information and our trade secrets, the value of our technology could be materially adversely affected and our business could be harmed.
We rely heavily on trade secrets and confidentiality agreements to protect our unpatented know-how, technology and other proprietary information, including parts of our technology platform, and to maintain our competitive position. However, trade secrets and know-how can be difficult to protect. In addition to pursuing patents on our technology, we take steps to protect our intellectual property and proprietary technology by entering into agreements, including confidentiality agreements, non-disclosure agreements and intellectual property assignment agreements, with our employees, consultants, academic institutions, corporate partners and, when needed, our advisers. However, we cannot be certain that such agreements have been entered into with all relevant parties, and we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. For example, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Such agreements may not be enforceable or may not provide meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements, and we may not be able to prevent such unauthorized disclosure, which could adversely impact our ability to establish or maintain a competitive advantage in the market. If we are required to assert our rights against such party, it could result in significant cost and distraction.
Monitoring unauthorized disclosure and detection of unauthorized disclosure is difficult, and we do not know whether the steps we have taken to prevent such disclosure are, or will be, adequate. If we were to enforce
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a claim that a third party had illegally obtained and was using our trade secrets, it would be expensive and time-consuming, and the outcome would be unpredictable. In addition, some courts both within and outside the United States and Canada may be less willing, or unwilling, to protect trade secrets.
We also seek to preserve the integrity and confidentiality of our confidential proprietary information by maintaining physical security of our premises and physical and electronic security of our information technology systems, but it is possible that these security measures could be breached. If any of our confidential proprietary information were to be lawfully obtained or independently developed by a competitor or other third party, absent patent protection, we would have no right to prevent such competitor from using that technology or information to compete with us, which could harm our competitive position. If any of our trade secrets were to be disclosed to or independently discovered by a competitor or other third party, it could harm our business, financial condition, results of operations and prospects.
We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
We have employed and expect to employ individuals who were previously employed at universities or other companies. Although we try to ensure that our employees, consultants, advisors and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that our employees, advisors, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information of their former employers or other third parties, or to claims that we have improperly used or obtained such trade secrets. Litigation may be necessary to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights and face increased competition to our business. A loss of key research personnel work product could hamper or prevent our ability to commercialize potential technologies and solutions, which could harm our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.
In addition, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. The assignment of intellectual property rights may not be self-executing, or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property. Any of the foregoing could harm our business, financial condition, results of operations and prospects.
We may not be able to protect and enforce our trademarks and trade names, or build name recognition in our markets of interest thereby harming our competitive position.
The registered or unregistered trademarks or trade names that we own may be challenged, infringed, circumvented, declared generic, lapsed or determined to be infringing on or dilutive of other marks. We may not be able to protect our rights in these trademarks and trade names, which we need in order to build name recognition. In addition, third parties may in the future file for registration of trademarks similar or identical to our trademarks, thereby impeding our ability to build brand identity and possibly leading to market confusion. If they succeed in registering or developing common law rights in such trademarks, and if we are not successful in challenging such rights, we may not be able to use these trademarks to develop brand recognition of our technologies or platform. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. Further, we have and may in the future enter into agreements with owners of such third party trade names or trademarks to avoid potential trademark litigation which may limit our ability to use our trade names or trademarks in certain fields of business.
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We have not yet registered certain of our trademarks in all of our potential markets, although we have registered AbCellera in the United States and Canada as well as certain of our trademarks outside of the United States and Canada. If we apply to register these trademarks in other countries, and/or other trademarks in the United States, Canada and other countries, our applications may not be allowed for registration in a timely fashion or at all; and further, our registered trademarks may not be maintained or enforced. In addition, opposition or cancellation proceedings may in the future be filed against our trademark applications and registrations, and our trademarks may not survive such proceedings. In addition, third parties may file first for our trademarks in certain countries. If they succeed in registering such trademarks, and if we are not successful in challenging such third party rights, we may not be able to use these trademarks to market our technologies in those countries. If we do not secure registrations for our trademarks, we may encounter more difficulty in enforcing them against third parties than we otherwise would. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively, which could harm our business, financial condition, results of operations and prospects. And, over the long-term, if we are unable to establish name recognition based on our trademarks, then our marketing abilities may be materially adversely impacted.
We may be subject to claims challenging the inventorship of our patents and other intellectual property.
We or our licensors may be subject to claims that former employees, partners or other third parties have an interest in our owned or in-licensed patents, trade secrets or other intellectual property as an inventor or co-inventor. Litigation may be necessary to defend against these and other claims challenging inventorship of our or our licensors ownership of our owned or in-licensed patents, trade secrets or other intellectual property. If we or our licensors fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to our systems, including our software, workflows, consumables and reagent kits. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees, and certain partners or partners may defer engaging with us until the particular dispute is resolved. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.
We are and in the future may be involved in litigation and other proceedings related to intellectual property, which could be time-intensive and costly and may adversely affect our business, financial condition, results of operations and prospects.
In recent years, there has been significant litigation in the United States and other jurisdictions involving intellectual property rights. We are and may in the future be involved with litigation or actions at the USPTO or the patent offices of other jurisdictions with various third parties that claim we or our partners using our solutions have misappropriated, misused or infringed other parties intellectual property rights. We expect that the number of such claims may increase as our business and the level of competition in our industry segments, grow. Any infringement claim, regardless of its validity, could harm our business by, among other things, resulting in time-consuming and costly litigation, diverting managements time and attention from the development of the business, requiring the payment of monetary damages (including treble damages, attorneys fees, costs and expenses) or royalty payments, or result in potential or existing partners delaying purchases of our data packages or entering into engagements with us pending resolution of the dispute.
As we move into new markets and applications for our platform, incumbent participants in such markets may assert their patents and other proprietary rights against us as a means of slowing our entry into such markets or as a means to extract substantial license and royalty payments from us. Our competitors and others may now and, in the future, have significantly larger and more mature patent portfolios than we currently have. In addition, future litigation may involve patent holding companies or other adverse patent owners who have no relevant product or service revenue and against whom our own patents may provide little or no deterrence or protection. Therefore, our commercial success may depend in part upon our ability to develop, manufacture, market and sell
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any products and services that we may develop and use without infringing, misappropriating or otherwise violating the intellectual property and proprietary rights of third parties, or the invalidity of such patents or proprietary rights.
Our research, development and commercialization activities may in the future be subject to claims that we infringe or otherwise violate patents or other intellectual property rights owned or controlled by third parties. There is a substantial amount of litigation and other patent challenges, both within and outside the United States and Canada, involving patent and other intellectual property rights in the biotechnology industry, including patent infringement lawsuits, interferences, oppositions and inter partes review proceedings before the USPTO, and corresponding foreign patent offices. Third parties may initiate legal proceedings against us or our licensor, and we or our licensor may initiate legal proceedings against third parties. The outcome of such proceedings would be uncertain and could have a material adverse effect on the success of our business. Numerous U.S., Canadian and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing our platform and technology. As the biotechnology industry expands and more patents are issued, the risk increases that our technologies may be subject to claims of infringement of the patent rights of third parties.
Additionally, the risks of being involved in such litigation and proceedings may increase if our technology nears commercialization and if we gain greater visibility associated with being a public company. Numerous significant intellectual property issues have been litigated, are being litigated and will likely continue to be litigated, between existing and new participants in our existing and targeted markets, and one or more third parties may assert that our technologies infringe their intellectual property rights as part of a business strategy to impede our successful entry into or growth in those markets.
The legal threshold for initiating litigation or contested proceedings is low, so that even lawsuits or proceedings with a low probability of success might be initiated and require significant resources to defend. An unfavorable outcome in any such proceeding could require us to cease using the related technology or developing or commercializing our technology, or to attempt to license rights to it from the prevailing party, which may not be available on commercially reasonable terms, or at all.
Third parties may assert that we are employing their proprietary technology without authorization. We are also aware of issued U.S. patents and patent applications with subject matter related to our platform, systems, workflows and processes, and there may be other related third party patents or patent applications of which we are not aware.
It is possible that we are or may become aware of patents or pending patent applications that we think do not relate to our technology or that we believe are invalid or unenforceable, but that may nevertheless be interpreted to encompass our technology and to be valid and enforceable. Thus, we do not know with certainty that our technology, or our development and commercialization thereof, do not and will not infringe, misappropriate or otherwise violate any third partys intellectual property.
In addition, we may receive in the future, correspondence from third parties referring to the relevance of such third parties intellectual property to our technology, our workflows or our advanced automated systems, and we are currently engaged in litigation with one such third party, Berkeley Lights. Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our current or future programs or technologies may infringe. In addition, similar to what other companies in our industry have experienced, we expect our competitors and others may have patents or may in the future obtain patents and claim that making, having made, using, selling, offering to sell or importing our platform, or the systems, workflows, consumables and reagent kits that comprise our platform, infringes these patents. As to pending third party applications, we cannot predict with any certainty which claims will issue, if any, or the scope of such issued claims. Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our platforms, including our
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systems, workflows, consumables and reagent kits. Under the applicable law of certain jurisdictions, the scope of a patent claim is determined by an interpretation of the law, the written disclosure in a patent and the patents prosecution history. Our interpretation of the relevance or the scope of a patent or a pending application may be incorrect, which may negatively impact our ability to market our technologies. We may incorrectly determine that our technologies are not covered by a third party patent or may incorrectly predict whether a third partys pending application will issue with claims of relevant scope. Our determination of the expiration date of any patent in the United States or abroad that we consider relevant may be incorrect, which may negatively impact our ability to develop and market our technologies.
There can be no assurance that we will prevail in any suit initiated against us by third parties, successfully settle or otherwise resolve patent infringement claims. A court of competent jurisdiction could hold that third party patents are valid, enforceable and infringed, which could materially and adversely affect our ability and the ability of our licensor to commercialize any technology we may develop and any other technologies covered by the asserted third-party patents. Third parties making claims against us may be able to obtain injunctive or other relief, which could block our ability to develop, commercialize and sell data packages, and could result in the award of substantial damages against us, including treble damages, attorneys fees, costs and expenses if we are found to have willfully infringed. In the event of a successful claim of infringement against us, we may be required to pay damages and ongoing royalties, and obtain one or more licenses from third parties, or be prohibited from selling certain products or services. We may not be able to obtain these licenses on acceptable or commercially reasonable terms, if at all, or these licenses may be non-exclusive, which could result in our competitors and other third parties gaining access to the same intellectual property. In addition, we could encounter delays and incur significant costs in service introductions while we attempt to develop alternative processes, technologies or services, or redesign our technologies or services, to avoid infringing third party patents or proprietary rights. Defense of any lawsuit or failure to obtain any of these licenses or to develop a workaround could prevent us from commercializing products or services, and the prohibition of sale or the threat of the prohibition of sale of any of our data packages could materially affect our business and our ability to gain market acceptance for our technologies. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation or administrative proceedings, there is a risk that some of our confidential information could be compromised by disclosure.
In addition, our agreements with some of our partners, suppliers or other entities with whom we do business require us to defend or indemnify these parties to the extent they become involved in infringement claims, including the types of claims described above. We could also voluntarily agree to defend or indemnify third parties in instances where we are not obligated to do so if we determine it would be important to our business relationships. If we are required or agree to defend or indemnify third parties in connection with any infringement claims, we could incur significant costs and expenses that could adversely affect our business, financial condition, results of operations and prospects.
Any uncertainties resulting from the initiation and continuation of any litigation or administrative proceeding could have a material adverse effect on our ability to raise additional funds or otherwise have a material adverse effect on our business, results of operations, financial condition and prospects.
The outcome of our litigation with Berkeley Lights may adversely affect our business, financial condition, results of operations and prospects.
In July 2020, we filed a complaint against Berkeley Lights, Inc., or Berkeley, in the United States District Court for the District of Delaware, alleging that Berkeley infringed and continues to infringe, directly and indirectly, the following patents exclusively licensed by the Company, including U.S. Patent Nos. 10,107,812; 10,274,494; 10,466,241; 10,578,618; 10,697,962; 10,087,408; 10,421,936 and 10,704,018, by making, using, offering for sale, selling and/or importing Berkeleys Beacon Optofluidic System. In August 2020, we filed an additional related complaint against Berkeley in the United States District Court for the District of Delaware, alleging that Berkeley infringed and continues to infringe, directly and indirectly, U.S. Patent Nos. 10,718,768;
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10,738,270; 10,746,737 and 10,753,933. In September 2020, we filed another complaint against Berkeley in the United States District Court for the District of Delaware, alleging that Berkeley infringed and continues to infringe, directly and indirectly, U.S. Patent Nos. 10,775,376; 10,775,377 and 10,775,378. On December 3, 2020, the judge assigned to these three lawsuits ordered that they be transferred to the U.S. District Court for the Northern District of California. In these lawsuits, we are seeking, among other things, a judgment of infringement, a permanent injunction and damages (including lost profits, a reasonable royalty, reasonable costs and attorneys fees and treble damages for willful infringement). These lawsuits remain pending.
In August 2020, Berkeley filed a complaint in the Northern District of California against us and our wholly-owned subsidiary Lineage Inc. The complaint includes two counts of unfair competition and one count of non-infringement of a U.S. patent: Patent No. 10,058,839 (the 839 patent). Berkeley is seeking, among other things, damages and a declaratory judgment of non-infringement of the 839 patent. The lawsuit remains pending. We believe the action filed by Berkeley is without merit and have moved to dismiss the above action for lack of jurisdiction and failure to state a claim upon which relief can be granted pursuant to Federal Rules of Civil Procedure 12(b) 1, 2, and 6.
In the event that Berkeley Lights were to prevail in the litigation against us, as a result of which Berkeley could continue to sell its products, it could reduce our competitive advantage and differentiation in the market place, impairing our ability to bring in new business. Furthermore, Berkeley may seek to invalidate the asserted patents during the litigation. If Berkeley succeeds in invalidating the asserted patents, the strength of our intellectual property portfolio could be adversely affected and our ability to protect our technology, business and reputation or to generate licensing revenue from our intellectual property would be adversely impacted.
Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Litigation or other legal proceedings relating to intellectual property claims, even if resolved in our favor, may cause us to incur substantial costs and divert the attention of our management and technical personnel from their normal responsibilities in defending against any of these claims. Parties making claims against us may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. Such litigation or proceedings could substantially increase our operating costs and reduce the resources available for development activities or any future sales, marketing, or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of intellectual property proceedings could harm our ability to compete in the marketplace. In addition, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. Any of the foregoing could harm our business, financial condition, results of operations and prospects.
We may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming and unsuccessful and have a material adverse effect on the success of our business.
Third parties, including our competitors, could be infringing, misappropriating or otherwise violating our intellectual property rights. Monitoring unauthorized use of our intellectual property is difficult and costly. From time to time, we seek to analyze our competitors products and services, and may in the future seek to enforce our rights against potential infringement, misappropriation or violation of our intellectual property. However, the steps we have taken to protect our proprietary rights may not be adequate to enforce our rights as against such infringement, misappropriation or violation of our intellectual property. We may not be able to detect unauthorized use of, or take appropriate steps to enforce, our intellectual property rights. Any inability to meaningfully enforce our intellectual property rights could harm our ability to compete and reduce demand for our data packages.
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Litigation may be necessary for us to enforce our patent and proprietary rights or to determine the scope, coverage and validity of the proprietary rights of others. We are currently engaged in a lawsuit with Berkeley Lights based upon our allegations of its infringement of our intellectual property rights and we may become involved in additional lawsuits in the future. If we do not prevail in such legal proceedings, we may be required to pay damages, we may lose significant intellectual property protection for our technologies, such that competitors could copy our technologies and we could be forced to cease selling certain of our data packages. Any litigation that may be necessary in the future could result in substantial costs and diversion of resources and could have a material adverse effect on our business, financial condition, results of operations and prospects. In any lawsuit we bring to enforce our intellectual property rights, a court may refuse to stop the other party from using the technology at issue on grounds that our intellectual property rights do not cover the technology in question. Further, in such proceedings, the defendant could counterclaim that our intellectual property is invalid or unenforceable and the court may agree, in which case we could lose valuable intellectual property rights. The outcome in any such lawsuits are unpredictable. Even if we do prevail in any future litigation related to intellectual property rights, the cost and time requirements of the litigation could negatively impact our financial results.
Obtaining and maintaining our patent protection depends on compliance with various required procedures, document submissions, fee payments and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on issued United States and most foreign patents and/or applications will be due to be paid to the USPTO and various governmental patent agencies outside of the United States at several stages over the lifetime of the patents and/or applications in order to maintain such patents and patent applications. We have systems in place to remind us to pay these fees, and we engage an outside service and rely on our outside counsel to pay these fees due to non-U.S. patent agencies. The USPTO and various non-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. We employ reputable law firms and other professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In such an event, if we or our licensors fail to maintain the patents and patent applications covering our products and technology our competitors may be able to enter the market with similar or identical products or technology without infringing our patents and this circumstance would have a material adverse effect on our business.
Patent terms may be inadequate to protect our competitive position on our technology for an adequate amount of time.
Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our platform or technology are obtained, once the patent life has expired, we may be open to competition from others. If our platform or technologies require extended development and/or regulatory review, patents protecting our platform or technologies might expire before or shortly after we are able to successfully commercialize them. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing processes or technologies similar or identical to ours.
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Our use of open source software could compromise our ability to offer our data packages and subject us to possible litigation.
We use open source software in connection with our technology and computational engine of our platform, Celium. Companies that incorporate open source software into their technologies and services have, from time to time, faced claims challenging their use of open source software and compliance with open source license terms. As a result, we could be subject to lawsuits by parties claiming ownership of what we believe to be open source software or claiming noncompliance with open source licensing terms. Some open source software licenses require users who distribute software containing open source software to publicly disclose all or part of the source code to the licensees software that incorporates, links or uses such open source software, and make available to third parties for no cost, any derivative works of the open source code created by the licensee, which could include the licensees own valuable proprietary code. While we monitor our use of open source software and try to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur, or could be claimed to have occurred, in part because open source license terms are often ambiguous. There is little legal precedent in this area and any actual or claimed requirement to disclose our proprietary source code or pay damages for breach of contract could harm our business and could help third parties, including our competitors, develop technologies that are similar to or better than ours. Any of the foregoing could harm our business, financial condition, results of operations and prospects.
Some intellectual property that we have in-licensed may have been discovered through government funded programs and thus may be subject to federal regulations such as march-in rights, certain reporting requirements and a preference for U.S.-based companies. Compliance with such regulations may limit our exclusive rights, and limit our ability to contract with non-U.S. manufacturers.
Some of our intellectual property rights may have been generated through the use of U.S. government funding and are therefore subject to certain federal regulations. As a result, the U.S. government may have certain rights to intellectual property embodied in our technology pursuant to the Bayh-Dole Act of 1980, or Bayh-Dole Act, and implementing regulations. These U.S. government rights in certain inventions developed under a government-funded program include a non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental purpose. In addition, the U.S. government has the right to require us or our licensors to grant exclusive, partially exclusive, or non-exclusive licenses to any of these inventions to a third party if it determines that: (i) adequate steps have not been taken to commercialize the invention; (ii) government action is necessary to meet public health or safety needs; or (iii) government action is necessary to meet requirements for public use under federal regulations (also referred to as march-in rights). The U.S. government also has the right to take title to these inventions if we, or the applicable licensor, fail to disclose the invention to the government and fail to file an application to register the intellectual property within specified time limits. These time limits have recently been changed by regulation, and may change in the future. Intellectual property generated under a government funded program is also subject to certain reporting requirements, compliance with which may require us or the applicable licensor to expend substantial resources. To date, only our work in helping develop LY-CoV555 may be subject to government funding or march-in rights. In addition, the U.S. government requires that any products embodying the subject invention or produced through the use of the subject invention be manufactured substantially in the United States. The manufacturing preference requirement can be waived if the owner of the intellectual property can show that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible. This preference for U.S. manufacturers may limit our ability to contract with non-U.S. product manufacturers for products covered by such intellectual property. To the extent any of our future intellectual property is generated through the use of U.S. government funding, the provisions of the Bayh-Dole Act may similarly apply.
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Risks Related to This Offering and Ownership of Our Common Shares
If we fail to establish and maintain proper and effective internal control over financial reporting, our operating results and our ability to operate our business could be harmed.
Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. In connection with this offering, we intend to begin the process of documenting, reviewing and improving our internal controls and procedures for compliance with Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, and applicable Canadian laws, which will require annual management assessment of the effectiveness of our internal control over financial reporting. We have begun recruiting additional finance and accounting personnel with certain skill sets that we will need as a public company.
Implementing any appropriate changes to our internal controls may distract our officers and employees, entail substantial costs to modify our existing processes, and take significant time to complete. These changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and harm our business. In our efforts to maintain proper and effective internal control over financial reporting, we may discover significant deficiencies or material weaknesses in our internal control over financial reporting, which we may not successfully remediate on a timely basis or at all. Any failure to remediate any significant deficiencies or material weaknesses identified by us or to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations or result in material misstatements in our financial statements. If we identify one or more material weaknesses in the future, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements, which may harm the market price of our shares.
In connection with the audit of our financial statements as of and for the years ended December 31, 2019 and 2018, a material weakness in our internal control over financial reporting was identified and we may identify additional material weaknesses in the future.
In connection with the preparation and audits of our financial statements as of and for the years ended December 31, 2019 and 2018, a material weakness (as defined under the Exchange Act and by the auditing standards of the U.S. Public Company Accounting Oversight Board, or PCAOB), was identified in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual financial statements will not be prevented or detected on a timely basis.
Specifically, there was a material adjustment in our financial statements required due to an overstatement of lease liability upon adoption of ASU 2016-02, Leases (Topic 842), as well as certain other adjustments. In the aggregate, such adjustments amounted to a material weakness. The material weakness resulted from a lack of resources and experience within our finance function with respect to our transition to U.S. GAAP, and our change in measurement currency from Canadian dollars to U.S. dollars.
Neither our management nor our independent registered public accounting firm has performed an evaluation of our internal control over financial reporting in accordance with the provision of the Sarbanes-Oxley Act because no such evaluation has been required. Had we or our independent registered public accounting firm performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act, additional material weaknesses may have been identified.
We have begun taking measures, and plan to continue to take measures, to remediate this material weakness. These measures include hiring or engaging additional accounting personnel with familiarity with reporting under
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U.S. GAAP, and implementing and adopting additional controls and procedures. However, the implementation of these measures may not fully address this material weakness in our internal control over financial reporting, and, if so, we would not be able to conclude that they have been fully remedied. If we are unable to successfully remediate our existing or any future material weaknesses in our internal control over financial reporting, or if we identify any additional material weaknesses, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting, and our share price may decline as a result. We also could become subject to investigations by Nasdaq, the SEC, or other regulatory authorities.
If you purchase our common shares in this offering, you will incur immediate and substantial dilution in the book value of your shares.
The initial public offering price is expected to be substantially higher than the net tangible book value per common share. Investors purchasing common shares in this offering will pay a price per share that substantially exceeds our net tangible book value per share after this offering. Based on the assumed initial public offering price of $15.50 per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, investors purchasing common shares in this offering will incur immediate dilution of $13.63 per share as of September 30, 2020, representing the difference between our pro forma as adjusted net tangible book value per share, after giving effect to this offering, and the initial public offering price. Further, investors purchasing common shares in this offering will contribute approximately 66.63% of the total amount invested by shareholders since our inception but will own only approximately 8.65% of the total number of common shares outstanding after this offering.
This dilution is due to our investors who purchased shares prior to this offering having paid substantially less when they purchased their shares than the price offered to the public in this offering. To the extent that outstanding stock options or warrants are exercised, there will be further dilution to new investors. As a result of the dilution to investors purchasing common shares in this offering, investors may receive significantly less than the purchase price paid in this offering, if anything, in the event of our liquidation. For a further description of the dilution that you will experience immediately after this offering, see the section of this prospectus titled Dilution.
Future sales and issuances of our common shares or rights to purchase common shares, including pursuant to our Employee Share Option and Incentive Plan, or EIP, could result in additional dilution of the percentage ownership of our shareholders and could cause our share price to fall.
We expect that significant additional capital will be needed in the future to continue our planned operations, including expanded research and development activities, and costs associated with operating as a public company. To raise capital, we may sell common shares, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common shares, convertible securities or other equity securities, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing shareholders, and new investors could gain rights, preferences, and privileges senior to the holders of our common shares, including common shares sold in this offering.
Pursuant to our new incentive plan, which will become effective upon the effectiveness of the registration statement of which this prospectus forms a part, our management is authorized to grant stock options to our employees, directors and consultants.
Initially, the aggregate number of our common shares that may be issued pursuant to share awards under the EIP will be 21,280,000 shares. The number of common shares reserved for issuance under the EIP shall be
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cumulatively increased on January 1, 2022 and each January 1 thereafter by 5% of the total number of common shares outstanding on December 31 of the preceding calendar year or a lesser number of shares determined by our board of directors. Unless our board of directors elects not to increase the number of shares available for future grant each year, our shareholders may experience additional dilution, which could cause our share price to fall.
Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies.
We may seek additional capital through a combination of public and private equity offerings, debt financings, strategic partnerships and alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a shareholder. The incurrence of indebtedness would result in increased fixed payment obligations and could involve certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or grant licenses on terms unfavorable to us.
We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.
Our management will have broad discretion in the application of the net proceeds from this offering, including for any of the purposes described in the section titled Use of Proceeds, and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. Our management might not apply our net proceeds in ways that ultimately increase or maintain the value of your investment.
We do not intend to pay dividends on our common shares, so any returns will be limited to the value of our common shares.
We currently anticipate that we will retain future earnings for the development, operation, expansion and continued investment into our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. In addition, we may enter into agreements that prohibit us from paying cash dividends without prior written consent from our contracting parties, or which other terms prohibiting or limiting the amount of dividends that may be declared or paid on our common shares. Any return to shareholders will therefore be limited to the appreciation of their common shares, which may never occur.
Our principal shareholders and management own a significant percentage of our shares and will be able to exert significant influence over matters subject to shareholder approval.
Based on the number of shares outstanding on a fully diluted basis as of October 31, 2020, our executive officers, directors, and 5% shareholders will beneficially own approximately 57% of our common shares. Non-executive employees will beneficially own an additional 20% of our common shares on a fully diluted basis. After the sale and issuance of 23,000,000 shares in this offering, our executive officers, directors, and 5% shareholders will beneficially own approximately 53% of our common shares (including any shares purchased by our executive officers, directors and 5% shareholders in this offering). Therefore, after this offering, these shareholders will have the ability to influence us through this ownership position. These shareholders may be able to determine all matters requiring shareholder approval. For example, these shareholders may be able to control elections of directors, amendments of our organizational documents or approval of any merger, sale of assets or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common shares that you may feel are in your best interest as one of our shareholders.
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Sales of a substantial number of our common shares by our existing shareholders in the public market could cause our share price to fall.
If our existing shareholders sell, or indicate an intention to sell, substantial amounts of our common shares in the public market after the lock-up and other legal restrictions on resale discussed in this prospectus lapse, the trading price of our common shares could decline. Based on the number of common shares outstanding as of September 30, 2020, and after giving effect to the sale of 23,000,000 common shares in this offering, upon the closing of this offering, we will have outstanding a total of 265,952,096 common shares. Of these shares, only the common shares sold in this offering by us, plus any shares sold upon exercise of the underwriters option to purchase additional shares (excluding any shares sold to our directors and officers in the directed share program), will be freely tradable without restriction in the public market immediately following this offering, unless purchased by our affiliates. In connection with this offering, our officers, directors and substantially all of our securityholders have agreed to be subject to a contractual lock-up with the underwriters, which will expire 180 days after the date of this prospectus. Credit Suisse Securities (USA) LLC, Stifel, Nicolaus & Company, Incorporated, Berenberg Capital Markets LLC, SVB Leerink LLC and BMO Capital Markets Corp., however, may, in their sole discretion, permit our officers, directors and other shareholders who are subject to these lock-up agreements to sell shares prior to the expiration of the lock-up agreements.
Common shares that are either subject to outstanding options reserved for future issuance under our ESIP, which will become effective immediately prior to the effectiveness of the registration statement of which this prospectus forms a part, will become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules, the lock-up agreements and Rule 144 and Rule 701 under the Securities Act of 1933, as amended, or the Securities Act. Additionally, common shares that are issuable upon the exercise of share options will become eligible for sale in the public market to the extent permitted by the lock-up agreements and Rule 144 and Rule 701 under the Securities Act. If these additional common shares are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common shares could decline.
After this offering, the holders of 86,278,312 common shares will be entitled to rights with respect to the registration of their shares under the Securities Act, subject to the 180-day lock-up agreements described above. See Description of Share Capital. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares held by affiliates, as defined in Rule 144 under the Securities Act. Any sales of securities by these shareholders could have a material adverse effect on the trading price of our common shares.
We are governed by the corporate laws of Canada which in some cases have a different effect on shareholders than the corporate laws of the United States.
We are governed by the Business Corporations Act (British Columbia), or BCBCA, and other relevant laws, which may affect the rights of shareholders differently than those of a company governed by the laws of a U.S. jurisdiction, and may, together with our charter documents, have the effect of delaying, deferring or discouraging another party from acquiring control of our company by means of a tender offer, a proxy contest or otherwise, or may affect the price an acquiring party would be willing to offer in such an instance. The material differences between the BCBCA and Delaware General Corporation Law, or DGCL, that may have the greatest such effect include, but are not limited to, the following: (i) for certain corporate transactions (such as mergers and amalgamations or amendments to our articles) the BCBCA generally requires the voting threshold to be a special resolution approved by 66 2/3% of shareholders, or as set out in the articles, as applicable, whereas DGCL generally only requires a majority vote; and (ii) under the BCBCA a holder of 5% or more of our common shares can requisition a special meeting of shareholders, whereas such right does not exist under the DGCL. See Comparison of British Columbia Law and Delaware Law elsewhere in this prospectus. We cannot predict whether investors will find our company and our common shares less attractive because we are governed by foreign laws.
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Our articles to be in effect prior to the completion of this offering and certain Canadian legislation contain provisions that may have the effect of delaying, preventing or making undesirable an acquisition of all or a significant portion of our shares or assets or preventing a change in control.
Certain provisions of our articles to be in effect immediately prior to the completion of this offering and certain provisions under the BCBCA, together or separately, could discourage, delay or prevent a merger, acquisition or other change in control of us that shareholders may consider favorable, including transactions in which they might otherwise receive a premium for their common shares. These provisions include the establishment of a staggered board of directors, which divides the board into three groups, with directors in each group serving a three-year term. The existence of a staggered board can make it more difficult for shareholders to replace or remove incumbent members of our board of directors. As such, these provisions could also limit the price that investors might be willing to pay in the future for our common shares, thereby depressing the market price of our common shares. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our shareholders to replace or remove our current management by making it more difficult for shareholders to replace members of our board of directors. Among other things, these provisions include the following:
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shareholders cannot amend our articles unless such amendment is approved by shareholders holding at least 66 2/3% of the shares entitled to vote on such approval; |
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our board of directors may, without shareholder approval, issue preferred shares in one or more series having any terms, conditions, rights, preferences and privileges as the board of directors may determine; and |
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shareholders must give advance notice to nominate directors or to submit proposals for consideration at shareholders meetings. |
A non-Canadian must file an application for review with the Minister responsible for the Investment Canada Act and obtain approval of the Minister prior to acquiring control of a Canadian business within the meaning of the Investment Canada Act, where prescribed financial thresholds are exceeded. A reviewable acquisition may not proceed unless the Minister is satisfied that the investment is likely to be of net benefit to Canada. If the applicable financial thresholds were exceeded such that a net benefit to Canada review would be required, this could prevent or delay a change of control and may eliminate or limit strategic opportunities for shareholders to sell their common shares. Furthermore, limitations on the ability to acquire and hold our common shares may be imposed by the Competition Act (Canada). This legislation has a pre-merger notification regime and mandatory waiting period that applies to certain types of transactions that meet specified financial thresholds, and permits the Commissioner of Competition to review any acquisition or establishment, directly or indirectly, including through the acquisition of shares, of control over or of a significant interest in us.
Our articles to be in effect prior to the completion of this offering designate specific courts in Canada and the United States as the exclusive forum for certain litigation that may be initiated by our shareholders, which could limit our shareholders ability to obtain a favorable judicial forum for disputes with us.
Pursuant to our articles to be in effect prior to the completion of this offering, unless we consent in writing to the selection of an alternative forum, the courts of the Province of British Columbia and the appellate courts therefrom shall, to the fullest extent permitted by law, be the sole and exclusive forum for: (a) any derivative action or proceeding brought on our behalf; (b) any action or proceeding asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of ours to us; (c) any action or proceeding asserting a claim arising out of any provision of the BCBCA or our articles (as either may be amended from time to time); or (d) any action or proceeding asserting a claim or otherwise related to our affairs, or the Canadian Forum Provision. The Canadian Forum Provision will not apply to any causes of action arising under the Securities Act or the Exchange Act. In addition, our articles to be in effect prior to the completion of this offering further provide that unless we consent in writing to the selection of an alternative forum, the United States District Court for the District of Delaware shall be the sole and exclusive forum for resolving any complaint filed in the United
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States asserting a cause of action arising under the Securities Act, or the U.S. Federal Forum Provision. In addition, our articles to be in effect prior to the completion of this offering provide that any person or entity purchasing or otherwise acquiring any interest in our common shares is deemed to have notice of and consented to the Canadian Forum Provision and the U.S. Federal Forum Provision; provided, however, that shareholders cannot and will not be deemed to have waived our compliance with the U.S. federal securities laws and the rules and regulations thereunder.
The Canadian Forum Provision and the U.S. Federal Forum Provision in our articles to be in effect prior to the completion of this offering may impose additional litigation costs on shareholders in pursuing any such claims. Additionally, the forum selection clauses in our amended articles to be in effect prior to the completion of this offering may limit our shareholders ability to bring a claim in a judicial forum that they find favorable for disputes with us or our directors, officers or employees, which may discourage the filing of lawsuits against us and our directors, officers and employees, even though an action, if successful, might benefit our shareholders. In addition, while the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court are facially valid under Delaware law, there is uncertainty as to whether other courts, including courts in Canada and other courts within the U.S., will enforce our U.S. Federal Forum Provision. If the U.S. Federal Forum Provision is found to be unenforceable, we may incur additional costs associated with resolving such matters. The U.S. Federal Forum Provision may also impose additional litigation costs on shareholders who assert that the provision is not enforceable or invalid. The courts of the Province of British Columbia and the United States District Court for the District of Delaware may also reach different judgments or results than would other courts, including courts where a shareholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our shareholders.
Because we are a Canadian company, it may be difficult to serve legal process or enforce judgments against us.
We are incorporated and maintain operations in Canada. In addition, while certain of our directors and officers reside in the United States, many of them reside outside of the United States. Accordingly, service of process upon us may be difficult to obtain within the United States. Furthermore, because substantially all of our assets are located outside the United States, any judgment obtained in the United States against us, including one predicated on the civil liability provisions of the U.S. federal securities laws, may not be collectible within the United States. Therefore, it may not be possible to enforce those actions against us.
In addition, it may be difficult to assert U.S. securities law claims in original actions instituted in Canada. Canadian courts may refuse to hear a claim based on an alleged violation of U.S. securities laws against us or these persons on the grounds that Canada is not the most appropriate forum in which to bring such a claim. Even if a Canadian court agrees to hear a claim, it may determine that Canadian law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Canadian law. Furthermore, it may not be possible to subject foreign persons or entities to the jurisdiction of the courts in Canada. Similarly, to the extent that our assets are located in Canada, investors may have difficulty collecting from us any judgments obtained in the U.S. courts and predicated on the civil liability provisions of U.S. securities provisions.
If our estimates or judgments relating to our critical accounting policies prove to be incorrect or financial reporting standards or interpretations change, our results of operations could be adversely affected.
The preparation of financial statements in conformity with generally accepted accounting principles in the United States, or U.S. GAAP, requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the
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circumstances, as provided in Managements Discussion and Analysis of Financial Condition and Results of OperationsCritical Accounting Policies and Estimates. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Significant assumptions and estimates used in preparing our consolidated financial statements include the estimated variable consideration included in the transaction price in our contracts with customers, stock-based compensation, and valuation of our equity investments in early-stage biotechnology companies. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our common shares.
Additionally, we regularly monitor our compliance with applicable financial reporting standards and review new pronouncements and drafts thereof that are relevant to us. As a result of new standards, changes to existing standards and changes in their interpretation, we might be required to change our accounting policies, alter our operational policies, and implement new or enhance existing systems so that they reflect new or amended financial reporting standards, or we may be required to restate our published financial statements. Such changes to existing standards or changes in their interpretation may have an adverse effect on our reputation, business, financial position, and profit.
Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
Upon completion of this offering, we will become subject to certain reporting requirements of the Exchange Act. Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management, recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements or insufficient disclosures due to error or fraud may occur and not be detected.
If we or our non-U.S. subsidiary is a CFC there could be materially adverse U.S. federal income tax consequences to certain U.S. Holders of our common shares.
Each Ten Percent Shareholder (as defined below) in a non-U.S. corporation that is classified as a controlled foreign corporation, or a CFC, for U.S. federal income tax purposes generally is required to include in income for U.S. federal tax purposes such Ten Percent Shareholders pro rata share of the CFCs Subpart F income, global intangible low taxed income, and investment of earnings in U.S. property, even if the CFC has made no distributions to its shareholders. Subpart F income generally includes dividends, interest, rents, royalties, gains from the sale of securities and income from certain transactions with related parties. In addition, a Ten Percent Shareholder that realizes gain from the sale or exchange of shares in a CFC may be required to classify a portion of such gain as dividend income rather than capital gain. An individual that is a Ten Percent Shareholder with respect to a CFC generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a Ten Percent Shareholder that is a U.S. corporation. Failure to comply with these reporting obligations may subject a Ten Percent Shareholder to significant monetary penalties and may prevent the statute of limitations with respect to such Ten Percent Shareholders U.S. federal income tax return for the year for which reporting was due from starting.
A non-U.S. corporation generally will be classified as a CFC for U.S. federal income tax purposes if Ten Percent Shareholders own, directly or indirectly, more than 50% of either the total combined voting power of all classes of stock of such corporation entitled to vote or of the total value of the stock of such corporation. A Ten
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Percent Shareholder is a United States person (as defined by the Code) who owns or is considered to own 10% or more of the total combined voting power of all classes of stock entitled to vote or 10% or more of the total value of all classes of stock of such corporation.
We believe that we were not a CFC in the 2019 taxable year and that we will not be a CFC in the 2020 taxable year, however, it is possible that we may become a CFC in a subsequent taxable year. The determination of CFC status is complex and includes attribution rules, the application of which is not entirely certain. In addition, recent changes to the attribution rules relating to the determination of CFC status may make it difficult to determine our CFC status for any taxable year. In addition, those changes to the attribution rules may result in ownership of the stock of our non-U.S. subsidiary being attributed to our U.S. subsidiary, which could result in our non-U.S. subsidiary being treated as a CFC and certain U.S. Holders of our common shares being treated as Ten Percent Shareholders of such non-U.S. subsidiary CFC. In addition, it is possible that, following this offering, a shareholder treated as a U.S. person for U.S. federal income tax purposes will acquire, directly or indirectly, enough of our common shares to be treated as a Ten Percent Shareholder. We cannot provide any assurances that we will assist holders of our common shares in determining whether we or any of our non-U.S. subsidiaries are treated as a CFC or whether any holder of the common shares is treated as a Ten Percent Shareholder with respect to any such CFC or furnish to any Ten Percent Shareholders information that may be necessary to comply with the aforementioned reporting and tax paying obligations.
U.S. Holders should consult their tax advisors with respect to the potential adverse U.S. tax consequences of becoming a Ten Percent Shareholder in a CFC, including the possibility and consequences of becoming a Ten Percent Shareholder in our non-U.S. subsidiary that may be treated as a CFC due to the changes to the attribution rules. If we are classified as both a CFC and a PFIC (as defined below), we generally will not be treated as a PFIC with respect to those U.S. Holders that meet the definition of a Ten Percent Shareholder during the period in which we are a CFC.
Our U.S. shareholders may suffer adverse tax consequences if we are characterized as a PFIC.
The rules governing passive foreign investment companies, or PFICs, can have adverse effects on U.S. Holders (as defined under Material U.S. Federal Income Tax Considerations for U.S. Holders) for U.S. federal income tax purposes. Generally, if, for any taxable year, at least 75% of our gross income is passive income (such as interest income), or at least 50% of the gross value of our assets (determined on the basis of a weighted quarterly average) is attributable to assets that produce passive income or are held for the production of passive income (including cash), we would be characterized as a PFIC for U.S. federal income tax purposes. The determination of whether we are a PFIC, which must be made annually after the close of each taxable year, depends on the particular facts and circumstances and may also be affected by the application of the PFIC rules, which are subject to differing interpretations. Our status as a PFIC will depend on the composition of our income and the composition and value of our assets (including good will and other intangible assets), which will be affected by how, and how quickly, we spend any cash that is raised in this offering or in any other financing transaction. If we are treated as a non-publicly traded CFC for the year being tested for purposes of the PFIC rules, the value of our assets will be measured by the adjusted tax basis of our assets. If we were a publicly traded CFC or not a CFC for such year, the value of our assets generally may be determined by reference to the market value of our common shares, which may be volatile. Moreover, our ability to earn specific types of income that will be treated as non-passive for purposes of the PFIC rules is uncertain with respect to future years. We believe we were not classified as a PFIC during the taxable year ended December 31, 2019. Based on current business plans and financial expectations, we do not believe we will be a PFIC for our taxable year ending December 31, 2020. The determination of whether we are a PFIC is a fact-intensive determination made on an annual basis applying principles and methodologies that in some circumstances are unclear and subject to varying interpretation. Accordingly, we cannot provide any assurances regarding our PFIC status for any current or future taxable years.
If we are a PFIC, a U.S. Holder would be subject to adverse U.S. federal income tax consequences, such as ineligibility for certain preferred tax rates on capital gains or on actual or deemed dividends, interest charges on
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certain taxes treated as deferred, and additional reporting requirements under U.S. federal income tax laws and regulations. A U.S. Holder may in certain circumstances mitigate adverse tax consequences of the PFIC rules by filing an election to treat the PFIC as a qualified electing fund, or QEF, or, if shares of the PFIC are marketable stock for purposes of the PFIC rules, by making a mark-to-market election with respect to the shares of the PFIC. For more information, see the discussion below under Material U.S. Federal Income Tax Considerations for U.S. HoldersPFIC Rules. You are urged to consult your tax advisors regarding the potential consequences to you if we were or were to become a PFIC, including the availability, and advisability, of, and procedure for making, QEF elections.
Tax authorities may disagree with our positions and conclusions regarding certain tax positions, resulting in unanticipated costs, taxes or non-realization of expected benefits.
A tax authority may disagree with tax positions that we have taken, which could result in increased tax liabilities. For example, the U.S. Internal Revenue Service or another tax authority could challenge our allocation of income by tax jurisdiction and the amounts paid between our affiliated companies pursuant to our intercompany arrangements and transfer pricing policies, including amounts paid with respect to our intellectual property development. Similarly, a tax authority could assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable connection, often referred to as a permanent establishment under international tax treaties, and such an assertion, if successful, could increase our expected tax liability in one or more jurisdictions. A tax authority may take the position that material income tax liabilities, interest and penalties are payable by us, in which case, we expect that we might contest such assessment. Contesting such an assessment may be lengthy and costly and if we were unsuccessful in disputing the assessment, the implications could increase our anticipated effective tax rate, where applicable.
General Risk Factors
The COVID-19 pandemic could adversely impact our business.
In late 2019, a novel strain of coronavirus, SARS-CoV-2, which resulted in the evolving COVID-19 pandemic, surfaced in Wuhan, China. Since then, COVID-19 has spread across the globe and to multiple regions within the United States and Canada, including British Columbia, where our primary office and laboratory space is located. The COVID-19 pandemic is evolving, and to date has led to the implementation of various responses, including government imposed shelter-in-place orders, quarantines, travel restrictions and other public health safety measures, as well as reported adverse impacts on healthcare resources, facilities and providers, in Canada, across the United States and in other countries. In response to the spread of COVID-19, and in accordance with guidance from provincial and local government authorities, we have restricted access to our facilities mostly to personnel and third parties who must perform critical activities that must be completed on-site, limited the umber of such personnel that can be present at our facilities at any one time, and requested that most of our personnel work remotely in compliance with the local government issued guidance. In the event that government authorities were to further modify current restrictions, our employees conducting research and development or manufacturing activities may not be able to access our laboratory and manufacturing space, and our core activities may be significantly limited or curtailed, possibly for an extended period of time.
As a result of the COVID-19 pandemic, or similar pandemics and outbreaks, we have experienced and may continue to experience severe delays and disruptions, including, for example:
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interruption of or delays in receiving products and supplies from third parties; |
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limitations on our business operations by local, state, provincial and/or federal governments that could impact our ability to sell our data packages; |
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delays in negotiations with partners and potential partners; |
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increases in facilities costs to comply with physical distancing guidance; |
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business disruptions caused by workplace, laboratory and office closures and an increased reliance on employees working from home, travel limitations, cyber security and data accessibility, or communication or mass transit disruptions; and |
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limitations on employee resources that would otherwise be focused on the conduct of our activities, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people. |
Any of these factors could severely impact our research and development activities, business operations and sales, or delay necessary interactions with local regulators, manufacturing sites and other important contractors and partners. These and other factors arising from the COVID-19 pandemic could worsen in countries that are already afflicted with COVID-19, could continue to spread to additional countries, or could return to countries where the pandemic has been partially contained, and could further adversely impact our ability to conduct our business generally and have a material adverse impact on our operations and financial condition and results.
The extent to which the COVID-19 pandemic may negatively impact our operations and results of operations or those of our stakeholders will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions, additional or modified government actions, new information that will emerge concerning the severity and impact of the COVID-19 pandemic and actions to contain the outbreak or treat its impact, such as social distancing, quarantines, lock-downs or business closures.
Our employees, consultants and commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements, and insider trading.
We are exposed to the risk of fraud or other misconduct by our employees, consultants and commercial partners. Misconduct by these parties could include intentional failures to comply with the applicable laws and regulations in the United States, Canada and abroad, report financial information or data accurately or disclose unauthorized activities to us. These laws and regulations may restrict or prohibit a wide range of pricing, discounting and other business arrangements. Such misconduct could result in legal or regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter employee misconduct, and any other precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses, or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could result in the imposition of significant civil, criminal and administrative penalties, which could have a significant impact on our business. Whether or not we are successful in defending against such actions or investigations, we could incur substantial costs, including legal fees and divert the attention of management in defending ourselves against any of these claims or investigations.
We do not know whether an active, liquid and orderly trading market will develop for our common shares or what the market price of our common shares will be and, as a result, it may be difficult for you to sell your common shares.
Prior to this offering, there was no public trading market for our common shares. Although we have applied to list our common shares on The Nasdaq Global Market, an active trading market for our shares may never develop or be sustained following this offering. You may not be able to sell your shares quickly or at the market rice if trading in our common shares is not active. The initial public offering price for our common shares will be determined through negotiations with the underwriters, and the negotiated price may not be indicative of the market price of the common shares after the offering. As a result of these and other factors, you may be unable to resell your common shares at or above the initial public offering price. Further, an inactive market may also impair our ability to raise capital by selling our common shares and may impair our ability to enter into strategic partnerships or acquire companies or products by using our common shares as consideration.
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The market price of our common shares may be volatile, and you could lose all or part of your investment.
The trading price of our common shares following this offering is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control, including limited trading volume These factors include:
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actual or anticipated fluctuations in our financial condition and operating results, including fluctuations in our quarterly and annual results; |
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the introduction of new technologies or enhancements to existing technology by us or others in our industry; |
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our inability to establish additional collaborations; |
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departures of key scientific or management personnel; |
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announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors; |
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our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public; |
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publication of research reports about us or our industry, or antibody discovery in particular, or positive or negative recommendations or withdrawal of research coverage by securities analysts; |
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changes in the market valuations of similar companies; |
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overall performance of the equity markets; |
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sales of our common shares by us or our shareholders in the future; |
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trading volume of our common shares; |
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disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; |
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significant lawsuits, including patent or shareholder litigation; |
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the impact of the ongoing COVID-19 pandemic on our business; |
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general political and economic conditions; and |
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other events or factors, many of which are beyond our control. |
In addition, the stock market in general, and The Nasdaq Global Market and technology and life sciences companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common shares, regardless of our actual operating performance. If the market price of our common shares after this offering does not exceed the initial public offering price, you may not realize any return on your investment in us and may lose some or all of your investment. In the past, securities class action litigation has often been instituted against companies following periods of volatility in the market price of a companys securities. This type of litigation, if instituted, could result in substantial costs and a diversion of managements attention and resources, which would harm our business, financial condition and results of operations.
We are an emerging growth company, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common shares less attractive to investors.
We are an emerging growth company, as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are
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applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and proxy statements, exemptions from the requirements of holding nonbinding advisory votes on executive compensation and shareholder approval of any golden parachute payments not previously approved, and an exemption from compliance with the requirement of the Public Accounting Oversight Board regarding the communication of critical audit matters in the auditors report on the financial statements. We could be an emerging growth company for up to five years following the year in which we complete this offering, although circumstances could cause us to lose that status earlier. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the date of the closing of this offering, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which requires the market value of our common shares that are held by non-affiliates to exceed $700.0 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
We cannot predict if investors will find our common shares less attractive because we may rely on these exemptions. If some investors find our common shares less attractive as a result, there may be a less active trading market for our common shares and our share price may be more volatile.
We will incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.
As a public company, we will incur significant legal, accounting, insurance and other expenses that we did not incur as a private company. We will be subject to the reporting requirements of the Exchange Act, which will require, among other things, that we file with the SEC annual, quarterly and current reports with respect to our business and financial condition. In addition, the Sarbanes-Oxley Act, as well as rules subsequently adopted by the SEC, and The Nasdaq Global Market to implement provisions of the Sarbanes-Oxley Act, impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Further, in July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, was enacted. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas, such as say-on-pay and proxy access. Recent legislation permits emerging growth companies to implement many of these requirements over a longer period and up to five years from the pricing of this offering. We intend to take advantage of this new legislation but cannot guarantee that we will not be required to implement these requirements sooner than budgeted or planned and thereby incur unexpected expenses. Shareholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate.
We expect the rules and regulations applicable to public companies to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. If these requirements divert the attention of our management and personnel from other business concerns, they could have a material adverse effect on our business, financial condition, and results of operations. The increased costs will decrease our net income or increase our net loss and may require us to reduce costs in other areas of our business or increase the prices we charge for our data packages. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain the same or similar coverage. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees, or as executive officers.
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Pursuant to Section 404, in our second annual report due to be filed with the SEC after becoming a public company, we will be required to furnish a report by our management on our internal control over financial reporting. To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants, adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing whether such controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. In addition, investors perceptions that our internal controls are inadequate or that we are unable to produce accurate financial statements on a timely basis may harm the market price of our shares.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our share price and trading volume could decline.
The trading market for our common shares will depend in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on our company. If no securities or industry analysts commence coverage of our company, the trading price for our common shares would likely be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrades our common shares or publishes inaccurate or unfavorable research about our business, our share price may decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our shares could decrease, which might cause our share price and trading volume to decline.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the sections titled Prospectus Summary, Risk Factors, Managements Discussion and Analysis of Financial Condition and Results of Operations, and Business, contains express or implied forward-looking statements that are based on our managements belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements in this prospectus include, but are not limited to, statements about:
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our expectations regarding the rate and degree of market acceptance of our drug-discovery platform; |
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companies and technologies in our industry that we compete with; |
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our ability to manage and grow our business by expanding our sales to existing partners or introducing our drug-discovery platform to new partners; |
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our ability to provide our partners with a full solution from target to IND submission; |
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our expectations regarding the completion of our GMP facility and our manufacturing capabilities; |
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our ability to establish and maintain intellectual property protection for our technologies and workflows, including with respect to our intellectual property litigation with Berkeley Lights, or avoid or defend against claims of infringement; |
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our ability to attract, hire and retain key personnel and to manage our future growth effectively; |
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our ability to obtain additional financing in this or future offerings; |
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the volatility of the trading price of our common shares; |
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our ability to attract and retain key scientific and engineering personnel; |
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our expectations regarding the period during which we qualify as an emerging growth company under the JOBS Act; |
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business disruptions affecting our operations and the development of our platform due to the global COVID-19 pandemic; |
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our ability to remediate our material weaknesses; |
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our expectations regarding our PFIC status for our taxable year ending December 31, 2020 or any future taxable year; |
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our expectations regarding the Trianni acquisition and our ability to realize the intended benefits of such transaction; |
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our expectations regarding the use of proceeds from this offering; and |
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our expectations about market trends. |
In some cases, you can identify forward-looking statements by terminology such as may, should, expects, intends, plans, anticipates, believes, estimates, predicts, potential, continue or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the section titled Risk Factors and elsewhere in this prospectus. If one or more of
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these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this prospectus and the documents that we reference in this prospectus and have filed with the SEC as exhibits to the registration statement, of which this prospectus forms a part, completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements.
The forward-looking statements in this prospectus represent our views as of the date of this prospectus. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this prospectus.
This prospectus also contains estimates, projections and other information concerning our industry, our business and the market for our data packages. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market, and other data from our own internal estimates and research as well as from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. While we are not aware of any misstatements regarding any third-party information presented in this prospectus, their estimates, in particular, as they relate to projections, involve numerous assumptions, are subject to risks and uncertainties and are subject to change based on various factors, including those discussed under the section titled Risk Factors and elsewhere in this prospectus.
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Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including our general expectations and market position, market opportunity and market size, is based on information from various sources on assumptions that we have made that are based on such information and other similar sources and on our knowledge of, and expectations about, the markets for our data packages. This information involves a number of assumptions and limitations and you are cautioned not to give undue weight to such estimates. While we believe the market position, market opportunity and market size information included in this prospectus is generally reliable, such information is inherently imprecise. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate is necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled Risk Factors and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by independent third parties and by us.
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We estimate that the net proceeds to us from the sale of 23,000,000 common shares in this offering will be approximately $331.4 million (or approximately $382.1 million if the underwriters exercise their option to purchase additional common shares in full), assuming an initial public offering price of $15.50 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
Each $1.00 increase or decrease in the assumed initial public offering price of $15.50 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, the net proceeds to us from this offering by $21.8 million, assuming that the number of common shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase or decrease of 1,000,000 in the number of common shares offered by us, as set forth on the cover page of this prospectus, would increase or decrease, as applicable, the net proceeds to us from this offering by $14.7 million, assuming no change in the assumed initial public offering price of $15.50 per share and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The principal purposes of this offering are to obtain additional capital to support our operations and growth, to create a public market for our common shares and to enable access to the public equity markets for us and our shareholders.
We currently intend to use the net proceeds from this offering, together with our existing cash and cash equivalents, to continue making investments in research and development efforts towards deepening our technology and expertise along our technology stack, to continue making investments in building our business development team and marketing our solutions to new and existing partners, as well as for general corporate purposes, including working capital, operating expenses and capital expenditures. We may also use a portion of the net proceeds from this offering for the acquisition of businesses, technologies or other assets that we believe are complementary to our own. The amount and timing of these expenditures will vary depending on a number of factors, including competitive and technological developments and the rate of growth of our business.
Based on our current plans, we believe that the net proceeds from this offering, together with our existing cash and cash equivalents, will be sufficient to fund our operating expenses and capital expenditure requirements for at least the next 24 months from the date of this prospectus. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect.
This expected use of the net proceeds from this offering represents our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the closing of this offering or the amounts that we will actually spend on the uses set forth above. The expected use of the net proceeds from this offering could change in the future depending on the development and conduct of our business. Our management will retain broad discretion over the allocation of the net proceeds from this offering.
Pending our use of proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation instruments, including short-term, investment-grade, interest-bearing instruments and government securities.
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We have never declared or paid any cash dividends on our share capital. We currently intend to retain any future earnings to fund the development and expansion of our business, and, therefore, we do not anticipate paying cash dividends on our share capital in the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our results of operations, financial condition, capital requirements, contractual restrictions and other factors deemed relevant by our board of directors. In addition, under the terms of our contribution agreements with Western Economic Diversification Canada, we are restricted from paying any dividends until we have repaid the contributions thereunder in full.
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The following table sets forth our cash and cash equivalents and our capitalization as of September 30, 2020 on:
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an actual basis; |
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a pro forma basis to give effect to (i) the automatic conversion of all of our outstanding convertible preferred shares as of September 30, 2020 into an aggregate of 81,230,480 common shares as if such conversion had occurred on September 30, 2020, (ii) the issuance of the Convertible Notes and receipt of $90.0 million in gross proceeds therefor, and the conversion of the Convertible Notes into an aggregate of 7,630,352 common shares upon the completion of this offering, assuming an initial public offering price of $15.50 per share, which is the midpoint of the price range set forth on the cover page of this prospectus; and (iii) the filing and effectiveness of our new notice of articles and effectiveness of our new articles prior to the completion of this offering; and |
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a pro forma as adjusted basis to give effect to (i) the pro forma adjustments described above, and (ii) the issuance and sale of 23,000,000 common shares in this offering at an assumed initial public offering price of $15.50 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. |
The pro forma as adjusted information below is illustrative only, and our capitalization following the closing of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table below together with our consolidated financial statements and the related notes appearing elsewhere in this prospectus and the Selected Consolidated Financial Data and Managements Discussion and Analysis of Financial Condition and Results of Operations sections of this prospectus.
As of September 30, 2020 | ||||||||||||
Actual | Pro Forma(2) |
Pro Forma
As Adjusted(1) |
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(unaudited) |
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(in thousands, except per share and per share data) | ||||||||||||
Cash and cash equivalents |
$ | 91,082 | $ | 91,082 | $ | 422,531 | ||||||
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Shareholders equity (deficit): |
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Common shares, no par value; unlimited shares authorized and 154,091,264 shares issued and outstanding, actual; unlimited shares authorized and 242,952,096 shares issued and outstanding, pro forma; unlimited shares authorized, 265,952,096 shares issued and outstanding, pro forma as adjusted |
6,374 | 178,582 | 510,031 | |||||||||
Convertible preferred shares, no par value; unlimited shares authorized and 81,230,480 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted |
82,208 | | | |||||||||
Additional paid-in capital |
3,453 | 3,453 | 3,453 | |||||||||
Accumulated deficit |
(2,797) | (2,797 | ) | (2,797 | ) | |||||||
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Total shareholders equity |
89,238 | 179,238 | 510,687 | |||||||||
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Total capitalization |
$ | 89,238 | $ | 179,238 | $ | 510,687 | ||||||
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(1) |
Each $1.00 increase or decrease in the assumed initial public offering price of $15.50 per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, each of our pro forma as adjusted cash and cash equivalents, additional paid-in capital, total shareholders equity and total capitalization by approximately $21.8 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated |
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underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase or decrease of 1.0 million shares in the number of shares we are offering would increase or decrease, as applicable, each of our pro forma as adjusted cash and cash equivalents, additional paid-in capital, total shareholders equity and total capitalization by approximately $14.7 million, assuming the assumed initial public offering price per share, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing. |
(2) |
Does not reflect the net payments of $8.0 million to reflect the November 2020 acquisition of Trianni of $98.0 million, less the receipt of the Convertible Notes issuance of $90.0 million. |
The number of common shares issued and outstanding pro forma and pro forma as adjusted in the table above is based on 242,952,096 common shares outstanding as of September 30, 2020 (including our convertible preferred shares on an as-converted basis into an aggregate of 81,230,480 common shares, and the conversion of the Convertible Notes into an aggregate of 7,630,352 common shares upon the completion of this offering, based on an assumed initial public offering price of $15.50 per share, which is the midpoint of the price range set forth on the cover of this prospectus), and excludes:
|
40,620,500 common shares issuable upon the exercise of share options outstanding as of September 30, 2020, with at a weighted-average exercise price of $0.27 per share; |
|
13,661,310 common shares issuable upon the exercise of share options granted after September 30, 2020, with a weighted-average price of $2.14 per share; |
|
12,911,310 common shares reserved for issuance under our Current Plan as of September 30, 2020, which shares will cease to be available for issuance at the time the 2020 Plan becomes effective; |
|
21,280,000 common shares to be reserved for future issuance under our 2020 Plan, which will become available for issuance upon the effectiveness of the registration statement of which this prospectus is a part, plus any future increases in the number of common shares reserved for issuance; and |
|
2,700,000 common shares to be reserved for future issuance under the 2020 ESPP, which will become available for issuance upon the effectiveness of the registration statement of which this prospectus is a part, plus any future increases in the number of common shares reserved for issuance. |
69
If you invest in our common shares in this offering, your ownership interest will be diluted immediately to the extent of the difference between the initial public offering price per common share and the pro forma as adjusted net tangible book value per common share after this offering.
Our historical net tangible book value as of September 30, 2020 was $76.0 million, or $0.49 per share as of September 30, 2020. Our historical net tangible book value per share is determined by dividing our total tangible assets less our total liabilities by the number of common shares outstanding as of such date.
Our pro forma net tangible book value as of September 30, 2020 was $166.0 million, or $0.68 per share. Our pro forma net tangible book value per share represents the amount of our total tangible assets reduced by the amount of our total liabilities and divided by the total number of common shares outstanding as of September 30, 2020, assuming (i) the automatic conversion of all of our outstanding convertible preferred shares as of September 30, 2020 into an aggregate of 81,230,480 common shares, which conversion will occur immediately prior to the completion of this offering and (ii) the issuance of the Convertible Notes and receipt of $90.0 million in gross proceeds therefor, and the conversion of the Convertible Notes into an aggregate of 7,630,352 shares upon the completion of this offering, assuming an initial public offering price of $15.50 per share, which is the midpoint of the price range set forth on the cover page of this prospectus.
Our pro forma as adjusted net tangible book value represents our pro forma net tangible book value, plus the effect of the sale of common shares in this offering at an assumed initial public offering price of $15.50 per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Dilution per share to new investors represents the difference between the amount per share paid by purchasers of common shares in this offering and the pro forma as adjusted net tangible book value per share of common shares immediately after completion of this offering. After giving effect to our sale of common shares in this offering at an assumed initial public offering price of $15.50 per share and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of September 30, 2020 would have been $497.4 million, or $1.87 per share. This represents an immediate increase in net tangible book value of $1.19 per share to existing shareholders and noteholders and an immediate dilution in net tangible book value of $13.63 per share to purchasers of common shares in this offering, as illustrated in the following table:
Assumed initial public offering price per share |
$ | 15.50 | ||||||
Historical net tangible book value per share as of September 30, 2020 |
$ | 0.49 | ||||||
Pro forma increase in net tangible book value per share as of September 30, 2020 |
0.19 | |||||||
|
|
|||||||
Pro forma net tangible book value per share as of September 30, 2020 |
0.68 | |||||||
Increase in pro forma as adjusted net tangible book value per share attributable to new investors purchasing common shares in this offering |
1.19 | |||||||
|
|
|||||||
Pro forma as adjusted net tangible book value (deficit) per share after this offering |
1.87 | |||||||
|
|
|||||||
Dilution per share to new investors purchasing common shares in this offering |
$ | 13.63 | ||||||
|
|
Each $1.00 increase or decrease in the assumed public offering price of $15.50 per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, our pro forma as adjusted net tangible book value by $21.8 million, or $0.08 per share, and dilution per share to investors in this offering by $0.92 per share, assuming that the number of shares offered by us, as set forth on the cover of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase or decrease of 1.0 million shares in the number of shares we are offering would increase
70
or decrease, as applicable, our pro forma as adjusted net tangible book value by approximately $14.7 million, or approximately $0.06 per share and would increase or decrease, as applicable, dilution per share to investors in this offering by approximately $(0.05) per share, assuming the assumed initial public offering price per share remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters option to purchase additional shares from us is exercised in full, the pro forma as adjusted net tangible book value per share after this offering would be $2.03 per share, the increase in pro forma as adjusted net tangible book value per share to existing shareholders would be $1.35 per share and the dilution to new investors purchasing shares in this offering would be $13.47 per share.
The following table summarizes, as of September 30, 2020, on a pro forma as adjusted basis (but before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us), the differences between the existing shareholders and the purchasers of shares in this offering with respect to the number of shares purchased from us, the total consideration paid, which includes net proceeds received from the issuance of common and convertible preferred shares, cash received from the exercise of share options, and the average price paid per share (in thousands, except per share amounts and percentages):
Shares Purchased | Total Consideration |
Weighted-Average
Price Per Share |
||||||||||||||||||
Number | Percentage | Amount | Percentage | |||||||||||||||||
Existing shareholders |
242,952,096 | 91.4 | % | $ | 178,571,993 | 33.4 | % | $ | 0.74 | |||||||||||
New investors |
23,000,000 | 8.6 | 356,500,000 | 66.6 | $ | 15.50 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total |
265,952,096 | 100.0 | % | $ | 535,071,993 | 100.0 | % | |||||||||||||
|
|
|
|
|
|
|
|
At our request, the underwriters have reserved up to 5.0% of the common shares offered by this prospectus for sale, at the initial public offering price, to directors, officers, employees, business associates and related persons through a directed share program. The above discussion and tables do not reflect any potential purchases in this offering by any existing shareholders.
If the underwriters exercise their option to purchase additional common shares in full:
|
the percentage of common shares held by existing shareholders will decrease to approximately 90.2% of the total number of our common shares outstanding after this offering; and |
|
the number of common shares held by new investors will increase to 26,450,000, or approximately 9.8% of the total number of our common shares outstanding after this offering. |
The foregoing tables and calculations (other than the historical net tangible book value calculations) are based on 265,952,096 common shares outstanding as of September 30, 2020 (including our convertible preferred shares on an as-converted basis into an aggregate of 81,230,480 common shares, and the conversion of the Convertible Notes into an aggregate of 7,630,352 common shares upon the completion of this offering, based on an assumed initial public offering price of $15.50 per share, which is the midpoint of the price range set forth on the cover of this prospectus), and excludes:
|
40,620,500 common shares issuable upon the exercise of share options outstanding under the Current Plan as of September 30, 2020, with at a weighted-average exercise price of $0.27 per share; |
|
13,661,310 common shares issuable upon the exercise of share options granted after September 30, 2020, with a weighted-average price of $2.14 per share; |
|
12,911,310 common shares reserved for issuance under our Current Plan as of September 30, 2020, which shares will cease to be available for issuance at the time the 2020 Plan becomes effective; |
71
|
21,280,000 common shares to be reserved for future issuance under our 2020 Plan, which will become available for issuance upon the effectiveness of the registration statement of which this prospectus is a part, plus any future increases in the number of common shares reserved for issuance; and |
|
2,700,000 common shares to be reserved for future issuance under the 2020 ESPP, which will become available for issuance upon the effectiveness of the registration statement of which this prospectus is a part, plus any future increases in the number of common shares reserved for issuance. |
To the extent that any outstanding options are exercised, new options are issued under our share-based compensation plans or we issue additional common shares or convertible debt in the future, there will be further dilution to investors participating in this offering.
72
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated statements of operations data for the years ended December 31, 2018 and 2019 and the consolidated balance sheet data as of December 31, 2018 and 2019 have been derived from our audited consolidated financial statements appearing elsewhere in this prospectus. The selected consolidated statements of operations data for the nine months ended September 30, 2019 and 2020 and the summary consolidated balance sheet as of September 30, 2020 have been derived from our unaudited condensed consolidated financial statements appearing elsewhere in this prospectus and have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, on the same basis as the audited consolidated financial statements. In the opinion of management, the unaudited data reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the information in those financial statements. You should read the following selected consolidated financial data together with the Managements Discussion and Analysis of Financial Condition and Results of Operations section of this prospectus and our consolidated financial statements and the related notes appearing elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in any future periods.
Year Ended December 31, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2019 | 2019 | 2020 | |||||||||||||
(unaudited) | ||||||||||||||||
(in thousands, except share and per share data) | ||||||||||||||||
Consolidated Statement of Operations Data: |
||||||||||||||||
Revenue: |
||||||||||||||||
Research fees |
$ | 8,831 | $ | 11,612 | $ | 8,409 | $ | 17,247 | ||||||||
Milestone payments |
| | | 8,000 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenue |
8,831 | 11,612 | 8,409 | 25,247 | ||||||||||||
Operating Expenses: |
||||||||||||||||
Research and development |
5,803 | 10,113 | 6,804 | 20,757 | ||||||||||||
Sales and marketing |
712 | 1,263 | 792 | 1,610 | ||||||||||||
General and administrative |
2,151 | 2,749 | 1,774 | 6,116 | ||||||||||||
Depreciation |
918 | 1,604 | 1,180 | 1,507 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses |
9,583 | 15,729 | 10,550 | 29,990 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Loss from operations |
(753 | ) | (4,117 | ) | (2,141 | ) | (4,743 | ) | ||||||||
Other income (expense): |
||||||||||||||||
Interest income |
(42 | ) | (155 | ) | (111 | ) | (195 | ) | ||||||||
Interest and other expense |
213 | 209 | 127 | 4,896 | ||||||||||||
Foreign exchange (gain) loss |
362 | (186 | ) | (348 | ) | (1,146 | ) | |||||||||
Grants and incentives |
(1,594 | ) | (1,774 | ) | (1,239 | ) | (10,217 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other income |
(1,061 | ) | (1,906 | ) | (1,571 | ) | (6,662 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net earnings (loss) for the period |
$ | 309 | $ | (2,211 | ) | $ | (570 | ) | $ | 1,918 | ||||||
|
|
|
|
|
|
|
|
|||||||||
Net earnings (loss) per share attributable to common shareholders(1): |
||||||||||||||||
Basic |
$ | 0.00 | $ | (0.01 | ) | $ | (0.00 | ) | $ | 0.01 | ||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted |
$ | 0.00 | $ | (0.01 | ) | $ | (0.00 | ) | $ | 0.01 | ||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted-average common shares outstanding(1): |
||||||||||||||||
Basic |
149,436,370 | 151,327,560 | 151,207,340 | 152,413,300 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted |
171,336,110 | 151,327,560 | 151,207,340 | 237,723,530 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Pro forma net loss per share attributable to common shareholders (unaudited)(1): |
||||||||||||||||
Basic |
$ | (0.01 | ) | $ | 0.01 | |||||||||||
|
|
|
|
|||||||||||||
Diluted |
$ | (0.01 | ) | $ | 0.01 | |||||||||||
|
|
|
|
|||||||||||||
Pro forma weighted-average common shares outstanding
|
||||||||||||||||
Basic |
|
172,380,200
|
|
215,414,730 | ||||||||||||
|
|
|
|
|||||||||||||
Diluted |
172,380,200 | 237,723,530 | ||||||||||||||
|
|
|
|
73
(1) | See Note 5 to our annual consolidated financial statements and our interim consolidated financial statements appearing elsewhere in this prospectus for details on the calculation of basic and diluted net loss per share attributable to common shareholders and unaudited basic and diluted pro forma net loss per share attributable to common shareholders. |
As of December 31, |
As of September 30,
2020 |
|||||||||||
2018 | 2019 | |||||||||||
(unaudited) | ||||||||||||
(in thousands) | ||||||||||||
Consolidated Balance Sheet Data: |
||||||||||||
Cash and cash equivalents |
$ | 10,444 | $ | 7,553 | $ | 91,082 | (1) | |||||
Working capital(2) |
8,729 | 4,745 | 93,895 | |||||||||
Total assets |
21,492 | 23,488 | 142,385 | |||||||||
Total liabilities |
9,883 | 13,236 | 53,147 | |||||||||
Total preferred shares |
7,557 | 7,546 | 82,208 | |||||||||
Total shareholders equity |
11,609 | 10,252 | 89,238 |
(1) | Does not reflect the net payments of $8.0 million to reflect the November 2020 acquisition of Trianni of $98.0 million, less the receipt of the Convertible Notes issuance of $90.0 million. |
(2) | We define working capital as current assets less current liabilities. |
74
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
In November 2020, we entered into the merger agreement with Trianni, under which, at the effective time, our wholly owned entity, or Merger Sub, merged with and into Trianni, with Trianni surviving as our wholly owned subsidiary.
Pursuant to the merger agreement, each share of Trianni convertible preferred stock was converted into one share of common stock of Trianni and each share of Trianni common stock (other than excluded shares and dissenting shares) was converted automatically into the right to receive cash in the amount equal to the cash purchase price divided by the total number of common stock of Trianni issued and outstanding. Further, each unexercised outstanding option to purchase shares of Trianni common stock whether vested or unvested, was cancelled and extinguished.
To fund the merger, we issued the Convertible Notes with an aggregate principal amount of $90.0 million on October 30, 2020. The Convertible Notes are convertible into our common shares at any time at the option of the holder after 12 months from the date of issuance or upon completion of certain qualifying financings.
The following unaudited pro forma condensed combined financial information of AbCellera and Trianni is presented to illustrate the estimated effects of the merger, which estimated effects are collectively referred to as adjustments or transaction accounting adjustments.
The unaudited pro forma condensed combined statements of income (loss) for the year ended December 31, 2019 and the nine months ended September 30, 2020 combine our historical consolidated statements of income (loss) with Triannis, after giving effect to the merger as if it had occurred on January 1, 2019. The unaudited pro forma condensed combined balance sheet as of September 30, 2020 combines our historical consolidated balance sheets of with Triannis as of September 30, 2020, after giving effect to the merger as if it had occurred on September 30, 2020.
These unaudited pro forma condensed combined statements of income (loss) and unaudited pro forma condensed combined balance sheet are collectively referred to in this section as the pro forma financial information.
The unaudited pro forma financial information should be read in conjunction with the accompanying notes in this section. In addition, the pro forma financial information is derived from and should be read in conjunction with the following historical consolidated financial statements and accompanying notes of AbCellera and Trianni in this section:
|
our audited consolidated financial statements as of and for the fiscal year ended December 31, 2019 and the related notes; |
|
our unaudited condensed consolidated financial statements as of and for the nine months ended September 30, 2020 and the related notes; |
|
audited consolidated financial statements of Trianni as of and for the fiscal year ended December 31, 2019 and the related notes; and |
|
unaudited condensed consolidated financial statements of Trianni as of and for the nine months ended September 30, 2020 and the related notes. |
The pro forma financial information has been prepared by us in accordance with Regulation S-X Article 11, Pro Forma Financial Information, as amended by the final rule, Release No. 33-10786, which is referred to herein as Article 11. We have voluntarily complied with Article 11 in advance of its mandatory compliance date. The pro forma financial information is based on various adjustments and assumptions and is not necessarily
75
indicative of what our consolidated statements of income (loss) or consolidated balance sheet actually would have been had the merger been completed as of the dates indicated or will be for any future periods. The pro forma financial information does not purport to project our future financial position or operating results following the completion of the merger. The pro forma financial information does not include adjustments to reflect any potential revenue, synergies or dis-synergies, or cost savings that may be achievable in connection with the merger, or the associated costs that may be necessary to achieve such revenues, synergies or cost savings.
We and Trianni prepared the respective financial statements in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The merger will be accounted for using the acquisition method of accounting, and we will be treated as the accounting acquirer. In identifying us as the acquiring entity for accounting purposes, we took into account a number of factors as of the date of this prospectus, including the nature of the consideration issued, relative voting rights of all equity instruments in the combined company, the composition of senior management of the combined company and corporate governance structure of the combined company. No single factor was the sole determinant in the overall conclusion that we are the acquirer for accounting purposes; rather all factors were considered in arriving at such conclusion.
The pro forma adjustments are preliminary, based upon available information as of the date of this prospectus, and prepared solely for the purpose of this pro forma financial information. These adjustments are based on preliminary estimates and will be different from the adjustments that may be determined based on final acquisition accounting when the merger is completed, and these differences could be material. The pro forma adjustments are based on preliminary estimates of the consideration to be paid in the merger, and of the fair values of assets acquired and liabilities assumed. Certain valuations and assessments, including valuations of inventory, property and equipment, deferred revenues and other intangible assets as well as the assessment of the tax positions and rates of the combined business, are in process and will not be completed until subsequent to the closing of the merger. The estimated fair values assigned in this unaudited pro forma financial information are preliminary and represent our current best estimate of fair value and are subject to revision.
76
Unaudited Pro Forma Condensed Combined Balance Sheet as of
September 30, 2020
(in thousands of U.S. dollars)
Historical
AbCellera |
Historical
Trianni (Note 6) |
Transaction
Accounting Adjustments |
Notes | Combined | ||||||||||||||||
Assets |
||||||||||||||||||||
Current assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 91,082 | $ | 15,146 | $ | (13,487 | ) |
|
[7A]
[7B] [7C] |
|
$ | 92,741 | ||||||||
Accounts receivable |
5,531 | 400 | | 5,931 | ||||||||||||||||
Accrued research fees receivable |
14,577 | | | 14,577 | ||||||||||||||||
Other current assets |
2,809 | 636 | | 3,445 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total current assets |
113,999 | 16,182 | (13,487 | ) | 116,694 | |||||||||||||||
Long-term assets: |
||||||||||||||||||||
Property and equipment, net |
14,278 | 189 | | 14,467 | ||||||||||||||||
Intangible and other long-term assets |
13,898 | 1,415 | 102,255 | [7C] | 117,568 | |||||||||||||||
Goodwill |
| | 33,216 | [7C] | 33,216 | |||||||||||||||
Loans to related parties |
210 | | | 210 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total long-term assets |
28,386 | 1,604 | 135,471 | 165,461 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total assets |
$ | 142,385 | $ | 17,786 | $ | 121,984 | $ | 282,155 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Liabilities and equity |
||||||||||||||||||||
Liabilities |
||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||
Accounts payable and accrued liabilities |
$ | 12,868 | $ | 6,766 | ($ | 5,952 | ) |
|
[7B]
[7C] [7D] |
|
$ | 13,682 | ||||||||
Deferred revenue |
6,917 | 1,578 | (1,578 | ) | [7C] | 6,917 | ||||||||||||||
Current portion of long-term debt |
320 | | | 320 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total current liabilities |
20,105 | 8,344 | (7,530 | ) | 20,919 | |||||||||||||||
Long-term liabilities |
||||||||||||||||||||
Operating lease liability |
$ | 3,066 | | | $ | 3,066 | ||||||||||||||
Long-term debt |
1,939 | | 89,900 | [7A] | 91,839 | |||||||||||||||
Deferred income tax |
| | 27,621 | [7F] | 27,621 | |||||||||||||||
Deferred revenue and grant funding |
23,718 | 417 | (417 | ) | [7C] | 23,718 | ||||||||||||||
Earn-out liability |
| | 21,835 | [7C] | 21,835 | |||||||||||||||
Long-term other liabilities |
4,319 | | | 4,319 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total long-term liabilities |
33,042 | 417 | 138,939 | 172,398 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities |
$ | 53,147 | $ | 8,761 | $ | 131,409 | $ | 193,317 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Equity |
||||||||||||||||||||
Share capitalcommon shares |
6,374 | 756 | (756 | ) | [7E] | 6,374 | ||||||||||||||
Share capitalpreferred shares |
82,208 | 3,132 | (3,132 | ) | [7E] | 82,208 | ||||||||||||||
Paid-in capital |
3,453 | 1,094 | (1,094 | ) | [7E] | 3,453 | ||||||||||||||
Accumulated deficit |
(2,797 | ) | 4,043 | (4,443 | ) |
|
[7D]
[7E] |
|
(3,197 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total equity |
89,238 | 9,025 | (9,425 | ) | 88,838 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities and equity |
$ | 142,385 | $ | 17,786 | $ | 121,984 | $ | 282,155 | ||||||||||||
|
|
|
|
|
|
|
|
77
Unaudited Pro Forma Condensed Combined Statement of Income (Loss)
Nine Months Ended September 30, 2020
(in thousands of U.S. dollars, except per share data)
Historical
AbCellera |
Historical
Trianni (Note 6) |
Transaction
Accounting Adjustments |
Notes | Combined | ||||||||||||||||
Revenue: |
||||||||||||||||||||
Research fees |
$ | 17,247 | | | $ | 17,247 | ||||||||||||||
Milestone payments |
8,000 | | | 8,000 | ||||||||||||||||
License |
| 5,946 | | 5,946 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total revenue |
$ | 25,247 | $ | 5,946 | | $ | 31,193 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Operating expenses: |
||||||||||||||||||||
Research and development |
20,757 | 2,374 | | 23,131 | ||||||||||||||||
Sales and marketing |
1,610 | | | 1,610 | ||||||||||||||||
General and administrative |
6,116 | 1,322 | | 7,438 | ||||||||||||||||
Depreciation and amortization |
1,507 | | 4,828 | [8A] | 6,335 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total operating expenses |
$ | 29,990 | $ | 3,696 | $ | 4,828 | $ | 38,515 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) from operations |
(4,743 | ) | 2,250 | (4,828 | ) | (7,321 | ) | |||||||||||||
Other (income) expense: |
||||||||||||||||||||
Interest income |
(195 | ) | (150 | ) | | (345 | ) | |||||||||||||
Interest expense and other (income) expense |
4,896 | (1 | ) | 2,381 | [8B] | 7,276 | ||||||||||||||
Foreign exchange (gain) loss |
(1,146 | ) | | | (1,146 | ) | ||||||||||||||
Grant funding |
(10,217 | ) | | | (10,217 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total other (income) expense |
(6,662 | ) | (151 | ) | 2,381 | (4,432 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Earnings before income taxes |
1,918 | 2,401 | (7,209 | ) | (2,890 | ) | ||||||||||||||
Income tax provision (recovery) |
| 118 | (1,352 | ) | [8C] | (1,234 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Net earnings (loss) for the period |
$ | 1,918 | $ | 2,283 | $ | (5,857 | ) | $ | (1,656 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Net earnings (loss) per share, basic (Note 10) |
$ | 0.01 | $ | (0.01 | ) | |||||||||||||||
|
|
|
|
|||||||||||||||||
Net earnings (loss) per share, diluted (Note 10) |
$ | 0.01 | $ | (0.01 | ) | |||||||||||||||
|
|
|
|
78
Unaudited Pro Forma Condensed Combined Statement of Income (Loss)
Year Ended December 31, 2019
(in thousands of U.S. dollars, except per share data)
Historical
AbCellera |
Historical
Trianni (Note 6) |
Transaction
Accounting Adjustments |
Notes | Combined | ||||||||||||||||
Revenue: |
||||||||||||||||||||
Research fees |
$ | 11,612 | | | $ | 11,612 | ||||||||||||||
Milestone payments |
| | | | ||||||||||||||||
License |
| 3,080 | | 3,080 | ||||||||||||||||
Other |
| 1,078 | | 1,078 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total revenue |
$ | 11,612 | $ | 4,158 | | $ | 15,770 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Operating expenses: |
||||||||||||||||||||
Research and development |
10,113 | 3,482 | | 13,595 | ||||||||||||||||
Sales and marketing |
1,263 | | | 1,263 | ||||||||||||||||
General and administrative |
2,749 | 2,084 | 400 | [9C] | 5,233 | |||||||||||||||
Depreciation and amortization |
1,604 | | 6,437 | [9A] | 8,041 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total operating expenses |
$ | 15,729 | $ | 5,566 | $ | 6,837 | $ | 28,132 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) from operations |
(4,117 | ) | (1,408 | ) | (6,837 | ) | (12,362 | ) | ||||||||||||
Other (income) expense: |
||||||||||||||||||||
Interest income |
(155 | ) | (250 | ) | | (405 | ) | |||||||||||||
Interest expense and other (income) expense |
209 | (33 | ) | 3,051 | [9B] | 3,227 | ||||||||||||||
Foreign exchange (gain) loss |
(186 | ) | | | (186 | ) | ||||||||||||||
Grant funding |
(1,775 | ) | | | (1,775 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total other (income) expense |
(1,907 | ) | (283 | ) | 3,051 | 861 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Earnings before income taxes |
(2,210 | ) | (1,125 | ) | (9,888 | ) | (13,223 | ) | ||||||||||||
Income tax provision (recovery) |
| (549 | ) | (1,802 | ) | [9D] | (2,351 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Net loss for the period |
$ | (2,210 | ) | $ | (576 | ) | $ | (8,086 | ) | $ | (10,872 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Net loss per share, basic (Note 10) |
$ | (0.01 | ) | $ | (0.07 | ) | ||||||||||||||
|
|
|
|
|||||||||||||||||
Net loss per share, diluted (Note 10) |
$ | (0.01 | ) | $ | (0.07 | ) | ||||||||||||||
|
|
|
|
79
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
Note 1Description of the Transaction
In November 2020, we entered into the merger agreement with Trianni, under which at the closing, Merger Sub, merged with and into Trianni, with Trianni surviving as our wholly owned subsidiary.
Pursuant to the merger agreement, each share of Trianni convertible preferred stock was converted into one share of common stock of Trianni and each share of Trianni common stock (other than excluded shares and dissenting shares) was converted automatically into the right to receive cash in the amount equal to the purchase price divided by the total number of common stock of Trianni issued and outstanding. Further, each unexercised outstanding option to purchase shares of Trianni common stock whether vested or unvested, was cancelled and extinguished.
To fund the merger, we issued the Convertible Notes in the aggregate principal amount of $90.0 million on October 30, 2020. The Convertible Notes mature five years from the date of issuance and bear no interest for the first twelve months and bear five percent (5%) interest per annum thereafter. Interest is payable annually starting twenty-four months from the date of issuance until maturity.
Upon the closing of certain qualified financings under the Convertible Notes, each a Qualified Financing, the principal amount of the Convertible Notes can be converted at the option of the note holder into our common shares of at a conversion price equal to (a) eighty-five percent (85%) of the price per common shares issued in such Qualified Financing if the Qualified Financing occurs less than six months from the issuance date and (b) eight-two percent (82%) of the price per common shares issued in such Qualified Financing if the Qualified Financing occurs more than six months from the issuance date plus 800,000 common shares (for certain specified investors). The Convertible Notes are also convertible at the option of the holders on the interest commencement date, which is 12 months after the issuance date. The number of common shares to be issued will be equal to 800,000 common shares (for certain specified investors) plus the number of common shares determined by dividing (i) the aggregate of the outstanding principal of the Convertible Note by (ii) our pre-money valuation of as defined in the agreement divided by the aggregate number of our common shares outstanding at the time of conversion.
We may at any time after twelve months from the issuance date prepay in cash any or all of the principal and interest owing pursuant to the Convertible Notes and in the event we close an initial public offering within six months of a prepayment, the Company shall immediately pay the holders a cash amount equal to 18% of the principal that was prepaid.
At issuance, we determined that no value should be assigned to the embedded derivatives and that there was no beneficial conversion feature. We incurred approximately $0.1 million in issuance costs associated with the Convertible Notes.
Note 2Basis of Presentation
The pro forma financial information was prepared accounting for the merger using the acquisition method of accounting in accordance with Accounting Standards Codification (ASC) Topic 805, Business Combinations, which is referred to as ASC 805, and is derived from our and Triannis audited and unaudited historical financial statements.
The pro forma financial information has been prepared by us in accordance with Article 11. The pro forma financial information is not necessarily indicative of what our consolidated statements of operations or consolidated balance sheet would have been had the merger been completed as of the dates indicated or will be for any future periods. The pro forma financial information does not purport to project our future financial
80
position or results of operations following the completion of the merger. The pro forma financial information reflects pro forma adjustments management believes are necessary to present fairly our pro forma results of operations and financial position following the closing of the merger as of and for the periods indicated. The pro forma adjustments are based on currently available information and assumptions management believes are, under the circumstances and given the information available at this time, reasonable, and reflective of adjustments necessary to report our financial condition and results of operations as if the merger was completed.
The acquisition method of accounting uses the fair value concepts defined in ASC 820, Fair Value Measurements and Disclosures, which is referred to as ASC 820. Fair value is defined in ASC 820 as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements can be highly subjective and can involve a high degree of estimation.
The determination of the fair value of the identifiable assets and liabilities of Trianni and the allocation of the estimated consideration to these identifiable assets and liabilities is preliminary and is pending finalization of various estimates, inputs and analyses. Certain valuations and assessments are in process and will not be completed until subsequent to the closing of the merger.
Since this pro forma financial information has been prepared based on preliminary estimates of consideration and fair values attributable to the merger, the actual amounts eventually recorded for the purchase accounting, including the identifiable intangibles and goodwill, may differ materially from the information presented.
At this preliminary stage, the estimated identifiable finite-life intangible assets include a license and technology and indefinite-life intangible include assets related to in process research and development, or IPR&D. Goodwill represents the excess of the estimated purchase price over the estimated fair value of Triannis identifiable assets acquired and liabilities assumed, including the fair value of the estimated identifiable finite assets and liabilities described above. Goodwill will not be amortized but will be subject to periodic impairment testing. The goodwill balance shown in the pro forma financial information is preliminary and subject to change as a result of the same factors affecting both the estimated consideration and the estimated fair value of identifiable assets and liabilities acquired. The goodwill balance represents the combined companys expectations of the strategic opportunities available to it as a result of the merger, as well as other synergies that will be derived from the merger. Goodwill also reflects the requirement to record deferred tax balances for the difference between the assigned values and the tax bases of assets acquired and liabilities assumed in the business combination. Goodwill is not deductible for tax purposes.
Upon consummation of the merger and the completion of a formal valuation study, the fair value of the acquired assets and liabilities assumed will be updated, including the estimated fair value and useful lives of the identifiable intangible assets and allocation of the excess purchase price, if any, to goodwill. The calculation of goodwill and other identifiable intangible assets could be materially impacted by changing fair value measurements caused by the volatility in the current market environment. Under ASC 805, transaction costs related to the merger are expensed in the period they are incurred. Total transaction related costs incurred by us and Trianni in connection with the merger are estimated to be approximately $0.4 million. The transaction costs incurred by Trianni are reflected as a reduction of Triannis assets acquired by us. The remaining amounts are reflected as a liability in the unaudited pro forma condensed combined balance sheet. The total amount is reflected as an expense in the unaudited condensed combined statement of operations for the year ended December 31, 2019. These costs are non-recurring.
The pro forma financial information does not reflect the following items:
|
the impact of any potential revenues, benefits or synergies that may be achievable in connection with the merger or related costs that may be required to achieve such revenues, benefits or synergies; |
81
|
changes in cost structure or any restructuring activities as such changes, if any, have yet to be determined; and |
|
any expenses related to employees and executives who may not be retained in the same roles after the merger, where such agreements with these employees or executives have not been reached at the date of this prospectus. These expenses may include both cash and equity payments, and which amounts could be substantial. These amounts will be reflected once agreements are reached with those employees or executives. |
Note 3Conforming Accounting Policies
At the current time, we are not aware of any material differences in accounting policies that would have a material impact on the pro forma financial information.
Accounting policies that were assessed but deemed to have an immaterial impact to the pro forma financial information include:
|
ASU No. 2016-02, Leases (Topic 842), which is referred to as ASC 842Trianni has not yet adopted ASC 842, and we adopted it with an effective date of January 1, 2019. For purposes of the unaudited condensed combined pro forma statements of operations for the year ended December 31, 2019 and nine months ended September 30, 2020, Trianni only had one operating lease as classified under ASC 842. Any resulting change would be immaterial and thus, for the purposes of the pro forma financial information, Trianni has not adjusted AbCelleras adoption of ASC 842 to January 1, 2019. |
|
ASU No. 2016-13, Financial InstrumentsCredit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which is referred to as ASC 326. Triannis historical financial statements used to derive the pro forma financial information do not reflect the adoption of ASC 326. For the purposes of the pro forma financial information, we have not adjusted Triannis adoption of ASC 326 to January 1, 2020 as the estimated impact on the pro forma financial information would be immaterial. |
Following the merger, we will conduct a review of Triannis accounting policies during its integration to determine if there are any additional material differences that require reclassification of Triannis revenues, expenses, assets or liabilities to conform to our accounting policies and classifications. As a result of that review, we may identify further differences between the accounting policies of the two companies that, when conformed, could have a material impact on the pro forma financial information.
Note 4Preliminary Estimated Purchase Price
The estimated preliminary purchase price is calculated as follows:
Estimated purchase price consideration (in thousands) |
Estimated Fair Value | |||
Estimated cash payment to Trianni stockholders |
$ | 97,964 | (i) | |
Earn-out payment |
21,835 | (ii) | ||
|
|
|||
Total |
$ | 119,799 | ||
|
|
(i) |
Pursuant to the merger agreement, the initial purchase price is $90.0 million adjusted for certain closing adjustments for working capital, indebtness, transaction and other expenses as well as payments to Trianni option holders for the cancellation and extinguishment of Trianni options. The closing adjustments are estimated to be $8.0 million and will result in an increase to the purchase price. |
(ii) |
Represents the estimated fair value of the earn-out payments related to a specific customer license ending on April 9, 2024. The estimated fair value was categorized within Level 3 of the fair value hierarchy and determined by estimating the payout of 85% of the expected future net cash flows associated to the specific customer license during the earn-out period ending on April 9, 2024. The significant assumptions inherent in the development of the value include the amount and timing of projected future net revenues received by us from the specific customer license, and the discount rate selected to measure the risks inherent in the future cash flows, which was approximately 22%. These values are based on the most recent estimate of the fair value available and will be updated as we obtain more information. |
82
Note 5Preliminary Fair Value Estimate of Purchase Price Allocation to Assets Acquired and Liabilities
The table below outlines the initial allocation of the preliminary estimated consideration to the identifiable assets and liabilities acquired by us as of September 30, 2020.
Estimated purchase price consideration (in thousands) |
$ | 119,799 | ||
|
|
Fair value of assets and liabilities acquired |
Historical
Value(i) |
Acquisition
Adjustments(ii) |
Preliminary
Purchase Price Allocation |
|||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 15,146 | $ | (5,523 | ) | $ | 9,623 | (iii) | ||||
Accounts receivable, net |
400 | | 400 | |||||||||
Other current assets |
636 | | 636 | |||||||||
|
|
|
|
|
|
|||||||
Total current assets |
16,182 | $ | (5,523 | ) | $ | 10,659 | ||||||
Property and equipment, net |
189 | | 189 | |||||||||
Intangibles |
| 103,635 | 103,635 | (iv) | ||||||||
Deferred income tax asset and other assets |
1,415 | (1,380 | ) | 35 | (v) | |||||||
Goodwill |
| 33,216 | 33,216 | (v) | ||||||||
|
|
|
|
|
|
|||||||
Total assets |
17,786 | 129,948 | 147,734 | |||||||||
|
|
|
|
|
|
|||||||
Accrued expenses and other current liabilities |
6,766 | (6,452 | ) | 314 | (iii) | |||||||
Deferred revenue |
1,578 | (1,578 | ) | | (vi) | |||||||
|
|
|
|
|
|
|||||||
Total current liabilities |
8,344 | (8,030 | ) | 314 | ||||||||
Deferred revenue and grant funding |
417 | (417 | ) | | (vi) | |||||||
Deferred income tax liability |
| 27,621 | 27,621 | (v) | ||||||||
|
|
|
|
|
|
|||||||
Total liabilities |
8,761 | 19,174 | 27,935 | |||||||||
|
|
|
|
|
|
|||||||
Estimated fair value of net identifiable assets acquired and liabilities assumed |
$ | 119,799 | ||||||||||
|
|
(i) |
These values represent the historical Trianni balance sheet at September 30, 2020, adjusted to conform to our presentation. |
(ii) |
When the merger is completed, the purchase price allocation will be performed based on the assets acquired and liabilities assumed and Trianni will perform a formal valuation study to update the estimates of fair value in the table above. The calculation of the fair value of the assets acquired and liabilities assumed, as well as the calculation of the fair value of the consideration transferred could materially change at the time the merger is completed. |
(iii) |
These values assume the payment of the dividends payable of $6.5 million to Trianni stockholders, receipt of $1.4 million from Triannis options holders from the exercise of all outstanding options and payments of $0.5 million in management bonuses prior to the closing of the merger. |
(iv) |
The estimated fair value of and useful lives of the intangible assets acquired is as follows: |
Estimated fair value
(in thousands)(a) |
Estimated useful lives
(in years)(b) |
|||||||
License |
$ | 21,835 | 5 | |||||
Technology |
41,400 | 20 | ||||||
IPR&D |
40,400 | (c) | ||||||
|
|
|||||||
Total |
$ | 103,635 | ||||||
|
|
(a) |
The estimated fair values were categorized within Level 3 of the fair value hierarchy and were determined using an income-based approach, which was based on the present value of the future estimated after-tax cash flows attributable to each intangible asset. The significant assumptions inherent in the development of the values, from the perspective of a market participant, include the amount and timing of projected future cash flows (including revenue, regulatory success and profitability), and the discount rate selected to measure the risks inherent in the future cash flows, which was between 19%-22%. These fair values are based on the most recent estimate of the fair value available and will be updated as we obtain more information. |
(b) |
The estimate of the useful life was based on an analysis of the expected use of the asset by us, any legal, regulatory or contractual provisions that may limit the useful life, the effects of obsolescence, competition and other relevant economic factors, and consideration of the expected cash flows used to measure the fair value of the intangible asset. |
(c) |
IPR&D assets are indefinite life intangible assets at the time of acquisition and will be amortized upon completion of IPR&D activities. |
(v) |
Goodwill represents the excess of the estimated purchase price over the estimated fair value of Triannis identifiable assets acquired and liabilities assumed. Goodwill also reflects the requirement to record deferred tax balances for the difference between the assigned values and the tax bases of assets acquired and liabilities assumed in the business combination. Goodwill is not deductible for tax purposes. |
(vi) |
The estimated fair value of deferred revenue is nominal. |
83
Note 6Adjustments to Reclassify Financial Statement Line Items to Our Presentation by Trianni Prior to Closing
Certain historical balances on the pro forma balance sheet and pro forma statements of income (loss) for the periods presented have been reclassified to conform to our presentation.
Note 7Adjustments to the Unaudited Pro Forma Condensed Combined Balance Sheet
[7A] To reflect the issuance of $90.0 million in Convertible Notes by us on October 30, 2020, net of estimated issuance costs of $0.1 million. The Convertible Notes are recorded at amortized cost.
[7B] To reflect the estimated cash payment to Trianni stockholders of $98.0 million as described in Note 4.
[7C] To reflect the recognition of goodwill and other purchase price adjustments as part of the purchase price allocation as described in Note 5 above and to record the earn-out liability as described in Note 4 above.
[7D] To reflect the transaction costs estimated to be incurred to complete the acquisition of Trianni of $0.4 million.
[7E] To eliminate Triannis historical stockholders equity.
[7F] To reflect the net deferred tax liabilities associated with the estimated fair value step-up of intangible assets acquired included in consideration.
These amounts are preliminary and are subject to change upon the completion of the merger. Further, the combined companys ability to use net operating loss carryforwards to offset future taxable income for U.S. federal income tax purposes may be subject to limitations, which are in the process of being assessed.
Note 8Adjustments to the Unaudited Pro Forma Condensed Combined Statement of Income (Loss) for the Nine Months Ended September 30, 2020
[8A] To reflect the incremental straight-line amortization related to the increase in fair value of the license and technology over a period of five years and 20 years, respectively, as outlined in Note 5 above.
[8B] To reflect the accrued interest expense resulting from the Convertible Notes which are assumed to be outstanding from January 1, 2019 for the purposes of the pro forma financial information. The Convertible Notes are carried at amortized cost with an effective interest rate of 3.4%.
[8C] To reflect the tax impact of the pro forma adjustments related to the reversal of the deferred income tax liability recognized for the amortization of intangible assets at a preliminary blended federal and state statutory tax rate of 28%.
Because the tax rates used for these pro forma financial statements are an estimate, they will likely vary from the actual effective tax rate in periods after the completion of the merger.
Note 9Adjustments to the Unaudited Pro Forma Condensed Combined Statement of Income (Loss) for the Year Ended December 31, 2019
[9A] To reflect the incremental straight-line amortization related to the increase in fair value of the license and technology over a period of five years and 20 years, respectively, as outlined in Note 5 above.
[9B] To reflect the interest expense resulting from the Convertible Notes issued by us which are assumed to be outstanding from January 1, 2019 for the purposes of the pro forma financial information. The Convertible Notes are carried at amortized cost with an effective interest rate of 3.4%.
84
[9C] To move the expenses related to the transaction into the year ended December 31, 2019 and reflect the additional transaction expenses expected to be incurred to complete the transaction incremental to those amounts recognized in our and Triannis historical financial statements.
[9D] To reflect the tax impact of the pro forma adjustments related to the reversal of the deferred income tax liability recognized for the amortization of intangible assets at a preliminary blended federal and state statutory tax rate of 28%.
Because the tax rates used for these pro forma financial statements are an estimate, they will likely vary from the actual effective tax rate in periods subsequent to the completion of the merger.
Note 10Loss Per Share
The pro forma combined diluted loss per share presented below for the year ended December 31, 2019 and the nine months ended September 30, 2020, is determined by using the weighted average number of common shares and dilutive common share equivalents outstanding during the period. We have excluded the effect to earnings per share related to the Convertible Notes and other dilutive instruments because including them would have been anti-dilutive.
(in thousands, except for per share amounts) |
Year Ended
December 31, 2019 |
Nine Months Ended
September 30, 2020 |
||||||
Pro forma net loss |
$ | (10,872 | ) | $ | (1,656 | ) | ||
Pro forma basic and diluted weighted-average shares outstanding |
151,328 | 152,413 | ||||||
Pro forma basic and diluted loss per share |
$ | (0.07 | ) | $ | (0.01 | ) |
85
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with the section titled Selected Consolidated Financial Data and our consolidated financial statements and the related notes thereto included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth in other parts of this prospectus contain forward-looking statements that involve risks, uncertainties and assumptions. As a result of many factors, including those factors set forth in the section titled Risk Factors, our actual results could differ materially from those discussed in or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled Risk Factors. Please also see the section titled Special Note Regarding Forward Looking Statements.
Overview
We believe that the surest path to a better future is through technological advancement and that the new frontier of technology lies at the interface of computation, engineering and biology. Our mission is to improve health with technologies that transform the way that antibody-based therapies are discovered. We aim to become the centralized operating system for next generation antibody discovery.
Our full-stack, artificial intelligence-, or AI, powered drug discovery platform searches and analyzes the database of natural immune systems to find antibodies that can be developed as drugs. We believe our technology increases the speed and the probability of success of therapeutic antibody discovery, including enabling discovery against targets that may otherwise be intractable. Rather than advancing our own clinical pipeline of drug candidates, we forge partnerships with drug developers of all sizes, from large cap pharmaceutical to small biotechnology companies. We empower them to move quickly, reduce cost and tackle the toughest problems in drug development. As of September 30, 2020, we had 94 discovery programs that are either completed, in progress or under contract with 26 partners. As a recent example, in a collaboration with Eli Lilly and Company, or Lilly, we applied our technology stack to co-develop LY-CoV555, a potential antibody therapy to treat and prevent COVID-19. Starting from a single blood sample obtained from a convalescent patient, we and our partners identified a viable antibody drug candidate within three weeks that advanced into clinical testing 90 days after initiation of the program. Lilly progressed into these clinical trials at a greatly accelerated pace as a result of the Coronavirus Treatment Acceleration Program, which is a special emergency program for possible coronavirus therapies created by the FDA in 2020 to expedite the development of potentially safe and effective life-saving treatments to combat the COVID-19 pandemic. With respect to other or future product candidates, there is no assurance that any of our partners or collaborators will be able to advance a product candidate into clinical development on this timeframe again in the future, or at all. We initiated our partnering program in 2015 and have only had this one program result in clinical milestone payments to us to date and we have not yet had a program receive marketing approval.
We structure our agreements in a way that is designed to align our partners economic interests with our own. We forge partnerships with large cap pharmaceutical companies, biotechnology companies of all sizes and non-profit and government organizations. Our partners select a target and define the antibody properties needed for therapeutic development. We provide discovery solutions to partners that have a range of discovery capabilities, from the highly enabled to the less enabled. We enable discovery against targets that have traditionally been intractable, and we accelerate programs against less difficult targets.
Our deals emphasize participation in the success and upside of future antibody therapeutics. Our partnership agreements include near-term payments for technology access, research and intellectual property rights, and downstream payments in the form of clinical and commercial milestones, and royalties on net sales. Longer-term we are eligible to receive additional payments upon satisfaction of clinical and commercial milestones, which we refer to as milestone payments, as well as royalties on sales of products derived from antibodies that we discover for our partners. Our discovery partnerships generally include royalty payments on net sales in the single digit to low-double digit range.
86
We generated revenue of $8.8 million and $11.6 million for the years ended December 31, 2018 and 2019, respectively (31% growth), and $8.4 million and $25.2 million for the nine months ended September 30, 2019 and 2020, respectively 200% growth). As of September 30, 2020, we had a total of 26 partners for whom we were conducting drug discovery activities. For the year ended December 31, 2019, two of our partners accounted for 47% and 15% of revenue, and eleven partners accounted for the remaining 38% of revenue. For the nine months ended September 30, 2020, two of our partnerships accounted for 50% and 21% of revenue, and nine partnerships accounted for the remaining 29% of revenue. Our partnership with Lilly constituted one of the partnerships that generated 10% or more of our consolidated revenues during the one or more periods described above. With respect to the other partners, we do not believe the loss of any one or more of such partners would have a material adverse effect on us and our subsidiaries taken as a whole. We have also grown the number of programs that we have under contract with our partners, as illustrated by the following charts.
We have achieved such growth in our business with a modest sales and marketing infrastructure, consisting of a limited number of business development personnel supported by marketing staff that have historically been primarily focused on scientific writing. We incurred sales and marketing expenses of $0.7 million and $1.3 million for the years ended December 31, 2018 and 2019, respectively, and $0.8 million and $1.6 million for the nine months ended September 30, 2019 and 2020, respectively. We intend to significantly increase investment into our business development team and into marketing our solutions to new and existing partners.
We focus a substantial portion of our resources on research and development efforts towards deepening our technology and expertise along our technology stack, and we expect to continue to make significant investments in this area for the foreseeable future. We incurred research and development expenses of $5.8 million and $10.1 million for the years ended December 31, 2018 and 2019, respectively, and $6.8 million and $20.8 million for the nine months ended September 30, 2019 and 2020, respectively. We incurred general and administrative expenses of $2.2 million and $2.7 million for the years ended December 31, 2018 and 2019, respectively, and $1.8 million and $6.1 million for the nine months ended September 30, 2019 and 2020, respectively. We have also experienced significant growth in our workforce in recent periods, increasing from 107 employees as of December 31, 2019 to 174 employees as of September 30, 2020. We expect to continue to incur significant expenses, and we expect such expenses to increase substantially in connection with our ongoing activities, including as we:
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invest in research and development activities to improve our technology stack and platform; |
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market and sell our solutions to existing and new partners; |
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expand and enhance operations to deliver programs, including investments in manufacturing; |
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acquire businesses or technologies to support the growth of our business; |
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attract, hire and retain qualified personnel; |
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continue to establish, protect and defend our intellectual property and patent portfolio, including our ongoing litigation; and |
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operate as a public company. |
To date, we have financed our operations primarily from revenue from our drug discovery partnerships in the form of research fees, government funding from grants, borrowings under credit facilities with commercial banks, and from the issuance and sale of convertible preferred shares and common shares.
Our net income for the year ended December 31, 2018 was $0.3 million and our net loss for the year ended December 31, 2019 was $2.2 million. Our net loss for the nine months ended September 30, 2019 was $0.6 million and our net income for the nine months ended September 30, 2020 was $1.9 million. As of September 30, 2020, we had an accumulated deficit of $2.8 million and we had cash and cash equivalents totaling $91.1 million, primarily from the Series A2 equity issuance which closed in March 2020 of $75.0 million.
The following chart illustrates key milestones achieved since our inception.
Recent Developments
In March 2020, we entered into a discovery partnership agreement with Eli Lilly and Company, or Lilly, pursuant to which we will perform discovery research for a number of targets for Lilly that will result in antibodies for Lilly to develop and potentially commercialize. This partnership includes the licensing of LY-CoV555, a monoclonal antibody designed to block viral attachment of the COVID-19 virus and its entry into human cells as well as other candidate antibodies against COVID-19 discovered by AbCellera. On June 1, 2020,
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90 days after program initiation, LY-CoV555 moved to first-in-human testing and progressed to Phase 3 clinical trials by July 2020. For the nine months ended September 30, 2020, we received an aggregate of $8.0 million upon the satisfaction of clinical milestones by Lilly.
In March 2020, we completed an equity financing, raising an aggregate of $75.0 million in gross proceeds through the sale and issuance of Series A2 convertible preferred shares. In connection with this financing, we also entered into a senior secured credit agreement with OrbiMed Royalty & Credit Opportunities III, LP, or OrbiMed, which provided for term debt in an aggregate amount of $30.0 million. In July 2020, we repaid funds borrowed under the credit agreement facility in full and retired the credit facility with OrbiMed.
In April 2020, we entered into a multi-year agreement with the Canadian governments Strategic Innovation Fund, or SIF. Under this agreement, CAD $175.6 million ($125.6 million) was committed by the Government of Canada. To date, our business has required only minimal expenditures for manufacturing activities. As part of our strategy to expand our market by delivering a full solution through forward integration, we plan to add capabilities and infrastructure to support GMP manufacturing, and we intend to apply such SIF funding towards this goal.
In November 2020, we acquired Trianni. In connection with the acquisition, our U.S. subsidiary entered into an agreement and plan of merger for an initial purchase price of $90.0 million, subject to certain adjustments for working capital, indebtedness and expenses. Upon consummation of the merger, Trianni became our wholly-owned subsidiary. We paid the purchase price for the acquisition using the proceeds from the issuance of the Convertible Notes in an aggregate amount of $90.0 million. The Convertible Notes will mature on October 30, 2025, unless earlier prepaid or converted, and will bear interest from October 30, 2021 at an annual rate of 5%, payable annually in arrears on October 30 of each year, beginning on October 30, 2022. Interest on the Convertible Notes is payable in cash or in the form of additional nonconvertible notes. The Convertible Notes are convertible at the option of the noteholders into our common shares under certain circumstances, including upon the closing of this offering. Convertible Notes converted upon the closing of this offering will convert at a price of 85% of the initial public offering price.
Key Factors Affecting Our Results of Operations and Future Performance
We believe that our financial performance has been, and in the foreseeable future will continue to be, primarily driven by multiple factors as described below, each of which presents growth opportunities for our business. These factors also pose important challenges that we must successfully address in order to sustain our growth and improve our results of operations. Our ability to successfully address these challenges is subject to various risks and uncertainties, including those described in the section of this prospectus titled Risk Factors.
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Securing additional programs under contract. Our potential to grow revenue, in both the near and long term, is dependent on our ability to secure additional programs under contract from new and existing partners. For existing partners, we seek to expand our relationships with them to cover multi-year, multi-target programs. Since our first commercial partnership in 2015, as of September 30, 2020, we had 94 discovery programs that are either completed, in progress or under contract with 26 partners. We are building our business development team across the major biotechnology geographic hubs in order to bring in new partners and new programs under contract, and we believe that we have a significant opportunity to continue to increase the number of partners who have programs based on our platform. Our ability to continue to grow our number of programs under contract is dependent upon our ability to educate the market and support the business through investment in our sales and marketing efforts and through further research and development to enhance our technological differentiation. |
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Our partners successfully developing and commercializing the antibodies that we discover. We have historically generated nearly all of our revenue from research fees. We estimate that, based on the terms of our existing contracts and estimates of historical rates of success of antibody drug |
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development, the vast majority of the potential value for each program under contract is represented by potential future milestone payments and royalties rather than research fees. As a result, we believe our business and our future results of operations will be highly reliant on the degree to which our partners successfully develop and commercialize the antibodies that we discover based on contracts with our partners. As our partners continue to advance development of the antibodies that we have discovered, we expect to start receiving additional milestone payments and royalties if any partners commence commercial sales of such antibodies. For example, recent public announcements by our partner Lilly have indicated that the LY-CoV555 antibody is advancing through late stage clinical trials. We received development milestone payments of $8.0 million from this partnership during the nine months ended September 30, 2020. If this product candidate receives marketing approval and is successfully commercialized by Lilly, we are entitled to receive approval milestones payments and royalties on such sales. The total aggregate amount of clinical and approval milestones related to this partnership is up to $29.0 million. On October 7, 2020, Lilly submitted a request for an EUA for the LY-CoV555 monotherapy to the FDA, which was granted on November 9, 2020. On October 28, 2020, Lilly announced an agreement with the U.S. government to supply 300,000 vials of LY-CoV555 for $375.0 million and on December 2, 2020, Lilly announced the purchase by the U.S. government of an additional 650,000 doses of LY-CoV555 for $812.5 million. On October 29, 2020, Lilly also announced a fixed price contract for procurement of LY-CoV555 in the amount of $312.5 million with the U.S. Army Contracting Command. On November 22, 2020, Lilly was granted authorization for the LY-CoV555 monotherapy by Health Canada under the Interim Order Respecting the Importation, Sale and Advertising of Drugs for Use in Relation to COVID-19. On November 24, 2020, Lilly announced an agreement with the Canadian government to supply 26,000 doses of LY-CoV555 for the three month period between December 2020 and February 2021, for $32.5 million. Under our partnership with Lilly, we are entitled to receive a specified percentage of proceeds that Lilly receives from these sales. |
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Rate and timing of selecting and initiating discovery projects by our partners. Once programs are secured under contract, partners must select targets and agree on a detailed statement of work before we commence discovery research on any antibodies. The rate and timing of such selection and initiation differs from partner to partner. Because the vast majority of research fees that we are entitled to recognize under our partnerships depend on our delivery of antibodies for development by our partners, any delays by our partners in selecting targets and agreeing on statements of work will impact revenue recognition. |
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Investing in enhancements to our technology stack. Our ability to maintain and expand our partnerships is dependent on the advantages our technology stack delivers to our partners. We intend to maintain our leading position through research and development investments to refine and add capabilities in areas such as computation, protein engineering, immunization technologies, genetically engineered rodents and cell line selection. We have successfully closed and will continue to look for strategic technology acquisitions to improve, broaden and deepen our capabilities and expertise in antibody drug discovery and development, or those that offer opportunities to expand our partnership business into adjacent therapeutic modalities. We intend to devote substantial resources to continue to improve our technological differentiation which will impact our financial performance. |
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Scaling our operations to execute on discovery programs. As we secure additional programs under contract and as our partners initiate discovery programs, our operational capacity to execute such research activities may become strained. We are making significant investments in capital and time to increase our ability to address future growth, including building new headquarters, building a new manufacturing plant, investing in research and development and hiring more talented personnel across functions. We have new facilities under development scheduled to take occupancy in 2021 that are intended to materially expand capacity. Over the past twelve months, we have grown our workforce by 82%, moving from 98 to 174 full time employees as of September 30, 2020. As we expand our workforce, we expect a significant increase in our operating expenses, including stock-based compensation. |
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Key Business Metrics
We regularly review the following key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. We believe that the following metrics are important to understand our current business. These metrics may change or may be substituted for additional or different metrics as our business develops. For example, as our business matures and to the extent programs are discontinued, we anticipate updating these metrics to reflect such changes.
Year Ended
December 31, |
Change |
Nine Months
Ended September 30, |
Change | |||||||||||||||||||||
Metric | 2018 | 2019 | % | 2019 | 2020 | % | ||||||||||||||||||
Number of discovery partners |
20 | 22 | 10 | % | 21 | 26 | 24 | % | ||||||||||||||||
Programs under contract, cumulative |
56 | 60 | 7 | % | 59 | 94 | 59 | % | ||||||||||||||||
Program starts, cumulative |
28 | 43 | 54 | % | 39 | 51 | 31 | % | ||||||||||||||||
Programs in the clinic |
0 | 0 | N/M | 0 | 1 | N/M |
Number of discovery partners represents the unique number of partners with whom we have executed partnership contracts. We view this metric as an indication of the competitiveness of our technology stack and our current level of market penetration. The metric also relates to our opportunities to secure programs under contract.
Programs under contract represent the number of antibody development programs that are under contract for delivery of discovery research activities. A program under contract is counted when a contract is executed with a partner under which we commit to discover antibodies against one selected target. A target is any relevant antigen for which a partner seeks our support in developing binding antibodies. We view this metric as an indication of commercial success and technological competitiveness. It further relates to revenue from technology access fees. The cumulative number of programs under contract with downstream participation is related to our ability to generate future revenue from milestone payments and royalties.
Program starts represent the number of unique programs under contract for which we have commenced the discovery effort. The discovery effort commences on the later of (i) the day on which we receive sufficient reagents to start discovery of antibodies against a target and (ii) the day on which the kick-off meeting for the program is held. We view this metric as an indication of our operational capacity to execute on programs under contract. It is also an indication of the selection and initiation of discovery projects by our partners and the resulting near-term potential to earn research fees. Cumulatively, program starts with downstream participation indicate our total opportunities to earn downstream revenue from milestone fees and royalties in the mid- to long-term.
Programs in the clinic represent the count of unique programs for which an Investigational New Drug, or IND, New Animal Drug or Pre-Market Approval, or PMA, application, or equivalents under other regulatory regimes, has been filed based on an antibody that was discovered by us. Where the date of such application is not known to us, the date of the first public announcement of clinical trials will be used instead for the purpose of this metric. We view this metric as an indication of our near- and mid-term potential revenue from milestone fees and potential royalty payments in the long term.
Components of Results of Operations
Revenue
Our revenue currently consists primarily of technology access fees, which are generally generated upon execution of our partnership agreements, and discovery research fees, which are generated through our performance of antibody discovery research for our partners. To a lesser extent, we have also generated revenue from payments triggered by the satisfaction of clinical milestones under our partnership agreements. Our partnership agreements also entitle us to receive payments upon the satisfaction of commercial milestones as well as royalties on our partners sales, if any, of the antibodies that we discover under our partnerships. To date, we have not generated any revenue from commercial
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milestone payments or royalties on product sales because all of our current programs under contract are in the target selection, discovery, preclinical or clinical development stages. We expect revenue to increase over time as we secure additional programs under contract and conduct discovery efforts for our partners, and as our partners continue the development of the antibodies that we deliver. We expect that our revenue will fluctuate from period to period due to the timing of securing additional programs under contract, the inherently uncertain nature of the timing of milestone achievement and our dependence on the program decisions of our partners.
Operating Expenses
Research and Development Expenses. Research and development expenses primarily consist of salaries, benefits, incentive compensation, stock-based compensation, laboratory supplies and materials expenses for employees and contractors engaged in research and product development. We expense all research and development costs in the period in which they are incurred. Research and development activities consist of discovery research for partners as well as our internal platform development. We derive improvements to our technology stack from both types of activities. We have not historically tracked our research and development expenses on a partner-by-partner basis or on a product candidate-by-product candidate basis.
We expect to continue to incur substantial research and development expenses as we conduct discovery research for our partners. In addition, we plan to continue to invest in research and development to enhance our solutions and offerings to our partners, including hiring additional employees and continuing research and development projects obtained through strategic technology acquisitions. As a result, we expect that our research and development expenses will continue to increase in absolute dollars in future periods and vary from period to period as a percentage of revenue.
Sales and Marketing Expenses. Our sales and marketing expenses consist primarily of salaries, benefits, and stock-based compensation costs for employees within our commercial sales functions, as well as marketing, travel expenses and information technology costs that are directly associated with sales and marketing efforts, such as client relationship management tools and other information technology data tools to provide insight into market segments and trends. Until 2019, our sales and marketing function was limited, with only one dedicated business development person supported by two to three marketing staff who are primarily focused on scientific writing. This activity has been complemented with research and development staff attending a variety of scientific conferences, which has helped increase the business development pipeline. The associated expenses are included in research and development expenses as scientific conference attendance is primarily related to our research and development efforts. We expect our sales and marketing expenses to increase in absolute dollars as we expand our commercial sales, marketing and business development teams; increase our presence globally; and increase marketing activities to drive awareness and adoption of our platform. While these expenses may vary from period to period as a percentage of revenue, we expect these expenses to increase as a percentage of sales in the short term as we continue to grow our commercial organization to drive anticipated growth in the business.
General and Administrative Expenses. General and administrative expenses primarily consist of salaries, benefits and stock-based compensation costs for employees in our executive, accounting and finance, project management, corporate development, office administration, legal and human resources functions as well as professional services fees, such as consulting, audit, tax and legal fees, general corporate costs and allocated overhead expenses. General and administrative expenses also include all rent and facilities expenses for all employees, regardless of department or function. We expect that our general and administrative expenses will continue to increase in absolute dollars in future periods, primarily due to increased headcount to support anticipated growth in the business and due to incremental costs associated with operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a securities exchange and costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC and stock exchange listing standards, public relations, insurance and professional services. We expect these expenses to vary from period to period as a percentage of revenue.
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Depreciation. Depreciation expense consists of the depreciation of equipment used actively in the business, primarily by research and development activities, and the depreciation of investments made in the build-out of facilities.
Other (Income) Expense
Interest Income. Interest income consists of interest earned on cash balances in our Bank of Montreal cash accounts. In 2020, following the closing of our preferred share financing, interest income also included interest earned on money market funds administered by Bank of Montreal.
Interest and Other (Income) Expense. Interest expense consists primarily of interest related to borrowings under our credit agreements. For the years ended December 31, 2018 and 2019, we had credit and overdraft agreements with Bank of Montreal. In 2020, prior to the closing of our preferred share financing, we repaid and terminated all material Bank of Montreal credit agreements. In connection with our preferred share financing, we entered into a new credit agreement with OrbiMed. In the third quarter of 2020, we repaid this credit agreement with OrbiMed and retired all of the credit facility.
Foreign Exchange (Gain) Loss, Net. Foreign exchange (gain) loss, net, consists primarily of income or loss due to fluctuation in exchange rates between the Canadian dollar and the U.S. dollar. All of our historical revenue has been generated in U.S. dollars.
Grants and Incentives. Grants and incentives include cost recovery on activities that qualified for approved projects supported by grant funding or tax credits. Grants primarily include the benefit from programs administered by the Canadian governments Ministry of Innovation, Science and Economic Development, such as their Industrial Research Assistance Program, which impacts 2018 and 2019, and the Strategic Innovation Fund, which impacts the nine months ended September 30, 2020. To the extent that grant funding covers capital expenditures, a deferred credit is recorded on the balance sheet and recognized ratably over the benefit period of the related expenditure for which the grant was intended to compensate.
Tax credits include benefits from the Canadian Scientific Research and Experimental Development, or SR&ED, program and the Australian R&D Tax Incentive program. Depending on our Canadian tax status, either a refundable cash or tax credit is accrued for every dollar spent in eligible research and development activities. In Australia, government investment tax credits are in the form of a tax credit for our Australian entity Channel Biologics Pty Ltd. Refundable tax credits are included in grants and incentives. Tax credits are included in a note in the financial statements. We expect to continue to benefit from these tax programs in the future.
Results of Operations
The results of operations presented below should be reviewed in conjunction with the consolidated financial statements and notes included elsewhere in the prospectus. The following tables set forth our results of operations for the periods presented:
Year Ended
December 31, |
Nine Months Ended
September 30, |
|||||||||||||||
2018 | 2019 | 2019 | 2020 | |||||||||||||
(unaudited) | ||||||||||||||||
(in thousands) | ||||||||||||||||
Revenue: |
||||||||||||||||
Research fees |
$ | 8,831 | $ | 11,612 | $ | 8,409 | $ | 17,247 | ||||||||
Milestone payments |
| | | 8,000 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenue |
8,831 | 11,612 | 8,409 | 25,247 | ||||||||||||
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|
|
|
|
|
|
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Year Ended
December 31, |
Nine Months Ended
September 30, |
|||||||||||||||
2018 | 2019 | 2019 | 2020 | |||||||||||||
(unaudited) | ||||||||||||||||
(in thousands) | ||||||||||||||||
Operating expenses: |
||||||||||||||||
Research and development(1) |
5,803 | 10,113 | 6,804 | 20,757 | ||||||||||||
Sales and marketing(1) |
712 | 1,263 | 792 | 1,610 | ||||||||||||
General and administrative(1) |
2,151 | 2,749 | 1,774 | 6,116 | ||||||||||||
Depreciation |
918 | 1,604 | 1,180 | 1,507 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating expenses |
9,583 | 15,729 | 10,550 | 29,990 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Loss from operations |
(753 | ) | (4,117 | ) | (2,141) | (4,743 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Other (income) expense: |
||||||||||||||||
Interest income |
$ | (42 | ) | $ | (155 | ) | $ | (111 | ) | $ | (195 | ) | ||||
Interest and other expense |
213 | 209 | 127 | 4,896 | ||||||||||||
Foreign exchange (gain) loss |
362 | (186 | ) | (348 | ) | (1,146 | ) | |||||||||
Grants and incentives |
(1,594 | ) | (1,774 | ) | (1,239 | ) | (10,217 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other income |
(1,061 | ) | (1,906 | ) | (1,571 | ) | (6,662 | ) | ||||||||
|
|
|
|
|
|
|
|
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Net earnings (loss) for the period |
$ | 309 | $ | (2,211 | ) | $ | (570 | ) | $ | 1,918 | ||||||
|
|
|
|
|
|
|
|
(1) |
Amounts include stock-based compensation as follows: |
Year Ended
December 31, |
Nine Months Ended
September 30, |
|||||||||||||||
2018 | 2019 | 2019 | 2020 | |||||||||||||
(unaudited) | ||||||||||||||||
(in thousands) | ||||||||||||||||
Research and development |
$ | 593 | $ | 606 | $ | 538 | $ | 2,817 | ||||||||
Sales and marketing |
17 | 85 | 83 | 76 | ||||||||||||
General and administrative |
6 | 199 | 157 | 882 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total stock-based compensation |
$ | 615 | $ | 890 | $ | 778 | $ | 3,775 | ||||||||
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|
|
|
|
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Comparison of the Nine Months Ended September 30, 2019 and 2020
Revenue
Nine Months Ended
September 30, |
Change | |||||||||||||||
2019 | 2020 | Amount | % | |||||||||||||
(unaudited) | ||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||
Revenue |
||||||||||||||||
Research fees |
$ | 8,409 | $ | 17,247 | $ | 8,838 | 105 | % | ||||||||
Milestone payments |
| 8,000 | 8,000 | N/M | ||||||||||||
|
|
|
|
|
|
|||||||||||
Total revenue |
$ | 8,409 | $ | 25,247 | $ | 16,838 | 200 | % | ||||||||
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|
|
|
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Revenue increased by $16.8 million, or 200%, from the nine months ended September 30, 2019 to the nine months ended September 30, 2020. The increase was primarily driven by the receipt of payments upon achieving Phase 1, Phase 2, and Phase 3 clinical milestones met by Lilly relating to molecule LY-CoV555 in the amount of $8.0 million, activity related to discovery for the COVID-19 program in the amount of $5.9 million, and increased activity in the partnership business resulting in increased receipts of research fees in the amount of $2.9 million.
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Operating Expenses
Research and Development
Nine Months Ended
September 30, |
Change | |||||||||||||||
2019 | 2020 | Amount | % | |||||||||||||
(unaudited) | ||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||
Research and development |
$ | 6,804 | $ | 20,757 | $ | 13,953 | 205 | % |
Research and development expenses increased by $14.0 million, or 205%, from the nine months ended September 30, 2019 to the nine months ended September 30, 2020. The increase was primarily driven by increased headcount and corresponding increase in compensation expense in the research and development function in the amount of $6.0 million in the aggregate and associated expenses for materials to support these personnel in the amount of $0.8 million and licenses for external platforms of $1.9 million. In the nine months ended September 30, 2020, the Company acquired the OrthoMab bispecific platform from Dualogics in the amount of $4.0 million. This transaction was accounted for as an acquisition of an asset and expensed as incurred, as the platform acquired is intended to be further utilized and expanded on in our research and development efforts.
Sales and Marketing
Nine Months Ended
September 30, |
Change | |||||||||||||||
2019 | 2020 | Amount | % | |||||||||||||
(unaudited) | ||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||
Sales and marketing |
$ | 792 | $ | 1,610 | $ | 818 | 103 | % |
Sales and marketing expenses increased by $0.8 million, or 103%, from the nine months ended September 30, 2019 to the nine months ended September 30, 2020. The increase was primarily driven by increased headcount in business development and marketing staff in the amount of an increase of $0.5 million in compensation expenses, as well as increased expenditures on external consultants for public relations and graphic design activities in the amount of $0.3 million. Sales and marketing expenses related to travel were significantly lower for the nine months ended September 30, 2020 due to COVID-19 related travel restrictions.
General and Administrative
Nine Months Ended
September 30, |
Change | |||||||||||||||
2019 | 2020 | Amount | % | |||||||||||||
(unaudited) | ||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||
General and administrative |
$ | 1,774 | $ | 6,116 | $ | 4,342 | 245 | % |
General and administrative expenses increased by $4.3 million, or 245%, from the nine months ended September 30, 2019 to the nine months ended September 30, 2020. The increase was primarily driven by increased headcount within the general and administrative function and the associated $1.8 million increase in compensation expenses. General and administrative expenses for the nine months ended September 30, 2020 also include costs related to the closing of our preferred share financing and preparation for public markets, legal and accounting fees all totaling $1.6 million. Rent and facilities operating costs also increased by $0.4 million due to two new facilities leases in Vancouver and an additional new facilities lease in Australia.
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Depreciation
Nine Months Ended
September 30, |
Change | |||||||||||||||
2019 | 2020 | Amount | % | |||||||||||||
(unaudited) | ||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||
Depreciation |
$ | 1,180 | $ | 1,507 | $ | 327 | 28 | % |
Depreciation expense increased by $0.3 million, or 28%, from the nine months ended September 30, 2019 to the nine months ended September 30, 2020. The increase was due to the depreciation of equipment and facilities related to increased capital equipment spending over the prior year, in the amount of $4.8 million. For the year ended December 31, 2019, net property, plant and equipment assets totaled $8.5 million, an increase of $2.1 million from the previous year, and for the nine months ended September 30, 2020, net property, plant and equipment assets totaled $14.3 million, an increase of $5.8 million from December 31, 2019.
Other (Income) Expense
Interest Income
Nine Months Ended
September 30, |
Change | |||||||||||||||
2019 | 2020 | Amount | % | |||||||||||||
(unaudited) | ||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||
Interest income |
$ | (111) | $ | (195) | $ | (84) | 76 | % |
Interest income increased by $0.1 million, or 76%, from the nine months ended September 30, 2019 to the nine months ended September 30, 2020. This increase was primarily driven by a larger cash balance maintained in the nine months ended September 30, 2020 compared to the prior period.
Interest and Other Expense
Nine Months Ended
September 30, |
Change | |||||||||||||||
2019 | 2020 | Amount | % | |||||||||||||
(unaudited) | ||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||
Interest and other expense |
$ | 127 | $ | 4,896 | $ | 4,769 | 3755 | % |
Interest and other expenses increased by $4.8 million, or 3755%, from the nine months ended September 30, 2019 to the nine months ended September 30, 2020. The increase was primarily driven by $3.7 million in combined cancellation fees and legal fees on early retirement of the OrbiMed credit agreement in July 2020. In addition there was higher interest charged on credit facilities outstanding during the nine months ended September 30, 2020 compared to the prior period. The main driver for this increase in interest expense was the OrbiMed credit agreement in the amount of $0.7 million while that agreement was in effect.
Foreign Exchange Gain
Nine Months Ended
September 30, |
Change | |||||||||||||||
2019 | 2020 | Amount | % | |||||||||||||
(unaudited) | ||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||
Foreign exchange gain, net |
$ | (348) | $ | (1,146 | ) | $ | (798 | ) | 229 | % |
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The foreign exchange gain, net, was primarily driven by the cash balance held in Canadian dollars and a strengthening of Canadian dollars against U.S. dollars, given the timing of when actual currency trades were made, during the nine months ended September 30, 2020 compared to the prior period.
Grants and Incentives
Nine Months Ended
September 30, |
Change | |||||||||||||||
2019 | 2020 | Amount | % | |||||||||||||
(unaudited) | ||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||
Grants and incentives |
$ | (1,239 | ) | $ | (10,217 | ) | $ | (8,978 | ) | 725 | % |
Grants and incentives increased by $9.0 million, or 725%, from the nine months ended September 30, 2019 to the nine months ended September 30, 2020. This increase was driven primarily by expenses for which there was cost recovery related to the SIF project entered into between us and the Government of Canada in April 2020, in the amount of $8.4 million. Any additional cash from the SIF project that we receive for eligible capital expenditure activities resulted in recognition of a deferred credit on the balance sheet.
Comparison of the Years Ended December 31, 2018 and 2019
Revenue
Year Ended
December 31, |
Change | |||||||||||||||
2018 | 2019 | Amount | % | |||||||||||||
(in thousands, except percentages) | ||||||||||||||||
Revenue |
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Research fees |
$ | 8,831 | $ | 11,612 | $ | 2,781 | 31 | % | ||||||||
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Total revenue |
$ | 8,831 | $ | 11,612 | $ | 2,781 | 31 | % | ||||||||
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Revenue increased by $2.8 million, or 31%, from the year ended December 31, 2018 to the year ended December 31, 2019. The increase was primarily driven by a higher number of programs under contract executed in 2019 for which we received research fees associated with discovery work conducted for our partners. There was no clinical milestone payment revenue in the years ended December 31, 2018 and 2019.
Operating Expenses
Research and Development
Year Ended
December 31, |
Change | |||||||||||||||
2018 | 2019 | Amount | % | |||||||||||||
(in thousands, except percentages) | ||||||||||||||||
Research and development |
$ | 5,803 | $ | 10,113 | $ | 4,310 | 74 | % |
Research and development expenses increased by $4.3 million, or 74%, from the year ended December 31, 2018 to the year ended December 31, 2019. The increase was primarily driven by increased headcount in the research and development function and associated expenses consisting primarily of personnel compensation in the amount of $2.5 million. In addition expenses related to materials supporting research and development activities increased $0.9 million.
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Sales and Marketing
Year Ended
December 31, |
Change | |||||||||||||||
2018 | 2019 | Amount | % | |||||||||||||
(in thousands, except percentages) | ||||||||||||||||
Sales and marketing |
$ | 712 | $ | 1,263 | $ | 551 | 77 | % |
Sales and marketing expenses increased by $0.6 million, or 77%, from the year ended December 31, 2018 to the year ended December 31, 2019. The increase was primarily driven by increased compensation expense in the amount of $0.3 million and the engagement of a public relations consulting firm of $0.2 million.
General and Administrative
Year Ended
December 31, |
Change | |||||||||||||||
2018 | 2019 | Amount | % | |||||||||||||
(in thousands, except percentages) | ||||||||||||||||
General and administrative |
$ | 2,151 | $ | 2,749 | $ | 598 | 28 | % |
General and administrative expenses increased by $0.6 million, or 28%, from the year ended December 31, 2018 to the year ended December 31, 2019. The increase was primarily driven by increased headcount within the general and administrative function and associated expenses consisting primarily of personnel compensation in the amount of $0.7 million.
Depreciation
Year Ended
December 31, |
Change | |||||||||||||||
2018 | 2019 | Amount | % | |||||||||||||
(in thousands, except percentages) | ||||||||||||||||
Depreciation |
$ | 918 | $ | 1,604 | $ | 686 | 75 | % |
Depreciation expense increased by $0.7 million, or 75%, from the year ended December 31, 2018 to the year ended December 31, 2019. The increase was primarily driven by a significant investment in capital assets made in 2018 and 2019 for laboratory space at our Vancouver Yukon Street facility and associated equipment in that facility in the amount of $5.3 million and $4.0 million, respectively.
Other (Income) Expense
Interest Income
Year Ended
December 31, |
Change | |||||||||||||||
2018 | 2019 | Amount | % | |||||||||||||
(in thousands, except percentages) | ||||||||||||||||
Interest income |
$ | (42 | ) | $ | (155 | ) | $ | (113 | ) | 269 | % |
Interest income increased by $0.1 million, or 269%, from the year ended December 31, 2018 to the year ended December 31, 2019. The increase was primarily driven by a larger average cash balance maintained in the year ended December 31, 2019 compared to the prior period.
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Interest and Other Expense
Year Ended
December 31, |
Change | |||||||||||||||
2018 | 2019 | Amount | % | |||||||||||||
(in thousands, except percentages) | ||||||||||||||||
Interest and other expense |
$ | 213 | $ | 209 | $ | (4 | ) | (2 | )% |
There was no material change in interest and other expenses for the year ended December 31, 2018 compared to the year ended December 31, 2019. Some interest was charged on the Bank of Montreal loan carried during these two periods.
Foreign Exchange (Gain) Loss
Year Ended
December 31, |
Change | |||||||||||||||
2018 | 2019 | Amount | % | |||||||||||||
(in thousands, except percentages) | ||||||||||||||||
Foreign exchange (gain) loss |
$ | 362 | $ | (186 | ) | $ | (548 | ) | N/M |
Foreign exchange (gain) loss decreased by $0.5 million from the year ended December 31, 2018 to the year ended December 31, 2019. Foreign exchange gains and losses are driven primarily by the Canadian dollar cash balances that we maintain and the relative exchange rates between Canadian dollars and U.S. dollars.
Grants and Incentives
Year Ended
December 31, |
Change | |||||||||||||||
2018 | 2019 | Amount | % | |||||||||||||
(in thousands, except percentages) | ||||||||||||||||
Grants and incentives |
$ | (1,594 | ) | $ | (1,774 | ) | $ | (180 | ) | 11 | % |
Grants and incentives increased by $0.2 million, or 11%, from the year ended December 31, 2018 to the year ended December 31, 2019. This amount is associated with the Canadian SR&ED refundable tax credit program. With this program, we are able to claim eligible research and development expenses and earn a refundable tax credit after applying the applicable rate. The 2018 refundable tax credit was $1.4 million and the 2019 refundable tax credit was $1.1 million. This change in the effective claim amount is largely due to our growth. As a larger enterprise we no longer qualify for the enhanced claim rate extended to smaller businesses in Canada.
Liquidity and Capital Resources
As of September 30, 2020, we had $91.1 million of cash and cash equivalents. To date, we have primarily relied on revenue in the form of research fees from partners, government grants, conventional bank debt and equity financings to fund our operations, including most recently raising gross proceeds of $75.0 million through the sale and issuance of Series A2 convertible preferred shares.
We have generated positive operating cash flow cumulatively since our inception in 2012 and in every year since 2018. We intend to significantly invest in our business, and as a result may incur operating losses in future periods. We will continue to invest in research and development efforts towards expanding our capabilities and expertise along our technology stack, as well as building our business development team and marketing our solutions to new and existing partners. Based on our current business plan, we believe the net proceeds from this offering, together with our existing cash and cash equivalents and anticipated cash flows from operations, will be sufficient to meet our working capital and capital expenditure needs over at least the next 24 months following the date of this prospectus.
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Our future capital requirements will depend on many factors, including, but not limited to our ability to successfully secure additional programs under contract with new and existing partners, the successful identification and discovery of antibodies for our partners and the successful development and commercialization by our partners of the antibodies that we deliver. If we are unable to execute on our business plan and adequately fund operations, or if the business plan requires a level of spending in excess of cash resources, we may be required to negotiate partnerships in which we receive greater near-term payments at the expense of potential downstream revenue. Alternatively, we may need to seek additional equity or debt financing, which may not be available on terms acceptable to us or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common shareholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants restricting our ability to take specific actions, such as incurring additional debt, selling or licensing our assets, making product acquisitions, making capital expenditures, or declaring dividends. If we are unable to generate sufficient revenue or raise additional capital when desired, our business, financial condition, results of operations and prospects would be adversely affected.
Sources of Liquidity
Since our inception, we have financed our operations primarily from revenue in the form of research fees and milestone payments from partners, government grants, conventional bank debt and equity financings.
Revenue from Research Fees
We receive payments from our partnerships in the form of technology access and discovery research fees as we conduct discovery activities for our partners. Such fees are recognized as revenue in the period when the discovery work is performed.
Revenue from Milestone and Royalty Payments
We are entitled to additional payments with respect to discovery programs with our partners upon the satisfaction of development and approval milestones, as well as royalties upon sales, if any, by our partners of the antibodies that we discover.
In May, June and July 2020, we received the first milestone payments related to LY-CoV555, a molecule discovered by us in connection with our partnership with Lilly. If this antibody receives marketing approval, we are entitled to additional approval milestone payments. If this antibody is commercialized and sales of this molecule commence, we are entitled to a royalty under our partnership agreement.
BLAZE-1 is a randomized, double-blind, placebo-controlled Phase 2 study conducted by Lilly that is designed to assess the efficacy and safety of LY-CoV555 and an additional Lilly product candidate for the treatment of symptomatic COVID-19 in the outpatient setting. Across all treatment arms, the trial is designed to enroll an estimated 800 participants. The monotherapy arms of BLAZE-1 enrolled mild-to-moderate recently diagnosed COVID-19 patients across four groups (placebo, LY-CoV555 700 mg, LY-CoV555 2800 mg, and LY-CoV555 7000 mg). The primary outcome measure for the BLAZE-1 monotherapy arms was change from baseline to day 11 in SARS-CoV-2 viral load. Additional endpoints include the percentage of participants who experience COVID-related hospitalization, emergency room visit or death from baseline through day 29, as well as safety. Lilly announced that the primary endpoint, change from baseline in viral load at day 11, was met at the 2800 mg dose level, but not the others. Most patients, including those receiving placebo, demonstrated near complete viral clearance by day 11. Additional analyses of viral data demonstrated that LY-CoV555 improved viral clearance at an earlier time point (day 3) and reduced the proportion of patients with persistently high viral load at later time points. Lilly also announced that LY-CoV555 was well-tolerated, with no drug-related serious adverse events reported. Treatment emergent adverse events were similar across all dose groups and comparable
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to placebo. Viral RNA sequencing revealed putative LY-CoV555-resistance variants in placebo and all treatment arms. The rate of resistance variants was numerically higher in treated patients (8 percent) versus placebo (6 percent).
On October 7, 2020, Lilly submitted a request for an EUA for the LY-CoV555 monotherapy to the FDA, which was granted on November 9, 2020. On October 28, 2020, Lilly announced an agreement with the U.S. government to supply 300,000 vials of LY-CoV555 for $375.0 million and on December 2, 2020, Lilly announced the purchase by the U.S. government of an additional 650,000 doses of LY-CoV555 for $812.5 million. On October 29, 2020, Lilly also announced a fixed price contract for procurement of LY-CoV555 in the amount of $312.5 million with the U.S. Army Contracting Command. On November 22, 2020, Lilly was granted authorization for the LY-CoV555 monotherapy by Health Canada under the Interim Order Respecting the Importation, Sale and Advertising of Drugs for Use in Relation to COVID-19. On November 24, 2020, Lilly announced an agreement with the Canadian government to supply 26,000 doses of LY-CoV555 for the three month period between December 2020 and February 2021, for $32.5 million. Under our partnership with Lilly, we are entitled to receive a specified percentage of proceeds that Lilly receives from these sales. See the section of this prospectus titled BusinessEli Lilly Partnership for additional details.
Equity Financings and Option Exercises
As of September 30, 2020, we have raised a total of $88.6 million from the issuance and sale of convertible preferred shares and common shares, net of costs associated with such financings, and exercises of employee share options.
Prior Credit Agreements
In 2018, we entered into a credit agreement with Bank of Montreal that provided for a term loan, a revolving credit facility and a facility for travel expenses. Interest on this facility accrued at a prime floating rate plus 1.5% per annum. In March 2020, we retired our term loan and revolving credit facility with Bank of Montreal. We continue to maintain a credit facility for travel expenses.
As part of our $105.0 million Series A2 financing in March 2020, we entered into a senior secured credit agreement with OrbiMed, which provided for a term loan in an aggregate amount of $30.0 million for a five-year term. Borrowings under this facility bore interest at a rate per annum equal to an applicable margin of 6% plus the higher of LIBOR for the applicable interest period and 1.75%. In July 2020, we repaid funds borrowed under this facility in full and retired the credit facility with OrbiMed. All associated security interests with this credit facility were released.
Ministry of Western Economic Diversification under the Western Innovation Initiative
Starting in April 2015, we have obtained funding from the Canadian Ministry of Western Economic Diversification, or WD Canada, under the Western Innovation Initiative, or WINN, and the Business Scale-up and Productivity, or BSP, programs. WINN and BSP are Canadian federal government initiatives which provide financing to projects that meet certain program criteria. The funding covers project expenditures for the purchase of capital equipment and the payment of project-related expenses. The terms of these WD Canada loans include a draw of the loan over the three years of a project, one year of no repayments for the loan followed by repayment over five years in equal installments of the principal amount of the loan. These loans are provided at zero interest and are unsecured. As of September 30, 2020, we have three loans with WD Canada for projects started in 2015, 2016, and 2019, representing total available funding of $5.7 million. For the projects started in 2015 and 2016, loan repayments have commenced and are expected to be $205,000 in 2020. As of September 30, 2020, approximately $2.3 million remained outstanding that was borrowed under this initiative, and these loans are repayable in installments through to 2028.
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Government of Canadas Strategic Innovation Fund
In April 2020, we entered into a multi-year agreement with the Canadian governments Strategic Innovation Fund, or SIF. Under this agreement, up to CAD $175.6 million ($125.6 million) was committed by the Government of Canada to be directed towards two key stages of a project.
The first stage will provide financial support to our operations during the work that we perform for the discovery of antibodies against COVID-19. The funding supports investment into equipment, teams and physical space to advance our platform for future pandemic preparedness. The Canadian government has committed up to CAD $63.9 million ($45.7 million) towards this stage of the project, based on costs incurred and paid and such funding is non-repayable. As of September 30, 2020, we have claimed a total of CAD $17.3 million ($12.8 million) under this first stage of the project.
The second stage of the project is intended to fund the expansion of research and development; building out process development and chemistry, manufacturing and control, or CMC, capabilities; constructing a facility for GMP manufacturing; and all related supporting laboratory and office requirements. The project related budget includes project costs for the land and building, the fit out for offices, labs, GMP cleanrooms as well as the equipment required to develop fully functional CMC and GMP capabilities as required to support clinical trials. The Canadian government has committed up to CAD $111.7 million ($79.9 million) for this project, contingent upon costs incurred and paid, with the rest to be co-funded by us through partnering with a developer and taking a co-ownership position in the resulting facilities. Completion and approval of a feasibility study is required to further advance this project and prior to any SIF reimbursement for this stage. SIF funding for this project is expected to occur between 2020 and 2025. Repayment of SIF assistance received for this stage of the project will be calculated as a percentage rate of AbCelleras revenue, with payment made to the Government of Canada on an annual basis during the repayment period starting in 2027. Repayment on this stage of the project is conditional on revenue thresholds being achieved in seven years, a year following the completion of the project and over the subsequent ten-year period. If the revenue threshold is not met, the SIF funding contribution will be non-repayable. This funding and its associated conditional repayment is not secured by any of our assets or that of the project. As of September 30, 2020, we have claimed a total of CAD $0.1 million ($0.1 million) under this second stage of the project.
We conduct work, incur expenses and fund all costs from our own cash resources. On a quarterly basis, we submit claims to the SIF for eligible reimbursable expenses. As of September 30, 2020, we have claimed a total of CAD $17.4 million ($12.9 million) under SIF.
Cash Flows
The following table summarizes our cash flows for the periods presented:
Year Ended
December 31, |
Nine Months Ended
September 30, |
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2018 | 2019 | 2019 | 2020 | |||||||||||||
(unaudited) | ||||||||||||||||
(in thousands) | ||||||||||||||||
Net cash provided by (used in): |
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Operating activities |
$ | 3,566 | $ | 2,694 | $ | 2,234 | $ | 21,414 | ||||||||
Investing activities |
(5,307 | ) | (5,780 | ) | (5,152 | ) | (11,598 | ) | ||||||||
Financing activities |
12,186 | 195 | (53 | ) | 73,713 | |||||||||||
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Net increase (decrease) in cash and cash equivalents, and restricted cash |
$ | 10,444 | $ | (2,891 | ) | $ | (2,971 | ) | $ | 83,529 | ||||||
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Operating Activities
Net cash provided by operating activities increased by $19.2 million from $2.2 million in the nine months ended September 30, 2019 to $21.4 million in the nine months ended September 30, 2020. The increase resulted primarily from increased revenue from discovery research activities, securing new multi-year, multi-target contracts with partners that involved up front technology access fees upon execution of the contract, and payments resulting from the satisfaction of clinical milestones under our partnership with Lilly.
Net cash provided by operating activities decreased by $0.9 million from $3.6 million in the year ended December 31, 2018 to $2.7 million in the year ended December 31, 2019. The decrease resulted primarily from fewer large contracts with technology access fees entered into in 2019 as compared to 2018.
Investing Activities
Net cash used in investing activities was $5.2 million in the nine months ended September 30, 2019 compared to $11.6 million in the nine months ended September 30, 2020. The increase in cash used was primarily driven by investment in a fully paid up license for access to a humanized rodent platform for discovery projects with Alloy Therapeutics. By contrast, in the nine months ended September 30, 2019, investments were limited to equipment used primarily in our research and development activities.
Net cash used in investing activities was $5.3 million during the year ended December 31, 2018 compared to $5.8 million in the year ended December 31, 2019. The increase in cash used was primarily driven by issuance of related party loans.
Financing Activities
Net cash used in financing activities was $0.1 million for the nine months ended September 30, 2019 compared to net cash provided by financing activities of $73.7 million for the nine months ended September 30, 2020. Net cash provided by financing activities for the nine months ended September 30, 2020 related primarily to the Series A2 financing round closed in March 2020. By contrast, no major equity financing was completed in 2019.
Net cash provided by financing activities was $12.2 million for the year ended December 31, 2018 compared to $0.2 million for the year ended December 31, 2019. Net cash provided by financing activities for the year ended December 31, 2018 resulted primarily from the Series A preferred share financing, common share equity issuances, and drawdowns from the Bank of Montreal credit agreement to fund facilities expansion in 2018. Net cash provided by financing activities during the year ended December 31, 2019 resulted primarily from the proceeds from debt at Bank of Montreal used to help finance equipment at our Vancouver Yukon Street facility.
Contractual Obligations and Commitments
The following table summarizes our contractual obligations and commitments as of September 30, 2020:
Payments Due by Period | ||||||||||||||||||||
(unaudited, in thousands) | Total |
Less than
1 Year |
1 to 3
Years |
3 to 5
Years |
More than
5 Years |
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Long-term debt obligations, including interest(1)(2) |
$ | 3,110 | $ | 530 | $ | 1,783 | $ | 732 | $ | 65 | ||||||||||
Operating lease obligations(3) |
4,495 | 818 | 1,300 | 1,201 | 1,177 | |||||||||||||||
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$ | 7,605 | $ | 1,348 | $ | 3,083 | $ | 1,932 | $ | 1,242 | ||||||||||
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(1) |
In March 2020, we retired our term loan and line of credit facility with Bank of Montreal. We continue to maintain a credit facility for travel expenses. |
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(2) | Includes obligations outstanding as of September 30, 2020 related to funding obtained from WD Canada under the WINN and BSP programs. The funding covers project expenditures for the purchase of capital equipment and the payment of project-related expenses. The terms of these WD Canada loans include a draw of the loan over the three years of a project, one year of no repayments for the loan followed by repayment over five years in equal installments of the principal amount of the loan. These loans are provided at zero interest and are unsecured. |
(3) | We lease our office and laboratory space of approximately 22,000 square feet at the Yukon St facility in Vancouver, British Columbia under a lease that expires in December 2027. In February 2020, we entered into an additional lease for approximately 5,000 square feet at the Broadway St facility in Vancouver, British Columbia under a lease that expires in 2025. In June 2020, we entered into an additional lease for approximately 6,300 square feet at the Ontario St facility in Vancouver, British Columbia under a lease that expires in 2022. Amounts in the table reflect minimum payments due for our leases of office and laboratory space. |
We are a party to license agreements with the University of British Columbia and the Leland Stanford Junior University, pursuant to which we are required to make payments to the counterparties, including, as applicable, annual license fees and royalties. See the section of this prospectus titled BusinessIntellectual Property for additional details.
Income Taxes
We do not have any Canadian non-capital loss carried forward. As of December 31, 2019, we had Canadian income tax credits of $1.2 million to offset Canadian federal and provincial taxes payable expiring in the years 2029 through 2040. As of December 31, 2019, we had unclaimed tax deductions for scientific research and experimental development of approximately $1.0 million that do not expire. As of December 31, 2019, we had income tax credits and operating losses carried forward related to non-Canadian operations of approximately $1.5 million, with expiration dates between 2029 and 2040. Our carryforwards are subject to review and possible adjustment by the appropriate taxing authorities. These carryforwards may generally be utilized in any future period but may be subject to limitations based upon changes in the ownership of our shares in a prior or future period. We have not quantified the amount of such limitations, if any.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Internal Control Over Financial Reporting
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. Under standards established by the Public Company Accounting Oversight Board, or PCAOB, a deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or personnel, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. The PCAOB defines a material weakness as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented, or detected and corrected, on a timely basis.
In connection with the preparation and audits of our financial statements as of and for the years ended December 31, 2018 and 2019 included elsewhere in this prospectus, we identified a material weakness in our internal control over financial reporting. Specifically, there was a material adjustment in our financial statements required due to an overstatement of a lease liability upon adoption of Accounting Standards Update, or ASU, 2016-02, Leases (Topic 842), as well as certain other adjustments. In the aggregate, such adjustments amounted to a material weakness. The material weakness resulted from a lack of resources and experience within our finance function, in particular with respect to the adoption of the new lease accounting standard and with respect to our transition to U.S. GAAP, and our change in measurement currency from Canadian dollars to U.S. dollars.
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We have begun taking measures, and plan to continue to take measures, to remediate this material weakness. These measures include hiring or engaging additional accounting personnel with familiarity with reporting under U.S. GAAP, and implementing and adopting additional controls and procedures. Our recruitment efforts to identify additional accounting personnel and implementation of additional accounting processes and controls are underway. Remediation costs consist primarily of additional personnel expenses, which we do not anticipate will have a material impact to our financial statements. See Risk FactorsRisks Related to this Offering and Ownership of Our Common Shares. We have identified a material weakness in our internal control over financial reporting, and we may identify additional material weaknesses in the future or otherwise fail to maintain proper and effective internal controls, which may impair our ability to produce accurate financial statements on a timely basis.
However, the implementation of these measures may not be sufficient to remediate the control deficiencies that led to the material weakness in our internal control over financial reporting or to prevent or avoid potential future material weaknesses. Moreover, our current controls and any new controls that we develop may become inadequate in the future because of changes in conditions in our business. Furthermore, we may not have identified all material weaknesses and weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. If we are unable to successfully remediate our existing or any future material weaknesses in our internal control over financial reporting, or if we identify any additional material weaknesses, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting, and our share price may decline as a result. We also could become subject to investigations by Nasdaq, the SEC, or other regulatory authorities. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods, which could cause the price of our common shares to decline.
Qualitative and Quantitative Disclosures About Market Risk
Concentration of Credit Risk
We bear credit risk primarily in the payments owed to us by our partners for work performed under our partnership agreements, for which receivables are concentrated in a limited number of partners. For the nine months ended September 30, 2020, two partners accounted for 50% and 21% of revenue, and the remaining 29% of revenue was accounted for by nine partners. For the nine months ended September 30, 2019, two partners accounted for 47% and 15% of revenue, and the remaining 38% of revenue was accounted for by nine partners. Two partners accounted for 93% and 5% of accounts receivable as of September 30, 2020.
For the years ended December 31, 2019 and 2018, two partners accounted for 61% and 71% of revenue. As of December 31, 2019, two partners comprised 49% and 24% of accounts receivable. As of December 31, 2018, two partners comprised 98% and 1% of accounts receivable.
Interest Rate Risk
As of December 31, 2019 and September 30, 2020, we had a cash balance of $7.6 million and $91.1 million, respectively, a majority of which was maintained in bank accounts and money market funds with Bank of Montreal. Our primary exposure to market risk is to interest income volatility, which is affected by changes in the general level of interest rates. As such rates are at a near record low, a 10% change in the market interest rates would not have a material effect on our business, financial condition or results of operations.
Foreign Currency Risk
We are exposed to financial risks as a result of exchange rate fluctuations between the U.S. dollar and the Canadian dollar and the volatility of these rates. In the normal course of business, we earn revenue denominated
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in U.S. dollars and we incur expenses in Canadian denominated, U.S. denominated and Australian denominated dollars. Our reporting currency is the U.S. dollar. We hold a majority of our cash in U.S. dollars. We do not expect that foreign currency gains and losses will have a material effect on our financial position or results of operations in the foreseeable future. To date, we have not entered into any hedging arrangements with respect to foreign currency risk. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency exchange rates.
Critical Accounting Policies and Estimates
We have prepared our consolidated financial statements in accordance with U.S. GAAP. Our preparation of these consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could therefore differ materially from these estimates under different assumptions or conditions.
While our significant accounting policies are described in more detail in Note 3 to our audited consolidated financial statements included elsewhere in this prospectus, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Revenue Recognition
Our revenue currently primarily consists of research fees and milestone payments, which are generated through our performance of antibody discovery research for our partners. Promised deliverables to our global partners include research and development. The Company applied ASC 606 to all arrangements to date.
In accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, or ASC 606, we account for revenue from contracts with partners, whom we view as customers under ASC 606, which includes the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when or as we satisfy a performance obligation. For instances where promises are not distinct at contract inception they are combined into a single performance obligation. An option to acquire additional goods and/or services is evaluated on both quantitative and qualitative aspects to determine if such an option provides a material right to the customer that the customer would not have received without entering into the contract. If so, the option is accounted for as a separate performance obligation. If not, the option is considered a marketing offer and is accounted for as a separate contract upon the customers election.
When applying the revenue recognition criteria of ASC 606 to research fees and milestone payments, management applies significant judgment when evaluating whether contractual obligations represent distinct performance obligations; allocating transaction price to performance obligations within a contract; determining when performance obligations have been met; assessing the recognition and future reversal of variable consideration; and when determining and applying appropriate methods of measuring progress for performance obligations satisfied over time.
We allocate the transaction price to each performance obligation identified in the contract on a relative standalone selling price basis. Revenue is recognized based on the amount of the transaction price that is allocated to each respective performance obligation when or as the performance obligation is satisfied by transferring a promised good and/or service to the customer. We generally use output methods to measure the progress toward satisfaction of performance obligations that are satisfied over time. Due to different types of end customers and differences in the nature of work involved, revenue contracts require formal inspection and
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approval of experiments and research plans at each stage of work. Therefore, the output method is the most faithful depiction of our performance.
Research fees. We negotiate technology access fees and discovery research fees in our partnership contracts that are recognized as revenue in the period when the discovery work is performed. The transaction price generally includes fixed fees due at contract inception as well as fixed fees payable at the beginning and end of different phases of the discovery research services performed. We utilize either the expected value method or the most likely amount method to estimate the amount of variable consideration to include in the transaction price, as most appropriate in the circumstances.
Milestone payments. At the inception of the arrangement, we evaluate whether the associated event is considered probable of achievement and estimate the amount to be included in the transaction price using the most likely amount method. In determining the transaction price, we constrain the transaction price for variable consideration to limit its inclusion so that it only includes the amount that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The process of successfully achieving the criteria for the milestone payments is highly uncertain. Consequently, there is a significant risk that we may not earn all of the milestone payments from each of our arrangements. Management applies significant judgment when assessing the likelihood of milestones being achieved and when allocating the transaction price to each performance obligation for revenue recognition purposes.
Stock-Based Compensation
We measure stock-based compensation based on the grant date fair value of the stock-based awards and recognize stock-based compensation expense on a straight-line basis over the requisite service period of the awards, which is generally the vesting period of the respective award. For non-employee awards, compensation expense is recognized as the services are provided, which is generally ratably over the vesting period. Awards with an exercise price which is not denominated in: (a) the currency of a market in which a substantial portion of our equity securities are traded, (b) the currency in which the individuals pay is denominated, or (c) our functional currency, are classified as liabilities, and are subsequently re-measured to fair value at each balance sheet date until exercised or cancelled, with changes in fair value recognized as compensation cost for the period.
Stock-based compensation expense is classified in our consolidated statements of income (loss) and comprehensive income (loss) based on the function to which the related services are provided. We recognize stock-based compensation expense for the portion of awards that have vested. Forfeitures are accounted for as they occur.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which requires inputs based on certain subjective assumptions, including the expected share price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the option, and our expected dividend yield.
As there is currently no public market for our common shares, we determined the volatility for awards granted with reference to an analysis of reported data for a group of guideline companies that issued options with substantially similar terms. We expect to continue to do so until we have adequate historical data regarding the volatility of the trading price of our common shares on the Nasdaq Stock Market. The risk-free interest rate is determined by reference to the Bank of Canada Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The expected term represents the period that the stock-based awards are expected to be outstanding. We use the simplified method to determine the expected term, which is based on the average of the time-to-vesting and the contractual life of the options. We have not paid, and do not anticipate paying, dividends on our common shares; therefore, the expected dividend yield is assumed to be zero.
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As there has been no public market for our common shares to date, the historical estimated fair value of our common shares has been approved by our board of directors. Prior to November 2019, our board of directors determined the per-share fair value of our common shares in connection with option grants as equal to the per-share issuance price of our common shares in the then-most recent arms length financing transaction. After such date, our board of directors determined the fair value of our common shares considering our most recently available independent third-party valuations of common shares and our operating results and financial performance.
In accordance with the guidance outlined in the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, third-party valuation firms prepared valuations of our common shares. From November 2019 until March 2020, such valuations used a discounted cash flow, or DCF, analysis, which is based on managements projection of future revenues and costs. The future cash flows are adjusted to arrive at a risk-adjusted present-day value of the future cash flows and fair value of equity. From March 2020 to July 2020, such valuations used a methodology that calculated the implied total value of an enterprise by accounting for all share class rights and preferences, as of the date of the latest financing. The total equity value implied by this transaction was then applied in the context of an option pricing model to determine the value of each class of our shares. The analysis used an option pricing method, or OPM, which treats common shares and preferred shares as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a companys securities changes. The OPM takes into account the preferred shareholders liquidation preferences, participation rights, dividend policy and conversion rights to determine how proceeds from a liquidity event will be distributed among various ownership classes at a future date. A discount for lack of marketability of the common shares is then applied to arrive at an indication of value for the common shares. After July 2020, in contemplation of this offering, such valuations estimated the enterprise value of our business using a hybrid approach in determining the fair value of our common shares that includes a probability-weighted expected return method, or PWERM and the OPM. Under a PWERM, the fair market value of our common shares is estimated based upon an analysis of future values for the enterprise assuming various future outcomes. Based on the timing and nature of an assumed liquidity event in each scenario, a discount for lack of marketability would be applied to each scenario, as appropriate. The probability-weighted the value of each expected outcome would then be used to arrive at an estimate of fair value per common share.
Our third-party valuation reports estimated a valuation of our common shares of $1.24 per share as of June 30, 2020, $2.37 per share as of September 30, 2020 and $2.71 per share as of October 31, 2020. No third-party valuation report was prepared for any period after October 31, 2020.
In addition to considering the results of the third-party valuations, our board of directors considered various objective and subjective factors to determine the fair value of our common shares as of each grant date, which may be a date other than the most recent third-party valuation date, including:
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the prices at which we most-recently sold preferred shares and the superior rights and preferences of the preferred shares relative to our common shares at the time of each grant; |
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the lack of liquidity of our equity as a private company; |
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our stage of development and business strategy and the material risks related to our business and industry; |
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our financial condition and operating results, including our levels of available capital resources and forecasted results; |
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developments in our business, including the achievement of milestones such as entering into partnering agreements; |
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the valuation of publicly traded companies in the life sciences, biopharmaceutical and healthcare technology sectors, as well as recently completed mergers and acquisitions of peer companies; |
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any external market conditions affecting our industry, and trends within our industry; |
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the likelihood of achieving a liquidity event for the holders of our preferred shares and holders of our common shares, such as an initial public offering, or IPO, or a sale of our company, given prevailing market conditions; and |
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the analysis of IPOs and the market performance of similar companies in our industry. |
For purposes of determining the fair value of our common shares for the awards granted on October 28, 2020 and October 29, 2020, we also considered the applicability of the following factors and determined not to assign probability weightings to the potential occurrence of such events for the reasons discussed below:
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The application by Eli Lilly on October 7, 2020 for EUA for the LY-CoV555 monotherapy to the FDA was not assigned a probability weighting due to the significant general risks and uncertainties in drug therapy applications with the FDA, in addition to the binary nature and outcome of the EUA application assessment. While we were aware that an EUA application was submitted to the FDA, we were not a party to the application, nor did we have control over its contents. In addition, we were not involved in any interactions with the FDA in relation to this application and therefore had little insight into the status of the application, the nature of any questions or comments raised by the agency in its review or any likelihood of the grant of the EUA. |
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The October 28, 2020 announcement by Eli Lilly of an agreement with the U.S. government to supply 300,000 vials of LY-CoV555 for $375.0 million for which we are eligible to receive royalties in the low- to mid-twenties was not assigned a probability weighting due to the substantial uncertainty as to the likelihood of receipt of the EUA that is a precondition for any sales of the antibody to occur and upon which our eligibility to receive royalties depends. |
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The process of acquiring Trianni, Inc. was not assigned a probability weighting because the proposed acquisition was to be made at fair value of the net assets acquired, the acquisition was not completed until November 3, 2020 and not publicly announced until November 18, 2020. Until such announcement, we had no insight into market reaction to this acquisition and its perceived impact on our valuation. |
The assumptions underlying these valuations represented managements best estimates, which involved inherent uncertainties and the application of managements judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, the fair value of our common shares and our stock-based compensation expense could be materially different.
The awards granted on November 18, 2020 had a per-share exercise price based on the factors described above that were considered for the October 28, 2020 and October 29, 2020 grants. Subsequent to October 29, 2020, the EUA application for the LY-CoV555 monotherapy was granted by the FDA on November 9, 2020. We intend to determine our ASC 718 compensation expense relating to the November 18, 2020 grants commencing in the fourth quarter of 2020. Although our estimate of the grant date fair value of these stock-based awards is not yet determined, we currently anticipate recording a material compensation expense as a result of assessing such fair value, which will be reflected in our consolidated financial statements commencing in the fourth quarter of the year ending December 31, 2020.
Following the completion of this offering, the fair value of our common shares will be determined based on the quoted market price of our common shares.
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The following table sets forth, by grant date, the number of shares granted, per share exercise price of stock options granted between January 1, 2020 and the date of this prospectus:
Grant Date |
Number of Shares
Subject to Options Granted |
Per Share Exercise
Price of Options (CAD $) |
Per Share Exercise
Price of Options (USD $) (1) |
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Q1 2020 |
3,640,000 | 0.43 - 0.48 | 0.33 - 0.37 | |||||||||
Q2 2020 |
590,000 | 0.48 - 1.63 | 0.37 - 1.27 | |||||||||
Q3 2020 |
1,648,370 | 0.48 - 1.63 | 0.37 - 1.27 | |||||||||
October 21, 2020 |
3,112,000 | 1.63 | 1.27 | |||||||||
October 28, 2020 |
250,000 | 0.48 | 0.37 | |||||||||
October 29, 2020 |
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176,000
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1.63 | 1.27 | |||||||
October 29, 2020 |
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8,523,310
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3.08 | 2.41 | |||||||
November 18, 2020 |
1,600,000 | 3.52 | 2.76 |
(1) | U.S. Dollar amounts have been translated from Canadian Dollars at the rate of 0.78 to 1 which was the exchange rate as of December 4, 2020. |
See Note 11 to our consolidated financial statements included elsewhere in this prospectus for information concerning certain specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options granted in the years ended December 31, 2018 and 2019, and the nine months ended September 30, 2019 and 2020.
Stock-based compensation expense was $0.6 million and $0.9 million during the years ended December 31, 2018 and 2019, respectively, and $0.8 million and $3.8 million during the nine months ended September 30, 2019 and 2020, respectively. As of December 31, 2019, we had $5.9 million of total unrecognized stock-based compensation expenses related to nonvested options which we expect to recognize over a weighted-average period of 2.9 years.
The intrinsic value of all outstanding options as of September 30, 2020 was $618.8 million, based on an assumed initial public offering price of $15.50 per share, the midpoint of the price range set forth on the cover of this prospectus, of which approximately $337.2 million was related to vested options and approximately $281.6 million was related to unvested options.
Recent Accounting Pronouncements
We have reviewed all recently issued standards and have determined that, other than as described below, such standards will not have a material impact on our financial statements or do not otherwise apply to our operations.
Effective January 1, 2019, we adopted ASU 2016-02, Leases (Topic 842), or ASC 842, using the optional transition method that allows for a cumulative-effective adjustment in the period of adoption and did not restate prior periods. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed us to carry forward the historical lease classification. We applied the definition of a lease under ASC 842 to contracts effective for periods on or after January 1, 2019. We determine if an arrangement is a lease at its inception. After determination of lease arrangement, we identify whether the lease arrangement consists of any non-lease component. We account for lease components (such as rental payments) separately from non-lease components (such as common area maintenance costs). The lease component is considered in operating leases, whereas the non-lease component is accounted for separately in profit and loss. Such non-lease component is accounted for ratably over a straight line basis over the duration of the lease period. Operating leases are included in operating lease right-of-use assets, accrued liabilities, and long-term operating lease liabilities in our consolidated balance sheet. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease liabilities and right-of-use assets are recognized at commencement date based on the present value of lease payments over the lease term. We use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments if an explicit
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rate is not available. We applied an incremental borrowing rate of 6.5% on transition and applied this rate to the lease in consideration. Rent expense, included as part of general and administrative expense, for lease payments is recognized on a straight-line basis over the lease term. The operating lease right-of-use assets also includes any rent prepayments, lease incentives upon receipt, and straight-line rent expense impacts, which represent the differences between our operating lease liabilities and right-of-use assets. Adoption of the new lease standard resulted in recognition of a right-of-use asset of $2.8 million and a lease liability of $3.1 million, as of January 1, 2019. The difference between the right-of-use asset and lease liability relates to the balance of deferred tenant inducements. The standard did not impact our statements of loss and had no impact on our cash flows, nor did the adoption of this standard result in a cumulative effect adjustment to accumulated deficit and had no impact on cash flows for the year ended December 31, 2019. Prior to 2019, we recognized rent expenses associated with our operating lease agreements on a straight-line basis over the terms of the leases. Incentives granted under our facility leases, including rent holidays, were capitalized, and recognized as adjustments to rent expense on a straight-line basis over the terms of the leases.
Effective January 1, 2018, we adopted ASU 2016-09 Improvements to Employee Share-Based Payment Accounting. This update provides an accounting policy election, to be applied on an entity-wide basis, to either estimate the number of awards that are expected to vest (consistent with existing U.S. GAAP) or account for forfeitures when they occur. The accounting policy election applies only to awards with service conditions; awards with performance conditions will still be assessed at each reporting date to determine whether it is probable that the performance conditions will be achieved. An entity that elects an accounting policy to account for forfeitures when they occur would assume that the service condition will be achieved when determining the initial amount of compensation cost to recognize. The entity should reverse compensation cost previously recognized when an award is forfeited before the completion of the requisite service period (the reversal is recognized in the period the award is forfeited). Therefore, regardless of the policy election, compensation cost will be recognized for all awards that ultimately vest. We elect to account for forfeitures when they occur. There was no financial statement impact on adoption of this ASU.
In June 2018, the Financial Accounting Standards Board, or FASB, issued ASU 201807, CompensationStock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this ASU expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. We adopted this standard as of January 1, 2029. Adoption of this new accounting standard did not have a significant impact on our consolidated financial statements.
On January 1, 2020, we adopted the new ASU 2016-13, issued by the FASB, and all related amendments under FASB Accounting Standards Codification, or ASC, Topic 326, Financial InstrumentsCredit Losses. Adoption of this new accounting standard will not have a significant impact on our consolidated financial statements.
Berkeley Lights Litigation
In July, August and September 2020, we filed suits against Berkeley Lights, Inc., or Berkeley, in the U.S. District Court for the District of Delaware alleging that Berkeley directly infringes and indirectly causes infringement of one or more of our patents. On December 3, 2020, the judge assigned to these three lawsuits ordered that they be transferred to the U.S. District Court for the Northern District of California. In August 2020, Berkeley filed suit against us and our subsidiary Lineage Biosciences Inc. in the U.S. District Court for the Northern District of California seeking (i) declaratory judgment of non-infringement of U.S. Patent No. 10,058,839, or the 839 patent; (ii) a finding of unfair competition and false advertising under the Lanham Act; and (iii) a finding of unfair business practices under the California Business and Professions Code. We believe the action filed by Berkeley is without merit and have moved to dismiss the above action for lack of jurisdiction and failure to state a claim upon which relief can be granted pursuant to Federal Rules of Civil Procedure 12(b) 1, 2, and 6. See the section of this prospectus titled BusinessLegal Proceedings for additional information. The timing of the incurrence of legal expenses relating to pending litigation is difficult to
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predict and the outcome of litigation is inherently uncertain. Related costs and outcomes could materially affect our financial condition and operating results in future periods.
Impact of the COVID-19 Pandemic
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus, or COVID-19, as a pandemic, which continues to spread throughout the United States and worldwide. As with many companies around the world, our day to day operations were disrupted with the imposition of work from home policies and requirements for physical distancing for any personnel present in our offices and laboratories. The pandemic has also disrupted our sales and marketing activities as shelter-in-place orders, quarantines, travel restrictions and other public health safety measures have impacted our ability to interact with our existing and potential partners for our solutions. There is significant uncertainty as to the trajectory of the pandemic and its impacts on our business in the future. We could be materially and adversely affected by the risks, or the public perception of the risks, related to the COVID-19 pandemic or similar public health crises. Such crises could adversely impact our ability to conduct on-site laboratory activities, expand our laboratory facilities, secure critical supplies such as reagents, laboratory tools or immunized animals required for discovery research activities, and hire and retain key personnel. The ultimate extent of the impact of any epidemic, pandemic, outbreak, or other public health crisis on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic, outbreak, or other public health crisis and actions taken to contain or prevent the further spread, among others. Accordingly, we cannot predict the extent to which our business, financial condition and results of operations will be affected. We remain focused on maintaining our operations, liquidity and financial flexibility and continue to monitor developments as we deal with the disruptions and uncertainties from the COVID-19 pandemic.
JOBS Act Accounting Election
We qualify as an emerging growth company as defined in the JOBS Act. An emerging growth company may take advantage of reduced reporting requirements that are not otherwise applicable to public companies. These provisions include, but are not limited to:
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being permitted to present only two years of audited financial statements and only two years of related Managements Discussion and Analysis of Financial Condition and Results of Operations in this prospectus; |
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not being required to comply with the auditor attestation requirements on the effectiveness of our internal controls over financial reporting; |
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not being required to comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditors report providing additional information about the audit and the financial statements (auditor discussion and analysis); |
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reduced disclosure obligations regarding executive compensation arrangements; and |
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exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. |
We may use these provisions until the last day of our fiscal year in which the fifth anniversary of the completion of this offering occurs. However, if certain events occur prior to the end of such five-year period, including if we become a large accelerated filer, our annual gross revenue exceeds $1.07 billion, or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.
We have elected to take advantage of certain of the reduced disclosure obligations in the registration statement of which this prospectus is a part and may elect to take advantage of other reduced reporting
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requirements in future filings. As a result, the information that we provide to our shareholders may be different than the information you receive from other public companies in which you hold stock.
The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards, until those standards apply to private companies. We have elected to take advantage of the benefits of this extended transition period and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards. Until the date that we are no longer an emerging growth company or affirmatively and irrevocably opt out of the exemption provided by Section 7(a)(2)(B) of the Securities Act upon issuance of a new or revised accounting standard that applies to our financial statements and that has a different effective date for public and private companies, we will disclose the date on which we will adopt the recently issued accounting standard.
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Overview
We believe that the surest path to a better future is through technological advancement and that the new frontier of technology lies at the interface of computation, engineering and biology. Our mission is to improve health with technologies that transform the way that antibody-based therapies are discovered. We aim to become the centralized operating system for next generation antibody discovery.
Our full-stack, artificial intelligence-, or AI, powered drug discovery platform searches and analyzes the database of natural immune systems to find antibodies that can be developed as drugs. We believe our technology increases the speed and the probability of success of therapeutic antibody discovery, including enabling discovery against targets that may otherwise be intractable. Rather than advancing our own clinical pipeline of drug candidates, we forge partnerships with drug developers of all sizes, from large cap pharmaceutical to small biotechnology companies. We empower them to move quickly, reduce cost and tackle the toughest problems in drug development. As of September 30, 2020, we had 94 discovery programs that are either completed, in progress or under contract with 26 partners. As a recent example, in a collaboration with Eli Lilly and Company, or Lilly, we applied our technology stack to co-develop LY-CoV555, a potential antibody therapy to treat and prevent COVID-19. Starting from a single blood sample obtained from a convalescent patient, we and our partners identified a viable antibody drug candidate within three weeks that advanced into clinical testing 90 days after initiation of the program. Lilly progressed into these clinical trials at a greatly accelerated pace as a result of the Coronavirus Treatment Acceleration Program, which is a special emergency program for possible coronavirus therapies created by the FDA in 2020 to expedite the development of potentially safe and effective life-saving treatments to combat the COVID-19 pandemic. With respect to other or future product candidates, there is no assurance that any of our partners or collaborators will be able to advance a product candidate into clinical development on this timeframe again in the future, or at all. We initiated our partnering program in 2015 and have only had this one program result in clinical milestone payments to us to date and we have not yet had a program receive marketing approval.
Antibodies, which are proteins generated by natural immune systems to fight infection and disease, are amongst the fastest growing class of drugs and are used across multiple therapeutic areas, including oncology, inflammation, neurodegeneration and many others. In 2019, antibody-based therapeutics accounted for over $140.0 billion in sales worldwide and represented five of the top 10 selling therapeutics. The rise of genomics, high-throughput biology and genetic engineering has greatly expanded the opportunity and the ecosystem of innovators working to advance the development of antibody-based therapeutics. There has been a proliferation of biopharmaceutical companies pursuing innovative drug candidate formats and new targets. As new entrants continue to emerge, we believe the total addressable market will continue to expand.
As the field of antibody therapeutics evolves, finding novel antibodies with desired therapeutic properties has become increasingly competitive and demanding. We believe that there are two fundamental problems hindering the discovery and development of next generation antibody-based therapeutics. The first is the state of technology: because of the limitations of legacy discovery approaches, there are many well-validated targets for which suitable antibodies cannot be found. The second is access: most companies are forced to cobble together fragmented solutions and lack the facilities and expertise needed to prosecute their antibody programs. Both of these problems contribute to the rising cost of drug development and delay bringing needed therapies to patients.
Many emerging and established life sciences companies have been built around technologies that focus on one or a limited number of steps in the discovery process, including immune repertoire sequencing, or RepSeq, single-cell analysis, AI, and transgenic rodent platforms. We believe we uniquely integrate proprietary technologies that address each of these steps, creating a complete solution for our partners. Over the last eight years, we have developed and assembled technologies that unlock the database of natural antibodies. We are democratizing the industry by providing our partners of all sizes with access to our centralized operating system.
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As depicted in Figure 1 below, our technology stack is a chain of interlocking technologies that is designed to enable the identification of antibodies with desired therapeutic properties.
Figure 1: Our Technology Stack
Some notable technologies within our stack that compound the productivity and efficiency of each step of the discovery process include:
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Source. We combine proprietary immunization with genetically engineered mouse technologies, including the proprietary suite of humanized mice we acquired in November 2020 in connection with our acquisition of Trianni, to provide a diverse source of human antibodies. |
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Search. Our patented microfluidic single-cell screening technology combines speed, throughput, efficiency, resolution and versatility, enabling rapid and deep searches of natural antibody responses. |
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Find. Following the acquisition of Lineage Biosciences Inc., or Lineage, in March 2017, we integrated high-throughput RepSeq technology with our single-cell screening technology to provide leading capabilities for the comprehensive profiling and functional characterization of antibody diversity. |
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Analyze. Our internally developed platform, Celium, a powerful computational engine for mining, interacting and visualizing the terabytes of data generated during an antibody discovery campaign, combines software, AI and visualization tools to organize, compute and interactively explore large multidimensional data sets. |
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Engineer. We acquired rights to the OrthoMab bispecific technology in June 2020, which is a versatile and clinically-validated protein engineering solution to design and produce bispecific antibodies. |
The marriage of advanced data collection and computation creates a flywheel effect that augments our technology. As we run our partnership business, we are amassing unique, multi-dimensional data sets that link measurements at the level of single immune cells with the properties of the antibodies they make and the DNA sequences that encode their function. A single antibody discovery project can generate millions of DNA sequences and single-cell measurements, as well as thousands of target-specific antibodies, each characterized by hundreds of data points. Every project generates more data about the antibody immune response. This creates a competitive advantage whereby Celium extracts insights from the data that allows us to accelerate wet lab
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experimentation with in silico computation in a continuously iterative process. Because our computation is grounded on real world data, the output of Celium is not theoretical predications. We find real molecules that have been optimized by nature.
Our business thesis is based on the belief that technological advancement can improve the drug development process and that maximizing the value and impact of our work is best achieved through partnerships. In March 2020, we tested these beliefs as we mobilized our response to the COVID-19 pandemic. Working with our partner Lilly, we were able to progress from initiation of discovery to clinical trials in only 90 days. The first clinical development candidate in this collaboration, LY-CoV555, is undergoing clinical trials as both a monotherapy and in combination with another antibody as potential therapeutics for COVID-19.
On September 16, 2020, Lilly released the first interim Phase 2 clinical data for the monotherapy arms of the BLAZE-1 study, which showed that treatments of COVID-19 infected patients with LY-CoV555 resulted in a 72% risk reduction in hospitalization as compared to placebo in a study of 465 patients. Additionally, a post-hoc analysis of interim data showed that in high risk patient groups, including those patients over the age of 65 or with body mass index above 35, LY-CoV555 reduced the absolute risk of hospitalization by 9.5% (from 13.5% in the placebo group to 4% across all monotherapy treatment groups). BLAZE-1 is a randomized, double-blind, placebo-controlled Phase 2 study conducted by Lilly that is designed to assess the efficacy and safety of LY-CoV555 and an additional Lilly product candidate for the treatment of symptomatic COVID-19 in the outpatient setting. Across all treatment arms, the trial is designed to enroll an estimated 800 participants. The monotherapy arms of BLAZE-1 enrolled mild-to-moderate recently diagnosed COVID-19 patients across four groups (placebo, LY-CoV555 700 mg, LY-CoV555 2800 mg, and LY-CoV555 7000 mg). The primary outcome measure for the BLAZE-1 monotherapy arms was change from baseline to day 11 in SARS-CoV-2 viral load. Additional endpoints include the percentage of participants who experience COVID-related hospitalization, emergency room visit or death from baseline through day 29, as well as safety. Lilly announced that the primary endpoint, change from baseline in viral load at day 11, was met at the 2800 mg dose level, but not the others. Most patients, including those receiving placebo, demonstrated near complete viral clearance by day 11. Additional analyses of viral data demonstrated that LY-CoV555 improved viral clearance at an earlier time point (day 3) and reduced the proportion of patients with persistently high viral load at later time points. Lilly also announced that LY-CoV555 was well-tolerated, with no drug-related serious adverse events reported. Treatment emergent adverse events were similar across all dose groups and comparable to placebo.
In addition to the BLAZE-1 study described above, LY-CoV555 is being evaluated in three other clinical trials, one of which is a Phase 3 trial for prophylaxis of COVID-19. LY-CoV555 was also evaluated in a Phase 3 trial in hospitalized patients. Based on trial data that suggested that LY-CoV555 is unlikely to help hospitalized COVID-19 patients recover from this advanced stage of their disease, Lilly announced on October 26, 2020 that it has stopped enrolling additional patients for treatment with LY-CoV555 in this study. The other clinical trials of LY-CoV555 referred to above to evaluate LY-CoV555 for treatment of mild to moderate COVID-19 and for prophylaxis remain active.
On October 7, 2020, Lilly submitted a request for an EUA for the LY-CoV555 monotherapy to the FDA, which was granted on November 9, 2020. On October 28, 2020, Lilly announced an agreement with the U.S. government to supply 300,000 vials of LY-CoV555 for $375.0 million and on December 2, 2020, Lilly announced the purchase by the U.S. government of an additional 650,000 doses of LY-CoV555 for $812.5 million. On October 29, 2020, Lilly also announced a fixed price contract for procurement of LY-CoV555 in the amount of $312.5 million with the U.S. Army Contracting Command. On November 22, 2020, Lilly was granted authorization for the LY-CoV555 monotherapy by Health Canada under the Interim Order Respecting the Importation, Sale and Advertising of Drugs for Use in Relation to COVID-19. On November 24, 2020, Lilly announced an agreement with the Canadian government to supply 26,000 doses of LY-CoV555 for the three month period between December 2020 and February 2021, for $32.5 million. Under our partnership with Lilly, we are entitled to receive a specified percentage of proceeds that Lilly receives from these sales. As proud as we are to have played a role in the global response to COVID-19, we believe it is only an example of how our technology can accelerate drug discovery.
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Our business has historically been both high growth and capital efficient. Revenues have grown at a 109% CAGR since 2014. We have generated positive operating cash flow cumulatively since our inception in 2012 and in every year since 2018. Our partnership agreements include: (i) payments for technology access and performance of research, (ii) downstream payments in the form of clinical and commercial milestones and (iii) royalties on net sales of any approved therapeutics. We structure our agreements in a way that is designed to align our partners economic interests with our own. While the vast majority of our historical revenue reflects upfront payments from research programs, we believe the long-term value of our business will be driven by downstream milestone and royalty payments. For the years ended December 31, 2018 and 2019 and the nine months ended September 30, 2019 and 2020, our revenue was $8.8 million, $11.6 million, $8.4 million and $25.2 million, respectively. For the years ended December 31, 2018 and 2019 and the nine months ended September 30, 2019 and 2020, our net income (loss) was $0.3 million, $(2.2) million, $(0.6) million and $1.9 million, respectively. As of September 30, 2020, we have entered into agreements for 94 partnered discovery programs, 71 of which include the potential for milestone and royalty payments from our partners. As of September 30, 2020, we had 174 full-time employees in Canada, the United States and Australia, consisting of 81 scientists, 45 engineers and data scientists and 48 business professionals.
Our Strategy
Our mission is to improve health with technologies that transform the way that antibody-based therapies are discovered. To achieve this mission, we aim to become the operating system for next generation antibody discovery and to act as an integral part of our partners development efforts.
We seek to expand the industry of antibody therapeutics in two ways. First, we believe our technology can solve discovery problems to unlock new opportunities for therapeutic antibody development. Second, by accessing our teams, technologies and facilities, partners can eliminate the extended delays and costs associated with setting up antibody discovery capabilities. Through our partnership business, we aim to enable our partners to start programs without delay and prosecute them at maximum speed.
Our strategy includes:
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Create more value with our existing partnerships. We have entered into contracts for more than 100 antibody discovery programs. Our partners include large cap pharmaceutical companies, biotechnology companies of all sizes and non-profit and government organizations. Where appropriate, we seek to expand our single-program partnerships to multi-year, multi-target agreements. As of September 30, 2020, over 70% of partnerships with royalty-bearing contracts included multiple targets. Through continual expansion of our capabilities and the addition of new technologies we will also look to increase the royalties associated with our partnership deals. |
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Increase the number of partnerships. We will work to forge new partnerships across our target customers, including large cap pharmaceutical companies, biotechnology companies of all sizes and non-profit and government organizations dedicated to drug development. We plan to gain new customers via increased business development activities, technological expansion and superiority over alternative methods. We will also work to increase the number of deals with smaller early-stage biotech firms by offering flexible deal structures and vertical integration from target to antibody drug candidate. |
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Expand our market by delivering a full solution through forward integration. Many of our potential partners, including early stage biotech companies, are seeking a partner with the infrastructure, resources and expertise to execute early stage discovery and preclinical development programs. Building on our existing platforms, we are adding capabilities and infrastructure to support full chemistry, manufacturing and control, or CMC, activities and GMP manufacturing to provide our partners with a full solution from target to investigational new drug application, or IND, submission. |
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Scale our teams and facilities to meet future demand. We are building capacity to support the execution of additional partnerships and expansion of the scope of discovery programs. To achieve this, we are investing in expanding our workforce and our facilities, and increasing efficiency through automation and |
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software solutions. Over the past year we have grown our workforce by 64%, moving from 106 to 174 full-time employees as of September 30, 2020. Over this period, we entered into leases to expand our facilities from 21,000 square feet to 80,000 square feet, including a new 48,000 square feet research headquarters that is expected to open in the fourth quarter of 2021, are building a new GMP facility and are planning for a further facility expansion of approximately 200,000 square feet that will support cell line development, process development and GMP manufacturing of antibody therapeutics. |
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Further our technological differentiation. We believe we have technological differentiation for discovery of antibody drug candidates from natural immune systems. We intend to maintain our leading position through research and development to amplify and add capabilities in areas such as computation, protein engineering, immunization technologies, genetically engineered rodents and cell line selection. As we do so, we will continue to expand and protect our intellectual property estate. We will continue to look for strategic technology acquisitions to broaden and deepen our capabilities and expertise in antibody drug discovery and development, or that offer opportunities to expand our partnership business into adjacent therapeutic modalities, including vaccine development and cell therapy. |
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Leverage synergy of data and computation. We leverage unique data sets and AI to increase the efficiency, speed, and capacity of our discovery programs. In our partnership programs, we maintain rights to large data sets that connect information at the level of single-cell measurements, DNA sequence and protein function. We use this data to create an accelerating flywheel of learning: data generation from our partnership business provides the basis for AI modules that lead to expanded capabilities and faster data generation which supports our partnership business. |
We believe our strategy creates a virtuous cycle, as depicted in Figure 2 below, that will drive our position as the centralized operating system for antibody discovery.
Figure 2: Our Business Strategy
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Our Key Competitive Strengths
Our industry position and success are based on the following key competitive strengths:
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Better antibody discovery, from the start. Our ability to perform comprehensive searches of natural immune systems allows us to expand the universe of antibody candidates and increase the probability of finding those candidates with therapeutic properties. This allows us to be more selective, thereby increasing the quality of leads that advance to development, including finding rare antibodies and reducing the time, cost and effort of having to start again or fix molecules that are broken. |
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A full-stack technology, accessible to all. We have built a centralized operating system for therapeutic antibody discovery and development. Our proprietary technology stack leverages and integrates a wide array of state-of-the-art technological tools and expertise in areas including microfluidics, single-cell analysis, high-throughput genomics, machine learning and hyper-scale data science. Our end-to-end solution allows us to rapidly source, search, decode, engineer and ultimately deliver lead antibodies for our partners development efforts. We democratize antibody discovery by enabling drug developers of all sizes throughout the world to benefit from our technologies and initiate their programs without delay. |
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An AI platform built on real world data. Our AI platform is built and continually validated with real world data. Unlike AI-only drug discovery platforms, the output of our process is not theoretical predictions. We apply computation to find real molecules with desired properties. We inform wet lab experimentation with in silico computation, and vice versa, continuously iterating this process for each discovery campaign. |
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A unique combination of hardware, software and wetware. We believe our approach is differentiated based on the integration of proprietary and patented technologies across hardware, software and wetware. Our founders pioneered single-cell antibody screening in nanoliter volumes and developed proprietary microfluidic devices and custom instrumentation to automate and scale screening. Our workflows incorporate proprietary immunization methods, including the Trianni suite of transgenic mice, optimized molecular biology protocols and patented protein engineering technologies. These technologies are bound together with custom software, data science tools and machine learning algorithms, and are operated by high-performing teams. |
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Industry-innovating business model. We have built a high-growth business that applies to a broad universe of partners and directly aligns with their economic interests. We believe this capital-efficient model allows us to build a diversified portfolio of royalty streams that reach into the future therapeutic antibody market. Because we focus on improving the process of drug discovery rather than developing an internal pipeline, we will continue to make critical investments in technology that benefit the entire industry. As of September 30, 2020, we have entered into 94 partnership agreements. |
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The flywheel of data, partnerships and technology. We believe our technology becomes more powerful and more accurate with each program. Data generated through our discovery partnerships provides the basis for training AI modules that yield new insights into antibody responses and that improve the speed, accuracy and efficiency of our technology. This creates a positive feedback loop through which each round of data analysis improves the speed and efficiency of the next round of data generation. |
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Strong brand built on performance and third-party recognition. Our business is built on the success of our partners and the strength of our technology. The strength of our technology has won the support of governments, including $30.6 million from the U.S. Defense Advanced Research Platform, or DARPA, Pandemic Prevention Platform, or P3, program and CAD $175.6 million ($125.6 million) from the Government of Canadas Strategic Innovation Fund. We have been covered extensively by the media, including top-tier outlets such as CNN, MSNBC, Time Magazine, the Financial Post, The New York Times, Wired and the Wall Street Journal. In 2020, we were named to Fierce Biotechs Fierce 15 list and received three awards from Fast Company, including Innovative Team of the Year. |
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Robust IP portfolio including foundation patents. Our patent portfolio reflects our innovative position and end-to-end capabilities in antibody discovery, including microfluidic single-cell screening and cell |
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culture, single-cell genomics, antibody RepSeq and bispecific antibody engineering. Our Chief Executive Officer and Chief Operating Officer are named inventors of the microfluidic single-cell screening and cell culture patents exclusively in-licensed from the University of British Columbia, or UBC. Through the acquisition of Lineage, we control some of the earliest filed RepSeq patents that we are aware of. We leverage the advanced computational and experimental protein engineering methodologies disclosed and claimed in the OrthoMab patent portfolio to generate bispecific antibodies from any two antibody sequences. In addition, we have filed multiple provisional applications related to LY-CoV555, and other COVID-19 antibodies, which we have exclusively licensed to our partner Lilly. |
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Founder-led team, custom-built for interdisciplinary technology development. We believe investments in teams and technology are the surest path to a better future and that the frontier of technology lies at the intersection of engineering, biology and data science. Our founder-led team, backed by blue chip investors from the life sciences and tech sectors, has been custom-built for technology development at the interface of genomics, microfluidics, computation, biologics, protein engineering and translational sciences. As of September 30, 2020, we employed 174 people, over two-thirds of whom are scientists, engineers, and data scientists. |
Industry Background
Natures database of antibodies
Antibodies are the bodys solution for fighting infection and disease. Antibodies are Y-shaped proteins, made by the immune system, that circulate in the blood. Their function is to specifically recognize foreign targets (viruses, bacteria, proteins or cancer cells), bind to them and then eliminate them. The repertoire of antibodies made during an immune response is extensive and encodes essential information about our health, our history of disease and our protection against future illness.
Unlike approximately 20,000 genes that are hard-coded in the human genome, antibodies are created de novo in each individual immune cell through a process of the random shuffling of DNA fragments. For each antibody, this random shuffling creates two separate genes, referred to as the heavy chain and the light chain, that assemble to form a complete antibody molecule. Taken together, there are approximately 2.9 million different combinations of heavy and light chain genes. The complexity of this diversity is augmented by additional random DNA insertions and edits. This results in over 100 trillion different possible antibody molecules, roughly 100 billion times the number of hard-coded genes in our genome. This diversity is astonishingly large. To put it into perspective, if all the possible antibody variable sequences were typed back-to-back in 12-point Arial font, the resulting string of letters would extend from the earth to the sun over 1,000 times.
At any given moment, each of us is making approximately one billion different antibodies, an infinitesimal fraction of the possible diversity of antibodies. Each antibody is made by a single immune cell. When provoked by infection or disease, these cells quickly divide and mutate their antibodies to create an expanded family, or lineage, of cells having closely related antibodies. Cells producing antibodies that best bind to the target get a selective advantage and divide faster: those that do not, are eliminated. Through this selection process, immune systems generate large families of optimized antibodies that can bind almost any target tightly and with exquisite precision.
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Natural antibodies created by the immune system benefit from the processes of selection, quality assurance and optimization that have evolved over 500 million years. As a result, naturally-produced antibodies generally have superior properties for drug development. As compared to antibodies isolated from man-made libraries, they generally bind more tightly and specifically, and have superior properties for manufacturing. Due to their superior drug-like properties, approximately 92% of all approved antibody drugs have been derived from natural immune systems, as illustrated in Figure 3 below.
Figure 3: Sources of Approved Antibody Drugs
(Source: TAB Database of Therapeutic Antibodies, September 27, 2020).
Our Market Opportunity
Antibodies are the fastest growing class of drugs and are used across multiple therapeutic areas, including oncology, inflammation, neurodegeneration and many more. In 2019, antibody-based therapeutics accounted for over $140.0 billion in sales and represented five of the top 10 selling therapeutics worldwide. Antibodies represented 70% of the sales of all biologics, and 36 antibody therapeutics reached blockbuster status with sales higher than $1.0 billion. Mean peak-year sales for currently marketed monoclonal antibody and monoclonal conjugate antibody drugs are estimated at approximately $3.1 billion (median $1.8 billion). As of September 30, 2020, there were over 115 approved antibody therapeutics, with more than 150 in Phase 3 clinical trials. The cycle time for drug discovery projects to reach Phase 1 clinical trials from target selection has been approximately 5.5 years. Monoclonal antibody and monoclonal conjugate antibody drugs have taken on average approximately 7.5 years to reach market authorization from the start of Phase 1 clinical trials. From 2014 to 2020, the number of Phase I clinical trials beginning to enroll patients for monoclonal antibody and conjugate antibody therapies increased by more than 120%, from 207 to over 460.
The probability for a biologic drug discovery program to succeed in reaching Phase 1 clinical trials has been estimated at approximately 37%. Monoclonal antibody and monoclonal conjugate antibody drugs have had an approximately 18.5% likelihood of receiving market authorization from the start of Phase 1 clinical trials. According to a study of over 9,000 clinical development programs at large pharmaceutical companies, approximately 90% of all molecules fail to reach approval. Antibody-based therapeutics have thus achieved a higher rate of clinical success and offer several advantages:
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Minimal off-target toxicity |
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Long half-life in circulation |
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Ability to stimulate the immune system |
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Low immunogenicity |
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Higher affinity and potency |
As shown in the Figure 4 below, the antibody-based therapeutics market is expected to reach approximately $260.0 billion in size by 2025, representing a CAGR of approximately 11% for the period from 2019 to 2025. Further, the more nascent cell therapy market is expected to grow from $1.0 billion in 2019 to over $17.0 billion in 2025, reflecting a CAGR of approximately 60%. Opportunities for accelerating growth of the antibody therapeutics market include improved access to traditionally difficult targets (e.g., G protein-coupled receptors, or GPCRs, and ion channels), the emergence of new therapeutic modalities (e.g., bispecifics, chimeric antigen receptor T cells, or CAR-T, cell therapy and antibody conjugates) and the ever-expanding number of companies entering the space. Our partnership business allows us to participate in the future antibody therapeutic market through royalties and milestones on drugs that have been discovered using our platform. As of September 30, 2020, we had 94 discovery programs that are either completed, in progress or under contract with 26 partners ranging from large pharmaceuticals to biotechnology companies.
Figure 4: Total End Market Sales ($billion)
Challenges
Technology has dramatically improved efficiency in nearly all sectors of our economy. Within drug discovery, technological improvements have also been made, but we believe the impact has been limited. For instance, the cost of developing new drugs has roughly doubled every nine years since the 1950s. This retrograde trend, referred to as Erooms Law, stands in stark contrast to Moores law, which successfully describes the doubling of computational power every two years.
Looked at from any perspective, drug development still:
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Fails too often. According to a study of over 9,000 clinical development programs at large pharmaceutical companies, approximately 90% of molecules fail to reach approval. Failure rates are even higher when considering programs that do not advance into clinical development. We believe the prevalent use of outdated technologies and fragmented processes by antibody drug developers of all sizes create significant inefficiencies throughout the drug discovery process. When antibodies with suboptimal |
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properties are advanced into preclinical and clinical development, they are less likely to progress through development. |
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Takes too long. Based on a database of antibody drug development programs, the average antibody drug takes between approximately 9.4 and 12 years from initiation to approval. Selecting an antibody with the desired properties for successful preclinical and clinical development is akin to finding a needle in a haystack. We believe the inefficiencies in established antibody discovery methods can contribute up to years of delays and result in suboptimal antibodies being developed. |
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Costs too much. According to a well publicized study published by Tufts University in 2016, the average cost of drug development was approximately $2.9 billion. A significant portion of this cost relates to the use of suboptimal drug candidates. |
We believe that these challenges are often attributable to a continued reliance on outdated technologies. This is a watershed moment to redefine drug discovery. The past 10 years have seen unprecedented advances in the tools to measure biology, including genomics, high-throughput imaging and industrial-scale lab automation. These tools generate an avalanche of data that contain the insights needed to more quickly bring drugs to the clinic. At the same time, computational power and AI now make it possible to see relationships within big data sets that could otherwise not be seen.
Deep integration of high-quality data generation and computational tools are needed to solve the following challenges in discovery:
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Underpowered and fragmented technologies. There are well-validated drug targets that cannot be addressed using conventional methods because of limitations with: |
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Outdated discovery technologies. Antibody discovery workflows primarily use technology invented more than 35 years ago, including hybrid cells, or hybridoma, and display. Hybridoma provides only a tiny window into the database of natural antibodies. Display technologies do not benefit from natural antibody optimization. |
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Fragmented solutions. Recently developed technologies are not integrated into a complete solution and address only a limited number of steps in antibody discovery. |
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Access to technology. Most companies are unable to access the novel technologies needed to address every step of the antibody discovery process: |
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High entry barrier. The time and capital-intensive nature of building internal drug discovery capabilities limits the number of firms that can effectively participate in drug development. |
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Siloed technology access. New technologies are often held within companies for internal use and not available broadly. |
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Developing technologies are entrenched in theoretical solutions. The application of machine learning approaches can be limited by predictions that are difficult or impossible to transfer into experimentally validated results. |
Our Platform
Our platform is an operating system designed to support many antibody modalities; unlock new targets; increase the speed to clinical development for our partners and increase the potential clinical and commercial success for our partners.
Our full-stack, AI-powered technology sources, searches, decodes and analyzes antibody responses with the ultimate goal of engineering new antibody drug candidates for our partners. Our platform incorporates and integrates modern technology tools from engineering, microfluidics, single-cell analysis, high-throughput
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genomics, machine learning and hyper-scale data science. We have internally developed, in-licensed or acquired our technologies. We deploy our platform to help our partners in their efforts to identify antibodies with better potency and developability.
We believe our approach of integrating modern hardware, software and wetware is unique. We have pioneered nanoliter volume single-cell antibody screening methods using microfluidics. Our workflows incorporate proprietary immunization methods, including the Trianni suite of transgenic mice, optimized molecular biology protocols and patented protein engineering technologies. The aggregation of these technologies, coupled with our proprietary processes and team, allows us to provide a differentiated offering to our partners. Figure 5 below represents how our technologies are integrated into one stack.
Figure 5: Our Technology Stack with Workflow Summary
The computational engine of our platform, Celium, combines software, AI and visualization tools to mine, organize, compute and interactively explore the immense multidimensional data sets that we produce in each antibody discovery campaign. Unlike many AI-based drug discovery approaches, Celium is continually improved with real world data. We iteratively inform wetlab experimentation with in silico computation, and vice versa. The output of our process is not theoretical predictions. We discover real molecules that have been optimized by nature.
Our platform is an operating system that is designed to provide the following benefits:
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Support many antibody modalities. Our technology is capable of performing discovery from a variety of species and using a wide array of selection criteria. We believe this expands the starting diversity and increases the likelihood of finding antibodies with specific properties needed for new antibody therapeutic modalities: discovery of binding domains for a variety of antibody formats; discovery of |
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internalizing antibodies for antibody-drug or antibody-siRNA conjugates; single-chain camelid antibodies for use in CAR-T and protein engineering; and antibody pairs that have specific affinity and binding epitope recognition for bispecific antibody applications. |
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Unlock new targets. Our technology is capable of performing deep searches of antibody responses using cell-based assays that preserve the native conformation of traditionally difficult membrane protein targets. We believe this capability, combined with our proprietary immunization methods, provides a unique advantage in the discovery of rare antibodies that modulate the function of GPCRs and ion channels, two large and well-validated families of drug targets for which discovery using traditional techniques has been extremely difficult or intractable. Our proprietary Trianni All-Epitope mouse line (currently in validation) is engineered to mount robust immune responses against difficult targets that have high homology between rodents and humans, such as some high-value GPCR and ion channel class of targets that are prevalent in many diseases and indications including cancer, neurodegenerative and cardiovascular diseases, and pain. |
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Increase the speed to clinical development for our partners. Our integrated technology stack is designed to accelerate the discovery and pre-clinical development process. We anticipate substantial time can be saved through faster workflows and avoiding unnecessary cyclical efforts. Our technology stack is capable of going from screen to hundreds of antibody sequences in only three days, and from sequences to characterized antibody proteins in less than 10 days. Speed may also be achieved by increasing diversity at the start of discovery to maximize the chance that suitable leads are found on the first pass, and by minimizing the requirement of protein engineering. Finally, additional speed in discovery can be achieved by integrating all steps of the process seamlessly. |
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Increase the potential clinical and commercial success for our partners. We aim to increase the probability of clinical and commercial success of our partners. Our technology stack is designed to provide a competitive advantage in speed to the clinic and to identify antibodies with superior biophysical properties. |
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We believe our competitive advantage is derived from integration of multiple proprietary technologies and a seamless workflow. Table 1 below provides how each aspect of our end-to-end technology stack addresses challenges in antibody therapeutic discovery:.
Table 1: Our Platform and Solution
Our Partnership Business
We forge partnerships with large cap pharmaceutical companies, biotechnology companies of all sizes and non-profit and government organizations. Our partners select a target and define the antibody properties needed for therapeutic development. We provide discovery solutions to partners that have a range of discovery capabilities, from the highly enabled to the less enabled. We enable discovery against targets that have traditionally been intractable, and we accelerate programs against less difficult targets.
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Our Target Market
We provide discovery solutions to partners that have a range of discovery capabilities, from the highly enabled to the less enabled. We accelerate discovery programs spanning a range of difficulty, from traditionally Intractable discovery problems to less difficult Tractable discovery problems. These categories, taken together, create a two-dimensional grid that segments our market opportunities as shown in Figure 6 below.
Figure 6: Our Target Market Matrix
The four segments depicted in Figure 6 above are as follows:
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Segment 1. Includes tractable targets at large cap pharmaceutical and large biotech companies that have made significant investments in building internal capabilities in antibody discovery, typically using automated hybridoma methods and/or antibody display technology. We believe that our full technology stack allows us to serve this market by delivering antibody drug candidates faster and of higher quality, and by providing access to more advanced technologies for next-generation biologics. |
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Segment 2. Includes intractable targets at large cap pharmaceutical and large biotech companies. This segment holds untapped potential to generate first-in-class therapies for large unmet medical needs (e.g., pain, autoimmunity, metabolism), but technological barriers have resulted in limited success. We believe our technology provides a strong competitive advantage to find viable antibody drugs candidates for difficult targets, including GPCRs and ion channel targets. |
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Segment 3. Includes tractable targets at growth biotech companies. These companies have comparatively limited discovery capabilities versus their larger peers. We believe that in working with these partners we can provide the following advantages: (i) access to a fully integrated technology stack (ii) accelerate their efforts with timely access to the necessary teams and facilities and (iii) improve the quality of the final antibody leads. In this way, we democratize antibody discovery by providing all of our partners with access to our centralized operating system. |
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Segment 4. Includes intractable targets at growth biotech companies. Presently, there are few partners working in this market segment. We believe that our technology stack can unlock these opportunities, leading to an expanded ecosystem of companies developing antibody therapeutics with the potential to become first-in-class therapies. |
Our Partnership Deals
Our deals emphasize participation in the success and upside of future antibody therapeutics. Our partnership agreements include near-term payments for technology access, research and intellectual property rights, and downstream payments in the form of clinical and commercial milestones, and royalties on net sales.
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As of September 30, 2020, we had 94 discovery programs that were either completed, in progress or under contract, including 71 with the potential for milestone and royalty payments. Our partnership agreements are typically terminable at will with 90 days notice prior to identification of a target, after which point they may only be terminated for cause. A summary of the recent publicly disclosed partnerships established over the last two years are included in Tables 2 and 3 below.
Table 2: Summary Partnership Agreements with Pharmaceutical & Biotechnology Companies from 2018 to 2020*
Partner |
# of Targets & Duration |
Therapeutic Indication or
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Date Announced |
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Kodiak Sciences | Single target | Ophthalmology | October 29, 2020 | |||
IGM Biosciences | Multi-target, multi-year | Oncology and immunology | September 24, 2020 | |||
Lilly | 9 targets, multi-year | COVID-19 program Additional indications | May 22, 2020 | |||
Invetx | Multi-target, multi-year | Animal health | February 23, 2020 | |||
Gilead Sciences | Single target | Infectious disease | June 13, 2019 | |||
Denali Therapeutics |
8 targets, multi-year | Neurological diseases | February 28, 2019 | |||
Novartis | Up to 10 targets, multi-year | Undisclosed | February 14, 2019 | |||
Autolus | Single target | Cell therapy (CAR-T) | November 29, 2018 | |||
Undisclosed large pharma | Multi-target, multi-year | Multiple undisclosed | Undisclosed | |||
Undisclosed | Multi-target, multi-year | Cell therapy | Undisclosed | |||
Undisclosed | Single target | Bispecific | Undisclosed |
* | All agreements include upfront payments and potential downstream milestone payments and commercial royalties. |
Table 3: Summary of Partnership Agreements with Non-Profit & Government Organizations from 2018 to 2020
Non-Profit & Government |
Summary |
Therapeutic Indication or
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Date Announced |
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Government of Canada |
CAD $175.6 million ($125.6 million) over multiple years
Funding for technology and manufacturing infrastructure for antibody therapies against future pandemic threats |
COVID-19
Infectious disease/ pandemic response |
May 3, 2020 | |||
Bill & Melinda Gates Foundation |
$4.8 million over two years
Follow-up to successful 2017 project on tuberculosis |
Infectious disease, including HIV and malaria |
March 14, 2019 |
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Non-Profit & Government |
Summary |
Therapeutic Indication or
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Date Announced |
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Genome BC and Genome Canada |
CAD $3.0 million
Genome Applications Partnership Program (GAAP) with UBC |
Duchenne muscular dystrophy
Fibrosis |
August 16, 2018 | |||
DARPA |
Up to $30.6 million over four years
Establish rapid pandemic response platform |
Pandemic response |
March 13, 2018 | |||
CQDM and Brain Canada |
CAD $0.8 million |
Function-modifying antibodies against GPCR target |
January 27, 2018 |
In March 2020, we entered into a multi-year strategic Research Collaboration and License Agreement, or RCLA, with Lilly on the discovery of antibodies for up to nine Lilly-selected therapeutic targets, including COVID-19. Under the terms of the RCLA, Lilly has the right to develop and commercialize therapeutic products resulting from our collaboration. As part of the RCLA, we received an upfront payment of $25.0 million and are eligible to receive research payments for non-COVID-19 targets. We are also eligible to receive pre-clinical, clinical, and product approval milestones and tiered royalties on future sales for all Lilly-selected targets. We are entitled to receive an aggregate of up to $29.0 million of milestone payments under the terms of the RCLA. As of September 30, 2020, we have received $8.0 million for clinical milestones related to LY-CoV555. For non-COVID-19 targets, we are eligible to receive royalties in the low single digits based on net sales; whereas for COVID-19, we are eligible to receive royalties in the low- to mid-teens for aggregate sales below $125.0 million and mid-teens to mid-twenties on aggregate sales above $125.0 million.
Our Technology
Therapeutic antibody discovery has a myriad of challenges. Antibodies that are suitable candidates for therapeutic development must engage a target specifically, induce the desired therapeutic function and also have physical properties that make them suitable for manufacturing and formulation as drug products. Only a small fraction of the antibodies in any given immune response will satisfy all these requirements. Even for those that do, only a small subset will be optimal for drug development. Therefore, a broad and deep search of the database of natural antibodies is needed to expand the universe of quality drug candidates and increase the likelihood of success.
We have built a technology stack with five key capabilities that we believe solve the discovery problem and are critical to the success of any therapeutic program:
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Source. Generate and access a high-quality universe of antibodies for any target; |
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Search. Explore this diversity with sufficient throughput and specificity to isolate the rare cells that make antibodies with the desired properties; |
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Find. Decode the genetic sequences of selected antibodies and expand diversity with related sequences present in the immune response; |
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Analyze. Collect data on the relevant therapeutic properties of each selected antibody to generate large multidimensional data packages, and apply computation to select the most promising leads; |
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Engineer. Use broader information of antibody responses and molecular engineering to optimize and reformat lead antibodies for development. |
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Our technology stack achieves these functionalities by leveraging state-of-the-art methods from microfluidics, single-cell analysis, high-throughput imaging, AI, robotics, genomics and protein engineering, all complemented by custom software and data visualization capabilities.
Source: Immunization
The first step in a therapeutic antibody discovery program is to generate the source of antibodies that will define the search space for discovery. There are two competing paradigms: generate synthetic antibody diversity in man-made libraries, known as the display methods, or generate antibody diversity in vivo by immunization of animals. A brief description of these methods, along with their challenges, is as follows:
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Synthetic antibodies. Display methods encompass a set of synthetic discovery approaches that are based on man-made collections, also referred to as libraries, of human antibody genes. These methods, in use for more than 25 years, have resulted in a small fraction of clinically approved antibody therapeutics. The main disadvantages of display libraries are (i) low binding affinity of antibodies from the initial selection step, necessitating protein engineering steps to increase affinity, (ii) difficulty in manufacturing leads due to poor expression and developability and (iii) difficulty in performing selections on high-value cell-surface targets. We believe these shortcomings have contributed to the relatively low success rate of display technologies in the clinic. |
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Natural antibodies. In the same way that seasonal vaccination is used to generate antibodies that protect the population against flu, antibody responses against a drug target can also be generated through the immunization of animals. Antibodies generated in this way benefit from the natural process of selection (enriched for antibodies that bind the target), quality assurance (antibodies can be expressed and are not sticky, making them more developable into a drug candidate) and affinity maturation (the natural process whereby antibodies are optimized within the body to bind tightly to the target). As a result, antibodies generated through immunization are generally of higher quality and have accounted for the large majority of all approved therapeutics. However, some of the challenges faced with many immunization-based approaches are (i) difficulty in raising a strong immune response against poorly immunogenic targets, (ii) traditional screening methods that restrict immunization and discovery to rodents and (iii) the need to convert antibodies discovered in rodents to human antibodies (humanization) before they can be used. |
Our Approach to Sourcing Diverse Antibodies. We believe natural immune sources are a superior search space for therapeutic antibodies. To solve the challenges of sourcing antibodies by immunization, we have assembled multi- species screening capabilities, genetically engineered mouse technology and optimized immunization technologies that are capable of generating diverse and high-quality sources of natural antibodies.
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Any source, any tissue. Our single-cell screening and RepSeq capabilities enable discovery from any host species and any immune tissue, bypassing the restriction to rodent species of traditional screening approaches. To date, we have successfully applied our discovery technology to search immune responses of numerous species, including humans, mice, rats, rabbits, dogs, cats, llamas, alpacas and cows. In addition to greatly expanding our search space, the versatility of our platform also means we can access antibody responses of species with unique properties. For instance, we have completed multiple programs focused on isolating single-chain antibodies, or VHH antibodies, that are made by camelids (e.g., llamas or alpacas). VHH antibodies derived from camelids are of high interest due to their small size, ability to bind to novel epitopes and the ease with which they can be engineered to produce next generation therapeutics, including multi-specific antibodies and cell therapies. Finally, as recently demonstrated in our work on COVID-19, our approach also allows for a deep search of antibody responses from the large and complex immune responses of human donors, which have been naturally exposed to a pathogen. |
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Human antibodies from rodents. The ability to source fully human antibodies from rodents provides our partners the added benefit of bypassing the need to humanize sequences identified from non-humanized animals. We acquired the Trianni humanized rodent platform in November 2020, which includes a suite of genetically engineered transgenic mice that express human variable antibody genes. Currently, the flagship |
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Trianni mouse is available for discovery projects. The flagship Trianni mouse was generated with proprietary in silico design of antibody genes that resulted in a novel antibody gene structure at the heavy, lambda and kappa mouse antibody loci to maximize antibody diversity. This proprietary antibody design contains the human antibody repertoire, plus the natural constant regions of mouse antibody genes and the natural regulatory elements from the mouse genome, making these human antibodies optimized for expression and maturation by the mouse immune system. We believe this feature helps maximize the response to immunization, the diversity of human antibodies, and enable proper affinity maturation in the mouse to isolate quality human antibodies as therapeutic candidates in drug discovery campaigns. In addition to the flagship Trianni mouse, we acquired a suite of additional transgenic humanized rodent lines currently being validated and available for discovery projects in the near future, as indicated below. These lines aim to provide partners with the following benefits: |
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Generate multispecifics and access difficult targets with the Heavy-Chain Only, or HCO, Mouse: The HCO Mouse expresses antibodies comprised of only heavy chains, without the accompanying light chains found in conventional IgG antibodies. This smaller HCO antibody can access additional target sites that the larger conventional IgG molecules cannot, due to less steric constraints, thereby expanding the target space. HCO antibodies can also serve as the basis for combining targeting arms for bispecific and multispecific antibodies without the complexity of correct heavy and light chain pairing. In addition, this mouse line provides the opportunity for generating the fully human VHH antibodies described above, without the expense of immunizing large camelids, and with the benefit of starting with fully human sequences that do not need to be engineered to be more human-like. The HCO Mouse was also generated with the proprietary Trianni in silico design that helps maximize immune response, antibody diversity and enable natural antibody maturation. |
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Break immune tolerance with the All-Epitope Mouse: The All-Epitope Mouse is engineered to overcome immune tolerance to antigens that have high-homology to mouse proteins, to allow generation of robust immune responses against highly-conserved, high-value drug targets such as GPCRs and ion channels that are prevalent in multiple diseases and indications, including cardiovascular diseases, cancer, neurological diseases, inflammation and pain (see the subsection below titled Our Technology in Action). |
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Target new epitopes with the DD Mouse: The DD Mouse provides additional flexibility to discover antibodies with long CDR3 regions (the region of the antibody that makes primary contact with the target) allowing access of hidden or recessed areas of targets that are not available for contact by conventional IgG molecules with typical CDR3 lengths). |
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Maximize efficiency with the Eazysort Mouse: The Eazysort Mouse is engineered to allow up-front enrichment of immune cells that recognize the target, helping maximize the efficiency of searching for the right antibodies by focusing the subsequent single cell screening to antibodies of interest. |
These proprietary transgenic mice, combined with our platform technologies in immunization, single-cell screening, immune repertoire profiling and protein engineering, provide a flexible and synergistic advantage for rapid, next-generation discovery and development of fully human antibodies for drug development across a very broad target space. Notably, the Trianni platform and suite of transgenic rodents, together with expertise from Trianni personnel joining our research and development program, is a foundation to develop additional novel next-generation animals to expand our platform.
In addition to the Trianni transgenic mouse technologies, we also have in-licensed the ATX-Gx humanized immunocompetent transgenic mouse platform from Alloy Therapeutics. Like the flagship Trianni mouse, the ATX-Gx mouse is genetically engineered to express human antibody genes. We believe that by performing immunizations on both the Trianni mouse and the ATX-Gx mouse in parallel, we are able to expand the diversity of human antibody responses, thereby creating a larger search space for antibody discovery. We believe this will allow us to isolate more and higher quality candidate antibodies. We expect to continue to use both the Trianni mouse and the ATX-Gx mouse in our partnered
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programs, along with the Trianni next generation mice for the most demanding therapeutic discovery projects.
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Optimized immunization methods. We have developed a suite of immunization technologies that have been optimized (i) for use with our screening platforms (ii) to address the challenge of immunizing each species, and (iii) to address challenging targets. Specifically, we have developed immunization methods that, when coupled with our deep screening capabilities, allow for antibody generation against targets that are 100% identical to the host species. This is particularly valuable for the generation of antibodies with desired species cross-reactivity (e.g., mouse, cynomolgus monkeyimportant animal models for testing antibodies in preclinical studiesand human), or for targeting highly conserved protein epitopes. Importantly, these strategies negate the perceived advantage of display platforms for bypassing tolerance, the process by which natural antibody responses are suppressed against self-similar targets. For further explanation, see the case study titled Overcoming Tolerance with Proprietary Immunization and Deep Search Technologies in Our Technology in Action. We have also developed a suite of genetic immunization methods for targets that cannot be easily expressed or purified as soluble antigens. This is particularly valuable for discovery against high-value membrane protein targets including GPCRs and ion channels. |
Search: Microfluidic Single-Cell Screening
Searching natural immune systems is fundamentally a single cell problem. One mL of blood contains approximately 1 million white blood cells, of which approximately 1% are single antibody secreting cells, or B cells, that make antibodies. Of these, only a fraction is likely to bind to a target of interest, and of these binders, only a very small fraction is likely to have properties that make it suitable as a therapeutic. To effectively search the natural immune system for antibodies requires a technology that can scan through millions of antibody-producing cells and make high-resolution measurements to assess the properties of their unique antibodies. B cells are microscopic, having a diameter of approximately 10 microns (about 1/10 of the width of a human hair) and generate only a minute amount of antibody. When analyzed in the volume of conventional screening formats and conventional labware such as a 96-well plate, this small amount of antibody is too dilute, making it essentially undetectable.
It is because conventional methods lack the sensitivity to analyze individual cells that traditional discovery approaches require that each cell be grown into a larger population. However, since B cells generally cannot be grown into these larger populations in the lab, the classic approach to this problem is the hybridoma method, which is literally fusing a special type of cancer cell with immune cells obtained from the spleen of an immunized rodent (typically a mouse or a rat). These hybridomas inherit the immortal properties of the cancer cell line (i.e., can be grown) and continue to secrete a single type of antibody. Although this approach has been the workhorse of antibody discovery for decades, it has major limitations: (i) it is generally limited to rodents, (ii) it is slow (taking weeks to achieve sufficient cells to test the secreted antibodies) and (iii) it loses more than 99% of the available antibody diversity since the fusion process has extremely low efficiency, typically between 0.1% and 1%.
Our Approach to Search Natural Antibodies. To solve these challenges, our founders pioneered and developed a nano-liter volume single-cell microfluidic screening technology that provides the sensitivity, resolution and scalability needed to perform a deep search of any antibody response.
We believe our screening approach provides a unique combination of speed, throughput and versatility in searching antibody responses. Our microfluidic single-cell screening technology consists of custom-made microfluidic devices that integrate 256,000 single-cell analysis chambers on a chip about twice the size of a credit card. At the beginning of a screening experiment, a sample of B cells isolated from an immunized animal is flowed into the device at a concentration selected to result in approximately one single cell per chamber. Once cells are loaded, they are isolated in single-cell analysis chambers, each having a volume of less than one
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nanoliter. In this small volume, approximately 100,000 times smaller than what is used in a conventional bench-top experiment, a B cell secretes enough antibodies within minutes to be detected by microscopy. Using fluidically-controlled reagent and particle additions, a variety of experimental protocols can be executed so that each single cell is interrogated to determine the properties of the antibody it makes. A screening experiment takes several hours and is performed the same day as immune cells are isolated from immunized rodents. This is significantly faster than the weeks required to establish hybridoma cultures.
Our microfluidic devices are operated using proprietary high-throughput imaging instruments that incorporate custom robotics, fluid control, software systems and AI-based image analysis. Each instrument can run two microfluidic chips in parallel for a total of 512,000 chambers per instrument run. In a two-hour run, each of the 512,000 chambers is imaged up to 10 times, resulting in over five million chamber images, or roughly 700 chamber images per second. A representation of our microfluidic screening devices and assay readouts are showing in Figure 7 below.
Figure 7: Our Screening Approach for Antibody Responses
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Our AI-based image algorithms perform real-time analysis of these images to identify chambers that contain single cells that make antibodies with the desired properties. As depicted in Figure 8 below, our technology supports a wide array of complex image-based single-cell secretion measurements including multiplexed target binding on up to six targets, affinity-based enrichment, multiplexed cell-binding, ligand blocking assays and a selection of functional assays. We currently have throughput to screen more than four million cells per screening day.
Figure 8: Representations of Exemplary Microfluidic Screening Assays
As compared to other technologies we believe our microfluidic screening platform provides unique combined advantages of:
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Throughput to screen greater than 500,000 cells per instrument run. |
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Speed to go from immune cells to selected antibody-generating single cells in less than a day. |
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Antibody selections based on a wide array of measurements. |
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Capability to perform selections on both protein and cellular targets. |
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Versatility to search antibody diversity from any species or tissue. |
Find: Automated Single-Cell Sequencing and RepSeq
The collection and interpretation of antibody sequence data presents several challenges. First, because only a small fraction of antibodies are suitable for therapeutic development, methods that are based on sequencing antibodies from single cells before evaluating their function are extremely inefficient, low-throughput and costly. Second, sequencing antibodies from selected single cells is technically challenging due to the very small quantities of starting material and the large number of possible sequences that need to be captured. Third, although bulk sequencing of antibodies can provide a comprehensive view of immune responses, these methods often lose information on the correct natural pairing of heavy and light protein chains, which together comprise an antibody, and provide no means to assess the functional relevance of each antibody.
Our Approach to Find Natural Antibodies. To solve these challenges, we combine our nano-liter volume microfluidic single-cell screening platform, automated single-cell antibody sequencing and immune repertoire antibody sequencing to enable the deep analysis and functional interpretation of antibody responses.
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Automated single-cell sequencing. Our microfluidic single-cell screening technology allows us to evaluate the binding and/or functional properties of antibodies made by millions of single cells at the first step of analysis. For each screening run on each instrument, up to 768 individual cells that exhibit desired properties can be recovered into microplates for the following single-cell sequencing steps. Our proprietary sequencing protocols have been optimized to achieve approximately 90% efficiency in the recovery of high-quality heavy and light chain antibody sequences from single cells and have been adapted for discovery from multiple species. To achieve speed, reproducibility and throughput, our single-cell sequencing pipeline has been implemented using robotic automation and automated bioinformatics software. We currently have throughput to process up to 15,360 single cell samples per week and to recover high-quality, chain-paired sequences from 3,840 single-cell samples in three days.
RepSeq. We believe our RepSeq technology, when coupled with our microfluidic single-cell screening and sequencing technologies, provides unique capabilities for expanding the search of natural antibody responses. RepSeq is based partly on foundational RepSeq patents that we have exclusively licensed from Stanford as part of our acquisition of Lineage in 2017. RepSeq uses high-throughput sequencing to perform near-comprehensive profiling of the repertoire of heavy and light chain antibody genes that are present in a sample. In its highest-throughput implementation, a single RepSeq sequencing run can generate approximately 800 million antibody sequences.
Since these are bulk sequences obtained from mixtures of large numbers of cells, the interpretation of these big data sets has multiple challenges. The first is the loss of information regarding which heavy chain is naturally paired with which light chain. The second is the inability to identify which rare antibody sequences are relevant to the program (e.g., bind to the target or have desired function). We solve both of these problems by annotating RepSeq data with functional sequence data derived from our single-cell microfluidic screening and sequencing technologies. Using the sequences of hundreds to thousands of antibodies with known properties, we are able to search RepSeq data from related samples to identify closely related families of antibodies that can be arranged in a lineage to reconstruct their evolution during the immune response. These expanded family trees provide valuable insights for vaccine research and are sources of ready-made alternative therapeutic candidates in cases where an antibody of interest has one or more suboptimal properties.
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We have shown that the combination of single-cell analysis and RepSeq can expand the number of therapeutic antibody candidates by more than 10-fold in a single experiment, increasing the number of candidates from hundreds to thousands. Enriching for sequences of value by isolating target-specific immune cells that go into a RepSeq experiment can amplify the number of therapeutic antibody candidates. The combination of single-cell screening and RepSeq allows deep interrogation of an immune repertoire to find the best antibodies. For further explanation, see the case study titled Human Immune Profiling under Our Technology in Action. The relationship between single-cell-derived antibodies and family members discovered using RepSeq data is depicted in Figure 9 below.
Figure 9: Antibody Lineage Mapping
Analyze: High Throughput Cloning, Expression and Bioanalytics
Our microfluidic single-cell screening and RepSeq technologies are capable of generating hundreds to thousands of unique antibody candidate sequences from single-cell screening, along with thousands of related antibody sequences from RepSeq. These large antibody sets create formidable challenges for efficiently down-selecting to a small number of the best candidates for development, including (i) the need to produce and handle large numbers of high-quality antibodies by expressing, or converting sequences into protein antibodies that can be further analyzed, (ii) the need to perform measurements to characterize each antibody property for target recognition, function, and properties related to suitability for drug development, and (iii) the need for data management and computational tools to organize and understand the resulting data.
Our Approach to Analyzing Natural Antibodies. To address these challenges, we have built a high-throughput antibody generation and characterization pipeline that generates high-dimensional data clouds for each antibody candidate.
Our antibody expression pipeline combines optimized molecular biology protocols, proprietary expression vectors and robotics to enable the rapid cloning, expression and purification of recombinant antibodies using
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expression systems that are representative of current drug manufacturing standards. When starting from single-cell-derived antibody samples, we are able to generate hundreds of recombinant antibodies within 8 days of screening. Our platform supports multiple antibody formats and currently has capacity to generate 960 high-purity antibody samples per week.
These antibodies are then tested across a suite of analytical assays to determine their biophysical properties including their purity, binding properties (e.g., specificity, epitope binning, affinity), thermal stability, expression levels and aggregation state. Expressed antibodies may be further characterized in appropriate functional cell-based assays to assess their potency. Corresponding in silico analysis is performed on each antibody to predict potential development liabilities, biophysical properties and immunogenicity.
We believe that by gathering more high-quality data on more antibodies from the start of the discovery process, we can significantly improve the speed, quality and success of antibody discovery.
Celium: Computation and Data Exploration
Our technology stack generates vast and complex data sets. In a single discovery program, our technology stack can produce terabytes of data per screen, including:
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tens of millions of microscopy images from raw screening data |
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hundreds of millions of DNA sequences from raw single-cell sequencing |
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billions of DNA sequences from raw RepSeq data |
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millions of single-cell antibody secretion measurements |
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hundreds to thousands of unique single-cell-derived antibody sequences |
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tens of thousands of related antibody sequences derived from RepSeq |
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several hundred thousand antibody characterization measurements |
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associated meta data for each experiment |
The sheer quantity and complexity of these data sets present formidable challenges. First, without specialized data collection, standardization, and storage solutions, data of this scale quickly becomes unmanageable and unusable. Second, finding hidden relationships in these complex data sets requires sophisticated computational tools that must be customized for the questions being asked and the data types and structures used. Finally, even once data has been reduced to the key properties of hundreds of antibodies, it may include hundreds of thousands of data points, making interpretation difficult or impossible for scientists.
Our Approach to Analyzing Complex Antibody Data. To address these challenges, we have built a computational engine called Celium that integrates data collection, standardization and storage with a suite of computational tools and an interactive visualization interface that allows scientists to quickly explore and interpret complex antibody data sets.
Our technology stack integrates software to automatically standardize the collection, storage, and version control of raw and processed experimental data obtained at every step in the discovery process. Data from every experiment is stored in a central database designed to maintain the relationships that exist between different measurement types, samples, and antibodies. Because we do not rely on third-party data, we are able to maintain strict data quality assurance and standardization. We believe this provides a critical advantage that greatly increases the value of data.
We have built a suite of computational tools for extracting information and uncovering relationships that are hidden within our data. Our data handling and report generation software automates standard analyses, and
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instantly returns essential information that would otherwise take days of work. We have developed machine learning and AI methods to replace manual data analysis, quality assurance and design steps associated with antibody sequencing, protein engineering and antibody chain-pairing. Similarly, our vast image data sets have allowed us to develop AI-based machine vision tools for real-time processing, enabling single-cell screening at much greater speed and resolution. Finally, we are using machine learning algorithms to explore the relationship between antibody sequence space and important drug-like properties including resistance to aggregation, stability and expressibility. We believe that these approaches will become increasingly powerful and predictive as our data sets grow.
We believe the value of data and computation is greatly amplified by intuitive tools that enable scientists to interactively explore and query complex data sets. Celium achieves this with a dynamic visualization interface that presents each unique antibody as a connection between two unique DNA sequences that encode for the heavy and light chain. Celium presents antibodies as a network of these connections that intuitively represents sequence similarity. Using this visual language, scientists can interactively navigate and filter thousands of antibodies in real time, using hundreds of different data features, as shown in Figure 10. This allows scientists to interactively explore the immune repertoire and set search criteria based on multiple features to find antibodies with the precise characteristics desired for a drug candidate.
Figure 10: Celium Detailed View of Heavy and Light Chain Pairing
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Antibodies of interest can be further explored to evaluate sequence features and to expand diversity by linking to associated RepSeq data as shown in Figure 11. By integrating RepSeq data, Celium has the power to map antibody lineages to identify lead candidates likely to have improved binding and functional properties. This allows for expansion of diversity around antibodies of interest to identify new drug candidates for testing and development.
Figure 11: Celium Chain ID Clonal & Rep Seq Lineage View
We believe Celium is a unique and powerful tool that enables rapid exploration of multiple data sets in hours that would otherwise take many weeks to search. It provides an elegant human interface that allows scientists to quickly explore data and gain insights that inform action.
Engineer: Advanced Computational Protein Engineering Toolkit
Using natural diversity to accelerate engineering. In many cases, antibodies selected for development need to be modified before they are developed as drugs. These modifications are generally made through a combination of computational design and experimental testing, a process known as antibody engineering. Examples of antibody engineering problems include improving how tightly an antibody binds to its target; removing antibody sequences known to be problematic during manufacturing; modifying non-human antibodies to resemble human antibodies; and removing antibody sequences that may induce immune responses in patients.
The central challenge in antibody engineering is that the relationship between DNA sequence modifications and the resulting antibodies is not well understood. Antibody engineering therefore relies heavily on trial and error to identify DNA changes that give the desired phenotypic results. This process is complicated by the fact that optimizing for one property, such as binding affinity, may cause the loss of another desirable property, such as solubility or expression. This challenge is amplified when the source antibodies need major improvements, as is the case for synthetic antibodies that typically require multiple rounds of antibody engineering to improve their binding affinity, biophysical properties, or both.
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Our Approach to Engineering Natural Antibodies. We address these challenges by first generating large, diverse and high-quality panels of candidate antibodies early in the discovery process and, second, by applying antibody engineering approaches that are informed by natural antibody responses.
We believe the best approach to protein engineering is to start with a large panel of the best possible candidate antibodies. To achieve this, we apply our microfluidic single-cell screening platform to maximize the diversity of antibodies selected upfront for multiple target-binding properties, followed by thorough characterization of their functional properties and developability. We then apply stringent filtering with the aim of down-selecting to a small number of leads. When performing discovery from humanized rodents, including our proprietary suite of Trianni humanized rodents, or from humans, we have used this approach to generate high affinity antibodies that require minimal engineering prior to development. Starting with a greater diversity of antibodies, which have been pre-selected for desirable properties and that benefit from natural immune responses, can significantly reduce development time and the technical risk of protein engineering.
In cases where antibody properties need to be improved, we can use expanded panels of antibody sequences from RepSeq to inform the design and generation of high-confidence optimization candidates. We believe this approach, to use natural antibody variants from the repertoire to help design optimized candidates, is particularly powerful for high-value membrane protein targets such as GPCRs and ion channels (which cannot be optimized by conventional display-based methods). We also believe it can significantly improve the success-rate and reduce the time needed to optimize development leads.
OrthoMab Bispecific Platform. Beyond improving antibody properties, antibody engineering can also build completely new antibody drug formats with novel molecular geometry, binding properties or chemical properties. Of particular interest is the combination of two source antibodies to create a bispecific antibody that can simultaneously bind to two targets. Antibodies are normally comprised of two identical heavy chains and two identical light chains, to make a symmetrical mirror-image molecule with two identical targeting arms. In contrast, bispecific antibodies are generally comprised of two different heavy chains and light chains, and therefore have targeting arms that recognize two different targets. Because of their unique properties, bispecific antibodies are a rapidly emerging new class of antibody therapy. Following the first approval in 2015, there are now more than 120 molecules in clinical development, including more than 80 in Phase 1. They enable improved and novel therapeutic mechanisms not possible with other modalities. Examples of the application of bispecific antibodies include (i) recruitment of immune cells to help kill cancer cells, (ii) linking together two receptors to activate a signaling pathway, (iii) serve as a protein scaffold to bring proteins together and (iv) modifying the pharmacokinetics and pharmacodynamics of soluble proteins, as depicted in Figure 12 below.
Figure 12: Therapeutic Modalities Using Bispecific Antibodies
To realize this potential, it is important to develop capabilities to:
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generate a large and diverse panel of starting antibodies that recognize multiple epitopes (locations on their respective targets), with varying binding affinities and binding geometries. |
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identify suitable pairs from this starting panel that bind with the right orientation and the right location on each respective target, and bind with suitable affinity |
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manufacture bispecific antibodies in a scalable and efficient process |
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ensure the resulting bispecific antibody looks as similar as possible to a normal antibody so as not to induce an immune response in the patient. |
Our Approach to Engineering Bispecific Antibodies. OrthoMab, addresses these challenges by enabling the combination of any two source antibodies into a bispecific antibody that can be manufactured using conventional expression and purification methods, with minimal liabilities and immunogenicity.
OrthoMab is a clinically-validated protein engineering technology that enables the creation of a bispecific antibody from any two source antibodies, each comprised of a unique heavy chain and a unique light chain. The key innovation of OrthoMab is a set of patented DNA mutations that have been computationally designed using molecular structural modeling. These mutations ensure that the four antibody chains pair correctly: the two different heavy chains preferentially associate together, rather than two molecules of the same heavy chain, and each light chain pairs only with its cognate heavy chain as shown in Figure 13 below.
Figure 13: Patented OrthoMab DNA Mutations
By using engineered mutations to control chain-pairing, OrthoMab enables manufacturing of bispecifics at high yields and purities using industry-standard processes. Because each side of an OrthoMab bispecific is 99% identical to the source antibody, it lowers the risk of introducing immunogenic epitopes. Finally, in addition to conventional Y-shaped bispecific antibodies, OrthoMab allows for the creation of a wide array of alternative bispecific formats as shown in Figure 14. The OrthoMab technology was patented by scientists at Lilly and the University of North Carolina at Chapel Hill. We acquired non-exclusive rights to use OrthoMab technology from Dualogics, LLC, through an asset purchase agreement in July 2020.
Figure 14: Exemplary Bispecific Formats Achievable with OrthoMab
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Our Technology in Action
COVID-19: From Discovery to Clinic in 90 Days
We have been working with DARPA since March 2018 as part of the P3 program to optimize our technology stack to find effective and field-ready therapeutics against pathogenic threats in record time.
Problem. An effective response to a pathogenic threat requires comprehensive deep screening and characterization of a human antibody response at the maximum speed possible, so that pathogen-specific therapeutics can be quickly identified, developed and deployed. Ideally, samples from index patients (patients who are the first to have been confirmed infected with the pandemic virus) who recovered would be made available to deploy our pandemic response platform.
Solution. We developed rapid antibody screening, expression, purification and characterization pipelines to deeply mine human antibody responses. As part of the P3 program, and prior to COVID-19, we pressure tested our technology stack twice in simulated pandemic responses. In late 2018, we demonstrated rapid isolation of hundreds of Middle Eastern Respiratory Syndrome Coronavirus, or MERS-CoV, heavy chain only antibodies, or HcAbs, from infected camelids (a natural host for MERS-CoV) in less than 96 hours from sample receipt. Many of these HcAbs were more potent neutralizers than benchmark antibodies. In early 2019, together with our partners, we discovered influenza-neutralizing antibodies from a single sample from a human donor, and demonstrated that we could deploy our platform from sample receipt to successful testing in animals in 55 working days. Our seven lead antibodies were all 100% protective against a 20-times lethal dose of the 2009 pandemic H1N1 strain of influenza virus in rodents.
Result. We rapidly deployed our pandemic response platform to find a therapeutic antibody against COVID-19 in the spring of 2020 starting from a blood sample obtained from a U.S. patient. We screened approximately 5.8 million single cells to identify over 500 unique anti-SARS-CoV-2 antibodies. Each of these antibodies was evaluated computationally and experimentally to identify approximately 500 different properties per antibody which yielded 220,000 data points, which allowed us to filter down to a smaller group of lead candidates. Within 23 days of receiving the sample, we and our partners identified 24 lead antibodies for further development and clinical testing. One antibody drug candidate was selected by our partner Lilly, and the first patients were dosed in the first-ever COVID-19 clinical trial in North America. This was only 90 days from when we received the sample. The antibody, LY-CoV555, is one of the worlds most clinically advanced COVID-19-specific therapeutic, having undergone or currently undergoing a Phase 1 clinical trial, three Phase 2 clinical trials and one Phase 3 clinical trial. On October 7, 2020, Lilly submitted a request for an EUA, for the LY-CoV555 monotherapy to the FDA, which was granted on November 9, 2020. Lilly was granted authorization for the LY-CoV555 monotherapy by Health Canada under the Interim Order Respecting the Importation, Sale and Advertising of Drugs for Use in Relation to COVID-19 on November 22, 2020. This demonstrates that a rapid discovery-to-clinic timeline is possible with our rapid and high throughput discovery engine.
Unlocking High-value Membrane Proteins (GPCRs and Ion Channels)
Membrane proteins such as GPCRs and ion channels are a validated and highly valuable class of drug targets in multiple prevalent diseases and indications, including cardiovascular diseases, cancer, neurological diseases, inflammation and pain. Membrane proteins are very difficult targets for antibody therapeutics. They are large and complex proteins, often with multiple subunits embedded in the cell membrane with only a small portion exposed outside of the cell. They also exist in families of multiple, closely-related members. The specificity of antibody drugs against membrane proteins would solve the off-target side effects that make many of these targets a barrier for small molecule drugs. However, membrane proteins present major challenges for antibody discovery: (i) they are poorly immunogenic, (ii) they are very difficult to purify and handle, (iii) it is difficult to generate binding or functional assays for them and (iv) they often have high homology with other species that are traditionally used for immunization campaigns (such as rodents), leading to natural tolerance mechanisms inhibiting a good immune response. In addition, legacy screening technologies either do not provide
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the depth and throughput to effectively search the immune response (hybridoma strategy), or are poorly suited for screening against complex membrane protein targets (display strategy).
Problem. Using conventional screening methods, a partner had failed to discover functional antibodies against a very small epitope of a GPCR protein target with close structural homology to a related protein.
Solution. For this campaign, we tailored our technology stack to include multiplexed live cell screening assays with counter-screens against the closely-related homologs in order to identify unique antibodies against the target epitope. The GPCR was expressed in its natural conformation on live cells, bypassing the need for complicated protein purification and handling. The ability to screen against live cells at such high throughput, while simultaneously screening for specificity against closely-related homologs, is a powerful application of our platform.
Result. Within three months, we identified hundreds of unique antibodies against the target epitope, including several that were the desired functional antagonists. This number of antibodies from a screening campaign against a GPCR, plus the high frequency of functional candidates, is a significant success, and a lead candidate was subsequently identified by our partner and advanced into IND-enabling studies. This project demonstrates the power of our technology stack to increase the probability of success for antibody drug discovery campaigns against difficult targets.
Overcoming Tolerance with Proprietary Immunization and Deep Search Technologies
Antibodies produced by immunized animals are subject to immune tolerance, the process by which the body suppresses antibodies that react to self-antigens. This makes it difficult to generate diverse sets of antibodies against human targets that are similar or identical to the analogous proteins expressed by the animal being immunized. The difficulty in generating immune responses against self-similar targets has long been perceived as a drawback of discovery from natural immune repertoires. Our technology and proprietary immunization approaches allow us to generate diverse antibodies against such targets.
Problem. A partner approached us with a human target with 100% homology across mice, rats and humans. In addition, the human target had two related protein homologs, against which any discovered antibodies must discriminate.
Solution. In this campaign we deployed our proprietary and optimized immunization protocols to first generate a robust immune response in rodents. Next, we developed an high throughput single-cell screening strategy that used multiplexed fluorescence detection to find antibodies specific to the target, but that did not bind the two homologous proteins.
Result. We screened four million single cells from the immunized rodents and identified more than 1,900 target-specific antibodies, a hit-frequency that demonstrates a robust immune response breaking tolerance against a 100% homologous target. Of these hits, we identified 428 unique antibody leads with a degree of somatic hypermutation that indicates a mature and directed immune response against a difficult target.
Single Chain Antibody Discovery from Camelids
HcAbs are single-chain antibodies lacking light chains, found naturally in camelids such as llamas and alpacas (along with conventional paired heavy and light chain IgG antibodies, at approximately 50% frequency). HcAbs are valuable for various antibody-based therapeutics, such as bispecific antibodies, antibody-drug conjugates and CAR-Ts. In addition, the decreased complexity of having only single chains comprising the antibody molecules means they are more straightforward to produce and manufacture.
Problem. A partner needed to identify HcAbs from immunized llamas against transforming growth factor beta-3, or TGF-ß3, that could also discriminate between closely-related homologs, transforming growth factor
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beta-1, or TGF-ß1, and transforming growth factor beta-2, or TGF-ß2. The partner did not have the screening technology to identify antibodies with such restricted specificity.
Solution. We designed custom reagents to distinguish HcAbs from conventional IgGs in llamas and also designed custom assays to identify HcAbs specific to TGF-ß3 that could differentiate between TGF-ß1 and TGF-ß2. To find these rare antibodies, we deployed our deep screening platform and screened approximately 20 million single cells over four days to deeply mine the immune response. We identified 67 unique HcAbs, which is a <0.001% antigen specific HcAb hit frequency, indicating an exceedingly rare antibody. This illustrates the flexibility of our platform to discover non-conventional antibody modalities, from alternative species, and the depth required to find rare antibodies with very specific properties.
Human Immune Profiling
An important application of immune profiling is devising improved strategies for the prevention and treatment of viral pathogens such as influenza. Influenza is a recurring seasonal epidemic with major pandemic potential. A significant challenge in addressing influenza is that it is constantly changing. Seasonal strains that circulate in a population accumulate mutations that are influenced by the existing population immunity, resulting in the emergence of new strains for which existing vaccines are less effective. Even more concerning, novel strains can sometimes emerge when viruses that normally infect only animals rearrange their genes in a way that allow them to jump to the human population. Functional profiling human immune responses to influenza infection or vaccination may assist in developing antibody or vaccine products that help protect against serious influenza infections.
Problem. Deep sequencing technologies have been applied to broadly survey the diversity of antibody sequences generated during an immune response. However, such technologies do not indicate which antibodies bind to the target of interest, where they bind on the target or which are most protective against infection.
Solution. To identify antibodies against influenza that may be effective in passive immunotherapy treatments (highly specific and potently neutralizing) and vaccine development (recognizes multiple strains of influenza to inform vaccines that generate long-lasting immunity), we screened four million single cells from multiple human donors. We designed a custom multiplexed screening strategy to simultaneously profile antibodies for their binding profiles against four hemagglutinin proteins derived from H1N1, H2N3, H3N2 or H5N1 influenza strains. We then recovered single cells with desired binding properties for sequencing to determine their heavy and light chain sequences. For selected antibodies we then searched RepSeq data for related antibody sequences.
Results. Our influenza screen uncovered 19,920 influenza-specific antibodies, from which we recovered and sequenced 3,646. This resulted in 1,743 unique antibodies grouped within 860 clonal lineages. Through the combination of single-cell sequences and RepSeq data, we were able to construct detailed antibody lineages for virus-specific antibodies, and then to expand the number of selected virus-specific antibodies by approximately 50 times.
Research and DevelopmentPlatform Expansions
We have several active research efforts to expand the breadth and depth of our technology stack. In addition to research and development directed to improve the speed, efficiency, throughput and capabilities of our existing technologies, we have initiated the following platform development projects:
GPCR and Ion Channel Targets. We believe our immunization and screening platform provide us with a competitive advantage in the discovery of antibody against traditionally difficult multi-pass transmembrane proteins, including GPCRs and ion channels. To date we have successfully applied our technology to discover panels of hundreds of antibodies against these target classes, with the most advanced of these programs now at late-stage preclinical development. However, we believe further improvements at the Source and Engineer steps
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of our technology stack would allow us to more fully unlock the potential of these target classes. To this end, in 2019 we started a research and development group, Channel Bio, in Sydney Australia, that is developing technologies specifically for GPCR and ion channel targets.
Transgenic rodents. Our recent acquisition of the Trianni platform of humanized rodents, plus the integration of key research and development personnel from Trianni, enables us to generate novel next-generation humanized transgenic rodents to further our platform and offering to partners. The suite of humanized rodents available or in development will serve as the foundation for additional engineering to create novel humanized rodents.
Cell Line Development. Using our microfluidic single-cell screening platform, and based on patented clonal selection methods that we have exclusively licensed from UBC, we are developing optimized workflows that we believe may accelerate the development of clonal cell lines with increased productivity in the expression of antibodies.
CMC and GMP Antibody Manufacturing. We are planning a further facilities expansion of approximately 200,000 square feet that will support cell line development, process development and GMP manufacturing of antibody therapeutics. Upon completion of this facility, we expect to be able to support our partners from program initiation to fill-finish. We believe the integration of an optimized manufacturing process with our discovery and protein engineering capabilities will create synergies in speed and efficiency and will allow us to more rapidly test and validate new antibody therapeutic formats, including bispecific antibodies or antibody conjugates. We expect to have completed this facility and to have GMP manufacturing capabilities in commercial use in approximately three to four years. In April 2020, in support of this effort, we received a commitment for up to CAD $175.6 million ($125.6 million) in financing from the Canadian government.
Competition
The market for technologies that enable the discovery and development of therapeutic antibodies, such as ours, is global, characterized by intense competition and subject to significant intellectual property barriers. The solutions and applications offered by our competitors vary in size, breadth and scope, and given the broad promise of antibody therapeutics, we face competition from many different sources, including companies developing single-cell screening technologies, antibody RepSeq and antibody engineering technologies, using a variety of business models, including the development of internal pipelines of therapeutics, technology licensing, and the sale of instruments and devices. We also face competition from integrated contract research organizations that use traditional hybridoma, phage, and yeast display technologies in discovery. Due to the significant interest and growth in antibody therapeutics more broadly, we expect the intensity of this competition to increase.
We are democratizing the industry by providing our partners of all sizes with access to our centralized operating system We seek to deliver a complete solution for our partners by providing uniquely integrated proprietary technologies that address each step in the discovery process, including immune RepSeq, single-cell analysis, AI, and transgenic rodent platforms. Many emerging and established life sciences companies have been built around technologies that focus on one or a limited number of these steps. Examples include:
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In the field of single-cell screening, we face technical competition from companies that provide access to similar technologies such as Berkeley Lights Inc., or Berkeley, HiFiBio Inc., Ligand Pharmaceuticals Inc. and Sphere Fluidics Ltd. |
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In antibody RepSeq, we face technical competition from companies that provide access to similar technologies such as 10X Genomics Inc., Adaptive Biotechnologies Corp., Atreca Inc. and Distributed Bio Inc. |
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In bispecific antibody engineering, we face technical competition primarily from companies that provide access to similar technologies such as Abbvie Inc., Genmab A/S, Merus N.V. and Zymeworks Inc. |
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In discovery using genetically engineered rodents, we face technical competition from companies that provide access to similar technologies such as Ablexis LLC, Crescendo Biologics Ltd., Harbour Antibodies BV, Kymab Ltd., Ligand Pharmaceuticals Inc. and RenBio Inc. |
We also face direct business competition from companies that provide antibody discovery services using technologies such as hybridoma and display. Companies with discovery business models that include downstream payments include Adimab LLC, Distributed Bio Inc. and WuXi Biologics Inc. In addition, we compete with a variety of fee-for-service contract research organizations that provide services, in most cases using legacy technologies, that compete with one or more steps in our technology stack.
For a discussion of the risks we face relating to competition, see Risk FactorsRisks Related to our Business and StrategyThe life sciences technology market is highly competitive, and if we cannot compete successfully with our competitors, we may be unable to increase or sustain our revenue, or achieve and sustain profitability.
Intellectual Property
We strive to protect the proprietary technologies that we believe are important to our business, including seeking and maintaining patent protection intended to cover the compositions of matter of our product candidates, their methods of use, related technology, and other inventions that are important to our business.
Our success depends in part on our ability to obtain and maintain intellectual property protection for the components of our technology stack and products arising from the same; to defend and enforce our patents, to preserve the confidentiality of our trade secrets, and to operate without infringing valid and enforceable patents and other proprietary rights of third parties; and to identify new opportunities for intellectual property protection.
As of September 30, 2020, we owned or exclusively licensed 38 issued or allowed patents and over 40 pending patent applications worldwide, which includes 27 issued U.S. patents and 15 pending U.S. patent applications. We own registered trademarks and trademark applications for AbCellera and Celium, in the U.S., Canada and Europe.
Obtaining patent protection is not the only method that we employ to protect our propriety rights. We also utilize other forms of intellectual property protection, including trademark, copyright, internal know how and trade secrets, when those other forms are better suited to protect a particular aspect of our intellectual property. Our belief is that our propriety rights are strengthened by our comprehensive approach to intellectual property protection. It is our policy to require our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to execute confidentiality and invention assignment agreement upon accepting employment or consulting relationships with us. These agreements provide that all confidential information concerning our business or financial affairs developed or made known to the individual during the course of the individuals relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of employees, the agreements provide that all inventions conceived by the individual, and which are related to our current or planned business or research and development or made during normal working hours, on our premises or using our equipment or proprietary information, are our exclusive property. We are diligent in taking precautions that our proprietary information is not released to third parties through the use of security measures. Our trade secrets encompass certain reagent compositions and concentrations, nucleic acid vector sequences and immunization protocols.
Data Rights
Our product to partners is data on the composition of matter of antibodies and their properties. We enter into contracts that allow us rights to use the data that we generate for the purpose of improving our technology stack and fueling machine-learning algorithms. We maintain strict firewall protocols so target-specific data derived from a client cannot be used to inform the discovery on another project by a different client.
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Patent Portfolio
We have developed an expansive patent portfolio with claims related to multiple aspects of our technology stack, beginning with our first patent applications exclusively licensed from UBC, in 2013. We continuously assess new ways to improve our technology platform through license or acquisition of third-party patent portfolios, as was the case with our acquisitions of Lineage in 2017 and the OrthoMab platform from Dualogics in 2020, our recent acquisition of Trianni Inc. and our license agreement with Alloy Therapeutics in 2020.
Our patent prosecution strategy encompasses the pursuit of protection for our technology stack and tangentially related methods.
UBC License
In December 2013, we executed a license agreement with UBC, or the UBC License, to gain a worldwide, exclusive license to certain patents, or the UBC Patents, patented at UBC by Dr. Hansen and his team for the later of 20 years from the start date of the UBC License, or the expiry date of the last patent licensed under the UBC License. Under the terms of the UBC License, we have the right to sublicense a subset of the UBC Patents and a worldwide, exclusive license to UBC Improvements and/or Joint Improvements on these Patents solely in the antibody field of use. In addition, for a second subset of the UBC Patents, we have a worldwide, exclusive license to use and sublicense solely within the antibody field of use.
Under the terms of the UBC License, we paid a CAD $56,500 ($52,716) initial license fee and pay annual license fees to UBC during the term of the UBC License. We also pay UBC a low single-digit royalty on our revenue and a single-digit royalty of our sublicensing revenue during the term of the UBC License. UBC was also granted a single-digit percent equity position in our company.
Under the terms of the UBC License, in consultation with UBC we manage the filing, maintenance and prosecution of the licensed patents and we pay all costs associated with the same while we control all litigation associated with the licensed patents.
UBC may terminate the license under certain circumstances, including in the case of our insolvency, winding up or liquidation, if a court or similar process is levied on the rights under the agreement or on money due to UBC that is not released, if the subject technology becomes subject to a security interest that is not released, if we or any of our directors or officers have materially breached or failed to comply with securities laws, or in the event of certain breaches of, or failure to perform, our obligations under the license or other agreements between us and UBC. Either party may terminate the license for any breach which is not remedied within certain specified time periods.
The UBC Core Patents
The UBC Core Patent license includes a patent family directed toward certain systems, devices and methods for microfluidic cell culture. This patent family includes four issued U.S. patents and one pending U.S. non-provisional patent application. Issued patents from this family are expected to expire in July 2031, absent any disclaimers or extensions available.
The UBC Core Patent license also includes a patent family directed toward systems and methods for assaying binding interactions between a protein produced by a single cell, e.g., an antibody produced by a single B cell, and a second biomolecule (e.g., antigen) in microfluidic chambers and devices. This patent family includes twelve issued U.S. patents and three pending U.S. non-provisional patent applications. Issued patents from this family are expected to expire in July 2031, absent any disclaimers or extensions available.
A patent family directed toward methods for assaying functional properties exhibited by a protein produced by a single cell, e.g., an antibody produced by a single B cell, and a second biomolecule (e.g., antigen) in
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microfluidic chambers and devices is also included in the UBC Core Patent license. This patent family includes patents issued in the U.S. and Australia and granted in Europe, as well as one pending U.S. non-provisional patent application and seven pending foreign counterpart patent applications. Issued patents from this patent family are expected to expire in March 2034, absent any disclaimers or extensions available.
Lastly, the UBC Core Patent license includes a patent family directed toward methods for determining lymphocyte receptor chain pairs, for example, antibody heavy and light chain pairs. This patent family includes an issued U.S. patent and a granted patent in Europe, as well as one pending U.S. non-provisional patent application and two pending foreign counterpart patent applications. Issued patents from this patent family are expected to expire in May 2035, absent any disclaimers or extensions available.
Lineage
The Lineage patent portfolio complements our single-cell microfluidic intellectual property with downstream methods of sequencing reaction preparation, immune RepSeq and analysis. The immune repertoire patents and applications that we obtained from Lineage form the basis for the sequencing technologies that we currently use in our technology stack.
Stanford License
Through our acquisition of Lineage, we obtained an exclusive license from Stanford University to patents and patent applications directed toward immune RepSeq. Our Stanford license includes one patent family directed toward methods of characterizing an immune repertoire. This patent family includes four issued U.S. patents and one granted patent in Europe, as well as one pending U.S. non-provisional patent application and one pending foreign counterpart patent application. Issued patents from this patent family are expected to expire in May 2031, absent any disclaimers or extensions available. The Stanford license also includes another patent family directed toward methods of characterizing immune response and vaccine selection. This patent family includes two issued U.S. patents and one pending U.S. non-provisional patent application. Issued patents from this patent family are expected to expire in February 2034, absent any disclaimers or extensions available.
Under the terms of the Stanford license, we are required to pay Stanford a yearly license maintenance fee, as well as certain milestone payments in an aggregate amount not to exceed $140,000. We are also required to pay Stanford low single-digit royalties on net sales of licensed products as well as a portion of non-royalty sublicensing revenues. The term of the Stanford license runs until the last licensed patent expires, and our obligation to pay royalties will continue so long as there is a valid claim of a licensed patent. Stanford may terminate the agreement governing the license if we are in material default in the provision of any report or payment of any amounts due to Stanford under the agreement, we do not use commercially reasonable efforts to develop or commercialize licensed products, we do not achieve certain diligence milestones, we are in material breach of any provision of the agreement, or if we provide any materially false report to Stanford. We may terminate the agreement at any time upon at least 30 days notice to Stanford.
In addition to the Stanford license, the acquisition of Lineage included a patent portfolio comprising four patent families. One patent family is directed toward methods of determining the immune repertoire of a subject. This patent family includes one granted patent in Europe, two pending U.S. non-provisional patent applications, and four pending foreign counterpart patent applications. Issued patents from this patent family are expected to expire in March 2034, absent any disclaimers or extensions available.
Another patent family is directed toward tagging target oligonucleotides. This patent family includes two issued U.S. patents, one issued patent in China, and two granted patents in Europe. This patent family also includes one pending U.S. non-provisional patent application and one pending foreign counterpart patent application. Issued patents from this patent family are expected to expire in March 2034, absent any disclaimers or extensions available.
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An additional patent family is directed toward methods for detection of isotype profiles as signatures for disease. This patent family includes patents issued in Japan and China, as well as a patent granted in Europe. This patent family also includes three pending foreign counterpart patent applications. Issued patents from this patent family are expected to expire in September 2032, absent any disclaimers or extensions available.
Lastly, the Lineage patent portfolio includes a patent family directed toward compositions and methods for analyzing heterogeneous samples. This patent family includes a granted patent in Europe and an issued patent in Hong Kong. This family also includes one pending U.S. non-provisional patent application and three pending foreign counterpart applications. Issued patents from this patent family are expected to expire in September 2032, absent any disclaimers or extensions available.
OrthoMab
As part of our agreement to purchase certain assets from Dualogics related to its OrthoMab bispecific antibody platform, we were assigned Dualogics interests and rights to that certain Exclusive License Agreement between Dualogics and the University of North Carolina at Chapel Hill, effective February 22, 2019, or the UNC Agreement. Under the UNC Agreement, we have an exclusive license to UNCs rights under three patent families.
One patent family is directed toward methods of producing a fragment, antigen binding (Fab). This patent family includes three issued U.S. patents and one patent granted in Europe. Issued patents from this patent family are expected to expire in March 2034, absent any disclaimers or extensions available.
Another patent family is directed toward IgG bispecific antibodies and processes for preparation. This patent family includes one issued U.S. patent, one pending U.S. non-provisional patent application, and one foreign counterpart patent application. Any patents that issue from this patent family are expected to expire in January 2036, absent any disclaimers or extensions available.
The last patent family is directed toward methods for producing Fabs and IgG bispecific antibodies. This patent family includes one pending U.S. and one pending foreign counterpart patent applications. Any patents that issue from this patent family are expected to expire in December 2037, absent any disclaimers or extensions available.
Under the terms of the OrthoMab asset purchase, we granted Dualogics a sublicense under the three patent families to develop, market, sell and otherwise commercialize its existing programs related to the OrthoMab technology.
Under the terms of the UNC Agreement, we are required to pay UNC an annual license maintenance fee, low single-digit royalties on net sales of clinically approved and other products as well as sublicense fees. The term of the license and our obligation to pay royalties runs until the last licensed patent expires. UNC may terminate the agreement governing the license if there is a material breach by us of the agreement and we fail to cure such breach, which breaches include but are not limited to our failure to deliver payment to UNC when due, to provide progress reports, to meet or achieve performance milestones or to possess and maintain insurance, or the execution of a sublicense that complies with the terms of the agreement. We may terminate the agreement at any time upon at least 60 days notice to UNC.
Trianni
Through our acquisition of Trianni Inc., we acquired all existing intellectual property including issued patents and pending applications worldwide relating to the flagship Trianni mouse and new platforms in development. We also acquired Triannis trademarks including the terms Trianni and Trianni Mouse that have been issued in the United States and various other jurisdictions worldwide.
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The Trianni intellectual property portfolio includes issued patents and pending applications in the U.S. and certain jurisdictions around the world.
In one patent family, the patents are directed to transgenic animals and methods of use. This patent family includes eight issued patents including in the U.S., Australia, the Russian Federation, Europe, India, and Japan. There are three pending applications, one in the U.S., one in Canada and one in Japan. Patents issuing from this family are expected to expire in July 2031, absent any disclaimers or extensions available.
Another patent family is directed to enhanced production of immunoglobulins. This patent family includes seven pending applications including one in the U.S and six in pending foreign counterparts including Australia, Canada, Europe, Israel, Japan and Korea. Any patents that issue from this family are expected to expire in February 2037, absent any disclaimers or extensions available.
Another patent family is also directed to enhanced production of immunoglobulins. This patent family includes eight pending applications including one in the U.S. and six in pending foreign counterparts including Australia, Canada, Europe, Israel, Japan, China and Korea. Any patents that issue from this family are expected to expire in August 2035, absent any disclaimers or extensions available.
Another patent family is directed to enhanced immunoglobulin diversity. This patent family includes one issued patent in the U.S. and two pending applications including one in the U.S. and one in Europe. Issued patents from this family are expected to expire in December 2035, absent any disclaimers or extensions available.
Another patent family is directed to transgenic mammals (canine) and methods of use. This patent family contains one issued U.S. patent and one pending application in the U.S. Issued patents from this family are expected to expire in May 2037, absent any disclaimers or extensions available.
Another patent family is directed to transgenic mammals (bovine) and methods of use. This patent family contains one issued U.S. patent. Issued patents from this family are expected to expire in May 2037, absent any disclaimers or extensions available.
Another patent family is directed to enhanced production of immunoglobulins. This patent family includes one pending application in the U.S. Any patents that issue from this family are expected to expire in August 2035, absent any disclaimers or extensions available.
Another patent family is directed to transgenic mammals (canine) and methods of use. This patent family contains two pending applications, one in the U.S. and one PCT application. Issued patents from this family are expected to expire in July 2039, absent any disclaimers or extensions available.
Another patent family is directed to transgenic mammals (bovine) and methods of use. This patent family contains one pending PCT application. Issued patents from this family are expected to expire in July 2039, absent any disclaimers or extensions available.
Another patent family is directed to single chain VH and heavy chain antibodies. This patent family contains seven pending applications including one in the U.S. and Canada, Australia, China, Europe, Israel and Japan. Issued patents from this family are expected to expire in July 2037, absent any disclaimers or extensions available.
Another patent family is directed to long germline DH gene and long HCDR3 antibodies. This patent family contains two pending applications including one in the U.S. one in Europe. Issued patents from this family are expected to expire in October 2037, absent any disclaimers or extensions available.
Another patent family is directed to transgenic mammals and methods of use. This patent family contains two pending applications including one in the U.S. and one in Europe. Issued patents from this family are expected to expire in August 2039, absent any disclaimers or extensions available.
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AbCellera
We also aim to continue developing our product portfolio. We currently own several recently filed pending U.S. provisional patent applications directed toward methods for high throughput screening of multispecific antibody libraries and anti-coronavirus antibodies and methods of use. We plan to convert these applications and pursue additional protection domestically and internationally as appropriate.
The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In the countries in which we file, the patent term is 20 years from the earliest non-provisional filing date, subject to any disclaimers or extensions. The term of a patent in the United States can be adjusted due to any failure of the United States Patent and Trademark Office following certain statutory and regulation deadlines for issuing a patent.
In the United States, the patent term of a patent that covers an FDA-approved drug may also be eligible for patent term extension, which permits patent term restoration as compensation for a portion of the patent term lost during the FDA regulatory review process. The Hatch-Waxman Act permits a patent term extension of up to five years beyond the original expiration of the patent. The protection provided by a patent varies from country to country, and is dependent on the type of patent granted, the scope of the patent claims, and the legal remedies available in a given country.
For a discussion of the risks we face relating to intellectual property, see Risk FactorsRisks Related to our Intellectual PropertyIf we are unable to obtain and maintain sufficient intellectual property protection for our technology, including our platform and Celium, our proprietary antibody visualization software, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize technologies or a platform similar or identical to ours, and our ability to successfully sell our data packages may be impaired.
Commercial
A vast majority of our historical revenue reflects upfront payments from research programs. Our partnership agreements include: (i) payments for technology access and performance of research; (ii) downstream payments in the form of clinical and commercial milestones and (iii) royalties on net sales of therapeutics. We structure our agreements in a way that directly aligns our partners economic interest with our own. We believe the long-term value of our business will be driven by downstream milestone and royalty payments.
We forge partnerships with drug developers of all sizes, from large cap pharmaceutical to small biotechnology companies. Our partners are predominantly based in the United States and Europe. As of September 30, 2020, we had a total of 26 partners for whom we were conducting drug discovery activities. For the year ended December 31, 2019, two of our partners accounted for 47% and 15% of revenue, and 11 partners accounted for the remaining 38% of revenue. For the nine months ended September 30, 2020, two of our partnerships accounted for 50% and 21% of revenue, and nine partnerships accounted for the remaining 29% of revenue. Our partnership with Lilly constituted one of the partnerships that generated 10% or more of our consolidated revenues during the one or more periods described above. With respect to the other partners, we do not believe the loss of any one or more of such partners would have a material adverse effect on us and our subsidiaries taken as a whole.
Over the past year we have grown our workforce by 64%, moving from 106 to 174 full-time employees. As of September 30, 2020, we had 174 full-time employees in Canada, the United States and Australia, consisting of 81 scientists, 45 engineers and data scientists and 48 business professionals.
Our strategy involves:
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creating more value with our existing partnerships by seeking to expand our single-program partnerships to multi-year, multi-target agreements |
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working to forge new partnerships across our target customers, including large pharmaceutical companies, biotechnology companies of all sizes and non-profit and government organizations dedicated to drug development |
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adding capabilities and infrastructure to support full CMC activities and GMP manufacturing to provide our partners with a full solution from target to IND submission |
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investing in expanding our workforce and our facilities, and increasing efficiency through automation and software solutions |
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maintaining our competitive advantage by undertaking extensive research and development to amplify and add capabilities in areas such as computation, protein engineering, immunization technologies, genetically engineered rodents and cell line selection |
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leveraging proprietary data sets obtained from our partnership programs and AI to increase the efficiency, speed, and capacity of our discovery programs |
Until 2019, our sales and marketing function was limited, with only one dedicated business development person supported by two to three marketing staff. As of September 30, 2020, our sales and marketing team has grown to six professionals, with two dedicated business development persons supported by four marketing staff. Our sales and marketing team has been complemented with research and development staff attending a variety of scientific conferences, which has helped increase the business development pipeline. We plan to further expand our commercial sales, marketing and business development teams, increase our presence globally and increase marketing activities to drive awareness and adoption of our platform.
Employees and Human Capital Resources
As of September 30, 2020, we had 174 full-time employees in Canada, the United States and Australia, consisting of 81 scientists, 45 engineers and data scientists and 48 business professionals. None of our employees are represented by a labor union or covered under a collective bargaining agreement. As of September 30, 2020, 158 of our employees were employed in Canada, 11 were employed in Australia and 5 were employed in the United States. We consider our relationship with our employees to be good.
Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees. The principal purposes of our equity incentive plans are to attract, retain and motivate selected employees, consultants and directors through the granting of stock-based compensation awards.
Facilities
Our corporate headquarters and research and development facilities are located in Vancouver, British Columbia, where we lease approximately 32,000 square feet of space under leases expiring between 2022 and 2028. In 2021, we will be building out a new, dedicated corporate headquarters currently under construction that will provide us with 48,000 square feet of additional lab and office space under a lease expiring in 2031. Channel Bio, our wholly owned subsidiary, occupies a 2,100 square feet research and development lab in Sydney, Australia, with a lease that expires 2022. We believe our facilities are adequate and suitable for our current needs and that should it be needed, suitable additional or alternative space will be available to accommodate our operations.
Government Regulation
Our focus is on the discovery of antibodies that our partners use to improve the speed and success of their drug discovery efforts; however, we ourselves are not currently involved in drug discovery, do not manufacture any products and do not conduct any clinical trials. As such, while we are subject to a number of regulations,
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such as those governing our laboratory facilities as well as regulations that apply to businesses in the private sector generally, we are not subject to many of the types of regulations that ordinarily apply to companies in the life sciences, biotechnology and pharmaceutical sectors and industries. However, we believe that the long-term success of our business depends, in part, on our partners ability to successfully develop and sell products using the antibodies that we discover. The regulations that govern our pharmaceutical and biotechnology partners are those we therefore believe have the most significant impact on our business.
Government authorities in the United States, at the federal, state and local level, and in the European Union and other countries and jurisdictions, extensively regulate, among other things, the research, development, testing, manufacturing, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of pharmaceutical products, including biological products such as those that our partners develop. The processes for obtaining marketing approvals in the United States and in foreign countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources.
Our partners will be subject to a variety of regulations in applicable jurisdictions governing, among other things, clinical studies and any commercial sales and distribution of their products. Whether or not our partners obtain FDA or EU approval for a product, they must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical studies or marketing of the product in those countries. The requirements and process governing the conduct of clinical studies, product licensing, coverage, pricing and reimbursement vary from country to country.
One such regulatory authority that is applicable to certain of our partners is the United States Secretary of Health and Human Services authority to authorize unapproved medical products, to be marketed in the context of an actual or potential emergency that has been designated by government officials. The COVID-19 pandemic has been designated such a national emergency. After an emergency has been announced, the Secretary of Health and Human Services may authorize the issuance of, and the FDA Commissioner may issue, Emergency Use Authorizations, or EUAs, for the use of specific products based on criteria established by statute, including that the product at issue may be effective in diagnosing, treating, or preventing serious or life-threatening diseases when there are no adequate, approved, and available alternatives. An EUA is subject to additional conditions and restrictions and is product-specific. An EUA terminates when the emergency determination underlying the EUA terminates. An EUA is not a long-term alternative to obtaining FDA approval, licensure, or clearance for a product. The FDA may revoke an EUA where it is determined that the underlying health emergency no longer exists or warrants such authorization, so it is not possible to predict how long an EUA may remain in place.
Similar to the United States, Canada has developed a mechanism to authorize unapproved medical products to be marketed in the context of certain emergencies. In particular, under the Food and Drugs Act (Canada), the federal Minister of Health may make an Interim Order if the Minister believes that immediate action is required to deal with a significant risk to health, safety or the environment. The Minister has made various Interim Orders in the context of the COVID- 19 pandemic. These Interim Orders provide the Minister with the authority to permit the sale of a COVID-19 drug in Canada via multiple new mechanisms, including authorizing a COVID-19
indication for a new drug with a modified set of application requirements with the potential for additional terms and conditions, as well as the possibility of authorizing a drug based on certain elements already being authorized by a foreign regulatory authority. Each Interim Order is valid for no longer than a one-year term and an authorization for importation and sale issued under an Interim Order is only valid for as long as the Interim Order is in effect. As is the case with EUAs in the United States, authorizations issued under an Interim Order are not a long-term alternative to obtaining Health Canada licensure for a product. Health Canada is currently considering
various options to minimize disruptions for the ongoing authorization of drugs upon the expiry of an Interim Order with the intent to implement transition as needed.
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Additional Regulation
In addition to the foregoing, provincial, state and federal U.S. and Canadian laws regarding environmental protection and hazardous substances affect our business. These and other laws govern our use, handling and disposal of various biological, chemical and radioactive substances used in, and wastes generated by, our operations. If our operations result in contamination of the environment or expose individuals to hazardous substances, we could be liable for damages and governmental fines. We believe that we are in material compliance with applicable environmental laws and that continued compliance therewith will not have a material adverse effect on our business. We cannot predict, however, how changes in these laws may affect our future operations.
Anti-Corruption Laws
We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, the Canadian Corruption of Foreign Public Officials Act and possibly other state and national anti-bribery and anti-money laundering laws in countries in which we conduct activities, such as the UK Bribery Act 2010 and the UK Proceeds of Crime Act 2002, collectively, Anti-Corruption Laws. Among other matters, such Anti-Corruption Laws prohibit corporations and individuals from directly or indirectly paying, offering to pay or authorizing the payment of money or anything of value to any foreign government official, government staff member, political party or political candidate, or certain other persons, in order to obtain, retain or direct business, regulatory approvals or some other advantage in an improper manner. We can also be held liable for the acts of our third party agents under the FCPA, the Canadian Corruption of Foreign Public Officials Act, the UK Bribery Act 2010 and possibly other Anti-Corruption Laws. In the healthcare sector, anti-corruption risk can also arise in the context of improper interactions with doctors, key opinion leaders and other healthcare professionals who work for state-affiliated hospitals, research institutions or other organizations.
Legal Proceedings
From time to time, we may be subject to legal proceedings. We are not currently a party to or aware of any proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations. However, regardless of outcome, litigation can have an adverse impact on our business because of defense and settlement costs, diversion of management resources and other factors.
We are currently involved in the following litigation matters:
The July 9, 2020 Delaware Action
On July 9, 2020, we filed suit against Berkeley in the U.S. District Court for the District of Delaware alleging that Berkeley directly infringes and indirectly causes infringement at least one claim of U.S. Patent Nos. 10,107,812; 10,274,494; 10,466,241; 10,578,618; 10,697,962; 10,087,408; 10,421,936 and 10,704,018 arising out of Berkeleys alleged infringing uses and sales of the Beacon® Optofluidic System which performs workflows using OptoSelect Chips. This case has been assigned to the Honorable Judge Richard Andrews. The complaint requests an order permanently enjoining Berkeley from making, using, offering to sell, selling or importing any process claimed in the asserted patents along with damages arising from Berkeleys infringement. We intend to vigorously pursue our action against Berkeley and defend the validity and enforceability of our patents.
The August 25, 2020 Delaware Action
On August 25, 2020, we filed a second suit against Berkeley in the U.S. District Court for the District of Delaware alleging that Berkeley directly infringes and indirectly causes infringement at least one claim of U.S. Patent Nos. 10,718,768; 10,738,270; 10,746,737; and 10,753,933 arising out of Berkeleys alleged infringing
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uses and sales of the Beacon® Optofluidic System which performs workflows using OptoSelect Chips. This case has been consolidated with our first suit for infringement and assigned to Judge Andrews. In this action we are also requesting an order permanently enjoining Berkeley from making, using, offering to sell, selling or importing any process claimed in the asserted patents along with damages arising from Berkeleys infringement. We intend to vigorously pursue our action against Berkeley and defend the validity and enforceability of our patents.
The September 16, 2020 Delaware Action
On September 16, 2020, we filed a third suit against Berkeley in the U.S. District Court for the District of Delaware alleging that Berkeley directly infringes and indirectly causes infringement at least one claim of U.S. Patent Nos. 10,775,376; 10,775,377 and 10,775,378 arising out of Berkeleys alleged infringing uses and sales of the Beacon® Optofluidic System which performs workflows using OptoSelect Chips. This case has been consolidated with our first and second suits for infringement and assigned to Judge Andrews. In this action we are also requesting an order permanently enjoining Berkeley from making, using, offering to sell, selling or importing any process claimed in the asserted patents along with damages arising from Berkeleys infringement. We intend to vigorously pursue our action against Berkeley and defend the validity and enforceability of our patents.
On December 3, 2020, after hearing oral arguments, Judge Andrews ordered the transfer of the three lawsuits described above to the U.S. District Court for the Northern District of California.
The 2020 Northern District of California Action
On August 24, 2020, Berkeley filed suit against us and our subsidiary Lineage in the U.S. District Court for the Northern District of California seeking (i) declaratory judgment of non-infringement of U.S. Patent No. 10,058,839, or the 839 patent; (ii) a finding of unfair competition and false advertising under the Lanham Act and (iii) a finding of unfair business practices under the California Business and Professions Code. Berkeley alleges that in sending private notice letters to Berkeley and certain select customers that have acquired the Beacon® Optofluidic System which performs workflows using OptoSelect Chips that we have violated the aforementioned provisions. The complaint seeks a judgement of non-infringement of the 839 patent on the first count and damages and injunctive relief related to the alleged unfair competition claims. We believe the action filed by Berkeley is without merit and have moved to dismiss the above action for lack of jurisdiction and failure to state a claim upon which relief can be granted pursuant to Federal Rules of Civil Procedure 12(b) 1, 2, and 6.
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The following table sets forth information about our executive officers, directors and director nominees as of December 7, 2020.
Name |
Age |
Position(s) |
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Executive Officers |
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Carl L. G. Hansen, Ph.D. |
46 | Chief Executive Officer and Director | ||||
Andrew Booth |
47 | Chief Financial Officer | ||||
Véronique Lecault, Ph.D. |
36 | Chief Operating Officer and Director | ||||
Tryn Stimart |
51 | Chief Legal Officer and Corporate Secretary | ||||
Non-Employee Directors |
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John Edward Hamer, Ph.D.(1)(2) |
62 | Director | ||||
Michael Hayden, Ph.D.(1)(2)(3) |
69 | Director | ||||
John S. Montalbano(1) |
55 | Director | ||||
Peter Thiel(3) |
53 | Director |
(1) | Member of our audit committee |
(2) | Member of our compensation committee |
(3) | Member of our nomination and corporate governance committee |
The following is a biographical summary of the experience of our executive officers and directors. There are no family relationships among any of our executive officers and directors.
Executive Officers
Carl L. G. Hansen, Ph.D. Dr. Hansen is our co-founder and has served as our Chief Executive Officer and as a member of our board of directors since our inception in November 2012. Dr. Hansen was also a scientific co-founder of Precision NanoSystems Inc., a Vancouver-based private company developing next-generation delivery technology for genetic medicines founded in 2010, where Dr. Hansen also served as a member of the board of directors from January 2011 to September 2015 and continues to serve as a scientific advisor. Until August 2019, Dr. Hansen was a professor at the University of British Columbia, where he coauthored over 65 manuscripts in the fields of microfluidics, immunology, genomics and nanotechnology. Dr. Hansen also was a co-founder and served as a member of the board of directors of Resolution Diagnostics, a private genomics technology company, from May 2015 to April 2016. Prior to that, he served on the science advisory board of Fluidigm Corporation, a public company providing biotechnology tools, from January 2008 to January 2012. Dr. Hansen holds a Ph.D. in Applied Physics with a focus on Biotechnology from the California Institute of Technology, and a B.A.Sc. in Engineering Physics and Honors Mathematics from the University of British Columbia. We believe Dr. Hansen is qualified to serve on our board of directors because of the perspective and experience he brings as our Chief Executive Officer and as one of our co-founders.
Andrew Booth. Mr. Booth has served as our Chief Financial Officer since August 2019, and previously served as a member of our board of directors from June 2016 to August 2019. From February 2017 to July 2019, Mr. Booth also served as the Chief Commercial Officer of STEMCELL Technologies Inc., a Vancouver-based private biotechnology company, and as the Chief Financial Officer of STEMCELL Technologies from March 2013 to January 2017, and as the VP, Instrumentation from January 2010 to February 2013. Prior to STEMCELL, Mr. Booth was at GE Healthcare based in London, UK leading M&A activities for EMEA and GE Lifesciences. Mr. Booth was at GE from 2004 to 2009. Mr. Booth has also previously served as a member of the board of directors of various private companies in the life sciences sector. Mr. Booth holds an MBA from INSEAD, France, and a B.A.Sc. in Engineering Physics from the University of British Columbia.
Véronique Lecault, Ph.D. Dr. Lecault is our co-founder and has served in various positions with us since November 2012, most recently as our Chief Operating Officer since January 2019 and as a member of our board
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of directors since August 2018. Dr. Lecault has also served as Vice President of our wholly owned biotechnology subsidiary, Lineage Biosciences Inc., since January 2018. Dr. Lecault has also served as a director of our wholly owned Australian biotechnology subsidiary, Channel Biologics Pty., since September 2019. Dr. Lecault received her Ph.D. in Chemical and Biological Engineering from the University of British Columbia, where she co-invented the high-throughput microfluidic platform that is now part of our core technology. Dr. Lecault holds a B.A.Sc. in Chemical Engineering/Honours B.Sc. Biochemistry (Biotechnology) dual degree from the University of Ottawa. We believe Dr. Lecault is qualified to serve on our board of directors because of the perspective and experience she brings as an officer and as one of our co-founders.
Tryn Stimart. Mr. Stimart has served as our Chief Legal Officer and corporate secretary since August 2019. Prior to joining AbCellera, Mr. Stimart was a partner at Gibbons P.C., a law firm, from October 2016 to August 2019. From May 2013 to September 2016, Mr. Stimart was a partner at Womble Carlyle Sandridge, & Rice, LLP, a law firm. Mr. Stimart holds a J.D. from American University Washington College of Law, an M.Sc. in Chemistry from Old Dominion University, and B.Scs. degrees in Biochemistry and Genetics & Cell Biology from the University of Minnesota.
Non-Employee Directors
John Edward Hamer, Ph.D. Dr. Hamer has served as a member of our board of directors since September 2018. Since April 2018, Dr. Hamer has also been a managing general partner of DCVC Bio, a San Francisco venture capital fund focused on investing in life sciences companies. Dr. Hamer served as managing partner and founder of Monsanto Growth Ventures, a venture capital fund, from September 2012 to April 2018. In October 2003, Dr. Hamer founded Arête Therapeutics Inc., a private biotechnology company, and served as Chief Executive Officer until February 2006. Prior to his career in venture capital, Dr. Hamer was an entrepreneur, initially at Paradigm Genetics, Inc., a biotechnology company, from August 1998 to December 2003, where he joined as a visiting scientist before becoming Chief Science Officer and eventually President and Chief Executive Officer following the companys initial public offering. Dr. Hamer holds a Ph.D. in Microbiology from the University of California at Davis, an M.Sc. in Biological Sciences from the University of Windsor, and a B.Sc. in Biology from the University of Windsor. We believe Dr. Hamer is qualified to serve on our board of directors because of the perspective and experience he brings as an entrepreneur and venture capitalist, as well his experience as an executive officer of biotechnology companies.
Michael Hayden, Ph.D. Dr. Hayden has served as a member of our board of directors since September 2019. Dr. Hayden has been the Chief Executive Officer of Prilenia Therapeutics B.V., a clinical stage biotechnology company since September 2018. From September 2012 to December 2017, Dr. Hayden served as Chief Science Officer and President of Global Research and Development at Teva Pharmaceutical Industries Ltd., a public pharmaceutical company. Dr. Hayden has founded a number of biotechnology companies, including Aspreva Pharmaceuticals Limited, a private pharmaceutical company; Neurovir Therapeutics, Inc., a private biopharmaceutical company; Xenon Pharmaceuticals Inc., a public clinical-stage biopharmaceutical company; 89bio, Inc., a public clinical-stage biopharma company; and Prilenia, a private clinical stage biotechnology startup. Dr. Hayden has served as a member of the board of directors for each of Ionis Pharmaceuticals Inc., a public biotechnology company, since September 2018; 89bio since April 2018, Aurinia Pharmaceuticals Inc., a public biopharmaceutical company, since February 2018, and Xenon Pharmaceuticals since November 1996. From September 2018 to June 2020, Dr. Hayden also served as the executive chairman of the board of directors of Prilenia. Dr. Hayden is also is a Killam Professor of Medical Genetics at the University of British Columbia, a Founder and Senior Scientist at the Centre for Molecular Medicine and Therapeutics, and a Canada Research Chair in Human Genetics and Molecular Medicine. Dr. Hayden holds an M.B., Ch.B. M.D. and a Ph.D. degree in Genetics from the University of Cape Town. He is board certified by the American Society of Internal Medicine and Medical Genetics. He is also certified by the Royal College of Physicians of Canada (Internal Medicine). We believe Dr. Hayden is qualified to serve on our board of directors because of his academic background, as well as his extensive experience as a director and executive officer of both publicly and privately held biotechnology and biopharmaceutical companies.
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John S. Montalbano. Mr. Montalbano has served as a member of our board of directors since November 2020. Mr. Montalbano has served as a member of the board of directors for each of Aritzia Inc., a public fashion company, since July 2019. Prior to his retirement, Mr. Montalbano served as the Chief Executive Officer of RBC Global Asset Management from 2008 to 2015, and as the President of Phillips, Hager & North Investment Management Ltd., a private wealth management firm, from 2005 to 2008. Mr. Montalbano also served as Vice Chair of RBC Wealth Management from April 2015 to December 2016. Mr. Montalbano holds a B.Comm. in Finance from the University of British Columbia. We believe Mr. Montalbano is qualified to serve on our board of directors due to his leadership, experience as an entrepreneur, and financial expertise.
Peter Thiel. Mr. Thiel has served as a member of our board of directors since October 2020. He has served as president of Thiel Capital, an investment firm, since 2011 and as a partner of Founders Fund, a venture capital firm, since 2005. In 1998, Mr. Thiel co-founded PayPal, Inc., an online payment company, where he served as Chief Executive Officer, President, and Chairman of its board of directors from 2000 until its acquisition by eBay in 2002. Mr. Thiel currently serves on the board of directors of Facebook and Palantir. Mr. Thiel holds a B.A. in Philosophy from Stanford University and a J.D. from Stanford Law School. We believe Mr. Thiel is qualified to serve on our board of directors due to his leadership and experience as an entrepreneur and venture capitalist.
Family Relationships and Other Arrangements
There are no family relationships among any of our directors or executive officers.
In December 2020, John Edward Hamer, Ph.D. was nominated as a director to our board of directors by the majority of the holders of preferred shares pursuant to our voting agreement, which will terminate upon the closing of this offering.
Board Composition and Election of Directors
Board Composition
Our board of directors currently consists of five members, each of whom is a member pursuant to the board composition provisions of our articles and agreements with our shareholders, which agreements are described in the section of this prospectus titled Certain Relationships and Related Person Transactions. These board composition provisions will terminate upon the closing of this offering. Upon the termination of these provisions, there will be no further contractual obligations regarding the election of our directors. Our nominating and corporate governance committee and our board of directors may therefore consider a broad range of factors relating to the qualifications and background of nominees. Our nominating and corporate governance committees and our board of directors priority in selecting board members is identification of persons who will further the interests of our shareholders through their established record of professional accomplishment, the ability to contribute positively to the collaborative culture among board members, knowledge of our business, understanding of the competitive landscape, professional and personal experiences and expertise relevant to our growth strategy.
Staggered Board Provisions
Under our new articles, for the purposes of facilitating staggered terms of the directors on the board, the following provisions, or the staggered board provisions, shall apply:
(i) |
two directors shall initially hold office for a term expiring on our third annual general meeting following the date of the effectiveness of our new articles; |
(ii) |
two directors shall initially hold office for a term expiring on our second annual general meeting following the date of effectiveness of our new articles; and |
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(iii) |
the remaining number of directors shall initially hold office for a term expiring on our first annual general meeting following the date of effectiveness of our new articles. |
Following the initial term of office described above, directors will be elected to hold office for a three-year term expiring on our third annual general meeting following their election.
At every annual general meeting and in every unanimous shareholder resolution in lieu thereof, all of the directors whose terms expire shall cease to hold office immediately before the election or appointment of directors, but are eligible for re-election or re-appointment. The shareholders entitled to vote at the annual general meeting for the election of directors may elect, or in a unanimous resolution appoint, the number of directors required to fill any vacancies created, which vacancies have not already been filled as otherwise permitted in the articles. The directors will hold office for the applicable terms contemplated in the staggered board provisions. Upon resignation of a director, the remaining directors may fill the casual vacancy resulting from such resignation for the remainder of the unexpired term.
Following the effectiveness of our new articles, we anticipate that the initial terms of office for each of the directors will be as follows:
(i) |
Drs. Hamer and Lecault will have terms expiring on the first annual general meeting following the date our new articles become effective; |
(ii) |
Drs. Hansen and Hayden will have terms expiring on the second annual general meeting following the date our new articles become effective; and |
(iii) |
Messrs. Montalbano and Thiel will have terms expiring on the third annual general meeting following the date our new articles become effective. |
Replacement or Removal of Directors
Under the BCBCA and our new articles, a director may be removed with or without cause by a special resolution passed by a special majority (being two-thirds) of the votes cast by shareholders present in person or by proxy at a duly convened meeting and who are entitled to vote.
To the extent directors are elected or appointed to fill casual vacancies or vacancies arising from the removal of directors, in both instances whether by shareholders or directors, the directors shall hold office until the remainder of the unexpired portion of the term of the departed director that was replaced.
Advance Notice Provisions
We will include certain advance notice provisions with respect to the election of our directors in our articles that will be in effect on closing of this offering. These provisions are intended to: (i) facilitate orderly and efficient annual general meetings or, where the need arises, special meetings; (ii) ensure that all our shareholders receive adequate notice of board nominations and sufficient information with respect to all nominees; and (iii) allow our shareholders to vote on an informed basis. Only persons who are nominated by shareholders in accordance with our advance notice provisions will be eligible for election as directors at any annual meeting of our shareholders, or at any special meeting of our shareholders if one of the purposes for which the special meeting was called was the election of directors.
Under our advance notice provisions, a shareholder wishing to nominate a director would be required to provide us with notice, in a prescribed form and within prescribed time periods. These time periods include, (i) in the case of an annual meeting of shareholders (including annual and special meetings), not less than 30 days prior to the date of the annual meeting of shareholders; provided that if the first public announcement of the date of the annual meeting of shareholders, which we refer to as the notice date, is less than 50 days before the meeting date, not later than the close of business on the 10th day following the notice date; and (ii) in the case of a special meeting (which is not also an annual meeting) of shareholders called for any purpose which includes electing directors, not later than the close of business on the 15th day following the notice date.
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Director Independence
We have applied to list our common shares on The Nasdaq Global Market. Under the Nasdaq Stock Market LLC, or Nasdaq, Marketplace Rules, or the Nasdaq Listing Rules, independent directors must comprise a majority of a listed companys board of directors within twelve months from the date of listing. In addition, the Nasdaq Listing Rules require that, subject to specified exceptions, each member of a listed companys audit, compensation and nominating and governance committees be independent within twelve months from the date of listing. Audit committee members must also satisfy additional independence criteria, including those set forth in Rule 10A-3 under the Exchange Act, and compensation committee members must also satisfy the independence criteria set forth in Rule 10C-1 under the Exchange Act. Under the Nasdaq Listing Rules, a director will only qualify as an independent director if, in the opinion of that companys board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In order to be considered independent for purposes of Rule 10A-3 under the Exchange Act, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: (i) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries, other than compensation for board service; or (ii) be an affiliated person of the listed company or any of its subsidiaries. In order to be considered independent for purposes of Rule 10C-1, the board of directors must consider, for each member of a compensation committee of a listed company, all factors specifically relevant to determining whether a director has a relationship to such company which is material to that directors ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to: the source of compensation of the director, including any consulting advisory or other compensatory fee paid by such company to the director, and whether the director is affiliated with the company or any of its subsidiaries or affiliates.
Our board of directors has undertaken a review of the composition of our board of directors and its committees and the independence of each director. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our board of directors has determined that Drs. Hamer and Hayden, and Messrs. Montalbano and Thiel are independent directors, including for purposes of Nasdaq and the SEC rules. In making that determination, our board of directors considered the relationships that each director has with us and all other facts and circumstances the board of directors deemed relevant in determining independence, including the potential deemed beneficial ownership of our capital shares by each director, including non-employee directors that are affiliated with certain of our major shareholders. Upon the closing of this offering, we expect that the composition and functioning of our board of directors and each of our committees will comply with all applicable Nasdaq Listing Rules and the rules and regulations of the SEC.
We intend to adopt a policy, subject to and effective upon the effectiveness of the registration statement of which this prospectus forms a part that outlines a process for our shareholders to send communications to the board of directors.
Board Committees
Our board of directors has established an audit committee, a compensation committee, and a nominating and corporate governance committee, each of which will operate pursuant to a charter to be adopted by our board of directors and will be effective upon the effectiveness of the registration statement of which this prospectus forms a part. We believe that the composition and functioning of all of our committees will comply with the applicable Nasdaq Listing Rules, SOX, and SEC rules and regulations. We intend to comply with future requirements to the extent they become applicable to us.
Following the consummation of this offering, the full text of our audit committee charter, compensation committee charter, and nominating and corporate governance charter will be posted on the investor relations
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portion of our website www.abcellera.com. We have included our website address in this prospectus solely as an inactive textual reference. The information contained on or that can be accessed through our website is not incorporated by reference into this prospectus.
Audit Committee
Upon the effectiveness of the registration statement of which this prospectus forms a part, our audit committee will consist of Mr. Montalbano, Dr. Hamer and Dr. Hayden and will be chaired by Mr. Montalbano. The functions of the audit committee will include:
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appointing, approving the compensation of, and assessing the independence of our independent registered public accounting firm; |
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pre-approving auditing and permissible non-audit services, and the terms of such services, to be provided by our independent registered public accounting firm; |
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reviewing the overall audit plan with our independent registered public accounting firm and members of management responsible for preparing our financial statements; |
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reviewing and discussing with management and our independent registered public accounting firm our annual and quarterly financial statements and related disclosures as well as critical accounting policies and practices used by us; |
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coordinating the oversight and reviewing the adequacy of our internal control over financial reporting; |
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establishing policies and procedures for the receipt and retention of accounting-related complaints and concerns; |
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recommending based upon the audit committees review and discussions with management and our independent registered public accounting firm whether our audited financial statements shall be included in our Annual Report on Form 10-K; |
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monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to our financial statements and accounting matters; |
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preparing the audit committee report required by SEC rules to be included in our annual proxy statement; |
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reviewing all related person transactions for potential conflict of interest situations and approving all such transactions; and |
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reviewing quarterly earnings releases. |
All members of our audit committee will meet the requirements for financial literacy under the applicable rules and regulations of the SEC, the Nasdaq Listing Rules. Our board of directors has determined that qualifies as an audit committee financial expert within the meaning of applicable SEC regulations. In making this determination, our board of directors considered the nature and scope of experience that Mr. Montalbano has previously had with public reporting companies, including service as a Chief Executive Officer of other public and private companies. Our board of directors has determined that all of the directors that will become members of our audit committee upon the effectiveness of the registration statement of which this prospectus forms a part satisfy the relevant independence requirements for service on the audit committee set forth in the rules of the SEC, the Nasdaq Listing Rules and applicable Canadian laws. Both our independent registered public accounting firm and management will periodically meet privately with our audit committee.
Compensation Committee
Upon the effectiveness of the registration statement of which this prospectus forms a part, our compensation committee will consist of Drs. Hayden and Hamer and will be chaired by Dr. Hayden. The functions of the compensation committee upon the closing of this offering will include:
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annually reviewing and recommending to the board of directors the corporate goals and objectives relevant to the compensation of our Chief Executive Officer; |
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evaluating the performance of our Chief Executive Officer in light of such corporate goals and objectives and based on such evaluation (i) reviewing and determining the cash compensation of our Chief Executive Officer and (ii) reviewing and approving grants and awards to our Chief Executive Officer under equity-based plans; |
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reviewing and approving the compensation of our other executive officers; |
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reviewing and establishing our overall management compensation, philosophy and policy; |
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overseeing and administering our compensation and similar plans; |
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evaluating and assessing potential and current compensation advisors in accordance with the independence standards identified in the applicable Nasdaq Listing Rules; |
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reviewing and approving our policies and procedures for the grant of equity-based awards; |
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reviewing and recommending to the board of directors the compensation of our directors; |
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preparing our compensation committee report if and when required by SEC rules; |
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reviewing and discussing annually with management our Compensation Discussion and Analysis, if and when required, to be included in our annual proxy statement; and |
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reviewing and approving the retention or termination of any consulting firm or outside advisor to assist in the evaluation of compensation matters. |
Each member of our compensation committee will be a non-employee director, as defined in Rule 16b-3 promulgated under the Exchange Act.
Nominating and Corporate Governance Committee
Upon the effectiveness of the registration statement of which this prospectus forms a part, our nominating and corporate governance committee will consist of Mr. Thiel and Dr. Hayden and will be chaired by Mr. Thiel. The functions of the nominating and corporate governance committee will include:
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developing and recommending to the board of directors criteria for board and committee membership; |
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establishing procedures for identifying and evaluating board of director candidates, including nominees recommended by shareholders; |
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reviewing the composition of the board of directors to ensure that it is composed of members containing the appropriate skills and expertise to advise us; |
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identifying individuals qualified to become members of the board of directors; |
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recommending to the board of directors the persons to be nominated for election as directors and to each of the boards committees; |
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developing and recommending to the board of directors a code of business conduct and ethics and a set of corporate governance guidelines; and |
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overseeing the evaluation of our board of directors and management. |
Our board of directors may from time to time establish other committees.
Compensation Committee Interlocks and Insider Participation
None of the members of our compensation committee is, or has at any time during the prior three years been, one of our officers or employees. None of our executive officers currently serve, or have in the past fiscal year served, as a member of the board of directors or compensation committee of any entity that has one or more of its executive officers serving as a member of our board of directors or our compensation committee.
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Code of Business Conduct and Ethics
Our board of directors intends to adopt, subject to and effective upon the effectiveness of the registration statement of which this prospectus forms a part, a Code of Business Conduct and Ethics in connection with this offering. The Code of Business Conduct and Ethics will apply to all of our employees, officers (including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions), agents and representatives, including directors and consultants.
We intend to disclose future amendments to certain provisions of our Code of Business Conduct and Ethics and our Code of Ethics on our website identified below. Upon the closing of this offering, the full text of our Code of Business Conduct and Ethics and our Code of Ethics will be posted on our website at www.abcellera.com. We have included our website address in this prospectus solely as an inactive textual reference. The information contained on or that can be accessed through our website is not incorporated by reference into this prospectus.
Limitations on Liability and Indemnification Agreements
We are governed by the Business Corporations Act (British Columbia), or BCBCA. Under the BCBCA, and our new articles that will be in effect upon the closing of this offering, we may (or must, in the case of our articles) indemnify all eligible parties against all eligible penalties to which such person is or may be liable, and we must, after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by such person in respect of that proceeding. Each director is deemed to have contracted with the Company on the terms of indemnity contained in our articles.
For the purposes of such an indemnification:
eligible party, in relation to the Company, means an individual who
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is or was a director or officer of the Company; |
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is or was a director or officer of another corporation |
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at a time when the corporation is or was an affiliate of the Company, or |
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at the request of the Company; or |
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at the request of the Company, is or was, or holds or held a position equivalent to that of, a director or officer of a partnership, trust, joint venture or other unincorporated entity and includes the heirs and personal or other legal representatives of that individual; |
eligible penalty means a judgment, penalty or fine awarded or imposed in, or an amount paid in settlement of, an eligible proceeding;
eligible proceeding means a proceeding in which an eligible party or any of the heirs and personal or other legal representatives of the eligible party, by reason of the eligible party being or having been a director or officer of, or holding or having held a position equivalent to that of a director or officer of, the Company or an associated corporation:
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is or may be joined as a party, or |
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is or may be liable for or in respect of a judgment, penalty or fine in, or expenses related to, the proceeding; |
expenses includes costs, charges and expenses, including legal and other fees, but does not include judgments, penalties, fines or amounts paid in settlement of a proceeding; and
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proceeding includes any legal proceeding or investigative action, whether current, threatened, pending or completed.
In addition, under the BCBCA, the Company may pay, as they are incurred in advance of the final disposition of an eligible proceeding, the expenses actually and reasonably incurred by an eligible party in respect of that proceeding, provided that the Company first receives from the eligible party a written undertaking that, if it is ultimately determined that the payment of expenses is prohibited by the restrictions noted below, the eligible party will repay the amounts advanced.
Notwithstanding the provisions of the Companys articles noted above, the Company must not indemnify an eligible party or pay the expenses of an eligible party, if any of the following circumstances apply:
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if the indemnity or payment is made under an earlier agreement to indemnify or pay expenses and, at the time that the agreement to indemnify or pay expenses was made, the Company was prohibited from giving the indemnity or paying the expenses by its articles; |
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if the indemnity or payment is made otherwise than under an earlier agreement to indemnify or pay expenses and, at the time that the indemnity or payment is made, the Company is prohibited from giving the indemnity or paying the expenses by its articles; |
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if, in relation to the subject matter of the eligible proceeding, the eligible party did not act honestly and in good faith with a view to the best interests of the Company or the associated corporation, as the case may be; or |
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in the case of an eligible proceeding other than a civil proceeding, if the eligible party did not have reasonable grounds for believing that the eligible partys conduct in respect of which the proceeding was brought was lawful. |
In addition, if an eligible proceeding is brought against an eligible party by or on behalf of the Company or by or on behalf of an associated corporation, the Company must not do either of the following:
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indemnify the eligible party in respect of the proceeding; or |
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pay the expenses of the eligible party in respect of the proceeding. |
Notwithstanding any of the foregoing, and whether or not payment of expenses or indemnification has been sought, authorized or declined under the BCBCA or the articles of the Company, on the application of the Company or an eligible party, the Supreme Court of British Columbia may do one or more of the following:
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order the Company to indemnify an eligible party against any liability incurred by the eligible party in respect of an eligible proceeding; |
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order the Company to pay some or all of the expenses incurred by an eligible party in respect of an eligible proceeding; |
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order the enforcement of, or any payment under, an agreement of indemnification entered into by the Company; |
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order the Company to pay some or all of the expenses actually and reasonably incurred by any person in obtaining an order under this section; or |
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make any other order the court considers appropriate. |
The BCBCA and our articles that will be in effect upon the completion of this offering authorize us to purchase and maintain insurance for the benefit of an eligible party against any liability that may be incurred by reason of the eligible party being or having been a director or officer of, or holding or having held a position equivalent to that of a director or officer of, the Company, a current or former affiliate of the Company or a corporation, partnership, trust, joint venture or other unincorporated entity at the request of the Company.
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In addition, we have entered, or will enter, into separate indemnity agreements with each of our directors and officers pursuant to which we agree to indemnify and hold harmless our directors and officers against any and all liability, loss, damage, cost or expense in accordance with the terms and conditions of the BCBCA and our articles.
We maintain a directors and officers insurance policy pursuant to which our directors and officers are insured against liability for actions taken in their capacities as directors and officers. We believe that these provisions in our articles and these indemnity agreements are necessary to attract and retain qualified persons as directors and officers. There is no pending litigation or proceeding naming any of our directors or officers as to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.
This description of the indemnification provisions of our articles and our indemnification agreements is qualified in its entirety by reference to these documents, each of which is attached as an exhibit to the registration statement of which this prospectus forms a part.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable.
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Overview
The following discussion contains forward-looking statements that are based on our current plans and expectations regarding our future compensation programs. The actual amount and form of compensation that we pay and the compensation policies and practices that we adopt in the future may differ materially from the currently-planned programs that are summarized in this discussion.
The compensation provided to our named executive officers for the fiscal year ended December 31, 2019 is detailed in the 2019 Summary Compensation Table and accompanying footnotes and narrative that follow. Our named executive officers for the fiscal year ended December 31, 2019, which consists of our Chief Executive Officer and our two most highly-compensated individuals (other than our Chief Executive Officer) who were serving as executive officers on December 31, 2019, are:
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Carl L.G. Hansen, Ph.D., our Chief Executive Officer; |
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Andrew Booth, our Chief Financial Officer; and |
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Tryn T. Stimart, our Chief Legal Officer & Corporate Secretary. |
2019 Summary Compensation Table
The following table provides information regarding the total compensation awarded to, earned by, or paid to our named executive officers for services rendered to us in all capacities for the fiscal year ended December 31, 2019. The USD amounts below are based on a weighted-average exchange ratio of CAD $1.31544:USD $1.00 for the reporting period as set forth on Bloomberg.
Name and Principal Position |
Year |
Salary
($) |
Bonus
($) |
Stock
Awards ($) |
Option
Awards ($)(1) |
Non-equity
Incentive Plan Compensation ($) |
All Other
Compensation ($) |
Total
($) |
||||||||||||||||||||||||
Carl L.G. Hansen, Ph.D. Chief Executive Officer |
2019 | 177,381 | 72,517 | | | | 249,898 | |||||||||||||||||||||||||
Andrew Booth Chief Financial Officer |
2019 | 95,745 | (2) | 34,361 | (2) | 1,440,830 | | | 1,570,936 | |||||||||||||||||||||||
Tryn Stimart Chief Legal Officer |
2019 | 115,152 | (3) | 17,500 | (3) | 519,218 | | | 651,869 |
(1) | The amounts reported represent the aggregate grant date fair value of the stock options granted to our named executive officers during the 2019 fiscal year, calculated in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 718. Such grant date fair values do not take into account any estimated forfeitures. The assumptions used in calculating the grant date fair value of the stock options reported in this column are set forth in Note 10 of our financial statements included elsewhere in this prospectus. The amounts reported in this column reflect the accounting cost for these stock options and do not correspond to the actual economic value that may be received by our named executive officers upon the exercise of the stock options or any sale of the underlying common shares. |
(2) | Mr. Booth commenced employment on August 22, 2019, and his salary and bonus were pro-rated accordingly. In connection with Mr. Booths employment, he received a signing bonus equal to $15,204. |
(3) | Mr. Stimart commenced employment on August 22, 2019, and his base salary and bonus were pro-rated accordingly. |
Narrative to Summary Compensation Table
Base Salaries
From January 1, 2019 through August 31, 2019, the annual base salary for Dr. Hansen was $152,040, which increased to $228,061 effective as of September 1, 2019. Messrs. Booth and Stimart both commenced employment with the Company on August 22, 2019, and their annual base salaries during 2019 were $266,071 and $320,000, respectively. Effective upon the completion of this offering, the annual base salaries for each of Dr. Hansen and Messrs. Booth and Stimart will be increased to $400,000.
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Annual Bonuses
During the fiscal year ended December 31, 2019, our named executive officers were eligible to earn a discretionary annual bonus based on the achievement of certain Company performance objectives and/or individual performance. For the fiscal year ended December 31, 2019, the target annual bonuses for Dr. Hansen and Messrs. Booth and Stimart were 30%, 20% and 20%, respectively, of the applicable named executive officers annual base salary, prorated as applicable based on their commencement date. Effective upon the completion of this offering, the target annual bonuses for Dr. Hansen and Messrs. Booth and Stimart will be increased to 55%, 40% and 40%, respectively, of their annual base salary.
Equity Compensation
During the fiscal year ended December 31, 2019, we granted stock option awards to each of our named executive officers (other than Dr. Hansen), as described in more detail in the Outstanding equity awards at fiscal 2019 year-end table.
Perquisites or Personal Benefits
We generally do not provide significant perquisites or personal benefits to our employees with an aggregate equal to or greater than $10,000, other than reimbursement for relocation expenses. None of our named executive officers received such perquisites or personal benefits during the 2019 fiscal year.
Executive Employment Arrangements
We have entered into an offer letter with each of the named executive officers in connection with his employment with us, which set forth the terms and conditions of his employment. The USD amounts below are based on a weighted-average exchange ratio of CAD $1.31544:USD $1.00 for the reporting period as set forth on Bloomberg.
Offer Letters in Place During the Fiscal Year Ended December 31, 2019 for Our Named Executive Officers
Carl L.G. Hansen, Ph.D.
On August 1, 2019, we entered into a continuation of employment letter with Dr. Hansen, who currently serves as our Chief Executive Officer. The offer letter, effective as of September 1, 2019, and amended as of March 6, 2020, provides for Dr. Hansens initial annual base salary of CAD $400,000 ($304,080), initial target annual bonus opportunity equal to 30% of Dr. Hansens base salary, a CAD $5,392 ($4,099) sign-on bonus, one pair of Air Jordan basketball shoes, and his ability to participate in our employee benefit plans generally. Dr. Hansens offer letter also provides that if he voluntarily resigns from the Company, he must provide the Company with three months prior written notice, which the Company may waive and provide payment of base salary in lieu of such notice. In addition, in the event of a termination of his employment by the Company without cause (as defined in Dr. Hansens offer letter), Dr. Hansen will be entitled to a severance benefit equal to his base salary for a period of six (6) months plus an additional month for every year of service rendered to the Company, up to a maximum of 18 months. If, within 12 months following a change in control (as defined in Dr. Hansens offer letter) of the Company, Dr. Hansens employment is terminated by the Company without cause, he will be entitled to a severance benefit equal to 24 months of base salary and benefits continuation, as well as full accelerated vesting of all unvested and outstanding equity awards. In the event of a resignation or termination of Dr. Hansens employment by the Company for cause, for a period of 12 months following such resignation or termination, the Company will have the right to repurchase 25% of Dr. Hansens founder shares at a price of 50% of the Series A preferred price (as defined in Dr. Hansens offer letter) if the resignation or termination occurs between September 1, 2020 and August 1, 2021. Dr. Hansen is subject to a perpetual non-disclosure of confidential information covenant, an assignment of intellectual property covenant and one (1) year non-compete and non-solicitation of clients and employees covenants following his termination from employment.
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The Company entered into a five-year loan agreement with Dr. Hansen on March 18, 2019, which provided Dr. Hansen with a principal loan amount of CAD $2,000,000 ($1,539,527), plus annual compounded interest, to assist Dr. Hansen with the financing of a residential property and his termination of employment with the University of British Columbia. The loan was secured by pledged shares (as defined in the loan agreement). The loan has been fully repaid by Dr. Hansen.
Andrew Booth
On April 12, 2019, we entered into an offer letter with Mr. Booth, who currently serves as our Chief Financial Officer. The offer letter, effective as of August 22, 2019, provides for Mr. Booths initial annual base salary of CAD $350,000 ($266,071), initial target annual bonus of 20% of Mr. Booths base salary, one pair of Air Jordan basketball shoes, a stock option award for 5,550,000 of our common shares, a CAD $20,000 ($15,204) sign-on bonus, as well as his ability to participate in our employee benefit plans generally. Mr. Booths offer letter also provides that if he voluntarily resigns from the Company, he must provide the Company with three months prior written notice, which the Company may waive and provide payment of base salary in lieu of such notice. In addition, in the event of a termination of his employment by the Company without cause (as defined in Mr. Booths offer letter), Mr. Booth will be entitled to a severance benefit equal to his base salary for a period of six (6) months plus an additional month for every year of service rendered to the Company, up to a maximum of 12 months. If, within 12 months following a change in control (as defined in Mr. Booths offer letter) of the Company, Mr. Booths employment is terminated by the Company without cause, he will be entitled to a severance benefit equal to 24 months of base salary and benefits continuation, as well as full accelerated vesting of all unvested and outstanding equity awards. Mr. Booth is subject to a perpetual non-disclosure of confidential information covenant, an assignment if intellectual property covenant and one (1) year non-compete and non-solicitation of clients and employees covenants following his termination from employment.
Tryn T. Stimart, Esq.
On July 10, 2019, we entered into an offer letter with Mr. Stimart, who currently serves as our Chief Legal Officer. The offer letter, effective as of August 22, 2019, provides for Mr. Stimarts initial annual base salary of $320,000, initial target annual bonus of 20% of Mr. Stimarts base salary, a stock option award for 2,000,000 of our common shares, up to $30,000 for relocation expenses (which Mr. Stimart has not yet incurred), a loan for $200,000 (as described below), as well as his ability to participate in our employee benefit plans generally. Mr. Stimarts offer letter also provides that if he voluntarily resigns from the Company, he must provide the Company with three months prior written notice, which the Company may waive and provide payment of base salary in lieu of such notice. In addition, in the event of a termination of his employment by the Company without cause (as defined in Mr. Stimarts offer letter), Mr. Stimart will be entitled to a severance benefit equal to his base salary for a period of six 6 months plus an additional month for every year of service rendered to the Company, up to a maximum of 12 months. Mr. Stimart is subject to a perpetual non-disclosure of confidential information covenant, an assignment if intellectual property covenant and one (1) year non-compete and non-solicitation of clients and employees covenants following his termination from employment.
Pursuant to Mr. Stimarts offer letter, the Company entered into a loan agreement with Mr. Stimart on July 12, 2019, which provided Mr. Stimart with a principal loan amount of $200,000, plus annual compounded interest equal to the prime rate of the Bank of Canada as reported by the Bank of Montreal on the start date of Mr. Stimarts employment with the Company. The loan has been repaid in full by Mr. Stimart.
Executive Severance Plan
Our board of directors has adopted an Executive Severance Plan, or the Severance Plan, which will become effective on the date on which the registration statement of which this prospectus is part is declared effective by the SEC and in which our named executive officers, and certain other executives, will participate. The benefits provided in the Severance Plan will replace any severance for which our named executive officers may be eligible under their existing offer letters or other agreements or arrangements.
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The Severance Plan will provide that upon a (A) termination by us for any reason other than for cause, death or disability, or (B) resignation for good reason as each such term is defined in the Severance Plan, outside of the change in control period (i.e., the period of one year after a change in control, as defined in the Severance Plan), an eligible participant will be entitled to receive, subject to the execution and delivery of an effective release of claims in favor of the Company and continued compliance with all applicable restrictive covenants, (i) 18 months of base salary (i.e., the higher of the annual base salary in effect immediately prior to the date of termination or the annual base salary in effect for the year immediately prior to the year in which the date of termination occurs) for our Chief Executive Officer and 12 months of base salary for the other named executive officers, and (ii) (x) for U.S. participants, a monthly amount equal to the monthly employer contribution, based on the premiums as of the date of termination, that we would have made to provide health insurance for the U.S. participant if the applicable U.S. participant had remained employed by us for up to 18 months for our Chief Executive Officer (if a U.S. participant) and 12 months for our other named executive officers (if U.S. participants) and (y) for Canadian participants, continued health benefits for 18 months for our Chief Executive Officer (if a Canadian participant) and 12 months for our other named executive officers (if Canadian participants), provided that in no case will a Canadian participant receive less benefit continuation than is required by applicable law. The payments under (i) and (ii) will be paid in substantially equal installments in accordance with our payroll practice over 18 months for our Chief Executive Officer and 12 months for our other named executive officers.
The Severance Plan will also provide that upon a (A) termination by us other than for cause, death or disability or (B) resignation for good reason in each case within the change in control period, an eligible participant will be entitled to receive, in lieu of the payments and benefits above and subject to the execution and delivery of an effective release of claims in favor of the Company and continued compliance with all applicable restrictive covenants, (i) a lump sum amount equal to 150% of the base salary and 150% of the target annual bonus in effect immediately prior to the date of termination (or immediately prior to the change in control, if higher) for our Chief Executive Officer and 100% of the base salary and 100% of the target annual bonus in effect immediately prior to the date of termination (or immediately prior to the change in control, if higher) for our other named executive officers, (ii) (x) for U.S. participants, a lump sum amount equal to the monthly employer contribution, based on the premiums as of the date of termination, that we would have made to provide health insurance for the participant if the applicable U.S. participant had remained employed by us for 18 months for our Chief Executive Officer (if a U.S. participant) and 12 months for our other named executive officers (if U.S. participants) and (y) for Canadian participants, continued health benefits for 18 months for our Chief Executive Officer (if a Canadian participant) and 12 months for our other named executive officers (if Canadian participants), provided that in no case will a Canadian participant receive less benefit continuation than is required by applicable law, and (iii) for all outstanding and unvested equity awards of the Company that are subject to time-based vesting held by the participant, full accelerated vesting of such awards; provided, that the performance conditions applicable to any outstanding and unvested equity awards subject to performance-based vesting will be deemed satisfied at the target level specified in the terms of the applicable award agreement.
The payments and benefits provided under the Severance Plan in connection with a change in control may not be eligible for a federal income tax deduction by us pursuant to Section 280G of the Code. These payments and benefits may also subject an eligible participant, including the named executive officers, to an excise tax under Section 4999 of the Code. If the payments or benefits payable in connection with a change in control would be subject to the excise tax imposed under Section 4999 of the Code, then those payments or benefits will be reduced if such reduction would result in a higher net after-tax benefit to the participant.
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Outstanding Equity Awards at Fiscal 2019 Year-End
The following table sets forth information regarding outstanding equity awards held by our named executive officers as of December 31, 2019.
Option Awards(1) | ||||||||||||||||||||||||||||
Name |
Grant
Date |
Vesting
Commencement Date |
Number of
Securities Underlying Unexercised Options Exercisable (#) |
Number of
Securities Underlying Unexercised Options Unexercisable (#) |
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
Option
Exercise Price ($)(2) |
Option
Expiration Date |
|||||||||||||||||||||
Carl L.G. Hansen, Ph.D. |
| | | | | | | |||||||||||||||||||||
Andrew Booth |
8/3/16 | (3)(4) | 6/15/16 | 450,000 | 450,000 | | 0.19 | 6/15/26 | ||||||||||||||||||||
10/30/19 | (5) | 8/22/19 | | 3,550,000 | | 0.33 | 8/22/29 | |||||||||||||||||||||
10/30/19 | (6) | 8/22/19 | | | 2,000,000 | 0.33 | 8/22/29 | |||||||||||||||||||||
Tryn Stimart |
10/30/19 | (7) | 8/22/19 | | 2,000,000 | | 0.33 | 8/22/29 |
(1) | Each stock option award was granted under our Pre-IPO Plan. |
(2) | Per share exercise price has been converted from CAD to USD based on a weighted-average exchange ratio of CAD $1.31544:USD $1.00 for the reporting period as set forth on Bloomberg. |
(3) | One-sixth of the shares subject to the stock option vest annually beginning on the one year anniversary of the vesting commencement date, subject to the named executive officers continuous service relationship with us through each such date. Additionally, upon a Change in Control (as defined in the stock option agreement), the stock option shall immediately vest in full and be fully exercisable. |
(4) | This stock option was granted to Mr. Booth while he served as a non-employee member of the Board and prior to his commencement of employment as our Chief Financial Officer on August 22, 2019. |
(5) | One-fourth of the shares subject to the stock option vests on the one year anniversary of the vesting commencement date and the remaining vests in equal quarterly installments for the next three years, subject to the named executive officers continuous service relationship with us through each such date. Additionally, upon a Change in Control (as defined in the stock option agreement), the stock option shall immediately vest in full and be fully exercisable. |
(6) | The stock option vests upon the closing of a Series A2 financing with a value greater than $30 million, subject to the named executive officers continuous service relationship with us through such date. The stock option vested in March 2020. |
(7) | One-fourth of the shares subject to the stock option vests on the one year anniversary of the vesting commencement date and the remaining vests in equal quarterly installments for the next three years, subject to the named executive officers continuous service relationship with us through each such date. Additionally, upon a Change in Control (as defined in the stock option agreement), the stock option shall immediately vest in full and be fully exercisable. |
Employee Benefits and Equity Compensation Plans
2020 Share Option and Incentive Plan
Our 2020 Share Option and Incentive Plan, or 2020 Plan, was approved by our board of directors on November 18, 2020 and approved by our shareholders on December 1, 2020, and will become effective on the date immediately prior to the date on which the registration statement of which this prospectus is part is declared effective by the SEC. The 2020 Plan will replace our Pre-IPO Plan, as our board of directors will not make additional awards under the Pre-IPO Plan following the closing of this offering. The 2020 Plan will provide flexibility to our compensation committee to use various equity-based incentive awards as compensation tools to motivate our workforce.
We will initially reserve 21,280,000 common shares, or the Initial Limit, for the issuance of awards under the 2020 Plan. The 2020 Plan provides that the number of shares reserved and available for issuance under the plan will automatically increase each January 1, beginning on January 1, 2022, by 5% of the outstanding number of common shares issued and outstanding on the immediately preceding December 31, or such lesser number of shares as determined by our compensation committee. This is referred to herein as the Annual Increase. This
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number will be subject to adjustment in the event of a share split, share dividend or other change in our capitalization.
The shares we issue under the 2020 Plan will be authorized but unissued shares or shares that we reacquire. The common shares underlying any awards that are forfeited, cancelled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by us prior to vesting, satisfied without any issuance of shares, expire or are otherwise terminated (other than by exercise) under the 2020 Plan and the Pre-IPO Plan will be added back to the common shares available for issuance under the 2020 Plan.
The maximum aggregate number of common shares that may be issued as incentive share options may not exceed the Initial Limit cumulatively increased on January 1, 2022, and on each January 1 thereafter by the lesser of (i) the Annual Increase for such year or (ii) 21,280,000 common shares.
The 2020 Plan will be administered by our compensation committee. Our compensation committee will have full power to select, from among the individuals eligible for awards, the individuals to whom awards will be granted, to make any combination of awards to participants, and to determine the specific terms and conditions of each award, subject to the provisions of the 2020 Plan. Persons eligible to participate in the 2020 Plan will be those full or part-time employees, non-employee directors and consultants of our company and our affiliates, as selected from time to time by our compensation committee in its discretion.
The 2020 Plan will permit the granting of both options to purchase common shares intended to qualify as incentive share options under Section 422 of the Internal Revenue Code and options that do not so qualify. The option exercise price of each option will be determined by our compensation committee but generally may not be less than 100% of the fair market value of our common share on the date of grant, except under certain limited circumstances. The term of each option will be fixed by our compensation committee and may not exceed ten years from the date of grant. Our compensation committee will determine at what time or times each option may be exercised.
Our compensation committee will be able to award share appreciation rights subject to such conditions and restrictions as it may determine. Share appreciation rights will entitle the recipient to common shares or cash, equal to the value of the appreciation in our share price over the exercise price. The exercise price of each share appreciation right generally may not be less than 100% of the fair market value of the common share on the date of grant, except under certain limited circumstances. The term of each share appreciation right will be fixed by our compensation committee and may not exceed ten years from the date of grant. Our compensation committee will determine at what time or times each share appreciation right may be exercised.
Our compensation committee will be able to award restricted common shares and restricted share units to participants subject to such conditions and restrictions as it may determine. These conditions and restrictions may include the achievement of certain performance goals and continued employment or service relationship with us through a specified vesting period. Our compensation committee may also be permitted to grant common shares that are free from any restrictions under the 2020 Plan. Unrestricted shares may be granted to participants in recognition of past services or other valid consideration and may be issued in lieu of cash compensation due to such participants.
Our compensation committee will be able to grant cash bonuses under the 2020 Plan to participants, subject to the achievement of certain performance goals.
The 2020 Plan will provide that upon the effectiveness of a sale event, as defined in the 2020 Plan, an acquirer or successor entity may assume, continue or substitute outstanding awards under the 2020 Plan. To the extent that awards granted under our 2020 Plan are not assumed or continued or substituted by the successor entity, then to the extent otherwise provided in the relevant award certificate or at the discretion of the compensation committee, all awards with time-based vesting, conditions or restrictions will become fully vested
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and nonforfeitable as of the effective time of the sale event, and all awards with conditions and restrictions relating to the attainment of performance goals may become vested and nonforfeitable in connection with a sale event. Upon the effective time of the sale event, all outstanding awards granted under the 2020 Plan will terminate to the extent not assumed, continued or substituted for. In the event of such termination, individuals holding options and share appreciation rights will be permitted to exercise such options and share appreciation rights (to the extent exercisable) within a specified period of time prior to the sale event. In addition, in connection with the termination of the 2020 Plan upon a sale event, we may make or provide for a payment, in cash or in kind, to participants holding vested and exercisable options and share appreciation rights equal to the difference between the per share cash consideration payable to shareholders in the sale event and the exercise price of the options or share appreciation rights and we may make or provide for a payment, in cash or in kind, to participants holding other vested awards.
Our board of directors will be able to amend or discontinue the 2020 Plan and our compensation committee will be permitted, at any time, to amend or cancel outstanding awards for purposes of satisfying changes in law or any other lawful purpose but no such action may adversely affect rights under an award without the holders consent. The compensation committee cannot reduce the exercise price of outstanding share options or share appreciation rights or effect the repricing of such awards through cancellation and re-grants without prior shareholder approval. Certain amendments to the 2020 Plan will require the approval of our shareholders.
No awards will be granted under the 2020 Plan after the date that is 10 years from the date of shareholder approval. No awards under the 2020 Plan will be made prior to the date of this prospectus.
Sixth Amended and Restated Stock Option Plan
We maintain the AbCellera Biologics Inc. Sixth Amended and Restated Stock Option Plan, our Pre-IPO Plan, which was most recently approved by our board of directors on November 18, 2020. The Pre-IPO Plan allows for the grant of options (and for U.S. participants, either incentive stock options and/or nonstatutory stock options) to employees, directors, and consultants, subject in each case to compliance with applicable tax laws.
Our 2020 Plan will become effective on the date immediately prior to the date on which the registration statement of which this prospectus is part is declared effective by the SEC. As a result, we do not expect to grant any additional awards under the Pre-IPO Plan following that date. Any awards granted under the Pre-IPO Plan will remain subject to the terms of our Pre-IPO Plan and applicable award agreements. As of October 31, 2020, options to purchase 53,491,810 common shares were outstanding under the Pre-IPO Plan.
The Pre-IPO Plan has only reserved enough common shares required for issuance under outstanding option grants. When options expire or are otherwise terminated for any reason without having been exercised in full, the common shares subject to such options will be added to the number of common shares reserved for issuance under the 2020 Plan. The Pre-IPO Plan is currently administered by our Chief Executive Officer, on the instructions of our board of directors. Our board of directors has full power to construe and interpret the plan, select, from among the individuals eligible for options, the individuals to whom options will be granted and to determine the specific terms and conditions of each options, all subject to the provisions of the Pre-IPO Plan. Following this offering, the Pre-IPO Plan will be administered by our compensation committee.
The per share exercise price of each option is determined by our board of directors but may not be less than market value on the grant date. The term of each option, unless otherwise specified by the board of directors to be an earlier date, expires 10 years from the grant date. When an option holders service relationship with the Company ends for any reason, other than termination for Cause (as defined in the Pre-IPO Plan), then any vested options will generally expire 90 days from such termination. In the event that an option holder dies, the vested portion of their options generally expire twelve months after the date of the option holders death. Lastly, in the event that an option holder becomes permanently disabled, any vested portion of their option generally expire six months after the date of disability. Unless otherwise specified by the board of directors at the time of grant,
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options generally vest over a three year period whereby one quarter of the shares subject to the option shall vest immediately upon grant, and the remaining share shall vest in equal thirds on each of the three anniversaries of the grant date. Unless otherwise determined by our board of directors, the vesting of options shall be suspended during any Company-approved or statutory leave of absence taken by the holder of an option. Options intended to qualify as incentive stock options under Section 422 of the Code are subject to additional provisions as required under Section 422 of the Code and set forth in our Pre-IPO Plan. The Pre-IPO Plan provides that participants may exercise their options by paying with a certified check or bank draft payable to the Company. Option holders who exercise their options must, if required by our board of directors, execute certain voting, co-sale and/or other agreements as requested.
The Pre-IPO Plan provides that prior to the completion of an initial public offering, our board of directors, the regulatory authorities, or the underwriter may require termination of all outstanding options. In this event, the Company may provide notice to option holders that the unvested portions of their options will immediately vest in full and that the option will expire 30 days following the date of such notice. In the event the Company does not complete its initial public offering, the Company will, to the extent reasonably practicable, grant to the option holder an option equivalent (including the original vesting terms, if any).
In the event of a Substantial Sale (as defined in the Pre-IPO Plan), where more than 66 2/3% of the shares of the Company are sold to a purchaser, and such purchaser offers to buy any outstanding options, an option holder must sell their options to the purchaser for the per share price to be paid by the purchaser minus the exercise price and multiplied by the number of shares subject to the option. If an option holder does not sell their options, then such options will expire, terminate, and be cancelled upon completion of the Substantial Sale. In the event of a share consolidation, subdivision, conversion, exchange, reclassification or any substitution pertaining to our common shares, the our board of directors has the power to make any necessary adjustments as they deem appropriate.
The Pre-IPO Plan generally does not allow for the transfer or assignment of options; however, option holders may deliver an option direction to the Company to direct the Company to grant options to certain permitted assignees.
Our board of directors may amend or terminate the Pre-IPO Plan at any time in its sole discretion; provided that, no such amendment or termination will alter the terms and conditions of any option, or impair the rights of any option holder pursuant to options granted prior to such amendment or termination. Our board of directors may retrospectively amend the Pre-IPO Plan, and with the consent of affected option holders, may retrospectively amend the terms and conditions of any previously-granted options. Our board of directors has determined not to make any further awards under the Pre-IPO Plan following the completion of the offering.
2020 Employee Share Purchase Plan
Our 2020 Employee Share Purchase plan, or the 2020 ESPP, was adopted by our board of directors on November 18, 2020 and approved by our shareholders on December 1, 2020, and will become effective on the date immediately prior to the date on which the registration statement of which this prospectus is part is declared effective by the SEC. The 2020 ESPP will initially reserve and authorize the issuance of up to a total of 2,700,000 common shares to participating employees. The 2020 ESPP will provide that the number of shares reserved and available for issuance will automatically increase each January 1 starting on January 1, 2022, by the least of 2,700,000 common shares, 1% of the outstanding number of common shares on the immediately preceding December 31, or such lesser number of shares as determined by our compensation committee. This number will be subject to adjustment in the event of a share split, share dividend or other change in our capitalization.
All employees who have been employed for more than 20 hours a week and have completed at least six full months of employment will be eligible to participate in the 2020 ESPP. Any employee who owns 5% or more of the total combined voting power or value of all classes of shares will not be eligible to purchase shares under the 2020 ESPP.
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We will make one or more offerings each year to our employees to purchase shares under the 2020 ESPP. Offerings will generally begin every six months and will continue for six-month periods, referred to as offering periods. Each eligible employee may elect to participate in any offering by submitting an enrollment form at least 15 business days before the relevant offering date.
Each employee who is a participant in the 2020 ESPP may purchase shares by authorizing contributions of between 1% and 15% of his or her compensation during an offering period. Unless the participating employee has previously withdrawn from the offering, his or her accumulated contributions will be used to purchase shares on the last business day of the offering period at a price equal to 85% of the fair market value of the shares on the first business day of the offering period or the last business day of the offering period, whichever is lower, provided that no more than 30,000 common shares (or a lesser number as established by the plan administrator in advance of the offering period) may be purchased by any one employee during each offering period. Under applicable tax rules, an employee may purchase no more than US $25,000 worth of common shares, valued at the start of the offering period, under the 2020 ESPP for each calendar year in which a purchase right is outstanding.
The accumulated contributions of any employee who is not a participant on the last day of an offering period will be refunded. An employees rights under the 2020 ESPP terminate upon voluntary withdrawal from the plan or when the employee ceases employment with us for any reason.
In the event of a corporate transaction, our board of directors may make such adjustment as it deems appropriate to prevent dilution or enlargement of rights in the number and class of shares which may be delivered under the ESPP, in the number, class or price available for purchase under the ESPP and in the number of shares which a participant is entitled to purchase and any other adjustments it deems appropriate. Our board of directors may also elect to have options under the ESPP assumed or substituted by a successor, to have options terminated without consent (either prior to their expiration or upon completion of the purchase of shares on the next exercise date), to shorten the offering period by setting a new exercise date or to take such other action as it deems appropriate.
The 2020 ESPP may be terminated or amended by our board of directors at any time, but will automatically terminate on the 10-year anniversary of this offering. An amendment that increases the number of common shares that are authorized under the 2020 ESPP and certain other amendments will require the approval of our shareholders. The plan administrator may adopt subplans under the 2020 ESPP for employees of our non-U.S. subsidiaries.
Senior Executive Cash Incentive Bonus Plan
On November 18, 2020, our board of directors adopted the Senior Executive Cash Incentive Bonus Plan, or the Bonus Plan. The Bonus Plan will provide for cash bonus payments based upon the attainment of performance targets established by our compensation committee. The payment targets will be related to financial and operational measures or objectives with respect to our company, or corporate performance goals, as well as individual performance objectives.
Our compensation committee may select corporate performance goals from among the following: research, pre-clinical, non-clinical, developmental, publication, clinical or regulatory milestones; scientific or technological advances; research and development or manufacturing capabilities; cash flow (including, but not limited to, operating cash flow and free cash flow); revenue; corporate revenue; earnings before interest, taxes, depreciation and amortization; net income (loss) (either before or after interest, taxes, depreciation and/or amortization); changes in the market price of the Companys common shares; economic value-added; acquisitions, licenses, collaborations or strategic transactions; financing or other capital raising transactions; operating income (loss); return on capital, assets, equity, or investment; shareholder returns; return on sales; total shareholder return; gross or net profit levels; productivity; expense efficiency; margins; operating efficiency; satisfaction of, or other achievement metrics relating to, key third parties; working capital; earnings (loss) per
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share of the Companys common shares; bookings, new bookings or renewals; sales or market shares; number of prescriptions or prescribing physicians; coverage decisions; leadership development, employee retention, and recruiting and other human resources matters; operating income and/or net annual recurring revenue, any of which may be measured in absolute terms, as compared to any incremental increase, in terms of growth, as compared to results of a peer group, against the market as a whole, compared to applicable market indices and/or measured on a pre-tax or post-tax basis.
Each executive officer who is selected to participate in the Bonus Plan will have a target bonus opportunity set for each performance period. The bonus formulas will be adopted in each performance period by the compensation committee and communicated to each executive. The corporate performance goals will be measured at the end of each performance period after our financial reports have been published. If the corporate performance goals and individual performance objectives are met, payments will be made as soon as practicable following the end of each performance period, but no later than 74 days after the end of the fiscal year in which such performance period ends. Subject to the rights contained in any agreement between the executive officer and us, an executive officer must be employed by us on the bonus payment date to be eligible to receive a bonus payment, unless otherwise determined by the compensation committee. If an executive officer becomes a participant in the Bonus Plan during a performance period and is not employed for the entire performance period, the compensation committee may pro-rate the bonus for such executive officer, based on the number of days employed during such period.
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Prior Director Compensation Program
During the fiscal year ended December 31, 2019, we did not provide any compensation to our employee directors or non-employee director affiliated with DCVC Bio for their services on our board of directors and did not have a formal program for compensating our other non-employee directors. As of December 31, 2019, Dr. Hamer did not hold any outstanding equity awards and Dr. Lecault held options to purchase 2,000,000 common shares, which were granted to her as an employee of the Company.
Non-Employee Director Compensation Table
The following table provides information regarding the total compensation that was earned by or paid to each of our non-employee directors during the fiscal year ended December 31, 2019. Dr. Hansen, who is our Chief Executive Officer, did not receive any additional compensation for his service as a director. The compensation received by Dr. Hansen, as a named executive officer of our company, is presented in Executive Compensation2019 Summary Compensation Table above. Dr. Lecault received consideration solely in her capacity as our Chief Operating Officer, and such compensation would have been reported under Item 402 of Regulation S-K as compensation earned for services to us if she was a named executive officer as defined in Item 402 of Regulation S-K, and such compensation has been approved by our board of directors upon the recommendation of a group of independent directors.
Name |
Fees
Earned or Paid in Cash ($) |
Option
Awards ($) |
All Other
Compensation ($) |
Total
($) |
||||||||||||
Michael Hayden(1) |
13,297 | (2) | 280,378 | | 293,674 |
(1) | Genworks 2 has been granted stock options for Dr. Haydens service on our board of directors. As of December 31, 2019, Genworks 2 held options to purchase 1,080,000 common shares. |
(2) | The USD amount is based on a weighted-average exchange ratio of CAD $1.31544:USD $1.00 for the reporting period as set forth on Bloomberg. |
Non-Employee Director Compensation Policy
In connection with this offering, our board of directors adopted a non-employee director compensation policy, to be effective in connection with this offering. The policy is designed to enable us to attract and retain, on a long-term basis, highly qualified non-employee directors. Under the policy, our non-employee directors will be eligible to receive cash retainers (which will be prorated for partial years of service) and equity awards as set forth below:
Annual Retainer for Board Membership |
||||
Annual service on the board of directors |
$ | 40,000 | ||
Additional retainer for annual service as non-executive chairperson or lead director of the board of directors |
$ | 30,000 | ||
Additional Annual Retainer for Committee Membership |
||||
Annual service as audit committee chairperson |
$ | 20,000 | ||
Annual service as member of the audit committee (other than chair) |
$ | 10,000 | ||
Annual service as compensation committee chairperson |
$ | 15,000 | ||
Annual service as member of the compensation committee (other than chair) |
$ | 7,500 | ||
Annual service as nominating and corporate governance committee chairperson |
$ | 10,000 | ||
Annual service as member of the nominating and corporate governance committee (other than chair) |
$ | 5,000 |
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In addition, our policy will provide that, upon initial election or appointment to our board of directors, each new non-employee director will be granted a one-time grant of either a non-statutory share option to purchase our common shares, restricted share units, or a combination thereof, with a value determined by our board of directors on the date of such directors election or appointment to the board of directors, or the Director Initial Grant. The Director Initial Grant will vest in substantially equal annual installments over three years. On the date of each annual meeting of shareholders of our company following the completion of this offering, each non-employee director who will continue as a non-employee director following such meeting will be granted an annual award of either a non-statutory share option to purchase our common shares, restricted share units, or a combination thereof, with a value determined by our board of directors, or the Director Annual Grant. The Director Annual Grant will vest in full on the earlier of the one-year anniversary of the grant date or on the date of our next annual meeting of shareholders. Notwithstanding the foregoing, with respect to the Director Annual Grants to be made at the annual meeting of shareholders occurring in 2021 and 2022, such Director Annual Grants will not occur at such annual meetings and will instead occur in December of the year immediately prior to the year of the applicable annual meeting, and such Director Annual Grants shall vest on the one-year anniversary of the grant date. The Director Initial Grant and Director Annual Grant are subject to full acceleration of vesting upon the sale of our company.
We will reimburse all reasonable out-of-pocket expenses incurred by directors for their attendance at meetings of our board of directors or any committee thereof.
Employee directors will receive no additional compensation for their service as a director.
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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
The following is a description of transactions or series of transactions since January 1, 2017, to which we were or will be a party, in which:
|
the amount involved in the transaction exceeds, or will exceed $120,000; and |
|
in which any of our executive officers, directors or holders of 5% or more of any class of our share capital, or the immediate family members of, or any person sharing the household with, the foregoing persons, or any affiliated entities, had or will have a direct or indirect material interest. |
Compensation arrangements for our named executive officers and our directors are described elsewhere in this prospectus under the sections titled Executive Compensation and Director Compensation.
Private Placements of Securities
Series A1 Convertible Preferred Share Financing
In August 2018, we issued and sold an aggregate of 2,105,264 Series A1 convertible preferred shares at a purchase price of $3.66 per share, for an aggregate amount of approximately $7.7 million. The following table summarizes the Series A1 convertible preferred shares purchased by related persons.
Purchaser |
Series A1 Convertible
Preferred Shares Purchased |
Aggregate Purchase
Price ($) |
||||||
DCVC Bio, L.P.(1) |
2,105,264 | $ | 7,702,380 | |||||
|
|
|
|
|||||
Total |
2,105,264 | $ | 7,702,380 | |||||
|
|
|
|
(1) | John Edward Hamer, Ph.D., a member of our board of directors, is a Managing Partner at DCVC Bio, L.P. |
Series A2 Convertible Preferred Share Financing
In March 2020, we issued and sold an aggregate of 6,017,784 Series A2 convertible preferred shares at a purchase price of $12.4631 per share for an aggregate amount of approximately $75 million. The following table summarizes the Series A2 convertible preferred shares purchased by related persons.
Purchaser |
Series A2 Convertible
Preferred Shares Purchased |
Aggregate Purchase
Price ($) |
||||||
DCVC Bio, L.P.(1) |
802,371 | $ | 10,000,030 | |||||
OrbiMed Royalty & Credit Opportunities III, LP(2) |
802,371 | 10,000,030 | ||||||
Viking Global Opportunities Illiquid Investments Sub-Master LP(3) |
1,604,771 | 20,000,061 | ||||||
Entities affiliated with Baker Brothers(4) |
802,371 | 10,000,030 | ||||||
Entities affiliated with Thiel Capital(5) |
758,479 | 9,453,000 | ||||||
Eli Lilly and Company(6) |
401,186 | 5,000,021 | ||||||
Harvard Management Private Equity Corporation(7) |
401,186 | 5,000,021 | ||||||
Regents of the University of Minnesota(8) |
401,186 | 5,000,021 | ||||||
|
|
|
|
|||||
Total |
5,973,892 | $ | 74,453,214 | |||||
|
|
|
|
(1) | John Edward Hamer, Ph.D., a member of our board of directors, is a Managing Partner at DCVC Bio, L.P., an entity that holds 5% or more of our Series A1 convertible preferred shares. |
(2) | OrbiMed Royalty & Credit Opportunities III, LP is a holder of 5% or more of our Series A2 convertible preferred shares. |
(3) | Viking Global Opportunities Illiquid Investments Sub-Master LP is a holder of 5% or more of our Series A2 convertible preferred shares. |
(4) | Baker Brothers Life Sciences, L.P. and 667, L.P. together hold 5% or more of our Series A2 convertible preferred shares. |
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(5) | ABE Investments LLC, The Founders Fund VII Principals Fund, LP, or FFVIIP, The Founders Fund VII, LP, or FFVII, and The Founders Fund VII Entrepreneurs Fund, LP, or FFVIIE, together hold 5% or more of our Series A2 convertible preferred shares. |
(6) | Eli Lilly and Company is a holder of 5% or more of our Series A2 convertible preferred shares. |
(7) | Harvard Management Private Equity Corporation is a holder of 5% or more of our Series A2 convertible preferred shares. |
(8) | Regents of the University of Minnesota is a holder of 5% or more of our Series A2 convertible preferred shares. |
Convertible Notes
In October 2020, in order to finance a portion of the purchase price for the Trianni acquisition, we issued $90.0 million aggregate principal amount of Convertible Notes to an aggregate of 14 purchasers, including the related persons set forth in the table below. In connection with this offering, the outstanding balances under such notes will convert into our common shares at a conversion price equal to 85% of the initial public offering price in this offering plus 800,000 common shares (for certain specified purchasers).
Purchaser |
Aggregate Principal
Amount of the Convertible Notes |
|||
DCVC Bio, L.P.(1) |
$ | 500,000 | ||
OrbiMed Royalty & Credit Opportunities III, LP(2) |
3,010,000 | |||
DRAGSA 76 LLC(3) |
6,150,000 | |||
Entities affiliated with Baker Brothers(4) |
3,000,000 | |||
Entities affiliated with Thiel Capital(5) |
35,430,000 | |||
Eli Lilly and Company(6) |
1,500,000 | |||
Harvard Management Private Equity Corporation(7) |
1,500,000 | |||
Genworks 2 Consulting Inc.(8) |
$ | 2,000,000 | ||
|
|
|||
Total(9) |
$ | 53,090,000 | ||
|
|
(1) | John Edward Hamer, Ph.D., a member of our board of directors, is a Managing Partner at DCVC Bio, L.P, which is a holder of 5% or more of our Series A1 convertible preferred shares. |
(2) | OrbiMed Royalty & Credit Opportunities III, LP is a holder of 5% or more of our Series A2 convertible preferred shares. |
(3) | DRAGSA 76 LLC is an affiliate of Viking Global Opportunities Illiquid Investments Sub-Master LP, which is a holder of 5% or more of our Series A2 convertible preferred shares. |
(4) | Baker Brothers Life Sciences, L.P. and 667, L.P. together hold 5% or more of our Series A2 convertible preferred shares. |
(5) | Reflects purchases by ABE Investments LLC, The Founders Fund Growth, LP, or FFG, and The Founders Fund Growth Principals Fund, LP, or FFGP. ABE Investments LLC, FFG and FFGP will also be issued an aggregate of 800,000 common shares in connection with the completion of this offering. ABE Investments LLC and certain other Founders Fund entities together hold 5% or more of our Series A2 convertible preferred shares, as described in more detail above. |
(6) | Eli Lilly and Company is a holder of 5% or more of our Series A2 convertible preferred shares. |
(7) | Harvard Management Private Equity Corporation is a holder of 5% or more of our Series A2 convertible preferred shares. |
(8) | Reflects purchase by Genworks 2 Consulting Inc., or Genworks 2. The spouse of Michael Hayden, Ph.D., a member of our board of directors, has sole voting and investment power with respect to the shares held by Genworks 2. |
(9) | Represents approximately 59.0% of the aggregate amount of Convertible Notes issued in connection with the Trianni acquisition. |
Agreements with Shareholders
In connection with our Series A1 preferred share financing and our Series A2 preferred share financings, we entered into investors rights, voting, right of first refusal and co-sale agreements, as well as share exchange agreements, containing registration rights, information rights, voting rights and rights of first refusal, among other things, with holders of our preferred shares and certain holders of our common shares. See the section titled Description of Share Capital appearing elsewhere in this prospectus for more information.
In February 2014, we entered into a shareholders agreement with certain holders of our common shares containing, among other things, transfer restrictions, required voting for a director, and obligations of non-competition and non-solicitation on certain holders of our capital shares. Pursuant to the agreement, we or our assignees have a right to purchase shares which certain shareholders propose to sell or transfer to other parties. Prior to the completion of this offering, the agreement will terminate and the restrictions on the transfer of our capital shares set forth in the agreement will no longer apply.
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Executive Officers and Directors Compensation
See the sections titled Executive Compensation and Director Compensation appearing elsewhere in this prospectus for information regarding compensation arrangements and share option grants for our executive officers and our directors.
Loans to Officers
On March 18, 2019, we entered into a loan agreement with our Chief Executive Officer, Carl L.G. Hansen, Ph.D., which provided Dr. Hansen with a principal loan amount of CAD $2,000,000 ($1,539,527), plus annual compounded interest, to assist Dr. Hansen with the financing of a residential property and his termination of employment with the University of British Columbia. The loan was secured by pledged shares (as defined in the loan agreement). As of September 30, 2020, the loan has been fully repaid by Dr. Hansen.
On July 12, 2019, we entered into a loan agreement with our Chief Legal Officer, Tryn Stimart, which provided Mr. Stimart with a principal loan amount of $200,000, plus annual compounded interest equal to the prime rate of the Bank of Canada as reported by the Bank of Montreal on the start date of Mr. Stimarts employment with the Company. The loan has been repaid in full by Mr. Stimart.
Share Transfers
On June 11, 2020, Viking Global, a holder of more than 5% of our share capital, purchased an aggregate of 2,674,560 of our outstanding common shares from Carl L.G. Hansen, Ph.D., our Chief Executive Officer, the Hankla Family Trust, of which Dr. Hansen and his spouse are joint trustees, and Thermopylae Holdings Ltd., an entity wholly owned by Dr. Hansen, at a purchase price of $1.1217 per share, for an aggregate purchase price of approximately $3.0 million.
On April 29 and April 30, 2020, certain third parties and an existing shareholder purchased an aggregate of 551,450 of our outstanding common shares from the Slomo Family Trust, of which Véronique Lecault, Ph.D., our Chief Operating Officer, is a co-trustee, at a purchase price of $1.1217 per share, for an aggregate purchase price of approximately $618,550.
Indemnification Agreements
In connection with this offering, we will enter into new agreements to indemnify our directors and executive officers. These agreements will, among other things, require us to indemnify these individuals for certain expenses (including attorneys fees), judgments, fines and settlement amounts reasonably incurred by such person in any action or proceeding, including any action by or in our right, on account of any services undertaken by such person on behalf of our company or that persons status as a member of our board of directors to the maximum extent allowed under Canadian law.
Directed Share Program
At our request, the underwriters have reserved up to 5.0% of the common shares offered by this prospectus for sale, at the initial public offering price, to our directors, officers, employees, business associates and related persons through a directed share program. We do not currently know the extent to which these related persons will participate in the directed share program, if at all. Any reserved shares purchased by our directors and officers will be subject to a 180-day lock-up described under the section titled Underwriters. See UnderwritingDirected Share Program.
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Policies for Approval of Related Party Transactions
Our board of directors reviews and approves transactions with directors, officers and holders of five percent or more of our voting securities and their affiliates, each a related party. Prior to this offering, the material facts as to the related partys relationship or interest in the transaction were disclosed to our board of directors prior to their consideration of such transaction, and the transaction was not considered approved by our board of directors unless a majority of the directors who are not interested in the transaction approved the transaction. Further, when shareholders are entitled to vote on a transaction with a related party, the material facts of the related partys relationship or interest in the transaction were disclosed to the shareholders, who must approve the transaction in good faith.
In connection with this offering, we expect to adopt a written related party transactions policy that will provide that such transactions must be approved by our audit committee. This policy will become effective on the date on which the registration statement of which this prospectus forms a part is declared effective by the SEC. Pursuant to this policy, the audit committee has the primary responsibility for reviewing and approving or disapproving related party transactions, which are transactions between us and related persons in which the aggregate amount involved exceeds or may be expected to exceed $120,000, and in which a related person has or will have a direct or indirect material interest. For purposes of this policy, a related person will be defined as a director, executive officer, nominee for director, or greater than 5% beneficial owner of our common shares, in each case since the beginning of the most recently completed year, and their immediate family members.
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The following table sets forth, as of October 31, 2020, information regarding the beneficial ownership of our common shares by:
|
each of our directors; |
|
each of our named executive officers; |
|
all of our current directors and executive officers as a group; and |
|
each person, or group of affiliated persons, who is known by us to beneficially own more than 5% of our share capital. |
We have determined beneficial ownership in accordance with SEC rules. The information does not necessarily indicate beneficial ownership for any other purpose. Under these rules, a person is deemed to be a beneficial owner of our common shares if that person has a right to acquire ownership within 60 days by the exercise of options or the conversion of our convertible preferred shares. A person is also deemed to be a beneficial owner of our common shares if that person has or shares voting power, which includes the power to vote or direct the voting of our common shares, or investment power, which includes the power to dispose of or to direct the disposition of such capital shares. Except in cases where community property laws apply or as indicated in the footnotes to this table, we believe that each shareholder identified in the table possesses sole voting and investment power over all common shares shown as beneficially owned by the shareholder.
The number of shares and percentage ownership information before the offering in the table below is based on 235,361,744 common shares deemed to be outstanding as of October 31, 2020, assuming the automatic conversion of all of our outstanding convertible preferred shares into 81,230,480 common shares immediately prior to the completion of this offering. The number of shares and percentage ownership information after the offering is based on the sale of 23,000,000 shares in this offering and assumes the conversion of the Convertible Notes into an aggregate of 7,630,352 common shares of the Company upon the completion of this offering, assuming an initial public offering price of $15.50 per share, which is the midpoint of the price range set forth on the cover page of this prospectus. The following table does not reflect any common shares that may be purchased pursuant to our directed share program described in the section titled UnderwritingDirected Share Program. The table below further assumes that the underwriters do not exercise their option to purchase additional shares. Common shares subject to options that are currently exercisable or exercisable within 60 days of October 31, 2020 are considered outstanding and beneficially owned by the person holding the options for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated below, the address of each individual listed below is c/o AbCellera Biologics Inc., 2215 Yukon Street, Vancouver, BC V5Y 0A1.
Common Shares
Beneficially Owned |
Percentage of Shares
Outstanding |
|||||||||||||||
Before
Offering |
After
Offering |
Before
Offering |
After
Offering |
|||||||||||||
5% or Greater Shareholders |
||||||||||||||||
Thermopylae Holdings Ltd.(1) |
61,202,750 | 61,202,750 | 26.0 | % | 23.0 | % | ||||||||||
DCVC Bio, L.P.(2) |
29,076,350 | 29,114,300 | 12.4 | % | 10.9 | % | ||||||||||
Viking Global Opportunities Illiquid Investments Sub-Master LP(3) |
18,721,980 | 19,188,773 | 8.0 | % | 7.2 | % |
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Common Shares
Beneficially Owned |
Percentage of Shares
Outstanding |
|||||||||||||||
Before
Offering |
After Offering |
Before
Offering |
After
Offering |
|||||||||||||
Named Executive Officers and Directors |
||||||||||||||||
Carl L.G. Hansen, Ph.D.(4) |
61,827,830 | 61,827,830 | 26.3 | % | 23.2 | % | ||||||||||
Andrew Booth(5) |
3,826,329 | 3,826,329 | 1.6 | % | 1.4 | % | ||||||||||
Tryn T. Stimart(6) |
625,000 | 625,000 | * | * | ||||||||||||
Véronique Lecault, Ph.D.(7) |
9,806,548 | 9,806,548 | 4.2 | % | 3.7 | % | ||||||||||
John Edward Hamer, Ph.D.(8) |
29,076,350 | 29,114,300 | 12.4 | % | 10.9 | % | ||||||||||
Michael Hayden, Ph.D.(9) |
1,030,330 | 1,182,132 | * | * | ||||||||||||
John Montalbano |
| | * | * | ||||||||||||
Peter Thiel(10) |
8,476,310 | 11,965,493 | 3.6 | % | 4.5 | % | ||||||||||
All executive officers and directors as a group (8 persons) |
114,668,697 | 118,347,632 | 48.7 | % | 44.5 | % |
* | Represents beneficial ownership of less than one percent. |
(1) | Consists of (i) 61,202,750 common shares held by Thermopylae Holdings Ltd. or Thermopylae, which is an entity wholly owned by Dr. Hansen. |
(2) | The number of shares beneficially owned before this offering consists of (i) 29,076,350 common shares issuable upon conversion of convertible preferred shares held by DCVC Bio, L.P., or DCVC Bio, and the number of shares beneficially owned after this offering includes (ii) 37,950 common shares of the Company issuable upon the conversion of the Convertible Notes in connection with the completion of this offering, assuming an initial public offering price of $15.50 per share, which is the midpoint of the price range set forth on the cover page of this prospectus. DCVC Bio GP, LLC, or DCVC Bio GP, is the general partner of DCVC Bio. JNK Capital Management, LLC, or JNK, and ZNM Capital Management, LLC, or ZNM, are the managing members of DCVC Bio GP. John Hamer, or Hamer, a member of our board of directors, and Kiersten Stead, or Stead, are the managing members of JNK, and Zachary Bogue, or Bogue, and Matthew Ocko, or Ocko, are the managing members of ZNM. Hamer, Stead, Bogue and Ocko collectively make voting and investment decisions with respect to shares held by DCVC Bio. The principal business address of DCVC Bio is 270 University Avenue, Palo Alto, California 94301. |
(3) | The number of shares beneficially owned before this offering consists of (i) 2,674,560 common shares held by Viking Global Opportunities Illiquid Investments Sub-Master LP, or Opportunities Fund and (ii) 16,047,420 common shares issuable upon conversion of convertible preferred shares held by Opportunities Fund, and the number of shares beneficially owned after this offering includes (iii) 466,793 common shares of the Company issuable upon the conversion of the Convertible Notes held by DRAGSA 76 LLC, an affiliate of Opportunities Fund, in connection with the completion of this offering, assuming an initial public offering price of $15.50 per share, which is the midpoint of the price range set forth on the cover page of this prospectus. Opportunities Fund, the authority to dispose of and vote the shares directly owned by it, which power may be exercised by its general partner, Viking Global Opportunities Portfolio GP LLC, or Opportunities GP, and by Viking Global Investors LP, or VGI, an affiliate of Opportunities GP, which provides managerial services to Opportunities Fund. O. Andreas Halvorsen, David C. Ott and Rose Shabet, as Executive Committee members of Viking Global Partners LLC (the general partner of VGI) and Opportunities GP, have shared authority to direct the voting and disposition of investments beneficially owned by VGI and Opportunities GP. The address of the Opportunities Fund is c/o Viking Global Investors LP, 55 Railroad Avenue, Greenwich, Connecticut 06830. |
(4) | Consists of (i) the shares listed in footnote (1) and (ii) 625,080 common shares held by Hankla Family Trust, of which Dr. Hansen and his spouse are joint trustees. |
(5) | Consists of (i) 116,959 common shares held by Mr. Booths spouse, and (ii) 3,709,370 common shares underlying options held by Mr. Booth exercisable within 60 days of October 31, 2020. |
(6) | Consists of 625,000 common shares underlying options held by Mr. Stimart exercisable within 60 days of October 31, 2020. |
(7) | Consists of (i) 7,155,008 common shares held by Pacific Swell Capital Corp., or Pacific Swell, (ii) 1,273,630 common shares held by Slomo Family Trust, of which Dr. Lecault is a co-trustee, (iii) 44,580 common shares held by the spouse of Dr. Lecault, (iv) 1,000,000 common shares held by Dr. Lecault, and (v) 333,330 common shares underlying options held by Dr. Lecault exercisable within 60 days of October 31, 2020. Dr. Lecault is a director of Pacific Swell and shares voting and dispositive power with respect to the shares held by Pacific Swell. The principal business address of Pacific Swell is 1300-777 Dunsmuir Street, PO Box 10444, Vancouver, BC V7Y 1K2, Canada. |
(8) | Consists of the shares listed in footnote (2). |
(9) | The number of shares beneficially owned before this offering consists of (i) 715,750 common shares held by Genworks 2 Consulting, Inc., or Genworks 2, (ii) 44,580 shares held by Dr. Haydens spouse and (iii) 270,000 common shares underlying options held by Genworks 2 exercisable within 60 days of October 31, 2020. The number of shares beneficially owned after this offering includes 151,802 common shares of the Company issuable upon the conversion of the Convertible Notes in connection with the completion of this offering, assuming an initial public offering price of $15.50 per share, which is the midpoint of the price range set forth on the cover page of this prospectus. Dr. Haydens spouse has sole voting and investment power with respect to the shares held by Genworks 2. The principal business address Genworks 2 is 4484 West 7th Avenue, Vancouver, BC, Canada V6R1W9. |
(10) |
The number of shares beneficially owned before this offering consists of (i) 401,050 common shares issuable upon conversion of convertible preferred shares held by FFVIIP, (ii) 3,343,240 common shares issuable upon conversion of convertible preferred shares held by FFVII, (iii) 29,240 common shares issuable upon conversion of convertible preferred shares held by FFVIIE, (iv) 891,520 common |
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shares held by ABE Investments LLC, and (v) 3,811,260 common shares issuable upon conversion of convertible preferred shares held by ABE Investments LLC. The number of shares beneficially owned after this offering includes 800,000 common shares plus 2,689,183 common shares of the Company issuable upon the conversion of the Convertible Notes in connection with the completion of this offering, assuming an initial public offering price of $15.50 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, by FFG, FFGP and ABE Investments LLC, respectively. Mr. Thiel is the beneficial owner of ABE Investments LLC and has sole voting and investment power over the securities held by ABE Investments LLC. Peter Thiel, Brian Singerman, and Keith Rabois have shared voting and investment power over the shares held by each of FFG, FFGP, FFVIIP, FFVII and FFVIIE. The address of ABE Investments LLC is 1209 Orange Street, Wilmington, Delaware, 19801. The address of each of FFG, FFGP, FFVIIP, FFVII and FFVIIE is One Letterman Drive, Building D, 5th Floor, San Francisco, California 94129. |
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The following descriptions are summaries of our share capital and the material terms of our new notice of articles and articles, which will be effective before the closing of this offering. The descriptions of the common shares and preferred shares give effect to changes to our capital structure that will occur before the closing of this offering.
General
Following the completion of this offering, our authorized share capital will consist of an unlimited number of common shares and an unlimited number of preferred shares, issuable in series, all of which preferred shares will be undesignated.
As of September 30, 2020, 154,091,264 common shares were outstanding and held of record by 183 shareholders, and 2,105,264 Series A1 convertible preferred shares and 6,017,784 Series A2 convertible preferred shares were outstanding and held of record by an aggregate of 15 shareholders. This amount does not take into account the conversion of all of our outstanding convertible preferred shares into common shares upon the closing of this offering.
Common Shares
The holders of our common shares are entitled to one vote for each share held on all matters submitted to a vote of the shareholders. Holders of our common shares are entitled to receive ratably any dividends declared by our board of directors out of funds legally available for that purpose, subject to any preferential dividend rights of any outstanding preferred shares. Under the terms of our contribution agreements with Western Economic Diversification Canada, we are restricted from paying any dividends until we have repaid the contributions thereunder in full. Our common shares have no preemptive rights, conversion rights or other subscription rights or redemption or sinking fund provisions.
In the event of our liquidation, dissolution or winding up, holders of our common shares will be entitled to share ratably in all assets remaining after payment of all debts and other liabilities and any liquidation preference of any outstanding preferred shares. The shares to be issued by us in this offering will be, when issued and paid for, validly issued, fully paid and non-assessable.
Preferred Shares
Immediately prior to the closing of this offering, all of our outstanding convertible preferred shares will be converted into common shares. Upon the closing of this offering, our board of directors will have the authority, without further action by our shareholders, to issue an unlimited number of preferred shares in one or more series and to fix the rights, preferences, privileges and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting, or the designation of, such series, any or all of which may be greater than the rights of common shares. The issuance of our preferred shares could adversely affect the voting power of holders of common shares and the likelihood that such holders will receive dividend payments and payments upon our liquidation, dissolution or winding up. In addition, the issuance of preferred shares could have the effect of delaying, deferring or preventing a change in control of our company or other corporate action. Immediately after consummation of this offering, no preferred shares will be outstanding, and we have no present plan to issue any preferred shares.
Options
As of September 30, 2020, options to purchase 40,620,500 common shares with a weighted-average exercise price of $0.27 per share were outstanding under our Current Plan.
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Registration Rights
Upon the closing of this offering, the holders of 81,230,480 common shares issuable upon the conversion of preferred shares upon closing of this offering will be entitled to rights with respect to the registration of these securities under the Securities Act. These rights are provided under the terms of an amended and restated investors rights agreement between us and holders of our preferred shares and are subject to the provisions of the lock-up agreements entered into by such holders of our preferred shares. See the section titled Underwriting appearing elsewhere in this prospectus for more information. The amended and restated investors rights agreement includes demand registration rights, short-form registration rights and piggyback registration rights. All fees, costs and expenses of underwritten registrations under this agreement will be borne by us and all selling expenses, including the estimated underwriting discounts and selling commissions, will be borne by the holders of the shares being registered.
Demand Registration Rights
Beginning 180 days after the effective date of this registration statement, the holders of 81,230,480 common shares issuable upon the conversion of our preferred shares upon closing of this offering are entitled to demand registration rights. Under the terms of the amended and restated investors rights agreement, we will be required, upon the written request of holders of at least a majority of the securities eligible for registration then outstanding, to use all reasonable efforts to effect the registration of these registrable securities for public resale so long as the aggregate offering price, net of related fees and expenses, would be at least $15 million. We are required to effect only two registrations pursuant to this provision of the amended and restated investors rights agreement.
Form S-3 Registration Rights
Pursuant to the amended and restated investors rights agreement, if we are eligible to file a registration statement on Form S-3 or a Canadian short-form prospectus, upon the written request of shareholders holding at least 30% of the common shares issuable upon the conversion of our preferred shares upon closing of this offering then outstanding we will be required to file a Form S-3 registration restatement or a Canadian short-form prospectus, with respect to outstanding securities of such shareholders having an anticipated aggregate offering, net of related fees and expenses, of at least $5.0 million. We are required to effect only two registrations in any 12-month period pursuant to this provision of the amended and restated investors rights agreement. The right to have such shares registered on Form S-3 or a Canadian short-form prospectus is further subject to other specified conditions and limitations.
Piggyback Registration Rights
Pursuant to the amended and restated investors rights agreement, if we register any of our securities either for our own account or for the account of other security holders, the holders of our common shares issuable upon the conversion of our preferred shares are entitled to include their shares in the registration. Subject to certain exceptions and limitations contained in the amended and restated investors rights agreement, we and the underwriters may limit the number of shares included in the underwritten offering to the number of shares which we and the underwriters determine in our sole discretion will not jeopardize the success of the offering.
Indemnification
Our amended and restated investors rights agreement contains customary cross-indemnification provisions, under which we are obligated to indemnify holders of registrable securities in the event of material misstatements or omissions in the registration statement attributable to us, and they are obligated to indemnify us for material misstatements or omissions attributable to them.
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Expiration of Registration Rights
The demand registration rights, short form registration rights, and piggyback registration rights granted under the amended and restated investors rights agreement will terminate on the earlier of a fourth anniversary of the closing of this offering, the closing of a deemed liquidation event, at such time after this offering when the holders shares may be sold without restriction pursuant to Rule 144 within a three-month period, or in such case that the sale of all such holders shares would not be a distribution under Section 2.5 or Section 2.6 of National Instrument 45-102, and would not be a control distribution (as defined in National Instrument 45-102).
Expenses
Ordinarily, other than the underwriting discounts and commissions, we are generally required to pay all expenses incurred by us related to any registration effected pursuant to the exercise of these registration rights. These expenses may include all registration and filing fees, printing expenses, fees and disbursements of our counsel, reasonable fees and disbursements of a counsel for the selling security holders not to exceed $30,000 and blue-sky fees and expenses.
Canadian Registration Rights
The amended and restated investors rights agreement also includes substantially similar demand registration rights, short-form registration rights and piggyback registration rights and related provisions, with respect to distributions of our securities in Canada or otherwise subject to applicable Canadian laws.
Exchange Listing
We have applied to list our common shares on the Nasdaq Global Market under the proposed trading symbol ABCL.
Transfer Agent and Registrar
Upon the completion of this offering, the transfer agent and registrar for our common shares will be Philadelphia Stock Transfer, Inc., located at 2320 Haverford Road, Suite 230, Ardmore, Pennsylvania 19003; telephone (484) 416-3124.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our shares. Future sales of our common shares in the public market, or the availability of such shares for sale in the public market, could adversely affect market prices prevailing from time to time. As described below, only a limited number of shares will be available for sale shortly after this offering due to contractual and legal restrictions on resale. Nevertheless, sales of our common shares in the public market after such restrictions lapse, or the perception that those sales may occur, could adversely affect the prevailing market price at such time and our ability to raise equity capital in the future.
Based on the number of shares outstanding as of September 30, 2020, upon the closing of this offering, 265,952,096 common shares will be outstanding, assuming the issuance of 23,000,000 shares offered by us in this offering, no exercise of the underwriters option to purchase additional shares and no exercise of outstanding options. Of the outstanding shares, all of the shares sold in this offering will be freely tradable (excluding any shares sold to our directors and officers in the directed share program), except that any shares held by our affiliates, as that term is defined in Rule 144 under the Securities Act, may only be sold in compliance with the limitations described below, and restricted common shares are subject to time-based vesting terms. All remaining common shares held by existing shareholders immediately prior to the closing of this offering will be restricted securities as such term is defined in Rule 144 under the Securities Act. These restricted securities were issued and sold by us in private transactions and are eligible for public sale only if registered under the Securities Act or if they qualify for an exemption from registration under the Securities Act, including the exemptions provided by Rule 144 or Rule 701, summarized below.
Rule 144
In general, a person who has beneficially owned restricted shares for at least six months would be entitled to sell their securities provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the 90 days preceding, a sale and (ii) we are subject to the periodic reporting requirements of the Exchange Act for at least 90 days before the sale. Persons who have beneficially owned restricted shares for at least six months but who are our affiliates at the time of, or any time during the 90 days preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of either of the following:
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1% of the number of shares then outstanding, which will equal approximately 2,659,521 shares immediately after this offering, assuming no exercise of the underwriters option to purchase additional shares, based on the number of shares outstanding as of September 30, 2020; or |
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the average weekly trading volume of our common shares on the Nasdaq Global Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale; |
provided, in each case, that we are subject to the periodic reporting requirements of the Exchange Act for at least 90 days before the sale. Such sales both by affiliates and by non-affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144.
Rule 701
Rule 701 under the Securities Act, as in effect on the date of this prospectus, permits resales of shares in reliance upon Rule 144 but without compliance with certain restrictions of Rule 144, including the holding period requirement. Most of our employees, executive officers or directors who purchased shares under a written compensatory plan or contract may be entitled to rely on the resale provisions of Rule 701, but all holders of Rule 701 shares are required to wait until 90 days after the date of this prospectus before selling their shares.
However, substantially all Rule 701 shares are subject to lock-up agreements as described below and under the section titled Underwriting appearing elsewhere in this prospectus and will become eligible for sale upon the expiration of the restrictions set forth in those agreements.
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Lock-up Agreements
We, all of our directors and officers and substantially all of our securityholders have agreed not to sell or otherwise transfer or dispose of any of our securities for a period of 180 days from the date of this prospectus, subject to certain exceptions. Credit Suisse Securities (USA) LLC, Stifel, Nicolaus & Company, Incorporated, Berenberg Capital Markets LLC, SVB Leerink LLC and BMO Capital Markets Corp. may, in their sole discretion, permit early release of shares subject to the lock-up agreements. See the section titled Underwriting for more information.
Registration Rights
Upon closing of this offering, certain holders of our securities will be entitled to various rights with respect to registration of their shares under the Securities Act. Registration of these shares under the Securities Act
would result in these shares becoming fully tradable without restriction under the Securities Act immediately upon the effectiveness of the registration. See the section titled Description of Share CapitalRegistration Rights appearing elsewhere in this prospectus for more information.
Equity Compensation Plans
We intend to file one or more registration statements on Form S-8 under the Securities Act to register our shares issued or reserved for issuance under our equity compensation plans. The first such registration statement is expected to be filed soon after the date of this prospectus and will automatically become effective upon filing with the SEC. Accordingly, shares registered under such registration statement will be available for sale in the open market, unless such shares are subject to vesting restrictions with us or the lock-up restrictions described above.
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COMPARISON OF BRITISH COLUMBIA LAW AND DELAWARE LAW
We are governed by the Business Corporations Act (British Columbia), or the BCBCA. Significant differences between the BCBCA and the General Corporation Law of the State of Delaware, or the DGCL, which governs companies incorporated in the State of Delaware, include the following:
Capital Structure
Delaware | British Columbia | |
Under the DGCL, the certificate of incorporation must set forth the total number of shares of stock which the corporation shall have authority to issue and the par value of each of such shares, or a statement that the shares are to be without par value. | As permitted by the BCBCA and our new articles that will be effective following the completion of this offering, our authorized share capital consists of (i) an unlimited number of common shares without par value, with special rights and restrictions attached and (ii) an unlimited number of preferred shares without par value, issuable in series, with special rights and restrictions attached. |
Dividends
Delaware | British Columbia | |
The DGCL generally provides that, subject to certain restrictions, the directors of a corporation may declare and pay dividends upon the shares of its capital stock either out of the corporations surplus or, if there is no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Further, the holders of preferred or special stock of any class or series may be entitled to receive dividends at such rates, on such conditions and at such times as stated in the certificate of incorporation. | Under the BCBCA, dividends may be declared at the discretion of the board of directors. Any dividends declared shall be subject to the rights, if any, of shareholders holding shares with special rights as to dividends. Dividends may not be declared if there are reasonable grounds for believing that the Company is insolvent or the payment of such dividends would render the Company insolvent. |
Number and Election of Directors
Delaware | British Columbia | |
Under the DGCL, the board of directors must consist of at least one person, and the number of directors is generally fixed by, or in the manner provided in, the by-laws of the corporation, unless the certificate of incorporation fixes the number of directors, in which case a change in the number of directors shall be made only by amendment of the certificate. The Board may be divided into three classes of directors, with one-third of each class subject to election by the stockholder each year after such classification becomes effective. | Under the BCBCA, a company must have at least one director and, in the case of a public company, must have at least three directors. Our new articles permit our board of directors to set the number of directors. Succeeding directors must be elected and appointed in accordance with the BCBCA and the articles of the company. |
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Removal of Directors
Delaware | British Columbia | |
Under the DGCL, any or all directors may be removed with or without cause by the holders of a majority of shares entitled to vote at an election of directors unless the certificate of incorporation otherwise provides or in certain other circumstances if the corporation has cumulative voting. | As permitted under the BCBCA, our new articles provide that a director may be removed before the expiration of the directors term by a special resolution of shareholders. Our new articles also provide that the directors may remove any director before the expiration of such directors term if the director is convicted of an indictable offence or if the director ceases to be qualified to act as a director. |
Vacancies on the Board of Directors
Delaware | British Columbia | |
Under the DGCL, vacancies and newly created directorships resulting from an increase in the authorized number of directors, may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. | Under the BCBCA, filling vacancies on the board of directors will depend on whether a director was removed or if there is a casual vacancy. If the director was removed, the position can be filled by the shareholders at the shareholder meeting where the director is removed. If there is a casual vacancy, such vacancy can be filled by the remaining directors. |
Qualifications of Directors
Delaware | British Columbia | |
Under the DGCL, directors are not required to be residents of Delaware or the United States. The certificate of incorporation or by-laws may prescribe other qualifications for directors. | Under the BCBCA, there are four criteria for a person to be qualified as a director. The director must (i) be 18 years of age or older, (ii) be capable of managing the directors own affairs, (iii) have no undischarged bankruptcy and (iv) not be convicted of an offence in connection with the promotion, formation or management of a corporation or unincorporated business or of an offence involving fraud. Directors are not required to be residents of British Columbia or Canada. |
Board of Director Quorum and Vote Requirements
Delaware | British Columbia | |
Under the DGCL, a majority of the total number of directors shall constitute a quorum for the transaction of business unless the certificate or by-laws require a greater number. The by-laws may lower the number required for a quorum to one-third the number of directors, but no less. | The BCBCA does not set out any requirements for a meeting of directors, except that minutes must be kept of all proceedings at meetings of directors or committees of directors. The articles of a company may set out requirements and quorum for board meetings. |
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Transactions with Directors and Officers
Delaware | British Columbia | |
The DGCL generally provides that no transaction between a corporation and one or more of its directors or officers, or between a corporation and any other corporation or other organization in which one or more of its directors or officers, are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board or committee which authorizes the transaction, or solely because any such directors or officers votes are counted for such purpose, if (i) the material facts as to the directors or officers interest and as to the transaction are known to the board of directors or the committee, and the board or committee in good faith authorizes the transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; (ii) the material facts as to the directors or officers interest and as to the transaction are disclosed or are known to the stockholders entitled to vote thereon, and the transaction is specifically approved in good faith by vote of the stockholders; or (iii) the transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the board of directors, a committee or the stockholders. | Subject to certain exceptions, the BCBCA provides that a director or senior officer of a company holds a disclosable interest in a contract or transaction if the contract or transaction is material to the company, the company has entered, or proposes to enter, into the contract or transaction, and either of the following applies to the director or senior officer: (i) the director or senior officer has a material interest in the contract; or (ii) the director or senior officer is a director or senior officer of, or has a material interest in, a person who has a material interest in the contract or transaction. Under the BCBCA and our new articles, a director who holds a disclosable interest in a contract or transaction may not vote on any directors resolution to approve such contract or transaction unless all directors have a disclosable interest, in which case any or all of the directors may vote. Excluded directors will, however, count for the purposes of quorum. A director or senior officer is liable to account to the company for any profit that accrues to the director or senior officer under or as a result of the interested contract or transaction. |
Limitation on Liability of Directors
Delaware | British Columbia | |
The DGCL permits a corporation to include a provision in its certificate of incorporation eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for a breach of the directors fiduciary duty as a director, except for liability:
for breach of the directors duty of loyalty to the corporation or its stockholders;
for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law;
under Section 174 of the DGCL, which concerns unlawful payment of dividends, stock purchases or redemptions; or
for any transaction from which the director derived an improper personal benefit. |
Under the BCBCA, a director of a company is jointly and severally liable to restore to the company any amount paid or distributed as a result of paying dividends, commissions and compensation, among other things, contrary to the BCBCA. A director will not be found liable if the director relied, in good faith, on (i) financial statements of the company represented to the director by an officer of the company or in a written report of the auditor of the company, (ii) a written report of a lawyer, accountant, engineer, appraiser or other person whose profession lends credibility, (iii) a statement of fact represented to the director by an officer of the company or any record, information or (iv) a representation that the court considers provides reasonable grounds for the actions of the director. Further, any director is not liable if the director did not know and could not reasonably have known that the act done by the director or authorized by resolution voted for or consented to by the director was contrary to the BCBCA. |
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Indemnification of Directors and Officers
Delaware | British Columbia | |
Under the DGCL, a corporation may indemnify any person who is made a party to any third-party action, suit or proceeding on account of being a director, officer, employee or agent of the corporation (or was serving at the request of the corporation in such capacity for another corporation, partnership, joint venture, trust or other enterprise) against expenses, including attorneys fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with the action, suit or proceeding through, among other things, a majority vote of a quorum consisting of directors who were not parties to the suit or proceeding, if the person:
acted in good faith and in a manner he or she reasonably believed to be;
in or not opposed to the best interests of the corporation;
or, in some circumstances, at least not opposed to its best interests; and
in a criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The DGCL permits indemnification for derivative suits against expenses (including legal fees) if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and only if the person is not found liable, unless a court determines the person is fairly and reasonably entitled to the indemnification. |
Our new articles provide that we must indemnify all eligible parties (which includes our current and former directors and officers), and such persons heirs and legal personal representatives, as set out in the BCBCA, against all eligible penalties to which such person is or may be liable, and we must, after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by such person in respect of that proceeding. Each director is deemed to have contracted with us on the terms of indemnity contained in our new articles. In addition, we may indemnify any other person in accordance with the BCBCA. |
Call and Notice of Stockholder Meetings
Delaware | British Columbia | |
Under the DGCL, an annual or special stockholder meeting is held on such date, at such time and at such place as may be designated by the board of directors or any other person authorized to call such meeting under the corporations certificate of incorporation or by-laws.
If an annual meeting for election of directors is not held on the date designated or an action by written consent to elect directors in lieu of an annual meeting has not been taken within 30 days after the date designated for the annual meeting, or if no date has been designated, for a period of 13 months after the later of the last annual meeting or the last action by written consent to elect directors in lieu of an annual meeting, the Delaware |
In accordance with the BCBCA, our new articles provide that an annual general meeting must be held at least once in each calendar year, and not more than 15 months after the last annual reference date, at such time and place as may be determined by the directors. An annual meeting of shareholders may be held at a location outside British Columbia if the location for the meeting is provided for in the articles or, if the articles do not restrict the company from holding a meeting outside of British Columbia, at a location approved as required by the articles (and if not so specified then as approved by ordinary resolution of the shareholders). Our articles permit the directors to approve a location for the annual general meeting |
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Court of Chancery may summarily order a meeting to be held upon the application of any stockholder or director.
Special meetings of the stockholders may be called by the board of directors or by such person or persons as may be authorized by the certificate of incorporation or by the by-laws. |
that is outside of British Columbia. We must provide notice of the annual general meeting to each shareholder entitled to attend the meeting, to each director and to the auditor of the company at least 21 days but not more then two months before the meeting date.
Under our new articles, our directors have the power at any time to call a meeting of shareholders. Under the BCBCA, the holders of not less than 5% of the issued shares of a company that carry the right to vote at a general meeting may requisition the directors to call a meeting of shareholders. |
Stockholder Action by Written Consent
Delaware | British Columbia | |
Under the DGCL, a majority of the stockholders of a corporation may act by written consent without a meeting unless such action is prohibited by the corporations certificate of incorporation. | Under the BCBCA, shareholders may act by written resolution signed by all the shareholders entitled to vote on that resolution at a meeting of shareholders. |
Stockholder Nominations and Proposals
Delaware | British Columbia | |
Under the DGCL, the by-laws of a corporation may include provisions respecting the nomination of directors or proposals by stockholders, including requirements for advance notice to the corporation. | Under the BCBCA, a person submitting a proposal must have been the registered or beneficial owner of one or more voting shares for an uninterrupted period of at least two years before the date of the signing of the proposal. In addition, the proposal must be signed by shareholders who, together with the submitter, are registered or beneficial owners of (i) at least 1% of the companys voting shares, or (ii) shares with a fair market value exceeding an amount prescribed by regulation. Our new articles will contain advance notice provisions respecting the nomination of directors. |
Stockholder Quorum and Vote Requirements
Delaware | British Columbia | |
Under the DGCL, quorum for a stock corporation is a majority of the shares entitled to vote at the meeting unless the certificate of incorporation or by-laws specify a different quorum, but in no event may a quorum be less than one-third of the shares entitled to vote. Unless the DGCL, certificate of incorporation or by-laws provide for a greater vote, generally the required vote under the DGCL is a majority of the shares present in person or represented by proxy, except for the election of directors which requires a plurality of the votes cast. | As permitted under the BCBCA, our articles provide that a quorum for general meetings of shareholders is two persons present and being, or representing by proxy, shareholders holding at least a majority of the issued shares entitled to be voted at the meeting. Unless the BCBCA or articles provide for a greater vote, generally the required vote under the BCBCA is a majority of the votes cast by the shareholders who voted in respect of that resolution. |
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Amendment of Governing Instrument
Delaware | British Columbia | |
Amendment of Certificate of Incorporation. Generally, under the DGCL, the affirmative vote of the holders of a majority of the outstanding stock entitled to vote is required to approve a proposed amendment to the certificate of incorporation, following the adoption of the amendment by the board of directors of the corporation, provided that the certificate of incorporation may provide for a greater vote. Under the DGCL, holders of outstanding shares of a class or series are entitled to vote separately on an amendment to the certificate of incorporation if the amendment would have certain consequences, including changes that adversely affect the rights and preferences of such class or series.
Amendment of By-laws. Under the DGCL, after a corporation has received any payment for any of its stock, the power to adopt, amend or repeal by-laws shall be vested in the stockholders entitled to vote; provided, however, that any corporation may, in its certificate of incorporation, provide that by-laws may be adopted, amended or repealed by the board of directors. The fact that such power has been conferred upon the board of directors shall not divest the stockholders of the power nor limit their power to adopt, amend or repeal the by-laws. |
As permitted by the BCBCA, under our new articles, any amendment to the notice of articles or articles generally requires approval by a special resolution of the shareholders. In the event that an amendment to the articles would prejudice or interfere with a right or special right attached to issued shares of a class or series of shares, such amendment must be approved separately by the holders of the class or series of shares being affected by a special resolution. |
Votes on Mergers, Consolidations and Sales of Assets
Delaware | British Columbia | |
The DGCL provides that, unless otherwise provided in the certificate of incorporation or by-laws, the adoption of a merger agreement requires the approval of a majority of the outstanding stock of the corporation entitled to vote thereon. | Under the BCBCA, certain extraordinary corporate actions, such as continuances, certain amalgamations, sales, leases or other dispositions of all, or substantially all of, the undertaking of a company (other than in the ordinary course of business), liquidations, dissolutions and certain arrangements, are required to be approved by a special resolution of shareholders. |
Dissenters Rights of Appraisal
Delaware | British Columbia | |
Under the DGCL, a stockholder of a Delaware corporation generally has the right to dissent from and request payment for the stockholders shares upon a merger or consolidation in which the Delaware corporation is participating, subject to specified procedural requirements, including that such dissenting | Under the BCBCA, a shareholder, whether or not the shareholders shares carry the right to vote, is entitled to dissent in respect of a resolution to: (i) alter the companys articles to alter restrictions on the powers of the company or on the business the company is permitted to carry on; (ii) adopt an amalgamation |
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stockholder does not vote in favor of the merger or consolidation. However, the DGCL does not confer appraisal rights, in certain circumstances, including if the dissenting stockholder owns shares traded on a national securities exchange and will receive publicly traded shares in the merger or consolidation. Under the DGCL, a stockholder asserting appraisal rights does not receive any payment for his or her shares until a court determines the fair value or the parties otherwise agree to a value. The costs of the proceeding may be determined by the court and assessed against the parties as the court deems equitable under the circumstances. | agreement; (iii) approve an arrangement; (iv) authorize or ratify the sale, lease or other disposition of all or substantially all of the companys undertaking; and (v) authorize the continuation of the company into a jurisdiction other than British Columbia. A shareholder is also entitled to dissent in respect of any court order that permits dissent and in respect of any other resolution if dissent is authorized by the resolution. A shareholder asserting dissent rights is entitled, subject to specified procedural requirements, including objecting to the action giving rise to dissent rights and making a proper demand for payment, to be paid by the company the fair value of the shares in respect of which the shareholder dissents. Under the BCBCA, if the shareholder and the company do not agree on the fair value for the shareholders shares, the company or the dissenting shareholder may apply to a court to fix a fair value for the shares. |
Anti-Takeover and Ownership Provisions
Delaware | British Columbia | |
Unless an issuer opts out of the provisions of Section 203 of the DGCL, Section 203 generally prohibits a public Delaware corporation from engaging in a business combination with a holder of 15% or more of the corporations voting stock (as defined in Section 203), referred to as an interested stockholder, for a period of three years after the date of the transaction in which the interested stockholder became an interested stockholder, except as otherwise provided in Section 203. For these purposes, the term business combination includes mergers, asset sales and other similar transactions with an interested stockholder. | The BCBCA contains no restriction on adoption of a shareholder rights plan. The BCBCA does not restrict related party transactions; however, in Canada, takeover bids and related party transactions are addressed in provincial securities legislation and policies. |
Inspection of Books and Records
Delaware | British Columbia | |
Under the DGCL, any holder of record of stock or a person who is the beneficial owner of shares of such stock held either in a voting trust or by a nominee on behalf of such person may, upon written demand, inspect the corporations books and records during business hours for a proper purpose and may make copies and extracts therefrom. | Under the BCBCA, specified books and records of the company must be available for inspection by any of our shareholders at the registered and records office. |
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Derivative Actions
Delaware | British Columbia | |
Under the DGCL, a stockholder may bring a derivative action on behalf of a corporation to enforce the corporations rights if he or she was a stockholder at the time of the transaction which is the subject of the action. Additionally, under Delaware case law, a stockholder must have owned stock in the corporation continuously until and throughout the litigation to maintain a derivative action. Delaware law also requires that, before commencing a derivative action, a stockholder must make a demand on the directors of the corporation to assert the claim, unless such demand would be futile. A stockholder also may commence a class action suit on behalf of himself or herself and other similarly situated stockholders where the requirements for maintaining a class action have been met. | Under the BCBCA, a shareholder, defined for derivative actions to include a beneficial shareholder and any other person whom a court considers to be an appropriate person to make an application under the BCBCA, or a director of a company may, with leave of the court, bring a legal proceeding in the name and on behalf of the company to enforce an obligation owed to the company that could be enforced by the company itself, or to obtain damages for any breach of such an obligation. An applicant may also, with leave of the court, defend a legal proceeding brought against a company. |
Oppression Remedy
Delaware | British Columbia | |
The DGCL does not expressly provide for a similar remedy. | The BCBCA provides an oppression remedy that enables a court to make any order, whether interim or final, to rectify matters that are oppressive or unfairly prejudicial to any shareholder, which includes a beneficial shareholder or any other person who, in the courts discretion, is a proper person to make such an application. The oppression remedy provides the court with very broad and flexible powers to intervene in corporate affairs to protect shareholders and other applicants. |
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR U.S. HOLDERS
The following is a description of the material U.S. federal income tax consequences to U.S. Holders, as defined below, of owning and disposing of our common shares. It is not a comprehensive description of all tax considerations that may be relevant to a particular persons decision to acquire securities. This discussion applies only to a U.S. Holder that is an initial purchaser of the common shares pursuant to the offering and that holds our common shares as a capital asset for tax purposes (generally, property held for investment), and does not address the effects of any U.S. federal tax laws other than U.S. federal income tax laws (such as estate and gift tax laws) or any state, local or non-U.S. tax laws. In addition, it does not describe all of the tax consequences that may be relevant in light of a U.S. Holders particular circumstances, including state and local tax consequences, alternative minimum tax consequences, and tax consequences applicable to U.S. Holders subject to special rules, such as:
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banks, insurance companies, and certain other financial institutions; |
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U.S. expatriates and certain former citizens or long-term residents of the United States; |
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dealers or traders in securities who use a mark-to-market method of tax accounting; |
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persons holding common shares as part of a hedging transaction, straddle, wash sale, conversion transaction or integrated transaction or persons entering into a constructive sale with respect to common shares; |
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persons whose functional currency for U.S. federal income tax purposes is not the U.S. Dollar; |
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brokers, dealers or traders in securities, commodities or currencies; |
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tax-exempt entities or government organizations; |
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S corporations, partnerships, or other entities or arrangements classified as partnerships for U.S. federal income tax purposes (and investors therein); |
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regulated investment companies or real estate investment trusts; |
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persons who acquired our common shares pursuant to the exercise of any employee share option or otherwise as compensation; |
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persons required to accelerate the recognition of any item of gross income with respect to their common shares as a result of such income being recognized on an applicable financial statement; |
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persons holding our common shares in connection with a trade or business, permanent establishment, or fixed base outside the United States; and |
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persons who own (directly, indirectly, or through attribution) 10% or more (by vote or value) of our outstanding common shares. |
If an entity that is classified as a partnership for U.S. federal income tax purposes holds common shares, the U.S. federal income tax treatment of a partner in that partnership will generally depend on the status of the partner and the activities of the partnership. Partnerships holding common shares and partners in such partnerships are encouraged to consult their tax advisers as to the particular U.S. federal income tax consequences of holding and disposing of common shares.
This discussion is based on the Internal Revenue Code of 1986, as amended, or the Code, Treasury Regulations (whether final, temporary, or proposed), published rulings of the IRS, published administrative positions of the IRS, the Convention Between Canada and the United States of America with Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended, or the Treaty, and U.S. court decisions that are applicable, and, in each case, as in effect and available, as of the date hereof. Any of the authorities on which this summary is based could be changed in material and adverse manner at any time, and any such change could be applied retroactively. This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation.
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A U.S. Holder is a holder who, for U.S. federal income tax purposes, is a beneficial owner of common shares and is:
(i) An individual who is a citizen or resident of the United States;
(ii) a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state therein or the District of Columbia;
(iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
(iv) a trust if (1) a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust or (2) the trust has a valid election to be treated as a U.S. person under applicable U.S. Treasury Regulations.
PERSONS CONSIDERING AN INVESTMENT IN THE COMMON SHARES SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES APPLICABLE TO THEM RELATING TO THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE COMMON SHARES, INCLUDING THE APPLICABILITY OF U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX LAWS, AND THE APPLICATION OF ANY TAX TREATIES.
Distributions on Common Shares
Subject to the discussion below under PFIC rules, a U.S. Holder that receives a distribution with respect to common shares will be required to include the amount of such distribution in gross income as a dividend (without reduction for any Canadian income tax withheld from such distribution) to the extent of our current and accumulated earnings and profits, as computed for U.S. federal income tax purposes. To the extent that a distribution exceeds our current and accumulated earnings and profits, such distribution will be treated first as a tax-free return of capital to the extent of a U.S. Holders tax basis in our common shares and thereafter as gain from the sale or exchange of such common shares. (See Sale or other taxable disposition of common shares, below). However, we may not maintain the calculations of our earnings and profits in accordance with U.S. federal income tax principles, and accordingly each U.S. Holder should assume that the entirety of any distribution by us with respect to our common shares will constitute dividend income. The dividends will not be eligible for the dividends received deduction generally allowed to U.S. corporations. Subject to applicable limitations, and provided we are eligible for the benefits of the Treaty, dividends paid by us to non-corporate U.S. Holders, including individuals, generally will be eligible for the preferential tax rates applicable to dividends, provided certain holding period and other conditions are satisfied, including that we not be classified as a PFIC in the taxable year of distribution or in the preceding taxable year. For any taxable year in which we are a PFIC, any dividends we pay will not be eligible for the preferential tax rate applicable to qualified dividend income received by individuals and certain other non-corporate U.S. Holders. The dividend rules are complex, and each U.S. Holder should consult its own tax advisors regarding the application of such rules.
Sale or Other Taxable Disposition of Common Shares
Subject to the discussion below under PFIC rules, upon the sale or other taxable disposition of our common shares, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between the U.S. dollar value of cash received plus the fair market value of any property received and such U.S. Holders tax basis in such common shares sold or otherwise disposed of. A U.S. Holders tax basis in our common shares generally will be such holders U.S. dollar cost for such common shares (adjusted for gains or losses previously recognized in connection with the rules applicable to PFICs, to the extent applicable, discussed below). Gain or loss recognized on such sale or other disposition generally will be long-term capital gain or loss if, at the time of the sale or other disposition, our common shares have been held for more than one year.
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Preferential tax rates currently apply to long-term capital gain of a U.S. Holder that is an individual, estate, or trust. There are currently no preferential tax rates for long-term capital gain of a U.S. Holder that is a corporation. Deductions for capital losses are subject to significant limitations under the Code.
PFIC Rules
If we are classified as a passive foreign investment company, or PFIC, in any taxable year, a U.S. Holder will be subject to special rules generally intended to reduce or eliminate any benefits from the deferral of U.S. federal income tax that a U.S. Holder could derive from investing in a non-U.S. company that does not distribute all of its earnings on a current basis.
A non-U.S. corporation will be classified as a PFIC for any taxable year in which, after applying certain look-through rules, either:
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at least 75% of its gross income is passive income (such as interest income); or |
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at least 50% of its gross assets (determined on the basis of a weighted quarterly average) is attributable to assets that produce passive income or are held for the production of passive income (including cash). |
We believe we were not classified as a PFIC during the taxable year ended December 31, 2019. Based on current business plans and financial expectations, we do not believe we will be a PFIC for our taxable year ending December 31, 2020, although we cannot provide any assurances regarding our PFIC status for any current taxable year or any future taxable years. The determination of whether we are a PFIC is a fact-intensive determination made on an annual basis applying principles and methodologies that in some circumstances are unclear and subject to varying interpretation. If we are treated as a non-publicly traded CFC for the year being tested for purposes of the PFIC rules, the value of our assets will be measured by the adjusted tax basis of our assets. If we are a publicly traded CFC or not a CFC for such year, the value of our assets generally will be determined by reference to the market price of our common shares from time to time, which may fluctuate considerably. Under the income test, our status as a PFIC depends on the composition of our income which will depend on the transactions we enter into in the future and our corporate structure. The composition of our income and assets is also affected by the spending of the cash we raise in any offering, including this offering.
If we are classified as a PFIC in any year with respect to which a U.S. Holder owns the common shares, we will continue to be treated as a PFIC with respect to such U.S. Holder in all succeeding years during which the U.S. Holder owns the common shares, regardless of whether we continue to meet the tests described above unless (i) we cease to be a PFIC and the U.S. Holder has made a deemed sale election under the PFIC rules, or (ii) the U.S. Holder makes a Qualified Electing Fund Election, or QEF Election, with respect to all taxable years during such U.S. Holders holding period in which we are a PFIC. If the deemed sale election is made, a U.S. Holder will be deemed to have sold the common shares the U.S. Holder holds at their fair market value and any gain from such deemed sale would be subject to the rules described below. After the deemed sale election, so long as we do not become a PFIC in a subsequent taxable year, the U.S. Holders common shares with respect to which such election was made will not be treated as shares in a PFIC and the U.S. Holder will not be subject to the rules described below with respect to any excess distribution the U.S. Holder receives from us or any gain from an actual sale or other disposition of the common shares. U.S. Holders should consult their tax advisors as to the possibility and consequences of making a deemed sale election if we cease to be a PFIC and such election becomes available.
For each taxable year we are treated as a PFIC with respect to U.S. Holders, U.S. Holders will be subject to special tax rules with respect to any excess distribution such U.S. Holder receives and any gain such U.S. Holder recognizes from a sale or other disposition (including, under certain circumstances, a pledge) of common shares, unless (i) such U.S. Holder makes a QEF Election or (ii) our common shares constitute marketable securities, and such U.S. Holder makes a mark-to-market election as discussed below. Distributions a U.S. Holder receives in a taxable year that are greater than 125% of the average annual distributions a U.S. Holder
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received during the shorter of the three preceding taxable years or the U.S. Holders holding period for the common shares will be treated as an excess distribution. Under these special tax rules:
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the excess distribution or gain will be allocated ratably over a U.S. Holders holding period for the common shares; |
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the amount allocated to the taxable year of disposition or distribution, and any taxable year prior to the first taxable year in which we became a PFIC, will be treated as ordinary income; and |
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the amount allocated to each other year will be subject to the highest tax rate in effect for that year for individuals or corporations, as appropriate, and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year. |
The tax liability for amounts allocated to years prior to the year of disposition or excess distribution cannot be offset by any net operating losses for such years, and gains (but not losses) realized on the sale of the common shares cannot be treated as capital, even if a U.S. Holder holds the common shares as capital assets.
If we are a PFIC, a U.S. Holder will generally be subject to similar rules with respect to distributions we receive from, and our dispositions of the stock of, any of our direct or indirect subsidiaries that also are PFICs, as if such distributions were indirectly received by, and/or dispositions were indirectly carried out by, such U.S. Holder. U.S. Holders should consult their tax advisors regarding the application of the PFIC rules to our subsidiaries.
Certain elections exist that may alleviate some of the adverse consequences of PFIC status and would result in an alternative treatment of the common shares. A U.S. Holder may avoid the general tax treatment for PFICs described above by electing to treat us as a qualified electing fund under Section 1295 of the Code, or QEF, for each of the taxable years during the U.S. Holders holding period that we are a PFIC. If a QEF election is not in effect for the first taxable year in the U.S. Holders holding period in which we are a PFIC, a QEF election generally can only be made if the U.S. Holder elects to make an applicable deemed sale or deemed dividend election on the first day of its taxable year in which the PFIC becomes a QEF pursuant to the QEF election. The deemed gain or deemed dividend recognized with respect to such an election would be subject to the general tax treatment of PFICs discussed above. We intend to determine our PFIC status at the end of each taxable year and to satisfy any applicable record keeping and reporting requirements that apply to a QEF, and will endeavor to provide to U.S. Holders, for each taxable year that we determine we are a PFIC, a PFIC Annual Information Statement containing information necessary for a U.S. Holder to make a QEF Election with respect to us. We may elect to provide such information on our website. However, U.S. Holders should be aware that we can provide no assurances that we will provide any such information relating to any of our subsidiaries that are PFICs.
If a U.S. Holder makes a QEF election with respect to a PFIC, it will be taxed currently on its pro rata share of the PFICs ordinary earnings and net capital gain (at ordinary income and capital gain rates, respectively) for each taxable year that the entity is a PFIC, even if no distributions were received. Any distributions we make out of our earnings and profits that were previously included in such a U.S. Holders income under the QEF election would not be taxable to such U.S. Holder. Such U.S. Holders tax basis in its common shares would be increased by an amount equal to any income included under the QEF election and decreased by any amount distributed on the common shares that is not included in its income. In addition, a U.S. Holder will recognize capital gain or loss on the disposition of its common shares in an amount equal to the difference between the amount realized and its adjusted tax basis in the common shares, each as determined in U.S. dollars. Once made, a QEF election remains in effect unless invalidated or terminated by the IRS or revoked by the shareholder. A QEF election can be revoked only with the consent of the IRS. A U.S. Holder will not be currently taxed on the ordinary income and net capital gain of a PFIC with respect to which a QEF election was made for any taxable year of the non-U.S. corporation that such corporation does not satisfy the PFIC Income Test or Asset Test. Each U.S. Holder should consult its tax advisor regarding the availability of, and procedure for making, any deemed gain, deemed dividend or QEF election.
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U.S. Holders can avoid the interest charge on excess distributions or gain relating to the common shares by making a mark-to-market election with respect to the common shares, provided that the common shares are marketable. Common shares will be marketable if they are regularly traded on certain U.S. stock exchanges or on a foreign stock exchange that meets certain conditions. For these purposes, the common shares will be considered regularly traded during any calendar year during which they are traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. Any trades that have as their principal purpose meeting this requirement will be disregarded. We expect that following the closing of this offering, our common shares will be regularly traded on the Nasdaq Global Market in the fourth calendar quarter of 2020. However, there can be no assurance that our common shares will be regularly traded in subsequent calendar quarters. U.S. Holders should consult their own tax advisors regarding the marketable share rules.
A U.S. Holder that makes a mark-to-market election must include in ordinary income for each year an amount equal to the excess, if any, of the fair market value of the common shares at the close of the taxable year over the U.S. Holders adjusted tax basis in the common shares. An electing holder may also claim an ordinary loss deduction for the excess, if any, of the U.S. Holders adjusted basis in the common shares over the fair market value of the common shares at the close of the taxable year, but this deduction is allowable only to the extent of any net mark-to-market gains for prior years. Gains from an actual sale or other disposition of the common shares will be treated as ordinary income, and any losses incurred on a sale or other disposition of the shares will be treated as an ordinary loss to the extent of any net mark-to-market gains for prior years. Once made, the election cannot be revoked without the consent of the Internal Revenue Service, or the IRS, unless the common shares cease to be marketable.
However, a mark-to-market election generally cannot be made for equity interests in any lower-tier PFICs that we own, unless shares of such lower-tier PFIC are themselves marketable. As a result, even if a U.S. Holder validly makes a mark-to-market election with respect to our common shares, the U.S. Holder may continue to be subject to the PFIC rules (described above) with respect to its indirect interest in any of our investments that are treated as an equity interest in a PFIC for U.S. federal income tax purposes. U.S. Holders should consult their tax advisors to determine whether any of these elections would be available and if so, what the consequences of the alternative treatments would be in their particular circumstances.
Unless otherwise provided by the U.S. Treasury, each U.S. shareholder of a PFIC is required to file an annual report containing such information as the U.S. Treasury may require. A U.S. Holders failure to file the annual report will cause the statute of limitations for such U.S. Holders U.S. federal income tax return to remain open with regard to the items required to be included in such report until three years after the U.S. Holder files the annual report, and, unless such failure is due to reasonable cause and not willful neglect, the statute of limitations for the U.S. Holders entire U.S. federal income tax return will remain open during such period. U.S. Holders should consult their tax advisors regarding the requirements of filing such information returns under these rules.
WE STRONGLY URGE YOU TO CONSULT YOUR TAX ADVISOR REGARDING THE APPLICATION OF THE PFIC RULES TO YOUR INVESTMENT IN THE COMMON SHARES.
Additional Considerations
Additional Tax on Passive Income
Certain U.S. Holders that are individuals, estates or trusts (other than trusts that are exempt from tax) will be subject to a 3.8% tax on all or a portion of their net investment income, which may include dividend income and net gains from the disposition of our common shares. Further, excess distributions treated as dividends, gains treated as excess distributions, and Mark-to-Market inclusions and deductions may all be included in the calculation of net investment income. U.S. Holders that are individuals, estates or trusts should consult their own tax advisors regarding the applicability of this tax to any of their income or gains in respect of our common shares.
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Receipt of Foreign Currency
The amount of any distribution paid to a U.S. Holder in foreign currency, or on the sale, exchange or other taxable disposition of our common shares generally will be equal to the U.S. dollar value of such foreign currency based on the exchange rate applicable on the date of receipt (regardless of whether such foreign currency is converted into U.S. dollars at that time). A U.S. Holder will have a basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Any U.S. Holder who converts or otherwise disposes of the foreign currency after the date of receipt may have a foreign currency exchange gain or loss that would be treated as ordinary income or loss, and generally will be U.S. source income or loss for foreign tax credit purposes. Different rules apply to U.S. Holders who use the accrual method. Each U.S. Holder should consult its U.S. tax advisors regarding the U.S. federal income tax consequences of receiving, owning, and disposing of foreign currency.
Foreign Tax Credit
Subject to the PFIC rules discussed above, a U.S. Holder generally may claim the amount of Canadian withholding tax withheld either as a deduction from gross income or as a credit against U.S. federal income tax liability. Generally, a credit will reduce a U.S. Holders U.S. federal income tax liability on a dollar-for-dollar basis, whereas a deduction will reduce a U.S. Holders income that is subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to all foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a year.
Complex limitations apply to the foreign tax credit, including the general limitation that the credit cannot exceed the proportionate share of a U.S. Holders U.S. federal income tax liability that such U.S. Holders foreign source taxable income bears to such U.S. Holders worldwide taxable income. In applying this limitation, a U.S. Holders various items of income and deduction must be classified, under complex rules, as either foreign source or U.S. source. Generally, dividends paid by a foreign corporation should be treated as foreign source for this purpose, and gains recognized on the sale of shares of a foreign corporation by a U.S. Holder should be treated as U.S. source for this purpose, except as otherwise provided in an applicable income tax treaty, and if an election is properly made under the Code. However, the amount of a distribution that is treated as a dividend may be lower for U.S. federal income tax purposes than it is for Canadian federal income tax purposes, resulting in a reduced foreign tax credit allowance to a U.S. Holder. In addition, this limitation is calculated separately with respect to specific categories of income. The foreign tax credit rules are complex, and each U.S. Holder should consult its U.S. tax advisors regarding the foreign tax credit rules.
Backup Withholding and Information Reporting
Under U.S. federal income tax law, certain categories of U.S. Holders must file information returns with respect to their investment in, or involvement in, a foreign corporation. For example, U.S. return disclosure obligations (and related penalties) are imposed on individuals who are U.S. Holders that hold certain specified foreign financial assets in excess of certain thresholds. The definition of specified foreign financial assets includes not only financial accounts maintained in foreign financial institutions, but also, unless held in accounts maintained by a financial institution, any shares or security issued by a non-U.S. person, any financial instrument or contract held for investment that has an issuer or counterparty other than a U.S. person and any interest in a foreign entity. U.S. Holders may be subject to these reporting requirements unless their common shares are held in an account at certain financial institutions. Penalties for failure to file certain of these information returns are substantial. U.S. Holders should consult with their own tax advisors regarding the requirements of filing information returns, including the requirement to file an IRS Form 8938.
Payments made within the U.S., or by a U.S. payor or U.S. middleman, of dividends on, and proceeds arising from the sale or other taxable disposition of, our common shares will generally be subject to information reporting and backup withholding tax, currently at a rate of 24%, if a U.S. Holder (a) fails to furnish such U.S.
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Holders correct U.S. taxpayer identification number (generally on IRS Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number, (c) is notified by the IRS that such U.S. Holder has previously failed to properly report items subject to backup withholding tax, or (d) fails to certify, under penalty of perjury, that such U.S. Holder has furnished its correct U.S. taxpayer identification number and that the IRS has not notified such U.S. Holder that it is subject to backup withholding tax. However, certain exempt persons generally are excluded from these information reporting and backup withholding rules. Backup withholding is not an additional tax. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a credit against a U.S. Holders U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder furnishes required information to the IRS in a timely manner.
The discussion of reporting requirements set forth above is not intended to constitute a complete description of all reporting requirements that may apply to a U.S. Holder. A failure to satisfy certain reporting requirements may result in an extension of the time period during which the IRS can assess a tax, and, under certain circumstances, such an extension may apply to assessments of amounts unrelated to any unsatisfied reporting requirement. Each U.S. Holder should consult its own tax advisors regarding the information reporting and backup withholding rules.
THE FOREGOING DISCUSSION DOES NOT COVER ALL U.S. TAX MATTERS THAT MAY BE IMPORTANT TO U.S. HOLDERS. PROSPECTIVE U.S. HOLDERS ARE STRONGLY ENCOURAGED TO CONSULT THEIR TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL, NON-U.S. AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON SHARES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.
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MATERIAL CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
The following is, as of the date hereof, a summary of the material Canadian federal income tax considerations generally applicable under the Income Tax Act (Canada) and the regulations promulgated thereunder, collectively the Tax Act, to a purchaser who acquires as beneficial owner common shares under this offering, and who, for purposes of the Tax Act and at all relevant times, (i) is not, and is not deemed to be, resident in Canada for purposes of the Tax Act and any applicable income tax convention, (ii) holds the common shares as capital property, (iii) deals at arms length with, and is not affiliated with, the Company or the underwriters, and (iv) does not use or hold and will not be deemed to use or hold, the common shares in a business carried on in Canada, hereinafter, a Non-Resident Holder. Special rules, which are not discussed in this summary, may apply to a Non-Resident Holder that is an authorized foreign bank within the meaning of the Tax Act or an insurer carrying on an insurance business in Canada and elsewhere. Any such Non-Resident Holder should consult its own tax advisor.
This summary is based upon the provisions of the Tax Act in force as of the date hereof, all specific proposals to amend the Tax Act that have been publicly announced in writing by or on behalf of the Minister of Finance (Canada) prior to the date hereof, or the Proposed Amendments, the Canada-United States Tax Convention (1980), or the Treaty, and an understanding of the current administrative policies and assessing practices of the Canada Revenue Agency, or the CRA, published in writing by it prior to the date hereof. This summary assumes the Proposed Amendments will be enacted in the form proposed. However, no assurance can be given that the Proposed Amendments will be enacted in their current form, or at all. This summary is not exhaustive of all possible Canadian federal income tax considerations and, except for the Proposed Amendments, does not take into account or anticipate any changes in the law or any changes in the CRAs administrative policies or assessing practices, whether by legislative, governmental or judicial action or decision, nor does it take into account or anticipate any other federal or any provincial, territorial or foreign tax considerations, which may differ significantly from those discussed herein.
This summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax advice to any prospective purchaser or holder of the common shares, and no representations with respect to the income tax consequences to any prospective purchaser or holder are made. Consequently, prospective purchasers or holders of the common shares should consult their own tax advisors with respect to their particular circumstances.
Currency Conversion
Generally, for purposes of the Tax Act, all amounts relating to the acquisition, holding or disposition of the common shares must be converted into Canadian dollars based on the exchange rates as determined in accordance with the Tax Act.
Dividends
Dividends paid or credited or deemed to be paid or credited on the common shares to a Non-Resident Holder by the Company will be subject to Canadian withholding tax under the Tax Act at the rate of 25%, subject to any reduction under the provisions of an applicable income tax convention. For example, under the Treaty, the rate of withholding tax on dividends paid or credited or deemed to be paid or credited to a beneficially entitled Non-Resident Holder who is resident in the U.S. for purposes of the Treaty and who is fully entitled to the benefits of the Treaty is generally limited to 15% of the gross amount of the dividend. Non-Resident Holders are urged to consult their own tax advisors to determine their entitlement to relief under an applicable income tax treaty.
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Dispositions
A Non-Resident Holder generally will not be subject to tax under the Tax Act in respect of a capital gain realized on the disposition or deemed disposition of a common share, unless the common share constitutes taxable Canadian property (as defined in the Tax Act) of the Non-Resident Holder at the time of disposition and the Non-Resident Holder is not entitled to relief under an applicable income tax convention.
Generally, the common shares will not constitute taxable Canadian property of a Non-Resident Holder at a particular time provided the common shares are listed at that time on a designated stock exchange, as defined in the Tax Act (which currently includes Nasdaq), unless at any time during the 60-month period that ends at that time the following two conditions are satisfied concurrently: (i) (a) the Non-Resident Holder; (b) persons with whom the Non-Resident Holder did not deal at arms length; (c) partnerships in which the Non-Resident Holder or a person described in (b) holds a membership interest directly or indirectly through one or more partnerships; or (d) any combination of the persons and partnerships described in (a) through (c), owned 25% or more of the issued shares of any class or series of the shares of the company; and (ii) more than 50% of the fair market value of the common shares was derived directly or indirectly from one or any combination of: (a) real or immovable property situated in Canada, (b) Canadian resource properties, (c) timber resource properties (each as defined in the Tax Act), and (d) options in respect of, or interests in or for civil law rights in, such properties, whether or not such properties exist. Notwithstanding the foregoing, in certain circumstances set out in the Tax Act, the common shares could be deemed to be taxable Canadian property.
A Non-Resident Holder contemplating a disposition of common shares that may constitute taxable Canadian property should consult a tax advisor prior to such disposition.
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Under the terms and subject to the conditions contained in an underwriting agreement dated , 2020, we have agreed to sell to the underwriters named below, for whom Credit Suisse Securities (USA) LLC, Stifel, Nicolaus & Company, Incorporated, Berenberg Capital Markets LLC, SVB Leerink LLC and BMO Capital Markets Corp. are acting as representatives, the following respective number of common shares:
Underwriter |
Number of
Shares |
|||
Credit Suisse Securities (USA) LLC |
||||
Stifel, Nicolaus & Company, Incorporated |
||||
Berenberg Capital Markets LLC |
||||
SVB Leerink LLC |
||||
BMO Capital Markets Corp. |
||||
|
|
|||
Total |
23,000,000 | |||
|
|
The underwriting agreement provides that the underwriters are obligated to purchase all the common shares in the offering if any are purchased, other than those common shares covered by the option described below. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of the non-defaulting underwriters may be increased or the offering may be terminated.
We have agreed to indemnify the underwriters and certain of their controlling persons against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriters may be required to make in respect of those liabilities.
We have granted to the underwriters a 30-day option to purchase on a pro rata basis up to 3,450,000 additional common shares at the initial public offering price less the estimated underwriting discounts and commissions. The option may be exercised only to cover any over-allotments of common shares.
The underwriters propose to offer the common shares initially at the public offering price on the cover page of this prospectus and to selling group members at that price less a selling concession of up to $ per share. After the initial public offering, the representatives may change the public offering price and concession and discount to broker/dealers.
The following table summarizes the compensation and estimated expenses we will pay:
Per Share | Total | |||||||||||||||
Without
Option |
With
Option |
Without
Option |
With
Option |
|||||||||||||
Underwriting discounts and commissions paid by us |
$ | $ | $ | $ | ||||||||||||
Expenses payable by us |
$ | $ | $ | $ |
We estimate that our out of pocket expenses for this offering excluding the estimated underwriting discounts and commissions will be approximately $6.3 million. We have also agreed to reimburse the underwriters for up to $35,000 of expenses related to the review of this offering by the Financial Industry Regulatory Authority, Inc. In accordance with FINRA Rule 5110, this reimbursed fee is deemed underwriting compensation for this offering. In addition, the underwriters have agreed to reimburse us for certain of our expenses that we have incurred in connection with this offering.
We have agreed that we will not offer, sell, issue, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the SEC a registration statement under the Securities Act relating to, any of our common shares or securities convertible into or exchangeable or exercisable for any of our common shares, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of
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Credit Suisse Securities (USA) LLC, Stifel, Nicolaus & Company, Incorporated, Berenberg Capital Markets LLC, SVB Leerink LLC and BMO Capital Markets Corp. for a period of 180 days after the date of this prospectus, subject to certain exceptions.
Our officers, our directors and substantially all of our other securityholders have agreed that they will not offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise dispose of, directly or indirectly, any of our common shares or securities convertible into or exchangeable or exercisable for any of our common shares, enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common shares, whether any of these transactions are to be settled by delivery of our common shares or other securities, in cash or otherwise, or publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of Credit Suisse Securities (USA) LLC, Stifel, Nicolaus & Company, Incorporated, Berenberg Capital Markets LLC, SVB Leerink LLC and BMO Capital Markets Corp. for a period of 180 days after the date of this prospectus, subject to certain exceptions.
We have agreed to indemnify the underwriters against liabilities under the Securities Act, or contribute to payments that the underwriters may be required to make in that respect.
We have applied to list the common shares on the Nasdaq Global Market under the symbol ABCL.
Prior to this offering, there has been no public market for our common shares. The initial public offering price was determined by negotiations among us and the representatives and will not necessarily reflect the market price of our common shares following this offering. The principal factors that were considered in determining the initial public offering price included:
|
the information presented in this prospectus and otherwise available to the underwriters; |
|
the history of, and prospects for, the industry in which we will compete; |
|
the ability of our management; |
|
the prospects for our future earnings; |
|
the present state of our development, results of operations and our current financial condition; |
|
the general condition of the securities markets at the time of this offering; and |
|
the recent market prices of, and the demand for, publicly traded common shares of generally comparable companies. |
We cannot assure you that the initial public offering price will correspond to the price at which the common shares will trade in the public market subsequent to this offering or that an active trading market for the common shares will develop and continue after this offering.
In connection with the offering, the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions, penalty bids and passive market making in accordance with Regulation M under the Exchange Act.
|
Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. |
|
Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of |
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shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any covered short position by either exercising their over-allotment option and/or purchasing shares in the open market. |
|
Syndicate covering transactions involve purchases of the common shares in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. If the underwriters sell more shares than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering. |
|
Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common shares originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions. |
|
In passive market making, market makers in the common shares who are underwriters or prospective underwriters may, subject to limitations, make bids for or purchases of our common shares until the time, if any, at which a stabilizing bid is made. |
These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common shares or preventing or retarding a decline in the market price of the common shares. As a result the price of our common shares may be higher than the price that might otherwise exist in the open market. These transactions may be effected on The Nasdaq Global Market or otherwise and, if commenced, may be discontinued at any time.
A prospectus in electronic format may be made available on the web sites maintained by one or more of the underwriters, or selling group members, if any, participating in this offering and one or more of the underwriters participating in this offering may distribute prospectuses electronically. The representatives may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters and selling group members that will make internet distributions on the same basis as other allocations.
Directed Share Program
Furthermore, at our request, the underwriters have reserved up to 5.0% of the common shares offered by this prospectus for sale, at the initial public offering price, to directors, officers, employees, business associates and related persons through a directed share program. The number of common shares available for sale to the general public will be reduced to the extent these individuals purchase such reserved shares. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered by this prospectus. Any reserved shares purchased by our directors and officers will be subject to the 180-day restricted period described above.
Conflicts of Interest
The underwriters and their respective affiliates are full-service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for us, for which they received or will receive customary fees and expenses.
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In addition, in the ordinary course of their business activities, the underwriters and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. These investments and securities activities may involve securities and/or instruments of ours or our affiliates. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
Selling Restrictions
Australia
This prospectus is not a disclosure document for the purposes of Australias Corporations Act 2001 (Cth) of Australia, or Corporations Act, has not been lodged with the Australian Securities & Investments Commission and is only directed to the categories of exempt persons set out below. Accordingly, if you receive this prospectus in Australia:
You confirm and warrant that you are either:
|
a sophisticated investor under section 708(8)(a) or (b) of the Corporations Act; |
|
a sophisticated investor under section 708(8)(c) or (d) of the Corporations Act and that you have provided an accountants certificate to the Company which complies with the requirements of section 708(8)(c)(i) or (ii) of the Corporations Act and related regulations before the offer has been made; or |
|
a professional investor within the meaning of section 708(11)(a) or (b) of the Corporations Act. |
To the extent that you are unable to confirm or warrant that you are an exempt sophisticated investor or professional investor under the Corporations Act any offer made to you under this prospectus is void and incapable of acceptance.
You warrant and agree that you will not offer any of the common shares issued to you pursuant to this prospectus for resale in Australia within 12 months of those securities being issued unless any such resale offer is exempt from the requirement to issue a disclosure document under section 708 of the Corporations Act.
European Economic Area
In relation to each member state of the European Economic Area which has implemented the Prospectus Directive, each referred to herein as a Relevant Member State, with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State, referred to herein as the Relevant Implementation Date, no offer of any securities which are the subject of the offering contemplated by this prospectus has been or will be made to the public in that Relevant Member State other than any offer where a prospectus has been or will be published in relation to such securities that has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the relevant competent authority in that Relevant Member State in accordance with the Prospectus Directive, except that with effect from and including the Relevant Implementation Date, an offer of such securities may be made to the public in that Relevant Member State:
|
to any legal entity which is a qualified investor as defined in the Prospectus Directive; |
|
to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the representatives of the underwriters for any such offer; or |
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|
in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of securities shall require the Company or any of the underwriters to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive. |
For the purposes of this provision, the expression an offer to the public in relation to any securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe the securities, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression Prospectus Directive means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression 2010 PD Amending Directive means Directive 2010/73/EU.
PRC
This prospectus has not been and will not be circulated or distributed in the PRC, and no securities may be offered or sold, or will be offered or sold, to any person for re-offering or resale, directly or indirectly, to any resident of the PRC except pursuant to applicable laws and regulations of the PRC.
Hong Kong
No securities have been offered or sold, and no securities may be offered or sold, in Hong Kong, by means of any document, other than to persons whose ordinary business is to buy or sell shares or debentures, whether as principal or agent; or to professional investors as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong (SFO) and any rules made under that Ordinance; or in other circumstances which do not result in the document being a prospectus as defined in the Companies Ordinance (Cap. 32) of Hong Kong (CO), or which do not constitute an offer to the public for the purpose of the CO or the SFO. No document, invitation or advertisement relating to the securities has been issued or may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted under the securities laws of Hong Kong) other than with respect to securities which are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors as defined in the SFO and any rules made under that Ordinance.
This prospectus has not been registered with the Registrar of Companies in Hong Kong. Accordingly, this prospectus may not be issued, circulated or distributed in Hong Kong, and the securities may not be offered for subscription to members of the public in Hong Kong. Each person acquiring the securities will be required, and is deemed by the acquisition of the securities, to confirm that he is aware of the restriction on offers of the securities described in this prospectus and the relevant offering documents and that he is not acquiring, and has not been offered any securities in circumstances that contravene any such restrictions.
Israel
This document does not constitute a prospectus under the Israeli Securities Law, 5728-1968 (the Securities Law), and has not been filed with or approved by the Israel Securities Authority. In the State of Israel, this document is being distributed only to, and is directed only at, and any offer of the common shares is directed only at, (i) a limited number of persons in accordance with section 15A of the Securities Law and (ii) investors listed in the first addendum (the Addendum), to the Israeli Securities Law, consisting primarily of joint investment in trust funds, provident funds, insurance companies, banks, portfolio managers, investment advisors, members of the Tel Aviv Stock Exchange, underwriters, venture capital funds, entities with equity in excess of NIS 50 million and qualified individuals, each as defined in the Addendum (as it may be amended from time to
211
time), collectively referred to as qualified investors (in each case purchasing for their own account or, where permitted under the Addendum, for the accounts of their clients who are investors listed in the Addendum). Qualified investors will be required to submit written confirmation that they fall within the scope of the Addendum, are aware of the meaning of same and agree to it.
Japan
The offering has not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948 of Japan, as amended) (FIEL) and the Initial Purchaser will not offer or sell any securities, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means, unless otherwise provided herein, any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the FIEL and any other applicable laws, regulations and ministerial guidelines of Japan.
Singapore
This prospectus has not been and will not be lodged or registered with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or the invitation for subscription or purchase of the securities may not be issued, circulated or distributed, nor may the securities be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to the public or any member of the public in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the SFA) (ii) to a relevant person as defined under Section 275(2), or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions, specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of any other applicable provision of the SFA.
Where the securities are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
|
a corporation (which is not an accredited investor as defined under Section 4A of the SFA) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or |
|
a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, |
securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the common shares pursuant to an offer made under Section 275 of the SFA except:
|
to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA; |
|
where no consideration is or will be given for the transfer; |
|
where the transfer is by operation of law; |
|
as specified in Section 276(7) of the SFA; or |
|
as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore. |
United Kingdom
This prospectus is only being distributed to, and is only directed at, persons in the United Kingdom that are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive that are also (i) investment
212
professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, referred to herein as the Order, and/or (ii) high net worth entities falling within Article 49(2)(a) to (d) of the Order and other persons to whom it may lawfully be communicated. Each such person is referred to herein as a Relevant Person.
This prospectus and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other persons in the United Kingdom. Any person in the United Kingdom that is not a Relevant Person should not act or rely on this document or any of its contents.
Switzerland
This prospectus is not intended to constitute an offer or solicitation to purchase or invest in the common shares. The common shares may not be publicly offered, directly or indirectly, in Switzerland within the meaning of the Swiss Financial Services Act, or FinSA, and no application has or will be made to admit the common shares to trading on any trading venue (exchange or multilateral trading facility) in Switzerland. Neither this prospectus nor any other offering or marketing material relating to the common shares constitutes a prospectus pursuant to the FinSA, and neither this prospectus nor any other offering or marketing material relating to the common shares may be publicly distributed or otherwise made publicly available in Switzerland.
Canada
The common shares offered by this prospectus have not been qualified by prospectus for distribution in Canada, and may not be, directly or indirectly, offered or sold in Canada or to any residents of Canada, except in compliance with an exemption from Canadian prospectus requirements. Any sales of our common shares in any province or territory of Canada will only be made by a securities dealer appropriately registered in that province or territory to make such sales, which may include a Canadian affiliate of one of the underwriters using a separate Canadian Offering Memorandum that will include a copy of this prospectus. Any common shares acquired may not be sold in Canada, except in compliance with Canadian prospectus requirements or an exemption therefrom.
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Certain legal matters in connection with this offering will be passed upon for us by Goodwin Procter LLP, Redwood City, California, with respect to U.S. law, and by Blake, Cassels & Graydon LLP, Vancouver, British Columbia, with respect to Canadian law. Certain legal matters in connection with this offering will be passed upon for the underwriters by Cooley LLP, San Diego, California, with respect to U.S. law, and by Osler, Hoskin & Harcourt LLP, Vancouver, British Columbia, with respect to Canadian law.
The consolidated financial statements of the Company as of December 31, 2018 and December 31, 2019, and for each of the years then ended, have been included in this prospectus in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. The audit report covering the December 31, 2019 consolidated financial statements refers to a change in the Companys accounting policy for leases as of January 1, 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases.
The financial statements of Trianni, Inc. as of December 31, 2018 and 2019 and for the years then ended included in this prospectus have been so included in reliance on the report of Armanino LLP, an independent registered public accounting firm, appearing elsewhere herein, given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1, including exhibits and schedules, under the Securities Act with respect to the common shares we are offering by this prospectus. This prospectus, which constitutes part of the registration statement, does not contain all of the information included in the registration statement. For further information pertaining to us and our common shares, you should refer to the registration statement and to its exhibits. Whenever we make reference in this prospectus to any of our contracts, agreements or other documents, the references are not necessarily complete, and you should refer to the exhibits attached to the registration statement for copies of the actual contracts, agreements or other documents.
Upon the closing of the offering, we will be subject to the informational requirements of the Exchange Act and will file annual, quarterly and current reports, proxy statements and other information with the SEC. You can read our SEC filings, including this registration statement, at the SECs website at www.sec.gov. We also maintain a website at www.abcellera.com, and upon closing of the offering, you may access, free of charge, these materials, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. We have included our website address in this prospectus solely as an inactive textual reference. The information contained on or that can be accessed through our website is not incorporated by reference into this prospectus.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements: |
Page | |||
F-2 | ||||
F-3 | ||||
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) |
F-4 | |||
F-5 | ||||
F-6 | ||||
F-7 | ||||
Condensed Consolidated Financial Statements (Unaudited): |
||||
F-30 | ||||
Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) |
F-31 | |||
F-32 | ||||
F-33 | ||||
F-34 |
Trianni, Inc. (Financial statements for the years ended December 31, 2018 and 2019 and the nine months ended September 20, 2020): |
Page | |||
F-47 | ||||
F-49 | ||||
F-50 | ||||
Statements of Convertible Preferred Stock and Shareholders Equity |
F-51 | |||
F-53 | ||||
F-54 |
F-1
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors
AbCellera Biologics Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of AbCellera Biologics Inc. (the Company) as of December 31, 2019 and 2018, the related consolidated statements of income (loss) and comprehensive income (loss), shareholders equity, and cash flows for each of the years in the two-year period ended December 31, 2019, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.
Change in Accounting Principle
As discussed in Note 4 to the consolidated financial statements, the Company has changed its accounting policy for the leases as of January 1, 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases.
Basis for Opinion
These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ KPMG LLP
Chartered Professional Accountants
We have served as the Companys auditor since 2017.
Vancouver, Canada
October 2, 2020, except for Note 18, as to which the date is December 7, 2020
F-2
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. Dollars Except Share Data)
December 31,
2018 |
December 31,
2019 |
|||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 10,444,283 | $ | 7,552,917 | ||||
Accounts receivable |
595,582 | 2,123,968 | ||||||
Accrued accounts receivable |
808,875 | 1,152,558 | ||||||
Other current assets |
3,313,494 | 1,810,894 | ||||||
|
|
|
|
|||||
Total current assets |
15,162,234 | 12,640,337 | ||||||
Long-term assets: |
||||||||
Property and equipment, net |
6,329,941 | 8,479,940 | ||||||
Other long-term assets |
| 584,776 | ||||||
Loans to related parties |
| 1,783,019 | ||||||
|
|
|
|
|||||
Total long-term assets |
6,329,941 | 10,847,735 | ||||||
|
|
|
|
|||||
Total assets |
$ | 21,492,175 | $ | 23,488,072 | ||||
|
|
|
|
|||||
Liabilities and shareholders equity |
||||||||
Current liabilities: |
||||||||
Accounts payable and accrued liabilities |
$ | 1,568,336 | $ | 2,579,105 | ||||
Deferred revenue |
2,333,695 | 3,236,026 | ||||||
Current portion of long-term debt |
2,531,350 | 2,079,730 | ||||||
|
|
|
|
|||||
Total current liabilities |
6,433,381 | 7,894,861 | ||||||
Long-term liabilities: |
||||||||
Operating lease liability |
| 2,641,719 | ||||||
Long-term debt |
911,224 | 1,363,143 | ||||||
Deferred revenue and grant funding |
2,261,233 | 1,336,199 | ||||||
Other long-term liabilities |
277,134 | | ||||||
|
|
|
|
|||||
Total long-term liabilities |
3,449,591 | 5,341,061 | ||||||
|
|
|
|
|||||
Total liabilities |
9,882,972 | 13,235,922 | ||||||
|
|
|
|
|||||
Contingencies (Note 16) |
||||||||
Shareholders equity: |
||||||||
Common shares: no par value, unlimited authorized shares at December 31, 2018 and 2019; 150,941,382 and 151,681,382 shares issued and outstanding at December 31, 2018 and 2019, respectively |
5,073,692 | 5,121,751 | ||||||
Convertible Series A1 preferred shares unlimited authorized shares at December 31, 2018 and 2019; 2,105,264 and 2,105,264 issued and outstanding at December 31, 2018 and 2019, respectively |
7,557,007 | 7,545,853 | ||||||
Additional paid-in capital |
1,483,440 | 2,300,178 | ||||||
Accumulated deficit |
(2,504,936 | ) | (4,715,632 | ) | ||||
|
|
|
|
|||||
Total shareholders equity |
11,609,203 | 10,252,150 | ||||||
|
|
|
|
|||||
Total liabilities and shareholders equity |
$ | 21,492,175 | $ | 23,488,072 | ||||
|
|
|
|
|||||
Subsequent events (Note 18) |
The accompanying notes are an integral part of these consolidated financial statements.
F-3
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
(Expressed in U.S. Dollars Except Share Data)
Year Ended December 31, | ||||||||
2018 | 2019 | |||||||
Revenue: |
||||||||
Research fees |
$ | 8,830,557 | $ | 11,611,543 | ||||
Operating expenses: |
||||||||
Research and development |
5,802,521 | 10,112,939 | ||||||
Sales and marketing |
711,537 | 1,262,659 | ||||||
General and administrative |
2,150,652 | 2,748,869 | ||||||
Depreciation |
918,459 | 1,604,084 | ||||||
|
|
|
|
|||||
Total operating expenses |
9,583,169 | 15,728,551 | ||||||
|
|
|
|
|||||
Income (loss) from operations |
(752,612 | ) | (4,117,008 | ) | ||||
Other (income) expense |
||||||||
Interest income |
(42,353 | ) | (154,957 | ) | ||||
Interest and other expense |
212,625 | 209,196 | ||||||
Foreign exchange (gain) loss |
362,227 | (186,056 | ) | |||||
Grants and incentives |
(1,593,965 | ) | (1,774,495 | ) | ||||
|
|
|
|
|||||
Total other income |
(1,061,466 | ) | (1,906,312 | ) | ||||
|
|
|
|
|||||
Net earnings (loss) and comprehensive income (loss) for the period |
$ | 308,854 | $ | (2,210,696 | ) | |||
|
|
|
|
|||||
Net earnings (loss) per share attributable to common shareholders |
||||||||
Basic and diluted |
$ | 0.00 | $ | (0.01 | ) | |||
|
|
|
|
|||||
Weighted-average common shares outstanding |
||||||||
Basic |
149,436,370 | 151,327,560 | ||||||
|
|
|
|
|||||
Diluted |
171,336,110 | 151,327,560 | ||||||
|
|
|
|
|||||
Pro forma net loss per share attributable to common shareholders (unaudited) |
||||||||
Basic and diluted |
$ | (0.01 | ) | |||||
|
|
|||||||
Pro forma weighted-average common shares outstanding (unaudited) |
||||||||
Basic and diluted |
172,380,200 | |||||||
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-4
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(Expressed in U.S. Dollars Except Share Amounts)
Series A1
Preferred Shares |
Common Shares |
Additional
Paid-in Capital |
Accumulated
Deficit |
Total
Shareholders Equity |
||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Balances as at December 31, 2017 |
| $ | | 141,885,067 | $ | 2,392,294 | $ | 900,913 | $ | (2,813,790 | ) | $ | 479,417 | |||||||||||||||
Shares issued for cash |
| | 8,016,315 | 2,611,989 | | | 2,611,989 | |||||||||||||||||||||
Shares issued under stock option plan |
| | 1,040,000 | 69,410 | (32,846 | ) | | 36,564 | ||||||||||||||||||||
Preferred shares issued |
2,105,264 | 7,557,007 | | | | | 7,557,007 | |||||||||||||||||||||
Stock-based compensation expense |
| | | | 615,373 | | 615,373 | |||||||||||||||||||||
Net earnings (loss) |
| | | | | 308,854 | 308,854 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balances as at December 31, 2018 |
2,105,264 | 7,557,007 | 150,941,382 | 5,073,692 | 1,483,440 | (2,504,936 | ) | 11,609,203 | ||||||||||||||||||||
Shares issued under stock option plan |
| | 740,000 | 48,059 | (22,744 | ) | | 25,315 | ||||||||||||||||||||
Issuance Cost |
| (11,154 | ) | | | | | (11,154 | ) | |||||||||||||||||||
Stock-based compensation expense |
| | | | 839,482 | | 839,482 | |||||||||||||||||||||
Net earnings (loss) |
| | | | | (2,210,696 | ) | (2,210,696 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balances as at December 31, 2019 |
2,105,264 | $ | 7,545,853 | 151,681,382 | $ | 5,121,751 | $ | 2,300,178 | $ | (4,715,632 | ) | $ | 10,252,150 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. Dollars)
December 31,
2018 |
December 31,
2019 |
|||||||
Cash flows from operating activities: |
||||||||
Net income (loss) |
$ | 308,854 | $ | (2,210,696 | ) | |||
Cash flows from operating activities: |
||||||||
Depreciation of property and equipment |
918,459 | 1,604,084 | ||||||
Amortization of operating lease right-of-use-assets |
| 242,804 | ||||||
Stock-based compensation |
615,373 | 890,233 | ||||||
Accretion and other |
(187,637 | ) | 194,193 | |||||
Changes in operating assets and liabilities: |
||||||||
Accounts and accrued research fees receivable |
(477,230 | ) | (1,803,068 | ) | ||||
Investment tax credit receivable |
(1,208,493 | ) | 1,592,850 | |||||
Accounts payable and accrued liabilities |
180,550 | 150,095 | ||||||
Operating lease liabilities |
| 2,783,723 | ||||||
Deferred revenue |
3,246,638 | (6,478 | ) | |||||
Other operating assets and liabilities |
169,123 | (744,025 | ) | |||||
|
|
|
|
|||||
Net cash provided by operating activities |
3,565,635 | 2,693,715 | ||||||
|
|
|
|
|||||
Cash flows from investing activities: |
||||||||
Purchases of property and equipment |
(5,307,066 | ) | (3,996,888 | ) | ||||
Issuance of related party loans |
| (1,783,019 | ) | |||||
|
|
|
|
|||||
Net cash used in investing activities |
(5,307,066 | ) | (5,779,907 | ) | ||||
|
|
|
|
|||||
Cash flows from financing activities: |
||||||||
Repayment of long-term debt |
(898,761 | ) | (399,066 | ) | ||||
Proceeds from long-term debt |
2,911,113 | 192,479 | ||||||
Short-term borrowings |
(32,198 | ) | 387,252 | |||||
Issuance of common shares pursuant to exercise of stock options |
36,564 | 25,315 | ||||||
Issuance of common shares for cash |
2,611,989 | | ||||||
Proceeds from issuance of preferred sharesSeries A1 financing |
7,557,007 | (11,154 | ) | |||||
|
|
|
|
|||||
Net cash provided by financing activities |
12,185,714 | 194,826 | ||||||
|
|
|
|
|||||
Increase (decrease) in cash and cash equivalents |
10,444,283 | (2,891,366 | ) | |||||
Cash and cash equivalents, beginning of year |
| 10,444,283 | ||||||
|
|
|
|
|||||
Cash and cash equivalents, end of year |
$ | 10,444,283 | $ | 7,552,917 | ||||
|
|
|
|
|||||
Supplemental disclosure of non-cash investing and financing activities: |
||||||||
Property and equipment purchases in accounts payable |
$ | 548,000 | $ | 34,600 | ||||
|
|
|
|
|||||
Right -of-use assets obtained in exchange for operating lease obligation |
$ | | $ | 2,829,800 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars Except Share and Per Share Amounts)
1. Nature of operations
AbCellera Biologics Inc.s (the Company) mission is to improve health with technologies that transform the way that antibody-based therapies are discovered. The Company aims to become the centralized operating system for next generation antibody discovery. The Companys full-stack, AI-powered drug discovery platform searches and analyzes the database of natural immune systems to find antibodies that can be developed as drugs. The Company believes its technology increases the speed and the probability of success of therapeutic antibody discovery, including enabling discovery against targets that may otherwise be intractable. Rather than advancing its own clinical pipeline of drug candidates, the Company forges partnerships with drug developers of all sizes, from large cap pharmaceutical to small biotechnology companies.
2. Basis of presentation
These consolidated financial statements are presented in U.S. dollars and have been prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP), and include the accounts of the Company and its wholly owned subsidiaries Lineage Biosciences Inc. (U.S. foreign entity) and Channel Biologics Pty Ltd. (Australia foreign entity). All intercompany transactions and balances have been eliminated.
The Company is seeking to complete an initial public offering (IPO) of its common shares. Upon the closing of a qualified public offering, on specified terms, all outstanding preferred shares of the Company will automatically convert into the Companys common shares. In the event the Company does not complete an IPO, the Company expects that its existing cash and cash equivalents, including the proceeds from related subsequent event activities as described in Note 18, will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next 12 months from the date these financial statements are issued.
The future viability of the Company beyond that point is dependent on its ability to generate cash from operating activities and to raise additional capital and draw on government funding programs, as required, to finance its operations. If the Company is unable to obtain further funding, the Company may be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects.
In addition, the COVID-19 outbreak was declared a pandemic by the World Health Organization in early 2020. The situation is dynamic and the ultimate duration and magnitude of the impact on the economy and the Companys business are not known at this time.
3. Significant accounting policies
Use of Estimates
The preparation of the consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Areas of significant estimates include, but are not limited to, revenue recognition including estimated timing of completion of performance obligations and determining whether an option for additional goods or services represents a material right, recoverability of investment tax credits receivable, and the fair value of stock-based compensation awards. The Company bases its estimates on
F-7
historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could significantly differ from those estimates.
Revenue recognition
The Company accounts for revenue from contracts with customers, which includes the identification and assessment of the goods and/or services promised within a contract to evaluate which promises are distinct from each other. Promises that are not distinct at contract inception are combined into a single performance obligation. An option to acquire additional goods and/or services is evaluated on both quantitative and qualitative aspects to determine if such an option provides a material right to the customer that it would not have received without entering into the contract. If so, the option is accounted for as a separate performance obligation. If not, the option is considered a marketing offer and is accounted for as a separate contract upon the customers election. The Company applied ASC 606 to all arrangements to date.
The terms of our arrangements generally include the payment of one or more of the following: (i) non-refundable, up-front fixed fees, (ii) fixed fees for discovery research support, (iii) fixed technology assignment fees, (iv) fixed payments based on the achievement of specified development and/or commercial milestones, (v) royalties on net sales by the customer of licensed products, and in some cases, (vi) early termination penalties, and (vii) reimbursements for costs incurred to fulfill the contract with the customer at cost or at cost plus an agreed upon mark-up.
The transaction price generally includes fixed fees due at contract inception as well as fixed fees payable at the beginning and end of different phases of the discovery research support services performed. The Company utilizes either the expected value method or the most likely amount method to estimate the amount of variable consideration to include in the transaction price, as most appropriate in the circumstances. With respect to development and commercial milestone payments, at the inception of the arrangement, the Company evaluates whether the associated event is considered probable of achievement and estimate the amount to be included in the transaction price using the most likely amount method. In determining the transaction price the Company constrains the transaction price for variable consideration to limit its inclusion so that it only includes the amount that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. To date, the Company has not recognized any development, or commercial milestone payments, or royalty revenues resulting from its arrangements with customers.
The Company allocate the transaction price to each performance obligation identified in the contract on a relative standalone selling price basis. Revenue is recognized based on the amount of the transaction price that is allocated to each respective performance obligation when or as the performance obligation is satisfied by transferring a promised good and/or service to the customer. The Company generally uses output methods to measure the progress toward satisfaction of performance obligations that are satisfied over time. Due to different types of end customers and nature of work involved, revenue contracts require formal inspection and approval of experiments and research plans at each stage of work, therefore, the output method is the most faithful depiction of the Companys performance.
Segmented and Enterprise wide information
The Company manages its operations as a single operating segment for the purposes of assessing performance and making operating decisions. The Companys focus is on the discovery and development of antibodies.
The Companys revenues from external customers in which the services originated and long-term assets excluding financial instruments were in Canada.
F-8
Government grants and credits
Government grants are recognized when there is reasonable assurance that the grant will be received, and all associated conditions will be complied with. Reimbursements of eligible expenditures pursuant to government assistance programs are recorded when the related costs have been incurred and there is reasonable assurance regarding collection of the claim.
The Company receives payments from the government of Canada as investment tax credits for scientific research and experimental development expenditures. The benefits of investment tax credits are recognized in the year the qualifying expenditure is made providing there is reasonable assurance of recoverability. The Company records the investment tax credits based on its estimates of amounts expected to be recovered.
Government grants and credits received for expenditures on eligible research, development and capital expenditures are recognized ratably over the benefit period of the related expenditure for which the grants are intended to compensate in other income.
Grant claims not settled by the balance sheet date are recorded as receivables provided their receipt is reasonably assured. The determination of the amount of the claim and the corresponding receivable amount requires management judgement and interpretation of eligible expenditures in accordance with the terms of the programs. The reimbursement claims submitted by the Company are subject to review by the relevant government agencies. The Company has used its best judgement and understanding of the related program agreements in determining the receivable amount.
The benefit of below-market rate government loans is treated as a government grant. The government grant benefit is measured as the difference between the fair value of the government loan estimated by discounting future principal and interest amounts at interest rates expected to be available to the Company and the proceeds for the below-market government loan. The weighted-average interest rates estimated to be available to the Company for below-market loans received was 5.2% and 5.5% in the years ended December 31, 2018 and 2019, respectively.
Deferred financing fees
Deferred financing fees include amounts charged by attorneys, accountants and service providers that are directly attributable to future financing transactions. These costs are deferred and subsequently charged against the gross proceeds of the related financing transaction upon closing of such transaction. As of December 31, 2018 and 2019, the Company had no deferred financing fees.
Functional currency
The functional currency and reporting currency of the Company and its subsidiaries is the U.S. dollar. Transactions in foreign currencies are translated to the functional currency at exchange rates at the date of the transactions. Period end balances of monetary assets and liabilities in foreign currencies are translated to the functional currency using the period end foreign currency rates. Foreign currency gains and losses are recognized in the consolidated statements of income (loss) and comprehensive income (loss).
Cash and cash equivalents
Cash and cash equivalents are defined as cash on hand and deposits held with banks with maturity dates of less than three months.
Accounts receivable
The Company has trade receivables which are recorded at the invoiced amount and do not bear interest. The Company evaluates the collectability of accounts receivable on a regular basis based on economic assessment of
F-9
market conditions and review of customer financial history. There was no allowance for doubtful accounts recorded as of December 31, 2018 and 2019.
Property and equipment
Property and equipment are recorded at cost less accumulated depreciation. Expenditures for major additions and improvements to property and equipment are capitalized and repairs and maintenance costs are expensed as incurred.
Property and equipment are depreciated using the straight-line method over the estimated useful lives of the property and equipment as follows:
Asset |
Useful Life | |||
Computers |
3 years | |||
Laboratory equipment |
5 years | |||
Office furniture and equipment |
5 years | |||
Leasehold improvements |
Shorter of lease term or estimated useful life |
Estimated useful lives are periodically assessed to determine if changes are appropriate. When assets are retired or otherwise disposed of, the cost of these assets and related accumulated depreciation or amortization are removed from the accounts and any resulting gains or losses are included in loss from operations in the period of disposal. Costs for capital assets not yet placed into service are capitalized as construction-in-progress and depreciated once placed into service.
Intangible assets
Costs incurred to acquire patents and to prosecute and maintain intellectual property rights are expensed as incurred to general and administrative expense due to the uncertainty surrounding the drug development process and the uncertainty of future benefits. Patents and intellectual property acquired from third parties are capitalized and amortized over the remaining life of the patent, if related to approved products or if there are alternative future uses for the underlying technology. No patent or intellectual property costs have been capitalized to date.
Impairment of long-lived assets
The Company assesses the recoverability its long-lived assets, including property and equipment and intangible assets subject to amortization, for indicators of impairment. If events or changes in circumstances indicate impairment, the Company measures recoverability by a comparison of the assets carrying amount to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. When quoted market prices are not available, the Company uses the expected future cash flows discounted at a rate commensurate with the risks associated with the recovery of the asset as an estimate of fair value. No impairment of long-lived assets was identified for the years ended December 31, 2018 and 2019.
Research and development costs
Research and development costs are expensed in the period incurred. These costs related to spending for partner projects in addition to internal platform development programs and include required materials, salaries and benefits including stock-based compensation, and service contracts.
Income taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets (DTAs) and deferred tax liabilities (DTLs) for the expected future tax
F-10
consequences of events that have been included in the financial statements. Under this method, DTAs and DTLs are determined on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on DTAs and DTLs is recognized in income in the period that includes the enactment date.
The Company recognizes DTAs to the extent that these assets are more likely than not to be realized. In making such a determination, all available positive and negative evidence are considered, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If it is determined that the DTAs in the future in excess of their net recorded amount can be realized, an adjustment to the DTA valuation allowance will be made, which would reduce the provision for income taxes.
The Company records uncertain tax positions in accordance with Accounting Standards Codification (ASC) 740 on the basis of a two-step process in which (1) determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority is realized.
Income tax credit (ITC) policy
The Company earns income tax credits from the Canadian Federal and Provincial Scientific Research and Experimental Development Programs. The Company use the flow-through method to account for ITCs earned on eligible scientific research and development expenditures. Under this method, the ITCs subject to income tax accounting are recognized as a reduction to income tax expense in the year they are earned.
Stock-based compensation
The Company accounts for awards of stock options and shares to directors, employees, consultants, and non-employees using the fair value method. Under this method, stock-based compensation expense is measured at the fair value at the date of grant and is expensed over the awards vesting period. The requisite service period generally equals the vesting period of the awards.
Equity classified awards are measured using their grant date fair value. Liability classified awards are initially measured using their grant date fair value and are subsequently re-measured to fair value at each balance sheet date until exercised or cancelled, with changes in fair value recognized as compensation cost for the period.
For equity classified awards, a corresponding increase in additional paid-in capital is recorded when stock-based compensation is recognized. When stock options are exercised, share capital is credited by the sum of the consideration received and the related portion of the stock-based compensation previously recorded in additional paid-in capital. The effects of forfeitures of options and share awards are accounted for as they occur.
Awards with an exercise price which is not denominated in: (a) the currency of a market in which a substantial portion of the Companys equity securities traded, (b) the currency in which the individuals pay is denominated, or (c) the Companys functional currency, are classified as liabilities.
Net earnings (loss) per share
The Company follows the two-class method when computing net earnings (loss) per share as the Company has issued shares that meet the definition of participating securities. The two-class method determines net earnings (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common shareholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed.
F-11
Basic net earnings (loss) per share attributable to common shareholders is computed by dividing the net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted net earnings (loss) attributable to common shareholders is computed by adjusting net income (loss) attributable to common shareholders to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net earnings (loss) per share attributable to common shareholders is computed by dividing the diluted net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding for the period, including potential dilutive common shares. For purpose of this calculation, outstanding stock options and convertible preferred shares are considered potential dilutive common shares.
The Companys convertible preferred shares contractually entitle the holders of such shares to participate in dividends but do not contractually require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company reports a net loss attributable to common shareholders, such losses are not allocated to such participating securities. In periods in which the Company reported a net loss attributable to common shareholders, diluted net loss per share attributable to common shareholders is the same as basic net loss per share attributable to common shareholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.
Unaudited pro forma information
In the accompanying consolidated statements of income (loss) and comprehensive income (loss), the unaudited pro forma basic and diluted net loss per share attributable to common shareholders for the year ended December 31, 2019 has been prepared to give effect, upon the closing of an IPO, to all outstanding preferred shares of the Company converted into the Companys common shares, as if the proposed IPO had occurred on the later of January 1, 2019 or the issuance date of the preferred shares.
4. Changes in significant accounting policies
Leases
The Company adopted Accounting Standards Update (ASU) 2016-02, Leases (Topic 842) (ASC 842) effective January 1, 2019, using the optional transition method that allows for a cumulative-effective adjustment in the period of adoption and did not restate prior periods. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed us to carry forward the historical lease classification. The Company applied the definition of a lease under ASC 842 to contracts effective for periods on or after January 1, 2019.
The Company determines if an arrangement is a lease at its inception. After determination of lease arrangement, the Company identifies whether the lease arrangement consists of any non-lease component. The company account for lease components (e.g., rental payments) separately from non-lease components (e.g., common area maintenance costs). Lease component is considered in operating leases, whereas non-lease component is accounted for separately in profit and loss. Such non-lease component is accounted for ratably over a straight-line basis over the duration of lease period. Operating leases are included in operating lease right-of-use assets, accrued liabilities, and long-term operating lease liabilities in our consolidated balance sheet. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease liabilities and right-of-use assets are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments if an explicit rate is not available. The Company applied an internal borrowing rate of 6.5% on transition and applied this rate to the lease in consideration. Rent expense, included as part of general and administrative expense, for lease payments is recognized on a straight-line basis over the lease term. The operating lease right-of-use assets also includes any rent prepayments, lease incentives upon receipt, and straight-line rent expense impacts, which represent the differences between its operating lease liabilities and right-of-use assets.
F-12
Adoption of the new lease standard resulted in recognition of a right-of-use asset of $2,829,829 and a lease liability of $3,143,915, as of January 1, 2019. The difference between the right-of-use asset and lease liability relates to the balance of deferred tenant inducements.
The standard did not impact the Companys statements of loss and had no impact on its cash flows, nor did the adoption of this standard result in a cumulative effect adjustment to accumulated deficit and had no impact on cash flows for the year ended December 31, 2019.
Prior to 2019, the Company recognized rent expense associated with its operating lease agreements on a straight-line basis over the terms of the leases. Incentives granted under its facility leases, including rent holidays, were capitalized, and recognized as adjustments to rent expense on a straight-line basis over the terms of the leases.
Stock-based compensation
The Company adopted ASU 2016-09 Improvements to Employee Share-Based Payment Accounting, effective January 1, 2018. This update provides an accounting policy election, to be applied on an entity-wide basis, to either estimate the number of awards that are expected to vest (consistent with existing U.S. GAAP) or account for forfeitures when they occur. The accounting policy election applies only to awards with service conditions; awards with performance conditions will still be assessed at each reporting date to determine whether it is probable that the performance conditions will be achieved. An entity that elects an accounting policy to account for forfeitures when they occur would assume that the service condition will be achieved when determining the initial amount of compensation cost to recognize. The entity should reverse compensation cost previously recognized when an award is forfeited before the completion of the requisite service period (the reversal is recognized in the period the award is forfeited). Therefore, regardless of the policy election, compensation cost will be recognized for all awards that ultimately vest. The Company elects to account for forfeitures when they occur.
In June 2018, the FASB issued ASU 201807, CompensationStock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this ASU expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The Company adopted this standard as of January 1, 2019.
Adoption of these new accounting standards did not have a significant impact on the Companys consolidated financial statements.
Recent accounting pronouncements not yet adopted
On January 1, 2020, the Company adopted the new ASU 2016-13, issued by the Financial Accounting Standards Board (FASB), and all related amendments under ASC Topic 326, Financial InstrumentsCredit Losses.
Adoption of this new accounting standard will not have a significant impact on the Companys consolidated financial statements.
F-13
5. Net Earnings (Loss) per share
Basic and diluted net earnings (loss) per share attributable to common shareholders was calculated as follows:
Year Ended December 31, | ||||||||
2018 | 2019 | |||||||
Basic earnings (loss) per share: |
||||||||
Net earnings (loss) |
$ | 308,854 | $ | (2,210,696 | ) | |||
Less: earnings allocated to Preferred Shares Series A1 |
(16,947 | ) | | |||||
|
|
|
|
|||||
Net earnings (loss) attributable to common shareholdersbasic |
$ | 291,907 | $ | (2,210,696 | ) | |||
|
|
|
|
|||||
Weighted-average common shares outstandingbasic |
149,436,370 | 151,327,560 | ||||||
|
|
|
|
|||||
Net earnings (loss) per share attributable to common shareholdersbasic |
$ | 0.00 | $ | (0.01 | ) | |||
Diluted earnings (loss) per share: |
||||||||
Net earnings (loss) attributable to common shareholdersdiluted |
$ | 308,854 | $ | (2,210,696 | ) | |||
|
|
|
|
|||||
Weighted-average common shares outstandingbasic |
149,436,370 | 151,327,560 | ||||||
Preferred Shares Series A1 |
8,675,540 | | ||||||
Effect of stock options |
13,224,200 | | ||||||
|
|
|
|
|||||
Weighted-average common shares outstandingdiluted |
171,336,110 | 151,327,560 | ||||||
|
|
|
|
|||||
Net earnings (loss) per share attributable to common shareholdersdiluted |
$ | 0.00 | $ | (0.01 | ) | |||
|
|
|
|
The Companys potentially dilutive securities, which include convertible preferred shares and stock options have been excluded from the computation of diluted net loss per share for the year ended December 31, 2019 as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding for the year ended December 31, 2019 used to calculate both basic and diluted net loss per share attributable to common shareholders is the same.
The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net earnings (loss) per share attributable to common shareholders for the periods indicated because including them would have had an anti-dilutive effect:
Year Ended December 31, | ||||||||
2018 | 2019 | |||||||
Options to purchase common shares |
| 37,359,000 | ||||||
Convertible preferred shares (as converted to common shares) |
| 21,052,640 | ||||||
|
|
|
|
|||||
| 58,411,640 | |||||||
|
|
|
|
Unaudited Pro Forma Net Loss per Share Attributable to Common Shareholders
The unaudited pro forma basic and diluted net loss per share attributable to common shareholders for the year ended December 31, 2019 has been prepared to give effect to adjustments arising upon the closing of a qualified IPO. The unaudited pro forma net loss attributable to common shareholders used in the calculation of unaudited pro forma basic and diluted net loss per share attributable to common shareholders gives effect, upon the closing of a IPO, all outstanding preferred shares of the Company converted into the Companys common shares, as if the proposed IPO had occurred on the later of January 1, 2019 or the issuance date of the preferred
F-14
shares to the conversion of all the outstanding preferred shares. Unaudited pro forma basic and diluted net loss per share attributable to common shareholders was calculated as follows:
Year Ended
December 31, 2019 |
||||
Pro forma loss per sharebasic |
||||
Net loss attributable to common shareholders |
(2,210,696 | ) | ||
Weighted-average common shares outstandingbasic |
151,327,560 | |||
Pro forma adjustment to reflect subsequent conversion of all outstanding preferred shares, in each case upon the closing of the proposed IPO |
21,052,640 | |||
|
|
|||
Pro forma weighted-average common shares outstandingbasic |
172,380,200 | |||
|
|
|||
Pro forma net loss per share attributable to common shareholdersbasic |
$ | (0.01 | ) | |
Pro forma loss per sharediluted |
||||
Net loss attributable to common shareholders |
(2,210,696 | ) | ||
Pro forma weighted-average common shares outstandingdiluted |
172,380,200 | |||
|
|
|||
Pro forma net loss per share attributable to common shareholdersdiluted |
$ | (0.01 | ) |
6. Other Current Assets
Other current assets consisted of the following:
December 31, | ||||||||
2018 | 2019 | |||||||
Tax and investment tax credit receivable |
$ | 2,763,156 | $ | 1,101,306 | ||||
Prepaid expenses and other current assets |
550,338 | 709,588 | ||||||
|
|
|
|
|||||
Total other current assets |
$ | 3,313,494 | $ | 1,810,894 | ||||
|
|
|
|
7. Property and equipment, net
Property and equipment, net consisted of the following:
December 31, | ||||||||
2018 | 2019 | |||||||
Computers |
$ | 3,218,721 | $ | 3,829,768 | ||||
Laboratory equipment |
1,654,080 | 2,301,947 | ||||||
Furniture and fixtures |
46,589 | 85,513 | ||||||
Leasehold improvements |
2,963,429 | 2,728,825 | ||||||
Operating lease right-of-use assets |
| 2,690,844 | ||||||
|
|
|
|
|||||
Property and equipment |
7,882,819 | 11,636,897 | ||||||
|
|
|
|
|||||
Less accumulated depreciation |
(1,552,878 | ) | (3,156,957 | ) | ||||
|
|
|
|
|||||
Property and equipment, net |
$ | 6,329,941 | $ | 8,479,940 | ||||
|
|
|
|
Depreciation expense on property and equipment for the years ended December 31, 2018 and 2019 was $918,459 and $1,604,084, respectively.
F-15
8. Accounts payable and other liabilities
Accounts payable and other liabilities consisted of the following:
December 31, | ||||||||
2018 | 2019 | |||||||
Accounts payable and accrued liabilities |
$ | 1,518,220 | $ | 1,643,367 | ||||
Bank indebtedness |
| 387,252 | ||||||
Operating lease liability |
| 419,139 | ||||||
Other liabilities |
50,116 | 129,347 | ||||||
|
|
|
|
|||||
Total accounts payable and other liabilities |
$ | 1,568,336 | $ | 2,579,105 | ||||
|
|
|
|
9. Long-term debt
Long-term debt consisted of the following:
December 31, | ||||||||
2018 | 2019 | |||||||
Non-revolving BMO loan |
$ | 2,233,444 | $ | 2,009,340 | ||||
WD CanadaWINN Loan A |
346,354 | 289,356 | ||||||
WD CanadaWINN Loan B |
862,776 | 1,144,177 | ||||||
Less: current portion of long-term debt |
(2,531,350 | ) | (2,079,730 | ) | ||||
|
|
|
|
|||||
Total long-term debt |
$ | 911,224 | $ | 1,363,143 | ||||
|
|
|
|
Non-revolving BMO loan
The Company has a non-revolving loan from Bank of Montreal, to finance leasehold improvements and new equipment purchases, bearing interest at prime floating rate plus 1.5% per annum, secured by a first general security agreement over all the Companys assets, assignment of account receivables, and guarantee from Export Development Canada covering 50% of all advances. The Company was in compliance with debt covenants at December 31, 2019 and the loan is presented as current on the consolidated balance sheets.
WD CanadaWINN Loan A
The Company secured contribution-based, shared cost, non-interest-bearing funding from the Ministry of Western Economic Diversification under the Western Innovation Initiative (WINN), towards capital equipment and expenses for a project based in Vancouver, BC. The funding commenced on April 1, 2015 and was completed on March 30, 2018. The maximum amount of funding under the agreement was $458,312. The contribution is repayable to the Ministry by 59 monthly installments of $7,692 starting from June 1, 2018, and one final installment of $26,923.
WD CanadaWINN Loan B
The Company secured contribution-based, shared cost, non-interest-bearing funding from the Ministry of Western Economic Diversification under the WINN towards capital equipment and expenses for a project based in Vancouver, BC. This represents the second project for which we have received funding. The funding commenced on July 1, 2017 and was completed on August 1, 2019. The maximum amount of funding under the agreement is $1,347,086 subject to annual maximums of: 2017 - $549,240; 2018 - $564,555; 2019 -$222,551. The contribution is repayable to the Ministry by 59 monthly instalments of $22,462 starting August 1, 2020 and one final instalment of $20,923.
F-16
WD CanadaBSP Loan
The Company secured contribution-based, shared cost, non-interest-bearing funding from the Ministry of Western Economic Diversification under the BSP towards capital equipment and expenses for a project based in Vancouver, BC. This represents the third project for which we have received funding. The maximum amount of funding under the agreement is $3,846,154 subject to the following maximum annual amounts based on the government funding years ending March 31: 2020 - $750,000; 2021 - $1,588,462; 2022 - $1,507,692. The contribution is repayable to the Ministry by 59 monthly instalments of $64,102 starting April 1, 2023 and one final instalment of $64,118. At December 31, 2019 the Company had not made any draws on this loan.
The Western Economic Diversification (WD) Loans are subject to certain non-financial and restrictive covenants, including restrictions over the use of proceeds towards capital equipment and expenses and the sale of assets acquired related to the respective approved projects. At December 31, 2018 and 2019, all eligible expenditures from proceeds received by the Company had been spent and the Company was in compliance with these covenants.
Principal repayments required on the Western Economic Diversification loans over the next five years and thereafter are as follows:
Year ending December, 31 |
Required
Principal Repayments |
|||
2020 |
$ | 195,677 | ||
2021 |
327,694 | |||
2022 |
307,112 | |||
2023 |
260,966 | |||
2024 |
200,861 | |||
Thereafter |
110,213 | |||
|
|
|||
Total |
$ | 1,402,523 | ||
|
|
10. |
Shareholders Equity |
Common shares
As of December 31, 2018 and 2019, the Companys articles of the corporation, as amended and restated, authorized the Company to issue unlimited voting common shares, each with no par value per share. The voting, dividend, and liquidation rights of the holders of the Companys common shares are subject to and qualified by the rights, powers and preferences of the holders of the Series A preferred shares set forth below.
As of each balance sheet date, common shares consisted of the following:
December 31, 2018 | December 31, 2019 | |||||||||||||||
Shares
Authorized |
Shares Issued
and Outstanding |
Shares
Authorized |
Shares Issued
and Outstanding |
|||||||||||||
Common shares |
Unlimited | 150,941,382 | Unlimited | 151,681,382 |
Each voting common share entitles the holder to one vote on all matters submitted to a vote of the Companys shareholders. Common shareholders are entitled to receive dividends, if any, as may be declared by the board of directors, subject to the preferential dividend rights of the preferred shares. Through December 31, 2019, no cash dividends had been declared or paid by the Company.
F-17
Series A1 preferred shares
On August 3, 2018, the Company entered into an investment agreement with DCVC Bio, L.P. for gross proceeds of CAD $10,000,004 ($7,702,380) in exchange for 2,105,264 shares. Total proceeds received net of financing costs were $7,557,007.
The Series A1 preferred shares are voting and are convertible, at any time and from time to time at the option of its holder, into fully paid and non-assessable common shares at a 1:10 ratio, subject to appropriate adjustment for splits, dividends, other similar recapitalization and the like.
Conversion of preferred shares to common shares is mandatory in the event of a Qualified Initial Public Offering with proceeds of at least $70.0 million.
The holders of the Series A1 preferred shares are entitled to vote, together with the holders of common shares, as a single class, on all matters submitted to the shareholders for a vote and are entitled to the number of votes equal to the number of common shares into which the Series A1 preferred shares could convert on the record date for determination of shareholders entitled to vote.
The holders of the Series A1 preferred shares are entitled to receive noncumulative dividends, as and if declared by the Companys board of directors (the Preferred Dividend). The Company may not pay any dividends on common shares of the Company unless the holders of preferred shares then outstanding first receive, or simultaneously receive, the Preferred Dividend on each outstanding Series A1 preferred share and a dividend on each outstanding Series A1 preferred share in an amount at least equal to the product of the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into common shares. Through December 31, 2019, no cash dividends had been declared or paid by the Company.
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or Deemed Liquidation Event, the holders of Series A1 preferred shares then outstanding are entitled to a 1x non-participating liquidation preference. In addition, holders of the Series A1 preferred shares are eligible to demand redemption of their shares in the event of certain deemed liquidation events, as defined the agreement. Due to the various rights and privileges within the existing Series A1 preferred and common shareholder agreements, the Company concluded triggering a deemed liquidation event is within the control of the Company, and therefore the Series A1 preferred shares are classified as permanent equity.
As of each balance sheet date, preferred shares consisted of the following:
December 31, 2018 | December 31, 2019 | |||||||||||||||
Shares
Authorized |
Shares
Issued and Outstanding |
Shares
Authorized |
Shares
Issued and Outstanding |
|||||||||||||
Series A1 preferred shares |
Unlimited | 2,105,264 | Unlimited | 2,105,264 |
Stock-based compensation
The Companys Stock Option Plan provides for the Company to grant stock options to employees, officers, directors and non-employee consultants of the Company. Options granted to employees, directors and independent contractors under the program are exercisable over their 10-year life and vest over 4 years. Common shares are issued when options are exercised.
The Company has established a compensatory stock option program that provides that the board of directors of the Company may, from time to time, at its discretion, grant directors, employees, consultants and non-employees options to purchase common shares up to 44,206,390 and 43,466,390 for the years ended December 31, 2018 and 2019, respectively.
F-18
Options granted under the Companys stock option program are denominated in Canadian dollars and are translated into U.S dollars using the period end rate or the average foreign exchange rate for the period, as applicable, and have been noted for information purposes.
The following table summarizes the Companys stock options granted in Canadian dollars since December 31, 2017:
Number of
Shares |
Weighted-Average
Exercise Price (CAD) |
Weighted-Average
Exercise Price (USD) |
Weighted-Average
Remaining Contractual Term |
|||||||||||||
(in years) | ||||||||||||||||
Outstanding as of December 31, 2017 |
24,044,000 | $ | 0.18 | $ | 0.14 | 8.28 | ||||||||||
Granted |
1,550,000 | 0.42 | 0.31 | |||||||||||||
Exercised |
(1,040,000 | ) | 0.05 | 0.03 | ||||||||||||
Forfeited |
(810,000 | ) | 0.27 | 0.20 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Outstanding as of December 31, 2018 |
23,744,000 | 0.20 | 0.15 | |||||||||||||
Granted |
14,905,000 | 0.43 | 0.33 | |||||||||||||
Exercised |
(740,000 | ) | 0.05 | 0.04 | ||||||||||||
Forfeited |
(550,000 | ) | 0.43 | 0.33 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Outstanding as of December 31, 2019 |
37,359,000 | $ | 0.29 | $ | 0.22 | 7.66 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Options exercisable as of December 31, 2019 |
15,559,080 | $ | 0.18 | $ | 0.14 | 6.27 |
The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Companys common shares for those options that had exercise prices lower than the fair value of the Companys common shares. The intrinsic value for stock options exercised during the years ended December 31, 2018 and 2019 was $Nil and $Nil, respectively.
Stock-based compensation expense was classified in the consolidated statements of income (loss) and comprehensive income (loss) as follows:
Year Ended December 31, | ||||||||
2018 | 2019 | |||||||
Research and development expenses |
$ | 592,661 | $ | 605,699 | ||||
General and administrative expenses |
5,888 | 199,461 | ||||||
Sales and marketing expenses |
16,824 | 85,073 | ||||||
|
|
|
|
|||||
Total stock-based compensation expense |
$ | 615,373 | $ | 890,233 | ||||
|
|
|
|
As of December 31, 2019, there was $5,915,288 of total unrecognized compensation cost related to nonvested stock-based compensation arrangements granted under the employee share option plan. That cost is expected to be recognized over a weighted-average period of 2.9 years.
F-19
The fair value of each option award is determined on the date of grant using the Black-Scholes option pricing model. The calculation of fair value includes several assumptions that require managements judgment. The estimated fair value of stock options was determined using the Black-Scholes option pricing model with the following weighted-average assumptions:
Year Ended
December 31, |
||||||||
2018 | 2019 | |||||||
Average risk-free interest rate(1) |
3.50 | % | 1.60 | % | ||||
Expected volatility(2) |
100.00 | % | 100.00 | % | ||||
Average expected term (years)(3) |
6.25 | 6.25 | ||||||
Expected dividend yield(4) |
0.00 | % | 0.00 | % | ||||
Weighted-average fair value of options granted(5) |
$ | 0.34 | $ | 0.34 |
(1) | This rate is from federal government marketable bonds for each option grant during the year, having a term that most closely resembles the expected life of the option. |
(2) | Volatility is a measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. As the Company does not yet have sufficient history of its own volatility, the Company has identified several public entities of similar complexity and stage of development and calculates historical volatility using the volatility of these companies. |
(3) | This is the period of time that the options granted are expected to remain unexercised. Options granted have a maximum term of ten years. The Company uses the simplified method to calculate the average expected term, which represents the average of the vesting period and the contractual term. |
(4) | No dividends have been paid by the Company yet. |
(5) | The Company granted stock options at exercise prices not less than the fair value of its common shares as determined by the Companys board of directors, with input from management. Management estimated the fair value of its common shares based on a number of objective and subjective factors, including internal valuations, external market considerations affecting the biotechnology industry and the historic prices at which the Company sold common shares. |
11. Research fees:
The disaggregated revenue categories are presented on the face of the statements of income (loss) and comprehensive income (loss).
Contract liabilities
Contract liabilities represent payments received for performance obligations not yet satisfied and relate to deferred revenue, and are presented as current or long-term in the accompanying balance sheets based on the expected timing of satisfaction of the underlying goods and/or services.
In the following table summarizes the changes in deferred revenue:
December 31, | ||||||||
2018 | 2019 | |||||||
Opening balance |
$ | 1,270,986 | $ | 4,517,624 | ||||
Increase due to consideration received, net of revenue recognized during the year |
12,077,195 | 11,605,065 | ||||||
Revenue recognized during the period |
(8,830,557 | ) | (11,611,543 | ) | ||||
|
|
|
|
|||||
Closing balance |
$ | 4,517,624 | $ | 4,511,146 | ||||
|
|
|
|
F-20
12. Income taxes
a. |
For financial reporting purposes, income before income taxes included the following components: |
December 31, | ||||||||
2018 | 2019 | |||||||
Canadian |
$ | 340,900 | $ | (2,015,183 | ) | |||
Foreign |
(32,046 | ) | (195,513 | ) | ||||
|
|
|
|
|||||
Total |
$ | 308,854 | $ | (2,210,696 | ) | |||
|
|
|
|
The expense (benefit) for income taxes consisted of:
December 31, | ||||||||
2018 | 2019 | |||||||
Canadian: |
||||||||
Current |
$ | | $ | | ||||
Deferred |
| | ||||||
|
|
|
|
|||||
Total |
| | ||||||
Foreign: |
||||||||
Current |
| | ||||||
Deferred |
| | ||||||
|
|
|
|
|||||
Total |
| | ||||||
|
|
|
|
|||||
Income tax expense |
$ | | $ | | ||||
|
|
|
|
b. |
The consolidated effective income tax rate differs from the expected Canadian statutory tax rate of 27% (2018: 27%). Reconciliation between the expected tax rate on income from operations and the statutory tax rate was as follows: |
December 31, | ||||||||
2018 | 2019 | |||||||
Net income (loss) before income taxes |
$ | 308,854 | $ | (2,210,696 | ) | |||
Combined statutory tax rate |
27 | % | 27 | % | ||||
|
|
|
|
|||||
Expected income tax expense (recovery) at statutory rates |
83,391 | (596,888 | ) | |||||
Stock-based compensation |
166,151 | 253,895 | ||||||
Change in valuation allowance |
237,373 | 854,475 | ||||||
Change for (over) under accrual |
(141,843 | ) | 49,225 | |||||
Change due to SR&ED |
(242,590 | ) | (510,273 | ) | ||||
Foreign Exchange |
(131,048 | ) | (8,503 | ) | ||||
Other |
28,566 | (41,931 | ) | |||||
|
|
|
|
|||||
Income tax expense |
$ | | $ | | ||||
|
|
|
|
F-21
c. |
Deferred income tax assets and liabilities result from the temporary differences between assets and liabilities recognized for financial statement and income tax purposes. The significant components of the Companys deferred income tax assets and liabilities were as follows: |
December 31, | ||||||||
2018 | 2019 | |||||||
Deferred tax assets: |
||||||||
Long-term debt |
$ | 519,027 | $ | 450,056 | ||||
Financing fee |
35,966 | 29,130 | ||||||
Operating lease liability |
74,826 | 826,432 | ||||||
Deferred revenue |
| 66,492 | ||||||
Net operating losses carried forward |
359,489 | 433,011 | ||||||
Research and development deductions and credits |
218,298 | 1,013,354 | ||||||
|
|
|
|
|||||
Total deferred tax assets |
1,207,606 | 2,818,476 | ||||||
Deferred tax liabilities: |
||||||||
Property and equipment |
(659,310 | ) | (590,915 | ) | ||||
Operating lease right of use assets |
6,710 | (746,139 | ) | |||||
Other |
| (831 | ) | |||||
|
|
|
|
|||||
Total deferred tax liabilities |
(652,600 | ) | (1,337,885 | ) | ||||
|
|
|
|
|||||
Total deferred tax assets and liabilities |
555,006 | 1,480,591 | ||||||
Less: Valuation allowance |
(555,006 | ) | (1,480,591 | ) | ||||
|
|
|
|
|||||
Net deferred tax asset (liability) |
| | ||||||
|
|
|
|
|||||
Deferred tax asset |
652,600 | 1,337,885 | ||||||
Deferred tax liability |
(652,600 | ) | (1,337,885 | ) | ||||
|
|
|
|
|||||
Net deferred tax assets (liability) |
$ | | $ | | ||||
|
|
|
|
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing DTAs. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2019 in the United States and Canada. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth.
On the basis of this evaluation, valuation allowances of $555,006 and $1,480,591 as of December 31, 2018 and 2019, respectively, have been recorded to recognize only the portion of the DTA that is more likely than not to be realized against DTL that reverses in carryforward period. The amount of the DTA considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is longer present and additional weight is given to subjective evidence such as our projections for growth.
F-22
d. |
The Company does not have any Canadian non-capital loss carried forward. The Company had Canadian income tax credits of $410,656 and $1,168,720 as of December 31, 2018 and 2019, respectively, to offset Canadian federal and provincial taxes payable expiring commencing in 2029 through 2040. The Company had unclaimed tax deductions for scientific research and experimental development of approximately $421,477 and $968,376 as of December 31, 2018 and 2019, respectively, with no expiry. The Company had operating losses carried forward related to foreign operations of approximately $1,284,640 and $1,547,375 as of December 31, 2018 and 2019, respectively. The operating losses available for the foreign subsidiary deferred tax assets expire as follows: |
Expiry date |
Income Tax
Credit |
Net
Operating Loss |
||||||
2029 |
$ | 248,759 | $ | | ||||
2030 |
429,200 | | ||||||
2035 |
| 363,418 | ||||||
2036 |
| 423,467 | ||||||
2037 |
| 332,515 | ||||||
2038 |
| 145,398 | ||||||
2039 |
161,897 | 19,842 | ||||||
2040 |
328,864 | 262,735 | ||||||
|
|
|
|
|||||
Total |
$ | 1,168,720 | $ | 1,547,375 | ||||
|
|
|
|
e. |
As of December 31, 2019, the Company has accumulated undistributed earnings generated by foreign subsidiaries of approximately $16,000. The Company has not provided a deferred liability for the income taxes associated with its foreign investments because it is the Companys intention to indefinitely reinvest in its foreign investments. |
f. |
A reconciliation of total unrecognized tax benefits for the years ended December 31, 2018 and 2019 were as follows: |
2018 | 2019 | |||||||
January 1 balance |
$ | 356,668 | $ | 448,471 | ||||
Gross increasetax position in prior period |
| | ||||||
Gross increasetax position in current period |
448,471 | 386,596 | ||||||
Gross decreasetax position in current period |
(356,668 | ) | (448,471 | ) | ||||
|
|
|
|
|||||
December 31 balance |
$ | 448,471 | $ | 386,596 | ||||
|
|
|
|
Included in the balance of unrecognized tax benefits at December 31, 2018 and 2019 are potential benefits of $nil that, if recognized, would affect the effective tax rate on income from operations. Recognition of these potential benefits would result in a deferred tax asset in the form of undeducted SR&ED expenditures or tax credits available for carry-forward, which would be subject to a valuation allowance based on conditions existing at the reporting date.
On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act. A significant change under this reform is the reduction of U.S. federal statutory corporate income tax rate from 35% to 21% beginning in 2018. As a result of the reform, the Company revalued its deferred income tax balances accordingly. A full valuation is taken on the deferred tax balance. Further changes may be implemented as the U.S. authorities issue additional regulations and interpretations in the future.
The Company is subject to taxation in Canada, the United States and Australia. Further, while the statute of limitations in each jurisdiction where an income tax return has been filed generally limits the examination period, as a result of loss carry-forwards, the limitation period for examination generally does not expire until several
F-23
years after the loss carry-forwards are utilized. Other than routine audits by tax authorities for tax credits and tax refunds that the Company has claimed, management is not aware of any other material income tax examination currently in progress by any taxing jurisdiction. Tax years ranging from 2017 to 2019 remain subject to Canadian income tax examinations. Tax years ranging from 2016 to 2019 remain subject to U.S. income tax examinations. Other than routine audits done by tax authorities for tax credits and tax refunds that the Company has claimed, management is not aware of any other material income tax examination currently in progress by any taxing jurisdiction.
13. Lease
The Company leases approximately 20,996 square feet for its head office, which represents both office and laboratory space, in Vancouver, British Columbia with terms expiring in 2027. The Company entered into the 10 year lease for its facility on January 1, 2018, including base rent and regular maintenance and cleaning fees. The Company accounts for this lease as an operating lease with maintenance as a non-lease component. The extension period has not been included in the determination of the right-of-use asset or the lease liability for operating leases as the Company did not consider it reasonably certain that the Company would exercise this option.
The balance sheet classification of the Companys operating lease liability were as follows:
December 31,
2018 |
December 31,
2019 |
|||||||
Operating lease liabilities: |
||||||||
Current portion |
$ | | $ | 419,139 | ||||
Long-term portion |
| 2,641,719 | ||||||
|
|
|
|
|||||
Total operating lease liabilities |
$ | | $ | 3,060,858 | ||||
|
|
|
|
As of December 31, 2019, the future minimum lease payments of the Companys operating lease liability were as follows:
Year Ending December 31 |
Amount | |||
2020 |
$ | 460,616 | ||
2021 |
460,616 | |||
2022 |
460,616 | |||
2023 |
492,940 | |||
2024 |
492,940 | |||
Thereafter |
1,575,791 |
As of December 31, 2019, the remaining lease term is 8 years and the discount rate used to determine the operating lease liability was 6.5%. During the year ended December 31, 2019, the Company incurred total operating lease expenses of $638,397, which included a lease component associated with fixed lease payments of $444,454 and a non-lease component of $193,943.
14. Financial instruments:
Financial instruments and fair value
The Company categorizes its financial assets and liabilities measured at fair value into a three-level hierarchy established by U.S. GAAP that prioritizes those inputs to valuation techniques used to measure fair value based on the degree to which they are observable. The three levels of the fair value hierarchy are as follows: Level 1 inputs are quoted prices in active markets for identical assets and liabilities; Level 2 inputs, other than quoted prices included within Level 1, are observable for the asset or liability either directly or indirectly; and Level 3 inputs are not observable in the market.
F-24
The Companys financial instruments consist of cash and cash equivalents, accounts receivable, loans to related parties, accounts payable and accrued liabilities, bank indebtedness, operating lease obligations, and long-term debt. The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and bank indebtedness approximate their fair values due to the immediate and short-term maturity of these financial instruments. The fair value of loans to related party approximate the carrying value as the interest rates approximate the rates applicable for non-related party loans.
The estimated fair value of long-term debt classified as Level 2 was $3,600,000 and $3,400,000 at December 31, 2018 and 2019, respectively. The estimated fair value has been determined by discounting future principal and interest amounts at estimated interest rates expected to be available to the Company at year end.
15. Financial risk management
Concentration of Credit risk
Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. Cash and cash equivalents are invested with the primary objective being the preservation of capital and maintenance of liquidity. The guidelines on the quality of financial instruments that the Company believes minimizes the exposure to concentration of credit risk. The Company limits its exposure to credit loss by placing its cash and cash equivalents with high credit quality financial institutions.
The Companys exposure to credit risk for accounts and accrued receivables is indicated by the carrying value of its accounts receivable and accrued receivables. The Company provides an allowance for doubtful accounts when there is uncertainty regarding collection of the related receivable. The Company does not require customers to provide collateral to support accounts receivable. If deemed necessary, credit reviews of significant customers may be performed prior to extending credit. The determination of a customers ability to pay requires judgment, and failure to collect from a customer can adversely affect revenue, cash, and net earnings. The Company currently does not have an allowance and expects to collect the full balance receivable. At December 31, 2018 and 2019, accounts receivable amounts were due from five customers.
Interest rate risk
The Companys interest rate risk is primarily attributable to its cash and cash equivalents, long term operating lease liability and long-term debt.
The Company believes that it does not have material exposure to changes in the fair value of cash and cash equivalents because of changes in interest rates due to the short-term nature of cash and cash equivalents. The Company does not enter into investments for trading or speculative purposes and has not used any derivative financial instruments to manage interest rate exposure.
The Company is exposed to the risk that the fair value or future cash flows of the operating lease liability and long-term debt will vary as a result of changes in market interest rates. In order to manage funding needs or capital structure goals, the Company enters into debt or lease agreements that are subject to either fixed market interest rates set at the time of issue or floating rates determined by ongoing market conditions. Debt subject to variable interest rates exposes the Company to variability in interest expense, while debt subject to fixed interest rates exposes the Company to variability in the fair value of debt. To manage interest rate exposure, the Company accesses various sources of financing and manages borrowings in line with a targeted range of capital structure, debt ratings, liquidity needs, maturity schedule, and currency and interest rate profiles.
Foreign currency risk
The Company had U.S. dollar denominated cash and cash equivalents of $2,687,133 and $3,005,514 at December 31, 2018 and 2019, respectively. The Company had Canadian denominated cash and cash equivalents
F-25
of CAD $10,578,426 and CAD $5,845,484 at December 31, 2018 and 2019, respectively. The Company had Australian denominated cash and cash equivalents of $nil and A$66,835 at December 31, 2018 and 2019, respectively.
The Company incurs certain operating expenses and accounts payable in currencies other than the U.S. dollar, including the Canadian and the Australian dollar, and accordingly is subject to foreign exchange risk due to fluctuations in exchange rates. The Company does not use derivative instruments to hedge exposure to foreign exchange risk. The operating results and financial position of the Company are reported in U.S. dollars in the Companys consolidated financial statements. The fluctuation of the U.S. dollar relative to the Canadian dollar and the Australian dollar will have an impact on the reported balances for net assets, net loss and shareholders equity in the Companys consolidated financial statements.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Companys short-term cash requirements are primarily to settle its financial liabilities, which consist primarily of accounts payable and accrued liabilities falling due on average within 30 days and current portion of lease obligations and long term debt falling due within the next 12 months, with medium term requirements to invest in property and equipment and research and development. The Companys principal sources of liquidity to settle its financial liabilities are cash, cash equivalents and, collection of accounts and accrued receivables relating to research collaboration and license agreements and additional government grant funding as required. The Company believes that these principal sources of liquidity are sufficient to fund its operations for at least the next 12 months.
Counterparty risk
In 2018, a significant portion of revenue was recognized from one customer representing 61%. In 2019, a significant portion of revenue was recognized from three customers representing 47%, 15% and 12%, respectively.
16. Contingencies:
From time to time, the Company may become involved in routine litigation arising in the ordinary course of business. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company does not have contingency reserves established for any litigation liabilities and any the costs related to such legal proceedings are expensed as incurred.
The Company may enter into certain agreements with strategic partners in the ordinary course of operations that may include contractual milestone payments related to the achievement of pre-specified research, development, regulatory and commercialization events and indemnification provisions, which are common in such agreements. Pursuant to the agreements, the Company may be obligated to make research and development and regulatory milestone payments upon the occurrence of certain events and low single-digit royalty payments based on net sales.
To date, the Company has not recognized any development, or commercial milestone payments, or royalty payments resulting from our arrangements with our strategic partners.
F-26
17. Related party transactions:
The Company utilizes its network of investors, directors, and advisors in executing business. As such, we have transactions with related parties including the following:
(a) |
The Chief Commercial Officer of StemCell Technologies Inc. was a Director for the Company until September 11, 2019. StemCell provides reagents, tools and services for life science research. The Company incurred $6,206 and $29,998 of expenses from transactions with StemCell Technologies Inc. during the years ended December 31, 2018 and 2019, respectively. The amounts charged were subject to normal trade terms and recorded at the exchange amount. |
(b) |
The Chief Executive Officer (CEO) of the Company was the recipient of a personal loan of CAD $2,000,000 ($1,539,527) from the Company during the year ended December 31, 2019 for the purposes of financing the purchase of a residential property. The loan is interest bearing at an annual interest rate of 3.54% and has a term to maturity of the earlier of, and unless otherwise extended as mutually agreed with the Company: |
a. |
Five years from the date of the advance, |
b. |
Two years following the date the CEO ceases to be an employee of the Company, |
c. |
Sale of the residential property, or |
d. |
Upon a qualifying liquidation event, as defined in the agreement. |
The accrued interest at December 31, 2019 was $40,874.
(c) |
The General Counsel of the Company was the recipient of a loan of $200,000 during the year ended December 31, 2019. The loan is interest bearing at an annual interest rate of 3.95% and has a term to maturity of 3.33 years. The accrued interest at December 31, 2019 was $2,633. |
18. Subsequent events:
The Company evaluated subsequent events through to December 7, 2020, the date on which these financial statements were issued. These consolidated financial statements have been adjusted from amounts previously presented to reflect changes to the ordering and formatting of certain columnar tabular information throughout and updates to certain subsequent events. No changes have been made to amounts previously reported. Subsequent events are as follows:
(a) |
In August of 2019 the Company entered into a contribution agreement with Western Economic Diversification Canada wherein CAD $5,000,000 ($3,846,154) of a CAD $12,000,000 ($9,237,164) Business Scale up Project will be contributed to the Company as a non-interest bearing loan with repayments commencing in April 2023 over 60 months. Subsequent to year-end, the Company had obtained an initial contribution of CAD $1,637,622 ($1,260,582) for this loan. |
(b) |
Announced partnerships: |
Subsequent to December 31, 2019, the Company announced a grant funded by Innovation, Science and Economic Development (ISED) Canada for a total of CAD $175,631,000 ($125,600,000) over the next five years.
Subsequent to December 31, 2019, the Company announced a new partnership with Eli Lilly. The partnership agreement is for the Company to perform discovery research for Eli Lilly to then pursue further along the drug development process to eventually bring to the market. The agreement resulted in an upfront fee received of $25,000,000.
In March 2020, the Company entered into an agreement with Alloy Therapeutics (Alloy) to use the ATX-Gx humanized mice platform to enable in vivo human antibody discovery for its partner programs. Under the terms of the agreement, the Company will offer its biotech and pharma partners access to ATX-Gx, Alloys proprietary suite of immunocompetent transgenic mice, for use in any antibody discovery program and against any therapeutic target. The Company paid $15,000,000 for this license which will be paid over three years.
F-27
In June 2020, the Company acquired rights to the OrthoMab bispecific platform from Dualogics, LLC for $4,000,000. The acquisition represents a group of similar assets sourced from the agreement. All the fair value associated with the agreement is concentrated in a group of similar assets and is not considered a business in accordance with ASC 805-10-55-5A. The Company does not reasonably expect the platform acquired will be used to receive economic benefit in an alternative manner, nor does the acquisition agreement provide for any future economic benefit to the Company from the rights retained by Dualogics, LLC. The Company therefore accounted for the right to the Dualogics, LLC platform acquired under the agreement as an acquisition of an asset and recognized $4,000,000 as research and development expenses under ASC 730.
(c) |
On March 23, 2020, the Company entered into an investment agreement for gross proceeds of $75,000,244 in exchange for 6,017,784 Series A2 Preferred Shares. The preferred shares are voting and convertible into common shares. |
(d) |
In March 2020, the Company retired its debt facility with Bank of Montreal and subsequently entered into a credit agreement with OrbiMed Royalty & Credit Opportunities III, LP, for an available principal amount of $30,000,000 of which $15,000,000 was drawn, and was subsequently repaid and retired in July 2020. |
(e) |
Subsequent to year end, the Company entered into two five-year leases for office space, commencing in February 2020 and November 2020, with annual minimum lease payments of approximately $117,891 and $178,500, respectively, and another five year lease for laboratory and office space, commencing in October 2021 with annual minimum lease payments of approximately $1,552,684. |
(f) |
The CEO loan outstanding at December 31, 2019 was subsequently repaid in full during the second quarter of 2020. |
(g) |
Subsequent to September 30, 2020, the Company acquired 100% of the outstanding shares of Trianni, Inc. (Trianni) for a total cash consideration of approximately $98,000,000, including certain closing adjustments for working capital, indebtedness, as well as payments to Trianni option holders for the cancellation and extinguishment of Trianni options. The acquisition was approved by necessary parties and closed in November 2020. To fund this acquisition, the Company issued convertible notes in the principal amount of $89,990,000 on October 30, 2020. These notes are convertible at the option of the noteholder under certain circumstances, including upon closing of certain qualified financings as defined in the note agreement. These notes mature five years from the date of issuance and bear no interest for the first twelve months and bear five percent (5%) interest per annum thereafter. The Company will account for the acquisition as a business combination. As part of the acquisition, the Company has agreed to pay former shareholders of Trianni 85% of any payments received in relation to a specific customer license, less any direct expenses, for the period ending on the earlier of April 9, 2024 or the date that the Companys obligations under the license have been completed and discharged in full. |
(h) |
On November 3, 2020 the Company entered into a five-year lease for office space, commencing in November 2020 with annual minimum lease payments of approximately $178,500. |
F-28
(i) |
Subsequent to December 31, 2019, the Company granted 19,539,680 stock options. The following table sets forth, by grant date, the number of shares granted, and per share exercise price for options granted between January 1, 2020 and December 4, 2020: |
Grant Date |
Number of Shares Subject
to Options Granted |
Per Share Exercise
Price of Options (CAD $) |
Per Share Exercise
Price of Options (USD $) (1) |
|||||||||
Q1 2020 |
3,640,000 | 0.43-0.48 | 0.33-0.37 | |||||||||
Q2 2020 |
590,000 | 0.48-1.63 | 0.37-1.27 | |||||||||
Q3 2020 |
1,648,370 | 0.48-1.63 | 0.37-1.27 | |||||||||
October 21, 2020 |
3,112,000 | 1.63 | 1.27 | |||||||||
October 28, 2020 |
250,000 | 0.48 | 0.37 | |||||||||
October 29, 2020 |
176,000 | 1.63 | 1.27 | |||||||||
October 29, 2020 |
8,523,310 | 3.08 | 2.41 | |||||||||
November 18, 2020 |
1,600,000 | 3.52 | 2.76 |
(1) | U.S. Dollar amounts have been translated from Canadian Dollars at the rate of 0.78 to 1 which was the exchange rate as of December 4, 2020. |
For grants issued prior to October 1, 2020 the Company concluded that the fair value of its common shares equalled the exercise price of the award. For grants issued subsequent to September 30, 2020, the Company is in the process of finalizing the fair value estimate of its stock-based awards and expects that the fair value of its common shares will exceed the exercise price of the underlying options granted. In accordance with ASC 718, such excess will increase the fair value of such stock-based awards and such effect may be material.
(j) |
On December 4, 2020, the Board of Directors of the Company approved a 1-for-10 forward stock split of its issued and outstanding common shares and stock options, which was effected on December 4, 2020. All issued and outstanding common shares and stock options, and related per share amounts contained in the accompanying consolidated financial statements have been retroactively adjusted to reflect this stock split for all periods presented. The conversion rate for the convertible preferred stock has been adjusted accordingly to reflect the stock split. All share and per share data shown in the accompanying financial statements and related notes have been retroactively revised to reflect the stock split. |
F-29
CONDENSED CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. dollars except share data)
(Unaudited)
December 31,
2019 |
September 30,
2020 |
Pro Forma
September 30, 2020 |
||||||||||
Assets |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 7,552,917 | $ | 91,081,765 | ||||||||
Accounts receivable |
2,123,968 | 5,531,239 | ||||||||||
Accrued amounts receivable |
1,152,558 | 14,577,297 | ||||||||||
Other current assets |
1,810,894 | 2,809,207 | ||||||||||
|
|
|
|
|||||||||
Total current assets |
12,640,337 | 113,999,508 | ||||||||||
Long-term assets |
||||||||||||
Property and equipment, net |
8,479,940 | 14,277,641 | ||||||||||
Intangible and other long-term assets |
584,776 | 13,898,314 | ||||||||||
Loans to related parties |
1,783,019 | 209,875 | ||||||||||
|
|
|
|
|||||||||
Total long-term assets |
10,847,735 | 28,385,830 | ||||||||||
|
|
|
|
|||||||||
Total assets |
$ | 23,488,072 | $ | 142,385,338 | ||||||||
|
|
|
|
|||||||||
Liabilities and shareholders equity |
||||||||||||
Current liabilities: |
||||||||||||
Accounts payable and accrued liabilities |
$ | 2,579,105 | $ | 12,867,571 | ||||||||
Deferred revenue |
3,236,026 | 6,917,081 | ||||||||||
Current portion of long-term debt |
2,079,730 | 319,550 | ||||||||||
|
|
|
|
|||||||||
Total current liabilities |
7,894,861 | 20,104,202 | ||||||||||
Long-term liabilities: |
||||||||||||
Operating lease liability |
2,641,719 | 3,066,360 | ||||||||||
Long-term debt |
1,363,143 | 1,939,005 | ||||||||||
Deferred revenue and grant funding |
1,336,199 | 23,718,009 | ||||||||||
Other long-term liabilities |
| 4,319,713 | ||||||||||
|
|
|
|
|||||||||
Total long-term liabilities |
5,341,061 | 33,043,087 | ||||||||||
|
|
|
|
|||||||||
Total liabilities |
13,235,922 | 53,147,289 | ||||||||||
|
|
|
|
|||||||||
Contingencies (Note 16) |
||||||||||||
Shareholders equity |
||||||||||||
Common shares: no par value, unlimited authorized shares at December 31, 2019, September 30, 2020 and pro forma: 151,681,382, 154,091,264 and 235,321,744 shares issued and outstanding at December 31, 2019, September 30, 2020 and pro forma, respectively |
5,121,751 | 6,373,548 | 88,581,993 | |||||||||
Convertible preferred shares unlimited authorized shares at December 31, 2019 and September 30, 2020: 2,105,264 and 8,123,048 issued and outstanding at December 31, 2019 and September 30, 2020, respectively; no shares issued or outstanding, pro forma |
7,545,853 | 82,208,445 | | |||||||||
Additional paid-in capital |
2,300,178 | 3,453,230 | 3,453,230 | |||||||||
Accumulated deficit |
(4,715,632 | ) | (2,797,174 | ) | (2,797,174 | ) | ||||||
|
|
|
|
|
|
|||||||
Total shareholders equity |
10,252,150 | 89,238,049 | 89,238,049 | |||||||||
|
|
|
|
|
|
|||||||
Total liabilities and shareholders equity |
$ | 23,488,072 | $ | 142,385,338 | $ | 142,385,338 | ||||||
|
|
|
|
|
|
|||||||
Subsequent events (Note 19) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-30
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
(Expressed in U.S. Dollars except share data)
(Unaudited)
Nine Months Ended
September 30, |
||||||||
2019 | 2020 | |||||||
Revenue: |
||||||||
Research fees |
$ | 8,409,143 | $ | 17,246,728 | ||||
Milestone payments |
| 8,000,000 | ||||||
|
|
|
|
|||||
Total revenue |
8,409,143 | 25,246,728 | ||||||
|
|
|
|
|||||
Operating expenses: |
||||||||
Research and development |
6,804,269 | 20,756,650 | ||||||
Sales and marketing |
792,084 | 1,610,084 | ||||||
General and administrative |
1,773,862 | 6,115,635 | ||||||
Depreciation |
1,179,910 | 1,507,656 | ||||||
|
|
|
|
|||||
Total operating expenses |
10,550,124 | 29,990,025 | ||||||
|
|
|
|
|||||
Loss from operations |
(2,140,982 | ) | (4,743,297 | ) | ||||
Other (income) expense |
||||||||
Interest income |
(110,927 | ) | (194,739 | ) | ||||
Interest and other expense |
126,991 | 4,896,143 | ||||||
Foreign exchange gain |
(348,095 | ) | (1,145,892 | ) | ||||
Grants and incentives |
(1,239,229 | ) | (10,217,265 | ) | ||||
|
|
|
|
|||||
Total other income |
(1,571,260 | ) | (6,661,755 | ) | ||||
|
|
|
|
|||||
Net earnings (loss) and comprehensive income (loss) for the period |
$ | (569,722 | ) | $ | 1,918,458 | |||
|
|
|
|
|||||
Net earnings (loss) per share attributable to common shareholders |
||||||||
Basic |
$ | (0.00 | ) | $ | 0.01 | |||
Diluted |
$ | (0.00 | ) | $ | 0.01 | |||
Weighted-average common shares outstanding |
||||||||
Basic |
151,207,340 | 152,413,300 | ||||||
Diluted |
151,207,340 | 237,723,530 | ||||||
Pro forma net earnings (loss) per common share |
||||||||
Basic |
$ | 0.01 | ||||||
Diluted |
$ | 0.01 | ||||||
Pro forma weighted-average common shares outstanding |
||||||||
Basic |
215,414,730 | |||||||
Diluted |
237,723,530 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-31
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(Expressed in U.S. Dollars except share amounts)
(Unaudited)
Series A1
Preferred Shares |
Series A2
Preferred Shares |
Common Shares |
Additional
Paid-in Capital |
Accumulated
Deficit |
Total
Shareholders Equity |
|||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||
Balances as at December 31, 2018 |
2,105,264 | $ | 7,557,007 | 150,941,382 | $ | 5,073,692 | $ | 1,483,440 | $ | (2,504,936 | ) | $ | 11,609,203 | |||||||||||||||||||||||
Share issued under stock option plan |
| | | | 740,000 | 32,123 | (15,206 | ) | | 16,917 | ||||||||||||||||||||||||||
Stock-based compensation expense |
| | | | | | 778,225 | | 778,225 | |||||||||||||||||||||||||||
Net earnings (loss) |
| | | | | | | (569,722 | ) | (569,722 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balances as at September 30,
|
2,105,264 | $ | 7,557,007 | | $ | | 151,681,382 | $ | 5,105,815 | $ | 2,246,459 | $ | (3,074,658 | ) | $ | 11,834,624 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balances as at December 31, 2019 |
2,105,264 | $ | 7,545,853 | | $ | | 151,681,382 | $ | 5,121,751 | $ | 2,300,178 | $ | (4,715,632 | ) | $ | 10,252,150 | ||||||||||||||||||||
Issuance of Series A2 preferred shares |
| | 6,017,784 | 75,000,244 | | | | | 75,000,244 | |||||||||||||||||||||||||||
Share issued under stock option plan |
| | | | 2,409,882 | 1,251,797 | (358,947 | ) | | 892,850 | ||||||||||||||||||||||||||
Stock-based compensation expense |
| | | | | | 1,511,999 | | 1,511,999 | |||||||||||||||||||||||||||
Share issuance costs |
| | | (337,652 | ) | | | | | (337,652 | ) | |||||||||||||||||||||||||
Net earnings (loss) |
| | | | | | | 1,918,458 | 1,918,458 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balances as at September 30,
|
2,105,264 | $ | 7,545,853 | 6,017,784 | $ | 74,662,592 | 154,091,264 | $ | 6,373,548 | $ | 3,453,230 | $ | (2,797,174 | ) | $ | 89,238,049 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-32
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. Dollars)
(Unaudited)
Nine Months Ended
September 30, |
||||||||
2019 | 2020 | |||||||
Cash flows from operating activities: |
||||||||
Net income (loss) |
$ | (569,722 | ) | $ | 1,918,458 | |||
Cash flows from operating activities: |
||||||||
Depreciation |
1,179,910 | 1,507,656 | ||||||
Amortization of operating lease right-of-use-assets |
169,646 | 334,664 | ||||||
Amortization of intangible assets |
| 821,012 | ||||||
Stock-based compensation |
778,225 | 3,775,426 | ||||||
Accretion and other |
(304,497 | ) | 439,887 | |||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
(970,559 | ) | (3,567,533 | ) | ||||
Accrued research fees receivable |
(356,823 | ) | (13,424,739 | ) | ||||
Deferred revenue |
(930,842 | ) | 27,023,036 | |||||
Other operating assets and liabilities |
3,239,102 | 2,585,742 | ||||||
|
|
|
|
|||||
Net cash provided by operating activities |
2,234,439 | 21,413,609 | ||||||
|
|
|
|
|||||
Cash flows from investing activities: |
||||||||
Purchases of property and equipment |
(3,413,728 | ) | (8,170,874 | ) | ||||
Purchase of intangible asset |
| (5,000,000 | ) | |||||
Repayment (issuance) of loan to related parties |
(1,738,147 | ) | 1,573,144 | |||||
|
|
|
|
|||||
Net cash used in investing activities |
(5,151,874 | ) | (11,597,730 | ) | ||||
|
|
|
|
|||||
Cash flows from financing activities: |
||||||||
Proceeds from long-term debt |
217,470 | 15,515,851 | ||||||
Repayment of long-term debt |
(287,857 | ) | (16,971,073 | ) | ||||
Short-term borrowings |
| (387,252 | ) | |||||
Issuance of common shares pursuant to exercise of stock options |
16,917 | 892,851 | ||||||
Proceeds from issuance of preferred sharesSeries A2 Financing |
| 74,662,592 | ||||||
|
|
|
|
|||||
Net cash (used in) provided by financing activities |
(53,469 | ) | 73,712,969 | |||||
|
|
|
|
|||||
Increase (decrease) in cash and cash equivalents |
(2,970,904 | ) | 83,528,848 | |||||
Cash and cash equivalents, beginning of the period |
10,444,283 | 7,552,917 | ||||||
|
|
|
|
|||||
Cash and cash equivalents, end of the period |
$ | 7,473,379 | $ | 91,081,765 | ||||
|
|
|
|
|||||
Supplemental disclosure of non-cash investing and financing activities |
||||||||
Purchase of intangible assetssee Note 8 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-33
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars except share and per share amounts)
(Unaudited)
1. Nature of operations
AbCellera Biologics Inc. (the Company) was incorporated and commenced business activities on November 8, 2012 under the laws of the British Columbia Business Corporations Act. The Company is engaged in the business of utilizing a mix of complex technologies in its medical research and development to unearth antibody-based drugs more quickly, cheaply and effectively. Since its inception the Company has dedicated resources to research and development activities that support its current partner projects and future platform development efforts. The Company is headquartered in Vancouver, Canada.
2. Basis of presentation
The accompanying interim condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP) and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information. Accordingly, these financial statements do not include all the information and footnotes required for complete financial statements and should be read in conjunction with the audited consolidated financial statements of the Company and the accompanying notes thereto for the year ended December 31, 2019.
These unaudited interim condensed consolidated financial statements reflect all adjustments, consisting solely of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of results for the interim periods presented. The results of operations for the nine months ended September 30, 2020 and 2019 are not necessarily indicative of results that can be expected for a full year. These unaudited interim condensed consolidated financial statements follow the same significant accounting policies as those described in the notes to the audited consolidated financial statements of the Company for the year ended December 31, 2019, except for the new accounting guidance adopted during the period as described in Note 4.
These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries Lineage Biosciences Inc. and Channel Biologics Pty Ltd. All intercompany transactions and balances have been eliminated on consolidation.
The Company is seeking to complete an initial public offering (IPO) of its common shares. Upon the closing of a qualified public offering, on specified terms, all outstanding preferred shares of the Company will automatically convert into the Companys common shares. In the event the Company does not complete an IPO, the Company expects that its existing cash will be sufficient to fund its operating expenses and capital expenditure requirements into the foreseeable future.
The future viability of the Company beyond that point is dependent on its ability to generate cash from operating activities and to raise additional capital and draw on government funding programs, as required, to finance its operations. If the Company is unable to obtain further funding, the Company may be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects. In addition, the COVID-19 outbreak was declared a pandemic by the World Health Organization in early 2020. The situation is dynamic and the ultimate duration and magnitude of the impact on the economy and the Companys business are not known at this time.
F-34
3. Significant accounting policies
Use of Estimates
The preparation of the consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Areas of significant estimates include, but are not limited to, revenue recognition including estimated timing of completion of performance obligations and determining whether an option for additional goods or services represents a material right, recoverability of investment tax credits receivable, and the fair value of equity awards and related share-based compensation. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could significantly differ from those estimates.
The full extent to which the COVID-19 pandemic may directly or indirectly impact the Companys business, results of operations and financial condition, including revenues, expenses, clinical trials, research and development costs and employee-related amounts, will depend on future developments that are evolving and highly uncertain, such as the duration and severity of the outbreak, including potential future waves or cycles, and the effectiveness of actions taken to contain and treat COVID-19. The Company considered the potential impact of COVID-19 when making certain estimates and judgments relating to the preparation of these interim condensed consolidated financial statements. While there was no material impact to the Companys interim condensed consolidated financial statements as of and for the nine months ended September 30, 2020, the Companys future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in a material impact to the Companys interim condensed consolidated financial statements in future reporting periods.
Unaudited Pro Forma Information
The accompanying unaudited pro forma consolidated balance sheet as of September 30, 2020 has been prepared to give effect, upon the closing of an IPO, to all outstanding preferred shares of the Company converted into the Companys common shares, as if the proposed IPO had occurred on September 30, 2020. It does not reflect any assumed proceeds from or costs related to the IPO.
In the accompanying consolidated statements of income (loss) and comprehensive income (loss), the unaudited pro forma basic and diluted net earnings per share attributable to common shareholders for the nine-month period ended September 30, 2020 has been prepared to solely give effect, upon the closing of a IPO, as if all outstanding preferred shares of the Company converted into the Companys common shares, as if the proposed IPO had occurred on the later of January 1, 2019 or the issuance date of the preferred shares.
4. Changes in significant accounting policies
On January 1, 2020, the Company adopted the new Accounting Standards Update (ASU) 2016-13, issued by the Financial Accounting Standards Board (FASB), and all related amendments under FASB Accounting Standards Codification (ASC) Topic 326, Financial InstrumentsCredit Losses.
Adoption of this new accounting standard did not have a significant impact on the Companys interim condensed consolidated financial statements.
F-35
Recent accounting pronouncements not yet adopted
The Company has reviewed recent accounting pronouncements and concluded that they are either not applicable to the Company or that no material impact is expected in the consolidated financial statements as a result of future adoption.
5. Net earnings (loss) per share
Basic and diluted net earnings (loss) per share attributable to common shareholders was calculated
as follows (in U.S. dollars, except share and per share amounts):
Nine Months Ended September 30, | ||||||||
2019 | 2020 | |||||||
Basic earnings per share |
||||||||
Net earnings (loss) |
$ | (569,722 | ) | $ | 1,918,458 | |||
Less: earnings allocated to Preferred Shareholders |
| (561,083 | ) | |||||
|
|
|
|
|||||
Net earnings (loss) attributable to common shareholdersbasic |
$ | (569,722 | ) | $ | 1,357,375 | |||
|
|
|
|
|||||
Weighted-average common shares outstandingbasic |
151,207,340 | 152,413,300 | ||||||
|
|
|
|
|||||
Net earnings (loss) per share attributable to common shareholdersbasic |
$ | (0.00 | ) | $ | 0.01 | |||
|
|
|
|
|||||
Diluted earnings per share |
||||||||
Net earnings (loss) attributable to common shareholdersdiluted |
$ | (569,722 | ) | $ | 1,918,458 | |||
|
|
|
|
|||||
Weighted-average common shares outstandingbasic |
151,207,340 | 152,413,300 | ||||||
Convertible Preferred Shares |
| 63,001,430 | ||||||
Effect of stock options |
| 22,308,800 | ||||||
|
|
|
|
|||||
Weighted-average common shares outstandingdiluted |
151,207,340 | 237,723,530 | ||||||
|
|
|
|
|||||
Net earnings (loss) per share attributable to common shareholdersdiluted |
$ | (0.00 | ) | $ | 0.01 | |||
|
|
|
|
The Company excluded the following potential common shares, presented based on amounts
outstanding at each period end, from the computation of diluted net earnings (loss) per share attributable to common shareholders for the periods indicated because including them would have had an anti-dilutive effect:
Nine Months Ended
September 30, |
||||||||
2019 | 2020 | |||||||
Options to purchase common shares |
27,539,000 | | ||||||
Convertible preferred shares (as converted to common shares) |
21,052,640 | | ||||||
|
|
|
|
|||||
48,591,640 | | |||||||
|
|
|
|
Unaudited Pro Forma Net Earnings per Share Attributable to Common Shareholders
The unaudited pro forma basic and diluted net earnings per share attributable to common shareholders for the nine-month period ended September 30, 2020 has been prepared to solely give effect to solely give effect to the conversion of all outstanding preferred shares of the Company into the Companys common shares on the later of January 1, 2019 or the issuance date of the preferred shares.
F-36
Unaudited pro forma basic and diluted net earnings per share attributable to common shareholders for the period ended September 30, 2020 was calculated as follows:
Pro forma earnings per sharebasic |
||||
Net earnings (loss) attributable to common shareholders |
$ | 1,918,458 | ||
Weighted-average common shares outstandingbasic |
152,413,300 | |||
Pro forma adjustment to reflect subsequent conversion of all outstanding preferred shares, in each case upon the closing of the proposed IPO |
63,001,430 | |||
|
|
|||
Pro forma weighted-average common shares outstandingbasic |
215,414,730 | |||
|
|
|||
Pro forma net earnings (loss) per share attributable to common shareholdersbasic |
$ | 0.01 | ||
Pro forma earnings per sharediluted |
||||
Net earnings (loss) attributable to common shareholders |
$ | 1,918,458 | ||
Pro forma weighted-average common shares outstandingbasic |
215,414,730 | |||
Effect of stock options |
22,308,800 | |||
|
|
|||
Pro forma weighted-average common shares outstandingdiluted |
237,723,530 | |||
|
|
|||
Pro forma net earnings (loss) per share attributable to common shareholdersdiluted |
$ | 0.01 |
6. Other current assets
Other current assets consisted of the following:
December 31, 2019 | September 30, 2020 | |||||||
Tax and Investment tax credit receivable |
$ | 1,101,306 | $ | 907,892 | ||||
Prepaid expenses |
547,170 | 873,598 | ||||||
Materials and supplies |
162,418 | 1,027,717 | ||||||
|
|
|
|
|||||
Total other current assets |
$ | 1,810,894 | $ | 2,809,207 | ||||
|
|
|
|
7. Property and equipment, net
Property and equipment consisted of the following:
December 31, 2019 | September 30, 2020 | |||||||
Computers |
$ | 3,829,768 | $ | 6,238,883 | ||||
Laboratory equipment |
2,301,947 | 5,362,255 | ||||||
Furniture and fixtures |
85,513 | 120,118 | ||||||
Leasehold improvements |
2,728,825 | 3,861,124 | ||||||
Operating lease right-of-use asset |
2,690,844 | 3,358,594 | ||||||
|
|
|
|
|||||
Property and equipment |
11,636,897 | 18,940,974 | ||||||
Less: accumulated depreciation |
(3,156,957 | ) | (4,663,333 | ) | ||||
|
|
|
|
|||||
Property and equipment, net |
$ | 8,479,940 | $ | 14,277,641 | ||||
|
|
|
|
Depreciation expense on property and equipment for the nine month periods ended September 30, 2019 and 2020 was $1,179,910 and $1,507,656, respectively.
8. |
Intangible assets, net |
In March 2020, the Company entered into an agreement with Alloy Therapeutics (Alloy) to use the ATX-Gx humanized mice platform to enable in vivo human antibody discovery for its partner programs. Under the terms of the agreement, the Company will offer its biotech and pharma partners access to ATX-Gx, Alloys proprietary suite of immunocompetent transgenic mice, for use in any antibody discovery program and against any therapeutic target. The agreement provides for future alternative use to the Company and as such the corresponding value has been recorded as an intangible asset. The asset will be amortized on a straight-line basis over the 10-year term of the license agreement with Alloy.
F-37
The acquisition consists of an initial cash payment of $5,000,000, with two additional $5,000,000 installment payments paid in twelve and twenty-four months, respectively. The estimated fair value of the non-current portion of the financial obligation was determined by discounting future principal and interest amounts at estimated interest rates expected to be available to the Company with an interest rate of 10.98%. Amortization expense is included in research and development.
Intangible assets related to this acquisition consisted of the following:
December 31, 2019 | September 30, 2020 | |||||||
Asset cost |
$ | | $ | 14,074,493 | ||||
Less: accumulated amortization |
| (821,012 | ) | |||||
|
|
|
|
|||||
Intangible assets, net |
$ | | $ | 13,253,481 | ||||
|
|
|
|
9. Accounts payable and other liabilities
Accounts payable and other liabilities consist of the following:
December 31, 2019 | September 30, 2020 | |||||||
Accounts payable and accrued liabilities |
$ | 1,643,367 | $ | 2,986,112 | ||||
Liability for in-licensing agreement |
| 5,000,000 | ||||||
Bank indebtedness |
387,252 | | ||||||
Operating lease liability |
419,139 | 588,590 | ||||||
Liability classified options |
50,751 | 2,314,181 | ||||||
Government remittances payable |
46,143 | 986,064 | ||||||
Current portion of deferred grant funding |
32,453 | 992,624 | ||||||
|
|
|
|
|||||
Total accounts payable and other liabilities |
$ | 2,579,105 | $ | 12,867,571 | ||||
|
|
|
|
10. Long-term debt
Long-term debt consisted of the following:
December 31, 2019 | September 30, 2020 | |||||||
Long-term debt |
||||||||
Non-revolving BMO loan |
$ | 2,009,340 | $ | | ||||
WD CanadaWINN Loan A |
289,356 | 263,934 | ||||||
WD CanadaWINN Loan B |
1,144,177 | 1,151,642 | ||||||
WD CanadaBSP Loan |
| 842,979 | ||||||
Less: current portion of long-term debt |
(2,079,730 | ) | (319,550 | ) | ||||
|
|
|
|
|||||
Total long-term debt |
$ | 1,363,143 | $ | 1,939,005 | ||||
|
|
|
|
Non-revolving BMO loan
The non-revolving loan from Bank of Montreal (BMO), along with interest accrued, was paid off in full in March 2020.
OrbiMed Debt Facility
In March 2020, the Company entered into a senior secured credit agreement (the Credit Agreement) with OrbiMed Royalty & Credit Opportunities III, LP (OrbiMed), which provided for term debt in an aggregate amount of $30,000,000, which matures on March 23, 2025 (a 5 year term). As of June 30, 2020, the Company
F-38
had $15,000,000 of borrowings outstanding under the Credit Agreement. Borrowings under the Credit Agreement bear interest at a rate per annum equal to an applicable margin of 6.00% plus the higher of (a) the London Inter-bank Offered Rate (LIBOR) for the applicable interest period and (b) 1.75%.
In July 2020, the outstanding loan was repaid in full, the Credit Agreement retired, and all associated security with the Credit Agreement was released. The Company incurred approximately $3.7 million in combined cancellation fees and legal fees on early retirement of the Credit Agreement which has been classified in interest and other (income) expense on the condensed consolidated statements of income (loss) and comprehensive income (loss). The Company was in compliance with all covenants under the Credit Agreement up to the date of retirement.
WD CanadaBusiness Scale Up and Productivity (BSP) Loan
The Company secured contribution-based, shared cost, non-interest-bearing funding from the Ministry of Western Economic Diversification under the BSP towards capital equipment and expenses for a project based in Vancouver, BC. This represents the third project for which we have received funding. The maximum amount of funding under the agreement is $3,846,154 subject to the following maximum annual amounts based on government funding years ending March 31: 2020$750,000; 2021$1,588,462; 2022$1,507,692. The contribution is repayable to the Ministry by 59 monthly instalments of $64,102 starting April 1, 2023 and one final instalment of $64,118. At September 30, 2020 the Company has made draws amounting to $1,491,725.
The Western Economic Diversification (WD) Loans are subject to certain non-financial and restrictive covenants, including restrictions over the use of proceeds towards capital equipment and expenses and the sale of assets acquired related to the respective approved projects. At September 30, 2020, all eligible expenditures from proceeds received by the Company have been spent and the Company was in compliance with these covenants.
11. Shareholders equity
Common shares
As of December 31, 2019, and September 30, 2020, the Companys articles of the corporation, as amended and restated, authorized the Company to issue unlimited voting common shares, each with no par value per share. The voting, dividend, and liquidation rights of the holders of the Companys common shares are subject to and qualified by the rights, powers and preferences of the holders of the Series A1 and Series A2 preferred shares set forth below.
As of each balance sheet date, common shares consisted of the following:
December 31, 2019 | September 30, 2020 | |||||||||||||||
Shares
authorized |
Shares issued and
outstanding |
Shares
authorized |
Shares issued and
outstanding |
|||||||||||||
Common shares |
Unlimited | 151,681,382 | Unlimited | 154,091,264 |
Each voting common share entitles the holder to one vote on all matters submitted to a vote of the Companys shareholders. Common shareholders are entitled to receive dividends, if any, as may be declared by the board of directors, subject to the preferential dividend rights of the preferred shares. Through September 30, 2020, no cash dividends had been declared or paid by the Company.
Series A1 preferred shares
On August 3, 2018, the Company entered into an investment agreement with DCVC Bio, L.P. for gross proceeds of CAD $10,000,004 ($7,702,380) in exchange for 2,105,264 shares. Total proceeds received net of financing costs were $7,557,007.
F-39
The Series A1 preferred shares are voting and are convertible, at any time and from time to time at the option of its holder, into fully paid and non-assessable common shares at a 1:10 ratio, subject to appropriate adjustment for splits, dividends, other similar recapitalization and the like.
Conversion of preferred shares to common shares is mandatory in the event of a Qualified Initial Public Offering with proceeds of at least $70 million.
The holders of the Series A1 preferred shares are entitled to vote, together with the holders of common shares, as a single class, on all matters submitted to the shareholders for a vote and are entitled to the number of votes equal to the number of common shares into which the Series A1 preferred shares could convert on the record date for determination of shareholders entitled to vote.
The holders of the Series A1 preferred shares are entitled to receive noncumulative dividends, as and if declared by the board of directors (the Preferred Dividend). The Company may not pay any dividends on common shares of the Company unless the holders of Preferred Shares then outstanding first receive, or simultaneously receive, the Preferred Dividend on each outstanding Series A1 preferred share and a dividend on each outstanding Series A1 preferred share in an amount at least equal to the product of the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into common shares. Through September 30, 2020, no cash dividends had been declared or paid by the Company.
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or Deemed Liquidation Event, the holders of Series A1 Preferred Shares then outstanding are entitled to a 1x non-participating liquidation preference. Due to the various rights and privileges within the existing Series A1 Preferred and Common shareholder agreements, the Company concluded triggering a deemed liquidation event is within the control of the Company, and therefore the Series A1 Preferred Shares are classified as permanent equity.
Series A2 preferred shares
On March 23, 2020, the Company entered into an investment agreement with certain shareholders for gross proceeds of $75,000,244 in exchange for 6,017,784 shares. Total proceeds received net of financing costs were $74,662,592.
The Series A2 preferred shares are voting and are convertible, at any time and from time to time at the option of its holder, into fully paid and non-assessable common shares at a 1:10 ratio, subject to appropriate adjustment for splits, dividends, other similar recapitalization and the like.
Conversion of preferred shares to common shares is mandatory in the event of a Qualified Initial Public Offering with proceeds of at least $70 million.
The holders of the Series A2 preferred shares are entitled to vote, together with the holders of common shares, as a single class, on all matters submitted to the shareholders for a vote and are entitled to the number of votes equal to the number of common shares into which the Series A2 preferred shares could convert on the record date for determination of shareholders entitled to vote.
The holders of the Series A2 preferred shares are entitled to receive noncumulative dividends, as and if declared by the board of directors (the Preferred Dividend). The Company may not pay any dividends on common shares of the Company unless the holders of Preferred Shares then outstanding first receive, or simultaneously receive, the Preferred Dividend on each outstanding Series A2 preferred share and a dividend on each outstanding Series A2 preferred share in an amount at least equal to the product of the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into common shares. Through September 30, 2020, no cash dividends had been declared or paid by the Company.
F-40
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or Deemed Liquidation Event, the holders of Series A2 Preferred Shares then outstanding are entitled to a 1x non-participating liquidation preference. In addition, holders of the Series A2 Preferred Shares are eligible to demand redemption of their shares in the event of certain deemed liquidation events, as defined the agreement. Due to the various rights and privileges within the existing Series A2 Preferred and Common shareholder agreements, the Company concluded triggering a deemed liquidation event is within the control of the Company, and therefore the Series A2 Preferred Shares are classified as permanent equity.
As of each balance sheet date, preferred shares consisted of the following:
December 31, 2019 | September 30, 2020 | |||||||||||||||
Shares
Authorized |
Shares Issued and
Outstanding |
Shares
Authorized |
Shares Issued and
Outstanding |
|||||||||||||
Series Al preferred shares |
Unlimited | 2,105,264 | Unlimited | 2,105,264 | ||||||||||||
Series A2 preferred shares |
n/a | | n/a | 6,017,784 |
Stock-based compensation
At September 30, 2020, there are 53,531,810 options authorized to be issued under the program.
Options granted under the Companys stock option program are denominated in Canadian dollars and are translated into U.S dollars using the period end rate or the average foreign exchange rate for the period, as applicable, and have been noted for information purposes.
The following table summarizes the Companys stock options granted in Canadian dollars since December 31, 2019:
Number of Shares |
Weighted-Average
Exercise Price (CAD) |
Weighted-Average
Exercise Price (USD) |
||||||||||
Outstanding as of December 31, 2019 |
37,359,000 | $ | 0.29 | $ | 0.22 | |||||||
Granted |
5,878,370 | 0.83 | 0.62 | |||||||||
Exercised |
(2,409,882 | ) | 0.50 | 0.37 | ||||||||
Forfeited |
(206,988 | ) | 0.52 | 0.39 | ||||||||
|
|
|
|
|
|
|||||||
Outstanding as of September 30, 2020 |
40,620,500 | 0.35 | 0.27 | |||||||||
|
|
|
|
|
|
|||||||
Options exercisable as of September 30, 2020 |
22,012,370 | $ | 0.24 | $ | 0.18 |
Stock-based compensation expense was classified in the interim condensed consolidated statements of income (loss) and comprehensive income (loss) as follows:
Nine Months Ended
September 30, |
||||||||
2019 | 2020 | |||||||
Research and development expenses |
$ | 538,361 | $ | 2,816,957 | ||||
General and administrative expenses |
156,644 | 881,590 | ||||||
Sales and marketing expenses |
83,220 | 76,879 | ||||||
|
|
|
|
|||||
Total stock-based compensation expense |
$ | 778,225 | $ | 3,775,426 | ||||
|
|
|
|
F-41
The fair value of each option award is determined on the date of grant using the Black-Scholes option pricing model. The weighted-average valuation assumptions for stock options granted in the period are as follows:
Nine Months Ended
September 30, 2020 |
||||
Risk-free interest rate1 |
1.11 | % | ||
Expected volatility2 |
90 | % | ||
Expected term (years)3 |
5.76 | |||
Expected dividend yield4 |
0.00 | % | ||
Weighted-average fair value of options granted5 |
$ | 0.60 |
The weighted-average valuation assumptions for liability classified stock options outstanding at September 30, 2020 are as follows:
Nine Months Ended
September 30, 2020 |
||||
Risk-free interest rate1 |
0.38 | % | ||
Expected volatility2 |
75 | % | ||
Expected term (years)3 |
6.25 | |||
Expected dividend yield4 |
0.00 | % | ||
Weighted-average fair value of options5 |
$ | 2.06 |
(1) | This rate is from federal government marketable bonds for each option grant during the year, having a term that most closely resembles the expected life of the option. |
(2) | Volatility is a measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. As the Company does not yet have sufficient history of its own volatility, the Company has identified several public entities of similar complexity and stage of development and calculates historical volatility using the volatility of these companies. |
(3) | This is the period of time that the options granted are expected to remain unexercised. Options granted have a maximum term of ten years. The Company uses the simplified method to calculate the average expected term, which represents the average of the vesting period and the contractual term. |
(4) | No dividends have been paid by the Company yet. |
(5) | The Company granted stock options at exercise prices not less than the fair value of its common shares as determined by the Board, with input from management. Management estimated the fair value of its common shares based on a number of objective and subjective factors, including internal valuations, external market considerations affecting the biotechnology industry and the historic prices at which the Company sold common shares. |
At September 30, 2019 there were no liability classified options outstanding. At September 30, 2020, there were 5,748,000 liability classified options outstanding which are included in other liabilities.
12. Revenue
The disaggregated revenue categories are presented on the face of the statement of income (loss) and comprehensive income (loss).
Contract liabilities
Contract liabilities represent payments received for performance obligations not yet satisfied and relate to deferred revenue, and are presented as current or long-term in the accompanying balance sheets based on the expected timing of satisfaction of the underlying goods and/or services.
F-42
The following table summarizes the changes in deferred revenue:
Nine Months Ended
September 30, |
||||||||
2019 | 2020 | |||||||
Opening balance |
$ | 4,511,146 | $ | 4,517,624 | ||||
Increase due to consideration received, net of revenue recognized during the year |
7,484,780 | 47,671,305 | ||||||
Revenue recognized during the period |
(8,409,143 | ) | (25,246,728 | ) | ||||
|
|
|
|
|||||
Closing balance |
$ | 3,586,783 | $ | 26,942,201 | ||||
|
|
|
|
In March of 2020, the Company entered into a research collaboration and license agreement with Eli Lilly pursuant to which the Company will perform discovery research for several targets for Eli Lilly to develop and commercialize. The agreement resulted in an upfront payment of $26,700,000, of which $22,400,000 was included in deferred revenue at September 30, 2020. Under the agreement, the Company is entitled to receive an aggregate of up to $29,000,000 of milestone payments as well as royalties in the low single digits based on net sales for non-COVID-19 targets and in the low- to mid-teens for aggregate sales below $125.0 million and mid-teens to mid-twenties on aggregate sales above $125.0 million. The Company expects to recognize approximately $3,700,000 in revenue in the next 12 months related to this agreement. Of the remaining deferred revenue balance of $4,500,000, which amount is related to various other agreements, approximately $3,200,000 is expected to be recognized in revenue in the next 12 months.
13. Government funding
In 2020 the Company received a funding commitment from the Government of Canada under Innovation, Science and Economic Developments (ISED) Strategic Innovation Fund (SIF) for a total of CAD $175,631,000 ($125,600,000) which is intended to support research and development efforts related to the discovery of antibodies for use drugs to treat COVID-19, and to build technology and manufacturing infrastructure for antibody therapies against future pandemic threats.
To September 30, 2020 the Company incurred $12,869,112 in expenditures in respect of the SIF grant funding. This amount relates primarily to spending under phase 1 of the agreement and such amounts are not repayable. An immaterial amount was claimed in respect of phase 2 of the funding commitment which includes a non-probable repayable condition that is not estimable at this time.
Of the total spend during the nine months ended September 30, 2020, $8,426,355 relates to research and development expenditures and is reflected in other income. The remaining $4,442,757 is attributable to capital asset expenditures and is amortized into other income over the average asset life of five years. Unamortized amounts are included in other liabilities and other long-term liabilities.
14. Leases
The Company leases approximately 20,996 square feet for its head office, which represents both office and laboratory space, in Vancouver, British Columbia with terms expiring in 2027. The Company entered into the 10 year lease for its facility on January 1, 2018, including base rent and regular maintenance and cleaning fees. The Companys three leased facilities are accounted for as operating leases with maintenance segregated as a non-lease component. The Company has not included the extension period in the determination of the right-of-use-asset or the lease liability for operating leases as the Company did not consider it reasonably certain that the Company would exercise any extension option.
During the first half of 2020 the Company entered two additional office lease spaces. The first is an additional office facility in Vancouver BC commencing February 1, 2020 with a term of 5 years 10 months and is
F-43
approximately 4,900 square feet. This lease agreement does not include an extension option. The second is approximately 2,100 square feet and is an office and laboratory facility in Sydney Australia commencing January 1, 2020 with a one year initial lease term and a one year extension period. The Company has included the extension period in the determination of the right-of-use-asset and lease liability for operating leases.
In July 2020 the Company entered into an additional office lease space. The lease term commences July 1, 2020 with a term of two years and is approximately 6,300 square feet.
The balance sheet classification of the Companys lease liabilities was as follows:
December 31,
2019 |
September 31,
2020 |
|||||||
Operating lease liabilities |
||||||||
Current portion |
$ | 419,139 | $ | 588,590 | ||||
Long-term portion |
2,641,719 | 3,066,360 | ||||||
|
|
|
|
|||||
Total operating lease liabilities |
$ | 3,060,858 | $ | 3,654,950 | ||||
|
|
|
|
At September 30, 2020, the future minimum lease payments of the Companys operating lease liabilities were as follows:
Amount | ||||
2020 |
$ | 204,564 | ||
2021 |
818,257 | |||
2022 |
648,275 | |||
2023 |
595,709 | |||
2024 |
595,709 | |||
Thereafter |
1,632,742 |
As of September 30, 2020, the weighted-average remaining lease term is 6.39 years and the discount rate used to determine the operating lease liabilities was approximately 6.5%.
The Company incurred total operating lease expenses, including fixed lease payments and non-lease components, of $627,452 and $702,496 during the nine months ended September 30, 2019 and 2020, respectively.
15. Financial instruments
The Company categorizes its financial assets and liabilities measured at fair value into a three-level hierarchy established by U.S. GAAP that prioritizes those inputs to valuation techniques used to measure fair value based on the degree to which they are observable. The three levels of the fair value hierarchy are as follows: Level 1 inputs are quoted prices in active markets for identical assets and liabilities; Level 2 inputs, other than quoted prices included within Level 1, are observable for the asset or liability either directly or indirectly; and Level 3 inputs are not observable in the market.
The Companys financial instruments consist of cash and cash equivalents, accounts receivable, loans to related parties, accounts payable and accrued liabilities, bank indebtedness, operating lease obligations, liability classified stock options, and long-term debt. The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and bank indebtedness approximate their fair values due to the immediate and short-term maturity of these financial instruments. The fair value of loans to related party approximate the carrying value as the interest rates approximate the rates applicable for non-related party loans. The Company uses a Black-Scholes pricing model to estimate the fair value of liability classified options, which utilizes Level 3 inputs (Note 11).
F-44
The estimated fair value of long-term debt of $3,400,000 and $2,800,000 at December 31, 2019 and September 30, 2020, respectively, are classified as Level 2. The estimated fair value has been determined by discounting future principal and interest amounts at estimated interest rates expected to be available to the Company at period end.
16. Contingencies
From time to time, the Company may become involved in routine litigation arising in the ordinary course of business. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company does not have contingency reserves established for any litigation liabilities and any the costs related to such legal proceedings are expensed as incurred.
The Company may enter into certain agreements with strategic partners in the ordinary course of operations that may include contractual milestone payments related to the achievement of pre-specified research, development, regulatory and commercialization events and indemnification provisions, which are common in such agreements. Pursuant to the agreements, the Company may be obligated to make research and development and regulatory milestone payments upon the occurrence of certain events and upon receipt of royalty payments in the low single-digits to mid-twenties based on certain net sales targets.
To date the Company has made payments of approximately $225,000 related to such obligations.
17. Related party transactions
The Company utilizes its network of investors, directors, and advisors in executing business. As
such, the Company had transactions with related parties including the following:
(a) |
The Chief Commercial Officer of StemCell Technologies Inc. was a director for the Company until September 11, 2019. StemCell provides reagents, tools and services for life science research. The Company incurred expenditures of $14,431 and $26,143 from transactions with StemCell Technologies Inc. during the nine months ended September 30, 2019 and 2020, respectively. The amounts charged were subject to normal trade terms. As of September 30, 2020, StemCell Technologies Inc. was no longer a related party of the Company. |
(b) |
The personal loan to the Chief Executive Officer of the Company was repaid in full during the nine months ended September 30, 2020. |
(c) |
The General Counsel of the Company was the recipient of a loan of $200,000 during the year ended December 31, 2019. The loan is interest bearing at an annual interest rate of 3.95% and has a term to maturity of 3.33 years. |
18. Asset Acquisition
In June 2020, the Company acquired rights to the OrthoMab bispecific platform from Dualogics, LLC for $4,000,000. The acquisition represents a group of similar assets sourced from the agreement. All the fair value associated with the agreement is concentrated in a group of similar assets and is not considered a business in accordance with ASC 805-10-55-5A. The Company does not reasonably expect the platform acquired will be used to receive economic benefit in an alternative manner, nor does the acquisition agreement provide for any future economic benefit to the Company from the rights retained by Dualogics, LLC. The Company therefore accounted for the right to the Dualogics, LLC platform acquired under the agreement as an acquisition of an asset and recognized $4,000,000 as research and development expenses under ASC 730.
F-45
19. Subsequent events
The Company evaluated subsequent events through to December 7, 2020, the date on which these financial statements were issued.
(a) |
Subsequent to September 30, 2020, the Company acquired 100% of the outstanding shares of Trianni, Inc. (Trianni) for a total cash consideration of approximately $98,000,000, including certain closing adjustments for working capital, indebtedness, as well as payments to Trianni option holders for the cancellation and extinguishment of Trianni options. The acquisition was approved by necessary parties and closed in November 2020. To fund this acquisition, the Company issued convertible notes in the principal amount of $89,990,000 on October 30, 2020. These notes are convertible at the option of the noteholder under certain circumstances, including upon closing of certain qualified financings as defined in the note agreement. These notes mature five years from the date of issuance and bear no interest for the first twelve months and bear five percent (5%) interest per annum thereafter. The Company will account for the acquisition as a business combination. As part of the acquisition, the Company has agreed to pay former shareholders of Trianni 85% of any payments received in relation to a specific customer license, less any direct expenses, for the period ending on the earlier of April 9, 2024 or the date that the Companys obligations under the license have been completed and discharged in full. |
(b) |
On November 3, 2020 the Company entered into a five-year lease for office space, commencing in November 2020 with annual minimum lease payments of approximately $178,500. |
(c) |
Subsequent to September 30, 2020, the Company granted 13,661,310 stock options. The following table sets forth, by grant date, the number of shares granted, and per share exercise price of stock options granted between October 1, 2020 and December 4, 2020: |
Grant Date |
Number of Shares Subject
to Options Granted |
Per Share Exercise
Price of Options (CAD $) |
Per Share Exercise
Price of Options (USD $)(1) |
|||||||||
October 21, 2020 |
3,112,000 | 1.63 | 1.27 | |||||||||
October 28, 2020 |
250,000 | 0.48 | 0.37 | |||||||||
October 29, 2020 |
176,000 | 1.63 | 1.27 | |||||||||
October 29, 2020 |
8,523,310 | 3.08 | 2.41 | |||||||||
November 18, 2020 |
1,600,000 | 3.52 | 2.76 |
(1) | U.S. Dollar amounts have been translated from Canadian Dollars at the rate of 0.78 to 1 which was the exchange rate as of December 4, 2020. |
For grants issued subsequent to September 30, 2020, the Company is in the process of finalizing the fair value estimate of its stock-based awards and expects that the fair value of its common shares will exceed the exercise price of the underlying options granted. In accordance with ASC 718, such excess will increase the fair value of such stock-based awards and such effect may be material.
(d) |
On December 4, 2020, the Board of Directors of the Company approved a 1 -for- 10 forward stock split of its issued and outstanding common shares and stock options, which was effected on December 4, 2020. All issued and outstanding common shares and stock options, and related per share amounts contained in the accompanying condensed consolidated financial statements have been retroactively adjusted to reflect this stock split for all periods presented. The conversion rate for the convertible preferred stock has been adjusted accordingly to reflect the stock split. All share and per share data shown in the accompanying condensed consolidated financial statements and related notes have been retroactively revised to reflect the stock split. |
F-46
Board of Directors
Trianni, Inc.
San Francisco, California
We have audited the accompanying financial statements of Trianni, Inc. (a California corporation) (the Company), which comprise the balance sheets as of December 31, 2018 and 2019, and the related statements of operations, convertible preferred stock and stockholders equity, and cash flows for the years then ended, and the related notes to the financial statements.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from 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 auditors 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 entitys 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 entitys internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant 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 referred to above present fairly, in all material respects, the financial position of Trianni, Inc. as of December 31, 2018 and 2019, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Change in Accounting Principle
As described in Note 2 to the financial statements, the Company has elected to change its method of accounting for revenue from contracts with customers as of January 1, 2018 due to the adoption of Accounting Standards Codification Topic 606. This adoption did not result in a cumulative adjustment to opening retained earnings as of January 1, 2018. Our opinion is not modified with respect to that matter.
F-47
Emphasis of Matter
As discussed in Note 2 to the financial statements, on March 11, 2020, the World Health Organization declared the novel string of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. The ultimate financial impact and duration of these events cannot be reasonably estimated at this time. Our opinion is not modified with respect to this matter.
/s/ Armanino LLP |
Armanino LLP |
San Jose, California |
October 26, 2020
F-48
TRIANNI, INC.
(IN THOUSANDS AND EXPRESSED IN U.S. DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
December 31, |
September 30,
2020 |
|||||||||||
2018 | 2019 | |||||||||||
(unaudited) | ||||||||||||
Assets: |
||||||||||||
Current Assets: |
||||||||||||
Cash |
$ | 2,400 | $ | 1,105 | $ | 15,146 | ||||||
Marketable securities |
11,280 | 11,508 | | |||||||||
Accounts receivable |
1,560 | 1,500 | 400 | |||||||||
Inventory |
18 | 28 | 15 | |||||||||
Prepaid expenses and other current assets |
1,734 | 1,250 | 621 | |||||||||
|
|
|
|
|
|
|||||||
Total current assets |
$ | 16,992 | $ | 15,391 | $ | 16,182 | ||||||
|
|
|
|
|
|
|||||||
Property and equipment, net |
244 | 216 | 189 | |||||||||
Deferred tax assets |
861 | 1,380 | 1,380 | |||||||||
Other assets |
35 | 35 | 35 | |||||||||
|
|
|
|
|
|
|||||||
Total assets |
$ | 18,132 | $ | 17,022 | $ | 17,786 | ||||||
|
|
|
|
|
|
|||||||
Liabilities, Convertible Preferred Stock and Stockholders Equity: |
||||||||||||
Current Liabilities: |
||||||||||||
Accounts payable |
$ | 48 | $ | 30 | $ | 186 | ||||||
Accrued expenses and other current liabilities |
107 | 47 | 128 | |||||||||
Dividend payable |
| | 6,452 | |||||||||
Deferred revenue, current portion |
2,642 | 2,825 | 1,578 | |||||||||
|
|
|
|
|
|
|||||||
Total current liabilities |
$ | 2,797 | $ | 2,902 | $ | 8,344 | ||||||
|
|
|
|
|
|
|||||||
Deferred revenue, net of current portion |
1,805 | 926 | 417 | |||||||||
|
|
|
|
|
|
|||||||
Total liabilities |
$ | 4,602 | $ | 3,828 | $ | 8,761 | ||||||
|
|
|
|
|
|
|||||||
Commitments and Contingencies (Note 5) |
||||||||||||
Convertible Preferred Stock: no par value, 6,069,642 shares authorized as of December 31, 2018 and 2019; 5,448,290 shares issued and outstanding as of December 31, 2018 and 2019, and aggregate liquidation preference of $3,132 as of December 31, 2018 and 2019 |
3,132 | 3,132 | 3,132 | |||||||||
Stockholders Equity: |
||||||||||||
Common stock: no par value, 15,000,000 shares authorized as of December 31, 2018 and 2019; 7,082,031 shares issued and outstanding as of December 31, 2018 and 2019 |
756 | 756 | 756 | |||||||||
Additional paid-in capital |
854 | 1,094 | 1,094 | |||||||||
Retained earnings |
8,788 | 8,212 | 4,043 | |||||||||
|
|
|
|
|
|
|||||||
Total stockholders equity |
10,398 | 10,062 | 5,893 | |||||||||
|
|
|
|
|
|
|||||||
Total liabilities, convertible preferred stock, and stockholders equity |
$ | 18,132 | $ | 17,022 | $ | 17,786 | ||||||
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
F-49
TRIANNI, INC.
(IN THOUSANDS AND EXPRESSED IN U.S. DOLLARS)
Year Ended
December 31, |
Nine Months
Ended September 30, |
|||||||||||||||
2018 | 2019 | 2019 | 2020 | |||||||||||||
(Unaudited) | ||||||||||||||||
Revenue |
||||||||||||||||
License revenue |
$ | 1,533 | $ | 3,080 | $ | 2,979 | $ | 5,946 | ||||||||
Other revenue |
963 | 1,078 | | | ||||||||||||
Total revenue |
2,496 | 4,158 | 2,979 | 5,946 | ||||||||||||
Cost of goods sold |
211 | 142 | 104 | 127 | ||||||||||||
Gross profit |
2,285 | 4,016 | 2,875 | 5,819 | ||||||||||||
Operating expenses: |
||||||||||||||||
Research and development |
2,889 | 3,340 | 2,007 | 2,247 | ||||||||||||
Selling, general and administrative expenses |
2,351 | 2,084 | 1,200 | 1,322 | ||||||||||||
Total operating expenses |
5,240 | 5,424 | 3,207 | 3,569 | ||||||||||||
Operating income (loss) |
(2,955 | ) | (1,408 | ) | (332 | ) | 2,250 | |||||||||
Interest income |
167 | 250 | 193 | 150 | ||||||||||||
Other income, net |
2 | 33 | 1 | 1 | ||||||||||||
Income (loss) before income taxes |
(2,786 | ) | (1,125 | ) | (138 | ) | 2,401 | |||||||||
Income tax provision (benefit) |
(364 | ) | (549 | ) | (125 | ) | 118 | |||||||||
Net income (loss) |
$ | (2,422 | ) | $ | (576 | ) | $ | (13 | ) | $ | 2,283 |
The accompanying notes are an integral part of these financial statements.
F-50
TRIANNI, INC.
STATEMENTS OF CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2019
IN THOUSANDS AND EXPRESSED IN U.S. DOLLARS (EXCEPT SHARE DATA)
Convertible Preferred Stock | Common Stock |
Additional
Paid- In Capital |
Retained
Earnings |
Total
Stockholders Equity |
||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||
Balances at December 31, 2017 |
5,448,290 | $ | 3,132 | 7,082,031 | $ | 756 | $ | 547 | $ | 11,210 | $ | 12,513 | ||||||||||||||||||||
Vesting of early exercised stock options |
| | | | 45 | | 45 | |||||||||||||||||||||||||
Stock-based compensation expense |
| | | | 262 | | 262 | |||||||||||||||||||||||||
Net loss |
| | | | | (2,422 | ) | (2,422 | ) | |||||||||||||||||||||||
Balances at December 31, 2018 |
5,448,290 | $ | 3,132 | 7,082,031 | $ | 756 | $ | 854 | $ | 8,788 | $ | 10,398 | ||||||||||||||||||||
Stock-based compensation expense |
| | | | 240 | | 240 | |||||||||||||||||||||||||
Net loss |
| | | | | (576 | ) | (576 | ) | |||||||||||||||||||||||
Balances at December 31, 2019 |
5,448,290 | $ | 3,132 | 7,082,031 | $ | 756 | $ | 1,094 | $ | 8,212 | $ | 10,062 |
The accompanying notes are an integral part of these financial statements.
F-51
TRIANNI, INC.
STATEMENTS OF CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2020
IN THOUSANDS AND EXPRESSED IN U.S. DOLLARS (EXCEPT SHARE DATA)
Convertible Preferred Stock | Common Stock |
Additional
Paid- in Capital |
Retained
Earnings |
Total
Stockholders Equity |
||||||||||||||||||||||||||||
For the Nine Months Ended
|
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||
Balances at December 31, 2018 |
5,448,290 | $ | 3,132 | 7,082,031 | $ | 756 | $ | 854 | $ | 8,788 | $ | 10,398 | ||||||||||||||||||||
Stock-based compensation expense (unaudited) |
| | | | 182 | | 182 | |||||||||||||||||||||||||
Net loss (unaudited) |
| | | | | (13 | ) | (13 | ) | |||||||||||||||||||||||
Balances at September 30, 2019 (unaudited) |
5,448,290 | $ | 3,132 | 7,082,031 | $ | 756 | $ | 1,036 | $ | 8,775 | $ | 10,567 |
Convertible Preferred Stock | Common Stock |
Additional
Paid- in Capital |
Retained
Earnings |
Total
Stockholders Equity |
||||||||||||||||||||||||||||
For the Nine Months Ended
|
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||
Balances at December 31, 2019 |
5,448,290 | $ | 3,132 | 7,082,031 | $ | 756 | $ | 1,094 | $ | 8,212 | $ | 10,062 | ||||||||||||||||||||
Declaration of dividend (unaudited) |
| | | | | (6,452 | ) | (6,452 | ) | |||||||||||||||||||||||
Net income (unaudited) |
| | | | | 2,283 | 2,283 | |||||||||||||||||||||||||
Balances at September 30, 2020 (unaudited) |
5,448,290 | $ | 3,132 | 7,082,031 | $ | 756 | $ | 1,094 | $ | 4,043 | $ | 5,893 |
The accompanying notes are an integral part of these financial statements.
F-52
TRIANNI, INC.
(IN THOUSANDS AND EXPRESSED IN U.S. DOLLARS)
Year Ended
December 31, |
Nine Months Ended
September 30, |
|||||||||||||||
2018 | 2019 | 2019 | 2020 | |||||||||||||
(unaudited) | ||||||||||||||||
Cash flows from operating activities: |
||||||||||||||||
Net income (loss) |
$ | (2,422 | ) | $ | (576 | ) | $ | (13 | ) | $ | 2,283 | |||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||||||||||||
Depreciation and amortization |
33 | 33 | 24 | 27 | ||||||||||||
Stock-based compensation |
262 | 240 | 182 | | ||||||||||||
Deferred income taxes |
(757 | ) | (519 | ) | | | ||||||||||
Changes in operating assets and liabilities: |
||||||||||||||||
Accounts receivable |
(1,444 | ) | 60 | 1,118 | 1,100 | |||||||||||
Inventory |
6 | (10 | ) | (1 | ) | 13 | ||||||||||
Prepaid expenses and other current assets |
(475 | ) | 484 | 123 | 629 | |||||||||||
Other assets |
1 | | | | ||||||||||||
Accounts payable |
(42 | ) | (18 | ) | 29 | 156 | ||||||||||
Accrued expenses and other current liabilities |
23 | (60 | ) | (18 | ) | 81 | ||||||||||
Deferred revenue |
3,538 | (696 | ) | (1,647 | ) | (1,756 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net cash provided by (used in) operating activities |
(1,277 | ) | (1,062 | ) | (203 | ) | 2,533 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Cash flows from investing activities: |
||||||||||||||||
Maturities of marketable securities |
11,071 | 11,280 | 11,280 | 11,508 | ||||||||||||
Purchase of marketable securities |
(11,280 | ) | (11,508 | ) | (11,500 | ) | | |||||||||
Purchases of property and equipment |
| (5 | ) | (5 | ) | | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net cash provided by (used in) investing activities |
(209 | ) | (233 | ) | (225 | ) | 11,508 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase (decrease) in cash |
(1,486 | ) | (1,295 | ) | (428 | ) | 14,041 | |||||||||
Cash at beginning of period |
3,886 | 2,400 | 2,400 | 1,105 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Cash at end of period |
$ | 2,400 | $ | 1,105 | $ | 1,972 | $ | 15,146 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Supplementary cash flow disclosures: |
||||||||||||||||
Cash paid for taxes |
$ | 307 | $ | 61 | $ | | $ | 104 | ||||||||
Noncash financing activitiesdividend payable |
$ | | $ | | $ | | $ | 6,452 |
The accompanying notes are an integral part of these financial statements.
F-53
TRIANNI, INC.
DECEMBER 31, 2018 AND 2019 AND SEPTEMBER 30, 2020
(INFORMATION AS OF SEPTEMBER 30, 2019 AND 2020 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2019 AND 2020 IS UNAUDITED)
1. BUSINESS OVERVIEW
Trianni, Inc. (the Company) was incorporated as a California corporation on August 25, 2008. The Company is a biotechnology company whose main activity is specializing in antibody discovery technology and selling licenses to it. The Companys lead technology, the Trianni Mouse®, is a platform enabling efficient generation of fully-human monoclonal antibodies (the Trianni Platform). The Companys transgenic platform leverages a novel approach to design made possible by advances in DNA synthesis and genomic modification technology. The Company is headquartered in San Francisco, California.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements of the Company are prepared in conformity with U.S. generally accepted accounting principles, or GAAP, and reflect the accounts and operations of the Company.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires the Company to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. These estimates form the basis for judgments the Company makes about the carrying values of assets and liabilities that are not readily apparent from other sources. The Company bases its estimates and judgments on historical experience and on various other assumptions that the Company believes are reasonable under the circumstances. These estimates are based on managements knowledge about current events and expectations about actions the Company may undertake in the future. Such estimates include, but are not limited to, revenue recognition, useful lives of property and equipment, fair value of the Companys common stock, fair values of stock-based awards and income taxes. Actual results could differ materially from those estimates.
Unaudited Interim Financial Information
The accompanying interim balance sheet as of September 30, 2020, the interim statements of operations and cash flows for the nine months ended September 30, 2019 and 2020, the interim statements of convertible preferred stock and stockholders equity for the nine months ended September 30, 2020, and the financial data disclosed in these notes as of September 30, 2020 and for the nine months ended September 30, 2019 and 2020 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of these interim financial statements. The results of operations for the nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020, or for any other future annual or interim period.
COVID-19
In March 2020, the World Health Organization declared the global novel coronavirus disease 2019 (COVID-19), outbreak a pandemic. While certain impacts of COVID-19 have been favorable to possible sale of the Companys products and services, the Company cannot at this time predict the specific extent, duration, or full impact that the COVID-19 outbreak will have on its financial condition and operations. The impact of the COVID-19 coronavirus outbreak on the financial performance of the Company may depend on future
F-54
TRIANNI, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2019 AND SEPTEMBER 30, 2020
(INFORMATION AS OF SEPTEMBER 30, 2019 AND 2020 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2019 AND 2020 IS UNAUDITED)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
COVID-19 (continued)
developments, including the duration and spread of the outbreak and related governmental advisories and restrictions. In addition, the Company could see some limitations on employee resources that would otherwise be focused on its operations, including but not limited to sickness of employees or their families, the desire of employees to avoid contact with large groups of people, and increased reliance on working from home.
Certain Significant Risks and Uncertainties
The Companys future results of operations involve a number of risks and uncertainties. Factors that could affect the Companys future operating results and cause actual results to vary materially from expectations include, but are not limited to, the achievement of the Companys research and development activities, competition from other larger companies, protection of research and development results, strategic relationships, and dependence on key individuals.
Cash
Cash includes cash held in checking accounts, savings accounts, and certificates of deposit with an original maturity of three months or less held with high credit quality financial institutions in the United States. The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
Marketable Securities
The Company invests its excess cash balances in bank certificates of deposits. Investments with original maturities greater than three months at the time of purchase are classified as marketable securities.
Concentrations of Risks
Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, marketable securities and accounts receivable. The Company places its cash primarily with domestic financial institutions that are federally insured within statutory limits. The Company is exposed to credit risk in the event of default by financial institutions to the extent that cash balances are in excess of the amounts that are insured by the Federal Deposit Insurance Corporation (FDIC). As of December 31, 2018 and 2019, the Company had approximately $2.2 million and $0.9 million, respectively, deposited in a major financial institution in excess of FDIC insurance limitations. As of September 30, 2020, the Company had approximately $14.9 million deposited in a major financial institution in excess of FDIC insurance limitations. The Company has not experienced any losses to date.
The Company has not experienced any losses on its customer accounts and management believes the Company is not exposed to any significant risk of bad debt. As of December 31, 2018 and 2019, one customer represented 96% and 100%, respectively, of accounts receivable. As of September 30, 2020, two customers represented 57% and 34% of total accounts receivable, respectively. For the year ended December 31, 2018, three customers represented more than 10% of total revenue at approximately 24%, 14% and 11% of total revenue, respectively. For the year ended December 31, 2019, one customer represented more than 10% of total revenue at
F-55
TRIANNI, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2019 AND SEPTEMBER 30, 2020
(INFORMATION AS OF SEPTEMBER 30, 2019 AND 2020 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2019 AND 2020 IS UNAUDITED)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Concentrations of Risks (continued)
approximately 38%. For the nine months ended September 30, 2019, one customer represented more than 10% of revenue at approximately 40% of total revenue. For the nine months ended September 30, 2020, two customers represented more than 10% of revenue at approximately 59% and 19%, respectively, of total revenue.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable consist primarily of amounts due to the Company under the terms of license arrangements. It is the practice of the Company to provide for uncollectible accounts in the year the accounts are determined to be uncollectible. Based on managements evaluation of accounts receivable, no allowance for doubtful accounts has been recorded in the accompanying balance sheets and the accompanying statements of operations do not reflect any bad debt expense.
Inventory
Inventory consists of mice inventory, including those sold to customers for breeding and/or those that are available to customers for non-breeding research purposes. Inventory is recorded at lower-of-cost or net realizable value. Inventory costs include direct costs associated with the development of mice. The Company does not have significant overhead costs. The Company regularly monitors for excess and obsolete inventory and reduces the carrying value of inventory accordingly. The Company has not historically recorded any inventory write-downs and did not record any inventory write-downs during the years ended December 31, 2018 and 2019 or during the nine-months ended September 30, 2019 and 2020.
Property and Equipment, net
Property and equipment, net are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows:
Laboratory equipment |
5-10 years |
|
Computer equipment |
2 years |
Maintenance and repairs are charged to operations when incurred. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved and any gain or loss in included in the results of operations.
Revenue Recognition
The Company generates revenue primarily from entering into licensing arrangements with customers, either under perpetual license or term license arrangements, under which the Company provides customers the rights to its human antibody discovery platform that is carried in the Trianni Mouse. The Companys customers are primarily life science research pharmaceutical and biotechnology companies.
F-56
TRIANNI, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2019 AND SEPTEMBER 30, 2020
(INFORMATION AS OF SEPTEMBER 30, 2019 AND 2020 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2019 AND 2020 IS UNAUDITED)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue Recognition (continued)
On January 1, 2018, the Company adopted the new accounting standard Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers (ASC 606) using the modified retrospective method. Under the modified retrospective method, this guidance is applied to those contracts that were not completed as
of January 1, 2018, with no restatement of contracts that were commenced and completed within fiscal years prior to January 1, 2018. The adoption of the new revenue standard had no impact on the opening retained earnings as of January 1, 2018 and, accordingly, no cumulative adjustment was required. Under ASC 606, revenue is recognized when control of promised goods or services is transferred to a customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To determine revenue recognition for its arrangements with customers, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.
At contract inception, the Company assesses the goods or services promised within each contract, identifies those that are performance obligations, and assesses whether each promised good or service is distinct. Performance obligations are considered distinct if they are both capable of being distinct and distinct within the context of the contract. In determining whether performance obligations meet the criteria for being distinct, the Company considers a number of factors, such as the degree of interrelation and interdependence between obligations, and whether or not the good or service significantly modifies or transforms another good or service in the contract. The Company has determined that the Trianni Mouse is not distinct from the perpetual or term licenses with which they are sold. The Company offers limited hours of support to its customers which has been deemed as an immaterial performance obligation.
Perpetual license agreements typically provide customers the right to use the Trianni Mouse for the development of antibodies and include the right to breed the mice and are comprised of a single performance obligation. Revenue associated with a perpetual license is recognized at a point in time when control of the Trianni Mouse is transferred. Term license agreements provide customers with the right to use the Companys technology inherent in the Trianni Platform over a defined period of time, typically tied to specific projects, and prohibit customers the ability to use the Trianni Mouse for breeding purposes. Revenue under term licenses is recognized over time, on a ratable basis, as access to the technology within the Trianni Platform is rendered. Subsequent mice sales are recognized as the mice are delivered. Term license agreements as well as research and development agreements may require milestone-based, measured by certain events, and/or royalty-based payments and the associated revenue is recognized at a point in time when certain milestones are reached. The Company also has certain arrangements in which, in addition to providing access to the Trianni Platform, a percentage of revenue generated from antibodies derived from the Trianni Mouse must be paid to the Company as a royalty or revenue sharing. Revenue share payments are recognized as revenue when received.
The transaction price is allocated to each performance obligation on a relative standalone selling price basis. In developing the standalone price for a performance obligation, the Company considers applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer and estimated costs. Generally, payments from customers are due when goods and
F-57
TRIANNI, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2019 AND SEPTEMBER 30, 2020
(INFORMATION AS OF SEPTEMBER 30, 2019 AND 2020 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2019 AND 2020 IS UNAUDITED)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue Recognition (continued)
services are transferred. For arrangements where the anticipated period between timing of transfer of goods and services and the timing of payment is one year or less, the Company has elected to not assess whether a significant financing component exists. Revenue is recognized only to the extent that it is probable that a significant reversal of the cumulative amount recognized will not occur in future periods.
The Company accepts mice returns and sends replacements only if the mice do not pass appropriate genotype testing or health standards and historically, the Companys volume of returns has not been significant. Further, no warranties are provided for promised goods and services other than assurance type warranties.
Contract costs
Applying the practical expedient, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred when the amortization period of the assets that otherwise would have been recognized is one year or less. These costs are included in sales and marketing and general and administrative expenses. The costs to fulfill the contracts are determined to be immaterial and are recognized as an expense when incurred.
Contract balances
Contract assets are generated when contractual billing schedules differ from revenue recognition timing and the Company records a contract receivable when it has an unconditional right to consideration. No contract asset balances were recorded for the periods presented in the accompanying financial statements.
Contract liabilities are recorded when cash payments are received or due in advance of performance. Contract liabilities consist of deferred revenue, where the Company has unsatisfied performance obligations. As of December 31, 2018 and 2019 and September 30, 2020, the contract liabilities were $4.4 million and $3.8 million and $2.0 million, respectively.
Disaggregation of Revenue
Based on the pattern of revenue recognition, the following table provides a disaggregation of revenue for the years ended December 31, 2018 and 2019 and for the nine months ended September 30, 2019 and 2020 (in thousands):
Year Ended
December 31, |
Nine Months Ended
September 30, |
|||||||||||||||
2018 | 2019 | 2019 | 2020 | |||||||||||||
(unaudited) | ||||||||||||||||
Revenue recognized at a point in time |
$ | 963 | $ | 711 | $ | 432 | $ | 3,265 | ||||||||
Revenue recognized over time |
1,533 | 3,447 | 2,547 | 2,681 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Revenue |
$ | 2,496 | $ | 4,158 | $ | 2,979 | $ | 5,946 | ||||||||
|
|
|
|
|
|
|
|
F-58
TRIANNI, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2019 AND SEPTEMBER 30, 2020
(INFORMATION AS OF SEPTEMBER 30, 2019 AND 2020 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2019 AND 2020 IS UNAUDITED)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair Value of Financial Instruments
The Company defines fair value as the exchange price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company measures its financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instruments classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:
|
Level 1Observable inputs are unadjusted quoted prices in active markets for identical assets or liabilities. |
|
Level 2Observable inputs are quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices which are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments. |
|
Level 3Unobservable inputs which are supported by little or no market activity and which are significant to the fair value of the assets or liabilities. These inputs are based on the Companys own assumptions used to measure assets and liabilities at fair value and require significant management judgment or estimation. |
The carrying value of financial instruments approximates fair value. The Company estimates fair value of cash and cash equivalents, accounts receivable, other current assets, and liabilities based upon existing interest rates related to such assets and liabilities compared to the current market rates for instruments of similar nature and degree of risk.
Research and Development
Research and development (R&D) expenses consist primarily of personnel costs, including salaries, benefits and stock-based compensation, for laboratory personnel, depreciation of lab equipment, facility costs and the cost of supplies. In addition, the Company includes in R&D expense costs associated with mice breeding services. R&D costs are expensed as incurred.
Advertising Expenses
The Company expenses advertising expenses as they are incurred. Advertising expense for the years ended December 31, 2018 and 2019 were $372,000 and $337,000, respectively. Advertising expense for the nine months ended September 30, 2019 and 2020 were $263,000 and $127,000, respectively.
Stock-Based Compensation
The Company recognizes stock-based compensation expense for stock options awards to employees and nonemployees, on a straight-line basis over the requisite service period of the award, which is generally three years and which is generally equivalent to the vesting period. Certain of the Companys stock options were fully
F-59
TRIANNI, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2019 AND SEPTEMBER 30, 2020
(INFORMATION AS OF SEPTEMBER 30, 2019 AND 2020 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2019 AND 2020 IS UNAUDITED)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Stock-Based Compensation (continued)
vested on the date of grant. The fair value of each stock option is estimated on the date of grant using the Black-Scholes option-pricing model which includes various inputs, including Company estimates of expected volatility, term, risk-free rate and future dividends. Forfeitures are recognized as they occur.
The fair value of the shares of common stock underlying the Companys stock options has historically been determined by management and approved by the Board of Directors. Because there has been no public market for the Companys common stock, the Board of Directors has determined the fair value of the common stock at the time of grant of the option by considering a number of objective and subjective factors, including valuations performed by an unrelated third-party specialist, valuations of comparable companies, operating and financial performance, the lack of liquidity of capital stock, recent private stock sale transactions (including the rights and preference of preferred stock relative to common stock), and general and industry-specific economic outlook.
Valuations performed by third-party valuation specialists were done contemporaneously and used the methodologies, approaches, and assumptions consistent with the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation (AICPA Accounting and Valuation Guide). In addition to the Companys estimates of the fair value of common stock on the date of grant, the Companys Black-Scholes option-pricing model uses various inputs, including expected term, expected volatility, risk-free interest rate, and expectations regarding future dividends. The following describes these additional key inputs:
Expected TermThe expected term represents the period that the Companys stock options are expected to be outstanding. The Company determines the expected term using the simplified method.
Expected VolatilityThe expected volatility is derived from the historical stock volatilities of several unrelated public companies within the Companys industry that the Company considers to be comparable to the business over a period equivalent to the expected term of the stock option grants.
Risk-Free Interest RateThe risk-free interest rate is based on the interest yield in effect at the date of grant for zero coupon U.S. Treasury notes with maturities approximately equal to the options expected term.
Dividend RateThe expected dividend rate includes consideration of the Companys historical dividend activity, if any.
Leases
The Company recognizes rent expense over the term of an operating lease, starting when the property is made available for use by the owner/landlord. When a lease contains a predetermined fixed rent escalation, the related rent expense is recognized on a straight-line basis and the difference between the recognized rent expense and the amounts paid under the lease are recorded as deferred rent included in accrued expenses and other current liabilities on the balance sheets.
F-60
TRIANNI, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2019 AND SEPTEMBER 30, 2020
(INFORMATION AS OF SEPTEMBER 30, 2019 AND 2020 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2019 AND 2020 IS UNAUDITED)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes
The Company accounts for income taxes in accordance with Financial Accounting Standards Board (FASB) ASC 740, Accounting for Income Taxes, which requires an asset and liability approach under which deferred tax assets and liabilities arise from the temporary differences between the tax basis of an asset or liability and its reported amount in the financial statements, as well as from net operating loss and tax credit carryforwards.
Deferred tax amounts are determined by using the tax rates expected to be in effect when the taxes will actually be paid or refunds received, as provided for under currently enacted tax law. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.
Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, the Company considers all available evidence, including past operating results, estimates of future taxable income, and the feasibility of tax planning strategies. In the event that the Company changes its determination as to the amount of deferred tax assets that can be realized, it will adjust the valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.
The Company also follows the provisions of ASC 740-10, Accounting for Uncertainty in Income Taxes. ASC 740-10 prescribes a comprehensive model for the recognition, measurement, presentation and disclosure in financial statements of any uncertain tax positions that have been taken or expected to be taken on a tax return. No liability related to uncertain tax positions is recorded on the consolidated financial statements. It is the Companys policy to include penalties and interest expense related to income taxes as part of the provision for income taxes.
Recently Adopted Accounting Pronouncements
In June 2020, the FASB issued ASU No 2020-05 (ASU 2020-05), Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842). ASU 2020-05 defers, for one year, the required effective date of ASC 606 for certain entities that have not yet issued their financial statements (or made financial statements available for issuance) reflecting the adoption of ASC 606. Those entities may elect to adopt the guidance for annual reporting periods beginning after December 15, 2019, and for interim reporting periods within annual reporting periods beginning after December 15, 2020. The Company elected to adopt ASC 606 as of January 1, 2018 with no impact to its opening retained earnings as of January 1, 2018.
In June 2018, the Financial Accounting Standards Board (FASB) issued ASU No. 2018-07, CompensationStock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 simplifies the accounting for share-based payment transactions in which a grantor acquires goods or services to be used or consumed in operations from a nonemployee and aligns with the current requirements for share-based awards granted to employees. The Company adopted this standard beginning January 1, 2018. The adoption of ASC 2018-07 did not have a material impact on its financial statements.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) provides guidance on eight specific cash flow issues, thereby reducing the diversity in practice in how certain transactions are
F-61
TRIANNI, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2019 AND SEPTEMBER 30, 2020
(INFORMATION AS OF SEPTEMBER 30, 2019 AND 2020 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2019 AND 2020 IS UNAUDITED)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Recently Adopted Accounting Pronouncements (continued)
classified in the statement of cash flows. The amendments in ASU 2016-15 were effective for annual reporting periods beginning after December 15, 2018. The Companys adoption of this standard did not have an impact on the financial statements.
Recently Issued Accounting Pronouncements
ASU 2020-05 also defers the effective date for one year for entities in the all other category and public not-for-profit entities that have not yet issued their financial statements (or made financial statements available for issuance) reflecting the adoption of ASC 842. Therefore, under the amendments, ASC 842 is effective for entities within the all other category for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Additionally, ASC 842 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, for public NFP entities that have not yet issued financial statements (or made available for issuance) reflecting the adoption of ASC 842. Early application continues to be permitted, which means that an entity may choose to implement ASC 842 before those deferred effective dates. The Company has not yet determined the potential impact of the new standard on its financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes. This guidance is effective for fiscal years beginning after December 31, 2021 with early adoption permitted. The Company has not yet determined the potential impact of the new standard on its financial statements.
In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments Credit Losses (Topic 326), Targeted Transition Relief, which amends the transition guidance for ASU 2016-13. The ASU provides entities with the option to irrevocably elect the fair value option in Subtopic 825-10 on an instrument-by- instrument basis. This standard is effective for years beginning after December 15, 2019, with early adoption permitted. The Company has not yet determined the potential effects of this ASU on its financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) Changes to the Disclosure Requirements for Fair Value Measurement. The ASU eliminates certain disclosure requirements for fair value measurements for all entities and modifies some disclosure requirements. This ASU is effective for nonpublic entities beginning after December 15, 2019, with early adoption permitted. The Company has not yet determined the potential effects of this ASU on its financial statements.
In July 2018, the FASB issued ASU No. 2018-09, Codification Improvements. The ASU amendments represent changes to clarify, correct errors, or make minor improvements to the Accounting Standards Codification. Some amendments do not require transition guidance and are effective immediately. Amendments that require transition guidance have various effective dates. The amendments applicable to and effective for the Companys 2019 fiscal years did not have a significant impact on the Companys financial statements. The Company has not yet determined the full effects of the remaining amendments, which are effective beginning after December 15, 2019, within this ASU on its financial statements, however, many of the remaining amendments are not expected to be applicable to the Company.
F-62
TRIANNI, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2019 AND SEPTEMBER 30, 2020
(INFORMATION AS OF SEPTEMBER 30, 2019 AND 2020 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2019 AND 2020 IS UNAUDITED)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Recently Issued Accounting Pronouncements (continued)
In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception (ASU 2017-11). Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity- linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in Part II of this update do not have an accounting effect. The amendments in Part I of this update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early
adoption is permitted for all entities, including adoption in an interim period. The Company is currently assessing the potential impact of adopting ASU 2017-11 on its consolidated financial statements and disclosures.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes the guidance in former ASC 840, Leases. The new standard, as amended by subsequent ASUs on Topic 842 and recent extensions issued by the FASB in response to COVID-19, requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. Topic 842, is effective for annual periods beginning after December 15, 2021, with early adoption permitted. The Company has not yet determined the full effects of this ASU on its financial statements.
F-63
TRIANNI, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2019 AND SEPTEMBER 30, 2020
(INFORMATION AS OF SEPTEMBER 30, 2019 AND 2020 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2019 AND 2020 IS UNAUDITED)
3. MARKETABLE SECURITIES AND FAIR VALUE MEASUREMENTS
The table below presents the Companys assets measured at fair value on a recurring basis aggregated by the level in the fair value hierarchy (in thousands):
December 31, 2018 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Marketable securities: |
||||||||||||||||
Certificate of deposit |
$ | 11,280 | $ | 11,280 | $ | | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total marketable securities |
$ | 11,280 | $ | 11,280 | $ | | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
December 31, 2019 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Marketable securities: |
||||||||||||||||
Certificate of deposit |
$ | 11,508 | $ | 11,508 | $ | | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total marketable securities |
$ | 11,508 | $ | 11,508 | $ | | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
September 30, 2020 (unaudited) | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Marketable securities: |
||||||||||||||||
Certificate of deposit |
$ | | $ | | $ | | $ | | ||||||||
Total marketable securities |
$ | | $ | | $ | | $ | |
The remaining contractual maturities of marketable securities as of December 31, 2018 and 2019 are as follows (in thousands):
2018 | 2019 | |||||||
Due within one year |
$ | 11,280 | $ | 11,508 | ||||
|
|
|
|
|||||
Total |
$ | 11,280 | $ | 11,508 | ||||
|
|
|
|
4. SIGNIFICANT BALANCE SHEET COMPONENTS
Property and equipment, net Property and equipment, net as of December 31, 2018 and 2019 and as of September 30, 2020 consisted of the following (in thousands):
December 31, | September 30, | |||||||||||
2018 | 2019 | 2020 | ||||||||||
(unaudited) | ||||||||||||
Laboratory equipment |
$ | 296 | $ | 296 | $ | 296 | ||||||
Computer equipment |
13 | 18 | 18 | |||||||||
|
|
|
|
|
|
|||||||
Total property and equipment |
309 | 314 | 314 | |||||||||
Less accumulated depreciation |
(65 | ) | (98 | ) | (125 | ) | ||||||
|
|
|
|
|
|
|||||||
Total property and equipment - net |
$ | 244 | $ | 216 | $ | 189 | ||||||
|
|
|
|
|
|
F-64
TRIANNI, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2019 AND SEPTEMBER 30, 2020
(INFORMATION AS OF SEPTEMBER 30, 2019 AND 2020 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2019 AND 2020 IS UNAUDITED)
4. SIGNIFICANT BALANCE SHEET COMPONENTS (continued)
Depreciation expense totaled $33,000 for the years ended December 31, 2018 and 2019, respectively.
Depreciation expense for the nine months ended September 30, 2019 and 2020 totaled $24,000 and $27,000, respectively.
Accrued expenses and other current liabilities Accrued expenses and other current liabilities as of December 31, 2018 and 2019 and as of September 30, 2020 consisted of the following (in thousands):
December 31, | September 30, | |||||||||||
2018 | 2019 | 2020 | ||||||||||
(unaudited) | ||||||||||||
Employee related |
$ | | $ | 18 | $ | 81 | ||||||
State taxes payable |
3 | 5 | 1 | |||||||||
Accrued other |
104 | 24 | 46 | |||||||||
|
|
|
|
|
|
|||||||
Total accrued expenses |
$ | 107 | $ | 47 | $ | 128 | ||||||
|
|
|
|
|
|
5. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases a facility in California, which includes laboratory space under a short term cancelable operating lease. The leased facility has an initial term of 90 days with successive auto-renewing 90 day terms unless either party provides notice. Rent expense for the years ended December 31, 2018 and 2019 was $193,000 and $167,000, respectively. Rent expense for the nine months ended September 30, 2019 and 2020 was $125,000 and $127,000, respectively.
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingences are expensed as incurred. The Company believes that the results of any such contingencies, either individually or in the aggregate, will not have a material adverse effect on the Companys financial position, results of operations or cash flows.
6. STOCKHOLDERS EQUITY
Common Stock
The Company has one class of common stock. Under the terms of the Amended and Restated Certificate of Incorporation dated May 10, 2013, the number of authorized common stock is 15,000,000 shares. The voting, dividend and liquidation rights of the holders of the common stock are subject to and qualified by the rights, powers and preferences of the holders of the preferred stock. Each share of common stock is entitled to one vote per share and there shall be no cumulative voting.
F-65
TRIANNI, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2019 AND SEPTEMBER 30, 2020
(INFORMATION AS OF SEPTEMBER 30, 2019 AND 2020 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2019 AND 2020 IS UNAUDITED)
6. STOCKHOLDERS EQUITY (continued)
Common Stock (continued)
Common stock reserved for issuance as of December 31, 2019 is as follows: |
||||
Series A convertible preferred stock |
1,609,417 | |||
Series B convertible preferred stock |
2,367,633 | |||
Series C convertible preferred stock |
1,471,240 | |||
Stock options to purchase common stock |
1,045,000 | |||
Stock options available for future issuance |
187,969 | |||
|
|
|||
Total shares of common stock reserved |
6,681,259 | |||
|
|
Convertible Preferred Stock
A summary of the authorized, issued and outstanding redeemable convertible preferred stock (collectively, the Preferred Stock) as of December 31, 2019, consisted of the following (in thousands, except per share data):
As of December 31, 2019 | ||||||||||||
Shares Authorized |
Shares Issued and
Outstanding |
Liquidation Preference | ||||||||||
Series A |
1,609,417 | 1,609,417 | $ | 425 | ||||||||
Series B |
2,395,325 | 2,367,633 | 1,282 | |||||||||
Series C |
2,064,900 | 1,471,240 | 1,425 | |||||||||
|
|
|
|
|
|
|||||||
Total |
6,069,642 | 5,448,290 | $ | 3,132 | ||||||||
|
|
|
|
|
|
The holders of the preferred stock have various rights and preferences as follows:
Voting Rights Each holder of preferred stock is entitled to votes equal to the number of whole shares of common stock into which the shares of preferred stock are convertible. The holders of preferred stock shall be entitled to elect (voting as a single class on an as-converted basis) one director of the Company. The holders of common stock shall be entitled to elect (voting as a single class) two directors of the Company.
Dividends The holders of preferred stock have priority to the holders of common stock, and are entitled to receive, on a pari passu basis, a noncumulative cash dividend at the rate of $0.0158 per share for Series A, $0.0325 per share for Series B, and $0.0581 per share for Series C, per annum, if and when declared by the Board. After payment in full of such amounts as set forth above, any additional dividends declared will be distributed among all holders of preferred stock and common stock on an as-if-converted basis.
On July 20, 2020, by unanimous written consent, the Companys Board of Directors declared dividends of approximately $6.5 million to its preferred and common stockholders. Dividends for the Series A, Series B, and Series C were declared at per share amounts of $0.0158, $0.0325, and $0.0581, respectively, and dividends for all holders of preferred stock and common stock on an as-if-converted basis were declared at a per share amount of $0.50.
F-66
TRIANNI, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2019 AND SEPTEMBER 30, 2020
(INFORMATION AS OF SEPTEMBER 30, 2019 AND 2020 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2019 AND 2020 IS UNAUDITED)
6. STOCKHOLDERS EQUITY (continued)
Convertible Preferred Stock (continued)
Conversion and Redemption Each share of preferred stock is convertible, at any time at the option of the stockholder, into one share of common stock, subject to certain anti-dilution or other adjustments. In a deemed liquidation event, the conversion rights shall terminate at the close of business on the last full day preceding the date fixed for the payment of any such amounts distributable on such event to the holders of preferred stock. The convertible preferred stock is not mandatorily redeemable upon demand by the holders of the preferred stock.
Each share of convertible preferred stock is convertible, at the option of the holder, into such number of fully paid and nonassessable shares of common stock as is determined by dividing $0.26407 for each share of Series A, $0.54168 for each share of Series B, or $0.96857 for each share of Series C. Each share of Series A, Series B and Series C automatically converts into the number of shares of common stock into which such shares are convertible at the then-effective conversion ratio upon the earlier of (i) closing of a firm commitment underwritten public offering in which the gross proceeds is at least $10,000,000 and the public offering price is at least $5.00 per share or (ii) the consent of the holders of at least a majority of the outstanding shares of Series A, Series B and Series C, voting together as a single class.
Liquidation The holders of the convertible preferred stock are entitled to have their shares redeemed upon the occurrence of certain redemption events. A liquidation or winding up of the Company, a greater than 50% change of control, or sale of substantially all of its assets, would constitute a redemption event. The redemption events have been concluded as being outside the control of the Company, accordingly, all shares of preferred stock have been presented outside of permanent equity. Further, the Company has not adjusted the carrying values of the Series A, Series B and Series C convertible preferred stock to the redemption value of such shares, since it is uncertain whether or when a redemption event will occur. Adjustments to increase the carrying value to the redemption values will be made when it becomes probable that such redemption will occur.
In the event of any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, the holders of the preferred shares shall be entitled to receive, prior and in preference to any distribution of any of the assets of the Company to the holders of common stock, (i) an amount equal to $0.26407 (as adjusted for recapitalizations) for Series, A, $0.54168 (as adjusted for recapitalizations) for Series B, and $0.96857 (as adjusted for recapitalizations for Series C, plus (ii) any accrued or declared but unpaid dividends on such shares. If the assets available for distribution to the holders of the preferred shares shall be insufficient to pay the preferential amount in full, then the entire assets and funds of the company legally available for distribution shall be distributed ratably to the holders of the preferred stock in proportion to the preferential amount each such holder is otherwise entitled to receive, only until the aggregate proceeds received by such holder equals $0.66018 per share of Series A, $1.3542 per share for Series B, and $2.42143 per share for Series C.
Protective ProvisionsSo long as shares of preferred stock remain outstanding, the Company must obtain approval from a majority of the then outstanding holders of preferred stock (voting as a separate class) in order to (i) amend or repeal any provision of, or add any provision to, the Companys Articles of Incorporation if such action would materially and adversely alter or change the rights, preferences or privileges or powers of, or the restrictions provided for the benefit of the preferred stock; (ii) authorize or issue any new class or series of stock having any preference or priority as to dividends or assets superior to or on a party with any such preference or
F-67
TRIANNI, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2019 AND SEPTEMBER 30, 2020
(INFORMATION AS OF SEPTEMBER 30, 2019 AND 2020 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2019 AND 2020 IS UNAUDITED)
6. STOCKHOLDERS EQUITY (continued)
Convertible Preferred Stock (continued)
priority of the preferred stock; (iii) sell all or substantially all of its property or business or merge into or consolidate with any other corporation or effect any other transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of; and (iv) liquidate or dissolve the Company.
7. STOCK-BASED COMPENSATION
In 2015, the Companys Board of Directors approved the amendment to the 2009 Stock Plan (the Plan), under which there are 5,142,778 shares available for issuance. The purpose of the Plan is to provide incentives to attract and retain the best available persons for positions of substantial responsibility and to provide additional inventive to employees, directors and consultants and to promote the success of the Companys business. The Plan provides for different forms of benefits including incentive stock options, nonqualified stock options, and restricted stock awards. Options granted under the Plan to employees continue to vest until the last day of employment and generally vest over three years and expire 10 years from the date of grant. Employees generally forfeit their rights to exercise vested options after 12 months following their termination of employment. During the year ended December 31, 2018, all of the Companys stock options with early exercise provisions became fully vested, thus, as of December 31 2018 and 2019 and September 30, 2020, there were no stock options subject to a repurchase right as a result of having been exercised prior to becoming fully vested.
The exercise price for options granted under the Plan must generally be equal to at least 100% of the fair value of the Companys common stock at the date of grant, as determined by the Board of Directors. The exercise price of an incentive stock option granted under the Plan to a ten percent stockholder must be at least equal to 110% of the fair value of the Companys common stock at the date of grant, as determined by the Board of Directors.
The Companys stock options were fully vested as of December 31, 2019, thus, did record any stock-based compensation for the nine months ended September 30, 2020. For the years ended December 31, 2018 and 2019 and for the nine months ended September 30, 2019, stock-based compensation expense included in the statements of operations is as follows (in thousands):
Year Ended December 31, |
Nine Months
Ended September 30, |
|||||||||||
2018 | 2019 | 2019 | ||||||||||
(unaudited) | ||||||||||||
R&D |
$ | 152 | $ | 143 | $ | 108 | ||||||
Selling, general and administrative |
110 | 97 | 74 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 262 | $ | 240 | $ | 182 | ||||||
|
|
|
|
|
|
F-68
TRIANNI, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2019 AND SEPTEMBER 30, 2020
(INFORMATION AS OF SEPTEMBER 30, 2019 AND 2020 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2019 AND 2020 IS UNAUDITED)
7. STOCK-BASED COMPENSATION (continued)
The following table summarizes options activity under the Plan:
Shares
Available for Grant |
Outstanding
Options |
Options Outstanding
Weighted Average Exercise Price |
Weighted
Average Remaining Contractual Life |
|||||||||||||
Balance, January 1, 2018 |
187,969 | 1,045,000 | $ | 1.32 | 9.0 | |||||||||||
|
|
|||||||||||||||
Balance, December 31, 2018 |
187,969 | 1,045,000 | $ | 1.32 | 8.0 | |||||||||||
|
|
|||||||||||||||
Balance, December 31, 2019 |
187,969 | 1,045,000 | $ | 1.32 | 7.0 | |||||||||||
|
|
|||||||||||||||
Balance, September 30, 2020 (unaudited) |
187,969 | 1,045,000 | $ | 1.32 | 7.0 | |||||||||||
|
|
|||||||||||||||
Vested and exercisable to vest at |
||||||||||||||||
December 31, 2019 |
1,045,000 | $ | 1.32 | 7.0 | ||||||||||||
Vested and expected to vest at |
1,045,000 | $ | 1.32 | 7.0 | ||||||||||||
December 31, 2019 |
As of December 31, 2019, all outstanding options are fully vested, thus, there was no unamortized stock-based compensation cost yet to be recognized.
8. INCOME TAXES
The components of loss before income taxes for the years ended December 31, 2018 and 2019 are as follows (in thousands):
2018 | 2019 | |||||||
Domestic |
$ | (2,786 | ) | $ | (1,125 | ) | ||
Foreign |
| | ||||||
|
|
|
|
|||||
Total loss before income taxes |
$ | (2,786 | ) | $ | (1,125 | ) | ||
|
|
|
|
F-69
TRIANNI, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2019 AND SEPTEMBER 30, 2020
(INFORMATION AS OF SEPTEMBER 30, 2019 AND 2020 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2019 AND 2020 IS UNAUDITED)
8. INCOME TAXES (continued)
The Company recognizes benefits of uncertain tax positions if it is more likely than not that such positions will be sustained upon examination based solely on their technical merits, as the largest amount of benefit that is more likely than not to be realized upon the ultimate settlement. The Companys policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense or benefit. The benefit for income taxes for the years ended December 31, 2018 and 2019 consisted of the following (in thousands):
2018 | 2019 | |||||||
Federal |
||||||||
Current |
$ | 389 | $ | (62 | ) | |||
Deferred |
(644 | ) | (327 | ) | ||||
State and local |
||||||||
Current |
4 | 32 | ||||||
Deferred |
(113 | ) | (192 | ) | ||||
|
|
|
|
|||||
Income tax benefit |
$ | (364 | ) | $ | (549 | ) | ||
|
|
|
|
As at December 31, 2018 and 2019, the Companys deferred tax assets and liabilities consisted of the effects of temporary differences attributable to the following (in thousands):
2018 | 2019 | |||||||
Deferred Tax Assets: |
||||||||
Federal & State NOL Carryforward |
$ | 618 | $ | 468 | ||||
Research & Other Credits |
109 | 314 | ||||||
Deferred Revenue |
55 | 473 | ||||||
Stock Based Compensation |
161 | 247 | ||||||
|
|
|
|
|||||
Total Deferred Tax Assets |
943 | 1,502 | ||||||
Valuation allowance |
| | ||||||
|
|
|
|
|||||
Net deferred tax assets |
943 | 1,502 | ||||||
|
|
|
|
|||||
Deferred Tax Liabilities: |
||||||||
Fixed assets |
(58 | ) | (58 | ) | ||||
Deferred state income tax |
(24 | ) | (64 | ) | ||||
|
|
|
|
|||||
Total gross deferred tax liabilities |
(82 | ) | (122 | ) | ||||
|
|
|
|
|||||
Net deferred tax assets |
$ | 861 | $ | 1,380 | ||||
|
|
|
|
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Based on its historical earnings track and forecasted future earnings, the Company believes it is more likely than not that all its deferred tax assets as at December 31, 2018 and December 31, 2019, respectively, will be realized prior to their expiration. Accordingly, a valuation allowance has not been established on the Companys net deferred tax assets.
F-70
TRIANNI, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2019 AND SEPTEMBER 30, 2020
(INFORMATION AS OF SEPTEMBER 30, 2019 AND 2020 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2019 AND 2020 IS UNAUDITED)
8. INCOME TAXES (continued)
As of December 31, 2018, the Company had federal net operating loss carryforwards of $2,592,000 and $881,000, respectively. As of December 31, 2019, the Company had federal and state net operating loss carryforwards of $1,924,000 and $772,000 respectively. The federal net operating losses will be carried forward indefinitely. Portions of the state net operating loss carryforwards will begin to expire in 2038.
Pursuant to IRC Section 382 and 383, use of the Companys U.S. federal and state net operating loss and research and development income tax credit carry forwards may be limited in the event of a cumulative change in ownership of more than 50% within a three-year period. The Company has not completed an analysis under IRC Sections 382 and 383, and therefore net operating loss carry forwards reflected in the deferred tax assets at December 31, 2018 have not been adjusted to reflect Section 382 and 383 limitations. If a change in ownership were to have occurred, additional net operating loss and tax credit carry forwards could be eliminated or restricted. If eliminated, the related asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance.
As of December 31, 2018 and 2019, the Company had federal credits of approximately $87,000 and $217,000, respectively, which will begin to expire in 2038. State research credits as of December 31, 2018 and 2019 of approximately $22,000 and $97,000, respectively, have no expiration date. These tax credits are subject to the same ownership change limitations.
On December 22, 2017, the Tax Cuts and Jobs Act (the 2017 Tax Act) was enacted. The 2017 Tax Act includes a number of changes to existing U.S. tax laws that impact the Company, most notably a reduction of the U.S. corporate income tax rate from 35 percent to 21 percent for tax years beginning after December 31, 2017. As the Companys opening deferred tax balances were calculated as at January 1, 2018, no remeasuring of deferred tax assets and/or liabilities to reflect the reduction in corporate income tax rate was required.
In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed into law in March 2020. The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (2017 Tax Act). Corporate taxpayers may carryback net operating losses (NOLs) originating during 2018 through 2020 for up to five years, which was not previously allowed under the 2017 Tax Act. The CARES Act also eliminates the 80% of taxable income limitations by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018, 2019 or 2020. Taxpayers may generally deduct interest up to the sum of 50% of adjusted taxable income plus business interest income (30% limit under the 2017 Tax Act) for tax years beginning January 1, 2019 and 2020. The CARES Act allows taxpayers with alternative minimum tax credits to claim a refund in 2020 for the entire amount of the credits instead of recovering the credits through refunds over a period of years, as originally enacted by the 2017 Tax Act.
In addition, the CARES Act raises the corporate charitable deduction limit to 25% of taxable income and makes qualified improvement property generally eligible for 15-year cost-recovery and 100% bonus depreciation. The enactment of the CARES Act will not be applicable to the Company until 2020 and is expected to have a material impact on the Companys ability to utilize its federal net operating loss carryforwards and tax credit carryforwards due to the five-year carryback rule, among other matters. The Company is also evaluating other impacts the CARES Act will have on its financial statements.
F-71
TRIANNI, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2018 AND 2019 AND SEPTEMBER 30, 2020
(INFORMATION AS OF SEPTEMBER 30, 2019 AND 2020 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2019 AND 2020 IS UNAUDITED)
8. INCOME TAXES (continued)
The Company files income tax returns in the US federal jurisdiction as well as various state jurisdictions. The Companys federal income tax returns from 2017 are open to audit by the Internal Revenue Service. Under IRC 38(c), the Company is limited in the utilization of its Federal Research and Development Tax Credit in the year. The Company has therefore utilized the Federal Research and Development Tax Credit against 75% of its net taxable income that exceeds $25,000 in the year.
9. RELATED PARTY TRANSACTIONS
Licensing Agreement
On April 2, 2015, the Company entered into a license agreement with respect to the Trianni Platform with Austrianni GmbH (Austrianni), a biotechnology company founded in 2015 to develop novel antibody-based therapeutics for the prevention and treatment of multidrug-resistant tuberculosis. In exchange for the license, Austrianni issued shares of capital stock to the Company representing approximately 10% of Austrianni total share capital on a fully diluted basis. The Company also made cash payments of approximately $7,000 for capital stock in Austrianni. In addition, the Companys CEO is also the Chief Science Office of Austrianni. Under the license agreement, the Company granted Austrianni a world-wide, non-exclusive, fully paid, royalty-free, perpetual license to use the Trianni Platform to discover, develop and commercialize therapeutic and diagnostic antibody-based products and services. The Company accounted for the 10% capital stock interest in Austrianni using the carryover basis, which was $0 for the non-exclusive license and approximately $7,000 in cash that is recorded within other assets in the accompanying balance sheets. In March 2020, the Company entered into two license and validation agreements with this related party involving the Companys next generation mice. Upon validation of the next generation mice the Company will receive an annual license fee of $50,000 per next generation mouse agreement as well as future pre-clinical milestone payments upon advancement of the respective milestone as defined in the agreement.
10. EMPLOYEE BENEFIT PLANS
The Company sponsors a defined contribution plan which includes an employee deferral feature under IRC Section 401(k) and a discretionary employer profit sharing component. All employees are eligible to participate. There is no minimum age or service requirements. Under the 401(k) plan, the Company matches 100% of the employee elective deferral up to 4% of eligible compensation. The Company did not make a matching contribution during the year ended December 31, 2018. During the year ended December 31, 2019, the Company made 401(k) safe harbor matching contributions approximating $22,000. All employer contributions are immediately vested.
11. SUBSEQUENT EVENTS
The Company has evaluated subsequent events through October 26, 2020, which is the date the financial statements were available to be issued.
F-72
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than the estimated underwriting discounts and commissions, to be paid by us in connection with the sale of common shares being registered hereby. All amounts shown are estimates except for the Securities and Exchange Commission, or SEC, registration fee, the FINRA filing fee and The Nasdaq Global Market initial listing fee.
Amount
Paid or to Be Paid |
||||
SEC registration fee |
$ | 49,057 | ||
FINRA filing fee |
67,948 | |||
Nasdaq Global Market initial listing fee |
295,000 | |||
Printing expenses |
575,000 | |||
Legal fees and expenses |
4,470,000 | |||
Accountants fees and expenses |
800,000 | |||
Transfer agent and registrar fees and expenses |
3,500 | |||
Miscellaneous |
39,495 | |||
|
|
|||
Total |
$ | 6,300,000 | ||
|
|
Item 14. Indemnification of Directors and Officers
We are governed by the Business Corporations Act (British Columbia), or BCBCA. Under the BCBCA, and our new articles that will be in effect upon the closing of this offering, we may (or must, in the case of our articles) indemnify all eligible parties against all eligible penalties to which such person is or may be liable, and we must, after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by such person in respect of that proceeding. Each director is deemed to have contracted with the Company on the terms of indemnity contained in our articles.
For the purposes of such an indemnification:
eligible party, in relation to the Company, means an individual who
|
is or was a director or officer of the Company; |
|
is or was a director or officer of another corporation |
|
at a time when the corporation is or was an affiliate of the Company, or |
|
at the request of the Company; or |
|
at the request of the Company, is or was, or holds or held a position equivalent to that of, a director or officer of a partnership, trust, joint venture or other unincorporated entity and includes the heirs and personal or other legal representatives of that individual; |
eligible penalty means a judgment, penalty or fine awarded or imposed in, or an amount paid in settlement of, an eligible proceeding;
eligible proceeding means a proceeding in which an eligible party or any of the heirs and personal or other legal representatives of the eligible party, by reason of the eligible party being or having been a director or officer
II-1
of, or holding or having held a position equivalent to that of a director or officer of, the Company or an associated corporation:
|
is or may be joined as a party, or |
|
is or may be liable for or in respect of a judgment, penalty or fine in, or expenses related to, the proceeding; |
expenses includes costs, charges and expenses, including legal and other fees, but does not include judgments, penalties, fines or amounts paid in settlement of a proceeding; and
proceeding includes any legal proceeding or investigative action, whether current, threatened, pending or completed.
In addition, under the BCBCA, the Company may pay, as they are incurred in advance of the final disposition of an eligible proceeding, the expenses actually and reasonably incurred by an eligible party in respect of that proceeding, provided that the Company first receives from the eligible party a written undertaking that, if it is ultimately determined that the payment of expenses is prohibited by the restrictions noted below, the eligible party will repay the amounts advanced.
Notwithstanding the provisions of the Companys articles noted above, the Company must not indemnify an eligible party or pay the expenses of an eligible party, if any of the following circumstances apply:
|
if the indemnity or payment is made under an earlier agreement to indemnify or pay expenses and, at the time that the agreement to indemnify or pay expenses was made, the Company was prohibited from giving the indemnity or paying the expenses by its articles; |
|
if the indemnity or payment is made otherwise than under an earlier agreement to indemnify or pay expenses and, at the time that the indemnity or payment is made, the Company is prohibited from giving the indemnity or paying the expenses by its articles; |
|
if, in relation to the subject matter of the eligible proceeding, the eligible party did not act honestly and in good faith with a view to the best interests of the Company or the associated corporation, as the case may be; or |
|
in the case of an eligible proceeding other than a civil proceeding, if the eligible party did not have reasonable grounds for believing that the eligible partys conduct in respect of which the proceeding was brought was lawful. |
In addition, if an eligible proceeding is brought against an eligible party by or on behalf of the Company or by or on behalf of an associated corporation, the Company must not do either of the following:
|
indemnify the eligible party in respect of the proceeding; or |
|
pay the expenses of the eligible party in respect of the proceeding. |
Notwithstanding any of the foregoing, and whether or not payment of expenses or indemnification has been sought, authorized or declined under the BCBCA or the articles of the Company, on the application of the Company or an eligible party, the Supreme Court of British Columbia may do one or more of the following:
|
order the Company to indemnify an eligible party against any liability incurred by the eligible party in respect of an eligible proceeding; |
|
order the Company to pay some or all of the expenses incurred by an eligible party in respect of an eligible proceeding; |
|
order the enforcement of, or any payment under, an agreement of indemnification entered into by the Company; |
II-2
|
order the Company to pay some or all of the expenses actually and reasonably incurred by any person in obtaining an order under this section; or |
|
make any other order the court considers appropriate. |
The BCBCA and our articles that will be in effect upon the closing of this offering authorize us to purchase and maintain insurance for the benefit of an eligible party against any liability that may be incurred by reason of the eligible party being or having been a director or officer of, or holding or having held a position equivalent to that of a director or officer of, the Company, a current or former affiliate of the Company or a corporation, partnership, trust, joint venture or other unincorporated entity at the request of the Company.
In addition, we have entered, or will enter, into separate indemnity agreements with each of our directors and officers pursuant to which we agree to indemnify and hold harmless our directors and officers against any and all liability, loss, damage, cost or expense in accordance with the terms and conditions of the BCBCA and our articles.
Item 15. Recent Sales of Unregistered Securities
Set forth below is information regarding our common shares and our preferred shares issued, warrants issued and share options granted, by us within the past three years that were not registered under the Securities Act. Included is the consideration, if any, we received for such shares and options.
|
In March 2018, we sold an aggregate of 8,016,340 common shares at a purchase price of CAD $0.428 per share ($0.326 per share) for an aggregate purchase price of approximately CAD $3.4 million ($2.6 million). |
|
In August 2018, we sold an aggregate of 2,105,264 convertible preferred shares at a purchase price of $3.66 for an aggregate purchase price of approximately $7.7 million. |
|
In March 2020, we sold an aggregate of 6,017,784 convertible preferred shares at a purchase price of $12.4631 per share for an aggregate amount of approximately $75.0 million. |
|
In October 2020, we issued the convertible notes in the aggregate amount of $90.0 million. In connection with the completion of this offering, the principal amount of the convertible notes and accrued interest thereon will convert into 7,630,352 shares, assuming an initial public offering price of $15.50 per share, the midpoint of the range set forth on the cover of the prospectus to which this registration statement relates. |
|
We granted options to purchase an aggregate of 36,084,680 common shares with a weighted-average exercise price of $1.04 per share, to certain of our employees, consultants and directors in connection with services provided to us by such persons. |
|
We issued and sold an aggregate of 4,999,870 common shares with a weighted-average purchase price of $0.22 per share to employees, directors and consultants for aggregate proceeds to us of approximately $1,096,592 million upon the exercise of stock options. |
None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering. The sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act (or Regulation D or Regulation S promulgated thereunder) or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were placed upon the share certificates issued in these transactions. All of the foregoing securities are deemed restricted securities for purposes of the Securities Act.
II-3
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits.
+ |
Previously filed. |
|
Portions of this exhibit (indicated by asterisks) have been omitted in accordance with the rules of the Securities and Exchange Commission. |
# |
Indicates a management contract or any compensatory plan, contract or arrangement. |
II-4
(b) Financial Statement Schedules.
None.
Item 17. Undertakings
The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rules 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, AbCellera Biologics Inc. has duly caused this registration statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Vancouver, Province of British Columbia, Canada on the 7th day of December, 2020.
ABCELLERA BIOLOGICS INC. |
||
By: |
/s/ Carl L. G. Hansen |
|
Carl L. G. Hansen, Ph.D. |
||
Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities held on the dates indicated.
Signature |
Title |
Date |
||
/s/ Carl L. G. Hansen Carl L. G. Hansen, Ph.D. |
Chief Executive Officer and Director (Principal Executive Officer) |
December 7, 2020 | ||
/s/ Andrew Booth Andrew Booth |
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
December 7, 2020 | ||
* Véronique Lecault, Ph.D. |
Chief Operating Officer and Director | December 7, 2020 | ||
/s/ John Edward Hamer John Edward Hamer, Ph.D.+ |
Director | December 7, 2020 | ||
* Michael Hayden, Ph.D. |
Director | December 7, 2020 | ||
* John S. Montalbano |
Director | December 7, 2020 | ||
* Peter Thiel |
Director | December 7, 2020 | ||
/s/ Tryn Stimart Tryn Stimart |
Authorized Representative in the United States |
December 7, 2020 |
*By: |
/s/ Carl L. G. Hansen, Ph.D. |
|
Carl L. G. Hansen, Ph.D. |
||
Attorney-in-fact |
+ |
John Edward Hamer, Ph.D., hereby constitutes and appoints Carl L. G. Hansen, Ph.D. and Andrew Booth, and each of them, either of whom may act without the joinder of the other, as his true and lawful attorneys-in-fact and agents with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to sign any registration statement for the same offering covered by the registration statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or their substitute or substitutes, may lawfully do or cause to be done or by virtue hereof. |
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Exhibit 1.1
[●]
AbCellera Biologics Inc.
Common Shares
UNDERWRITING AGREEMENT
[●], 2020
CREDIT SUISSE SECURITIES (USA) LLC
STIFEL, NICOLAUS & COMPANY, INCORPORATED
BERENBERG CAPITAL MARKETS LLC
SVB LEERINK LLC
BMO CAPITAL MARKETS CORP.
As Representatives of the Several Underwriters
c/o Credit Suisse Securities (USA) LLC
Eleven Madison Avenue
New York, N.Y. 10010-3629
c/o Stifel, Nicolaus & Company, Incorporated
787 7th Avenue, 11th Floor
New York, NY 10019
c/o Berenberg Capital Markets LLC
1251 Avenue of the Americas, 53rd Floor
New York, NY 10020
c/o SVB Leerink LLC
1301 Avenue of the Americas, 12th Floor
New York, NY 10019
c/o BMO Capital Markets Corp.
3 Times Square, 24th Floor
New York, NY 10036
Dear Sirs:
1. Introductory. AbCellera Biologics Inc., a corporation incorporated under the Business Corporations Act (British Columbia) (Company), agrees with the several Underwriters named in Schedule A hereto (Underwriters) to issue and sell to the several Underwriters [●] common shares (Firm Securities) without par value (Securities), and also proposes to issue and sell to the Underwriters, at the option of the Underwriters, an aggregate of not more than [●] additional shares (Optional Securities) of the Companys Securities as set forth below. The Firm Securities and the Optional Securities are herein collectively called the Offered Securities. As part of the offering contemplated by this Agreement, Credit Suisse Securities (USA) LLC (the Designated Underwriter) has agreed to reserve out of the Firm Securities purchased by it under this Agreement up to [●] common shares for sale to the Companys directors, officers, employees and other parties associated with the Company (collectively, Participants), as set forth in the Final Prospectus (as defined herein) under the heading Underwriting (the Directed Share Program). The Firm Securities to be sold by the Designated Underwriter pursuant to the Directed Share Program (the Directed Shares) will be sold by the Designated Underwriter pursuant to this Agreement at the public offering price. Any Directed Shares not subscribed for by the end of the business day on which this Agreement is executed will be offered to the public by the Underwriters as set forth in the Final Prospectus.
The Offered Securities will be offered and sold in the United States pursuant to a Registration Statement (as defined below) and in Canada on a private placement basis pursuant to a preliminary and final Canadian offering memorandum (the Canadian Private Placement Memorandum).
2. Representations and Warranties of the Company. The Company represents and warrants to, and agrees with, the several Underwriters that:
(a) Filing and Effectiveness of Registration Statement; Certain Defined Terms. The Company has filed with the Commission (as defined below) a registration statement on Form S-1 (No. 333-250838) covering the registration of the Offered Securities under the Act (as defined below), including a related preliminary prospectus or prospectuses. At any particular time, this initial registration statement, in the form then on file with the Commission, including all information contained in the registration statement (if any) filed pursuant to Rule 462(b) and then deemed to be a part of the initial registration statement, and all 430A Information (as defined below) and all 430C Information (as defined below), that in any case has not then been superseded or modified, shall be referred to as the Initial Registration Statement. The Company may also have filed, or may file with the Commission, a Rule 462(b) registration statement covering the registration of the Offered Securities. At any particular time, this Rule 462(b) registration statement, in the form then on file with the Commission, including the contents of the Initial Registration Statement incorporated by reference therein and including all 430A Information and all 430C Information, that in any case has not then been superseded or modified, shall be referred to as the Additional Registration Statement.
As of the time of execution and delivery of this Agreement, the Initial Registration Statement has been declared effective under the Act and is not proposed to be amended. Any Additional Registration Statement has or will become effective upon filing with the Commission pursuant to Rule 462(b) and is not proposed to be amended. The Offered Securities all have been or will be duly registered under the Act pursuant to the Initial Registration Statement and, if applicable, the Additional Registration Statement.
For purposes of this Agreement:
430A Information, with respect to any registration statement, means information included in a prospectus and retroactively deemed to be a part of such registration statement pursuant to Rule 430A(b).
430C Information, with respect to any registration statement, means information included in a prospectus then deemed to be a part of such registration statement pursuant to Rule 430C.
Act means the Securities Act of 1933, as amended.
Applicable Time means [●]:00 [A./P.]M. (New York time) on the date of this Agreement.
Closing Date has the meaning defined in Section 3 hereof.
Commission means the Securities and Exchange Commission.
Effective Time with respect to the Initial Registration Statement or, if filed prior to the execution and delivery of this Agreement, the Additional Registration Statement means the date and time as of which such Registration Statement was declared effective by the Commission or has become effective upon filing pursuant to Rule 462(c). If an Additional Registration Statement has not been filed prior to the execution and delivery of this Agreement but the Company has advised the Representatives that it proposes to file one, Effective Time with respect to such Additional Registration Statement means the date and time as of which such Additional Registration Statement is filed and becomes effective pursuant to Rule 462(b).
Exchange Act means the Securities Exchange Act of 1934, as amended.
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Final Prospectus means the Statutory Prospectus that discloses the public offering price, other 430A Information and other final terms of the Offered Securities and otherwise satisfies Section 10(a) of the Act.
General Use Issuer Free Writing Prospectus means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors, as evidenced by its being so specified in Schedule B to this Agreement.
Issuer Free Writing Prospectus means any issuer free writing prospectus, as defined in Rule 433, relating to the Offered Securities in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Companys records pursuant to Rule 433(g).
Limited Use Issuer Free Writing Prospectus means any Issuer Free Writing Prospectus that is not a General Use Issuer Free Writing Prospectus.
The Initial Registration Statement and any Additional Registration Statement, after the filing thereof, are referred to collectively as the Registration Statements and each is individually referred to as a Registration Statement. A Registration Statement with reference to a particular time means the Initial Registration Statement and any Additional Registration Statement as of such time. A Registration Statement without reference to a time means such Registration Statement as of its Effective Time. For purposes of the foregoing definitions, 430A Information with respect to a Registration Statement shall be considered to be included in such Registration Statement as of the time specified in Rule 430A.
Representatives means Credit Suisse Securities (USA) LLC, Stifel, Nicolaus & Company, Incorporated, Berenberg Capital Markets LLC, SVB Leerink LLC, and BMO Capital Markets Corp. as representatives of the several Underwriters.
Rules and Regulations means the rules and regulations of the Commission.
Securities Laws means, collectively, the Sarbanes-Oxley Act of 2002, as amended and all rules and regulations promulgated thereunder or implementing the provisions thereof (Sarbanes-Oxley), the Act, the Exchange Act, the Rules and Regulations, the auditing principles, rules, standards and practices applicable to auditors of issuers (as defined in Sarbanes-Oxley) promulgated or approved by the Public Company Accounting Oversight Board and, as applicable, the rules of The Nasdaq Stock Market (Exchange Rules).
Statutory Prospectus with reference to a particular time means the prospectus included in a Registration Statement immediately prior to that time, including any 430A Information or 430C Information with respect to such Registration Statement. For purposes of the foregoing definition, 430A Information shall be considered to be included in the Statutory Prospectus as of the actual time that form of prospectus is filed with the Commission pursuant to Rule 424(b) or Rule 462(c) and not retroactively.
Testing-the-Waters Communication means any oral or written communication with potential investors undertaken in reliance on Section 5(d) of the Act.
Written Testing-the-Waters Communication means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Act.
Unless otherwise specified, a reference to a rule is to the indicated rule under the Act.
(b) Compliance with Securities Act Requirements. (i) (A) At their respective Effective Times, (B) on the date of this Agreement and (C) on each Closing Date, each of the Initial Registration Statement and the Additional Registration Statement (if any) conformed and will conform in all material respects to the requirements of the Act and the Rules and Regulations and did not and will not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) on its date, at the time of filing of the Final Prospectus pursuant to Rule 424(b) or (if no such filing is required) at the Effective Time of the Additional Registration Statement in which the Final Prospectus is included, and on each Closing Date, the Final Prospectus will conform in all material respects to the requirements of the Act and the Rules and Regulations and will not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and (iii) on the date of this Agreement, at their respective Effective Times or issue dates and on each Closing Date, each Registration Statement, the Final Prospectus, any Statutory Prospectus, any prospectus wrapper, and any Issuer Free Writing Prospectus complied or comply, and such documents and any further amendments or supplements thereto will comply, in all material respects with any applicable laws or regulations of foreign jurisdictions in which the Final Prospectus, any Statutory Prospectus, any prospectus wrapper or any Issuer Free Writing Prospectus, as amended or supplemented, if applicable, are distributed in connection with the Directed Share Program. The preceding sentence does not apply to statements in or omissions from any such document based upon written information furnished to the Company by any Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such information is that described as such in Section 8(b) hereof (the Underwriter Information).
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(c) Ineligible Issuer Status. (i) At the time of the initial filing of the Initial Registration Statement and (ii) at the date of this Agreement, the Company was not and is not an ineligible issuer, as defined in Rule 405, including (A) the Company or any subsidiary of the Company in the preceding three years not having been convicted of a felony or misdemeanor or having been made the subject of a judicial or administrative decree or order as described in Rule 405 and (B) the Company in the preceding three years not having been the subject of a bankruptcy petition or insolvency or similar proceeding, not having had a registration statement be the subject of a proceeding under Section 8 of the Act and not being the subject of a proceeding under Section 8A of the Act in connection with the offering of the Offered Securities, all as described in Rule 405.
(d) Emerging Growth Company Status. From the time of the initial confidential submission of the Initial Registration Statement to the Commission (or, if earlier, the first date on which the Company engaged directly or through any person authorized to act on its behalf in any Testing-the-Waters Communication) through the date hereof, the Company has been and is an emerging growth company, as defined in Section 2(a) of the Act (an Emerging Growth Company).
(e) General Disclosure Package and Statutory Prospectuses. As of the Applicable Time, none of (i) the General Use Issuer Free Writing Prospectus(es), if any, issued at or prior to the Applicable Time, the preliminary prospectus, dated [●], 2020 (which is the most recent Statutory Prospectus distributed to investors generally) and the other information, if any, stated in Schedule B to this Agreement to be included in the General Disclosure Package, all considered together (collectively, the General Disclosure Package), (ii) any individual Limited Use Issuer Free Writing Prospectus, when considered together with the General Disclosure Package, or (iii) any individual Written Testing-the-Waters Communication that has been authorized by the Company, when considered together with the General Disclosure Package, included any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from any Statutory Prospectus or the Registration Statement, any Issuer Free Writing Prospectus or any Written Testing-the-Waters Communication made in reliance upon and in conformity with Underwriter Information. No order preventing or suspending the use of any Statutory Prospectus has been issued by the Commission, and each Statutory Prospectus included in the General Disclosure Package, at the time of filing thereof, complied in all material respects with the Act, and no Statutory Prospectus, at the time of filing thereof, contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation and warranty with respect to any statements or omissions from any such document based upon Underwriter Information.
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(f) Issuer Free Writing Prospectuses. Each Issuer Free Writing Prospectus, as of its issue date and at all subsequent times through the completion of the public offer and sale of the Offered Securities or until any earlier date that the Company notified or notifies the Representatives as described in the next sentence, did not, does not and will not include any information that conflicted, conflicts or will conflict with the information then contained in the Registration Statement. If at any time following issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information then contained in the Registration Statement or as a result of which such Issuer Free Writing Prospectus, if republished immediately following such event or development, would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, (i) the Company has promptly notified or will promptly notify the Representatives and (ii) the Company has promptly amended or will promptly amend or supplement such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.
(g) Testing-the-Waters Communication. The Company (i) has not alone engaged in any Testing-the-Waters Communication and (ii) has not authorized anyone other than the Representatives to engage in Testing-the-Waters Communications. The Company reconfirms that the Representatives have been authorized to act on the Companys behalf in undertaking Testing-the-Waters Communication. The Company has not presented to any potential investors or otherwise distributed any Written Testing-the-Waters Communication, other than those specified in Schedule C to this Agreement.
(h) Good Standing of the Company. (i) The Company has been duly incorporated and is validly existing as a corporation and in good standing under the laws of the Province of British Columbia, with power and authority (corporate and other) to own, lease and operate its properties and to conduct its business as described in the Registration Statement, the General Disclosure Package and the Final Prospectus and to enter into and perform its obligations under this Agreement, and (ii) the Company is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except, in the case of clause (ii), where the failure so to qualify or to be in good standing would not reasonably be expected to result in a material adverse effect on the condition (financial or otherwise), results of operations, business, properties or prospects of the Company and its subsidiaries taken as a whole (Material Adverse Effect).
(i) Subsidiaries. (i) Each subsidiary of the Company has been duly incorporated or organized and is validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (to the extent the concept of good standing is applicable in each such jurisdiction), with power and authority (corporate and other) to own, lease and operate its properties and to conduct its business as described in the Registration Statement, the General Disclosure Package and the Final Prospectus; and (ii) each subsidiary of the Company is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification (to the extent the concept of good standing is applicable in each such jurisdiction), except, in the case of each of the foregoing clauses (i) and (ii), as would not reasonably be expected to result in a Material Adverse Effect. All of the issued and outstanding capital stock of each subsidiary of the Company has been duly authorized and validly issued and is fully paid and nonassessable; and the capital stock of each subsidiary owned by the Company, directly or through subsidiaries, is owned free from liens, encumbrances and defects. No subsidiary of the Company is currently prohibited, directly or indirectly, under any agreement or other instrument to which it is a party or is subject, from paying any dividends to the Company, from making any other distribution on such subsidiarys share capital or similar ownership interest, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiarys properties or assets to the Company or any other subsidiary of the Company.
(j) Offered Securities. The Offered Securities and all other outstanding securities of the Company have been duly authorized; the authorized equity capitalization of the Company is as set forth in the Registration Statement, the General Disclosure Package and the Final Prospectus; all outstanding shares of the Company are, and, when the Offered Securities have been delivered and paid for in accordance with this Agreement on each Closing Date, such Offered Securities will have been, validly issued, fully paid and nonassessable, and will conform in all material respects to the description of such Offered Securities contained in the General Disclosure Package and the Final Prospectus; the shareholders of the Company have no preemptive rights with respect to the Offered Securities and none of the outstanding shares of the Company have been issued in violation of any preemptive or similar rights of any security holder of the Company. Except as disclosed in the Registration Statement, the General Disclosure Package and the Final Prospectus, there are no outstanding (i) securities or obligations of the Company convertible into or exchangeable for any shares of the Company, (ii) warrants, rights or options to subscribe for or purchase from the Company any such shares of the Company or any such convertible or exchangeable securities or obligations or (iii) obligations of the Company to issue or sell any shares of the Company, any such convertible or exchangeable securities or obligations or any such warrants, rights or options. The Company has not, directly or indirectly, offered or sold any of the Offered Securities by means of any prospectus (within the meaning of the Act and the Rules and Regulations) or used any prospectus or made any offer (within the meaning of the Act and the Rules and Regulations) in connection with the offer or sale of the Offered Securities, including under applicable Canadian securities laws, in each case other than the preliminary prospectus referred to in Section 2(a) hereof, the General Disclosure Package, the Final Prospectus and the Canadian Private Placement Memorandum.
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(k) Other Offerings. Except as disclosed in the Registration Statement, the General Disclosure Package and the Final Prospectus, the Company has not sold, issued or distributed any Securities during the six-month period preceding the date hereof, including any sales pursuant to Rule 144A under, or Regulation D or S of, the Act, other than Securities issued pursuant to (A) the Companys employee benefit plans, option plans or other employee compensation plans or (B) outstanding options, rights or warrants.
(l) No Finders Fee. There are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the Company or any Underwriter for a brokerage commission, finders fee or other like payment in connection with this offering.
(m) Registration Rights. Except as disclosed in the Registration Statement, the General Disclosure Package and the Final Prospectus, and except as have been validly waived or complied with, there are no contracts, agreements or understandings between the Company (or any of its subsidiaries) and any person granting such person the right to require the Company to file a registration statement under the Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to a Registration Statement or in any securities being registered pursuant to any other registration statement filed by the Company under the Act (collectively, registration rights), and any person to whom the Company has granted registration rights has agreed not to exercise such rights until after the expiration of the Lock-Up Period referred to in Section 5 hereof.
(n) Listing. The Offered Securities have been approved for listing on The Nasdaq Global Market, subject to official notice of issuance.
(o) Absence of Further Requirements. No consent, approval, authorization, or order of, or filing or registration with, any person (including any governmental agency or body or any court) is required to be obtained or made by or on behalf of the Company for the consummation of the transactions contemplated by this Agreement in connection with the offering, issuance and sale of the Offered Securities by the Company, except such as have been obtained, or made and such as may be required under state securities laws or by the Financial Industry Regulatory Authority (FINRA) or Canadian securities laws, including, but not limited to a report of exempt distribution on Form 45-106F1. No authorization, consent, approval, license, qualification or order of, or filing or registration with any person (including any governmental agency or body or any court) in any foreign jurisdiction is required for the consummation of the transactions contemplated by this Agreement in connection with the offering, issuance and sale of the Directed Shares under the laws and regulations of such jurisdiction except such as have been obtained or made.
(p) Title to Property. The Company and its subsidiaries do not own any real property. Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect (and other than intellectual property which is addressed exclusively in Section 2(v) below), (i) the Company and its subsidiaries have good and marketable title to all personal property and assets owned by them, in each case free from all liens, charges, mortgages, pledges, security interests, claims, restrictions or encumbrances of any kind and defects that would affect the value thereof or interfere with the use made or to be made thereof by them and (ii) the Company and its subsidiaries hold any leased real or personal property under valid and enforceable leases with no terms or provisions that would interfere with the use made or to be made thereof by them.
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(q) Absence of Defaults and Conflicts Resulting from the Transaction. The execution, delivery and performance of this Agreement, and the offering, issuance and sale of the Offered Securities will not result in a breach or violation of any of the terms and provisions of, or constitute a default or a Debt Repayment Triggering Event (as defined below) under, or result in the imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, (i) the charter, notice of articles, articles or by-laws or similar organizational documents of the Company or any of its subsidiaries, (ii) any statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company or any of its subsidiaries or any of their properties, or (iii) any agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the properties of the Company or any of its subsidiaries is subject, except, in the case of clauses (ii) and (iii) for such breaches, violations or defaults that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. A Debt Repayment Triggering Event means any event or condition that gives, or with the giving of notice or lapse of time would give, the holder of any note, debenture, or other evidence of indebtedness (or any person acting on such holders behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness.
(r) Absence of Existing Defaults and Conflicts. Neither the Company nor any of its subsidiaries is (i) in violation of its respective charter, notice of articles, articles or by-laws or similar organizational documents; (ii) in default (or with the giving of notice or lapse of time would be in default) under any existing obligation, agreement, covenant or condition contained in any indenture, loan agreement, mortgage, lease or other agreement or instrument to which any of them is a party or by which any of them is bound or to which any of the properties of any of them is subject; or (iii) in violation of any law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority, except in the case of clauses (ii) and (iii) above, for any such defaults or violation that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
(s) Authorization of Agreement. This Agreement has been duly authorized, executed and delivered by the Company. The Company has all requisite power and authority to execute, deliver and perform its obligations under this Agreement.
(t) Possession of Licenses and Permits; Compliance with Contracts. The Company and its subsidiaries (i) possess, and are in compliance with the terms and conditions of, all adequate certificates, authorizations, franchises, licenses and permits issued by appropriate federal, state, provincial, local or foreign regulatory bodies (collectively, Licenses) necessary to the conduct of the business now conducted or proposed in the Registration Statement, the General Disclosure Package and the Final Prospectus to be conducted by them and (ii) have not received any notice of proceedings relating to the revocation or modification of any Licenses, except where the failure to possess or be in compliance with such Licenses or the revocation or modification of such License would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company is in compliance in all material respects with the terms of all agreements, licenses and contracts referenced in the General Disclosure Package or pursuant to which the Company and its subsidiaries are bound or are a party, and, to the best of the Companys and its subsidiaries knowledge, all counterparties to such agreements, licenses and contracts are in compliance in all material respects with such agreements, licenses and contracts. The General Disclosure Package discloses all material restrictions on the business or operations of the Company and its subsidiaries under such agreements.
(u) Absence of Labor Dispute. No labor dispute with the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company or any of its subsidiaries, is imminent and the Company and its subsidiaries are not aware of any existing or imminent labor disturbance by the employees of any of its or any subsidiarys principal suppliers, manufacturers, customers or contractors that could in either case have a Material Adverse Effect.
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(v) Possession of Intellectual Property. The Company and its subsidiaries own, possess or can acquire on reasonable terms sufficient rights to all trademarks, trade names, patent rights, copyrights, domain names, licenses, approvals, trade secrets, inventions, technology, know-how and other intellectual property and similar rights, including registrations and applications for registration thereof (collectively, Intellectual Property Rights) necessary to the conduct of the business now conducted or proposed in the General Disclosure Package to be conducted by them, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Intellectual Property Rights of the Company have not been adjudged by a court of competent jurisdiction to be invalid or unenforceable, in whole or in part, and the Company is unaware of any facts that would form a reasonable basis for any such adjudication, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has not received any notice of any claim, and is not otherwise aware of any facts or circumstances, that would render any Intellectual Property Rights of the Company invalid or inadequate to protect the interest of the Company therein, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Except as disclosed in the General Disclosure Package and except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, to the knowledge of the Company, (i) there are no rights of third parties to any of the Intellectual Property Rights owned or purported to be owned by the Company or its subsidiaries; (ii) there is no infringement, misappropriation, breach, default or other violation, or the occurrence of any event that with notice or the passage of time would constitute any of the foregoing, by the Company or any of its subsidiaries of any third party Intellectual Property Rights, and there is no infringement by third parties of any Intellectual Property owned by, or licensed to, the Company or its subsidiaries; (iii) there is no pending or, to the Companys knowledge, threatened action, suit, proceeding or claim by others, whether oral or written, challenging the Companys rights in or to any of their Intellectual Property Rights, and the Company is unaware of any facts that would form a reasonable basis for any such action, suit, proceeding or claim; (iv) there is no pending or, to the Companys knowledge, threatened action, suit, proceeding or claim by others, whether oral or written, challenging the validity, enforceability or scope of any Intellectual Property Rights of the Company, and the Company is unaware of any facts that would form a reasonable basis for any such action, suit, proceeding or claim; (v) there is no pending or, to the Companys knowledge, threatened action, suit, proceeding or claim by others, whether oral or written, that the Company or any of its subsidiaries, or the knowledge of the Company, any affiliates of the Company, infringes, misappropriates or otherwise violates or conflicts with, or would, upon the commercialization of any product or service described in the General Disclosure Package as under development, infringe, misappropriate or otherwise violate or conflict with any Intellectual Property Rights or other proprietary rights of others and the Company and any of its subsidiaries is unaware of any other fact that would form a reasonable basis for any such action, suit, proceeding or claim; (vi) none of the Intellectual Property Rights used by the Company or its subsidiaries in its or their businesses has been obtained or is being used by the Company in violation of any contractual obligation that is binding on the Company, its subsidiaries, or any of their respective officers, directors or employees; (vii) the Company and its subsidiaries have taken commercially reasonable measures to maintain and protect the Intellectual Property Rights necessary to the conduct of their businesses as now conducted or as proposed in the General Disclosure Package to be conducted by them, including trade secrets contained therein, including by requiring all employees, officers and consultants of and to the Company and any of its subsidiaries to sign agreements or otherwise agree to keep proprietary information of the Company and any of its subsidiaries in confidence and not to use it except on behalf of the Company or its subsidiaries, and requiring all third parties having access to Intellectual Property Rights of the Company to sign confidentiality and non-use agreements or otherwise agree in writing to adequately maintain the confidentiality and not to use such Intellectual Property Rights and no employee of the Company or any of its subsidiaries is in or has been in violation of any term of any employment contract, patent disclosure agreement, invention assignment agreement, non-competition agreement, non-solicitation agreement, nondisclosure agreement, or any restrictive covenant to or with a former employer where the basis of such violation relates to such employees employment with the Company or any of its subsidiaries; (viii) the Company and its subsidiaries have at all times complied in all respects with applicable laws pertaining to data privacy; (ix) the Company and its subsidiaries have complied with the terms of each agreement pursuant to which Intellectual Property Rights have been licensed to the Company or any of its subsidiaries, and all such agreements are in full force and effect; (x) there is no patent or patent application, in the U.S. or other jurisdictions, that contains claims that dominate or may dominate any of the Companys Intellectual Property Rights or that interfere with the issued or pending claims of any of the Intellectual Property Rights of the Company or that challenges the validity, enforceability or scope of any of the Intellectual Property Rights of the Company; (xi) there are no defects in any of the patents or patent applications included in the Intellectual Property Right of the Company; (xii) the duty of candor and good faith as required by the United States Patent and Trademark Office during the prosecution of the United States patents and patent applications included in the Intellectual Property Rights have been complied with, and in all foreign offices having similar requirements, all such requirements have been complied with; (xiii) the technologies described in the General Disclosure Package as under development by the Company or any of its subsidiaries fall within the scope of the claims of one or more patents or pending patent applications owned by, or exclusively licensed to, the Company or any of its subsidiaries; (xiv) the patents included in the Intellectual Property Rights of the Company are subsisting and have not lapsed and the patent applications in the Intellectual Property Rights of the Company are subsisting and have not been abandoned; and (xiv) except as set forth in the General Disclosure Package, the Company and its subsidiaries are not obligated or under any liability whatsoever to make any material payment by way of royalties, fees or otherwise to any owner or licensee of, or other claimant to, any Intellectual Property Rights, with respect to the use thereof or in connection with the conduct of their respective businesses or otherwise.
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(w) Environmental Laws. (i) Neither the Company nor any of its subsidiaries (A) is or has been in violation of any foreign, federal, state, provincial or local statute, law, rule, regulation, judgment, order, decree, decision, ordinance, code or other legally binding requirement (including common law) relating to the pollution, protection or restoration of the environment, wildlife or natural resources; human health or safety; or the generation, use, handling, transportation, treatment, storage, discharge, disposal or release of, or exposure to, any Hazardous Substance (as defined below) (collectively, Environmental Laws), (B) is conducting or funding, in whole or in part, any investigation, remediation, monitoring or other corrective action pursuant to any Environmental Law, including to address any actual or suspected Hazardous Substance, (C) has received notice of, or is subject to any action, suit, claim or proceeding alleging, any actual or potential liability under, or violation of, any Environmental Law, including with respect to any Hazardous Substance, (D) is party to any order, decree or agreement that imposes any obligation or liability under any Environmental Law, or (E) is or has been in violation of, or has failed to obtain and maintain, any permit, license, authorization, identification number or other approval required under applicable Environmental Laws; (ii) to the knowledge of the Company and its subsidiaries, there are no facts or circumstances that would reasonably be expected to result in any violation of or liability under any Environmental Law, including with respect to any Hazardous Substance; and (iii) neither the Company nor any of its subsidiaries (A) is subject to any pending or threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations or proceedings relating to any Environmental Law against the Company or any of its subsidiaries, nor does the Company or any of its subsidiaries know any such proceeding is contemplated, (B) is aware of any effect on the capital expenditures, earnings or competitive position of the Company and its subsidiaries resulting from compliance with Environmental Laws, or (C) anticipates any capital expenditures relating to any Environmental Laws, except in the case of clauses (i), (ii) and (iii) above, for such matters as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. For purposes of this subsection, Hazardous Substance means (i) any pollutant, contaminant, petroleum and petroleum products, by-products or breakdown products, radioactive materials, asbestos, asbestos-containing materials, polychlorinated biphenyls or toxic mold, and (ii) any other toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous chemical, material, waste or substance.
(x) Accurate Disclosure. The statements in the Registration Statement, the General Disclosure Package and the Final Prospectus under the headings Material U.S. Federal Tax Consequences to Non-U.S. Holders, Material Canadian Federal Income Tax Considerations, Description of Share Capital, Shares Eligible for Future Sale, Comparison of British Columbia Law and Delaware Law, Business Government Regulation, and, insofar as such statements summarize legal matters, agreements, documents or proceedings discussed therein, are accurate and fair summaries of such legal matters, agreements, documents or proceedings in all material respects.
(y) Absence of Manipulation. Neither the Company nor any affiliate of the Company has taken, nor will the Company or any affiliate take, directly or indirectly, any action that is designed, or would be expected, to cause or result in, or which constitutes, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Offered Securities or to result in a violation of Regulation M under the Exchange Act (it being understood that the Company makes no representation with respect to any action taken by any Underwriter or their affiliates).
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(z) Statistical and Market-Related Data. Any third-party statistical and market-related data included in a Registration Statement, a Statutory Prospectus, the General Disclosure Package, the Final Prospectus or any Written Testing-the-Waters Communication is based on or derived from sources that the Company believes to be reliable and accurate.
(aa) Forward-Looking Statements. Each forward-looking statement (within the meaning of Section 27A of the Act or Section 21E of the Exchange Act) contained in a Registration Statement, a Statutory Prospectus or the General Disclosure Package has been made or reaffirmed with a reasonable basis and in good faith. The statements in a Registration Statement, a Statutory Prospectus, the General Disclosure Package or the Final Prospectus as to the Companys anticipated capital expenditures for facilities and equipment are the Companys good faith estimates based on information available to the Company.
(bb) Compliance with the Sarbanes-Oxley Act. The Company has taken all necessary actions to ensure that, upon the effectiveness of the Registration Statement, it will be in compliance in all material respects with all applicable provisions of Sarbanes-Oxley that are then in effect and with which the Company is required to comply as of the effectiveness of the Registration Statement, and is actively taking steps to ensure that it will be in material compliance with other provisions of the Sarbanes-Oxley Act which will become applicable to the Company at all times after the effectiveness of the Registration Statement. There is and has been no failure on the part of the Company or any of the Companys directors or officers, in their capacities as such, to comply with any provision of the Sarbanes-Oxley Act of 2002, as amended and the rules and regulations promulgated in connection therewith, including Section 402 related to loans.
(cc) Internal Controls. The Company and its subsidiaries, taken as a whole, maintain a system of internal controls, including, but not limited to, disclosure controls and procedures, internal controls over accounting matters and financial reporting, an internal audit function and legal and regulatory compliance controls (collectively, Internal Controls) that comply in all material respects with applicable Securities Laws and are sufficient to provide reasonable assurances that (i) transactions are executed in accordance with managements general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (GAAP) and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with managements 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. The Internal Controls are, or upon consummation of the offering of the Offered Securities will be, overseen by the Audit Committee (the Audit Committee) of the Companys Board of Directors (the Board) in accordance with Exchange Rules. Except as disclosed in the Registration Statement, the General Disclosure Package and the Final Prospectus, the Company has not publicly disclosed or reported to the Audit Committee or the Board, and within the next 135 days the Company does not reasonably expect to publicly disclose or report to the Audit Committee or the Board, a significant deficiency or material weakness (each, as defined in Rule 12b-2 of the Exchange Act), a change in Internal Controls or fraud involving management or other employees who have a significant role in Internal Controls (each, an Internal Control Event), any violation of, or failure to comply with, the Securities Laws, or any matter which, if determined adversely, would have a Material Adverse Effect.
(dd) Litigation. Except as disclosed in the General Disclosure Package and the Final Prospectus, there are no pending actions, suits or proceedings (including any inquiries or investigations by any court or governmental agency or body, domestic or foreign) against or affecting the Company, any of its subsidiaries or any of their respective properties that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect, or would materially and adversely affect their respective properties or assets or the ability of the Company to perform its obligations under this Agreement, or which are otherwise material in the context of the sale of the Offered Securities; and no such actions, suits or proceedings (including any inquiries or investigations by any court or governmental agency or body, domestic or foreign) are, to the knowledge of the Company or any of its subsidiaries, threatened or contemplated.
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(ee) Financial Statements. The financial statements of the Company included in each Registration Statement, the General Disclosure Package and the Final Prospectus, together with the related schedules and notes, present fairly, in all material respects, the financial position of the Company and its subsidiaries (other than Trianni) as of the dates shown and their results of operations, shareholders equity and cash flows for the periods shown, and such financial statements have been prepared in conformity with the generally accepted accounting principles in the United States applied on a consistent basis and the related schedules included in each Registration Statement present fairly the information required to be stated therein, except that any unaudited interim financial statements, which are subject to normal year-end adjustments, may not contain certain footnotes, as permitted by the applicable rules of the Commission. To the knowledge of the Company, the financial statements of Trianni, Inc. (Trianni) included in each Registration Statement, the General Disclosure Package and the Final Prospectus, together with the related schedules and notes, present fairly, in all material respects, the financial position of Trianni as of the dates shown and its results of operations, shareholders equity and cash flows for the periods shown, and, to the knowledge of the Company, such financial statements have been prepared in conformity with the generally accepted accounting principles in the United States applied on a consistent basis and the related schedules included in each Registration Statement present fairly the information required to be stated therein, except that any unaudited interim financial statements, which are subject to normal year-end adjustments, may not contain certain footnotes, as permitted by the applicable rules of the Commission. There are no financial statements (historical or pro forma) that are required to be included in the Registration Statement, the General Disclosure Package or the Prospectus that are not included as required. The summary and selected consolidated financial data included in the Registration Statement, the General Disclosure Package and the Final Prospectus under the captions Prospectus SummarySummary Consolidated Financial Data and Selected Consolidated Financial Data presents fairly, in all material respects, the information shown therein and such data has been compiled on a basis consistent with the financial statements presented therein and the books and records of the Company and its subsidiaries. The assumptions used in preparing the pro forma financial statements included in each Registration Statement, the General Disclosure Package and the Final Prospectus provide a reasonable basis for presenting the significant effects directly attributable to the transactions or events described therein, the related pro forma adjustments give appropriate effect to those assumptions, and the pro forma columns therein reflect the proper application of those adjustments to the corresponding historical financial statement amounts. Neither the Company nor any of its subsidiaries have any material liabilities or obligations, direct or contingent (including any off-balance sheet obligations or any variable interest entities within the meaning of Financial Accounting Standards Board Interpretation No. 46), not disclosed in the Registration Statement, the General Disclosure Package and the Final Prospectus.
(ff) No Material Adverse Change in Business. Since the end of the period covered by the latest audited financial statements included in the Registration Statement, the General Disclosure Package and the Final Prospectus and other than as disclosed in the Registration Statement, the General Disclosure Package and the Final Prospectus: (i) there has been no change, nor any development or event involving a prospective change, in the condition (financial or otherwise), results of operations, business, properties or prospects of the Company and its subsidiaries, taken as a whole that is material and adverse, (ii) there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its shares, (iii) there has been no material adverse change in the share capital of the Company or any of its subsidiaries (other than as a result of (A) the exercise, if any, of share options or the award, if any, of share options in the ordinary course of business pursuant to the Companys equity plans that are described in the General Disclosure Package and the Final Prospectus) or (B) the issuance, if any, of shares upon conversion of exchangeable or convertible securities as described in the General Disclosure Package and the Final Prospectus), short-term indebtedness, long-term indebtedness, net current assets or net assets of the Company or any of its subsidiaries, (iv) there has been no material transaction entered into and there is no material transaction that is probable of being entered into by the Company or any of its subsidiaries other than transactions in the ordinary course of business, (v) there has been no obligation, direct or contingent, that is material to the Company or any of its subsidiaries taken as a whole incurred by the Company or any of its subsidiaries, except obligations incurred in the ordinary course of business and (vi) neither the Company nor any of its subsidiaries has sustained any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any material labor disturbance or dispute or any action, order or decree of any court or arbitrator or governmental or regulatory authority.
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(gg) Investment Company Act. The Company is not and, after giving effect to the offering and sale of the Offered Securities and the application of the proceeds thereof as described in the Registration Statement, the General Disclosure Package and the Final Prospectus, will not be required to register as an investment company as defined in the Investment Company Act of 1940, as amended (the Investment Company Act).
(hh) Ratings. There are no debts or preferred securities issued, or guaranteed, by the Company or its subsidiaries that are rated by a nationally recognized statistical rating organization, as such term is defined in Section 3(a)(62) of the Exchange Act.
(ii) PFIC Status. Subject to the qualifications, limitations, exceptions and assumptions set forth in the Preliminary Prospectus and the Prospectus, the Company does not believe that it was a passive foreign investment company (a PFIC), as defined in section 1297 of the Internal Revenue Code of 1986 (the Code), as amended, or the year ended December 31, 2019 and does not currently expect, based on the information available to it, to be a PFIC for the year ending December 31, 2020.
(jj) Taxes. The Company and each of its subsidiaries has filed all federal, state, provincial, local and non-U.S. tax returns that are required to be filed or have requested extensions thereof (except in any case in which the failure so to file would not reasonably be expected to have a Material Adverse Effect); and the Company and its subsidiaries have paid all taxes (including any assessments, fines or penalties) required to be paid by them, except for any such taxes, assessments, fines or penalties currently being contested in good faith or as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(kk) Insurance. The Company and its subsidiaries are insured by insurers with appropriately rated claims paying abilities against such losses and risks and in such amounts as are reasonably prudent and customary for the businesses in which they are engaged; all material policies of insurance and fidelity or surety bonds insuring the Company or any of its subsidiaries or their respective businesses, assets, employees, officers and directors are in full force and effect; the Company and its subsidiaries are in compliance with the terms of such policies and instruments in all material respects; and there are no material claims by the Company or any of its subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; neither the Company nor any such subsidiary has been refused any material insurance coverage sought or applied for; neither the Company nor any such subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect; and the Company will obtain directors and officers insurance in such amounts as is customary for issuers in the Companys industry of similar size and stage as the Company, who are conducting an initial public offering.
(ll) No Unlawful Payments. Neither the Company nor any of its subsidiaries, nor any director, officer or employee, nor, to the knowledge of the Company or any of its subsidiaries, any agent of the Company or other person acting on behalf of the Company or of any of its subsidiaries, has (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) taken or will take any action in furtherance of an offer, payment, promise to pay, or authorization or approval of the payment or giving of money, property, gifts or anything else of value, directly or indirectly, to any government official, including any officer or employee of a government or government-owned or controlled entity or of a public international organization, or any person acting in an official capacity for or on behalf of any of the foregoing, or any political party or party official or candidate for political office (Governmental Official) to influence official action or secure an improper advantage; (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977, as amended, or any applicable law or regulation implementing the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, or committed an offence under the Bribery Act 2010 of the United Kingdom or any other applicable anti-bribery or anti-corruption law; or (iv) made, offered, agreed, requested or taken an act in furtherance of any unlawful bribe or other unlawful benefit, including, without limitation, any rebate, payoff, influence payment, kickback or other unlawful or improper payment or benefit, to any Government Official or other person or entity. The Company and its subsidiaries and affiliates have conducted their businesses in compliance with applicable anti-corruption laws and have instituted and maintain and will continue to maintain policies and procedures designed to promote and achieve compliance with all applicable anti-bribery and anti-corruption laws and with the representation and warranty contained herein.
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(mm) Compliance with Anti-Money Laundering Laws. The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with all applicable financial recordkeeping and reporting requirements, including those of the Bank Secrecy Act, as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), and the applicable anti-money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental or regulatory agency (collectively, the Anti-Money Laundering Laws), and no action, suit or proceeding by or before any court or governmental or regulatory agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to the knowledge of the Company and its subsidiaries, threatened.
(i) Economic Sanctions. Neither the Company nor any of its subsidiaries, nor any director, officer, or employee thereof, or any of its subsidiaries, any agent, controlled affiliate or representative of the Company or any of its subsidiaries, is an individual or entity (Person) that is, or is owned or controlled by a Person that is: the subject or target of any U.S. sanctions administered or enforced by the U.S. government (including, without limitation, the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State and including, without limitation, the designation as a specially designated national or blocked person), the United Nations Security Council, the European Union, Her Majestys Treasury, the Swiss Secretariat of Economic Affairs, the Hong Kong Monetary Authority, the Monetary Authority of Singapore, or other relevant sanctions authority (collectively, Sanctions), nor is the Company or any of its subsidiaries located, organized or resident in a country or territory that is the subject or target of Sanctions including, without limitation, Cuba, Iran, North Korea, Sudan, Syria and Crimea (each a Sanctioned Country); and the Company will not, directly or indirectly, use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person: (i) to fund or facilitate any activities or business of or with any Person or in any country or territory that, at the time of such funding or facilitation, is the subject or target of any Sanctions; (ii) to fund or facilitate any activities of or business in any Sanctioned Country or (iii) in any other manner that will result in a violation of Sanctions by any Person (including any Person participating in the offering, whether as underwriter, advisor, investor or otherwise). For the past five years, the Company and its subsidiaries have not knowingly engaged in, are not now knowingly engaged in, and will not engage in, any dealings or transactions with any Person, or in any country or territory, that at the time of the dealing or transaction is or was the subject or target of Sanctions or a Sanctioned Country, respectively.
(nn) Regulatory Filings. The Company and its subsidiaries have filed with applicable regulatory authorities all statements, reports, information or forms required by any applicable law, regulation or order, except where the failure to so file would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. All such filings were in compliance with applicable laws when filed and, to the Companys knowledge, no deficiencies have been asserted by any regulatory commission, agency or authority with respect to any such filing, except for any such failures to be in compliance or deficiencies that would not, individually or in the aggregate, have a Material Adverse Effect.
(oo) Regulatory. Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, the Company and its subsidiaries are, and at all times since January 1, 2018 have been, in compliance with the applicable provisions of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. § 301 et seq.) and the regulations promulgated thereunder and the Food and Drugs Act (Canada) and the regulations made thereunder.
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(pp) ERISA. To the extent applicable, (i) the minimum funding standard under Section 302 of the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (ERISA), has been satisfied by each pension plan (as defined in Section 3(2) of ERISA) which has been established or maintained by the Company, and the trust forming part of each such plan which is intended to be qualified under Section 401 of the Code, as amended, is so qualified; (ii) the Company has fulfilled its obligations, if any, under Section 515 of ERISA; (iii) the Company does not maintain and is not required to contribute to a welfare plan (as defined in Section 3(1) of ERISA) which provides retiree or other post-employment welfare benefits or insurance coverage (other than continuation coverage (as defined in Section 602 of ERISA)); (iv) each pension plan and welfare plan established or maintained by the Company is in compliance with the currently applicable provisions of ERISA, except where the failure to comply would not result in a Material Adverse Effect; and (v) the Company has not incurred and would not reasonably be expected to incur any withdrawal liability under Section 4201 of ERISA, any liability under Section 4062, 4063 or 4064 of ERISA, or any other liability under Title IV of ERISA.
(qq) Independent Accountant. KPMG, LLP, who certified the financial statements and supporting schedules of the Company and its subsidiaries, included in the Registration Statement, the General Disclosure Package and the Final Prospectus, is an independent registered public accounting firm with respect to the Company as required by the Act and the Rules and Regulations and the applicable rules and guidance from the Public Company Accounting Oversight Board (United States). Armanino LLP, who certified the financial statements and supporting schedules of Trianni included in the Registration Statement, the General Disclosure Package and the Final Prospectus, is an independent registered public accounting firm with respect to Trianni under Rule 101 of the American Institute of Certified Public Accountants Code of Professional Conduct and its interpretations and rulings.
(rr) Cybersecurity. Except where as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i)(A) there has been no actual or suspected security breaches or other incidents or compromises of or relating to any of the Companys or its subsidiaries information technology and computer systems, networks, hardware, software, data (including the data of their respective customers, employees, suppliers, vendors and any third party data maintained by or on behalf of them), equipment or technology (collectively, IT Systems and Data) and (B) neither the Company nor its subsidiaries have been notified of, and have no knowledge of any event or condition that would reasonably be expected to result in, any actual or suspected security breaches or other incidents or compromises to their IT Systems and Data; (ii) the Company and its subsidiaries are presently in compliance with all applicable laws or statutes and all judgments, orders, rules and regulations of any court or arbitrator or governmental or regulatory authority, internal policies, applicable industry standards, and contractual obligations relating to the privacy and security of IT Systems and Data and to the protection of such IT Systems and Data from unauthorized use, access, misappropriation or modification; (iii) the Company and its subsidiaries have taken all commercially reasonable measures necessary to protect the IT Systems and Data used in connection with the operation of the Companys and its subsidiaries businesses; and (iv) the Company and its subsidiaries have used reasonable efforts to establish and maintain, have established, maintained, implemented and complied with, and continue to maintain and comply with reasonable information technology, information security, cyber security and data protection controls, policies and procedures, including oversight, access controls, encryption, technological and physical safeguards, backup and disaster recovery technology consistent with industry standards and practices, and security plans to protect against and prevent breach, destruction, loss, unauthorized distribution, use, access, disablement, misappropriation or modification, or other compromise or misuse of or relating to any information technology system or Data used in connection with the operation of the Companys and its subsidiaries businesses.
(ss) Software. Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) the Company and its subsidiaries use and have used any and all software and other materials distributed under a free, open source, or similar licensing model (including but not limited to the MIT License, Apache License, GNU General Public License, GNU Lesser General Public License and GNU Lesser General Public License) (Open Source Software) in compliance with all license terms applicable to such Open Source Software; (ii) neither the Company or its subsidiaries use or distribute or have used or distributed any Open Source Software in any manner that, to the knowledge of the Company, requires or has required (A) Company or its subsidiaries to permit reverse engineering of any software code or other technology owned by Company or its subsidiaries or (B) any software code or other technology owned by Company or its subsidiaries to be (1) disclosed or distributed in source code form, (2) licensed for the purpose of making derivative works or (3) redistributed at no charge; and (iii) neither the Company nor its subsidiaries has deposited, nor could be required to deposit, into escrow the source code of any of its software and no such source code has been released to any third party, or is entitled to be released to any third party, by any escrow agent, and the consummation of the transactions contemplated by this Agreement will not trigger the release of any such source code.
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(tt) Accuracy of Exhibits. There are no contracts or documents which are required to be described in the Registration Statement, the General Disclosure Package or the Final Prospectus or to be filed as exhibits to the Registration Statement which have not been so described and filed as required.
(uu) Lending Relationship. The Company and its subsidiaries (i) do not have any material lending or other relationship with any bank or lending affiliate of any Underwriter and (ii) do not intend to use any of the proceeds from the sale of the Securities to repay any outstanding debt owed to any affiliate of any Underwriter.
(vv) Margin Rules. The application of the proceeds received by the Company from the issuance, sale and delivery of the Offered Securities as described in the Registration Statement, the General Disclosure Package and the Final Prospectus will not violate Regulation T, U or X of the Board of Governors of the Federal Reserve System or any other regulation of such Board of Governors.
(ww) Payments in Foreign Currency. Under current laws and regulations of Canada and any political subdivision thereof, all dividends and other distributions declared and payable on the Offered Securities may be paid by the Company to the holder thereof in Canadian dollars that may be converted into foreign currency and freely transferred out of Canada and all such payments made to holders thereof or therein who are non-residents of Canada will not be subject to income, withholding or other taxes under laws and regulations of Canada or any political subdivision or taxing authority thereof or therein and will otherwise be free and clear of any other tax, duty, withholding or deduction in Canada or any political subdivision or taxing authority thereof or therein and without the necessity of obtaining any governmental authorization in Canada or any political subdivision or taxing authority thereof or therein.
(xx) Absence of Other Agreements. Except as disclosed in the Registration Statement, the General Disclosure Package and the Final Prospectus, and except for such agreement(s) as will be terminated on or prior to the First Closing Date (as defined below), there are no shareholders agreements, voting agreements, investors rights agreements or other agreements to which the Company is a party in force or effect which in any manner affect or will affect the voting or control of any of the securities of the Company or its subsidiaries, the nomination of directors to the Board or the operations or affairs of the Company or its subsidiaries.
(yy) Related-Party Transactions. There are no business relationships or related-party transactions involving the Company or its subsidiaries or any other person required to be described in the Registration Statement, the General Disclosure Package or the Final Prospectus that have not been described as required.
(zz) Compliance with British Columbia Securities Laws. The Company has complied with the securities laws of the Province of British Columbia, including the rules and regulations made thereunder together with applicable published national and local instruments, policy statements, notices, blanket rulings and orders of the British Columbia Securities Commission, and all discretionary rulings and orders applicable to the Company, if any, of the Canadian securities commissions required to be complied with by the Company in order to sell the Offered Securities outside Canada as contemplated by this Agreement and (ii) to the Companys knowledge, no order, ruling or decision of any court or any securities regulatory authority in Canada is in effect that restricts or ceases trades in securities of the Company.
(aaa) Canadian Private Placement Memorandum. The Canadian Private Placement Memorandum does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation and warranty with respect to any statements or omissions from the Canadian Private Placement Memorandum based upon Underwriter Information.
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(bbb) Absence of Unlawful Influence. The Company has not offered or sold, or caused the Underwriters to offer or sell, any Offered Securities to any person pursuant to the Directed Share Program with the specific intent to unlawfully influence (i) a customer or supplier of the Company to alter the customers or suppliers level or type of business with the Company or (ii) a trade journalist or publication to write or publish favorable information about the Company or its products.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of the representations, warranties and agreements and subject to the terms and conditions set forth herein, the Company agrees to sell to the several Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company, at a purchase price of $[●] per share, the respective number of shares of Firm Securities set forth opposite the names of the Underwriters in Schedule A hereto.
The Company will deliver the Firm Securities to or as instructed by the Representatives for the accounts of the several Underwriters in a form reasonably acceptable to the Representatives against payment of the purchase price by the Underwriters in Federal (same day) funds by wire transfer to an account at a bank specified by the Company to the Representatives drawn to the order of the Company at the office of Cooley LLP, 4401 Eastgate Mall, San Diego, CA 92121, at [●] A.M., New York time, on [●], 2020 or at such other time not later than seven full business days thereafter as the Representatives and the Company determine, such time being herein referred to as the First Closing Date. For purposes of Rule 15c6-1 under the Exchange Act, the First Closing Date (if later than the otherwise applicable settlement date) shall be the settlement date for payment of funds and delivery of securities for all the Offered Securities sold pursuant to the offering. The certificates, if any, representing the Firm Securities so to be delivered will be made available for checking at the above office of Cooley LLP at least 24 hours prior to the First Closing Date.
In addition, upon written notice from the Representatives given to the Company from time to time not more than 30 days subsequent to the date of the Final Prospectus, the Underwriters may purchase all or less than all of the Optional Securities at the purchase price per share to be paid for the Firm Securities. The Company agrees to sell to the Underwriters the number of shares of Optional Securities specified in such notice and the Underwriters agree, severally and not jointly, to purchase such Optional Securities. Such Optional Securities shall be purchased for the account of each Underwriter in the same proportion as the number of shares of Firm Securities set forth opposite such Underwriters name bears to the total number of shares of Firm Securities (subject to adjustment by the Representatives to eliminate fractions) and may be purchased by the Underwriters only for the purpose of covering over-allotments made in connection with the sale of the Firm Securities. No Optional Securities shall be sold or delivered unless the Firm Securities previously have been, or simultaneously are, sold and delivered. The right to purchase the Optional Securities or any portion thereof may be exercised from time to time and to the extent not previously exercised may be surrendered and terminated at any time upon notice by the Representatives to the Company.
Each time for the delivery of and payment for the Optional Securities, being herein referred to as an Optional Closing Date, which may be the First Closing Date (the First Closing Date and each Optional Closing Date, if any, being sometimes referred to as a Closing Date), shall be determined by the Representatives but shall be (i) no earlier than two full business days and (ii) no later than five full business days after written notice of election to purchase Optional Securities is given. The Company will deliver the Optional Securities being purchased on each Optional Closing Date to or as instructed by the Representatives for the accounts of the several Underwriters in a form reasonably acceptable to the Representatives against payment of the purchase price therefor in Federal (same day) funds by wire transfer to an account at a bank specified by the Company to the Representatives drawn to the order of the Company, at the above office of Cooley LLP. The certificates, if any, for the Optional Securities being purchased on each Optional Closing Date will be made available for checking at the above office of Cooley LLP at a reasonable time in advance of such Optional Closing Date.
4. Offering by Underwriters. It is understood that the several Underwriters propose to offer the Offered Securities for sale to the public as set forth in the Final Prospectus. It is further understood that sales of the Offered Securities in Canada may be made pursuant to exemptions from the prospectus requirements of applicable Canadian securities laws.
5. Certain Agreements of the Company. The Company agrees with the several Underwriters that:
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(a) Additional Filings. Unless filed pursuant to Rule 462(c) as part of the Additional Registration Statement in accordance with the next sentence, the Company will file the Final Prospectus, in a form approved by the Representatives, with the Commission pursuant to and in accordance with subparagraph (1) (or, if applicable and if consented to by the Representatives, subparagraph (4)) of Rule 424(b) not later than the earlier of (A) the second business day following the execution and delivery of this Agreement or (B) the fifteenth business day after the Effective Time of the Initial Registration Statement. The Company will advise the Representatives promptly of any such filing pursuant to Rule 424(b) and provide satisfactory evidence to the Representatives of such timely filing. If an Additional Registration Statement is necessary to register a portion of the Offered Securities under the Act but the Effective Time thereof has not occurred as of the execution and delivery of this Agreement, the Company will file the Additional Registration Statement or, if filed, will file a post-effective amendment thereto with the Commission pursuant to and in accordance with Rule 462(b) on or prior to 10:00 P.M., New York time, on the date of this Agreement or, if earlier, on or prior to the time the Final Prospectus is finalized and distributed to any Underwriter, or will make such filing at such later date as shall have been consented to by the Representatives.
(b) Filing of Amendments; Response to Commission Requests. The Company will promptly advise the Representatives of any proposal to amend or supplement at any time the Initial Registration Statement, any Additional Registration Statement or any Statutory Prospectus and will not effect such amendment or supplementation without the Representatives consent; and the Company will also advise the Representatives promptly of (i) the effectiveness of any Additional Registration Statement (if its Effective Time is subsequent to the execution and delivery of this Agreement), (ii) any amendment or supplementation of a Registration Statement or any Statutory Prospectus, (iii) any request by the Commission or its staff for any amendment to any Registration Statement, for any supplement to any Statutory Prospectus or for any additional information, (iv) the institution by the Commission of any stop order proceedings in respect of a Registration Statement or the threatening of any proceeding for that purpose, and (v) the receipt by the Company of any notification with respect to the suspension of the qualification of the Offered Securities in any jurisdiction or the institution or threatening of any proceedings for such purpose. The Company will use its reasonable best efforts to prevent the issuance of any such stop order or the suspension of any such qualification and, if issued, to obtain as soon as possible the withdrawal thereof.
(c) Continued Compliance with Securities Laws. If, at any time when a prospectus relating to the Offered Securities is (or but for the exemption in Rule 172 would be) required to be delivered under the Act by any Underwriter or dealer, any event occurs as a result of which the Final Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Registration Statement or supplement the Final Prospectus to comply with the Act, the Company will promptly notify the Representatives of such event and will promptly prepare and file with the Commission and furnish, at its own expense, to the Underwriters and the dealers and any other dealers upon request of the Representatives, an amendment or supplement which will correct such statement or omission or an amendment which will effect such compliance. Neither the Representatives consent to, nor the Underwriters delivery of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 7 hereof.
(d) Testing-the-Waters Communication. If at any time following the distribution of any Written Testing-the-Waters Communication there occurred or occurs an event or development as a result of which such Written Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Representatives and will promptly amend or supplement, at its own expense, such Written Testing-the-Waters Communication to eliminate or correct such statement or omission.
(e) Rule 158. As soon as practicable, but not later than the Availability Date (as defined below), the Company will make generally available to its security holders (which may be satisfied by filing with the Commissions Electronic Data Gathering, Analysis and Retrieval (EDGAR) system) an earnings statement covering a period of at least 12 months beginning after the Effective Time of the Initial Registration Statement (or, if later, the Effective Time of the Additional Registration Statement) which will satisfy the provisions of Section 11(a) of the Act and Rule 158 under the Act. For the purpose of the preceding sentence, Availability Date means the day after the end of the fourth fiscal quarter following the fiscal quarter that includes such Effective Time on which the Company is required to file its Form 10-Q for such fiscal quarter except that, if such fourth fiscal quarter is the last quarter of the Companys fiscal year, Availability Date means the day after the end of such fourth fiscal quarter on which the Company is required to file its Form 10-K.
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(f) Furnishing of Prospectuses. The Company will furnish to the Representatives copies of each Registration Statement (including all exhibits), each related Statutory Prospectus, and, so long as a prospectus relating to the Offered Securities is (or but for the exemption in Rule 172 would be) required to be delivered under the Act, the Final Prospectus, the Canadian Private Placement Memorandum and all amendments and supplements to such documents, in each case in such quantities as the Representatives reasonably request. The Final Prospectus shall be so furnished on or prior to 3:00 P.M., New York time, on the second business day following the execution and delivery of this Agreement. All other documents shall be so furnished as soon as available. The Company will pay the expenses of printing and distributing to the Underwriters all such documents.
(g) Blue Sky Qualifications. The Company will arrange for the qualification of the Offered Securities for sale under the laws of such jurisdictions as the Representatives reasonably designate and will continue such qualifications in effect so long as required for the distribution of the Offered Securities as contemplated hereby; provided that the Company will not be required to qualify as a foreign corporation (where not otherwise required) in any jurisdiction in which it is not so qualified or file a general consent to service of process in any such jurisdiction or take any action that would subject it to taxation in respect of doing business in any such jurisdiction where it is not then so subject.
(h) Reporting Requirements. During the period of three years hereafter, the Company will furnish to the Representatives and, upon request, to each of the other Underwriters, as soon as practicable after the end of each fiscal year, a copy of its annual report to shareholders for such year; and the Company will furnish to the Representatives (i) as soon as available, a copy of each report and any definitive proxy statement of the Company filed with the Commission under the Exchange Act or mailed to shareholders, and (ii) from time to time, such other information concerning the Company as the Representatives may reasonably request. However, so long as the Company is subject to the reporting requirements of either Section 13 or Section 15(d) of the Exchange Act and is timely filing reports with the Commission on its EDGAR system, it is not required to furnish such reports or statements to the Underwriters.
(i) Payment of Expenses. The Company will pay all expenses incident to the performance of its obligations under this Agreement, including but not limited to (i) any filing fees and other expenses (including fees and disbursements of counsel to the Underwriters) incurred in connection with qualification of the Offered Securities for sale under the laws of such jurisdictions as the Representatives designate and the preparation and printing of memoranda relating thereto (such fees, expenses and disbursements not to exceed an aggregate of $5,000), (ii) costs and expenses related to the review by the Financial Industry Regulatory Authority, Inc. of the Offered Securities (including filing fees and the fees and expenses of counsel for the Underwriters relating to such review) (such costs, expenses and fees not to exceed an aggregate of $35,000), (iii) costs and expenses of the registrar and transfer agent of the Securities, (iv) costs and expenses relating to investor presentations or any road show in connection with the offering and sale of the Offered Securities including, without limitation, any travel expenses of the Companys officers and employees and any other expenses of the Company, including 50% of the cost of the chartering of any airplanes (with the remaining 50% of such airplanes to be paid by the Underwriters), (v) fees and expenses incident to listing the Offered Securities on the New York Stock Exchange, Nasdaq Stock Market and other national and foreign exchanges, (vi) fees and expenses in connection with the registration of the Offered Securities under the Exchange Act, (vii) any transfer taxes payable in connection with the delivery of the Offered Securities to the Underwriters, (viii) expenses incurred in distributing preliminary prospectuses, the Final Prospectus and the Canadian Private Placement Memorandum (including any amendments and supplements thereto) to the Underwriters, (ix) expenses incurred for preparing, printing and distributing any Issuer Free Writing Prospectuses to investors or prospective investors and (x) all fees and disbursements of counsel (including Canadian counsel and any other non-U.S. counsel) to the Company in connection with the Directed Share Program and stamp duties, similar taxes or duties or other taxes, if any, incurred by the Underwriters in connection with the Directed Share Program. It is understood, however, that except as provided in this Section 5(i), Section 8 titled Indemnity and Contribution, and the second sentence of Section 11 below, the Underwriters will pay all of their costs and expenses, including fees and disbursements of their counsel, share transfer taxes payable on resale of any of the Offered Securities by them and any advertising expenses connected with any offers they may make.
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(j) Use of Proceeds. The Company will use the net proceeds received in connection with this offering in the manner described in the Use of Proceeds section of the General Disclosure Package and, the Company.
(k) Absence of Manipulation. The Company will not take, directly or indirectly, any action designed to or that would constitute or that might reasonably be expected to cause or result in, stabilization or manipulation of the price of any securities of the Company to facilitate the sale or resale of the Offered Securities (it being understood that the Company makes no representation with respect to any action taken by any Underwriter or their affiliates).
(l) Taxes. The Company will indemnify and hold harmless the Underwriters against any documentary, stamp or similar issue tax, including any interest and penalties, on the creation, issue and sale of the Offered Securities and on the execution and delivery of this Agreement. All payments to be made by the Company hereunder shall be made without withholding or deduction for or on account of any present or future taxes, duties or governmental charges whatsoever unless the Company is compelled by law to deduct or withhold such taxes, duties or charges. In that event, the Company shall pay such additional amounts as may be necessary in order that the net amounts received after such withholding or deduction shall equal the amounts that would have been received if no withholding or deduction had been made.
(m) Restriction on Sale of Securities. For the period specified below (the Lock-Up Period), the Company will not, without the prior written consent of Credit Suisse Securities (USA) LLC, Stifel, Nicolaus & Company, Incorporated, Berenberg Capital Markets LLC, SVB Leerink LLC and BMO Capital Markets Corp (the Lock-Up Release Agents) directly or indirectly, take any of the following actions with respect to its Securities or any securities convertible into or exchangeable or exercisable for any of its Securities (Lock-Up Securities): (i) offer, sell, issue, contract to sell, pledge or otherwise dispose of Lock-Up Securities, (ii) offer, sell, issue, contract to sell, contract to purchase or grant any option, right or warrant to purchase Lock-Up Securities, (iii) enter into any swap, hedge or any other agreement that transfers, in whole or in part, the economic consequences of ownership of Lock-Up Securities, (iv) establish or increase a put equivalent position or liquidate or decrease a call equivalent position in Lock-Up Securities within the meaning of Section 16 of the Exchange Act or (v) submit or file with the Commission a registration statement under the Act relating to Lock-Up Securities, or publicly disclose the intention to take any such action, without the prior written consent of the Lock-Up Release Agents.
(n) The restrictions contained in the preceding paragraph shall not apply to (i) Lock-Up Securities sold pursuant to this Agreement, (ii) issuances of Lock-Up Securities pursuant to the conversion or exchange of convertible or exchangeable securities or the exercise of warrants or options, in each case outstanding on the date hereof and described in the General Disclosure Package and the Prospectus, (iii) grants of options and other equity awards pursuant to the terms of a plan described in the General Disclosure Package, or issuances of Lock-Up Securities pursuant to the exercise or settlement of such options or other equity awards, provided that each recipient of any such securities shall execute and deliver to the Representatives an agreement substantially in the form of Exhibit E hereto to the extent the Lock-Up Securities held by such person are not otherwise bound by an agreement in substantially the form attached as Exhibit E hereto (iv) the filing of a registration statement on Form S-8, and the issuance of securities registered thereunder, relating to any plans or arrangements disclosed in the General Disclosure Package and the Prospectus, (v) the issuance of Lock-Up Securities in connection with (A) the acquisition of the assets of, or a majority or controlling portion of the equity of, or a business combination or a joint venture with, another entity in connection with such business combination or such acquisition by the Company or any of its subsidiaries of such entity or (B) joint ventures, licensing, commercial relationships or other strategic transactions, provided that the aggregate number of Securities issued or issuable pursuant to this clause (v) does not exceed 5% of the number of Securities outstanding immediately after the offering of the Offered Securities pursuant to this Agreement and provided further that each recipient of any such securities shall execute and deliver to the Representatives an agreement substantially in the form of Exhibit E hereto, and (vi) facilitating the establishment of a trading plan on behalf of a shareholder, officer or director of the Company pursuant to Rule 10b5-1 under the Exchange Act for the transfer of Securities, provided that such plan does not provide for the transfer of Securities during the Lock-Up Period.
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The Lock-Up Period will commence on the date hereof and continue for 180 days after the date hereof or until such earlier date that the Lock-Up Release Agents consent to in writing.
(o) Agreement to Announce Lock-Up Waiver. If the Lock-Up Release Agents, in their sole discretion, agree to release or waive the restrictions set forth in a lock-up letter described in Section 7(j) hereof for an officer or director of the Company and provide the Company with notice of the impending release or waiver at least three business days before the effective date of the release or waiver, the Company agrees to announce the impending release or waiver by a press release substantially in the form of Exhibit A hereto through a major news service at least two business days before the effective date of the release or waiver.
(p) Loss of Emerging Growth Company Status. The Company will promptly notify the Representatives if the Company ceases to be an Emerging Growth Company at any time prior to the later of (i) completion of the distribution of the Offered Securities within the meaning of the Act and (ii) completion of the Lock-Up Period referred to in Section 5(m) hereof.
(q) Transfer Restrictions. In connection with the Directed Share Program, the Company will ensure that the Directed Shares will be restricted to the extent required by FINRA or the FINRA rules from sale, transfer, assignment, pledge or hypothecation for a period of three months following the date of the effectiveness of the Registration Statement. The Designated Underwriter will notify the Company as to which Participants will need to be so restricted. The Company will direct the transfer agent to place stop transfer restrictions upon such securities for such period of time.
(r) Compliance with Foreign Laws. The Company will comply with all applicable securities and other applicable laws, rules and regulations in each foreign jurisdiction in which the Directed Shares are offered in connection with the Directed Share Program.
6. Free Writing Prospectuses. The Company represents and agrees that, unless it obtains the prior consent of the Representatives, and each Underwriter represents and agrees that, unless it obtains the prior consent of the Company and the Representatives, it has not made and will not make any offer relating to the Offered Securities that would constitute an Issuer Free Writing Prospectus, or that would otherwise constitute a free writing prospectus, as defined in Rule 405, required to be filed with the Commission. Any such free writing prospectus consented to by the Company and the Representatives is hereinafter referred to as a Permitted Free Writing Prospectus. The Company represents that it has treated and agrees that it will treat each Permitted Free Writing Prospectus as an Issuer Free Writing Prospectus, and has complied and will comply with the requirements of Rules 164 and 433 applicable to any Permitted Free Writing Prospectus, including timely Commission filing where required, legending and record keeping. The Company represents that it has satisfied and agrees that it will satisfy the conditions in Rule 433 to avoid a requirement to file with the Commission any electronic road show.
7. Conditions of the Obligations of the Underwriters. The obligations of the several Underwriters to purchase and pay for the Firm Securities on the First Closing Date and the Optional Securities to be purchased on each Optional Closing Date will be subject to the accuracy of the representations and warranties of the Company herein (as though made on such Closing Date), to the accuracy of the statements of Company officers made pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions precedent:
(a) Accountants Comfort Letter. The Representatives shall have received letters, dated, respectively, the date hereof and each Closing Date, of KPMG, LLP and Armanino LLP, each confirming that they are a registered public accounting firm and independent public accountants within the meaning of the Securities Laws and in form and substance satisfactory to the Representatives, and containing statements and information of the type ordinarily included in accountants comfort letters to underwriters with respect to the financial statements and certain financial information of the Company and its subsidiaries contained in the Registration Statement, General Disclosure Package and Final Prospectus (except that, in any letter dated a Closing Date, the specified date referred to in such letter hereto shall be a date no more than three days prior to such Closing Date).
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(b) Effectiveness of Registration Statement. If the Effective Time of the Additional Registration Statement (if any) is not prior to the execution and delivery of this Agreement, such Effective Time shall have occurred not later than 10:00 P.M., New York time, on the date of this Agreement or, if earlier, the time the Final Prospectus is finalized and distributed to any Underwriter, or shall have occurred at such later time as shall have been consented to by the Representatives. The Final Prospectus shall have been filed with the Commission in accordance with the Rules and Regulations and Section 5(a) hereof. Prior to such Closing Date, no stop order suspending the effectiveness of a Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or, to the knowledge of the Company or the Representatives, shall be contemplated by the Commission.
(c) No Material Adverse Change. Subsequent to the execution and delivery of this Agreement, there shall not have occurred (i) any change, or any development or event involving a prospective change, in the condition (financial or otherwise), results of operations, business, properties or prospects of the Company and its subsidiaries taken as a whole which, in the judgment of the Representatives, is material and adverse and makes it impractical or inadvisable to market the Offered Securities; (ii) any change in U.S., Canadian or international financial, political or economic conditions or currency exchange rates or exchange controls the effect of which is such as to make it, in the judgment of the Representatives, impractical to market or to enforce contracts for the sale of the Offered Securities, whether in the primary market or in respect of dealings in the secondary market; (iii) any suspension or material limitation of trading in securities generally on the New York Stock Exchange, The Nasdaq Stock Market LLC or any nationally recognized exchange, or any setting of minimum or maximum prices for trading on any such exchange; (iv) or any suspension of trading of any securities of the Company on any exchange or in the over-the-counter market; (v) any banking moratorium declared by any U.S. federal, New York or Canadian authorities; (vi) any major disruption of settlements of securities, payment, or clearance services in the United States or Canada or any other country where such securities are listed or (vii) any attack on, outbreak or escalation of hostilities or act of terrorism involving the United States or Canada, any declaration of war by The United States Congress or any other national or international calamity or emergency if, in the judgment of the Representatives, the effect of any such attack, outbreak, escalation, act, declaration, calamity or emergency is such as to make it impractical or inadvisable to market the Offered Securities or to enforce contracts for the sale of the Offered Securities.
(d) Opinion and Negative Assurance Letter of Counsel for the Company. The Representatives shall have received an opinion and negative assurance letter, dated such Closing Date, of Goodwin Procter LLP, counsel for the Company, in the form and substance acceptable to the Representatives.
(e) Opinion of Local Counsel for the Company. The Representatives shall have received an opinion, dated such Closing Date, of Blake, Cassels & Graydon LLP (Canada), Canadian counsel for the Company, in form and substance acceptable to the Representatives.
(f) Opinion of Intellectual Property Counsel for Company. The Representatives shall have received an opinion, dated such Closing Date, of Potomac Law Group, PLLC, intellectual property counsel for the Company, in the form and substance acceptable to the Representatives.
(g) Opinion and Negative Assurance Letter of Counsel for Underwriters. The Representatives shall have received from Cooley LLP, counsel for the Underwriters, such opinion or opinions and negative assurance letter, dated such Closing Date, with respect to such matters as the Representatives may require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters.
(h) Opinion of Local Counsel for Underwriters. The Representatives shall have received from Osler, Hoskin & Harcourt LLP, Canadian counsel for the Underwriters, such opinion or opinions, dated such Closing Date, with respect to such matters as the Representatives may require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters.
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(i) Officers Certificate. The Representatives shall have received a certificate, dated such Closing Date, of an executive officer of the Company and a principal financial or accounting officer of the Company in which such officers shall state that: the representations and warranties of the Company in this Agreement are true and correct; the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to such Closing Date; no stop order suspending the effectiveness of any Registration Statement has been issued and no proceedings for that purpose have been instituted or, to the best of their knowledge and after reasonable investigation, are contemplated by the Commission; the Additional Registration Statement (if any) satisfying the requirements of subparagraphs (1) and (3) of Rule 462(b) was timely filed pursuant to Rule 462(b), including payment of the applicable filing fee in accordance with Rule 3a(c) of the Commissions Informal and Other Procedures (16 CFR 202.3a); and, subsequent to the date of the most recent financial statements in the General Disclosure Package and the Final Prospectus, there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or otherwise), results of operations, business, properties or prospects of the Company and its subsidiaries taken as a whole except as set forth in the General Disclosure Package and the Final Prospectus or as described in such certificate.
(j) Lock-up Agreements. On or prior to the date hereof, the Representatives shall have received lockup agreements in the form set forth on Exhibit E from each of the executive officers and directors and substantially all security holders of the Company.
(k) Chief Financial Officer Certificate. The Representatives shall have received a certificate, dated the date hereof and such Closing Date, in form and substance reasonably satisfactory to the Representatives.
(l) No Objection. FINRA shall have confirmed that it has not raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements relating to the offering of the Offered Securities.
The Company will furnish the Representatives with such conformed copies of such opinions, certificates, letters and documents as the Representatives reasonably request. The Representatives may in their sole discretion waive on behalf of the Underwriters compliance with any conditions to the obligations of the Underwriters hereunder, whether in respect of an Optional Closing Date or otherwise.
8. Indemnification and Contribution.
(a) Indemnification of Underwriters. The Company will indemnify and hold harmless each Underwriter, its partners, members, directors, officers, employees, agents, affiliates and each person, if any, who controls such Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act (each, an Indemnified Party), against any and all losses, claims, damages or liabilities, joint or several, to which such Indemnified Party may become subject, under the Act, the Exchange Act, other federal, state or provincial statutory law or regulation or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any part of any Registration Statement at any time, any Statutory Prospectus as of any time, the Final Prospectus, the General Disclosure Package, any Issuer Free Writing Prospectus, any Written Testing-the-Waters Communication or the Canadian Private Placement Memorandum, or arise out of or are based upon the omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Indemnified Party for any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending against any loss, claim, damage, liability, action, litigation, investigation or proceeding whatsoever (whether or not such Indemnified Party is a party thereto), whether threatened or commenced, and in connection with the enforcement of this provision with respect to any of the above as such expenses are incurred; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Company by any Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in subsection (b) below.
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The Company agrees to indemnify and hold harmless the Designated Underwriter and its affiliates and each person, if any, who controls the Designated Underwriter within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act (the Designated Entities), from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) (i) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any material prepared by or with the consent of the Company for distribution to Participants in connection with the Directed Share Program or arising out of or based upon any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) arising out of or based upon the failure of any Participant to pay for and accept delivery of Directed Shares that the Participant agreed to purchase; or (iii) arising out of, related to, or in connection with the Directed Share Program, other than losses, claims, damages or liabilities (or expenses relating thereto) that are finally judicially determined to have resulted from the willful misconduct or gross negligence of the Designated Entities.
(b) Indemnification of Company. Each Underwriter will severally and not jointly indemnify and hold harmless the Company, each of its directors and each of its officers who signs a Registration Statement and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act (each, an Underwriter Indemnified Party), against any losses, claims, damages or liabilities to which such Underwriter Indemnified Party may become subject, under the Act, the Exchange Act, other Federal or state statutory law or regulation or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any part of any Registration Statement at any time, any Statutory Prospectus as of any time, the Final Prospectus, any Issuer Free Writing Prospectus, any Written Testing-the-Waters Communication or the Canadian Private Placement Memorandum, or arise out of or are based upon the omission or the alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Underwriter through the Representatives specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by such Underwriter Indemnified Party in connection with investigating or defending against any such loss, claim, damage, liability, action, litigation, investigation or proceeding whatsoever (whether or not such Underwriter Indemnified Party is a party thereto), whether threatened or commenced, based upon any such untrue statement or omission, or any such alleged untrue statement or omission as such expenses are incurred, it being understood and agreed that the only such information furnished by any Underwriter consists of (i) the following information in the Final Prospectus furnished on behalf of each Underwriter: the concession figure appearing in the fifth paragraph under the caption Underwriting and the information contained in the fourteenth and fifteenth paragraphs under the caption Underwriting.
(c) Actions against Parties; Notification. Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under subsection (a) or (b) above, notify the indemnifying party of the commencement thereof; but the failure to notify the indemnifying party shall not relieve it from any liability that it may have under subsection (a) or (b) above except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided further that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under subsection (a) or (b) above. In case any such action is brought against any indemnified party and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section 8 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. Notwithstanding anything contained herein to the contrary, if indemnity may be sought pursuant to the second paragraph in Section 8 (a) hereof in respect of such action or proceeding, then in addition to such separate firm for the indemnified parties, the indemnifying party shall be liable for the reasonable fees and expenses of not more than one separate firm (in addition to any local counsel) for the Designated Underwriter for the defense of any losses, claims, damages and liabilities arising out of the Directed Share Program, and all persons, if any, who control the Designated Underwriter within the meaning of either Section 15 of the Act of Section 20 of the Exchange Act. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (i) includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of an indemnified party.
23
(d) Contribution. If the indemnification provided for in this Section 8 is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Underwriters. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Underwriters and the parties relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding the provisions of this subsection (d), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters obligations in this subsection (d) to contribute are several in proportion to their respective underwriting obligations and not joint. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this subsection (d).
9. Default of Underwriters. If any Underwriter or Underwriters default in their obligations to purchase Offered Securities hereunder on either the First Closing Date or any Optional Closing Date and the aggregate number of shares of Offered Securities that such defaulting Underwriter or Underwriters agreed but failed to purchase does not exceed 10% of the total number of shares of Offered Securities that the Underwriters are obligated to purchase on such Closing Date, the Representatives may make arrangements satisfactory to the Company for the purchase of such Offered Securities by other persons, including any of the Underwriters, but if no such arrangements are made by such Closing Date, the non-defaulting Underwriters shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Offered Securities that such defaulting Underwriters agreed but failed to purchase on such Closing Date. If any Underwriter or Underwriters so default and the aggregate number of shares of Offered Securities with respect to which such default or defaults occur exceeds 10% of the total number of shares of Offered Securities that the Underwriters are obligated to purchase on such Closing Date and arrangements satisfactory to the Representatives and the Company for the purchase of such Offered Securities by other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriter or the Company, except as provided in Section 10 (provided that if such default occurs with respect to Optional Securities after the First Closing Date, this Agreement will not terminate as to the Firm Securities or any Optional Securities purchased prior to such termination). As used in this Agreement, the term Underwriter includes any person substituted for an Underwriter under this Section 9. Nothing herein will relieve a defaulting Underwriter from liability for its default.
24
10. Termination. The Underwriters may terminate this Agreement by notice given by the Representatives to the Company, if after the execution and delivery of this Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on, or by, as the case may be, any of the New York Stock Exchange or The Nasdaq Global Market, (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a material disruption in securities settlement, payment or clearance services in the United States or Canada shall have occurred, (iv) any moratorium on commercial banking activities shall have been declared by Federal, New York State or Canadian authorities or (v) there shall have occurred any outbreak or escalation of hostilities, or any change in financial markets or any calamity or crisis that, in the judgment of the Representatives, is material and adverse and which, singly or together with any other event specified in this clause (v), makes it, in the judgment of the Representatives, impracticable or inadvisable to proceed with the offer, sale or delivery of the Offered Securities on the terms and in the manner contemplated in the Registration Statement, the General Disclosure Package or the Final Prospectus.
11. Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations, warranties and other statements of the Company or its officers and of the several Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any termination of this Agreement or any investigation, or statement as to the results thereof, made by or on behalf of any Underwriter, the Company or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Offered Securities. If the purchase of the Offered Securities by the Underwriters is not consummated for any reason other than (i) solely because of the termination of this Agreement pursuant to Section 9 hereof (provided that any non-defaulting Underwriters will still be reimbursed) or (ii) those set forth in clauses (i), (iii), (iv) or (v) of Section 10), the Company will (A) prior to the First Closing Date, reimburse the Underwriters for all reasonable out-of-pocket expenses (including reasonable fees and disbursements of counsel) reasonably incurred by them in connection with the offering of the Offered Securities and (B) after the First Closing Date but prior to any Optional Closing Date, reimburse the Underwriters for all reasonable out-of-pocket expenses (including reasonable fees and disbursements of counsel) reasonably incurred by them in connection with the offering of any Optional Securities, and the respective obligations of the Company and the Underwriters pursuant to Section 8 hereof shall remain in effect. In addition, if any Offered Securities have been purchased hereunder, the representations and warranties in Section 2 and all obligations under Section 5 shall also remain in effect.
12. Notices. All communications hereunder will be in writing and, if sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed to the Representatives, c/o Credit Suisse Securities (USA) LLC, Eleven Madison Avenue, New York, New York 10010-3629, Facsimile: (212) 325-4296 Attention: IBCM-Legal, Stifel, Nicolaus & Company, Incorporated, 787 7th Avenue, 11th Floor, New York, NY 10019 Attention: Equity Capital Markets, c/o Berenberg Capital Markets LLC, 1251 Avenue of Americas, 53rd Floor, New York, NY 10020, Attention: Equity Syndicate Desk, c/o SVB Leerink at 1301 Avenue of the Americas, 12th Floor, New York, New York 10019, attention of Stuart R. Nayman, Esq. (facsimile (646) 499-7051), c/o BMO Capital Markets Corp., 3 Times Square, 25th Floor, New York New York 10026 (fax: (212) 702-1205); Attention: Legal Department, or, if sent to the Company, will be mailed, delivered or telegraphed and confirmed to it at AbCellera Biologics Inc., 2215 Yukon Street, Vancouver, BC V5Y 0A1, Attention: General Counsel; provided, however, that any notice to an Underwriter pursuant to Section 8 will be mailed, delivered or telegraphed and confirmed to such Underwriter.
13. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers and directors and controlling persons referred to in Section 8, and no other person will have any right or obligation hereunder.
25
14. Representation of Underwriters. The Representatives will act for the several Underwriters in connection with the transactions contemplated by this Agreement, and any action under this Agreement taken by the Representatives will be binding upon all the Underwriters.
15. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. The words execution, signed, signature, delivery, and words of like import in or relating to this Agreement or any document to be signed in connection with this Agreement shall be deemed to include electronic signatures, deliveries or the keeping of records in electronic form. Counterparts may be delivered via facsimile, electronic mail (including any electronic signature covered by the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act, the Electronic Signatures and Records Act or other applicable law, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, and the parties hereto consent to conduct the transactions contemplated hereunder by electronic means.
16. Absence of Fiduciary Relationship. The Company acknowledges and agrees that:
(a) No Other Relationship. The Representatives have been retained solely to act as underwriters in connection with the sale of the Offered Securities and that no fiduciary, advisory or agency relationship between the Company and the Representatives has been created in respect of any of the transactions contemplated by this Agreement or the Final Prospectus, irrespective of whether the Representatives have advised or are advising the Company on other matters;
(b) Arms Length Negotiations. The price of the Offered Securities set forth in this Agreement was established by the Company following discussions and arms-length negotiations with the Representatives and the Company is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated by this Agreement;
(c) Absence of Obligation to Disclose. The Company has been advised that the Representatives and their affiliates are engaged in a broad range of transactions which may involve interests that differ from those of the Company and that the Representatives have no obligation to disclose such interests and transactions to the Company by virtue of any fiduciary, advisory or agency relationship; and
(d) Waiver. The Company waives, to the fullest extent permitted by law, any claims it may have against the Representatives for breach of fiduciary duty or alleged breach of fiduciary duty and agrees that the Representatives shall have no liability (whether direct or indirect) to the Company in respect of such a fiduciary duty claim or to any person asserting a fiduciary duty claim on behalf of or in right of the Company, including shareholders, employees or creditors of the Company.
17. Applicable Law. This Agreement and any claim, controversy or dispute arising under or related to this Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.
The Company hereby submits to the non-exclusive jurisdiction of the Federal and state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. The Company irrevocably and unconditionally waives any objection to the laying of venue of any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby in Federal and state courts in the Borough of Manhattan in The City of New York and irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such suit or proceeding in any such court has been brought in an inconvenient forum. The Company irrevocably appoints The Corporation Trust Company, as its authorized agent in the Borough of Manhattan in The City of New York upon which process may be served in any such suit or proceeding, and agrees that service of process upon such agent, and written notice of said service to the Company by the person serving the same to the address provided in Section 10, shall be deemed in every respect effective service of process upon the Company in any such suit or proceeding. The Company further agrees to take any and all action as may be necessary to maintain such designation and appointment of such agent in full force and effect for a period of seven years from the date of this Agreement.
26
The obligation of the Company pursuant to this Agreement in respect of any sum due to any Underwriter shall, notwithstanding any judgment in a currency other than United States dollars, not be discharged until the first business day, following receipt by such Underwriter of any sum adjudged to be so due in such other currency, on which (and only to the extent that) such Underwriter may in accordance with normal banking procedures purchase United States dollars with such other currency; if the United States dollars so purchased are less than the sum originally due to such Underwriter hereunder, the Company agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Underwriter against such loss. If the United States dollars so purchased are greater than the sum originally due to such Underwriter hereunder, such Underwriter agrees to pay to the Company an amount equal to the excess of the dollars so purchased over the sum originally due to such Underwriter hereunder.
18. Waiver of Jury Trial. The Company and each of the Underwriters hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
19. Recognition of the U.S. Special Resolution Regimes.
(i) |
In the event that any Underwriter that is a Covered Entity becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer from such Underwriter of this Agreement, and any interest and obligation in or under this Agreement, will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Agreement, and any such interest and obligation, were governed by the laws of the United States or a state of the United States. |
(ii) |
In the event that any Underwriter that is a Covered Entity or a BHC Act Affiliate of such Underwriter becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under this Agreement that may be exercised against such Underwriter are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Agreement were governed by the laws of the United States or a state of the United States. |
As used in this Section 19:
BHC Act Affiliate has the meaning assigned to the term affiliate in, and shall be interpreted in accordance with, 12 U.S.C. § 1841(k).
Covered Entity means any of the following:
(i) |
a covered entity as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b); |
(ii) |
a covered bank as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or |
(iii) |
a covered FSI as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b). |
Default Right has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
U.S. Special Resolution Regime means each of (i) the Federal Deposit Insurance Act and the regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.
[Signature page follows]
27
If the foregoing is in accordance with the Representatives understanding of our agreement, kindly sign and return to the Company one of the counterparts hereof, whereupon it will become a binding agreement among the Company and the several Underwriters in accordance with its terms.
Very truly yours, | ||
ABCELLERA BIOLOGICS INC. |
By: |
|
Name: | ||
Title: |
[Signature Page to Underwriting Agreement]
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written. |
CREDIT SUISSE SECURITIES (USA) LLC |
By: |
|
Name: | ||||
Title: |
STIFEL, NICOLAUS & COMPANY, INCORPORATED |
By: |
|
Name: | ||||
Title: |
BERENBERG CAPITAL MARKETS LLC |
By: |
|
Name: | ||||
Title: |
By: |
|
Name: | ||||
Title: |
SVB LEERINK LLC |
By: |
|
Name: | ||||
Title: |
BMO CAPITAL MARKETS CORP. |
By: |
|
Name: | ||||
Title: | ||||
Acting on behalf of themselves and as the Representatives of the several Underwriters |
[Signature to Underwriting Agreement]
SCHEDULE A
Underwriter |
Number of Firm
Securities |
|||
Credit Suisse Securities (USA) LLC |
||||
Stifel, Nicolaus & Company, Incorporated |
||||
Berenberg Capital Markets LLC |
||||
SVB Leerink LLC |
||||
BMO Capital Markets Corp. |
||||
|
|
|||
Total |
||||
|
|
SCHEDULE B
1. |
General Use Free Writing Prospectuses (included in the General Disclosure Package) |
General Use Issuer Free Writing Prospectus includes each of the following documents:
[●]
2. |
Other Information Included in the General Disclosure Package |
The following information is also included in the General Disclosure Package:
1. |
The initial price per share to the public of the Offered Securities: $[●]. |
SCHEDULE C
Written Testing-the-Waters Communications
[●]
Exhibit A
Form of Press Release
AbCellera Biologics Inc. (the Company) announced today that Credit Suisse Securities (USA) LLC Credit Suisse Securities (USA) LLC, Stifel, Nicolaus & Company, Incorporated, Berenberg Capital Markets LLC and SVB Leerink LLC, the joint book-running managers, and BMO Capital Markets Corp, a book-runner, in the Companys recent public sale of [●] shares of common stock, are [waiving] [releasing] a lock-up restriction with respect to shares of the Companys common stock held by [certain officers or directors] [an officer or director] of the Company. The [waiver] [release] will take effect on , 20 , and the shares may be sold on or after such date. This press release is not an offer for sale of the securities in the United States or in any other jurisdiction where such offer is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the United States Securities Act of 1933, as amended.
Exhibit B
Form of Lock-Up Agreement
[●], 2020
AbCellera Biologics Inc.
2215 Yukon Street
Vancouver, BC V5Y 0A1
Canada
Credit Suisse Securities (USA) LLC
Stifel, Nicolaus & Company, Incorporated
SVB Leerink LLC
Berenberg Capital Markets LLC
BMO Capital Markets Corp
As Representatives of the several
Underwriters listed in Schedule 1 to the
Underwriting Agreement referred to below
c/o |
Credit Suisse Securities (USA) LLC |
Eleven Madison Avenue
New York, NY 10010-3629
c/o |
Stifel, Nicolaus & Company, Incorporated |
787 7th Avenue, 11th Floor
New York, NY 10019
c/o |
Berenberg Capital Markets LLC |
1251 Avenue of Americas, 53rd Floor
New York, NY 10020
c/o |
SVB Leerink LLC |
1301 Avenue of Americas, 12th Floor
New York, NY 10019
c/o |
BMO Capital Markets Corp. |
3 Times Square, 24th Floor
New York, NY 10036
Ladies and Gentlemen:
The undersigned understands that Credit Suisse Securities (USA) LLC, Stifel, Nicolaus & Company, Incorporated, Berenberg Capital Markets LLC, SVB Leerink LLC, and BMO Capital Markets Corp. (collectively, the Representatives) propose to enter into an Underwriting Agreement (the Underwriting Agreement) with AbCellera Biologics Inc., a corporation incorporated under the Business Corporations Act (British Columbia) (the Company), providing for the public offering (the Public Offering) by the several Underwriters listed in Schedule 1 therein (the Underwriters) of common shares (the Shares) of the Company. In consideration of the Underwriters agreement to purchase and make the Public Offering of the Shares, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned hereby irrevocably agrees that without the prior written consent of the Representatives, on behalf of the Underwriters, the undersigned will not, directly or indirectly (or cause any direct or indirect affiliate to), during the period beginning on the date of this Lock-Up Agreement and continuing to and including the date that is 180 days after the date of the final prospectus for the Public Offering (the Prospectus) (the Lock-Up Period), (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, any Shares or securities convertible into or exchangeable or exercisable for any Shares (including, without limitation, Shares that may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission (SEC), securities which may be issued upon exercise of a stock option or warrant and any Shares, options, warrants or securities now owned or hereafter acquired by the undersigned (collectively, the Lock-Up Securities)), (2) enter into any swap, hedge, option, derivative or other arrangement (including, without limitation, any short sale or the purchase or sale of, or entry into, any put or call option, or combination thereof, forward, swap or any other derivative transaction or instrument, however described or defined) designed or intended to, or which could reasonably be expected to lead to or result in, a sale, loan, pledge or other disposition (whether by the undersigned or someone other than the undersigned) or transfer of any economic consequences of ownership, in whole or in part, directly or indirectly, of any Lock-Up Securities, whether any such aforementioned transaction is to be settled by delivery of the Lock-Up Securities, in cash or otherwise, (3) exercise any right with respect to the registration of any Lock-Up Securities, or file, cause to be filed or cause to be confidentially submitted, any registration statement or prospectus in connection therewith, under the Securities Act of 1933, as amended (the Securities Act) or under applicable Canadian securities laws, or (4) publicly disclose the intention to do any of the foregoing. The undersigned represents and warrants that the undersigned is not, and has not caused or directed any of its affiliates to be or become, currently a party to any agreement or arrangement that provides for, is designed to or which reasonably could be expected to lead to or result in any transfer of Shares during the Lock-Up Period.
Notwithstanding the foregoing, the undersigned may transfer or dispose of the undersigneds Lock-Up Securities:
(a) |
as a bona fide gift or gifts or charitable contribution, or for bona fide estate planning purposes; |
(b) |
by will, other testamentary document or intestacy, or pursuant to a so-called living trust or other revocable trust established to provide for the disposition of property on the undersigneds death; |
(c) |
to an immediate family member of the undersigned, or to a trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned, or if the undersigned is a trust, to a trustor or beneficiary of the trust or to the estate of a beneficiary of such trust (for purposes of this Lock-Up Agreement, immediate family shall mean any relationship by blood, current or former marriage, or domestic partnership or adoption, not more remote than first cousin); |
(d) |
to a nominee or custodian of a person or entity to whom a transfer or disposition would be permissible under clauses (a) through (c), and in each such case, subject to the same conditions; |
(e) |
to a partnership, limited liability company or other entity of which the undersigned and/or the immediate family of the undersigned are the legal and beneficial owner of all of the outstanding equity securities or similar interests; |
(f) |
if the undersigned is a corporation, partnership, limited liability company, trust or other business entity, (i) to another corporation, partnership, limited liability company, trust or other business entity that is an affiliate (as defined in Rule 405 promulgated under the Securities Act) of the undersigned, or to any investment fund or other entity controlling, controlled by, managing or managed by or under common control with the undersigned or affiliates of the undersigned (including, for the avoidance of doubt, where the undersigned is a partnership, to its general partner or a successor partnership or fund, or any other funds managed by such partnership), or (ii) as part of a distribution to members, partners, shareholders or other equityholders of the undersigned; |
(g) |
by operation of law pursuant to a final qualified domestic order, divorce settlement, divorce decree or separation agreement or other order of a court; |
(h) |
acquired in the open market after the date of the Prospectus; |
(i) |
to the Company from an employee or other service provider of the Company upon death, disability or termination of employment or service provider, in each case, of such employee or service provider pursuant to a contractual arrangement, stock incentive plan or other equity award plan described in the Prospectus (such a plan, an Equity Plan), or otherwise disclosed in the Prospectus or filed as an exhibit to the registration statement to be filed with the Securities and Exchange Commission relating to the Public Offering (the Registration Statement), provided that no filing under Section 16 of the Exchange Act or other public filing, report or announcement reporting a reduction in beneficial ownership of shares of common stock shall be required or shall be voluntarily made during the Lock-Up Period within 30 days after the date the undersigned ceases to provide services to the Company, and after such 30th day, if the undersigned is required to file a report under Section 16 of the Exchange Act reporting a reduction in beneficial ownership of shares of common stock during the Lock-Up Period, the undersigned shall clearly indicate in the footnotes thereto that the filing relates to the termination of the undersigneds employment or other services; |
(j) |
pursuant to a bona fide third-party tender offer, merger, consolidation or other similar transaction that is approved by the board of directors of the Company (or a duly authorized committee thereof) involving a Change of Control (for purposes hereof, Change of Control shall mean the transfer (whether by tender offer, merger, consolidation or other similar transaction), in one transaction or a series of related transactions, to a person or group of affiliated persons, of shares of capital stock if, after such transfer, such person or group of affiliated persons would hold more than 50% of the outstanding voting securities of the Company (or the surviving entity)); provided, that in the event that such tender offer, merger, consolidation or other similar transaction is not completed, the undersigneds Lock-Up Securities shall remain subject to the provisions of this Lock-Up Agreement; |
(k) |
to the Company in connection with the vesting, settlement, or exercise of restricted stock units, options, warrants or other rights to purchase Shares (including, in each case, by way of net or cashless exercise), including for the payment of exercise price and tax and remittance payments due as a result of the vesting, settlement, or exercise of such restricted stock units, options, warrants or rights, provided that any such Shares received upon such exercise, vesting or settlement shall be subject to the terms of this Lock-Up Agreement, and provided further that any such restricted stock units, options, warrants or rights are held by the undersigned pursuant to an (A) agreement or (B) equity awards granted under an equity incentive plan, stock purchase plan or other equity award plan (each, an Equity Plan), each such agreement or Equity Plan which is described in the Prospectus, or filed as an exhibit to the Registration Statement and provided further that if any filing or public announcement of the transfer or disposition is required under Section 16(a) of the Exchange Act, the undersigned shall clearly indicate in the footnotes thereto that the filing relates to a transfer or disposition pursuant to an Equity Plan; or |
(l) |
in connection with the conversion of outstanding convertible preferred shares of the Company into Shares as described in the Prospectus, or any reclassification or conversion of the Shares as described in the Prospectus, provided that any Shares received upon such conversion or reclassification will be subject to the restrictions set forth in this Lock-Up Agreement, such conversion is disclosed in the Prospectus and that any required filing under the Exchange Act during the Lock-Up Period shall clearly indicate in the footnotes thereto that the filing relates to the circumstances described in this clause and no other filing or public announcement shall be made voluntarily during the Lock-Up Period in connection with the conversion or reclassification; |
provided that (A) in the case of any transfer or distribution pursuant to clauses (a), (b), (c), (d), (e), (f) and (g), each donee, trustee, transferee or distributee shall sign and deliver to the Representatives and the Company a lock-up letter substantially in the form of this Lock-Up Agreement, (B) in the case of any transfer or distribution pursuant to clauses (a), (b), (c), (d), (e) and (f), such transfers or distributions are not dispositions for value, and (C) in the case of any transfer or distribution pursuant to clauses (a), (b), (c), (d), (e), (f), (g) and (h), each party (donor, donee, trustee, transferor, transferee, distributer or distributee) shall not be required under Section 16(a) of the Exchange Act to make, and shall agree to not voluntarily make, any filing or public announcement of the transfer or disposition prior to the expiration of the Lock-Up Period (other than a filing on Form 5 after the expiration of the Lock-Up Period, and with respect to clauses (b) and (g), a filing on Form 4, in each case required to be filed under the Exchange Act, in which case any such filing will indicate by footnote disclosure or otherwise the nature of the transfer or disposition).
Notwithstanding anything herein to the contrary, the undersigned may enter into a written trading plan established pursuant to Rule 10b5-1 of the Exchange Act (a Rule 10b5-1 Plan) during the Lock-Up Period, and the Company may announce the establishment of such a plan, provided that no direct or indirect offers, pledges, sales, contracts to sell sales of any option or contract to purchase, purchases of any option or contract to sell, grants of any option, right or warrant to purchase, loans, or other transfers or disposals of any Lock-Up Securities may be effected pursuant to such plan during the Lock-Up Period; provided further, that the Company is not required to report the establishment of such Rule 10b5-1 Plan in any public report or filing with the SEC under the Exchange Act during the Lock-Up Period and does not otherwise voluntarily effect any such public filing or report regarding such Rule 10b5-1 Plan.
If the undersigned is not a natural person, the undersigned represents and warrants that no single natural person, entity or group (within the meaning of Section 13(d)(3) of the Exchange Act), other than a natural person, entity or group (as described above) that has executed a Lock-Up Agreement in substantially the same form as this Lock-Up Agreement, beneficially owns, directly or indirectly, 50% or more of the common equity interests, or 50% or more of the voting power, in the undersigned.
If the undersigned is an officer or director of the Company, (i) the undersigned further agrees that the foregoing restrictions in this Lock-Up Agreement shall be equally applicable to any issuer-directed Shares (as referred to in FINRA Rule 5131(d)(2)(A)) that the undersigned may purchase in the Public Offering pursuant to an allocation of Shares that is directed in writing by the Company, (ii) the Representatives agree that, at least three business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of Shares, they will notify the Company of the impending release or waiver, and (iii) the Company has agreed in the Underwriting Agreement to announce the impending release or waiver by issuing a press release through a major news service (as referred to in FINRA Rule 5131(d)(2)(B)) at least two business days before the effective date of the release of the waiver. Any release or waiver granted by the Representatives hereunder to any such officer or director shall only be effective two business days after the publication date of such press release. The provisions of this paragraph will not apply if both (a) the release or waiver is effected solely to permit a transfer not for consideration, and (b) the transferee has agreed in writing to be bound by the same terms described in this Lock-Up Agreement as are applicable to the transferor, to the extent and for the duration that such terms remain in effect at the time of the transfer.
In addition, the undersigned agrees that, without the prior written consent of the Representatives on behalf of the Underwriters, it will not, during the Lock-Up Period, make any demand for or exercise any right with respect to, the registration of any Shares or any security convertible into or exercisable or exchangeable for Shares.
In furtherance of the foregoing, the Company and its transfer agent and registrar are hereby authorized to decline to make any transfer of Lock-Up Securities if such transfer would constitute a violation or breach of this Lock-Up Agreement.
The undersigned understands that the Company and the Underwriters are entering into the Underwriting Agreement and proceeding with the Public Offering in reliance upon this Lock-Up Agreement.
It is understood that if (i) the Company notifies the Underwriters that it does not intend to proceed with the Public Offering, (ii) the Underwriting Agreement does not become effective by March 31, 2021 or (iii) the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Shares, this Lock-Up Agreement shall become null and void and the undersigned will be released from its obligations under this Lock-Up Agreement. Notwithstanding the foregoing, prior to March 31, 2021, the Company may, by written notice to the undersigned, extend such date for a period of up to three additional months.
Whether the Public Offering actually occurs depends on a number of factors, including market conditions. Any Public Offering will only be made pursuant to the Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Underwriters.
The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Lock-Up Agreement and that, upon request, the undersigned will execute any additional documents necessary in connection with the enforcement thereof. This Lock-Up Agreement is irrevocable and all authority herein conferred or agreed to be conferred shall survive the death or incapacity or dissolution of the undersigned and any obligations of the undersigned shall be binding on the undersigned and the successors, heirs, personal representatives and assigns of the undersigned.
The undersigned acknowledges and agrees that the Underwriters have not provided any recommendation or investment advice nor have the Underwriters solicited any action from the undersigned with respect to the Public Offering and the undersigned has consulted their own legal, accounting, financial, regulatory and tax advisors to the extent deemed appropriate. The undersigned further acknowledges and agrees that, although the Representatives may be required or choose to provide certain Regulation Best Interest and Form CRS disclosures to you in connection with the Public Offering, the Representatives and the other Underwriters are not making a recommendation to you to participate in the Public Offering, enter into this Lock-Up Agreement, or sell any Shares at the price determined in the Public Offering, and nothing set forth in such disclosures is intended to suggest that the Representatives or any Underwriter is making such a recommendation.
This Lock-Up Agreement may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com or www.echosign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
This Lock-Up Agreement and any claim, controversy or dispute arising under or related to this Lock-Up Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.
[Signature page follows]
Very truly yours, |
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(Name of Securityholder - Please Print) |
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(Signature) |
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(Name of Signatory if Securityholder is an entity - Please Print) |
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(Title of Signatory if Securityholder is an entity - Please Print) |
Address: |
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[Signature Page to Lock-Up Agreement]
Exhibit 3.1
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Location: | |||
Mailing Address: | 2nd Floor - 940 Blanshard Street | |||
PO Box 9431 Stn Prov Govt | Victoria BC | |||
Victoria BC V8W 9V3 | 1 877 526-1526 | |||
www.corporateonline.gov.bc.ca
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||||
CERTIFIED COPY | ||||
Of a Document filed with the Province of | ||||
British Columbia Registrar of Companies | ||||
Notice of Articles |
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BUSINESS CORPORATIONS ACT | CAROL PREST |
This Notice of Articles was issued by the Registrar on: December 4, 2020 10:35 AM Pacific Time | ||
Incorporation Number: | BC0954819 | |
Recognition Date and Time: Incorporated on November 8, 2012 02:05 PM Pacific Time
|
NOTICE OF ARTICLES | ||
Name of Company: | ||
ABCELLERA BIOLOGICS INC. | ||
REGISTERED OFFICE INFORMATION | ||
Mailing Address: | Delivery Address: | |
SUITE 2600, THREE BENTALL CENTRE | SUITE 2600, THREE BENTALL CENTRE | |
595 BURRARD STREET, P.O. BOX 49314 | 595 BURRARD STREET, P.O. BOX 49314 | |
VANCOUVER BC V7X 1L3 | VANCOUVER BC V7X 1L3 | |
CANADA | CANADA | |
RECORDS OFFICE INFORMATION | ||
Mailing Address: | Delivery Address: | |
SUITE 2600, THREE BENTALL CENTRE | SUITE 2600, THREE BENTALL CENTRE | |
595 BURRARD STREET, P.O. BOX 49314 | 595 BURRARD STREET, P.O. BOX 49314 | |
VANCOUVER BC V7X 1L3 | VANCOUVER BC V7X 1L3 | |
CANADA | CANADA |
Page: 1 of 3
DIRECTOR INFORMATION | ||
Last Name, First Name, Middle Name: | ||
Hansen, Carl | ||
Mailing Address: | Delivery Address: | |
2215 YUKON STREET VANCOUVER BC V5Y 0A1 CANADA |
2215 YUKON STREET VANCOUVER BC V5Y 0A1 CANADA |
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Last Name, First Name, Middle Name: | ||
Hamer, John | ||
Mailing Address: | Delivery Address: | |
2215 YUKON STREET VANCOUVER BC V5Y 0A1 CANADA |
2215 YUKON STREET VANCOUVER BC V5Y 0A1 CANADA |
|
Last Name, First Name, Middle Name: | ||
Lecault, Veronique | ||
Mailing Address: | Delivery Address: | |
2215 YUKON STREET VANCOUVER BC V5Y 0A1 CANADA |
2215 YUKON STREET VANCOUVER BC V5Y 0A1 CANADA |
|
Last Name, First Name, Middle Name: | ||
Hayden, Michael | ||
Mailing Address: | Delivery Address: | |
2215 YUKON STREET VANCOUVER BC V5Y 0A1 CANADA |
2215 YUKON STREET VANCOUVER BC V5Y 0A1 CANADA |
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Last Name, First Name, Middle Name: | ||
Montalbano, John | ||
Mailing Address: | Delivery Address: | |
2215 YUKON STREET VANCOUVER BC V5Y 0A1 CANADA |
2215 YUKON STREET VANCOUVER BC V5Y 0A1 CANADA |
|
Last Name, First Name, Middle Name: | ||
Thiel, Peter | ||
Mailing Address: | Delivery Address: | |
C/O THIEL CAPITAL LLC 9200 W. SUNSET BLVD., STE. 1110 WEST HOLLYWOOD CA 90069 UNITED STATES |
C/O THIEL CAPITAL LLC 9200 W. SUNSET BLVD., STE. 1110 WEST HOLLYWOOD CA 90069 UNITED STATES |
Page: 2 of 3
RESOLUTION DATES:
Date(s) of Resolution(s) or Court Order(s) attaching or altering Special Rights and Restrictions attached to a class or a series of shares:
November 19, 2013
July 6, 2017
August 1, 2018
August 3, 2018
March 20, 2020
March 23, 2020
December 3, 2020
AUTHORIZED SHARE STRUCTURE | ||||||||
1. | No Maximum | Common Shares | Without Par Value | |||||
With Special Rights or | ||||||||
Restrictions attached
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||||||||
2. | No Maximum | Class A Preferred Shares | Without Par Value | |||||
With Special Rights or | ||||||||
Restrictions attached | ||||||||
1. No Maximum | Series A1 Preferred | Special Rights or | ||||||
Restrictions are attached | ||||||||
2. No Maximum | Series A2 Preferred | Special Rights or | ||||||
Restrictions are attached |
Page: 3 of 3
Exhibit 3.2
BUSINESS CORPORATIONS ACT
BRITISH COLUMBIA
ARTICLES
ABCELLERA BIOLOGICS INC.
BUSINESS CORPORATIONS ACT
BRITISH COLUMBIA
ARTICLES
ABCELLERA BIOLOGICS INC.
I N D E X
PART 1 INTERPRETATION |
1 | |||
PART 2 ALTERATIONS |
3 | |||
PART 3 SHARES AND SHARE CERTIFICATES |
4 | |||
PART 4 SHARE TRANSFERS |
5 | |||
PART 5 PURCHASE OF SHARES |
6 | |||
PART 6 BORROWING POWERS |
6 | |||
PART 7 SHAREHOLDER MEETINGS |
7 | |||
PART 8 PROCEEDINGS AT SHAREHOLDER MEETINGS |
7 | |||
PART 9 SHAREHOLDERS VOTES |
10 | |||
PART 10 ELECTION AND REMOVAL OF DIRECTORS |
13 | |||
PART 11 PROCEEDINGS OF DIRECTORS |
14 | |||
PART 12 COMMITTEES OF DIRECTORS |
17 | |||
PART 13 OFFICERS |
18 | |||
PART 14 DISCLOSURE OF INTEREST OF DIRECTORS |
19 | |||
PART 15 INDEMNIFICATION |
19 | |||
PART 16 DIVIDENDS |
21 | |||
PART 17 AUDITOR |
22 | |||
PART 18 EXECUTION OF INSTRUMENTS |
22 | |||
PART 19 NOTICES |
23 | |||
PART 20 RESTRICTION ON SHARE TRANSFER |
24 | |||
PART 21 DRAG-ALONG RIGHTS |
25 |
PART 22 RIGHT OF FIRST REFUSAL AND CO-SALE |
30 | |||
PART 23 SPECIAL RIGHTS AND RESTRICTIONS ATTACHED TO COMMON SHARES |
35 | |||
PART 24 SPECIAL RIGHTS AND RESTRICTIONS ATTACHED TO CLASS A PREFERRED SHARES |
36 |
ARTICLES
Company Name: | AbCellera Biologics Inc. | |
Translations of Company Name | n/a | |
Incorporation Number: | BC0954819 |
PART 1
INTERPRETATION
Definitions
1.1 |
In these Articles, unless the context otherwise requires: |
(a) |
these Articles means the articles of the Company from time to time and all amendments thereto, and the words herein, hereto, hereby, hereunder, hereof and similar words refer to these Articles as so defined and not to any particular Part, article or other subdivision of these Articles; |
(b) |
board and directors mean the directors or sole director, as the case may be, of the Company for the time being; |
(c) |
Business Corporations Act means the Business Corporations Act (British Columbia) from time to time in force and includes amendments thereto, and all regulations made pursuant thereto; |
(d) |
Interpretation Act means the Interpretation Act (British Columbia) from time to time in force and includes amendments thereto, and all regulations made pursuant thereto; |
(e) |
shareholder means a shareholder of the Company; and |
(f) |
trustee, in relation to a shareholder, means the personal or other legal representative of the shareholder, and includes a trustee in bankruptcy of the shareholder. |
Application of Business Corporations Act Definitions
1.2 |
The definitions in the Business Corporations Act apply to these Articles. |
Application of Interpretation Act
1.3 |
The Interpretation Act applies to the interpretation of these Articles as if these Articles were an enactment. |
Conflict
1.4 |
If there is a conflict between a definition or rule in the Business Corporations Act and a definition or rule in the Interpretation Act relating to a term used in these Articles, the definition or rule in the Business Corporations Act will prevail. |
1.5 |
If any provision of these Articles conflicts with (i) the amended and restated shareholders agreement (the Shareholder Agreement) dated February 4, 2014 between the Company and certain shareholders, (ii) the amended and restated voting agreement dated March 23, 2020 between the Company and certain shareholders (the Amended and Restated Voting Agreement), (iii) the amended and restated right of first refusal and co-sale agreement dated March 23, 2020 (the Amended and Restated Right of First Refusal and Co-Sale Agreement) between the Company and certain shareholders, or (iv) the amended and restated investor rights agreement dated March 23, 2020 (the Amended and Restated Investor Rights Agreement) between the Company and certain shareholders, to the extent such agreements deal with any matter referred to herein, the provisions of these Articles will prevail. For so long as these Articles remains in existence, the provisions contained in Section II of the Shareholder Agreement shall be superseded in their entirety by the provisions contained in these Articles. |
Severability of Invalid Provisions
1.6 |
The invalidity or unenforceability of any provision of these Articles will not affect the validity or enforceability of the remaining provisions of these Articles. |
Effect of Omissions and Errors in Notices
1.7 |
The accidental omission to send notice of any meeting of shareholders or directors (including any committee of directors) to any person entitled to notice or the non-receipt of any notice by any of the persons entitled to notice or any error in any notice not affecting its substance will not invalidate any action or proceeding taken at that meeting or otherwise founded on the notice. |
Signing
1.8 |
Expressions referring to signing shall be construed as including facsimile signatures and the receipt of messages by telecopy or electronic mail or any other method of transmitting writing and indicating thereon that the requisite instrument is signed, notwithstanding that no actual original or copy of an original signature appears thereon. |
2
PART 2
ALTERATIONS
Change in Authorized Share Structure by Shareholders
2.1 |
Subject to the requirements of Articles 25.11 and 26.11, the shareholders may from time to time, by ordinary resolution, authorize the Company to effect a change to the authorized share structure of the Company and to the Notice of Articles and these Articles where applicable, to: |
(a) |
create one or more classes of shares; |
(b) |
increase, reduce or eliminate the maximum number of shares that the Company is authorized to issue out of any class or series of shares; |
(c) |
if the Company is authorized to issue shares of a class of shares with par value, |
(i) |
subject to section 74 of the Business Corporations Act, decrease the par value of those shares, or |
(ii) |
increase the par value of those shares if none of the shares of that class of shares are allotted or issued; or |
(d) |
otherwise alter its authorized share structure when required or permitted to do so by the Business Corporations Act. |
Change in Authorized Share Structure by Directors
2.2 |
Subject to the requirements of Articles 25.11 and 26.11, the directors may from time to time, by resolution, authorize the Company to effect a change to the authorized share structure of the Company and to the Notice of Articles and these Articles where applicable, to: |
(a) |
create one or more series of shares and if no such shares of such a series are issued, to also attach special rights and restrictions to such series or to alter any such special rights and restrictions; |
(b) |
establish a maximum number of shares that the Company is authorized to issue out of any class or series of shares for which no maximum is established; |
(c) |
subdivide all or any of its unissued, or fully paid issued, shares with par value into shares of smaller par value; |
(d) |
subdivide all or any of its unissued, or fully paid issued, shares without par value; |
(e) |
consolidate all or any of its unissued, or fully paid issued, shares with par value into shares of larger par value; |
(f) |
consolidate all or any of its unissued, or fully paid issued, shares without par value; |
(g) |
eliminate any class or series of shares if none of the shares of that class or series of shares are allotted or issued; |
(h) |
change all or any of its unissued, or fully paid issued, shares with par value into shares without par value; |
3
(i) |
change all or any of its unissued shares without par value into shares with par value; or |
(j) |
alter the identifying name of any of its shares. |
Special Rights or Restrictions
2.3 |
Subject to Articles 2.4, 25.11 and 26.11 the shareholders may from time to time, by ordinary resolution, authorize the Company to effect a change to these Articles to: |
(a) |
create special rights or restrictions for, and attach those special rights or restrictions to, the shares of any class or series of shares, whether or not any or all of those shares have been issued; or |
(b) |
vary or delete any special rights or restrictions attached to the shares of any class or series of shares, whether or not any or all of those shares have been issued. |
No Interference with Class or Series Rights without Consent
2.4 |
A right or special right attached to issued shares must not be prejudiced or interfered with under the Business Corporations Act or under the Notice of Articles or these Articles unless the shareholders holding shares of the class or series of shares to which the right or special right is attached consent by a special separate resolution of those shareholders. |
Other Alterations
2.5 |
Unless otherwise provided in these Articles, the shareholders may from time to time, by ordinary resolution, make any alteration to the Notice of Articles and these Articles as permitted by the Business Corporations Act. |
PART 3
SHARES AND SHARE CERTIFICATES
Sending of Share Certificate
3.1 |
Any share certificate which a shareholder is entitled to receive may be sent to the shareholder by mail and neither the Company nor any agent of the Company is liable for any loss to the shareholder arising as a result of the accidental omission to send any share certificate or non-receipt of any share certificate so sent. |
Joint Ownership
3.2 |
Where a share is registered in the names of two or more persons, unless the registration on the share certificate specifies otherwise, the share shall, for the purposes of these Articles, be considered to be jointly held by such persons and such persons shall, for the purposes of these Articles, be considered joint holders of such share. |
4
Limit on Registration of Joint Holders
3.3 |
Except in the case of the trustees of a shareholder, the directors may refuse to register in the central securities register more than three persons as the joint holders of a share. |
Delivery of Jointly Held Certificate
3.4 |
A share certificate for a share registered in the names of two or more persons shall be delivered to that one of them whose name appears first on the central securities register in respect of the share. |
Unregistered Interests
3.5 |
Except as required by law or these Articles, the Company need not recognize or provide for any persons interests in or rights to a share unless that person is registered as the holder. |
PART 4
SHARE TRANSFERS
Form of Instrument of Transfer
4.1 |
The instrument of transfer in respect of any share of the Company will be either in the form on the back of the certificate representing such share or in such other form as may be approved by the directors from time to time. |
Effect of Signed Instrument of Transfer
4.2 |
If a shareholder, or the duly authorized attorney of that shareholder, signs an instrument of transfer in respect of shares registered in the name of the shareholder, the signed instrument of transfer constitutes a complete and sufficient authority to the Company and its directors, officers and agents to register the number of shares specified in the instrument of transfer, or, if no number is specified, all the shares represented by share certificates deposited with the instrument of transfer, |
(a) |
in the name of the person named as transferee in that instrument of transfer; or |
(b) |
if no person is named as transferee in that instrument of transfer, in the name of the person on whose behalf the share certificate is deposited for the purpose of having the transfer registered. |
5
PART 5
PURCHASE OF SHARES
Authority to Purchase Shares
5.1 |
Subject to the special rights and restrictions attached to any class or series of shares, the Company may purchase or otherwise acquire any of its shares if authorized to do so by resolution of the directors. |
PART 6
BORROWING POWERS
Powers of Directors
6.1 |
The directors may from time to time at their discretion on behalf of the Company: |
(a) |
borrow money for the purposes of the Company in the manner and amount, on the security, from the sources and on the terms and conditions that they consider appropriate; |
(b) |
raise or secure the repayment of any borrowed money, including by the issuance of bonds, perpetual or redeemable, debentures or debenture stock and other debt obligations either outright or as security for any liability or obligation of the Company or any other person; |
(c) |
guarantee the repayment of money by any other person or the performance of any obligation of any other person; or |
(d) |
mortgage or charge, whether by way of specific or floating charge, grant a security interest or give other security on the whole or any part of the present and future property and undertaking of the Company, including uncalled capital. |
Terms of Debt and Security Instruments
6.2 |
Any debentures, debenture stock, bonds, mortgages, security interests and other securities may be issued at a discount, premium or otherwise, and with special or other rights or privileges as to redemption, surrender, drawings, allotment of or conversion into shares, attending and voting at a general meeting of the Company, appointment of directors and otherwise as the directors may determine at or prior to the time of issuance. |
6
PART 7
SHAREHOLDER MEETINGS
Calling of Shareholder Meetings
7.1 |
Meetings of shareholders of the Company shall be held at such time or times as the directors from time to time determine, and at such location or locations as the board, by resolution, may approve. |
Notice
7.2 |
Subject to the provisions of the Business Corporations Act regarding requisitions for general meetings and waiver of notice, the Company will send notice of the date, time and location of a meeting of shareholders to each shareholder entitled to vote at the meeting and to each director at least 10 days before the meeting. |
Special Business
7.3 |
If a general meeting is to consider special business within the meaning of Article 8.1, the notice of meeting will: |
(a) |
state the general nature of the special business; and |
(b) |
if the special business includes presenting, considering, approving, ratifying, adopting or authorizing any document or the signing of or giving of effect to any document, have attached to it, or be accompanied by, a copy of the document or state that a copy of the document will be available for inspection by shareholders: |
(i) |
at the Companys records office, or at such other reasonably accessible location in British Columbia as is specified by the notice; and |
(ii) |
during statutory business hours on any one or more specified days before the day set for the holding of the meeting. |
PART 8
PROCEEDINGS AT SHAREHOLDER MEETINGS
Special Business
8.1 |
At a meeting of shareholders, the following business is special business: |
(a) |
at a meeting of shareholders that is not an annual general meeting, all business is special business except business relating to the conduct of, or voting at, the meeting; |
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(b) |
at an annual general meeting, all business is special business except for the following: |
(i) business |
relating to the conduct of, or voting at, the meeting; |
(ii) consideration |
of any financial statements of the Company presented to the meeting; |
(iii) consideration |
of any reports of the directors or auditor; |
(iv) the |
setting or changing of the number of directors; |
(v) the |
election or appointment of directors; |
(vi) the |
appointment of an auditor; |
(vii) the |
setting of the remuneration of an auditor; and |
(viii) business |
arising out of a report of the directors not requiring the passing of a special resolution or an exceptional resolution. |
Quorum
8.2 |
Subject to Article 8.3 and the special rights and restrictions attached to the shares of any class or series of shares, the quorum for the transaction of business at a meeting of shareholders is 2 persons present in person or by proxy who, in the aggregate, hold or represent by proxy not less than 10% of the votes entitled to be cast at the meeting. |
Sole Shareholder
8.3 |
If there is only one shareholder entitled to vote at a meeting of shareholders: |
(a) |
the quorum is one person who is, or who represents by proxy, that shareholder; and |
(b) |
that shareholder, present in person or by proxy, may constitute the meeting. |
Lack of Quorum
8.4 |
If, within 1/2 hour from the time set for the holding of a meeting of shareholders, a quorum is not present, |
(a) |
in the case of a general meeting convened by requisition of shareholders, the meeting is dissolved; and |
(b) |
in the case of any other meeting of shareholders, the meeting stands adjourned to the same day in the next week at the same time and place, unless those shareholders present determine otherwise. |
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Quorum at Succeeding Meeting
8.5 |
If a meeting referred to in Article 8.4 was adjourned and if a quorum as provided in Article 8.2 is not present within 1/2 hour from the time set for the holding of the adjourned meeting, the persons present and being, or representing by proxy, shareholders entitled to attend and vote at the meeting constitute a quorum. |
Chair
8.6 |
The following individual is entitled to preside as chair at a meeting of shareholders: |
(a) |
the chair of the board, if any; and |
(b) |
if there is no chair of the board or if the chair of the board is absent or unwilling to act as chair of the meeting, the president, if any. |
Alternate Chair
8.7 |
If, at any meeting of shareholders: |
(a) |
there is no chair of the board or president present within 15 minutes after the time set for holding the meeting; |
(b) |
the chair of the board and the president are unwilling to act as chair of the meeting; or |
(c) |
the chair of the board and the president have advised the secretary, if any, or any director present at the meeting, that they will not be present at the meeting; |
the directors present may choose one of their number to be chair of the meeting or if all of the directors present decline to take the chair or fail to so choose or if no director is present, the shareholders present in person or by proxy may choose any person present at the meeting to chair the meeting.
Postponement or Cancellation of Meetings
8.8 |
A meeting of shareholders may be postponed or cancelled by the Company at any time prior to the holding of the meeting upon such notice or communication to shareholders, if any, as the board may determine, and, if postponed, the postponed meeting may be held at such time or times, and at such location or locations, as the board, by resolution, may approve. |
Procedure at Meetings
8.9 |
The board may determine the procedures to be followed at any meeting of shareholders including, without limitation, the rules of order. Subject to the foregoing, the chair of a meeting may determine the procedures of the meeting in all respects. |
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Casting Vote
8.10 |
In case of an equality of votes cast at a meeting of shareholders, the chair does not have a casting or second vote. |
PART 9
SHAREHOLDERS VOTES
Joint Shareholders
9.1 |
If there are joint shareholders registered in respect of any share: |
(a) |
any one of the joint shareholders may vote at any meeting, either personally or by proxy, in respect of the share as if that joint shareholder were solely entitled to it; or |
(b) |
if more than one of the joint shareholders is present at any meeting, personally or by proxy, the joint shareholder present whose name stands first on the central securities register in respect of the share is alone entitled to vote in respect of that share. |
Trustees
9.2 |
Two or more trustees of a shareholder in whose name any share is registered are, for the purposes of Article 9.1, deemed to be joint shareholders. |
Representative of Corporate Shareholder
9.3 |
If a corporation that is not a subsidiary of the Company is a shareholder, that corporation may appoint a person to act as its representative at any meeting of shareholders of the Company, and: |
(a) |
for that purpose, the instrument appointing a representative must: |
(i) |
be received at the registered office of the Company or at any other place specified, in the notice calling the meeting, for the receipt of proxies, at least 1 business day before the day set for the holding of the meeting; or |
(ii) |
be provided, at the meeting, to the chair of the meeting; and |
(b) |
if a representative is appointed under this Article 9.3: |
(i) |
the representative is entitled to exercise in respect of and at that meeting the same rights that the appointing corporation could exercise if it were a shareholder who is an individual, including, without limitation, the right to appoint a proxy holder; and |
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(ii) |
the representative, if present at the meeting, is to be counted for the purpose of forming a quorum and is deemed to be a shareholder present in person at the meeting. |
Application of Proxy Provisions
9.4 |
Articles 9.5 to 9.12 do not apply to the Company if and for so long as it is a public company or a pre-existing reporting company. |
Appointment of Proxy Holder
9.5 |
Each shareholder, including a corporation that is a shareholder but not a subsidiary of the Company, entitled to vote at a meeting of shareholders may, by proxy, appoint one or more individuals (who need not be shareholders) as such shareholders nominee to attend, speak, act and vote for and on behalf of such shareholder at the meeting in the manner, to the extent and with the power conferred by the proxy. |
Execution of Proxy
9.6 |
A shareholders proxy will be in writing, dated the date on which it is executed (or if not dated, will be deemed to be dated the date on which it is received by the Company), and will be executed by such shareholder or such shareholders attorney authorized in writing, or if the shareholder is a corporation, by a duly authorized officer or attorney. |
Continuing Proxy
9.7 |
A shareholder may appoint one or more individuals (who need not be shareholders) as such shareholders nominee to attend, speak, act and vote for and on behalf of such shareholder at every general meeting of the Company or at one or more general meetings which are held within such period of time as the proxy specifies. |
Form of Proxy
9.8 |
A proxy, whether for a specified meeting or otherwise, must be either in the following form or in any other form approved by the directors or the chair of the meeting: |
(Name of Company)
The undersigned, being a shareholder of the above named Company, hereby appoints , or, failing that person, , as proxy holder for the undersigned to attend, speak, act and vote for and on behalf of the undersigned at the meeting of shareholders to be held on the day of , 20 and at any adjournment of that meeting.
Signed this day of , 20
Signature of shareholder
11
Delivery of Proxy
9.9 |
Unless the board determines otherwise, a proxy for a meeting of shareholders must: |
(a) |
be received at the registered office of the Company or at any other place specified, in the notice calling the meeting, for the receipt of proxies, at least the number of business days specified in the notice, or if no number of days is specified, 1 business day, before the day set for the holding of the meeting; or |
(b) |
unless the notice provides otherwise, be provided, at the meeting, to the chair of the meeting. |
Revocation of Proxy
9.10 |
A shareholders proxy will, to the extent that it is inconsistent with a proxy of prior date, be deemed to revoke such prior proxy. Subject to Article 9.11, every proxy may be revoked by an instrument in writing that is: |
(a) |
received at the registered office of the Company at any time up to and including the last business day before the day set for the holding of the meeting at which the proxy is to be used; or |
(b) |
provided at the meeting to the chair of the meeting. |
Signing of Revocation of Proxy
9.11 |
An instrument referred to in Article 9.10 must be signed as follows: |
(a) |
if the shareholder for whom the proxy holder is appointed is an individual, the instrument must be signed by the shareholder or the trustee of the shareholder; and |
(b) |
if the shareholder for whom the proxy holder is appointed is a corporation, the instrument must be signed by the corporation or by a representative appointed for the corporation under Article 9.3. |
Validity of Proxy Votes
9.12 |
A vote given in accordance with the terms of a proxy is valid despite the death or incapacity of the shareholder giving the proxy and despite the revocation of the proxy or the revocation of the authority under which the proxy is given, unless notice in writing of that death, incapacity or revocation is received: |
(a) |
at the registered office of the Company, at any time up to and including the last business day before the day set for the holding of the meeting at which the proxy is to be used; or |
(b) |
by the chair of the meeting, before the vote is taken. |
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Authority to Vote
9.13 |
The chair of any meeting of shareholders may, but need not, inquire into the authority of any person to vote at the meeting and may, but need not, demand from that person production of evidence as to the existence of the authority to vote. |
PART 10
ELECTION AND REMOVAL OF DIRECTORS
Number of Directors
10.1 |
The Company will have a board of directors consisting of initially the number of directors that is equal to the number of the first directors and thereafter the number of directors set by ordinary resolution of the shareholders from time to time. |
Change in Number of Directors
10.2 |
If the number of directors is changed pursuant to Article 10.1, the directors may appoint or the shareholders may elect, or appoint by ordinary resolution, the directors needed to fill any vacancies in the board of directors that result from that change. |
Election of Directors
10.3 |
At every annual general meeting: |
(a) |
the shareholders entitled to vote at the annual general meeting for the election or appointment of directors will elect a board of directors consisting of the number of directors for the time being required under these Articles; and |
(b) |
subject to Article 10.6, all the directors cease to hold office immediately before the election or appointment of directors under paragraph (a), but are eligible for re-election or reappointment. |
Failure to Elect or Appoint Directors
10.4 |
If the Company fails to hold an annual general meeting in accordance with the Business Corporations Act or fails, at an annual general meeting, to elect or appoint any directors, the directors then in office continue to hold office until the earlier of: |
(a) |
the date on which the failure is remedied; and |
(b) |
the date on which they otherwise cease to hold office under the Business Corporations Act or these Articles. |
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Additional Directors
10.5 |
Notwithstanding Articles 10.1 and 10.2, the directors may appoint one or more additional directors, but the number of additional directors appointed under this Article 10.5 will not at any time exceed: |
(a) |
1/3 of the number of first directors if, at the time of the appointment, one or more of the first directors have not yet completed their first term of office; or |
(b) |
in any other case, 1/3 of the number of the current directors who were elected or appointed as directors other than under this Article 10.5. |
Removal of Director
10.6 |
The shareholders may, by ordinary resolution, remove any director from office at any time. |
PART 11
PROCEEDINGS OF DIRECTORS
Timing of Meetings
11.1 |
Meetings of the board will be held on such day and at such time and place as the president or secretary of the Company or any two directors may determine. |
Chair
11.2 |
Meetings of directors are to be chaired by: |
(a) |
the chair of the board, if any, |
(b) |
in the absence of the chair of the board, the president, if any, if the president is a director, or |
(c) |
any other director chosen by the directors if: |
(i) |
neither the chair of the board nor the president, if a director, is present at the meeting within 15 minutes after the time set for holding the meeting, |
(ii) |
neither the chair of the board nor the president, if a director, is willing to chair the meeting, or |
(iii) |
the chair of the board and the president, if a director, have advised the secretary, if any, or any other director, that they will not be present at the meeting. |
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Voting
11.3 |
At all meetings of directors every question will be decided by a majority of votes cast on the question and, in the case of an equality of votes, the chair of the meeting will not be entitled to a second or casting vote. |
Notice
11.4 |
Subject to Articles 1.7 and 11.5, if a meeting of the board is called under Article 11.1 notice of that meeting will be given to each director not less than 24 hours before the time when the meeting is to be held, specifying the place, date and time of that meeting: |
(a) |
by mail addressed to the directors address as it appears on the books of the Company or to any other address provided to the Company by the director for this purpose; |
(b) |
by leaving it at the directors prescribed address or at any other address provided to the Company by the director for this purpose; |
(c) |
orally, including, by telephone, voice mail or on other recorded media; or |
(d) |
by e-mail, fax or any other method of reliably transmitting messages. |
Notice not Required
11.5 |
It is not necessary to give notice of a meeting of the directors to a director if: |
(a) |
the meeting is to be held immediately following a meeting of shareholders at which that director was elected or appointed or is the meeting of the directors at which that director is appointed; or |
(b) |
the director has filed a waiver under Article 11.6. |
Waiver of Notice
11.6 |
Any director may file with the Company a document signed by the director waiving notice of any past, present or future meeting of the directors or a direction that notice of meetings of the directors be given to the alternate of such director and may, at any time, withdraw the waiver or direction, as the case may be, by instrument in writing delivered to the registered office of the Company, and until the waiver or direction, as the case may be, is withdrawn, no notice of meetings of the directors shall be given to that director or notice of meetings of the directors shall be sent to the alternate of such director, as the case may be; and any and all meetings of the directors, notice of which has not been given to such director or has been given to the alternate of such director, as the case may be, shall, provided a quorum of the directors is present, be valid and effective. |
15
Quorum
11.7 |
The quorum necessary for the transaction of the business of the directors may be set by the directors and, if not so set, is a majority of the directors, or if the number of directors is fixed at one, shall be one director and any alternate director shall be counted in a quorum at a meeting at which such alternates appointor is absent. A director holding a disclosable interest in a contract or transaction to be considered at a meeting is to be counted in a quorum notwithstanding such directors interest. |
Alternate Directors
11.8 (a) |
A director (in these Articles called an appointor) may appoint as such directors alternate any person who is not disqualified to be a director. |
(b) |
An appointment of an alternate shall not be effective until an instrument in writing declaring the appointment and signed by the appointor, and the consent of the alternate to so act, is delivered to the registered office of the Company. |
(c) |
An appointor may revoke an appointment of an alternate by instrument in writing delivered to the registered office of the Company. |
(d) |
The appointment of an alternate terminates if such alternates appointor ceases to be a director or if the alternate is at any time not qualified to act as a director under the Business Corporations Act. |
(e) |
The Company is not obligated to remunerate any alternate or to reimburse an alternate for any expense incurred in carrying out such alternates function. |
(f) |
If an appointor is absent from any meeting of the directors or of a committee of directors, the alternate for such appointor shall be entitled to attend, speak, act and vote at such meeting as a director in place of such appointor, and may sign or concur in resolutions pursuant to Article 11.9. |
(g) |
A director or other person may act as alternate for any one or more directors and at any meeting of the directors or of a committee of directors shall be counted as one director for each director for whom such person is the alternate for purposes of determining the quorum and be entitled to cast one vote for each director for whom such person is the alternate in addition to, in the case of a director acting as the alternate for any one or more directors, being counted and voting as a director in his or her own right. |
Resolutions in Writing
11.9 |
A resolution in writing signed by each director or such directors alternate, or if there is only one director by that one director, shall be as valid and effectual as if it had been passed at a meeting of the board duly convened and held. |
16
Counterparts
11.10 |
A resolution in writing may be in one or more counterparts, each of which may be signed by one or more directors or alternates or one or more committee members, and which together shall be deemed to constitute a resolution in writing. |
Remuneration of Directors
11.11 |
Unless the shareholders by ordinary resolution otherwise resolve, the directors may fix the remuneration of the directors and officers of the Company. |
PART 12
COMMITTEES OF DIRECTORS
Appointment
12.1 |
The directors may, by resolution: |
(a) |
appoint one or more committees consisting of the director or directors that they consider appropriate; |
(b) |
delegate to a committee appointed under paragraph (a) any of the directors powers, except: |
(i) |
the power to fill vacancies in the board; |
(ii) |
the power to change the membership of, or fill vacancies in, any committee of the board; and |
(iii) |
the power to appoint or remove officers appointed by the board; and |
(c) |
make any delegation referred to in paragraph (b) subject to the conditions set out in the resolution. |
Duties
12.2 |
Any committee formed under Article 12.1, in the exercise of the powers delegated to it, shall: |
(a) |
conform to any rules that may from time to time be imposed on it by the directors; and |
(b) |
report every act or thing done in exercise of those powers to the earliest meeting of the directors to be held after the act or thing has been done. |
17
Powers of Board
12.3 |
The board may, at any time: |
(a) |
revoke the authority given to a committee, or override a decision made by a committee, except as to acts done before such revocation or overriding; |
(b) |
terminate the appointment of, or change the membership of, a committee; and |
(c) |
fill vacancies in a committee. |
Meetings
12.4 |
Subject to Article 12.2(a): |
(a) |
the members of a directors committee may meet and adjourn as they think proper; |
(b) |
a directors committee may elect a chair of its meetings but, if no chair of the meeting is elected, or if at any meeting the chair of the meeting is not present within 15 minutes after the time set for holding the meeting, the directors present who are members of the committee may choose one of their number to chair the meeting; |
(c) |
a majority of the members of a directors committee constitutes a quorum of the committee; and |
(d) |
questions arising at any meeting of a directors committee are determined by a majority of votes of the members present, and in case of an equality of votes, the chair of the meeting has no second or casting vote. |
PART 13
OFFICERS
Functions, Duties and Powers
13.1 |
The board may appoint any officers it considers necessary and for each officer: |
(a) |
determine the functions and duties the officer is to perform; |
(b) |
entrust to and confer on the officer any of the powers exercisable by the directors on such terms and conditions and with such restrictions as the directors think fit; |
(c) |
from time to time revoke, withdraw, alter or vary all or any of the functions, duties and powers of the officer; and |
(d) |
may terminate such officers appointment at any time. |
18
PART 14
DISCLOSURE OF INTEREST OF DIRECTORS
Other Office
14.1 |
A director may hold any office or position of profit with the Company (other than the office of auditor of the Company) in addition to his or her office of director for the period and on the terms (as to remuneration or otherwise) that the directors may determine. |
No Disqualification
14.2 |
No director or intended director is disqualified by his or her office from contracting with the Company either with regard to the holding of any office or place of profit the director holds with the Company or as vendor, purchaser or otherwise. |
Professional Services
14.3 |
Subject to compliance with the provisions of the Business Corporations Act, a director or officer of the Company, or any corporation or firm in which that individual has an interest, may act in a professional capacity for the Company, except as auditor of the Company, and the director or officer or such corporation or firm is entitled to remuneration for professional services as if that individual were not a director or officer. |
Accountability
14.4 |
A director or officer may be or become a director, officer or employee of, or may otherwise be or become interested in, any corporation, firm or entity in which the Company may be interested as a shareholder or otherwise, and, subject to compliance with the provisions of the Business Corporations Act, the director or officer is not accountable to the Company for any remuneration or other benefits received by him or her as director, officer or employee of, or from his or her interest in, such other corporation, firm or entity. |
PART 15
INDEMNIFICATION
Mandatory Indemnification
15.1 |
The Company will indemnify a director or officer of the Company, a former director or officer of the Company or another individual who acts or acted at the Companys request as a director or officer, or in a similar capacity, of another entity, and such persons heirs and legal representatives to the extent permitted by the Business Corporations Act. |
Deemed Contract
15.2 |
Each director is deemed to have contracted with the Company on the terms of the indemnity referred to in this Part. |
19
Optional Indemnification
15.3 |
Except as otherwise required by the Business Corporations Act and subject to Article 15.1, the Company may from time to time indemnify and save harmless any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) by reason of the fact that he or she is or was an employee or agent of the Company, or is or was serving at the request of the Company as an employee, agent of or participant in another entity against expenses (including legal fees), judgments, fines and any amount actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted honestly and in good faith with a view to the best interests of the Company or, as the case may be, to the best interests of the other entity for which he or she served at the Companys request and, with respect to any criminal or administrative action or proceeding that is enforced by a monetary penalty, had reasonable grounds for believing that his or her conduct was lawful. The termination of any action, suit or proceeding by judgment, order, settlement or conviction will not, of itself, create a presumption that the person did not act honestly and in good faith with a view to the best interests of the Company or other entity and, with respect to any criminal or administrative action or proceeding that is enforced by a monetary penalty, had no reasonable grounds for believing that his or her conduct was lawful. |
Right of Indemnity not Exclusive
15.4 |
The provisions for indemnification contained in these Articles will not be deemed exclusive of any other rights to which any person seeking indemnification may be entitled under any agreement, vote of shareholders or directors or otherwise, both as to action in his or her official capacity and as to action in another capacity, and will continue as to a person who has ceased to be a director, officer, employee or agent and will inure to the benefit of that persons heirs and legal representatives. |
Limit on Liability
15.5 |
To the extent permitted by law, no director or officer for the time being of the Company will be liable for the acts, receipts, neglects or defaults of any other director or officer or employee or for joining in any receipt or act for conformity or for any loss, damage or expense happening to the Company through the insufficiency or deficiency of title to any property acquired by the Company or for or on behalf of the Company or for the insufficiency or deficiency of any security in or upon which any of the moneys of or belonging to the Company will be placed out or invested or for any loss or damage arising from the bankruptcy, insolvency or tortious act of any person, firm or body corporate with whom or which any moneys, securities or other assets belonging to the Company will be lodged or deposited or for any loss, conversion, misapplication or misappropriation of or any damage resulting from any dealings with any moneys, securities or other assets belonging to the Company or for any other loss, damage or misfortune whatever which may happen in the execution of the duties of his or her respective office or trust or in relation thereto unless the same will happen by or through his or her failure to act honestly and in good faith with a view to the best interests of the Company and in connection therewith to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. If any director or officer of the Company is employed by or performs services for the Company otherwise than as a director or officer or is a member of a firm or a shareholder, director or officer of a body corporate which is employed by or performs services for the Company, the fact that the person is a director or officer of the Company will not disentitle such director or officer or such firm or body corporate, as the case may be, from receiving proper remuneration for such services. |
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PART 16
DIVIDENDS
Declaration
16.1 |
Subject to the Business Corporations Act and any special rights or restrictions as to dividends, the directors may from time to time by resolution declare and authorize payment of any dividends the directors consider appropriate out of profits, capital or otherwise, including, without limitation, retained earnings, other income, contributed surplus, capital surplus, any share premium account or appraisal surplus or any other unrealized appreciation in the value of the assets of the Company, if any. |
No Notice
16.2 |
The directors need not give notice to any shareholder of any declaration under Article 16.1. |
Timing of Payment
16.3 |
Any dividend declared by the directors may be made payable on such date as is fixed by the directors. |
Dividends Proportionate to Number of Shares
16.4 |
Subject to any special rights or restrictions as to dividends, all dividends on shares of any class or series of shares will be declared and paid according to the number of such shares held. |
Manner of Payment
16.5 |
The Company may pay any dividend wholly or partly by issuing shares or warrants or by the distribution of property, bonds, debentures or other debt obligations of the Company, or in any one or more of those ways, and, if any difficulty arises in regard to the distribution, the directors may settle the difficulty as they consider expedient, and, in particular, may set the value for distribution of specific property. |
21
Rounding
16.6 |
If a dividend to which a shareholder is entitled includes a fraction of the smallest monetary unit of the currency of the dividend, that fraction may be disregarded in making payment of the dividend and that payment represents full payment of the dividend. |
Method of Payment
16.7 |
Any dividend or other distribution payable in cash in respect of shares may be paid by cheque, made payable to the order of the person to whom it is sent, and mailed: |
(a) |
subject to paragraphs (b) and (c), to the address of the shareholder; |
(b) |
subject to paragraph (c), in the case of joint shareholders, to the address of the joint shareholder whose name stands first on the central securities register in respect of the shares; or |
(c) |
to the person and to the address as the shareholder or joint shareholders may direct in writing. |
Joint Shareholders
16.8 |
If several persons are joint shareholders of any share, any one of them may give an effective receipt for any dividend, bonus or other money payable in respect of the share. |
PART 17
AUDITOR
Remuneration
17.1 The directors may set the remuneration of any auditor of the Company.
PART 18
EXECUTION OF INSTRUMENTS
Authority to Execute Instruments
18.1 |
The following persons have authority to execute and deliver and certify documents on behalf of the Company: |
(a) |
such director, officer or other person(s) as are prescribed by resolution of the board; |
(b) |
any two directors; |
(c) |
if there is only one director, that director, alone; or |
22
(d) |
the president, alone. |
Seal
18.2 |
The Companys seal, if any, shall not be impressed on any record except when that impression is attested by the signature or signatures of: |
(a) |
any two directors; |
(b) |
any officer, together with any director; |
(c) |
if there is only one director, that director; or |
(d) |
any one or more directors or officers or persons as may be determined by resolution of the directors. |
Certified Copies
18.3 |
For the purpose of certifying under seal a true copy of any resolution or other document, the seal shall be impressed on that copy and, notwithstanding Article 18.2, may be attested by the signature of any director or officer. |
PART 19
NOTICES
Notice to Joint Shareholders
19.1 |
A notice, statement, report or other record may be provided by the Company to the joint shareholders of a share by providing the notice to the joint shareholder whose name stands first on the central securities register in respect of the share. |
Trustees
19.2 |
If a person becomes entitled to a share as a result of the death, bankruptcy or incapacity of a shareholder, the Company may provide a notice, statement, report or other record to that person by: |
(a) |
mailing the record, addressed to that person: |
(i) |
by name, by the title of representative of the deceased or incapacitated shareholder, by the title of trustee of the bankrupt shareholder or by any similar description; and |
(ii) |
at the address, if any, supplied to the Company for that purpose by the person claiming to be so entitled; or |
23
(b) |
if an address referred to in paragraph (a)(ii) has not been supplied to the Company, by giving the notice in a manner in which it might have been given if the death, bankruptcy or incapacity had not occurred. |
PART 20
RESTRICTION ON SHARE TRANSFER
Consent Required
20.1 |
Subject to Articles 22.2 and 22.11, no security of the Company, other than a non-convertible debt security, may be transferred without the consent of: |
(a) |
the board of the Company, expressed by a resolution duly passed at a meeting of the directors; |
(b) |
a majority of the directors of the Company, expressed by an instrument or instruments in writing signed by such directors; |
(c) |
the holders of the voting shares of the Company, expressed by a resolution duly passed at a meeting of the holders of voting shares; or |
(d) |
the holders of the voting shares of the Company representing a majority of the votes attached to all the voting shares, expressed by an instrument or instruments in writing signed by such holders. |
20.2 |
Notwithstanding Article 20.1, a holder of Preferred Shares (as defined in Article 21.1(g)), including Common Shares (as defined in PART 23) issued upon conversion of Preferred Shares, may transfer such Preferred Shares (or Common Shares issued upon conversion of Preferred Shares) to its affiliates, including any other Person (as defined in Article 21.1(e)) who, directly or indirectly, controls, is controlled by, or is under common control with such holder of Preferred Shares (or Common Shares issued upon conversion of Preferred Shares), or constituent partners, limited partners, general partners, retired partners, members, former members or shareholders in accordance with their partnership interest, membership interest or shareholdings in such Person, or a trust for the benefit of the foregoing, provided that each such transfer complies with the relevant provisions set forth in the Amended and Restated Investor Rights Agreement. |
24
PART 21
DRAG-ALONG RIGHTS
Definitions
21.1 |
For the purposes of this PART 21, the following definitions will apply: |
(a) |
Change of Control shall mean a transaction or series of related transactions in which a Person, or a group of related Persons, acquires from shareholders of the Company securities representing a majority of the voting power of the Company, excluding a Reorganization Transaction; |
(b) |
Common Holder shall means a holder of Common Shares; |
(c) |
Common Shares has the meaning given to such term in PART 23; |
(d) |
Holders shall mean the Common Holders and the Preferred Holders; |
(e) |
Person includes a natural person, partnership, limited partnership, limited liability partnership, corporation, limited liability company, unlimited liability company, joint stock company, trust, unincorporated association, joint venture or other entity; |
(f) |
Preferred Holder shall mean a holder of the Preferred Shares; |
(g) |
Preferred Shares shall mean the Series A1 Preferred Shares and the Series A2 Preferred Shares; |
(h) |
Reorganization Transaction means a transaction or series of related transactions (including but not limited to any merger, amalgamation, reorganization, arrangement, recapitalization or other transaction) approved by the board (including the Series A1 Designee and at least one of the Series A2 Designees (each as defined in the Amended and Restated Voting Agreement) ( if, and only to the extent, each such designee is a director of the Company at the applicable time) pursuant to which a Person (Holdco) (A) acquires all of the issued and outstanding shares of the Company and the Company becomes a direct or indirect wholly owned subsidiary of Holdco and (B) shareholders of the Company become shareholders of Holdco and hold shares of Holdco proportionate to their shareholdings in the Company and which have substantially the same rights, preferences and privileges as the shares of the Company previously held by such shareholders of the Company (as set forth in PARTS 23, 24, 25 and 26) other than as may be approved by the board (including the Series A1 Designee and at least one of the Series A2 Designees if, and only to the extent, each such designee is a director of the Company at the applicable time); |
(i) |
Sale of the Company shall mean either: (a) a Change of Control; or (b) a transaction that qualifies as a Deemed Liquidation Event as defined in PART 25; |
(j) |
Series A1 Preferred Shares has the meaning given to such term in PART 25; |
(k) |
Series A2 Preferred Shares has the meaning given to such term in PART 26; and |
(l) |
Voting Share shall mean and include any securities of the Company the holders of which are entitled to vote for members of the board of directors, including the Common Shares, Preferred Shares and any Common Shares issued upon conversion thereof, as to which a Holder has or hereafter acquires beneficial ownership. |
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Actions to be Taken
21.2 |
In the event of: (A) a Sale of the Company where (i) the holders of 67% of the then outstanding Preferred Shares (the Requisite Preferred Holders), (ii) the board, and (iii) the holders of a majority of the then outstanding Common Shares (other than those issued or issuable upon conversion of the Preferred Shares) (the Selling Holders and, together with the Requisite Preferred Holders, the Electing Holders) approve such Sale of the Company in writing, specifying that this Article 21.2 shall apply to such transaction, or (B) a Reorganization Transaction where the Requisite Preferred Holders approve such Reorganization Transaction, then each Holder and the Company hereby agree: |
(a) |
if such transaction requires shareholder approval, with respect to all Voting Shares that such Holder owns or over which such Holder otherwise exercises voting power, to vote (in person, by proxy or by action by written consent, as applicable) all Voting Shares in favor of, and adopt, such Sale of the Company or such Reorganization Transaction, as applicable (together with any related amendment to these Articles required in order to implement such Sale of the Company or such Reorganization Transaction, as applicable) and to vote in opposition to any and all other proposals that could reasonably be expected to delay or impair the ability of the Company to consummate such Sale of the Company or such Reorganization Transaction, as applicable; |
(b) |
if such transaction is a share sale, to sell and be deemed to have sold the same proportion of Voting Shares beneficially held by such Holder as is being sold by the Electing Holders to the person or entity to whom the Electing Holders propose to sell their Voting Shares, and, except as permitted in Article 21.3 below, on the same terms and conditions as the Electing Holders; |
(c) |
to execute and deliver all related documentation and take such other action in support of the Sale of the Company or the Reorganization Transaction, as applicable as shall reasonably be requested by the Company or the Electing Holders in order to carry out the terms and provision of this Article 21.2, including executing and delivering instruments of conveyance and transfer, and any purchase agreement, merger agreement, indemnity agreement, escrow agreement, consent, waiver, governmental filing, share certificates duly endorsed for transfer (free and clear of impermissible liens, claims and encumbrances) and any similar or related documents, provided that the University of British Columbia (UBC) shall not be subject to any indemnification obligations whatsoever in connection with any sale of its respective Common Shares; |
(d) |
not to deposit, and to cause their affiliates not to deposit, except as provided in these Articles, any Voting Shares owned by such party or affiliate in a voting trust or subject any such Voting Shares to any arrangement or agreement with respect to the voting of such Voting Shares, unless specifically requested to do so by the acquiror in connection with the Sale of the Company or the Reorganization Transaction, as applicable; |
26
(e) |
to refrain from exercising any dissenters rights or rights of appraisal under applicable law at any time with respect to such Sale of the Company or such Reorganization Transaction, as applicable; |
(f) |
if the consideration to be paid pursuant to this Article 21.2 includes any securities and due receipt thereof by any Holder would require under applicable law (x) the registration or qualification of such securities or of any person as a broker or dealer or agent with respect to such securities or (y) the provision to any Holder of any information other than such information as a prudent issuer would generally furnish in an offering made solely to accredited investors as defined in National Instrument 45-106 Prospectus Exemptions, the Company may cause to be paid to any such Holder in lieu thereof, against surrender of the Voting Shares held by such Holder which would have otherwise been sold by such Holder, an amount in cash equal to the fair value (as determined in good faith by the Company) of the securities which such Holder would otherwise receive as of the date of the issuance of such securities in exchange for such Voting Shares; |
(g) |
in the event that the Electing Holders, in connection with such Sale of the Company, or such Reorganization Transaction, as applicable, appoint a shareholder representative (the Shareholder Representative) with respect to matters affecting the Holders under the applicable definitive transaction agreements following consummation of such Sale of the Company or such Reorganization Transaction, as applicable, (A) to consent to (x) the appointment of such Shareholder Representative, (y) the establishment of any applicable escrow, expense or similar fund in connection with any indemnification or similar obligations, and (z) the payment of such Holders pro rata portion (from the applicable escrow or expense fund or otherwise) of any and all reasonable fees and expenses to such Shareholder Representative in connection with such Shareholder Representatives services and duties in connection with such Sale of the Company or such Reorganization Transaction, as applicable, and its related service as the representative of the Holders, and (B) not to assert any claim or commence any suit against the Shareholder Representative or any other Holder with respect to any action or inaction taken or failed to be taken by the Shareholder Representative in connection with its service as the Shareholder Representative, absent fraud or willful misconduct; and |
(h) |
in the event of a Reorganization Transaction, the Company, Holdco and the shareholders agree to adopt and enter into a voting agreement, a right of first refusal and co-sale agreement and an investor rights agreement between Holdco and the shareholders, in a form approved by the board (including the Series A1 Designee and at least one of the Series A2 Designees if, and only to the extent, each such designee is a director of the Company at the applicable time) (the Holdco Investor Agreements), each of which will have substantially the same terms and conditions as the respective voting agreement, right of first refusal and co-sale agreement and investor rights agreement other than as may be approved by the board (including the Series A1 Designee and at least one of the Series A2 Designees if, and only to the extent, each such designee is a director of the Company at the applicable time), each as amended and restated, to which the Company and certain shareholders of the Company are a party (the Company Investor Agreements), which Holdco Investor Agreements shall replace each such existing Company Investor Agreements and the Company Investor Agreements shall terminate pursuant to their terms upon the closing of such Reorganization Transaction. |
27
Exceptions
21.3 |
Notwithstanding the foregoing, a Holder will not be required to comply with Article 21.2 above in connection with any proposed Sale of the Company (the Proposed Sale) unless: |
(a) |
any representations and warranties to be made by such Holder in connection with the Sale of the Company are limited to representations and warranties related to authority, ownership and the ability to convey title to such Voting Shares and residency of the Holders for tax purposes, including, but not limited to, representations and warranties that (A) the Holder holds all right, title and interest in and to the Voting Shares such Holder purports to hold, free and clear of all liens and encumbrances, (B) the obligations of the Holder in connection with the transaction have been duly authorized, if applicable, (C) the documents to be entered into by the Holder have been duly executed by the Holder and delivered to the acquiror and are enforceable against the Holder in accordance with their respective terms; and (D) neither the execution and delivery of documents to be entered into in connection with the transaction, nor the performance of the Holders obligations thereunder, will cause a breach or violation of the terms of any agreement, law or judgment, order or decree of any court or governmental agency, in each case, to which such Holder is subject; |
(b) |
the Holder is not required to agree (unless such Holder is a Company officer or employee) to any restrictive covenant in connection with the Proposed Sale (including without limitation any covenant not to compete or covenant not to solicit customers, employees or suppliers of any party to the Proposed Sale); |
(c) |
the Holder and its affiliates shall not be required to amend, extend or terminate any contractual or other relationship with the Company, the acquirer or their respective affiliates, except that the Holder may be required to agree to terminate the investment-related documents between or among such Holder, the Company and/or the other shareholders of the Company; |
(d) |
the Holder shall not be liable for the inaccuracy of any representation or warranty made by any other person in connection with the Sale of the Company, other than the Company (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the Company as well as breach by any Holder of any of identical representations, warranties and covenants provided by all shareholders); |
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(e) |
the liability for indemnification, if any, of such Holder in the Proposed Sale and for the inaccuracy of any representations and warranties made by the Company or its shareholders in connection with such Proposed Sale, is several and not joint with any other Person (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the Company as well as breach by any shareholder of any identical representations, warranties and covenants provided by all shareholders), and, subject to the provisions of these Articles related to the allocation of the escrow, as amended, is pro rata in proportion to, and does not exceed, the amount of consideration paid to such Holder in connection with such Proposed Sale, except with respect to claims related to fraud by such Holder, the liability for which need not be limited as to such Holder; |
(f) |
liability shall be limited to such Holders (other than UBCs) applicable share (determined based on the respective proceeds payable to each shareholder in connection with such Proposed Sale in accordance with the provisions of these Articles) of a negotiated aggregate indemnification amount that applies equally to all shareholders but that in no event exceeds the amount of consideration otherwise payable to such Holder in connection with such Proposed Sale, except with respect to claims related to fraud by such Holder, the liability for which need not be limited as to such Holder; and |
(g) |
upon the consummation of the Proposed Sale, (1) each holder of each class or series of the Companys shares will receive the same form of consideration for their shares of such class or series as is received by other holders in respect of their shares of such same class or series of shares, (2) each holder of Series A1 Preferred Shares will receive the same amount of consideration per share of such Series A1 Preferred Shares as is received by other holders in respect of their Series A1 Preferred Shares, (3) each holder of Series A2 Preferred Shares will receive the same amount of consideration per share of such Series A2 Preferred Shares as is received by other holders in respect of their Series A2 Preferred Shares, (4) each holder of Common Shares will receive the same amount of consideration per Common Share as is received by other holders in respect of their Common Shares, and (5) unless the holders of at least 67% of the Preferred Shares then outstanding elect to receive a lesser amount by written notice given to the Company at least fifteen (15) days prior to the effective date of any such Proposed Sale, the aggregate consideration receivable by all holders of the Preferred Shares and Common Shares shall be allocated among the holders of Preferred Shares and Common Shares on the basis of the relative liquidation preferences to which the holders of Preferred Shares and the holders of Common Shares are entitled in these Articles for a Sale of the Company. |
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Restrictions on Sales of Control of the Company
21.4 |
No Common Holders shall be a party to any Change of Control unless all holders of Preferred Shares are allowed to participate in such transaction and the consideration received pursuant to such transaction is allocated among the parties thereto in the manner specified in these Articles in effect immediately prior to the Change of Control (as if such transaction were a Deemed Liquidation Event, as defined in PART 25), unless the holders of at least 67% of the Preferred Shares then outstanding elect otherwise by written notice given to the Company at least fifteen (15) days prior to the effective date of any such transaction or series of related transactions. |
PART 22
RIGHT OF FIRST REFUSAL AND CO-SALE
Definitions
22.1 |
For the purposes of this PART 22, the following definitions will apply: |
(a) |
Change of Control shall mean a transaction or series of related transactions in which a Person, or a group of related Persons, acquires from shareholders of the Company securities representing a majority of the voting power of the Company, excluding a Reorganization Transaction; |
(b) |
Common Holder shall means a holder of Common Shares; |
(c) |
Common Shares has the meaning given to such term in PART 23; |
(d) |
Person includes a natural person, partnership, limited partnership, limited liability partnership, corporation, limited liability company, unlimited liability company, joint stock company, trust, unincorporated association, joint venture or other entity; |
(e) |
Preferred Holder shall mean a holder of the Preferred Shares; |
(f) |
Preferred Shares shall mean the Series A1 Preferred Shares and the Series A2 Preferred Shares; |
(g) |
Reorganization Transaction means a transaction or series of related transactions (including but not limited to any merger, amalgamation, reorganization, arrangement, recapitalization or other transaction) approved by the board (including the Series A1 Designee and at least one of the Series A2 Designees (each as defined in the Amended and Restated Voting Agreement) ( if, and only to the extent, each such designee is a director of the Company at the applicable time) pursuant to which a Person (Holdco) (A) acquires all of the issued and outstanding shares of the Company and the Company becomes a direct or indirect wholly owned subsidiary of Holdco and (B) shareholders of the Company become shareholders of Holdco and hold shares of Holdco proportionate to their shareholdings in the Company and which have substantially the same rights, preferences and privileges as the shares of the Company previously held by such shareholders of the Company (as set forth in PARTS 23, 24, 25 and 26) other than as may be approved by the board (including the Series A1 Designee and at least one of the Series A2 Designees if, and only to the extent, each such designee is a director of the Company at the applicable time); |
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(h) |
Sale of the Company shall mean either: (a) a Change of Control; or (b) a transaction that qualifies as a Deemed Liquidation Event as defined in PART 25; |
(i) |
Series A1 Preferred Shares has the meaning given to such term in PART 25; and |
(j) |
Series A2 Preferred Shares has the meaning given to such term in PART 26. |
Restrictions on Transfer of Common Shares; Grant
22.2 |
Before any Common Shares (other than Common Shares issued or issuable upon conversion of the Preferred Shares) now or hereafter held by any Common Holder (sometimes referred to herein as a Selling Common Holder) may be sold, assigned, encumbered, pledged, transferred or otherwise disposed of (a Transfer), the Selling Common Holder shall first comply with the conditions set forth in this PART 22 pursuant to which it has granted to each Preferred Holder holding at least 200,000 Preferred Shares (each, a Major Investor) (i) a right of first refusal (subject to the prior right of the Company) on the terms described in this PART 22, and (ii) a right of co-sale (subject to the Selling Common Holder being a Key Holder) on the terms described in this PART 22. The Selling Common Holder must certify to the Company that any Transfer of Common Shares was made in accordance with the terms of these Articles and the Company can rely on such certification to record such Transfer on the books of the Company. No Common Holder or transferee shall Transfer any Common Shares or any other securities issued in respect of such shares upon any stock split, stock dividend, combination, recapitalization, merger or similar event, to a Competitor. Competitor shall mean, upon the advice of counsel, any Person that is primarily engaged in or actively participates in any activity or line of business in which the Company or any of its subsidiaries then engages or participates in, but shall not include any financial investment firm or collective investment vehicle that, together with its affiliates, holds less than twenty percent (20%) of the outstanding equity of any Competitor; notwithstanding anything to the contrary in the foregoing, in no event shall (a) DCVC Bio, L.P. or any of its affiliates, (b) OrbiMed Royalty & Credit Opportunities III, LP or any of its affiliates, or (c) Eli Lilly and Company or any of its affiliates, be deemed a Competitor. Key Holder shall mean a Common Holder who holds at least 1% of the outstanding Common Shares. |
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Right of First Refusal on Common Shares; Notice of Proposed Transfer
22.3 |
If a Selling Common Holder proposes to Transfer any of his, her or its Common Shares, the Selling Common Holder shall deliver to the Company and the Major Investors prompt written notice (the Common Sale Notice) at least thirty (30) days prior to the closing of such Transfer. The Common Sale Notice shall state in reasonable detail: (i) the Selling Common Holders bona fide intention to Transfer such Common Shares (the Offered Common Shares); (ii) the number of Offered Common Shares to be transferred to each proposed transferee and the identity of each such proposed transferee, if known; and (iii) the bona fide cash price or other consideration and other terms under which the Selling Common Holder proposes to Transfer the Offered Common Shares (the Offered Common Price), and the Selling Common Holder shall offer the Offered Common Shares at the Offered Common Price to the Company and the Major Investors. The Common Sale Notice shall also include a copy of any written proposal, term sheet or letter of intent or other agreement relating to the proposed Transfer, if any then exist. In the event that the Transfer is being made pursuant to the provisions of Article 22.11, the Common Sale Notice shall state under which clause of Article 22.11 the Transfer is being made. |
Exercise of Right of First Refusal by the Company
22.4 |
At any time within fifteen (15) days after the date of the Common Sale Notice, the Company may, by giving written notice to the Selling Common Holder and each Major Investor, elect to purchase any or all of the Offered Common Shares, at the Common Purchase Price determined in accordance with Article 0 below. |
Exercise of Right of First Refusal by a Major Investor
22.5 |
If the Company does not choose to purchase all of the Offered Common Shares (such remaining shares, the Residual Common Shares) within fifteen (15) days after the date of the Common Sale Notice, each Major Investor may elect by giving written notice (the Major Investor Election Notice) to the Selling Common Holder and the Company within twenty (20) days after the date of the Common Sale Notice either (i) to purchase its Pro Rata Common Share (as defined below) of the Residual Common Shares at the Common Purchase Price determined in accordance with Article 0 or (ii) if and only to the extent the Selling Common Holder is a Key Holder, to exercise its co-sale right as provided in Article 22.9 below. Any Major Investor may indicate in the Major Investor Election Notice that such party desires to purchase or sell a stated amount of the Offered Common Shares in excess of its Pro Rata Common Share. If the total number of shares a Major Investor offers to purchase exceeds the number of Residual Common Shares, each such party shall be entitled to purchase, at the Offered Common Price, such partys Pro Rata Common Share of the Residual Common Shares, with any remaining amount of Residual Common Shares to be allocated proportionately among the fully participating purchasers in accordance with their Major Investor Election Notice and relative respective Pro Rata Common Shares. For purposes of these Articles, a Major Investors Pro Rata Common Share is the ratio that the number of Common Shares (assuming conversion of any securities convertible into Common Shares) held by such Major Investor to the total number of Common Shares (assuming conversion of any securities convertible into Common Shares) held by all Major Investors in the aggregate. |
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Purchase Price
22.6 |
The purchase price (Common Purchase Price) for the Offered Common Shares purchased by the Company or Major Investors shall be the Offered Common Price (subject, in the case of the Company, to any rights the Company may have under any share purchase or restriction agreement to purchase all or some of such Offered Common Shares at a lower price). If the Offered Common Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the board in good faith. |
Payment
22.7 |
Payment of the Common Purchase Price shall be made, (i) at the option of the Company or the Major Investors, as the case may be, in cash (by certified check or wire transfer of available funds), by cancellation of all or a portion of any outstanding indebtedness of the Selling Common Holder, or by any combination thereof and (ii) at the option of the Company or the Major Investors, as the case may be, within thirty (30) days after the date of the Common Sale Notice or in the manner and at the times set forth in the Common Sale Notice, if any. |
Selling Common Holders Right to Transfer
22.8 |
To the extent all of the Offered Common Shares proposed in the Common Sale Notice to be transferred are not purchased by the Company or the Major Investors as provided herein, the Selling Common Holder may Transfer the remaining Offered Common Shares not purchased at the Offered Common Price or at a higher price and on the terms specified in the Common Sale Notice; provided that such Transfer (i) complies with the provisions of this PART 22 with respect to co-sale rights if such Selling Common Holder is a Key Holder, (ii) is consummated within ninety (90) days after the date of the Common Sale Notice, (iii) is in accordance with all the terms of these Articles and all other agreements between the Selling Common Holder and the Company, and (iv) is effected in accordance with any applicable securities laws. If the Offered Common Shares described in the Common Sale Notice are not so transferred within such period, a new Common Sale Notice shall be given to the Company and the Major Investors, and the Company and the Major Investors shall again be offered a right of first refusal and co-sale right pursuant to this PART 22 before any Offered Common Shares held by the Selling Common Holder may be Transferred. |
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Co-Sale Right Among Major Investors
22.9 |
To the extent (i) the Company and the Major Investors fail to exercise their right of first refusal pursuant to this PART 22 with respect to all of the Offered Common Shares, and (ii) the Selling Common Holder is a Key Holder, any Major Investor who delivers a Major Investor Election Notice pursuant to Article 22.5 above indicating an election to exercise such partys right of co-sale (a Selling Major Investor) shall then have the right to participate on a pro rata basis to sell up to the number of Common Shares it has indicated for co-sale in the Major Investor Election Notice. Each Selling Major Investor shall be entitled to sell all or any part of such Selling Major Investors Common Shares specified in their Major Investor Election Notice equal to such partys Pro Rata Common Co-Sale Share (as defined below) of the Residual Common Shares. For purposes of these Articles, a Selling Major Investors Pro Rata Common Co-Sale Share is the ratio that the number of Common Shares (assuming conversion of any securities convertible into Common Shares) held by such Selling Major Investor to the total number of Common Shares (assuming conversion of any securities convertible into Common Shares) of the Company held by the Selling Common Holder and the Selling Major Investors in the aggregate. To the extent one or more of the Selling Major Investors exercise such right of participation, the number of Common Shares that the Selling Common Holder may Transfer shall be correspondingly reduced. |
Closing
22.10 |
The participating Selling Major Investors shall enter into an agreement with the proposed investor on terms and conditions substantially similar to those in the agreement entered into by the Selling Common Holder, providing representations and warranties and other terms and conditions agreed to by the Selling Common Holder. To the extent that any prospective investor or investors refuses to purchase shares or other securities from a Selling Major Investor exercising its rights of co-sale hereunder, the Selling Common Holder shall not sell to such prospective investor or investors any Common Shares unless and until, simultaneously with such sale, the Selling Common Holder shall purchase such shares or other securities from such Selling Major Investor for the same consideration and on the same terms and conditions as the proposed Transfer described in the Common Sale Notice. Any Selling Major Investor exercising its rights of co-sale hereunder may convert into Common Shares such number of shares of Preferred Shares it has indicated for co-sale in the Major Investor Election Notice, conditional upon closing. |
Limitations on Common Right of First Refusal and Co-Sale Right
22.11 |
The restrictions on the Common Holders set forth in this PART 22 shall not apply where the Transfer of Common Shares by such Common Holder is: |
(a) |
to the Common Holders spouse or the parents, grandparents, siblings, children or grandchildren, of the Common Holder or Common Holders spouse, or to a custodian, trustee or other fiduciary for the account of the Common Holder or the members of the Common Holders family described in this Article 22.11(a) in connection with an estate planning transaction; |
(b) |
by way of a Reorganization Transaction (as defined in Article 22.1); |
(c) |
by way of gift or donation in the current calendar year in aggregate amount not to exceed five percent (5%) of the number of Common Shares held by the Common Holder as at the end of the last calendar year (which amount shall not be cumulative); |
(d) |
by way of bequest or inheritance upon death; |
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(e) |
to the Company in connection with any repurchase of Common Shares held by a Common Holder by the Company pursuant to agreements under which the Company has the option to repurchase such Common Shares upon the occurrence of certain events, such as termination of employment, or in connection with the exercise by the Company of any rights of first refusal; |
(f) |
by involuntary Transfer by operation of law; |
(g) |
by UBC (A) to a society if UBC has the exclusive right to control the membership of such society, and (B) to any Person employed by UBC who has, in the judgment of UBC, made a contribution to any intellectual property licensed by UBC to the Company on December 16, 2013; or |
(h) |
by a Key Holder of up to 10% of the number of Common Shares held by such Key Holder as of the date that such Key Holder first became party to the Amended and Restated Right of First Refusal and Co-Sale Agreement. |
PART 23
SPECIAL RIGHTS AND RESTRICTIONS ATTACHED TO COMMON SHARES
23.1 |
The Common Shares Without Par Value (the Common Shares) have attached to them the special rights and restrictions set out in this PART 23. |
Dividends
23.2 |
Except as otherwise provided in these Articles, each holder of a Common Share is entitled, as such, to receive, on the date fixed for payment thereof, and the Company will pay thereon, such dividends as the directors may in their sole and absolute discretion declare from time to time out of the money or other property of the Company properly applicable to the payment of dividends. |
23.3 |
No holder of a Common Share will be entitled, as such, to any dividend other than or in excess of the dividends, if any, declared pursuant to Article 23.2. |
23.4 |
The directors may, in their sole and absolute discretion, declare and pay or set apart for payment dividends on the Common Shares independently of any dividend on, and without also declaring or paying or setting apart for payment any dividend (whether or not of a similar amount) on, any one or more other classes of shares in the Company and may, in their sole and absolute discretion, declare and pay or set apart for payment dividends on shares of any one or more classes of shares in the Company other than the Common Shares independently of any dividend on, and without also declaring or paying or setting apart for payment any dividend (whether or not of a similar amount) on, the Common Shares. |
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Winding Up
23.5 |
In the event of the liquidation, dissolution or winding-up of the Company or other distribution of property or assets of the Company among its shareholders for the purpose of winding up its affairs, no amount will be paid and no property or asset of the Company will be distributed to the holders of the Common Shares, as such, until the holders of the Class A Preferred Shares and any other class or series of shares entitled to receive assets of the Company upon such a distribution in priority to the holders of the Common Shares, as such, have first received from the property and assets of the Company the amount to which they are entitled pursuant to these Articles, but thereafter, the holders of the Common Shares will be entitled to all remaining property and assets of the Company on a share for share basis. |
Votes
23.6 |
Each holder of a Common Share, as such, is entitled to receive notice of and to attend and vote in person or by proxy at all meetings of the shareholders of the Company and is entitled to one vote for each such share held. |
PART 24
SPECIAL RIGHTS AND RESTRICTIONS ATTACHED TO
CLASS A PREFERRED SHARES
24.1 |
The Class A Preferred Shares Without Par Value (the Class A Preferred Shares) have attached to them, as a class, the special rights and restrictions set out in this PART 24. |
Directors Authority to Issue in One or More Series
24.2 |
The Class A Preferred Shares may include one or more series of shares and subject to the provisions of the Business Corporations Act, the directors may, by resolution, if none of the shares of any particular series are issued, alter the Articles of the Company and authorize the alteration to the Notice of Articles of the Company, as the case may be, to: |
(a) |
determine the maximum number of shares of that series that the Company is authorized to issue, determine that there is no such maximum number, or alter any such determination; |
(b) |
create an identifying name by which the share of that series may be identified, or alter any such identifying name; and |
(c) |
attach special rights and restrictions to the shares of that series, or alter any such special rights and restrictions. |
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Votes
24.3 |
Each holder of a Class A Preferred Share, as such, is entitled to receive notice of and to attend and vote in person or by proxy at all meetings of the shareholders of the Company and is entitled to one vote for each such share held. |
DATED: March 23, 2020.
/s/ Véronique Lecault |
Signature of Director |
Name of Director: Véronique Lecault |
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PART 25
SPECIAL RIGHTS AND RESTRICTIONS ATTACHED TO
SERIES A1 PREFERRED SHARES
25.1 |
The Series A1 Preferred Shares (the Series A1 Preferred Shares) have attached to them the special rights and restrictions set out in this PART 25. |
Payment of Dividends
25.2 |
The Company shall not declare, pay or set aside any dividends on shares of any other class or series of the Company (other than dividends on Common Shares payable in Common Shares) unless (in addition to the obtaining of any consents required elsewhere in the Articles) the holders of the Series A1 Preferred Shares then outstanding first receive, or simultaneously receive, a dividend on each outstanding Series A1 Preferred Share, on a pari passu basis with the holders of the Series A2 Preferred Shares, in an amount at least equal to (i) in the case of a dividend on Common Shares or any class or series of shares of the Company that is convertible into Common Shares, that dividend per Series A1 Preferred Share as would equal the product of (A) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Shares and (B) the number of Common Shares issuable upon conversion of a Series A1 Preferred Share, in each case calculated on the record date for determination of holders entitled to receive such dividend or (ii) in the case of a dividend on any class or series of shares of the Company that is not convertible into Common Shares, at a rate per Series A1 Preferred Share determined by (A) dividing the amount of the dividend payable on each share of such class or series by the original issuance price of such class or series (subject to appropriate adjustment in the event of any share dividend, share split, combination or other similar recapitalization with respect to such class or series) and (B) multiplying such fraction by an amount equal to the Series A1 Original Issue Price (as defined below); provided that, if the Company declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of shares of the Company, the dividend payable to the holders of Series A1 Preferred Shares under this Article 25.2 shall be calculated based upon the dividend on the class or series of shares of the Company that would result in the highest Series A1 Preferred Shares dividend. The Series A1 Original Issue Price means CDN$4.75 per Series A1 Preferred Share, subject to appropriate adjustment in the event of any share dividend, share split, combination or other similar recapitalization with respect to the Series A1 Preferred Shares. |
Participation upon Liquidation, Dissolution or Winding Up
25.3 |
In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company or Deemed Liquidation Event, the holders of Series A1 Preferred Shares then outstanding are entitled, on a pari passu basis with the holders of Series A2 Preferred Shares, to be paid out of the assets of the Company available for distribution to its shareholders before any payment is made to the holders of Common Shares, an amount per share equal to the greater of (i) the Series A1 Original Issue Price, plus any dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable had all Series A1 Preferred Shares been converted into Common Shares under Article |
25.12 |
immediately before such liquidation, dissolution, winding-up or Deemed Liquidation Event (this amount payable is referred to as the Series A1 Liquidation Amount). If upon any such liquidation, dissolution or winding-up of the Company or Deemed Liquidation Event, the assets of the Company available for distribution to its shareholders are insufficient to pay the holders of the Series A1 Preferred Shares and the Series A2 Preferred Shares (the Preferred Shares) the full amount to which they are entitled under Articles 25.3 to 25.9 and 26.3 to 26.9, the holders of the Preferred Shares shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts that would otherwise be payable in respect of the Preferred Shares upon such distribution if all amounts payable on or with respect to such Series A1 Preferred Shares were paid in full. |
25.4 |
In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company or Deemed Liquidation Event, after the payment of all preferential amounts required to be paid to the holders of Series A1 Preferred Shares, pari passu with the holders of Series A2 Preferred Shares, the remaining assets of the Company available for distribution to its shareholders shall be distributed among the holders of Common Shares, pro rata based on the number of Common Shares held by each holder. |
25.5 |
Each of the following is a Deemed Liquidation Event unless the holders of at least 67% of the outstanding Preferred Shares elect otherwise by written notice sent to the Company at least ten (10) days before the effective date of any such event: |
(a) |
any merger, amalgamation, reorganization, arrangement or other transaction involving the Company and any other Company or other entity or person in which the persons who were the shareholders of the Company immediately prior to such merger, amalgamation, reorganization, arrangement or other transaction own less than fifty percent (50%) of the outstanding voting shares of the surviving or continuing entity after such merger, amalgamation, reorganization, arrangement or other transaction; |
(b) |
the sale, exchange or transfer by the Companys shareholders, in a single transaction or series of related transactions, of all of the voting shares of the Company; and |
(c) |
the sale or exclusive license of all or substantially all of the assets of the Company, whether in a single transaction or a series of related transactions. |
Notwithstanding the foregoing, any Reorganization Transaction will not be considered a Deemed Liquidation Event.
25.6 |
The Company may not effect a Deemed Liquidation Event referred to in Article 25.5(a) unless the agreement or consolidation for such transaction provides that the consideration payable to the shareholders of the Company shall be allocated among the holders of shares of the Company in accordance with Articles 25.3, 25.4 26.3 and 26.4. |
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25.7 |
In the event of a Deemed Liquidation Event referred to in Article 25.5(a) or 25.5(c), if the Company does not effect a dissolution of the Company within 90 days after the Deemed Liquidation Event, then (i) the Company shall send a written notice to each holder of Preferred Shares no later than the 90th day after the Deemed Liquidation Event advising such holders of their right (and the requirements to be met to secure such right) under the following clause; (ii) to require the redemption of such Series A1 Preferred Shares, and (iii) if the holders of at least 67% of the then outstanding Preferred Shares, so request in a written instrument delivered to the Company not later than 120 days after the Deemed Liquidation Event, the Company shall use the consideration received by the Company for the Deemed Liquidation Event (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the Companys board of directors), together with any other assets of the Company available for distribution to its shareholders, all to the extent permitted by law (the Available Proceeds), on the 150th day after the Deemed Liquidation Event, to redeem, on a pari passu basis with all outstanding Series A2 Preferred Shares, all outstanding Series A1 Preferred Shares at a price per share equal to the Series A1 Liquidation Amount. Notwithstanding the foregoing, in the event of such a redemption, if the Available Proceeds are not sufficient to redeem all outstanding Preferred Shares, the Company shall ratably redeem, on a pari passu basis with the holders of Series A2 Preferred Shares, each holders Series A1 Preferred Shares to the fullest extent of the Available Proceeds and shall redeem the remaining shares as soon as it may lawfully do so. Before such distribution or redemption, the Company shall not expend or dissipate the consideration received for the Deemed Liquidation Event, except to discharge expenses incurred in connection with the Deemed Liquidation Event or to pay or discharge any liabilities associated with the assets sold or technology licensed. |
25.8 |
The amount deemed paid or distributed to the shareholders of the Company upon any such amalgamation, consolidation, sale, transfer, exclusive license, other disposition or redemption shall be the cash or the value of the property, rights or securities paid or distributed to such holders by the Company or the acquiring person, firm or other entity. |
25.9 |
In the event of a Deemed Liquidation Event under Article 25.5(a), if any portion of the consideration payable to the shareholders of the Company is payable only upon satisfaction of contingencies (the Additional Consideration), the agreement or other documents for such transaction shall provide that (a) the portion of such consideration that is not Additional Consideration (such portion, the Initial Consideration) shall be allocated among the shareholders of the Company in accordance with Articles 25.3, 25.4, 26.3 and 26.4 as if the Initial Consideration were the only consideration payable in connection with the Deemed Liquidation Event; and (b) any Additional Consideration that becomes payable to the shareholders of the Company upon satisfaction of such contingencies shall be allocated among the shareholders of the Company in accordance with Articles 25.3, 25.4, 26.3 and 26.4 after taking into account the previous payment of the Initial Consideration as part of the same transaction. For the purposes of this Article 25.9, consideration placed into escrow or retained as holdback to be available for satisfaction of indemnification or similar obligations in connection with the Deemed Liquidation Event is deemed to be Additional Consideration. |
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Voting Rights
25.10 |
On any matter presented to the shareholders of the Company for their action or consideration at any meeting of shareholders of the Company (or by written consent of shareholders in lieu of meeting), each holder of outstanding Series A1 Preferred Shares is entitled to cast the number of votes equal to the number of whole Common Shares into which the Series A1 Preferred Shares held by the holder are convertible as of the record date for determining shareholders entitled to vote on such matter. Except as provided by law or by the other provisions of the Articles, holders of Series A1 Preferred Shares shall vote together with the holders of Common Shares and the holders of Series A2 Preferred Shares as a single class. |
25.11 |
Preferred Share Protective Provisions. At any time when Preferred Shares (subject to appropriate adjustment in the event of any dividend, share split, combination or other similar recapitalization with respect to the Preferred Shares) are outstanding, the Company shall not, either directly or indirectly by amendment, amalgamation, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or the Articles) the written consent or affirmative vote of the holders of at least 67% of the then outstanding Preferred Shares, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote is null and of no force or effect: |
(a) |
amend, alter, waive or repeal any provision of the Articles or Notice of Articles of the Company (other than in connection with the Reorganization Transaction); |
(b) |
reclassify, reorganize, exchange, cancel or recapitalize any of the outstanding capital of the Company (other than in connection with the Reorganization Transaction); |
(c) |
issue or obligate itself to issue any preferred shares, including any as-yet-unauthorized class or series of preferred shares, other than Series A2 Preferred Shares pursuant to that certain Investment Agreement between the Company and certain investors dated March 23, 2020; |
(d) |
make any change to the Companys stock option plan or create any new stock option plans or other incentive plans; |
(e) |
make any change to the number of directors of the board; |
(f) |
take any proceedings with a view to the dissolution, winding-up or termination of the corporate existence of the Company (other than in connection with the Reorganization Transaction); |
(g) |
sell, lease, transfer, license or otherwise dispose of all or substantially all of the assets or intellectual property of the Company and its subsidiaries (other than in connection with the Reorganization Transaction); |
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(h) |
pay or declare any dividend or make any distribution on any shares of the Company; |
(i) |
purchase or redeem (or permit any subsidiary to purchase or redeem) (i) any Preferred Shares or (ii) any Common Shares; provided, however, that this restriction shall not apply to the repurchase of any Common Shares or Preferred Shares from employees, officers, directors or consultants of the Company or any subsidiary pursuant to agreements under which the Company has the option to repurchase such shares upon the occurrence of certain events, such as the termination of employment or service, or pursuant to any right of first refusal in favour of the Company; |
(j) |
incur aggregate indebtedness or related liabilities, including loans, guarantees of third party indebtedness or granting of security for indebtedness over the Companys assets in excess of CDN$250,000, other than indebtedness incurred in the ordinary course of business of the Company (unless otherwise approved by the Companys board of directors, including the Series A1 Designee and at least one of the Series A2 Designees (as defined in the Amended and Restated Voting Agreement) (if, and only to the extent, each such designee is a director of the Company at the applicable time); or . |
(k) |
enter into any transaction, agreement or arrangement with an affiliate or founder of the Company (except for employment or consulting arrangements in the ordinary course of business of the Company). |
Optional Conversion
25.12 |
The holders of Series A1 Preferred Shares have conversion rights as follows (the Series A1 Conversion Rights): |
Right to Convert.
(a) |
Each Series A1 Preferred Share may be converted, at the option of its holder, at any time and from time to time, and without the payment of additional consideration by its holder, into such number of fully paid and non-assessable Common Shares as is determined by dividing the Series A1 Original Issue Price by the Series A1 Conversion Price (as defined below) in effect at the time of conversion. The Series A1 Conversion Price shall initially be equal to CDN$4.75. Such initial Series A1 Conversion Price, and the rate at which Series A1 Preferred Shares may be converted into Common Shares, are subject to adjustment as provided below. |
(b) |
In the event of a liquidation, dissolution or winding-up of the Company or a Deemed Liquidation Event, the Series A1 Conversion Rights terminate at the close of business on the last full day preceding the date fixed for the payment of any such amounts distributable on such event to the holders of Series A1 Preferred Shares. |
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(c) |
No fractional Common Shares shall be issued upon conversion of Series A1 Preferred Shares. In lieu of any fractional shares to which the holder would otherwise be entitled, the Company shall pay cash equal to such fraction multiplied by the fair market value of a Common Share as determined in good faith by the Companys board of directors. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of Series A1 Preferred Shares the holder is at the time converting into Common Shares and the aggregate number of Common Shares issuable upon such conversion. |
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Mechanics of Conversion.
(d) |
In order for a holder of Series A1 Preferred Shares to voluntarily convert Series A1 Preferred Shares into Common Shares, such holder shall (a) provide written notice at the principal office of the Company (or to the Companys transfer agent at the office of the transfer agent for the Series A1 Preferred Shares if the Company appoints such a transfer agent) that the holder elects to convert all or any number of the holders Series A1 Preferred Shares and, if applicable, any event on which the conversion is contingent and (b) if the holders shares are certificated, surrender the certificate or certificates for the Series A1 Preferred Shares (or, if the registered holder alleges that the certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement acceptable to the Company to indemnify the Company against any claim that may be made against the Company on account of the alleged loss, theft or destruction of the certificate), at the office of the transfer agent for the Series A1 Preferred Shares (or at the principal office of the Company if the Company serves as its own transfer agent). Such notice shall state the holders name or the names of the nominees in which the holder wishes the Common Shares to be issued. If required by the Company, any certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Company, duly signed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Company if the Company serves as its own transfer agent) of such notice and, if applicable, certificates (or lost certificate affidavit and agreement) shall be the time of conversion (the Series A1 Conversion Time), and the Common Shares issuable upon conversion of the specified Series A1 Preferred Shares will be deemed to be outstanding of record as of that date. The Company shall, as soon as practicable after the Series A1 Conversion Time (i) issue and deliver to the holder of Series A1 Preferred Shares, or to his, her or its nominees, a certificate or certificates for the number of full Common Shares issuable upon such conversion in accordance with these provisions and a certificate for the number (if any) of Series A1 Preferred Shares represented by the surrendered certificate that were not converted into Common Shares, (ii) pay in cash such amount as provided in Article 25.12(c) in lieu of any fraction of a Common Share otherwise issuable upon such conversion and (iii) pay all declared but unpaid dividends on the Series A1 Preferred Shares converted. |
(e) |
The Company shall at all times when Series A1 Preferred Shares are outstanding, but only if the authorized number of Common Shares that the Company may issue is not unlimited, reserve and keep available out of its authorized but unissued shares, for the purpose of effecting the conversion of the Series A1 Preferred Shares, such number of its duly authorized Common Shares as are from time to time sufficient to effect the conversion of all outstanding Series A1 Preferred Shares; and if at any time the number of authorized but unissued Common Shares is not sufficient to effect the conversion of all then outstanding Series A1 Preferred Shares, the Company shall take such corporate action as may be necessary to increase its authorized but unissued Common Shares to such number of shares as sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite shareholder approval of any necessary amendment to the Notice of Articles and Articles. |
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(f) |
All Series A1 Preferred Shares duly surrendered for conversion will no longer be deemed to be outstanding and all rights with respect to such shares will immediately cease and terminate at the Series A1 Conversion Time, except only the right of their holders to receive Common Shares in exchange therefor, to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Article 25.12(c) and to receive payment of any dividends declared but unpaid thereon. |
(g) |
Upon any such conversion, no adjustment to the Series A1 Conversion Price shall be made for any declared but unpaid dividends on the Series A1 Preferred Shares surrendered for conversion or on the Common Shares delivered upon conversion. |
Adjustments to Series A1 Conversion Price for Diluting Issues
25.13 |
The following definitions shall apply: |
(a) |
Additional Shares means all Common Shares issued (or, under Article 25.14 below, deemed to be issued) by the Company after the Series A1 Original Issue Date, other than Exempt Securities. |
(b) |
Convertible Securities means any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Shares, but excluding Options. |
(c) |
Exempt Securities means the following Common Shares and Common Shares deemed issued under the following Options and Convertible Securities of the Company: |
(i) |
Common Shares, Options or Convertible Securities issued upon conversion of any Preferred Share, or as a dividend or distribution on Preferred Shares; |
(ii) |
Common Shares, Options or Convertible Securities issued by reason of a dividend, share split, split-up or other distribution on the Common Shares that is covered by Article 25.19, 25.20, 25.21 or 25.22; |
(iii) |
Common Shares or Options issued to employees or directors of, or consultants to, the Company pursuant to any stock option or equity incentive plan unanimously approved by the Companys board of directors; |
(iv) |
Common Shares issued upon conversion of any Convertible Securities and Options outstanding as of the Series A1 Original Issue Date; |
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(v) |
Common Shares, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property lessors, under a debt financing, equipment leasing or real or immovable property leasing transaction unanimously approved by the Companys board of directors (including shares underlying (directly or indirectly) any such Options or Convertible Securities); |
(vi) |
Common Shares, Options or Convertible Securities issued to suppliers or third party service providers in connection with the provision of goods or services under transactions unanimously approved by the Companys board of directors (including shares underlying (directly or indirectly) any such Options or Convertible Securities); |
(vii) |
Common Shares, Options or Convertible Securities issued (A) under the acquisition of another company by the Company by amalgamation, purchase of substantially all of the assets or other reorganization or to a joint venture agreement, provided that such issuances are unanimously approved by the Companys board of directors (including shares underlying (directly or indirectly) any such Options or Convertible Securities), or (B) in connection with the Reorganization Transaction; or |
(viii) |
Common Shares, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development, marketing or other similar agreements or strategic partnerships unanimously approved by the Companys board of directors (including shares underlying (directly or indirectly) any such Options or Convertible Securities). |
(d) |
Option means rights, options or warrants to subscribe for, purchase or otherwise acquire Common Shares or Convertible Securities. |
(e) |
Series A1 Original Issue Date means the date on which the first Series A1 Preferred Share was issued. |
25.14 |
If the Company at any time or from time to time after the Series A1 Original Issue Date issues Options or Convertible Securities (excluding Options or Convertible Securities that are themselves Exempt Securities) or fixes a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of Common Shares (as set forth in the relating instrument, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any of its provisions for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, will be deemed to be Additional Shares issued as of the time of such issue or, in case such a record date has been fixed, as of the close of business on such record date. |
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(a) |
If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Series A1 Conversion Price under Article 25.15, are revised as a result of an amendment to such terms or any other adjustment under such Option or Convertible Security (but excluding automatic adjustments to such terms under anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (a) any increase or decrease in the number of Common Shares issuable upon the exercise, conversion and/or exchange of the Option or Convertible Security or (b) any increase or decrease in the consideration payable to the Company upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Series A1 Conversion Price computed upon the original issue of the Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Series A1 Conversion Price as would have obtained had such revised terms been in effect upon the original date of issuance of the Option or Convertible Security. Notwithstanding the foregoing, no readjustment under this clause (a) shall increase the Series A1 Conversion Price to an amount that exceeds the lower of (i) the Series A1 Conversion Price in effect immediately before the original adjustment made as a result of the issuance of the Option or Convertible Security, or (ii) the Series A1 Conversion Price that would have resulted from any issuances of Additional Shares (other than deemed issuances of Additional Shares as a result of the issuance of the Option or Convertible Security) between the original adjustment date and such readjustment date. |
(b) |
If the terms of any Option or Convertible Security (excluding Options or Convertible Securities that are themselves Exempt Securities), the issuance of which did not result in an adjustment to the Conversion Price under Article 25.15 (either because the consideration per share (determined under Article 25.16) of the Additional Shares subject thereto was equal to or greater than the Series A1 Conversion Price then in effect, or because such Option or Convertible Security was issued before the Series A1 Original Issue Date), are revised after the Series A1 Original Issue Date as a result of an amendment to such terms or any other adjustment under such Option or Convertible Security (but excluding automatic adjustments to such terms under anti-dilution or similar provisions of the Option or Convertible Security) to provide for either (a) any increase in the number of Common Shares issuable upon the exercise, conversion or exchange of the Option or Convertible Security or (b) any decrease in the consideration payable to the Company upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares subject thereto (determined in the manner provided in Article 25.14 will be deemed to have been issued effective upon such increase or decrease becoming effective. |
(c) |
Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) that resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Series A1 Conversion Price under Article 25.15, the Series A1 Conversion Price shall be readjusted to such Series A1 Conversion Price as would have obtained had such Option or Convertible Security (or portion thereof) never been issued. |
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(d) |
If the number of Common Shares issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Company upon such exercise, conversion and/or exchange, is calculable at the time the Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Series A1 Conversion Price under this Article 25.14 shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses (a) and (b) of this Article 25.14). If the number of Common Shares issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Company upon such exercise, conversion and/or exchange, cannot be calculated at all at the time the Option or Convertible Security is issued or amended, any adjustment to the Series A1 Conversion Price that would result under this Article 25.14 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to the Series A1 Conversion Price that such issuance or amendment took place at the time such calculation can first be made. |
25.15 |
If the Company, at any time after the Series A1 Original Issue Date, issues Additional Shares (including Additional Shares deemed to be issued under Article 25.14), without consideration or for a consideration per share less than the Series A1 Conversion Price in effect immediately before such issue, then the Series A1 Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest one-hundredth of a cent) determined in accordance with the following formula: |
CP2 = CP1* (A + B) / (A + C)
For purposes of the foregoing formula, the following definitions shall apply:
CP2 = the Series A1 Conversion Price in effect immediately after such issue of Additional Shares
CP1 = the Series A1 Conversion Price in effect immediately before such issue of Additional Shares;
A = the number of Common Shares deemed to be outstanding immediately before such issue of Additional Shares (treating for this purpose as outstanding all Common Shares, all outstanding Preferred Shares on an as-converted basis, all outstanding Options on an as-exercised basis and all outstanding Convertible Securities on an as-exchanged or as-converted basis);
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B = the number of Common Shares that would have been issued if such Additional Shares had been issued at a price per share equal to CP1 (determined by dividing the aggregate consideration received by the Company in respect of such issue by CP1); and
C = the number of such Additional Shares issued in such transaction.
25.16 |
For purposes of Articles 25.13 to 25.24, the consideration received by the Company for the issue of any Additional Shares shall be computed as follows: |
(a) |
Cash and Property: Such consideration shall: |
(i) |
if it consists of cash, be computed at the aggregate amount of cash received by the Company, excluding amounts paid or payable for accrued interest; |
(ii) |
if it consists of property other than cash, be computed at its fair market value at the time of such issue, as determined in good faith by the Companys board of directors; and |
(iii) |
if Additional Shares are issued together with other shares or securities or other assets of the Company for consideration that covers both, be the proportion of such consideration so received, computed as provided in clauses ((i)) and ((ii)) above, as determined in good faith by the Companys board of directors. |
(b) |
Options and Convertible Securities: The consideration per share received by the Company for Additional Shares deemed to have been issued under Article 25.14, relating to Options and Convertible Securities, shall be determined by dividing: |
(i) |
the total amount, if any, received or receivable by the Company as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the relating instruments, without regard to any of its provision for a subsequent adjustment of such consideration) payable to the Company upon the exercise of the Options or the conversion or exchange of the Convertible Securities, or in the case of Options for Convertible Securities, the exercise of the Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by |
(ii) |
the maximum number of Common Shares (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities. |
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25.17 |
No adjustment in the Series A1 Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares if the Company receives written notice from the holders of at least 67% of the then outstanding Series A1 Preferred Shares agreeing that no such adjustment be made as the result of the issuance or deemed issuance of such Additional Shares. |
25.18 |
If the Company issues on more than one date Additional Shares that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Series A1 Conversion Price under Article 25.15, and such issuance dates occur within a period of no more than 90 days from the first such issuance to the final such issuance, then, upon the final such issuance, the Series A1 Conversion Price shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period). |
25.19 |
If the Company, at any time or from time to time after the Series A1 Original Issue Date, subdivides the outstanding Common Shares, the Series A1 Conversion Price in effect immediately before the subdivision shall be proportionately decreased so that the number of Common Shares issuable on conversion of each share of such class be increased in proportion to such increase in the aggregate number of Common Shares outstanding. If the Company, at any time or from time to time after the Series A1 Original Issue Date, combines the outstanding Common Shares, the Series A1 Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of Common Shares issuable on conversion of each share of such class be decreased in proportion to such decrease in the aggregate number of Common Shares outstanding. Any adjustment under this Article shall become effective at the close of business on the date the subdivision or combination becomes effective. |
25.20 |
If the Company, at any time or from time to time after the Series A1 Original Issue Date, makes or issues, or fixes a record date for the determination of holders of Common Shares entitled to receive, a dividend or other distribution payable on the Common Shares in additional Common Shares, then and in each such event the Series A1 Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date is fixed, as of the close of business on such record date, by multiplying the Series A1 Conversion Price then in effect by a fraction: |
(a) |
the numerator of which is the total number of Common Shares issued and outstanding immediately before the time of such issuance or the close of business on such record date, and |
(b) |
the denominator of which is the total number of Common Shares issued and outstanding immediately before the time of such issuance or the close of business on such record date plus the number of Common Shares issuable in payment of such dividend or distribution. |
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Notwithstanding the foregoing (A) if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series A1 Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Series A1 Conversion Price shall be adjusted under this subsection as of the time of actual payment of such dividends or distributions; and (B) no such adjustment shall be made if the holders of Series A1 Preferred Shares simultaneously receive a dividend or other distribution of Common Shares in a number equal to the number of Common Shares as they would have received if all outstanding Series A1 Preferred Shares had been converted into Common Shares on the date of such event.
25.21 |
If the Company, at any time or from time to time after the Series A1 Original Issue Date, makes or issues, or fixes a record date for the determination of holders of Common Shares entitled to receive, a dividend or other distribution payable in securities of the Company (other than a distribution of Common Shares in respect of outstanding Common Shares) or in other property and Article 25.2 does not apply to such dividend or distribution, then and in each such event the holders of Series A1 Preferred Shares shall receive, pari passu with the holders of the Series A2 Preferred Shares and simultaneously with the distribution to the holders of Common Shares, a dividend or other distribution of such securities or other property in an amount equal to the amount of such securities or other property as they would have received if all outstanding Series A1 Preferred Shares had been converted into Common Shares on the date of such event. |
25.22 |
If any reorganization, recapitalization, reclassification, consolidation or amalgamation occurs involving the Company in which the Common Shares (but not the Series A1 Preferred Shares) are converted into or exchanged for securities, cash or other property (other than the Reorganization Transaction or a transaction covered by Articles 25.15, 25.20 or 25.21), then, following any such reorganization, recapitalization, reclassification, consolidation or amalgamation, each Series A1 Preferred Share shall be convertible in lieu of the Common Shares into which it was convertible before such event into the kind and amount of securities, cash or other property that a holder of the number of Common Shares issuable upon conversion of one Series A1 Preferred Share immediately before such reorganization, recapitalization, reclassification, consolidation or amalgamation would have been entitled to receive under such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Companys board of directors) shall be made in the application of Articles 25.12 and 25.13 with respect to the rights and interests of the holders of Series A1 Preferred Shares, to the end that Articles 25.12 and 25.13 (including provisions with respect to changes in and other adjustments of the Series A1 Conversion Price) shall be applicable, as nearly as reasonably may be, in relation to any securities or other property deliverable upon the conversion of the Series A1 Preferred Shares. For the avoidance of doubt, nothing in this Article 25.22 prevents the holders of Series A1 Preferred Shares from seeking any dissent rights to which they are otherwise entitled under law in connection with an amalgamation triggering an adjustment, nor is this Article 25.22 conclusive evidence of the fair value of the Series A1 Preferred Shares in any such dissent-right proceeding. |
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25.23 |
Upon the occurrence of each adjustment or readjustment of the Series A1 Conversion Price under Articles 25.12 and/or 25.13, the Company at its expense shall, as promptly as reasonably practicable but in any event not later than within ten (10) business days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series A1 Preferred Shares a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Series A1 Preferred Shares is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, as promptly as reasonably practicable after the written request at any time of any holder of Series A1 Preferred Shares (but in any event not later than within ten (10) business days), furnish or cause to be furnished to the holder a certificate setting forth (i) the Series A1 Conversion Price then in effect, and (ii) the number of Common Shares and the amount, if any, of other securities, cash or property that then would be received upon the conversion of the Series A1 Preferred Shares. |
25.24 |
In the event: |
(a) |
the Company takes a record of the holders of Common Shares (or other shares or securities at the time issuable upon conversion of the Series A1 Preferred Shares) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of any class or any other securities, or to receive any other security; or |
(b) |
of any capital reorganization of the Company, any reclassification of the Common Shares of the Company, or any Deemed Liquidation Event; or |
(c) |
of the voluntary or involuntary dissolution, liquidation or winding-up of the Company, |
then, and in each such case, the Company shall send or cause to be sent to the holders of Series A1 Preferred Shares a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, amalgamation, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Shares (or such other securities at the time issuable upon the conversion of the Series A1 Preferred Shares) are entitled to exchange their Common Shares (or such other securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, amalgamation, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Series A1 Preferred Shares and the Common Shares. Such notice shall be sent at least ten (10) business days before the record date or effective date for the event specified in the notice.
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Mandatory Conversion
25.25 |
Upon either (i) immediately prior to the closing of the sale of Common Shares to the public in a firm-commitment underwritten public offering under an effective registration statement under the Securities Act of 1933, as amended, and/or a prospectus filed with a securities commission or authority in any of the provinces or territories of Canada resulting in gross proceeds to the Company of at least US$70,000,000, or (ii) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of at least 67% of the then outstanding Preferred Shares (the time immediately prior to such closing or the date and time specified or the time of the event specified in such vote or written consent is referred to herein as the Series A1 Mandatory Conversion Time), then (A) all outstanding Series A1 Preferred Shares shall automatically be converted into Common Shares, at the then effective conversion rate as calculated under Article 25.12(a) and (B) such shares may not be reissued by the Company. |
25.26 |
All holders of record of Series A1 Preferred Shares shall be sent written notice of the Series A1 Mandatory Conversion Time and the place designated for mandatory conversion of all such Series A1 Preferred Shares under Article 25.25 and this Article 25.26. Such notice need not be sent in advance of the occurrence of the Series A1 Mandatory Conversion Time. Upon receipt of such notice, each holder of Series A1 Preferred Shares in certificated form shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement acceptable to the Company to indemnify the Company against any claim that may be made against the Company on account of the alleged loss, theft or destruction of such certificate) to the Company at the place designated in such notice. If so required by the Company, any certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Company, duly signed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Series A1 Preferred Shares converted under Article 25.25, including the rights, if any, to receive notices and vote (other than as a holder of Common Shares), will terminate at the Series A1 Mandatory Conversion Time (notwithstanding the failure of their holder or holders to surrender any certificates at or before such time), except only the rights of the holders thereof, upon surrender of any certificate or certificates of such holders (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Article 25.26. As soon as practicable after the Series A1 Mandatory Conversion Time and, if applicable, the surrender of any certificate or certificates (or lost certificate affidavit and agreement) for Series A1 Preferred Shares, the Company shall (a) issue and deliver to their holder, or to his, her or its nominees, a certificate or certificates for the number of full Common Shares issuable on such conversion in accordance with these provisions and (b) pay cash as provided in Article 25.12(c) in lieu of any fraction of a share of Common Shares otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the Series A1 Preferred Shares converted. |
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Waiver
25.27 |
Any of the rights, powers, preferences and other terms of the Series A1 Preferred Shares may be waived on behalf of all holders of Series A1 Preferred Shares by the affirmative written consent or vote of the holders of at least 67% of the Series A1 Preferred Shares then outstanding (unless otherwise specified in this Part 25 or in the Articles). |
Notices
25.28 |
Any notice required or permitted by these provisions to be given to a holder of Series A1 Preferred Shares shall be mailed, postage prepaid, to the post office address last shown on the records of the Company, or given by electronic communication, and will be deemed sent upon such mailing or electronic transmission. |
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PART 26
SPECIAL RIGHTS AND RESTRICTIONS ATTACHED TO
SERIES A2 PREFERRED SHARES
26.1 |
The Series A2 Preferred Shares (the Series A2 Preferred Shares) have attached to them the special rights and restrictions set out in this PART 26. |
Payment of Dividends
26.2 |
The Company shall not declare, pay or set aside any dividends on shares of any other class or series of the Company (other than dividends on Common Shares payable in Common Shares) unless (in addition to the obtaining of any consents required elsewhere in the Articles) the holders of the Series A2 Preferred Shares then outstanding first receive, or simultaneously receive, a dividend on each outstanding Series A2 Preferred Share, on a pari passu basis with the holders of the Series A1 Preferred Shares, in an amount at least equal to (i) in the case of a dividend on Common Shares or any class or series of shares of the Company that is convertible into Common Shares, that dividend per Series A2 Preferred Share as would equal the product of (A) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Shares and (B) the number of Common Shares issuable upon conversion of a Series A2 Preferred Share, in each case calculated on the record date for determination of holders entitled to receive such dividend or (ii) in the case of a dividend on any class or series of shares of the Company that is not convertible into Common Shares, at a rate per Series A2 Preferred Share determined by (A) dividing the amount of the dividend payable on each share of such class or series by the original issuance price of such class or series (subject to appropriate adjustment in the event of any share dividend, share split, combination or other similar recapitalization with respect to such class or series) and (B) multiplying such fraction by an amount equal to the Series A2 Original Issue Price (as defined below); provided that, if the Company declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of shares of the Company, the dividend payable to the holders of Series A2 Preferred Shares under this Article 26.2 shall be calculated based upon the dividend on the class or series of shares of the Company that would result in the highest Series A2 Preferred Shares dividend. The Series A2 Original Issue Price means CDN$16.722 per Series A2 Preferred Share, subject to appropriate adjustment in the event of any share dividend, share split, combination or other similar recapitalization with respect to the Series A2 Preferred Shares. |
Participation upon Liquidation, Dissolution or Winding Up
26.3 |
In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company or Deemed Liquidation Event, the holders of Series A2 Preferred Shares then outstanding are entitled, on a pari passu basis with the holders of Series A1 Preferred Shares, to be paid out of the assets of the Company available for distribution to its shareholders before any payment is made to the holders of Common Shares, an amount per share equal to the greater of (i) the Series A2 Original Issue Price, plus any dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable had all Series A2 Preferred Shares been converted into Common Shares under Article |
26.12 |
immediately before such liquidation, dissolution, winding-up or Deemed Liquidation Event (this amount payable is referred to as the Series A2 Liquidation Amount). If upon any such liquidation, dissolution or winding-up of the Company or Deemed Liquidation Event, the assets of the Company available for distribution to its shareholders are insufficient to pay the holders of the Preferred Shares the full amount to which they are entitled under Articles 25.3 to 25.9 and 26.3 to 26.9, the holders of the Preferred Shares shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts that would otherwise be payable in respect of the Preferred Shares upon such distribution if all amounts payable on or with respect to such Series A2 Preferred Shares were paid in full. |
26.4 |
In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company or Deemed Liquidation Event, after the payment of all preferential amounts required to be paid to the holders of Series A2 Preferred Shares, pari passu with the holders of Series A1 Preferred Shares, the remaining assets of the Company available for distribution to its shareholders shall be distributed among the holders of Common Shares, pro rata based on the number of Common Shares held by each holder. |
26.5 |
Each of the following is a Deemed Liquidation Event unless the holders of at least 67% of the outstanding Preferred Shares elect otherwise by written notice sent to the Company at least ten (10) days before the effective date of any such event: |
(a) |
any merger, amalgamation, reorganization, arrangement or other transaction involving the Company and any other Company or other entity or person in which the persons who were the shareholders of the Company immediately prior to such merger, amalgamation, reorganization, arrangement or other transaction own less than fifty percent (50%) of the outstanding voting shares of the surviving or continuing entity after such merger, amalgamation, reorganization, arrangement or other transaction; |
(b) |
the sale, exchange or transfer by the Companys shareholders, in a single transaction or series of related transactions, of all of the voting shares of the Company; and |
(c) |
the sale or exclusive license of all or substantially all of the assets of the Company, whether in a single transaction or a series of related transactions. |
Notwithstanding the foregoing, any Reorganization Transaction will not be considered a Deemed Liquidation Event.
26.6 |
The Company may not effect a Deemed Liquidation Event referred to in Article 26.5(a) unless the agreement or consolidation for such transaction provides that the consideration payable to the shareholders of the Company shall be allocated among the holders of shares of the Company in accordance with Articles 25.3, 25.4, 26.3 and 26.4. |
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26.7 |
In the event of a Deemed Liquidation Event referred to in Article 26.5(a) or 26.5(c), if the Company does not effect a dissolution of the Company within 90 days after the Deemed Liquidation Event, then (i) the Company shall send a written notice to each holder of Preferred Shares no later than the 90th day after the Deemed Liquidation Event advising such holders of their right (and the requirements to be met to secure such right) under the following clause; (ii) to require the redemption of such Series A2 Preferred Shares, and (iii) if the holders of at least 67% of the then outstanding Preferred Shares so request in a written instrument delivered to the Company not later than 120 days after the Deemed Liquidation Event, the Company shall use the consideration received by the Company for the Deemed Liquidation Event (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the Companys board of directors), together with any other assets of the Company available for distribution to its shareholders, all to the extent permitted by law (the Available Proceeds), on the 150th day after the Deemed Liquidation Event, to redeem, on a pari passu basis with all outstanding Series A1 Preferred Shares, all outstanding Series A2 Preferred Shares at a price per share equal to the Series A2 Liquidation Amount. Notwithstanding the foregoing, in the event of such a redemption, if the Available Proceeds are not sufficient to redeem all outstanding Preferred Shares, the Company shall ratably redeem, on a pari passu basis with the holders of Series A1 Preferred Shares, each holders Series A2 Preferred Shares to the fullest extent of the Available Proceeds, and shall redeem the remaining shares as soon as it may lawfully do so. Before such distribution or redemption, the Company shall not expend or dissipate the consideration received for the Deemed Liquidation Event, except to discharge expenses incurred in connection with the Deemed Liquidation Event or to pay or discharge any liabilities associated with the assets sold or technology licensed. |
26.8 |
The amount deemed paid or distributed to the shareholders of the Company upon any such amalgamation, consolidation, sale, transfer, exclusive license, other disposition or redemption shall be the cash or the value of the property, rights or securities paid or distributed to such holders by the Company or the acquiring person, firm or other entity. |
26.9 |
In the event of a Deemed Liquidation Event under Article 26.5(a), if any portion of the consideration payable to the shareholders of the Company is payable only upon satisfaction of contingencies (the Additional Consideration), the agreement or other documents for such transaction shall provide that (a) the portion of such consideration that is not Additional Consideration (such portion, the Initial Consideration) shall be allocated among the shareholders of the Company in accordance with Articles 25.3, 25.4, 26.3 and 26.4 as if the Initial Consideration were the only consideration payable in connection with the Deemed Liquidation Event; and (b) any Additional Consideration that becomes payable to the shareholders of the Company upon satisfaction of such contingencies shall be allocated among the shareholders of the Company in accordance with Articles 25.3, 25.4, 26.3 and 26.4 after taking into account the previous payment of the Initial Consideration as part of the same transaction. For the purposes of this Article 26.9, consideration placed into escrow or retained as holdback to be available for satisfaction of indemnification or similar obligations in connection with the Deemed Liquidation Event is deemed to be Additional Consideration. |
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Voting Rights
26.10 |
On any matter presented to the shareholders of the Company for their action or consideration at any meeting of shareholders of the Company (or by written consent of shareholders in lieu of meeting), each holder of outstanding Series A2 Preferred Shares is entitled to cast the number of votes equal to the number of whole Common Shares into which the Series A2 Preferred Shares held by the holder are convertible as of the record date for determining shareholders entitled to vote on such matter. Except as provided by law or by the other provisions of the Articles, holders of Series A2 Preferred Shares shall vote together with the holders of Common Shares and the holders of Series A1 Preferred Shares as a single class. |
26.11 |
Preferred Share Protective Provisions. At any time when Preferred Shares (subject to appropriate adjustment in the event of any dividend, share split, combination or other similar recapitalization with respect to the Preferred Shares) are outstanding, the Company shall not, either directly or indirectly by amendment, amalgamation, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or the Articles) the written consent or affirmative vote of the holders of at least 67% of the then outstanding Preferred Shares, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote is null and of no force or effect: |
(a) |
amend, alter, waive or repeal any provision of the Articles or Notice of Articles of the Company (other than in connection with the Reorganization Transaction); |
(b) |
reclassify, reorganize, exchange, cancel or recapitalize any of the outstanding capital of the Company (other than in connection with the Reorganization Transaction); |
(c) |
issue or obligate itself to issue any preferred shares, including any as-yet-unauthorized class or series of preferred shares, other than Series A2 Preferred Shares issued pursuant to that certain Investment Agreement between the Company and certain investors dated March 23, 2020; |
(d) |
make any change to the Companys stock option plan or create any new stock option plans or other incentive plans; |
(e) |
make any change to the number of directors of the board; |
(f) |
take any proceedings with a view to the dissolution, winding-up or termination of the corporate existence of the Company (other than in connection with the Reorganization Transaction); |
(g) |
sell, lease, transfer, license or otherwise dispose of all or substantially all of the assets or intellectual property of the Company and its subsidiaries (other than in connection with the Reorganization Transaction); |
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(h) |
pay or declare any dividend or make any distribution on any shares of the Company; |
(i) |
purchase or redeem (or permit any subsidiary to purchase or redeem) (i) any Preferred Shares or (ii) any Common Shares; provided, however, that this restriction shall not apply to the repurchase of any Common Shares or Preferred Shares from employees, officers, directors or consultants of the Company or any subsidiary pursuant to agreements under which the Company has the option to repurchase such shares upon the occurrence of certain events, such as the termination of employment or service, or pursuant to any right of first refusal in favour of the Company; |
(j) |
incur aggregate indebtedness or related liabilities, including loans, guarantees of third party indebtedness or granting of security for indebtedness over the Companys assets in excess of CDN$250,000, other than indebtedness incurred in the ordinary course of business of the Company (unless otherwise approved by the Companys board of directors, including the Series A1 Designee and at least one of the Series A2 Designees (each as defined in the Amended and Restated Voting Agreement) (if, and only to the extent, each such designee is a director of the Company at the applicable time); or |
(k) |
enter into any transaction, agreement or arrangement with an affiliate or founder of the Company (except for employment or consulting arrangements in the ordinary course of business of the Company). |
Optional Conversion
26.12 |
The holders of Series A2 Preferred Shares have conversion rights as follows (the Series A2 Conversion Rights): |
Right to Convert.
(a) |
Each Series A2 Preferred Share may be converted, at the option of its holder, at any time and from time to time, and without the payment of additional consideration by its holder, into such number of fully paid and non-assessable Common Shares as is determined by dividing the Series A2 Original Issue Price by the Series A2 Conversion Price (as defined below) in effect at the time of conversion. The Series A2 Conversion Price shall initially be equal to CDN$16.722. Such initial Series A2 Conversion Price, and the rate at which Series A2 Preferred Shares may be converted into Common Shares, are subject to adjustment as provided below. |
(b) |
In the event of a liquidation, dissolution or winding-up of the Company or a Deemed Liquidation Event, the Series A2 Conversion Rights terminate at the close of business on the last full day preceding the date fixed for the payment of any such amounts distributable on such event to the holders of Series A2 Preferred Shares. |
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(c) |
No fractional Common Shares shall be issued upon conversion of Series A2 Preferred Shares. In lieu of any fractional shares to which the holder would otherwise be entitled, the Company shall pay cash equal to such fraction multiplied by the fair market value of a Common Share as determined in good faith by the Companys board of directors. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of Series A2 Preferred Shares the holder is at the time converting into Common Shares and the aggregate number of Common Shares issuable upon such conversion. |
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Mechanics of Conversion.
(d) |
In order for a holder of Series A2 Preferred Shares to voluntarily convert Series A2 Preferred Shares into Common Shares, such holder shall (a) provide written notice at the principal office of the Company (or to the Companys transfer agent at the office of the transfer agent for the Series A2 Preferred Shares if the Company appoints such a transfer agent) that the holder elects to convert all or any number of the holders Series A2 Preferred Shares and, if applicable, any event on which the conversion is contingent and (b) if the holders shares are certificated, surrender the certificate or certificates for the Series A2 Preferred Shares (or, if the registered holder alleges that the certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement acceptable to the Company to indemnify the Company against any claim that may be made against the Company on account of the alleged loss, theft or destruction of the certificate), at the office of the transfer agent for the Series A2 Preferred Shares (or at the principal office of the Company if the Company serves as its own transfer agent). Such notice shall state the holders name or the names of the nominees in which the holder wishes the Common Shares to be issued. If required by the Company, any certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Company, duly signed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Company if the Company serves as its own transfer agent) of such notice and, if applicable, certificates (or lost certificate affidavit and agreement) shall be the time of conversion (the Series A2 Conversion Time), and the Common Shares issuable upon conversion of the specified Series A2 Preferred Shares will be deemed to be outstanding of record as of that date. The Company shall, as soon as practicable after the Series A2 Conversion Time (i) issue and deliver to the holder of Series A2 Preferred Shares, or to his, her or its nominees, a certificate or certificates for the number of full Common Shares issuable upon such conversion in accordance with these provisions and a certificate for the number (if any) of Series A2 Preferred Shares represented by the surrendered certificate that were not converted into Common Shares, (ii) pay in cash such amount as provided in Article 26.12(c) in lieu of any fraction of a Common Share otherwise issuable upon such conversion and (iii) pay all declared but unpaid dividends on the Series A2 Preferred Shares converted. |
(e) |
The Company shall at all times when Series A2 Preferred Shares are outstanding, but only if the authorized number of Common Shares that the Company may issue is not unlimited, reserve and keep available out of its authorized but unissued shares, for the purpose of effecting the conversion of the Series A2 Preferred Shares, such number of its duly authorized Common Shares as are from time to time sufficient to effect the conversion of all outstanding Series A2 Preferred Shares; and if at any time the number of authorized but unissued Common Shares is not sufficient to effect the conversion of all then outstanding Series A2 Preferred Shares, the Company shall take such corporate action as may be necessary to increase its authorized but unissued Common Shares to such number of shares as sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite shareholder approval of any necessary amendment to the Notice of Articles and Articles. |
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(f) |
All Series A2 Preferred Shares duly surrendered for conversion will no longer be deemed to be outstanding and all rights with respect to such shares will immediately cease and terminate at the Series A2 Conversion Time, except only the right of their holders to receive Common Shares in exchange therefor, to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Article 26.12(c) and to receive payment of any dividends declared but unpaid thereon. |
(g) |
Upon any such conversion, no adjustment to the Series A2 Conversion Price shall be made for any declared but unpaid dividends on the Series A2 Preferred Shares surrendered for conversion or on the Common Shares delivered upon conversion. |
Adjustments to Series A2 Conversion Price for Diluting Issues
26.13 |
The following definitions shall apply: |
(a) |
Additional Shares means all Common Shares issued (or, under Article 26.14 below, deemed to be issued) by the Company after the Series A2 Original Issue Date, other than Exempt Securities. |
(b) |
Convertible Securities means any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Shares, but excluding Options. |
(c) |
Exempt Securities means the following Common Shares and Common Shares deemed issued under the following Options and Convertible Securities of the Company: |
(i) |
Common Shares, Options or Convertible Securities issued upon conversion of any Preferred Share, or as a dividend or distribution on Preferred Shares; |
(ii) |
Common Shares, Options or Convertible Securities issued by reason of a dividend, share split, split-up or other distribution on the Common Shares that is covered by Article 26.19, 26.20, 26.21 or 26.22; |
(iii) |
Common Shares or Options issued to employees or directors of, or consultants to, the Company pursuant to any stock option or equity incentive plan unanimously approved by the Companys board of directors; |
(iv) |
Common Shares issued upon conversion of any Convertible Securities and Options outstanding as of the Series A2 Original Issue Date; |
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(v) |
Common Shares, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property lessors, under a debt financing, equipment leasing or real or immovable property leasing transaction unanimously approved by the Companys board of directors (including shares underlying (directly or indirectly) any such Options or Convertible Securities); |
(vi) |
Common Shares, Options or Convertible Securities issued to suppliers or third party service providers in connection with the provision of goods or services under transactions unanimously approved by the Companys board of directors (including shares underlying (directly or indirectly) any such Options or Convertible Securities); |
(vii) |
Common Shares, Options or Convertible Securities issued (A) under the acquisition of another company by the Company by amalgamation, purchase of substantially all of the assets or other reorganization or to a joint venture agreement, provided that such issuances are unanimously approved by the Companys board of directors (including shares underlying (directly or indirectly) any such Options or Convertible Securities), or (B) in connection with the Reorganization Transaction; or |
(viii) |
Common Shares, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development, marketing or other similar agreements or strategic partnerships unanimously approved by the Companys board of directors (including shares underlying (directly or indirectly) any such Options or Convertible Securities). |
(d) |
Option means rights, options or warrants to subscribe for, purchase or otherwise acquire Common Shares or Convertible Securities. |
(e) |
Series A2 Original Issue Date means the date on which the first Series A2 Preferred Share was issued. |
26.14 |
If the Company at any time or from time to time after the Series A2 Original Issue Date issues Options or Convertible Securities (excluding Options or Convertible Securities that are themselves Exempt Securities) or fixes a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of Common Shares (as set forth in the relating instrument, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any of its provisions for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, will be deemed to be Additional Shares issued as of the time of such issue or, in case such a record date has been fixed, as of the close of business on such record date. |
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(a) |
If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Series A2 Conversion Price under Article 26.15, are revised as a result of an amendment to such terms or any other adjustment under such Option or Convertible Security (but excluding automatic adjustments to such terms under anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (a) any increase or decrease in the number of Common Shares issuable upon the exercise, conversion and/or exchange of the Option or Convertible Security or (b) any increase or decrease in the consideration payable to the Company upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Series A2 Conversion Price computed upon the original issue of the Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Series A2 Conversion Price as would have obtained had such revised terms been in effect upon the original date of issuance of the Option or Convertible Security. Notwithstanding the foregoing, no readjustment under this clause (a) shall increase the Series A2 Conversion Price to an amount that exceeds the lower of (i) the Series A2 Conversion Price in effect immediately before the original adjustment made as a result of the issuance of the Option or Convertible Security, or (ii) the Series A2 Conversion Price that would have resulted from any issuances of Additional Shares (other than deemed issuances of Additional Shares as a result of the issuance of the Option or Convertible Security) between the original adjustment date and such readjustment date. |
(b) |
If the terms of any Option or Convertible Security (excluding Options or Convertible Securities that are themselves Exempt Securities), the issuance of which did not result in an adjustment to the Conversion Price under Article 26.15 (either because the consideration per share (determined under Article 26.16) of the Additional Shares subject thereto was equal to or greater than the Series A2 Conversion Price then in effect, or because such Option or Convertible Security was issued before the Series A2 Original Issue Date), are revised after the Series A2 Original Issue Date as a result of an amendment to such terms or any other adjustment under such Option or Convertible Security (but excluding automatic adjustments to such terms under anti-dilution or similar provisions of the Option or Convertible Security) to provide for either (a) any increase in the number of Common Shares issuable upon the exercise, conversion or exchange of the Option or Convertible Security or (b) any decrease in the consideration payable to the Company upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares subject thereto (determined in the manner provided in Article 26.14 will be deemed to have been issued effective upon such increase or decrease becoming effective. |
(c) |
Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) that resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Series A2 Conversion Price under Article 26.15, the Series A2 Conversion Price shall be readjusted to such Series A2 Conversion Price as would have obtained had such Option or Convertible Security (or portion thereof) never been issued. |
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(d) |
If the number of Common Shares issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Company upon such exercise, conversion and/or exchange, is calculable at the time the Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Series A2 Conversion Price under this Article 26.14 shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses (a) and (b) of this Article 26.14). If the number of Common Shares issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Company upon such exercise, conversion and/or exchange, cannot be calculated at all at the time the Option or Convertible Security is issued or amended, any adjustment to the Series A2 Conversion Price that would result under this Article 26.14 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to the Series A2 Conversion Price that such issuance or amendment took place at the time such calculation can first be made. |
26.15 |
If the Company, at any time after the Series A2 Original Issue Date, issues Additional Shares (including Additional Shares deemed to be issued under Article 26.14), without consideration or for a consideration per share less than the Series A2 Conversion Price in effect immediately before such issue, then the Series A2 Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest one-hundredth of a cent) determined in accordance with the following formula: |
CP2 = CP1* (A + B) / (A + C)
For purposes of the foregoing formula, the following definitions shall apply:
CP2 = the Series A2 Conversion Price in effect immediately after such issue of Additional Shares
CP1 = the Series A2 Conversion Price in effect immediately before such issue of Additional Shares;
A = the number of Common Shares deemed to be outstanding immediately before such issue of Additional Shares (treating for this purpose as outstanding all Common Shares, all outstanding Preferred Shares on an as-converted basis, all outstanding Options on an as-exercised basis and all outstanding Convertible Securities on an as-exchanged or as-converted basis);
- 11 -
B = the number of Common Shares that would have been issued if such Additional Shares had been issued at a price per share equal to CP1 (determined by dividing the aggregate consideration received by the Company in respect of such issue by CP1); and
C = the number of such Additional Shares issued in such transaction.
26.16 |
For purposes of Articles 26.13 to 26.24, the consideration received by the Company for the issue of any Additional Shares shall be computed as follows: |
(a) |
Cash and Property: Such consideration shall: |
(i) |
if it consists of cash, be computed at the aggregate amount of cash received by the Company, excluding amounts paid or payable for accrued interest; |
(ii) |
if it consists of property other than cash, be computed at its fair market value at the time of such issue, as determined in good faith by the Companys board of directors; and |
(iii) |
if Additional Shares are issued together with other shares or securities or other assets of the Company for consideration that covers both, be the proportion of such consideration so received, computed as provided in clauses ((i)) and ((ii)) above, as determined in good faith by the Companys board of directors. |
(b) |
Options and Convertible Securities: The consideration per share received by the Company for Additional Shares deemed to have been issued under Article 26.14, relating to Options and Convertible Securities, shall be determined by dividing: |
(i) |
the total amount, if any, received or receivable by the Company as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the relating instruments, without regard to any of its provision for a subsequent adjustment of such consideration) payable to the Company upon the exercise of the Options or the conversion or exchange of the Convertible Securities, or in the case of Options for Convertible Securities, the exercise of the Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by |
(ii) |
the maximum number of Common Shares (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities. |
- 12 -
26.17 |
No adjustment in the Series A2 Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares if the Company receives written notice from the holders of at least 67% of the then outstanding Series A2 Preferred Shares agreeing that no such adjustment be made as the result of the issuance or deemed issuance of such Additional Shares. |
26.18 |
If the Company issues on more than one date Additional Shares that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Series A2 Conversion Price under Article 26.15, and such issuance dates occur within a period of no more than 90 days from the first such issuance to the final such issuance, then, upon the final such issuance, the Series A2 Conversion Price shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period). |
26.19 |
If the Company, at any time or from time to time after the Series A2 Original Issue Date, subdivides the outstanding Common Shares, the Series A2 Conversion Price in effect immediately before the subdivision shall be proportionately decreased so that the number of Common Shares issuable on conversion of each share of such class be increased in proportion to such increase in the aggregate number of Common Shares outstanding. If the Company, at any time or from time to time after the Series A2 Original Issue Date, combines the outstanding Common Shares, the Series A2 Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of Common Shares issuable on conversion of each share of such class be decreased in proportion to such decrease in the aggregate number of Common Shares outstanding. Any adjustment under this Article shall become effective at the close of business on the date the subdivision or combination becomes effective. |
26.20 |
If the Company, at any time or from time to time after the Series A2 Original Issue Date, makes or issues, or fixes a record date for the determination of holders of Common Shares entitled to receive, a dividend or other distribution payable on the Common Shares in additional Common Shares, then and in each such event the Series A2 Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date is fixed, as of the close of business on such record date, by multiplying the Series A2 Conversion Price then in effect by a fraction: |
(a) |
the numerator of which is the total number of Common Shares issued and outstanding immediately before the time of such issuance or the close of business on such record date, and |
(b) |
the denominator of which is the total number of Common Shares issued and outstanding immediately before the time of such issuance or the close of business on such record date plus the number of Common Shares issuable in payment of such dividend or distribution. |
- 13 -
Notwithstanding the foregoing (A) if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series A2 Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Series A2 Conversion Price shall be adjusted under this subsection as of the time of actual payment of such dividends or distributions; and (B) no such adjustment shall be made if the holders of Series A2 Preferred Shares simultaneously receive a dividend or other distribution of Common Shares in a number equal to the number of Common Shares as they would have received if all outstanding Series A2 Preferred Shares had been converted into Common Shares on the date of such event.
26.21 |
If the Company, at any time or from time to time after the Series A2 Original Issue Date, makes or issues, or fixes a record date for the determination of holders of Common Shares entitled to receive, a dividend or other distribution payable in securities of the Company (other than a distribution of Common Shares in respect of outstanding Common Shares) or in other property and Article 26.2 does not apply to such dividend or distribution, then and in each such event the holders of Series A2 Preferred Shares shall receive, pari passu with the holders of the Series A1 Preferred Shares and simultaneously with the distribution to the holders of Common Shares, a dividend or other distribution of such securities or other property in an amount equal to the amount of such securities or other property as they would have received if all outstanding Series A2 Preferred Shares had been converted into Common Shares on the date of such event. |
26.22 |
If any reorganization, recapitalization, reclassification, consolidation or amalgamation occurs involving the Company in which the Common Shares (but not the Series A2 Preferred Shares) are converted into or exchanged for securities, cash or other property (other than the Reorganization Transaction or a transaction covered by Articles 26.15, 26.20 or 26.21), then, following any such reorganization, recapitalization, reclassification, consolidation or amalgamation, each Series A2 Preferred Share shall be convertible in lieu of the Common Shares into which it was convertible before such event into the kind and amount of securities, cash or other property that a holder of the number of Common Shares issuable upon conversion of one Series A2 Preferred Share immediately before such reorganization, recapitalization, reclassification, consolidation or amalgamation would have been entitled to receive under such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Companys board of directors) shall be made in the application of Articles 26.12 and 26.13 with respect to the rights and interests of the holders of Series A1 Preferred Shares, to the end that Articles 26.12 and 26.13 (including provisions with respect to changes in and other adjustments of the Series A1 Conversion Price) shall be applicable, as nearly as reasonably may be, in relation to any securities or other property deliverable upon the conversion of the Series A2 Preferred Shares. For the avoidance of doubt, nothing in this Article 26.22 prevents the holders of Series A2 Preferred Shares from seeking any dissent rights to which they are otherwise entitled under law in connection with an amalgamation triggering an adjustment, nor is this Article 26.22 conclusive evidence of the fair value of the Series A2 Preferred Shares in any such dissent-right proceeding |
- 14 -
26.23 |
Upon the occurrence of each adjustment or readjustment of the Series A2 Conversion Price under Articles 26.12 and/or 26.13, the Company at its expense shall, as promptly as reasonably practicable but in any event not later than within ten (10) business days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series A2 Preferred Shares a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Series A2 Preferred Shares is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, as promptly as reasonably practicable after the written request at any time of any holder of Series A2 Preferred Shares (but in any event not later than within ten (10) business days), furnish or cause to be furnished to the holder a certificate setting forth (i) the Series A2 Conversion Price then in effect, and (ii) the number of Common Shares and the amount, if any, of other securities, cash or property that then would be received upon the conversion of the Series A2 Preferred Shares. |
26.24 |
In the event: |
(a) |
the Company takes a record of the holders of Common Shares (or other shares or securities at the time issuable upon conversion of the Series A2 Preferred Shares) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of any class or any other securities, or to receive any other security; or |
(b) |
of any capital reorganization of the Company, any reclassification of the Common Shares of the Company, or any Deemed Liquidation Event; or |
(c) |
of the voluntary or involuntary dissolution, liquidation or winding-up of the Company, |
then, and in each such case, the Company shall send or cause to be sent to the holders of Series A2 Preferred Shares a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, amalgamation, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Shares (or such other securities at the time issuable upon the conversion of the Series A2 Preferred Shares) are entitled to exchange their Common Shares (or such other securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, amalgamation, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Series A2 Preferred Shares and the Common Shares. Such notice shall be sent at least ten (10) business days before the record date or effective date for the event specified in the notice.
- 15 -
Mandatory Conversion
26.25 |
Upon either (i) the time immediately prior to the closing of the sale of Common Shares to the public in a firm-commitment underwritten public offering under an effective registration statement under the Securities Act of 1933, as amended, and/or a prospectus filed with a securities commission or authority in any of the provinces or territories of Canada resulting in gross proceeds to the Company of at least US$70,000,000, or (ii) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of at least 67% of the then outstanding Preferred Shares (the time immediately prior to such closing or the date and time specified or the time of the event specified in such vote or written consent is referred to herein as the Series A2 Mandatory Conversion Time), then (A) all outstanding Series A2 Preferred Shares shall automatically be converted into Common Shares, at the then effective conversion rate as calculated under Article 26.12(a) and (B) such shares may not be reissued by the Company. |
26.26 |
All holders of record of Series A2 Preferred Shares shall be sent written notice of the Series A2 Mandatory Conversion Time and the place designated for mandatory conversion of all such Series A2 Preferred Shares under Article 26.25 and this Article 26.26. Such notice need not be sent in advance of the occurrence of the Series A2 Mandatory Conversion Time. Upon receipt of such notice, each holder of Series A2 Preferred Shares in certificated form shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement acceptable to the Company to indemnify the Company against any claim that may be made against the Company on account of the alleged loss, theft or destruction of such certificate) to the Company at the place designated in such notice. If so required by the Company, any certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Company, duly signed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Series A2 Preferred Shares converted under Article 26.25, including the rights, if any, to receive notices and vote (other than as a holder of Common Shares), will terminate at the Series A2 Mandatory Conversion Time (notwithstanding the failure of their holder or holders to surrender any certificates at or before such time), except only the rights of the holders thereof, upon surrender of any certificate or certificates of such holders (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Article 26.26. As soon as practicable after the Series A2 Mandatory Conversion Time and, if applicable, the surrender of any certificate or certificates (or lost certificate affidavit and agreement) for Series A2 Preferred Shares, the Company shall (a) issue and deliver to their holder, or to his, her or its nominees, a certificate or certificates for the number of full Common Shares issuable on such conversion in accordance with these provisions and (b) pay cash as provided in Article 26.12(c) in lieu of any fraction of a share of Common Shares otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the Series A2 Preferred Shares converted. |
- 16 -
Waiver
26.27 |
Any of the rights, powers, preferences and other terms of the Series A2 Preferred Shares may be waived on behalf of all holders of Series A2 Preferred Shares by the affirmative written consent or vote of the holders of at least 67% of the Series A2 Preferred Shares then outstanding (unless otherwise specified in this Part 26 or in the Articles). |
Notices
26.28 |
Any notice required or permitted by these provisions to be given to a holder of Series A2 Preferred Shares shall be mailed, postage prepaid, to the post office address last shown on the records of the Company, or given by electronic communication, and will be deemed sent upon such mailing or electronic transmission. |
- 17 -
Exhibit 3.3
TABLE OF CONTENTS
BUSINESS CORPORATIONS ACT
ARTICLES
of
ABCELLERA BIOLOGICS INC.
Page | ||||||
ARTICLE 1 | ||||||
INTERPRETATION | ||||||
1.1 |
Definitions |
1 | ||||
1.2 |
Business Corporations Act and Interpretation Act Definitions Applicable |
1 | ||||
ARTICLE 2 | ||||||
SHARES AND SHARE CERTIFICATES | ||||||
2.1 |
Authorized Share Structure |
2 | ||||
2.2 |
Form of Share Certificate |
2 | ||||
2.3 |
Shareholder Entitled to Certificate or Acknowledgement |
2 | ||||
2.4 |
Delivery by Mail |
2 | ||||
2.5 |
Replacement of Worn Out or Defaced Certificate or Acknowledgement |
2 | ||||
2.6 |
Replacement of Lost, Stolen or Destroyed Certificate or Acknowledgement |
2 | ||||
2.7 |
Splitting Share Certificates |
2 | ||||
2.8 |
Certificate Fee |
3 | ||||
2.9 |
Recognition of Trusts |
3 | ||||
ARTICLE 3 | ||||||
ISSUE OF SHARES | ||||||
3.1 |
Directors Authorized |
3 | ||||
3.2 |
Commissions and Discounts |
3 | ||||
3.3 |
Brokerage |
3 | ||||
3.4 |
Conditions of Issue |
3 | ||||
3.5 |
Share Purchase Warrants and Rights |
3 | ||||
ARTICLE 4 | ||||||
SHARE REGISTERS | ||||||
4.1 |
Central Securities Register |
4 | ||||
4.2 |
Closing Register |
4 | ||||
ARTICLE 5 | ||||||
SHARE TRANSFERS | ||||||
5.1 |
Registering Transfers |
4 | ||||
5.2 |
Form of Instrument of Transfer |
4 | ||||
5.3 |
Transferor Remains Shareholder |
4 | ||||
5.4 |
Signing of Instrument of Transfer |
4 | ||||
5.5 |
Enquiry as to Title Not Required |
5 | ||||
5.6 |
Transfer Fee |
5 |
ARTICLE 6 | ||||||
TRANSMISSION OF SHARES | ||||||
6.1 |
Legal Personal Representative Recognized on Death |
5 | ||||
6.2 |
Rights of Legal Personal Representative |
5 | ||||
ARTICLE 7 | ||||||
PURCHASE OF SHARES | ||||||
7.1 |
Company Authorized to Purchase or Otherwise Acquire Shares |
5 | ||||
7.2 |
Purchase When Insolvent |
5 | ||||
7.3 |
Sale and Voting of Purchased, Redeemed, or Otherwise Acquired Shares |
5 | ||||
ARTICLE 8 | ||||||
BORROWING POWERS | ||||||
8.1 |
Borrowing Powers |
6 | ||||
ARTICLE 9 | ||||||
ALTERATIONS | ||||||
9.1 |
Alteration of Authorized Share Structure |
6 | ||||
9.2 |
Special Rights and Restrictions |
7 | ||||
9.3 |
No Interference with Class or Series Rights without Consent |
7 | ||||
9.4 |
Change of Name |
7 | ||||
9.5 |
Other Alterations |
7 | ||||
ARTICLE 10 | ||||||
MEETINGS OF SHAREHOLDERS | ||||||
10.1 |
Annual General Meetings |
7 | ||||
10.2 |
Resolution Instead of Annual General Meeting |
7 | ||||
10.3 |
Calling of Meetings of Shareholders |
7 | ||||
10.4 |
Notice for Meetings of Shareholders |
7 | ||||
10.5 |
Record Date for Notice |
8 | ||||
10.6 |
Record Date for Voting |
8 | ||||
10.7 |
Failure to Give Notice and Waiver of Notice |
8 | ||||
10.8 |
Notice of Special Business at Meetings of Shareholders |
8 | ||||
10.9 |
Class Meetings and Series Meetings of Shareholders |
8 | ||||
10.10 |
Meetings by Telephone or Other Communications Medium. |
9 | ||||
10.11 |
Advance Notice of Nominations of Directors |
9 |
- ii -
ARTICLE 11 | ||||||
PROCEEDINGS AT MEETINGS OF SHAREHOLDERS | ||||||
11.1 |
Special Business |
12 | ||||
11.2 |
Special Majority |
13 | ||||
11.3 |
Quorum |
13 | ||||
11.4 |
One Shareholder May Constitute Quorum |
13 | ||||
11.5 |
Other Persons May Attend |
13 | ||||
11.6 |
Requirement of Quorum |
13 | ||||
11.7 |
Lack of Quorum |
13 | ||||
11.8 |
Lack of Quorum at Succeeding Meeting |
14 | ||||
11.9 |
Chair |
14 | ||||
11.10 |
Selection of Alternate Chair |
14 | ||||
11.11 |
Adjournments |
14 | ||||
11.12 |
Notice of Adjourned Meeting |
14 | ||||
11.13 |
Decision by Show of Hands or Poll |
14 | ||||
11.14 |
Declaration of Result |
14 | ||||
11.15 |
Motion Need Not be Seconded |
14 | ||||
11.16 |
Casting Vote |
15 | ||||
11.17 |
Manner of Taking Poll |
15 | ||||
11.18 |
Demand for Poll on Adjournment |
15 | ||||
11.19 |
Chair Must Resolve Dispute |
15 | ||||
11.20 |
Casting of Votes |
15 | ||||
11.21 |
No Demand for Poll on Election of Chair |
15 | ||||
11.22 |
Demand for Poll Not to Prevent Continuance of Meeting |
15 | ||||
11.23 |
Retention of Ballots and Proxies |
15 | ||||
ARTICLE 12 | ||||||
VOTES OF SHAREHOLDERS | ||||||
12.1 |
Number of Votes by Shareholder or by Shares |
15 | ||||
12.2 |
Votes of Persons in Representative Capacity |
16 | ||||
12.3 |
Votes by Joint Holders |
16 | ||||
12.4 |
Legal Personal Representatives as Joint Shareholders |
16 | ||||
12.5 |
Representative of a Corporate Shareholder |
16 | ||||
12.6 |
Proxy Provisions Do Not Apply to All Companies |
17 | ||||
12.7 |
Appointment of Proxy Holders |
17 | ||||
12.8 |
Alternate Proxy Holders |
17 | ||||
12.9 |
When Proxy Holder Need Not Be Shareholder |
17 | ||||
12.10 |
Deposit of Proxy |
17 | ||||
12.11 |
Validity of Proxy Vote |
17 | ||||
12.12 |
Form of Proxy |
18 | ||||
12.13 |
Revocation of Proxy |
18 | ||||
12.14 |
Revocation of Proxy Must Be Signed |
18 | ||||
12.15 |
Chair May Determine Validity of Proxy |
19 | ||||
12.16 |
Production of Evidence of Authority to Vote |
19 |
- iii -
ARTICLE 13 | ||||||
DIRECTORS | ||||||
13.1 |
Number of Directors |
19 | ||||
13.2 |
Change in Number of Directors |
19 | ||||
13.3 |
Directors Acts Valid Despite Vacancy |
19 | ||||
13.4 |
Qualifications of Directors |
19 | ||||
13.5 |
Remuneration of Directors |
19 | ||||
13.6 |
Reimbursement of Expenses of Directors |
20 | ||||
13.7 |
Special Remuneration for Directors |
20 | ||||
13.8 |
Gratuity, Pension or Allowance on Retirement of Director |
20 | ||||
ARTICLE 14 | ||||||
ELECTION AND REMOVAL OF DIRECTORS | ||||||
14.1 |
Staggered Terms |
20 | ||||
14.2 |
Election at Annual General Meeting |
20 | ||||
14.3 |
Election or Appointment between Annual General Meetings |
21 | ||||
14.4 |
Consent to be a Director |
21 | ||||
14.5 |
Failure to Elect or Appoint Directors |
21 | ||||
14.6 |
Places of Retiring Directors Not Filled |
22 | ||||
14.7 |
Directors May Fill Casual Vacancies |
22 | ||||
14.8 |
Remaining Directors Power to Act |
22 | ||||
14.9 |
Shareholders May Fill Vacancies |
22 | ||||
14.10 |
Additional Directors |
22 | ||||
14.11 |
Ceasing to be a Director |
22 | ||||
14.12 |
Removal of Director by Shareholders |
22 | ||||
14.13 |
Removal of Director by Directors |
22 | ||||
ARTICLE 15 | ||||||
POWERS AND DUTIES OF DIRECTORS | ||||||
15.1 |
Powers of Management |
23 | ||||
15.2 |
Appointment of Attorney of Company |
23 | ||||
ARTICLE 16 | ||||||
DISCLOSURE OF INTEREST OF DIRECTORS | ||||||
16.1 |
Obligation to Account for Profits |
23 | ||||
16.2 |
Restrictions on Voting by Reason of Interest |
23 | ||||
16.3 |
Interested Director Counted in Quorum |
23 | ||||
16.4 |
Disclosure of Conflict of Interest or Property |
23 | ||||
16.5 |
Director Holding Other Office in the Company |
23 | ||||
16.6 |
No Disqualification |
24 | ||||
16.7 |
Professional Services by Director or Officer |
24 | ||||
16.8 |
Director or Officer in Other Corporations |
24 |
- iv -
ARTICLE 17 | ||||||
PROCEEDINGS OF DIRECTORS | ||||||
17.1 |
Meetings of Directors |
24 | ||||
17.2 |
Voting at Meetings |
24 | ||||
17.3 |
Chair of Meetings |
24 | ||||
17.4 |
Meetings by Telephone or Other Communications Medium |
24 | ||||
17.5 |
Calling of Meetings |
25 | ||||
17.6 |
Notice of Meetings |
25 | ||||
17.7 |
When Notice Not Required |
25 | ||||
17.8 |
Meeting Valid Despite Failure to Give Notice |
25 | ||||
17.9 |
Waiver of Notice of Meetings |
25 | ||||
17.10 |
Quorum |
25 | ||||
17.11 |
Validity of Acts Where Appointment Defective |
25 | ||||
17.12 |
Consent Resolutions in Writing |
25 | ||||
ARTICLE 18 | ||||||
EXECUTIVE AND OTHER COMMITTEES | ||||||
18.1 |
Appointment and Powers of Executive Committee |
26 | ||||
18.2 |
Appointment and Powers of Other Committees |
26 | ||||
18.3 |
Obligations of Committees |
26 | ||||
18.4 |
Powers of Board |
27 | ||||
18.5 |
Committee Meetings |
27 | ||||
ARTICLE 19 | ||||||
OFFICERS | ||||||
19.1 |
Directors May Appoint Officers |
27 | ||||
19.2 |
Functions, Duties and Powers of Officers |
27 | ||||
19.3 |
Qualifications |
27 | ||||
19.4 |
Remuneration and Terms of Appointment |
27 | ||||
ARTICLE 20 | ||||||
INDEMNIFICATION | ||||||
20.1 |
Definitions |
28 | ||||
20.2 |
Mandatory Indemnification of Directors and Former Directors |
28 | ||||
20.3 |
Indemnification of Other Persons |
28 | ||||
20.4 |
Non-Compliance with Business Corporations Act |
28 | ||||
20.5 |
Company May Purchase Insurance |
28 | ||||
ARTICLE 21 | ||||||
DIVIDENDS | ||||||
21.1 |
Payment of Dividends Subject to Special Rights |
29 | ||||
21.2 |
Declaration of Dividends |
29 | ||||
21.3 |
No Notice Required |
29 | ||||
21.4 |
Record Date |
29 | ||||
21.5 |
Manner of Paying Dividend |
29 | ||||
21.6 |
Settlement of Difficulties |
29 | ||||
21.7 |
When Dividend Payable |
29 | ||||
21.8 |
Dividends to be Paid in Accordance with Number of Shares |
29 | ||||
21.9 |
Receipt by Joint Shareholders |
30 | ||||
21.10 |
Dividend Bears No Interest |
30 | ||||
21.11 |
Fractional Dividends |
30 | ||||
21.12 |
Payment of Dividends |
30 | ||||
21.13 |
Capitalization of Surplus |
30 | ||||
21.14 |
Unclaimed Dividends |
30 |
- v -
ARTICLE 22 | ||||||
DOCUMENTS, RECORDS AND REPORTS | ||||||
22.1 |
Recording of Financial Affairs |
30 | ||||
22.2 |
Inspection of Accounting Records |
30 | ||||
ARTICLE 23 | ||||||
NOTICES | ||||||
23.1 |
Method of Giving Notice |
30 | ||||
23.2 |
Deemed Receipt |
31 | ||||
23.3 |
Certificate of Sending |
32 | ||||
23.4 |
Notice to Joint Shareholders |
32 | ||||
23.5 |
Notice to Legal Personal Representatives and Trustees |
32 | ||||
23.6 |
Undelivered Notices |
32 | ||||
ARTICLE 24 | ||||||
SEAL AND EXECUTION OF DOCUMENTS | ||||||
24.1 |
Who May Attest Seal |
32 | ||||
24.2 |
Sealing Copies |
32 | ||||
24.3 |
Mechanical Reproduction of Seal |
33 | ||||
24.4 |
Execution of Documents Generally |
33 | ||||
ARTICLE 25 | ||||||
PROHIBITIONS | ||||||
25.1 |
Definitions |
33 | ||||
25.2 |
Application |
33 | ||||
25.3 |
Consent Required for Transfer of Shares or Designated Securities |
33 | ||||
ARTICLE 26 | ||||||
FORUM SELECTION | ||||||
26.1 |
Forum for Adjudication of Certain Disputes |
34 | ||||
ARTICLE 27 | ||||||
SPECIAL RIGHTS AND RESTRICTIONS ATTACHED TO COMMON SHARES | ||||||
ARTICLE 28 | ||||||
SPECIAL RIGHTS AND RESTRICTIONS ATTACHED TO THE PREFERRED SHARES |
- vi -
Incorporation number: BC0954819
BUSINESS CORPORATIONS ACT
ARTICLES
of
ABCELLERA BIOLOGICS INC.
ARTICLE 1
INTERPRETATION
1.1 Definitions. In these Articles (the Articles), unless the context otherwise requires:
Applicable Securities Laws means the applicable securities legislation of the United States and 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 the United States and each province and territory of Canada;
board of directors, directors and board mean the directors of the Company for the time being;
Business Corporations Act means the Business Corporations Act (British Columbia) from time to time in force and all amendments thereto and includes all regulations and amendments thereto made pursuant to that Act;
Interpretation Act means the Interpretation Act (British Columbia) from time to time in force and all amendments thereto and includes all regulations and amendments thereto;
legal personal representative means the personal or other legal representative of a shareholder;
registered address of a shareholder means the shareholders address as recorded in the central securities register;
seal means the seal of the Company, if any; and
Securities Act means the Securities Act (British Columbia) from time to time in force and all amendments thereto and includes all regulations and amendments thereto made pursuant to that Act.
1.2 Business Corporations Act and Interpretation Act Definitions Applicable. The definitions in the Business Corporations Act and the definitions and rules of construction in the Interpretation Act, with the necessary changes, so far as applicable, and unless the context requires otherwise, apply to these Articles as if they were an enactment. If there is a conflict between a definition in the Business Corporations Act and a definition or rule in the Interpretation Act relating to a term used in these Articles, the definition in the Business Corporations Act will prevail in relation to the use of the term in these Articles. If there is a conflict between these Articles and the Business Corporations Act, the Business Corporations Act will prevail.
ARTICLE 2
SHARES AND SHARE CERTIFICATES
2.1 Authorized Share Structure. The authorized share structure of the Company consists of shares of the class or classes and series, if any, described in the Notice of Articles of the Company.
2.2 Form of Share Certificate. Each share certificate issued by the Company must comply with, and be signed as required by, the Business Corporations Act.
2.3 Shareholder Entitled to Certificate or Acknowledgement. Except in respect of shares that are uncertificated shares within the meaning of the Business Corporations Act, each shareholder is entitled, without charge, to (a) one share certificate representing the shares of each class or series of shares registered in the shareholders name or (b) a non-transferable written acknowledgement of the shareholders right to obtain such a share certificate, provided that in respect of a share held jointly by several persons, the Company is not bound to issue more than one share certificate and delivery of a share certificate for a share to one of several joint shareholders or to one of the shareholders duly authorized agents will be sufficient delivery to all.
2.4 Delivery by Mail. Any share certificate or non-transferable written acknowledgement of a shareholders right to obtain a share certificate may be sent to the shareholder by mail at the shareholders registered address and neither the Company nor any director, officer or agent of the Company (including the Companys transfer agent or legal counsel) is liable for any loss to the shareholder because the share certificate or acknowledgement is lost in the mail or stolen.
2.5 Replacement of Worn Out or Defaced Certificate or Acknowledgement. If the directors are satisfied that a share certificate or a non-transferable written acknowledgement of the shareholders right to obtain a share certificate is worn out or defaced, they must, on production to them of the share certificate or acknowledgement, as the case may be, and on such other terms, if any, as they think fit:
(a) |
order the share certificate or acknowledgement, as the case may be, to be cancelled; and |
(b) |
issue a replacement share certificate or acknowledgement, as the case may be. |
2.6 Replacement of Lost, Stolen or Destroyed Certificate or Acknowledgement. If a share certificate or a non-transferable written acknowledgement of a shareholders right to obtain a share certificate is lost, stolen or destroyed, a replacement share certificate or acknowledgement, as the case may be, must be issued to the person entitled to that share certificate or acknowledgement, as the case may be, if the directors receive:
(a) |
proof satisfactory to them that the share certificate or acknowledgement is lost, stolen or destroyed; and |
(b) |
any indemnity the directors consider adequate. |
2.7 Splitting Share Certificates. If a shareholder surrenders a share certificate to the Company with a written request that the Company issue in the shareholders name two or more share certificates, each representing a specified number of shares and in the aggregate representing the same number of shares as the share certificate so surrendered, the Company must cancel the surrendered share certificate and issue replacement share certificates in accordance with that request.
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2.8 Certificate Fee. There must be paid to the Company, in relation to the issue of any share certificate under Articles 2.5, 2.6 or 2.7, the amount, if any and which must not exceed the amount prescribed under the Business Corporations Act, determined by the directors.
2.9 Recognition of Trusts. Except as required by law or statute or these Articles, no person will be recognized by the Company as holding any share upon any trust, and the Company is not bound by or compelled in any way to recognize (even when having notice thereof) any equitable, contingent, future or partial interest in any share or fraction of a share or (except as by law or statute or these Articles provided or as ordered by a court of competent jurisdiction) any other rights in respect of any share except an absolute right to the entirety thereof in the shareholder.
ARTICLE 3
ISSUE OF SHARES
3.1 Directors Authorized. Subject to the Business Corporations Act and the rights of the holders of issued shares of the Company, the Company may issue, allot, sell or otherwise dispose of the unissued shares, and issued shares held by the Company, at the times, to the persons, including directors, in the manner, on the terms and conditions and for the issue prices (including any premium at which shares with par value may be issued) that the directors may determine. The issue price for a share with par value must be equal to or greater than the par value of the share.
3.2 Commissions and Discounts. The Company may at any time, pay a reasonable commission or allow a reasonable discount to any person in consideration of that person purchasing or agreeing to purchase shares of the Company from the Company or any other person or procuring or agreeing to procure purchasers for shares of the Company.
3.3 Brokerage. The Company may pay such brokerage fee or other consideration as may be lawful for or in connection with the sale or placement of its securities.
3.4 Conditions of Issue. Except as provided for by the Business Corporations Act, no share may be issued until it is fully paid. A share is fully paid when:
(a) |
consideration is provided to the Company for the issue of the share by one or more of the following: |
(i) |
past services performed for the Company; |
(ii) |
property; |
(iii) |
money; and |
(b) |
the value of the consideration received by the Company equals or exceeds the issue price set for the share under Article 3.1. |
3.5 Share Purchase Warrants and Rights. Subject to the Business Corporations Act, the Company may issue share purchase warrants, options and rights upon such terms and conditions as the directors determine, which share purchase warrants, options and rights may be issued alone or in conjunction with debentures, debenture stock, bonds, shares or any other securities issued or created by the Company from time to time.
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ARTICLE 4
SHARE REGISTERS
4.1 Central Securities Register. As required by and subject to the Business Corporations Act, the Company must maintain in British Columbia a central securities register, which may be kept in electronic form. The directors may, subject to the Business Corporations Act, appoint an agent to maintain the central securities register. The directors may also appoint one or more agents, including the agent which keeps the central securities register, as transfer agent for its shares or any class or series of its shares, as the case may be, and the same or another agent as registrar for its shares or such class or series of its shares, as the case may be. The directors may terminate such appointment of any agent at any time and may appoint another agent in its place.
4.2 Closing Register. The Company must not at any time close its central securities register.
ARTICLE 5
SHARE TRANSFERS
5.1 Registering Transfers. A transfer of a share of the Company must not be registered unless:
(a) |
a duly signed instrument of transfer in respect of the share has been received by the Company; |
(b) |
if a share certificate has been issued by the Company in respect of the share to be transferred, that share certificate has been surrendered to the Company; and |
(c) |
if a non-transferable written acknowledgement of the shareholders right to obtain a share certificate has been issued by the Company in respect of the share to be transferred, that acknowledgement has been surrendered to the Company. |
5.2 Form of Instrument of Transfer. The instrument of transfer in respect of any share of the Company must be either in the form, if any, on the back of the Companys share certificates or in any other form that may be approved by the directors from time to time.
5.3 Transferor Remains Shareholder. Except to the extent that the Business Corporations Act otherwise provides, the transferor of shares is deemed to remain the holder of the shares until the name of the transferee is entered in a securities register of the Company in respect of the transfer.
5.4 Signing of Instrument of Transfer. If a shareholder, or the shareholders duly authorized attorney, signs an instrument of transfer in respect of shares registered in the name of the shareholder, the signed instrument of transfer constitutes a complete and sufficient authority to the Company and its directors, officers and agents to register the number of shares specified in the instrument of transfer or specified in any other manner, or, if no number is specified, all the shares represented by the share certificates or set out in the written acknowledgements deposited with the instrument of transfer:
(a) |
in the name of the person named as transferee in that instrument of transfer; or |
(b) |
if no person is named as transferee in that instrument of transfer, in the name of the person on whose behalf the instrument is deposited for the purpose of having the transfer registered. |
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5.5 Enquiry as to Title Not Required. Neither the Company nor any director, officer or agent of the Company is bound to inquire into the title of the person named in the instrument of transfer as transferee or, if no person is named as transferee in the instrument of transfer, of the person on whose behalf the instrument is deposited for the purpose of having the transfer registered or is liable for any claim related to registering the transfer by the shareholder or by any intermediate owner or holder of the shares, of any interest in the shares, of any share certificate representing such shares or of any written acknowledgement of a right to obtain a share certificate for such shares.
5.6 Transfer Fee. There must be paid to the Company, in relation to the registration of any transfer, the amount, if any, determined by the directors.
ARTICLE 6
TRANSMISSION OF SHARES
6.1 Legal Personal Representative Recognized on Death. In case of the death of a shareholder, the legal personal representative, or if the shareholder was a joint holder, the surviving joint holder, will be the only person recognized by the Company as having any title to the shareholders interest in the shares. Before recognizing a person as a legal personal representative, the directors may require proof of appointment by a court of competent jurisdiction, a grant of letters probate, letters of administration or such other evidence or documents as the directors consider appropriate.
6.2 Rights of Legal Personal Representative. The legal personal representative has the same rights, privileges and obligations that attach to the shares held by the shareholder, including the right to transfer the shares in accordance with these Articles, provided the documents required by the Business Corporations Act and the directors have been deposited with the Company.
ARTICLE 7
PURCHASE OF SHARES
7.1 Company Authorized to Purchase or Otherwise Acquire Shares. Subject to Article 7.2, the special rights and restrictions attached to the shares of any class or series, the Business Corporations Act and the Applicable Securities Laws, the Company may, if authorized by the directors, purchase or otherwise acquire any of its shares at the price and upon the terms determined by the directors.
7.2 Purchase When Insolvent. The Company must not make a payment or provide any other consideration to purchase or otherwise acquire any of its shares if there are reasonable grounds for believing that:
(a) |
the Company is insolvent; or |
(b) |
making the payment or providing the consideration would render the Company insolvent. |
7.3 Sale and Voting of Purchased, Redeemed, or Otherwise Acquired Shares. If the Company retains a share purchased, redeemed, or otherwise acquired by it, the Company may sell, gift or otherwise dispose of the share, but, while such share is held by the Company, it:
(a) |
is not entitled to vote the share at a meeting of its shareholders; |
(b) |
must not pay a dividend in respect of the share; and |
(c) |
must not make any other distribution in respect of the share. |
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ARTICLE 8
BORROWING POWERS
8.1 Borrowing Powers. The Company, if authorized by the directors, may:
(a) |
borrow money in the manner and amount, on the security, from the sources and on the terms and conditions that the directors consider appropriate; |
(b) |
issue bonds, debentures and other debt obligations either outright or as security for any liability or obligation of the Company or any other person and at such discounts or premiums and on such other terms as the directors consider appropriate; |
(c) |
guarantee the repayment of money by any other person or the performance of any obligation of any other person; and |
(d) |
mortgage, charge, whether by way of specific or floating charge, grant a security interest in, or give other security on, the whole or any part of the present and future assets and undertaking of the Company. |
ARTICLE 9
ALTERATIONS
9.1 Alteration of Authorized Share Structure. Subject to Articles 9.2 and 9.3, the Business Corporations Act and the special rights and restrictions attached to the shares of any class or series, the Company may by special resolution:
(a) |
create one or more classes or series of shares or, if none of the shares of a class or series of shares are allotted or issued, eliminate that class or series of shares; |
(b) |
increase, reduce or eliminate the maximum number of shares that the Company is authorized to issue out of any class or series of shares or establish a maximum number of shares that the Company is authorized to issue out of any class or series of shares for which no maximum is established; |
(c) |
subdivide or consolidate all or any of its unissued, or fully paid issued, shares; |
(d) |
if the Company is authorized to issue shares of a class of shares with par value: |
(i) |
decrease the par value of those shares; or |
(ii) |
if none of the shares of that class of shares are allotted or issued, increase the par value of those shares; |
(e) |
change all or any of its unissued, or fully paid issued, shares with par value into shares without par value or any of its unissued shares without par value into shares with par value; |
(f) |
alter the identifying name of any of its shares; or |
(g) |
otherwise alter its shares or authorized share structure when required or permitted to do so by the Business Corporations Act; |
and, if applicable, alter its Notice of Articles and Articles accordingly.
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9.2 Special Rights and Restrictions. Subject to Article 9.3, the special rights or restrictions attached to any class or series of shares and the Business Corporations Act, the Company may by special resolution:
(a) |
create special rights or restrictions for, and attach those special rights or restrictions to, the shares of any class or series of shares, whether or not any or all of those shares have been issued; or |
(b) |
vary or delete any special rights or restrictions attached to the shares of any class or series of shares, whether or not any or all of those shares have been issued; |
and alter its Articles or Notice of Articles accordingly.
9.3 No Interference with Class or Series Rights without Consent. A right or special right attached to issued shares must not be prejudiced or interfered with under the Business Corporations Act, the Notice of Articles or these Articles unless the holders of shares of the class or series of shares to which the right or special right is attached consent by a special separate resolution of the holders of such class or series of shares.
9.4 Change of Name. The Company may by directors resolution authorize an alteration of its Notice of Articles in order to change its name.
9.5 Other Alterations. If the Business Corporations Act does not specify the type of resolution and these Articles do not specify another type of resolution, the Company may by special resolution alter these Articles.
ARTICLE 10
MEETINGS OF SHAREHOLDERS
10.1 Annual General Meetings. Unless an annual general meeting is deferred or waived in accordance with the Business Corporations Act, the Company must hold an annual general meeting at least once in each calendar year and not more than 15 months after the last annual reference date at such time and place as may be determined by the directors.
10.2 Resolution Instead of Annual General Meeting. If all the shareholders who are entitled to vote at an annual general meeting consent by a unanimous resolution under the Business Corporations Act to all of the business that is required to be transacted at that annual general meeting, the annual general meeting is deemed to have been held on the date of the unanimous resolution. The shareholders must, in any unanimous resolution passed under this Article 10.2, select as the Companys annual reference date a date that would be appropriate for the holding of the applicable annual general meeting.
10.3 Calling of Meetings of Shareholders. The directors may, whenever they think fit, call a meeting of shareholders, to be held at such time and place as may be determined by the directors.
10.4 Notice for Meetings of Shareholders. The Company must send notice of the date, time and location of any meeting of shareholders, in the manner provided in these Articles, or in such other manner, if any, as may be prescribed by ordinary resolution (whether previous notice of the resolution has been given or not), to each shareholder entitled to attend the meeting, to each director and to the auditor of the Company, unless these Articles otherwise provide, at least the following number of days before the meeting:
(a) |
if and for so long as the Company is a public company, 21 days; |
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(b) |
otherwise, 10 days. |
10.5 Record Date for Notice. The directors may set a date as the record date for the purpose of determining shareholders entitled to notice of any meeting of shareholders. The record date must not precede the date on which the meeting is to be held by more than two months or, in the case of a general meeting requisitioned by shareholders under the Business Corporations Act, by more than four months. The record date must not precede the date on which the meeting is held by fewer than:
(a) |
if and for so long as the Company is a public company, 21 days; |
(b) |
otherwise, 10 days. |
If no record date is set, the record date is 5 p.m. on the day immediately preceding the first date on which the notice is sent or, if no notice is sent, the beginning of the meeting.
10.6 Record Date for Voting. The directors may set a date as the record date for the purpose of determining shareholders entitled to vote at any meeting of shareholders. The record date must not precede the date on which the meeting is to be held by more than two months or, in the case of a general meeting requisitioned by shareholders under the Business Corporations Act, by more than four months. If no record date is set, the record date is 5 p.m. on the day immediately preceding the first date on which the notice is sent or, if no notice is sent, the beginning of the meeting.
10.7 Failure to Give Notice and Waiver of Notice. The accidental omission to send notice of any meeting to, or the non-receipt of any notice by, any of the persons entitled to notice does not invalidate any proceedings at that meeting. Any person entitled to notice of a meeting of shareholders may, in writing or otherwise, waive or reduce the period of notice of such meeting. Attendance of a person at a meeting of shareholders is a waiver of entitlement to notice of the meeting unless that person 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.
10.8 Notice of Special Business at Meetings of Shareholders. If a meeting of shareholders is to consider special business within the meaning of Article 11.1, the notice of meeting must:
(a) |
state the general nature of the special business; and |
(b) |
if the special business includes considering, approving, ratifying, adopting or authorizing any document or the signing of or giving of effect to any document, have attached to it a copy of the document or state that a copy of the document will be available for inspection by shareholders: |
(i) |
at the Companys records office, or at such other reasonably accessible location in British Columbia as is specified in the notice; and |
(ii) |
during statutory business hours on any one or more specified days before the day set for the holding of the meeting. |
For the avoidance of doubt, any special business that is not set out in the notice of meeting shall not be approved at that meeting.
10.9 Class Meetings and Series Meetings of Shareholders. Unless otherwise specified in these Articles, the provisions of these Articles relating to a meeting of shareholders will apply, with the necessary changes and so far as they are applicable, to a class meeting or series meeting of shareholders holding a particular class or series of shares.
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10.10 Meetings by Telephone or Other Communications Medium. The directors may determine that a meeting of shareholders shall be held entirely by means of telephonic, electronic or other communication facilities that permit all participants to communicate with each other during the meeting. A meeting of shareholders may also be held at which some, but not necessarily all, persons entitled to attend may participate by means of such communications facilities, if the directors determine to make them available. A person participating in a meeting by such means is deemed to be present at the meeting.
10.11 Advance Notice of Nominations of Directors.
(a) |
Nomination Procedures - Subject only to the Business Corporations Act, Applicable Securities Law and these Articles, only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Company. Nominations of persons for election to the board may be made at any annual meeting of shareholders, or at any special meeting of shareholders if the election of directors is a matter specified in the notice of meeting, |
(i) |
by or at the direction of the board, including pursuant to a notice of meeting; |
(ii) |
by or at the direction or request of one or more shareholders pursuant to a proposal made in accordance with the provisions of the Business Corporations Act, or a requisition of the shareholders made in accordance with the provisions of the Business Corporations Act; or |
(iii) |
by any person (a Nominating Shareholder) who (A) at the close of business on the date of the giving of the notice provided for in this Article 10.11 and on the record date for notice of such meeting, is entered in the securities register 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 Company, and (B) has given timely notice in proper written form as set forth in this Article 10.11. |
(b) |
Manner of timely notice - To be timely, a Nominating Shareholders notice must be received by the corporate secretary of the Company at the principal executive office or registered office of the Company: |
(i) |
in the case of an annual meeting (including an annual and special meeting) of shareholders, not later than the close of business on the 30th day prior to the date of the meeting; provided, however, that in the event that the meeting is to be held on a date that is less than 50 days after the date (the Notice Date) on which the first public announcement of the date of the meeting was made, notice by the Nominating Shareholder may be made not later than the close of business on the tenth (10th) day following the Notice Date; and |
(ii) |
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 called for other purposes), not later than the close of business on the fifteenth (15th) day following the day on which the first public announcement of the date of the meeting was made. |
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(c) |
Proper form of notice - To be in proper written form, a Nominating Shareholders notice must comply with this Article 10.11 and must set forth: |
(i) |
as to each person whom the Nominating Shareholder proposes to nominate for election as a director: |
(A) |
their name, age, business and residential address, and principal occupation or employment for the past five years; |
(B) |
their direct or indirect beneficial ownership in, or control or direction over, any class or series of securities of the Company, including the number or principal amount; and |
(C) |
any other information that would be required to be disclosed in a dissident proxy circular or other filings required to be made in connection with the solicitation of proxies for election of directors pursuant to the Business Corporations Act or Applicable Securities Laws; and |
(ii) |
as to each Nominating Shareholder giving the notice: |
(A) |
their name, business and residential address; |
(B) |
any direct or indirect beneficial ownership in, or control or direction over, any class or series of securities of the Company, including the number or principal amount; |
(C) |
any proxy, contract, arrangement, agreement or understanding pursuant to which such person, or any of its Affiliates or Associates, or any person acting jointly or in concert with such person, has any interests, rights or obligations relating to the voting of any securities of the Company or the nomination of directors to the board; and |
(D) |
any other information relating to such person that would be required to be included in a dissident proxy circular or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to the Business Corporations Act or as required by Applicable Securities Laws. |
References to Nominating Shareholder in this Article 10.11 shall be deemed to refer to each shareholder that nominates a person for election as a director in the case of a nomination proposal where more than one shareholder is involved in making such nomination proposal.
(d) |
Currency of information - All information to be provided in a timely notice pursuant to this Article 10.11 shall be provided as of the record date for determining shareholders entitled to vote at the meeting (if such date shall then have been publicly announced) and as of the date of such notice. The Nominating Shareholder shall update such information to the extent necessary so that it is true and correct as of the date that is ten (10) business days prior to the date of the meeting, or any adjournment or postponement thereof. |
(e) |
Power of the chair - 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 the foregoing provisions and, if any proposed nomination is not in compliance with such foregoing provisions, to declare that such defective nomination shall be disregarded. |
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(f) |
Delivery of notice - Notwithstanding any other provision of these Articles, notice given to the corporate secretary of the Company pursuant to this Article 10.11 may only be given by personal delivery, facsimile transmission or by email (at such email address as may be stipulated from time to time on the Companys website for general inquiries), and shall be deemed to have been given and made only at the time it is served by personal delivery to the corporate secretary at the address of the principal executive offices of the Company, email (at the address as aforesaid and provided that confirmation of receipt of such email has been received) or sent by facsimile transmission (provided that receipt of the confirmation of such transmission has been received); provided that if such delivery or electronic communication is made on a day which is not a business day or later than 5:00 p.m. (Vancouver time) on a day which is a business day, then such delivery or electronic communication shall be deemed to have been made on the subsequent day that is a business day. |
(g) |
Exclusive Means For the avoidance of doubt, this Article 10.11 shall be the exclusive means for any person to bring nominations for election to the board at or in connection with any annual or special meeting of the shareholders of the Company. |
(h) |
Waiver - Notwithstanding the foregoing, the board may, in its sole discretion, waive any requirement in this Article 10.11. |
(i) |
Definitions - For purposes of this Article 10.11, |
Affiliate, when used to indicate a relationship with a specific person, shall mean a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified person;
Associate, when used to indicate a relationship with a specified person, shall mean (i) any body corporate or trust of which such person beneficially owns, directly or indirectly, voting securities carrying more than 10% of the voting rights attached to all voting securities of such body corporate or trust for the time being outstanding, (ii) any partner of that person, (iii) any trust or estate in which such person has a substantial beneficial interest or as to which such person serves as trustee or in a similar capacity, (iv) a spouse of such specified person, (v) any person of either sex with whom such specified person is living in conjugal relationship outside marriage or (vi) any relative of such specified person or of a person mentioned in clauses (iv) or (v) of this definition if that relative has the same residence as the specified person;
beneficially owns or beneficially owned means, in connection with the ownership of shares in the capital of the Company by a person, (i) any such shares as to which such person or any of such persons Affiliates or Associates owns at law or in equity, or has the right to acquire or become the owner at law or in equity, where such right is exercisable immediately or after the passage of time and whether or not on condition or the happening of any contingency or the making of any payment, upon the exercise of any conversion right, exchange right or purchase right attaching to any securities, or pursuant to any agreement, arrangement, pledge or understanding whether or not in writing; (ii) any such shares as to which such person or any of such persons Affiliates or Associates has the right to vote, or the right to direct the voting, where such right is exercisable immediately or after the passage of time and whether or not on condition or the happening of any contingency or the making of any payment, pursuant to any agreement, arrangement, pledge or understanding whether or not in writing; (iii) any such shares which are beneficially owned, directly or indirectly, by a Counterparty (or any of such Counterpartys Affiliates or Associates) under any Derivatives Contract (without regard to any short or similar position under the same or any other Derivatives Contract) to which such person or any of such persons Affiliates or Associates is a Receiving Party; provided, however that the number of shares that a person beneficially owns pursuant to this clause (iii) in connection with a particular Derivatives Contract shall not exceed the number of Notional Securities with respect to such Derivatives Contract; provided, further, that the number of securities owned beneficially by each Counterparty (including their respective Affiliates and Associates) under a Derivatives Contract shall for purposes of this clause be deemed to include all securities that are owned beneficially, directly or indirectly, by any other Counterparty (or any of such other Counterpartys Affiliates or Associates) under any Derivatives Contract to which such first Counterparty (or any of such first Counterpartys Affiliates or Associates) is a Receiving Party and this proviso shall be applied to successive Counterparties as appropriate; and (iv) any such shares which are owned beneficially within the meaning of this definition by any other person with whom such person is acting jointly or in concert with respect to the Company or any of its securities;
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close of business means 5:00 p.m. (Vancouver time) on a business day in British Columbia, Canada;
Derivatives Contract shall mean a contract between two parties (the Receiving Party and the Counterparty) that is designed to expose the Receiving Party to economic benefits and risks that correspond substantially to the ownership by the Receiving Party of a number of shares in the capital of the Company or securities convertible into such shares specified or referenced in such contract (the number corresponding to such economic benefits and risks, the Notional Securities), regardless of whether obligations under such contract are required or permitted to be settled through the delivery of cash, shares in the capital of the Company or securities convertible into such shares or other property, without regard to any short position under the same or any other Derivatives Contract. For the avoidance of doubt, interests in broad-based index options, broad-based index futures and broad-based publicly traded market baskets of stocks approved for trading by the appropriate governmental authority shall not be deemed to be Derivatives Contracts; and
public announcement shall mean disclosure in a press release reported by a national news service in Canada or the United States, or in a document publicly filed by the Company under its profile on the System for Electronic Document Analysis and Retrieval at www.sedar.com or on the Electronic Data Gathering, Analysis and Retrieval system at https://www.sec.gov/edgar/searchedgar/companysearch.html.
ARTICLE 11
PROCEEDINGS AT MEETINGS OF SHAREHOLDERS
11.1 Special Business. At a meeting of shareholders, the following business is special business:
(a) |
at a meeting of shareholders that is not an annual general meeting, all business is special business except business relating to the conduct of or voting at the meeting; |
(b) |
at an annual general meeting, all business is special business except for the following: |
(i) |
business relating to the conduct of or voting at the meeting; |
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(ii) |
consideration of any financial statements of the Company presented to the meeting; |
(iii) |
consideration of any reports of the directors or auditor; |
(iv) |
the setting or changing of the number of directors; |
(v) |
the election or appointment of directors; |
(vi) |
the appointment of an auditor; |
(vii) |
the setting of the remuneration of an auditor; |
(viii) |
business arising out of a report of the directors not requiring the passing of a special resolution or an exceptional resolution; |
(ix) |
any other business which, under these Articles or the Business Corporations Act, may be transacted at a meeting of shareholders without prior notice of the business being given to the shareholders. |
11.2 Special Majority. The majority of votes required for the Company to pass a special resolution at a meeting of shareholders is two-thirds of the votes cast on the resolution.
11.3 Quorum. Subject to the special rights and restrictions attached to the shares of any class or series of shares and Article 11.4, the quorum for the transaction of business at a meeting of shareholders is two persons who are, or who represent by proxy, shareholders who, in the aggregate, hold at least a majority of the issued shares entitled to be voted at the meeting.
11.4 One Shareholder May Constitute Quorum. If there is only one shareholder entitled to vote at a meeting of shareholders:
(a) |
the quorum is one person who is, or who represents by proxy, that shareholder, and |
(b) |
that shareholder, present in person or by proxy, may constitute the meeting. |
11.5 Other Persons May Attend. In addition to those persons who are entitled to vote at a meeting of shareholders, the only other persons entitled to be present at the meeting are the directors, the officers, any lawyer for the Company, the auditor of the Company, any other persons invited to be present at the meeting by the directors or by the chair of the meeting and any persons entitled or required under the Business Corporations Act or these Articles to be present at the meeting; but if any of those persons does attend the meeting, that person is not to be counted in the quorum and is not entitled to vote at the meeting unless that person is a shareholder or proxy holder entitled to vote at the meeting.
11.6 Requirement of Quorum. No business, other than the election of a chair of the meeting and the adjournment of the meeting, may be transacted at any meeting of shareholders unless a quorum of shareholders entitled to vote is present at the commencement of the meeting, but such quorum need not be present throughout the meeting.
11.7 Lack of Quorum. If, within one-half hour from the time set for the holding of a meeting of shareholders, a quorum is not present:
(a) |
in the case of a general meeting requisitioned by shareholders, the meeting is dissolved, and |
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(b) |
in the case of any other meeting of shareholders, the meeting stands adjourned to the same day in the next week at the same time and place. |
11.8 Lack of Quorum at Succeeding Meeting. If, at the meeting to which the meeting referred to in Article 11.7(b) was adjourned, a quorum is not present within one-half hour from the time set for the holding of the meeting, the person or persons present and being, or representing by proxy, one or more shareholders entitled to attend and vote at the meeting constitute a quorum.
11.9 Chair. The following individual is entitled to preside as chair at a meeting of shareholders:
(a) |
the chair of the board, if any; or |
(b) |
if the chair of the board is absent or unwilling to act as chair of the meeting, the president, if any. |
11.10 Selection of Alternate Chair. If, at any meeting of shareholders, there is no chair of the board or president present within 15 minutes after the time set for holding the meeting, or if the chair of the board and the president are unwilling to act as chair of the meeting, or if the chair of the board and the president have advised the secretary, if any, or any director present at the meeting, that they will not be present at the meeting, the directors present must choose one of their number to be chair of the meeting or if all of the directors present decline to take the chair or fail to so choose or if no director is present, the shareholders entitled to vote at the meeting who are present in person or by proxy may choose any person present at the meeting to chair the meeting.
11.11 Adjournments. The chair of a meeting of shareholders may, and if so directed by the meeting must, adjourn the meeting from time to time and from place to place, but no business may be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place.
11.12 Notice of Adjourned Meeting. It is not necessary to give any notice of an adjourned meeting of shareholders or of the business to be transacted at an adjourned meeting of shareholders except that, when a meeting is adjourned for 30 days or more, notice of the adjourned meeting must be given as in the case of the original meeting.
11.13 Decision by Show of Hands or Poll. Subject to the Business Corporations Act, every motion put to a vote at a meeting of shareholders will be decided on a show of hands, or the functional equivalent of a show of hands by means of electronic, telephonic or other communications facility unless a poll, before or on the declaration of the result of the vote by show of hands or the functional equivalent of a show of hands, is directed by the chair or demanded by at least one shareholder entitled to vote who is present in person or by proxy.
11.14 Declaration of Result. The chair of a meeting of shareholders must declare to the meeting the decision on every question in accordance with the result of the show of hands (or its functional equivalent) or the poll, as the case may be, and that decision must be entered in the minutes of the meeting. A declaration of the chair that a resolution is carried by the necessary majority or is defeated is, unless a poll is directed by the chair or demanded under Article 11.13, conclusive evidence without proof of the number or proportion of the votes recorded in favour of or against the resolution.
11.15 Motion Need Not be Seconded. No motion proposed at a meeting of shareholders need be seconded unless the chair of the meeting rules otherwise, and the chair of any meeting of shareholders is entitled to propose or second a motion.
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11.16 Casting Vote. In the case of an equality of votes, the chair of a meeting of shareholders does not, either on a show of hands (or its functional equivalent) or on a poll, have a second or casting vote in addition to the vote or votes to which the chair may be entitled as a shareholder.
11.17 Manner of Taking Poll. Subject to Article 11.18, if a poll is duly demanded at a meeting of shareholders:
(a) |
the poll must be taken: |
(i) |
at the meeting, or within seven days after the date of the meeting, as the chair of the meeting directs; and |
(ii) |
in the manner, at the time and at the place that the chair of the meeting directs; |
(b) |
the result of the poll is deemed to be the decision of the meeting at which the poll is demanded; and |
(c) |
the demand for the poll may be withdrawn by the person who demanded it. |
11.18 Demand for Poll on Adjournment. A poll demanded at a meeting of shareholders on a question of adjournment must be taken immediately at the meeting.
11.19 Chair Must Resolve Dispute. In the case of any dispute as to the admission or rejection of a vote given on a poll, the chair of the meeting must determine the dispute, and the chairs determination made in good faith is final and conclusive.
11.20 Casting of Votes. On a poll, a shareholder entitled to more than one vote need not cast all the votes in the same way.
11.21 No Demand for Poll on Election of Chair. No poll may be demanded in respect of the vote by which a chair of a meeting of shareholders is elected.
11.22 Demand for Poll Not to Prevent Continuance of Meeting. The demand for a poll at a meeting of shareholders does not, unless the chair of the meeting so rules, prevent the continuation of a meeting for the transaction of any business other than the question on which a poll has been demanded.
11.23 Retention of Ballots and Proxies. The Company or its agent must, for at least three months after a meeting of shareholders, keep each ballot cast on a poll and each proxy voted at the meeting, and, during that period, make them available for inspection during normal business hours by any shareholder or proxy holder entitled to vote at the meeting. At the end of such three month period, the Company may destroy such ballots and proxies.
ARTICLE 12
VOTES OF SHAREHOLDERS
12.1 Number of Votes by Shareholder or by Shares. Subject to any special rights or restrictions attached to any shares and to the restrictions imposed on joint shareholders under Article 12.3:
(a) |
on a vote by show of hands (or its functional equivalent), every person present who is a shareholder or proxy holder and entitled to vote on the matter has one vote; and |
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(b) |
on a poll, every shareholder entitled to vote on the matter has one vote in respect of each share entitled to be voted on the matter and held by that shareholder and may exercise that vote either in person or by proxy. |
12.2 Votes of Persons in Representative Capacity. A person who is not a shareholder may vote at a meeting of shareholders, whether on a show of hands (or its functional equivalent) or on a poll, and may appoint a proxy holder to act at the meeting, if, before doing so, the person satisfies the chair of the meeting, or the directors, that the person is a legal personal representative or a trustee in bankruptcy for a shareholder who is entitled to vote at the meeting.
12.3 Votes by Joint Holders. If there are joint shareholders registered in respect of any share:
(a) |
any one of the joint shareholders may vote at any meeting of shareholders, personally or by proxy, in respect of the share as if that joint shareholder were solely entitled to it; or |
(b) |
if more than one of the joint shareholders is present at any meeting of shareholders, personally or by proxy, and more than one of them votes in respect of that share, then only the vote of the joint shareholder present whose name stands first on the central securities register in respect of the share will be counted. |
12.4 Legal Personal Representatives as Joint Shareholders. Two or more legal personal representatives of a shareholder in whose sole name any share is registered are, for the purposes of Article 12.3, deemed to be joint shareholders.
12.5 Representative of a Corporate Shareholder. If a corporation, that is not a subsidiary of the Company, is a shareholder, that corporation may appoint a person to act as its representative at any meeting of shareholders of the Company, and:
(a) |
for that purpose, the instrument appointing a representative must be received: |
(i) |
at the registered office of the Company or at any other place specified, in the notice calling the meeting, for the receipt of proxies, at least the number of business days specified in the notice for the receipt of proxies, or if no number of days is specified, two business days before the day set for the holding of the meeting or adjourned or postponed meeting; or |
(ii) |
at the meeting or any adjourned or postponed meeting, to the chair of the meeting or adjourned or postponed meeting or by a person designated by the chair of the meeting or adjourned or postponed meeting; |
(b) |
if a representative is appointed under this Article 12.5: |
(i) |
the representative is entitled to exercise in respect of and at that meeting the same rights on behalf of the corporation that the representative represents as that corporation could exercise if it were a shareholder who is an individual, including, without limitation, the right to appoint a proxy holder; and |
(ii) |
the representative, if present at the meeting, is to be counted for the purpose of forming a quorum and is deemed to be a shareholder present in person at the meeting. |
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Evidence of the appointment of any such representative may be sent to the Company or its transfer agent by written instrument, fax or any other method of transmitting legibly recorded messages.
12.6 Proxy Provisions Do Not Apply to All Companies. Articles 12.7 to 12.15 do not apply to the Company if and for so long as it is a public company or a pre-existing reporting company which has the Statutory Reporting Company Provisions as part of its Articles or to which the Statutory Reporting Company Provisions apply.
12.7 Appointment of Proxy Holders. Every shareholder of the Company, including a corporation that is a shareholder but not a subsidiary of the Company, entitled to vote at a meeting of shareholders of the Company may, by proxy, appoint one or more (but not more than five) proxy holders to attend and act at the meeting in the manner, to the extent and with the powers conferred by the proxy.
12.8 Alternate Proxy Holders. A shareholder may appoint one or more alternate proxy holders to act in the place of an absent proxy holder.
12.9 When Proxy Holder Need Not Be Shareholder. A person must not be appointed as a proxy holder unless the person is a shareholder, although a person who is not a shareholder may be appointed as a proxy holder if:
(a) |
the person appointing the proxy holder is a corporation or a representative of a corporation appointed under Article 12.5; |
(b) |
the Company has at the time of the meeting for which the proxy holder is to be appointed only one shareholder entitled to vote at the meeting; or |
(c) |
the shareholders present in person or by proxy at and entitled to vote at the meeting for which the proxy holder is to be appointed, by a resolution on which the proxy holder is not entitled to vote but in respect of which the proxy holder is to be counted in the quorum, permit the proxy holder to attend and vote at the meeting. |
12.10 Deposit of Proxy. A proxy for a meeting of shareholders must:
(a) |
be received at the registered office of the Company or at any other place specified, in the notice calling the meeting, for the receipt of proxies, at least the number of business days specified in the notice, or if no number of days is specified, two business days before the day set for the holding of the meeting or any adjourned meeting; |
(b) |
unless the notice provides otherwise, be provided, at the meeting or any adjourned meeting, to the chair of the meeting or to a person designated by the chair of the meeting; or |
(c) |
be received in any other manner determined by the board or the chair of the meeting. |
A proxy may be sent to the Company by written instrument, fax or any other method of transmitting legibly recorded messages or by using such available internet or telephone voting services as may be approved by the directors.
12.11 Validity of Proxy Vote. A vote given in accordance with the terms of a proxy is valid notwithstanding the death or incapacity of the shareholder giving the proxy and despite the revocation of the proxy or the revocation of the authority under which the proxy is given, unless notice in writing of that death, incapacity or revocation is received:
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(a) |
at the registered office of the Company, at any time up to and including the last business day before the day set for the holding of the meeting or any adjourned meeting at which the proxy is to be used; or |
(b) |
at the meeting or any adjourned meeting by the chair of the meeting or adjourned meeting, before any vote in respect of which the proxy has been given has been taken. |
12.12 Form of Proxy. A proxy, whether for a specified meeting or otherwise, must be either in the following form or in any other form approved by the directors or the chair of the meeting:
AbCellera Biologics Inc.
(the Company)
The undersigned, being a shareholder of the Company, hereby appoints [name] or, failing that person, [name], as proxy holder for the undersigned to attend, act and vote for and on behalf of the undersigned at the meeting of shareholders of the Company to be held on [month, day, year] and at any adjournment of that meeting.
Number of shares in respect of which this proxy is given (if no number is specified, then this proxy if given in respect of all shares registered in the name of the shareholder): _______________.
Signed this ______ day of __________, _____.
(Signature of shareholder) |
|
(Name of shareholderprinted) |
12.13 Revocation of Proxy. Subject to Article 12.14, every proxy may be revoked by an instrument in writing that is received:
(a) |
at the registered office of the Company at any time up to and including the last business day before the day set for the holding of the meeting at which the proxy is to be used; or |
(b) |
at the meeting or any adjourned meeting, by the chair of the meeting or any adjourned meeting, before any vote in respect of which the proxy has been given has been taken. |
12.14 Revocation of Proxy Must Be Signed. An instrument referred to in Article 12.13 must be signed as follows:
(a) |
if the shareholder for whom the proxy holder is appointed is an individual, the instrument must be signed by the shareholder or the shareholders legal personal representative or trustee in bankruptcy; |
(b) |
if the shareholder for whom the proxy holder is appointed is a corporation, the instrument must be signed by the corporation or by a representative appointed for the corporation under Article 12.5. |
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12.15 Chair May Determine Validity of Proxy. The chair of any meeting of shareholders may determine whether or not a proxy deposited for use at the meeting, which may not strictly comply with the requirements of this Article 12 as to form, execution, accompanying documentation, time of filing or otherwise, shall be valid for use at the meeting, and any such determination made in good faith shall be final, conclusive and binding upon the meeting.
12.16 Production of Evidence of Authority to Vote. The directors or the chair of any meeting of shareholders may, but need not, inquire into the authority of any person to vote at the meeting and may, but need not, demand from that person production of evidence as to the existence of the authority to vote.
ARTICLE 13
DIRECTORS
13.1 Number of Directors. The number of directors, excluding additional directors appointed under Article 14.10, is set at:
(a) |
if the Company is a public company, a number that is no less than three (3) and no greater than ten (10), and which shall be the most recently set of: |
(i) |
the number of directors set by the board of directors of the Company; and |
(ii) |
the number of directors set under Article 14.6; |
(b) |
if the Company is not a public company, the most recently set of: |
(i) |
the number of directors set by the board of directors of the Company; and |
(ii) |
the number of directors set under Article 14.6. |
13.2 Change in Number of Directors. If the number of directors is set under Article 13.1(a)(i) or 13.1(b)(i):
(a) |
the shareholders may elect the directors needed to fill any vacancies in the board of directors up to that number; |
(b) |
if the shareholders do not elect the directors needed to fill any vacancies in the board of directors up to that number contemporaneously with the setting of that number, then the directors may appoint directors to fill those vacancies. |
13.3 Directors Acts Valid Despite Vacancy. An act or proceeding of the directors is not invalid merely because fewer than the number of directors set or otherwise required under these Articles is in office.
13.4 Qualifications of Directors. Notwithstanding any other provision of these Articles, a director is not required to hold a share in the capital of the Company as qualification for the directors office but must be qualified as required by the Business Corporations Act to become, act or continue to act as a director.
13.5 Remuneration of Directors. The directors are entitled to the remuneration for acting as directors, if any, as the directors may from time to time determine. If the directors so decide, the remuneration of the directors, if any, will be determined by the shareholders. That remuneration may be in addition to any salary or other remuneration paid to any officer or employee of the Company as such, who is also a director.
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13.6 Reimbursement of Expenses of Directors. The Company must reimburse each director for the reasonable expenses that he or she may incur in and about the business of the Company.
13.7 Special Remuneration for Directors. If any director performs any professional or other services for the Company that in the opinion of the directors are outside the ordinary duties of, or not in that individuals capacity as, a director, or if any director is otherwise specially occupied in or about the Companys business, he or she may be paid remuneration fixed by the directors, or, at the option of that director, fixed by ordinary resolution, and such remuneration may be either in addition to, or in substitution for, any other remuneration that he or she may be entitled to receive.
13.8 Gratuity, Pension or Allowance on Retirement of Director. Unless otherwise determined by ordinary resolution, the directors on behalf of the Company may pay a gratuity or pension or allowance on retirement to any director who has held any salaried office or place of profit with the Company or to that directors spouse or dependants and may make contributions to any fund and pay premiums for the purchase or provision of any such gratuity, pension or allowance.
ARTICLE 14
ELECTION AND REMOVAL OF DIRECTORS
14.1 Staggered Terms. For purposes of facilitating staggered terms on the board, the following provisions shall apply:
(a) |
one-third of the directors (or if the number of directors is not divisible by three, then that number of directors that is one-third of the directors rounded up to the next whole number) shall initially hold office for a three-year term expiring on the third annual general meeting of the Company following the date noted at the end of these Articles, as approved by ordinary resolution of the shareholders of the Company prior to the date noted at the end of these Articles; |
(b) |
one-third of the directors (or if the number of directors is not divisible by three, then that number of directors that is one-third of the directors rounded up to the next whole number) shall initially hold office for a two-year term expiring on the second annual general meeting of the Company following the date noted at the end of these Articles, as approved by ordinary resolution of the shareholders of the Company prior to the date noted at the end of these Articles; and |
(c) |
the remaining number of directors shall initially hold office for a one-year term expiring on the first annual general meeting of the Company following the date noted at the end of these Articles, as approved by ordinary resolution of the shareholders of the Company prior to the date noted at the end of these Articles, |
and upon the expiry of the directors initial terms of office as set forth above, the directors shall be elected in the manner provided in Article 14.2 to hold office for three-year terms expiring on the third annual general meeting following their election.
14.2 Election at Annual General Meeting. At every annual general meeting and in every unanimous resolution contemplated by Article 10.2:
(a) |
all of the directors whose terms expire shall cease to hold office immediately before the election or appointment of directors under Article 14.2(b) below, but are eligible for re-election or re-appointment; and |
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(b) |
the shareholders entitled to vote at the annual general meeting for the election of directors may elect, or in the unanimous resolution appoint, the number of directors required to fill the following vacancies, such that the staggered terms are maintained as contemplated in Article 14.1: |
(i) |
the vacancies created by the expiry of any directors terms under these Articles, to hold office for three-year terms expiring on the third annual general meeting following their election; and |
(ii) |
any vacancies created before the expiry of any directors terms under these Articles, which vacancies have not already been filled as otherwise permitted in these Articles, to hold office until the remainder of the unexpired portion of the term of the departed directors for whom the new directors are replacing. |
14.3 Election or Appointment between Annual General Meetings. A director may be:
(a) |
elected or appointed under Articles 14.7, 14.9, 14.12, and 14.13 to hold office until the remainder of the unexpired portion of the term of the departed director for whom the new director is replacing; |
(b) |
appointed under Article 14.10 for a three-year term expiring on the third annual general meeting of the Company following the directors appointment under Article 14.10. |
For greater certainty, following the expiry of the term of any director appointed under Articles 14.7, 14.9, 14.10, 14.12, and 14.13, that director is eligible for re-election or re-appointment under these Articles.
14.4 Consent to be a Director. No election, appointment or designation of an individual as a director is valid unless:
(a) |
that individual consents to be a director in the manner provided for in the Business Corporations Act; or |
(b) |
that individual is elected or appointed at a meeting at which the individual is present and the individual does not refuse, at the meeting, to be a director. |
14.5 Failure to Elect or Appoint Directors. If:
(a) |
the Company fails to hold an annual general meeting, and all the shareholders who are entitled to vote at an annual general meeting fail to pass the unanimous resolution contemplated by Article 10.2 on or before the date by which the annual general meeting is required to be held under the Business Corporations Act; or |
(b) |
the shareholders fail, at the annual general meeting or in the unanimous resolution contemplated by Article 10.2, to elect or appoint any directors; |
then each director then in office continues to hold office until the earlier of:
(c) |
the date on which that directors successor is elected or appointed; and |
(d) |
the date on which that director otherwise ceases to hold office under the Business Corporations Act or these Articles. |
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14.6 Places of Retiring Directors Not Filled. If, at any meeting of shareholders at which there should be an election of directors, the places of any of the retiring directors are not filled by that election, then those retiring directors who are not re-elected and who are asked by the newly elected directors to continue in office will, if willing to do so, continue in office to complete the number of directors for the time being set pursuant to these Articles until further new directors are elected at a meeting of shareholders convened for that purpose. If any such election or continuance of directors does not result in the election or continuance of the number of directors for the time being set pursuant to these Articles, then the number of directors of the Company is deemed to be set at the number of directors actually elected or continued in office.
14.7 Directors May Fill Casual Vacancies. Any casual vacancy occurring in the board of directors may be filled by the directors, subject to these Articles.
14.8 Remaining Directors Power to Act. The directors may act notwithstanding any vacancy in the board of directors, but if the Company has fewer directors in office than the number set pursuant to these Articles as the quorum of directors, then the directors may only act for the purpose of appointing directors up to that number or of summoning a meeting of shareholders for the purpose of filling any vacancies on the board of directors or, subject to the Business Corporations Act, for any other purpose.
14.9 Shareholders May Fill Vacancies. If the Company has no directors or fewer directors in office than the number set pursuant to these Articles as the quorum of directors, then the shareholders may elect or appoint directors to fill any vacancies on the board of directors, subject to these Articles.
14.10 Additional Directors. Notwithstanding Articles 13.1 and 13.2, between annual general meetings or unanimous resolutions contemplated by Article 10.2, the directors may appoint one or more additional directors subject to these Articles, but the number of additional directors appointed under this Article 14.10 must not at any time exceed one-third of the number of the current directors who were elected or appointed as directors other than under this Article 14.10. Except as provided otherwise under these Articles or the Business Corporations Act, any director so appointed shall cease to hold office at the end of a three-year term expiring on the third annual general meeting of the Company following the directors appointment but is eligible for re-election or re-appointment.
14.11 Ceasing to be a Director. A director ceases to be a director when:
(a) |
the term of office of the director expires; |
(b) |
the director dies; |
(c) |
the director resigns as a director by notice in writing provided to the Company or a lawyer for the Company; or |
(d) |
the director is removed from office pursuant to Articles 14.12 or 14.13. |
14.12 Removal of Director by Shareholders. The Company may remove any director before the expiration of that directors term of office by special resolution. In that event, the shareholders may elect, or appoint by ordinary resolution, a director to fill the resulting vacancy, subject to these Articles. If the shareholders do not elect or appoint a director to fill the resulting vacancy contemporaneously with the removal, then the directors may appoint a director to fill that vacancy, subject to these Articles.
14.13 Removal of Director by Directors. The directors may remove any director before the expiration of his or that directors term of office if the director is convicted of an indictable offence, or if the director ceases to be qualified to act as a director of a company and does not promptly resign, and the directors may appoint a director to fill the resulting vacancy, subject to these Articles.
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ARTICLE 15
POWERS AND DUTIES OF DIRECTORS
15.1 Powers of Management. The directors must, subject to the Business Corporations Act and these Articles, manage or supervise the management of the business and affairs of the Company and have the authority to exercise all such powers of the Company as are not, by the Business Corporations Act or by these Articles, required to be exercised by the shareholders of the Company.
15.2 Appointment of Attorney of Company. The directors may from time to time, by power of attorney or other instrument, under seal if so required by law, appoint any person to be the attorney of the Company for such purposes, and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the directors under these Articles and excepting the power to fill vacancies in the board of directors, to remove a director, to change the membership of, or fill vacancies in, any committee of the directors, to appoint or remove officers appointed by the directors and to declare dividends) and for such period, and with such remuneration and subject to such conditions as the directors may think fit. Any such power of attorney may contain such provisions for the protection or convenience of persons dealing with such attorney as the directors think fit. Any such attorney may be authorized by the directors to sub-delegate all or any of the powers, authorities and discretions for the time being vested in such attorney.
ARTICLE 16
DISCLOSURE OF INTEREST OF DIRECTORS
16.1 Obligation to Account for Profits. A director or senior officer who holds a disclosable interest (as that term is used in the Business Corporations Act) in a contract or transaction into which the Company has entered or proposes to enter is liable to account to the Company for any profit that accrues to the director or senior officer under or as a result of the contract or transaction only if and to the extent provided in the Business Corporations Act.
16.2 Restrictions on Voting by Reason of Interest. A director who holds a disclosable interest in a contract or transaction into which the Company has entered or proposes to enter is not entitled to vote on any directors resolution to approve that contract or transaction, unless all the directors have a disclosable interest in that contract or transaction, in which case any or all of those directors may vote on such resolution.
16.3 Interested Director Counted in Quorum. A director who holds a disclosable interest in a contract or transaction into which the Company has entered or proposes to enter and who is present at the meeting of directors at which the contract or transaction is considered for approval may be counted in the quorum at the meeting whether or not the director votes on any or all of the resolutions considered at the meeting.
16.4 Disclosure of Conflict of Interest or Property. A director or senior officer who holds any office or possesses any property, right or interest that could result, directly or indirectly, in the creation of a duty or interest that materially conflicts with that individuals duty or interest as a director or senior officer, must disclose the nature and extent of the conflict as required by the Business Corporations Act.
16.5 Director Holding Other Office in the Company. A director may hold any office or place of profit with the Company, other than the office of auditor of the Company, in addition to their office of director for the period and on the terms (as to remuneration or otherwise) that the directors may determine.
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16.6 No Disqualification. No director or intended director is disqualified by that directors or intended directors office from contracting with the Company either with regard to the holding of any office or place of profit the director holds with the Company or as vendor, purchaser or otherwise, and no contract or transaction entered into by or on behalf of the Company in which a director is in any way interested is liable to be voided for that reason.
16.7 Professional Services by Director or Officer. Subject to the Business Corporations Act, a director or officer, or any person in which a director or officer has an interest, may act in a professional capacity for the Company, except as auditor of the Company, and the director or officer or such person is entitled to remuneration for professional services as if that director or officer were not a director or officer.
16.8 Director or Officer in Other Corporations. A director or officer may be or become a director, officer or employee of, or otherwise interested in, any person in which the Company may be interested as a shareholder or otherwise, and, subject to the Business Corporations Act, the director or officer is not accountable to the Company for any remuneration or other benefits received by that individual as director, officer or employee of, or from that individuals interest in, such other person.
ARTICLE 17
PROCEEDINGS OF DIRECTORS
17.1 Meetings of Directors. The directors may meet together for the conduct of business, adjourn and otherwise regulate their meetings as they think fit, and meetings of the directors held at regular intervals may be held at the place, at the time and on the notice, if any, as the directors may from time to time determine.
17.2 Voting at Meetings. Questions arising at any meeting of directors are to be decided by a majority of votes and, in the case of an equality of votes, the chair of the meeting does not have a second or casting vote.
17.3 Chair of Meetings. The following individual is entitled to preside as chair at a meeting of directors:
(a) |
the chair of the board, if any; |
(b) |
in the absence of the chair of the board, the president, if any, if the president is a director; or |
(c) |
any other director chosen by the directors if: |
(i) |
neither the chair of the board nor the president, if a director, is present at the meeting within 15 minutes after the time set for holding the meeting; |
(ii) |
neither the chair of the board nor the president, if a director, is willing to chair the meeting; or |
(iii) |
the chair of the board and the president, if a director, have advised the secretary, if any, or any other director, that they will not be present at the meeting. |
17.4 Meetings by Telephone or Other Communications Medium. A director may participate in a meeting of the directors or of any committee of the directors in person or by telephone if all directors participating in the meeting, whether in person or by telephone or other communications medium, are able to communicate with each other. A director may participate in a meeting of the directors or of any committee of the directors by a communications medium other than telephone if all directors participating in the meeting, whether in person or by telephone or other communications medium, are able to communicate with each other and if all directors who wish to participate in the meeting agree to such participation. A director who participates in a meeting in a manner contemplated by this Article 17.4 is deemed for all purposes of the Business Corporations Act and these Articles to be present at the meeting and to have agreed to participate in that manner.
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17.5 Calling of Meetings. A director may, and the corporate secretary or an assistant corporate secretary of the Company, if any, on the request of a director must, call a meeting of the directors at any time.
17.6 Notice of Meetings. Other than for meetings held at regular intervals as determined by the directors pursuant to Article 17.1, reasonable notice of each meeting of the directors, specifying the place, day and time of that meeting must be given to each of the directors by any method set out in Article 23.1 or orally or by telephone.
17.7 When Notice Not Required. It is not necessary to give notice of a meeting of the directors to a director if:
(a) |
the meeting is to be held immediately following a meeting of shareholders at which that director was elected or appointed, or is the meeting of the directors at which that director is appointed; or |
(b) |
the director has waived notice of the meeting. |
17.8 Meeting Valid Despite Failure to Give Notice. The accidental omission to give notice of any meeting of directors to, or the non-receipt of any notice by, any director does not invalidate any proceedings at that meeting.
17.9 Waiver of Notice of Meetings. Any director may send to the Company a document signed by that director waiving notice of any past, present or future meeting or meetings of the directors and may at any time withdraw that waiver with respect to meetings held after that withdrawal. After sending a waiver with respect to all future meetings and until that waiver is withdrawn, no notice of any meeting of the directors need be given to such director and all meetings of the directors so held are deemed not to be improperly called or constituted by reason of notice not having been given to such director.
Attendance of a director at a meeting of the directors is a waiver of notice of the meeting, unless that 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.
17.10 Quorum. The quorum necessary for the transaction of the business of the directors is a majority of the number of directors in office or such greater number as the directors may determine from time to time.
17.11 Validity of Acts Where Appointment Defective. Subject to the Business Corporations Act, an act of a director or officer is not invalid merely because of an irregularity in the election or appointment or a defect in the qualification of that director or officer.
17.12 Consent Resolutions in Writing. A resolution of the directors or of any committee of the directors consented to in writing by all of the directors entitled to vote on it, whether by signed document (which may include an electronic signature, as permitted by the Electronic Transactions Act (British Columbia)), fax, email or any other method of transmitting legibly recorded messages, is as valid and effective as if it had been passed at a meeting of the directors or of the committee of the directors duly called and held. Such resolution may be in two or more counterparts which together are deemed to constitute one resolution in writing. A resolution passed in that manner is effective on the date stated in the resolution or on the latest date stated on any counterpart. A resolution of the directors or of any committee of the directors passed in accordance with this Article 17.12 is deemed to be a proceeding at a meeting of directors or of the committee of the directors and to be as valid and effective as if it had been passed at a meeting of the directors or of the committee of the directors that satisfies all the requirements of the Business Corporations Act and all the requirements of these Articles relating to meetings of the directors or of a committee of the directors.
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ARTICLE 18
EXECUTIVE AND OTHER COMMITTEES
18.1 Appointment and Powers of Executive Committee. The directors may, by resolution, appoint an executive committee consisting of the director or directors that they consider appropriate, and this committee has, during the intervals between meetings of the board of directors, all of the directors powers, except:
(a) |
the power to fill vacancies in the board of directors; |
(b) |
the power to remove a director; |
(c) |
the power to change the membership of, or fill vacancies in, any committee of the directors; and |
(d) |
such other powers, if any, as may be set out in the resolution or any subsequent directors resolution. |
18.2 Appointment and Powers of Other Committees. The directors may, by resolution:
(a) |
appoint one or more committees (other than the executive committee) consisting of the director or directors that they consider appropriate; |
(b) |
delegate to a committee appointed under paragraph (a) any of the directors powers, except: |
(i) |
the power to fill vacancies in the board of directors; |
(ii) |
the power to remove a director; |
(iii) |
the power to change the membership of, or fill vacancies in, any committee of the directors; and |
(iv) |
the power to appoint or remove officers appointed by the directors; and |
(c) |
make any delegation referred to in paragraph (b) subject to the conditions set out in the resolution or any subsequent directors resolution. |
18.3 Obligations of Committees. Any committee appointed under Articles 18.1 or 18.2, in the exercise of the powers delegated to it, must:
(a) |
conform to any rules that may from time to time be imposed on it by the directors; and |
(b) |
report every act or thing done in exercise of those powers at such times as the directors may require. |
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18.4 Powers of Board. The directors may, at any time, with respect to a committee appointed under Articles 18.1 or 18.2:
(a) |
revoke or alter the authority given to the committee, or override a decision made by the committee, except as to acts done before such revocation, alteration or overriding; |
(b) |
terminate the appointment of, or change the membership of, the committee; and |
(c) |
fill vacancies in the committee. |
18.5 Committee Meetings. Subject to Article 18.3(a) and unless the directors otherwise provide in the resolution appointing the committee or in any subsequent resolution, with respect to a committee appointed under Articles 18.1 or 18.2:
(a) |
the committee may meet and adjourn as it thinks proper; |
(b) |
the committee may elect a chair of its meetings but, if no chair of a meeting is elected, or if at a meeting the chair of the meeting is not present within 15 minutes after the time set for holding the meeting, the directors present who are members of the committee may choose one of their number to chair the meeting; |
(c) |
a majority of the members of the committee constitutes a quorum of the committee; and |
(d) |
questions arising at any meeting of the committee are determined by a majority of votes of the members present, and in case of an equality of votes, the chair of the meeting does not have a second or casting vote. |
ARTICLE 19
OFFICERS
19.1 Directors May Appoint Officers. The directors may, from time to time, appoint such officers, if any, as the directors determine and the directors may, at any time, terminate any such appointment.
19.2 Functions, Duties and Powers of Officers. The directors may, for each officer:
(a) |
determine the functions and duties of the officer; |
(b) |
entrust to and confer on the officer any of the powers exercisable by the directors on such terms and conditions and with such restrictions as the directors think fit; and |
(c) |
revoke, withdraw, alter or vary all or any of the functions, duties and powers of the officer. |
19.3 Qualifications. No officer may be appointed unless that officer is qualified in accordance with the Business Corporations Act. One person may hold more than one position as an officer of the Company. Any person appointed as the chair of the board or as the managing director must be a director. Any other officer need not be a director.
19.4 Remuneration and Terms of Appointment. All appointments of officers are to be made on the terms and conditions and at the remuneration (whether by way of salary, fee, commission, participation in profits or otherwise) that the directors think fit and are subject to termination at the pleasure of the directors, and an officer may in addition to such remuneration be entitled to receive, after he or she ceases to hold such office or leaves the employment of the Company, a pension or gratuity.
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ARTICLE 20
INDEMNIFICATION
20.1 Definitions. In this Article 20:
(a) |
eligible party, in relation to a Company, means an individual who: |
(i) |
is or was a director or officer of the Company, |
(ii) |
is or was a director or officer of another corporation (A) at a time when the corporation is or was an affiliate of the Company, or (B) at the request of the Company, or |
(iii) |
at the request of the Company, is or was, or holds or held a position equivalent to that of, a director of officer of a partnership, trust, joint venture or other unincorporated entity, |
and includes, to the extent permitted by the Act, the heirs and personal or other legal representatives of that individual;
(b) |
eligible penalty means a judgment, penalty or fine awarded or imposed in, or an amount paid in settlement of, an eligible proceeding; |
(c) |
eligible proceeding means a proceeding in which an eligible party or any of the heirs and personal or other legal representatives of the eligible party, by reason of the eligible party being or having been a director or officer of, or holding or having held a position equivalent to that of a director or officer of, the Company or an associated corporation: |
(i) |
is or may be joined as a party; or |
(ii) |
is or may be liable for or in respect of a judgment, penalty or fine in, or expenses related to, the proceeding; |
(d) |
expenses has the meaning set out in the Business Corporations Act. |
20.2 Mandatory Indemnification of Directors and Former Directors. Subject to the Business Corporations Act, the Company must indemnify an eligible party against all eligible penalties to which such person is or may be liable, and the Company must, after the final disposition of an eligible proceeding, pay the expenses actually and reasonably incurred by such person in respect of that proceeding. Each director is deemed to have contracted with the Company on the terms of the indemnity contained in this Article 20.2.
20.3 Indemnification of Other Persons. Subject to any restrictions in the Business Corporations Act, the Company may indemnify any person.
20.4 Non-Compliance with Business Corporations Act. The failure of a director or officer of the Company to comply with the Business Corporations Act or these Articles does not invalidate any indemnity to which he or she is entitled under this Article 20.
20.5 Company May Purchase Insurance. The Company may purchase and maintain insurance for the benefit of any person (or that persons heirs or legal personal representatives) who:
(a) |
is or was a director, officer, employee or agent of the Company; |
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(b) |
is or was a director, officer, employee or agent of a corporation at a time when the corporation is or was an affiliate of the Company; |
(c) |
at the request of the Company, is or was a director, officer, employee or agent of a corporation or of a partnership, trust, joint venture or other unincorporated entity; |
(d) |
at the request of the Company, holds or held a position equivalent to that of a director or officer of a partnership, trust, joint venture or other unincorporated entity; |
against any liability incurred by that person as such director, officer, employee or agent or person who holds or held such equivalent position.
ARTICLE 21
DIVIDENDS
21.1 Payment of Dividends Subject to Special Rights. The provisions of this Article 21 are subject to the rights, if any, of shareholders holding shares with special rights as to dividends.
21.2 Declaration of Dividends. Subject to the Business Corporations Act and the rights of the holders of issued shares of the Company, the directors may from time to time declare and authorize payment of such dividends as they consider appropriate.
21.3 No Notice Required. The directors need not give notice to any shareholder of any declaration under Article 21.2.
21.4 Record Date. The directors may set a date as the record date for the purpose of determining shareholders entitled to receive payment of a dividend. The record date must not precede the date on which the dividend is to be paid by more than two months. If no record date is set, the record date is 5 p.m. on the date on which the directors pass the resolution declaring the dividend.
21.5 Manner of Paying Dividend. A resolution declaring a dividend may direct payment of the dividend wholly or partly in money or by the distribution of specific assets or of fully paid shares or of bonds, debentures or other securities of the Company or any other corporation, or in any one or more of those ways.
21.6 Settlement of Difficulties. If any difficulty arises in regard to a distribution under Article 21.5, the directors may settle the difficulty as they deem advisable, and, in particular, may:
(a) |
set the value for distribution of specific assets; |
(b) |
determine that cash payments in substitution for all or any part of the specific assets to which any shareholders are entitled may be made to any shareholders on the basis of the value so fixed in order to adjust the rights of all parties; and |
(c) |
vest any such specific assets in trustees for the persons entitled to the dividend. |
21.7 When Dividend Payable. Any dividend may be made payable on such date as is fixed by the directors.
21.8 Dividends to be Paid in Accordance with Number of Shares. All dividends on shares of any class or series of shares must be declared and paid according to the number of such shares held.
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21.9 Receipt by Joint Shareholders. If several persons are joint shareholders of any share, any one of them may give an effective receipt for any dividend, bonus or other money payable in respect of the share.
21.10 Dividend Bears No Interest. No dividend bears interest against the Company.
21.11 Fractional Dividends. If a dividend to which a shareholder is entitled includes a fraction of the smallest monetary unit of the currency of the dividend, that fraction may be disregarded in making payment of the dividend and that payment represents full payment of the dividend.
21.12 Payment of Dividends. Any dividend or other distribution payable in money in respect of shares may be paid by cheque, made payable to the order of the person to whom it is sent, and mailed to the address of the shareholder, or in the case of joint shareholders, to the address of the joint shareholder who is first named on the central securities register, or to the person and to the address the shareholder or joint shareholders may direct in writing. The mailing of such cheque will, to the extent of the sum represented by the cheque (plus the amount of the tax required by law to be deducted), discharge all liability for the dividend unless such cheque is not paid on presentation or the amount of tax so deducted is not paid to the appropriate taxing authority.
21.13 Capitalization of Surplus. Notwithstanding anything contained in these Articles, the directors may from time to time capitalize any surplus of the Company and may from time to time issue, as fully paid, shares or any bonds, debentures or other securities of the Company as a dividend representing the surplus or any part of the surplus.
21.14 Unclaimed Dividends. Any dividend unclaimed after a period of three years from the date on which the same has been declared to be payable shall be forfeited and shall revert to the Company. The Company shall not be liable to any person in respect of any dividend which is forfeited to the Company or delivered to any public official pursuant to any applicable abandoned property, escheat or similar law.
ARTICLE 22
DOCUMENTS, RECORDS AND REPORTS
22.1 Recording of Financial Affairs. The directors must cause adequate accounting records to be kept to record properly the financial affairs and condition of the Company and to comply with the Business Corporations Act.
22.2 Inspection of Accounting Records. Unless the directors determine otherwise, or unless otherwise determined by ordinary resolution, no shareholder of the Company is entitled to inspect or obtain a copy of any accounting records of the Company.
ARTICLE 23
NOTICES
23.1 Method of Giving Notice. Unless the Business Corporations Act or these Articles provide otherwise, a notice, statement, report or other record required or permitted by the Business Corporations Act or these Articles to be sent by or to a person may be sent by any one of the following methods:
(a) |
mail addressed to the person at the applicable address for that person as follows: |
(i) |
for a record mailed to a shareholder, the shareholders registered address; |
(ii) |
for a record mailed to a director or officer, the prescribed address for mailing shown for the director or officer in the records kept by the Company or the mailing address provided by the recipient for the sending of that record or records of that class; |
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(iii) |
in any other case, the mailing address of the intended recipient; |
(b) |
delivery at the applicable address for that person as follows, addressed to the person: |
(i) |
for a record delivered to a shareholder, the shareholders registered address; |
(ii) |
for a record delivered to a director or officer, the prescribed address for delivery shown for the director or officer in the records kept by the Company or the delivery address provided by the recipient for the sending of that record or records of that class; |
(iii) |
in any other case, the delivery address of the intended recipient; |
(c) |
sending the record by fax to the fax number provided by the intended recipient for the sending of that record or records of that class; |
(d) |
sending the record by email to the email address provided by the intended recipient for the sending of that record or records of that class; |
(e) |
physical delivery to the intended recipient; |
(f) |
creating and providing a record posted on or made available through a generally-accessible electronic source and providing written notice by any of the foregoing methods of the availability of such record; or |
(g) |
as otherwise permitted by any securities legislation (together with all regulations and rules made and promulgated thereunder and all administrative policy statements, blanket orders, and rulings, notices, and other administrative directions issued by securities commissions or similar authorities appointed thereunder) in any province or territory of Canada or in the federal jurisdiction of the United States or in any state of the United States that is applicable to the Company. |
23.2 Deemed Receipt. A notice, statement, report or other record that is:
(a) |
mailed to a person by ordinary mail to the applicable address for that person referred to in Article 23.1 is deemed to be received by the person to whom it was mailed on the day, Saturdays, Sundays and holidays excepted, following the date of mailing; |
(b) |
faxed to a person to the fax number provided by that person referred to in Article 23.1 is deemed to be received by the person to whom it was faxed on the day it was faxed; |
(c) |
e-mailed to a person to the e-mail address provided by that person referred to in Article 23.1 is deemed to be received by the person to whom it was e-mailed on the day it was e-mailed; and |
(d) |
delivered in accordance with Article 23.1(f), is deemed to be received by the person on the day such written notice is sent. |
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23.3 Certificate of Sending. A certificate signed by the corporate secretary, if any, or other officer of the Company or of any other corporation acting in that capacity on behalf of the Company stating that a notice, statement, report or other record was sent in accordance with Article 23.1 is conclusive evidence of that fact.
23.4 Notice to Joint Shareholders. A notice, statement, report or other record may be provided by the Company to the joint shareholders of a share by providing such record to the joint shareholder first named in the central securities register in respect of the share.
23.5 Notice to Legal Personal Representatives and Trustees. A notice, statement, report or other record may be provided by the Company to the persons entitled to a share in consequence of the death, bankruptcy or incapacity of a shareholder by:
(a) |
mailing the record, addressed to them: |
(i) |
by name, by the title of the legal personal representative of the deceased or incapacitated shareholder, by the title of trustee of the bankrupt shareholder or by any similar description; and |
(ii) |
at the address, if any, supplied to the Company for that purpose by the persons claiming to be so entitled; or |
(b) |
if an address referred to in paragraph (a)(ii) has not been supplied to the Company, by giving the notice in a manner in which it might have been given if the death, bankruptcy or incapacity had not occurred. |
23.6 Undelivered Notices. If, on two consecutive occasions, a notice, statement, report or other record is sent to a shareholder pursuant to Article 23.1 and on each of those occasions any such record is returned because the shareholder cannot be located, then, subject to the Business Corporations Act, the Company shall not be required to send any further records to the shareholder until the shareholder informs the Company in writing of that shareholders new address.
ARTICLE 24
SEAL AND EXECUTION OF DOCUMENTS
24.1 Who May Attest Seal. Except as provided in Articles 24.2 and 24.3, the Companys seal, if any, must not be impressed on any record except when that impression is attested by the signatures of:
(a) |
any two directors; |
(b) |
any officer, together with any director; |
(c) |
if the Company only has one director, that director; or |
(d) |
any one or more directors or officers or persons as may be determined by the directors. |
24.2 Sealing Copies. For the purpose of certifying under seal a certificate of incumbency of the directors or officers of the Company or a true copy of any resolution or other document, despite Article 24.1, the impression of the seal may be attested by the signature of any director or officer or the signature of any other person as may be determined by the directors.
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24.3 Mechanical Reproduction of Seal. The directors may authorize the seal to be impressed by third parties on share certificates or bonds, debentures or other securities of the Company as they may determine appropriate from time to time. To enable the seal to be impressed on any share certificates or bonds, debentures or other securities of the Company, whether in definitive or interim form, on which facsimiles of any of the signatures of the directors or officers of the Company are, in accordance with the Business Corporations Act or these Articles, printed or otherwise mechanically reproduced, there may be delivered to the person employed to engrave, lithograph or print such definitive or interim share certificates or bonds, debentures or other securities one or more unmounted dies reproducing the seal and such persons as are authorized to attest the Companys seal may in writing authorize such person to cause the seal to be impressed on such definitive or interim share certificates or bonds, debentures or other securities by the use of such dies. Share certificates or bonds, debentures or other securities to which the seal has been so impressed are for all purposes deemed to be under and to bear the seal impressed on them.
24.4 Execution of Documents Generally. The Directors may from time to time by resolution appoint any one or more persons, officers or Directors for the purpose of executing any instrument, document or agreement in the name of and on behalf of the Company for which the seal need not be affixed, and if no such person, officer or Director is appointed, then any one officer or Director of the Company may execute such instrument, document or agreement.
ARTICLE 25
PROHIBITIONS
25.1 Definitions. In this Article 25:
(a) |
designated security means: |
(i) |
a voting security of the Company; |
(ii) |
a security of the Company that is not a debt security and that carries a residual right to participate in the earnings of the Company or, on the liquidation or winding up of the Company, in its assets; or |
(iii) |
a security of the Company convertible, directly or indirectly, into a security described in paragraph (i) or (ii); |
(b) |
security has the meaning assigned in the Securities Act; |
(c) |
voting security means a security of the Company that: |
(i) |
is not a debt security, and |
(ii) |
carries a voting right either under all circumstances or under some circumstances that have occurred and are continuing. |
25.2 Application. Article 25.3 does not apply to the Company if and for so long as it is a public company or a pre-existing reporting company which has the Statutory Reporting Company Provisions as part of its Articles or to which the Statutory Reporting Company Provisions apply.
25.3 Consent Required for Transfer of Shares or Designated Securities. No share or designated security may be sold, transferred or otherwise disposed of without the consent of the directors and the directors are not required to give any reason for refusing to consent to any such sale, transfer or other disposition.
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ARTICLE 26
FORUM SELECTION
26.1 Forum for Adjudication of Certain Disputes. Unless the Company consents in writing to the selection of an alternative forum, the Supreme Court of British Columbia, Canada and the appellate Courts therefrom, shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company; (ii) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any director, officer, or other employee of the Company to the Company; (iii) any action or proceeding asserting a claim arising pursuant to any provision of the Business Corporations Act or these Articles (as either may be amended from time to time); or (iv) any action or proceeding asserting a claim otherwise related to the affairs of the Company. Unless the Company consents in writing to the selection of an alternative forum, and without limiting the generality of the foregoing sentence, the United States District Court for the District of Delaware shall be the sole and exclusive forum for resolving any complaint filed in the United States asserting a cause of action arising under the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended . If any action or proceeding, the subject matter of which is within the scope of the preceding sentence, is filed other than with the designated court (a Foreign Action) in the name of any securityholder, such securityholder shall be deemed to have consented to (x) the personal jurisdiction of the court in connection with any action or proceeding brought in in any such court to enforce the preceding sentence, and (y) having service of process made upon such securityholder in any such action or proceeding by service upon such securityholders counsel in the Foreign Action as agent for such securityholder. Any person or entity purchasing or otherwise acquiring any interest in common shares in the capital of the Company shall be deemed to have notice of and consented to the provisions of this Section 26.1.
ARTICLE 27
SPECIAL RIGHTS AND RESTRICTIONS ATTACHED TO COMMON SHARES
27.1 The Common Shares Without Par Value (the Common Shares) have attached to them the special rights and restrictions set out in this Article 27.
Dividends
27.2 Except as otherwise provided in these Articles, each holder of a Common Share is entitled, as such, to receive, on the date fixed for payment thereof, and the Company will pay thereon, such dividends as the directors may in their sole and absolute discretion declare from time to time out of the money or other property of the Company properly applicable to the payment of dividends.
27.3 No holder of a Common Share will be entitled, as such, to any dividend other than or in excess of the dividends, if any, declared pursuant to Article 27.2.
27.4 The directors may, in their sole and absolute discretion, declare and pay or set apart for payment dividends on the Common Shares independently of any dividend on, and without also declaring or paying or setting apart for payment any dividend (whether or not of a similar amount) on, any one or more other classes of shares in the Company and may, in their sole and absolute discretion, declare and pay or set apart for payment dividends on shares of any one or more classes of shares in the Company other than the Common Shares independently of any dividend on, and without also declaring or paying or setting apart for payment any dividend (whether or not of a similar amount) on, the Common Shares.
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Winding Up
27.5 In the event of the liquidation, dissolution or winding-up of the Company or other distribution of property or assets of the Company among its shareholders for the purpose of winding up its affairs, no amount will be paid and no property or asset of the Company will be distributed to the holders of the Common Shares, as such, until the holders of any other class or series of shares entitled to receive assets of the Company upon such a distribution in priority to the holders of the Common Shares, as such, have first received from the property and assets of the Company the amount to which they are entitled pursuant to these Articles, but thereafter, the holders of the Common Shares will be entitled to all remaining property and assets of the Company on a share for share basis.
Votes
27.6 Each holder of a Common Share, as such, is entitled to receive notice of and to attend and vote in person or by proxy at all meetings of the shareholders of the Company and is entitled to one vote for each such share held.
ARTICLE 28
SPECIAL RIGHTS AND RESTRICTIONS ATTACHED TO THE PREFERRED SHARES
Preferred Shares
28.1 The special rights or restrictions attached to the Preferred Shares Without Par Value (the Preferred Shares) shall be as follows:
Issuable in Series
28.2 The Preferred Shares may at any time and from time to time be issued in one or more series.
28.3 Subject to Article 9.3 and the Business Corporations Act, the board may from time to time, by directors resolution, if none of the Preferred Shares of any particular series are issued, alter these Articles and authorize the alteration of the Notice of Articles of the Company, as the case may be, to do one or more of the following:
(a) |
determine the maximum number of shares of any of those series of Preferred Shares that the Company is authorized to issue, determine that there is no such maximum number, or alter any determination made under this paragraph (i) or otherwise in relation to a maximum number of those shares; |
(b) |
create an identifying name by which the shares of any of those series of Preferred Shares may be identified, or alter any identifying name created for those shares; and |
(c) |
attach special rights or restrictions to the shares of any of those series of Preferred Shares or alter any special rights or restrictions attached to those shares, including, but without limiting or restricting the generality of the foregoing, special rights or restrictions with respect to: |
(i) |
the rate, amount, method of calculation and payment of any dividends, whether cumulative, partly cumulative or non-cumulative, and whether such rate, amount, method of calculation or payment is subject to change or adjustment in the future; |
(ii) |
any rights upon a dissolution, liquidation or winding-up of the Company or upon any other return of capital or distribution of the assets of the Company among its shareholders for the purpose of winding up its affairs; |
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(iii) |
any rights of redemption, retraction or purchase for cancellation and the prices and terms and conditions of any such rights; |
(iv) |
any rights of conversion, exchange or reclassification and the terms and conditions of any such rights; |
(v) |
any voting rights and restrictions; |
(vi) |
the terms and conditions of any share purchase plan or sinking fund; and |
(vii) |
any other special rights or restrictions, not inconsistent with these share provisions, attaching to such series of Preferred Shares. |
28.4 No special rights or restrictions attached to any series of Preferred Shares will confer upon the shares of that series a priority over the shares of any other series of Preferred Shares in respect of dividends or a return of capital in the event of the dissolution of the Company or on the occurrence of any other event that entitles the shareholders holding the shares of all series of the Preferred Shares to a return of capital. The Preferred Shares of each series will, with respect to the payment of dividends and the distribution of assets or return of capital in the event of dissolution or on the occurrence of any other event that entitles the shareholders holding the shares of all series of the Preferred Shares to a return of capital, rank on a parity with the shares of every other series.
Class Rights or Restrictions
28.5 Holders of Preferred Shares will be entitled to preference with respect to payment of dividends over the Common Shares and any other shares ranking junior to the Preferred Shares with respect to payment of dividends.
28.6 In the event of the liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or any other distribution of the assets of the Company among its shareholders for the purpose of winding up its affairs, the holders of the Preferred Shares will be entitled to preference over the Common Shares and any other shares ranking junior to the Preferred Shares with respect to the repayment of capital paid up on and the payment of unpaid dividends accrued on the Preferred Shares.
28.7 The Preferred Shares may also be given such other preferences over the Common Shares and any other shares ranking junior to the Preferred Shares as may be fixed by directors resolution as to the respective series authorized to be issued.
DATED _______________________, 2020.
SIGNATURE OF A DIRECTOR OF THE COMPANY |
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Exhibit 4.2
PROOF PROOF PROOF PROOF PROOF PROOF PROOF NUMBER SHARES CS SEE REVERSE FOR INCORPORATED UNDER THE LAWS OF BRITISH COLUMBIA, CANADA CERTAIN DEFINITIONS C o M M o n s h a r e s CUSIP C4950N 10 8 This CerTifies ThaT: PROOF is The owner of FULLY PAID AND NON-ASSESSABLE SHARES WITHOUT PAR VALUE OF AbCellerA biologiCs inC. transferable on the books of the Corporation in person or by duly authorized attorney upon surrender of this certificate duly endorsed or assigned. This certificate and the shares represented hereby are subject to the laws of British Columbia, Canada, and to the Notice of Articles and Articles of the Corporation, as now or hereafter amended. This certificate is not valid until countersigned by the Transfer Agent. WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. COUNTERSIGNED: DATED: PHILADELPHIA STOCK TRANSFER, INC. 2320 HAVERFORD RD., SUITE 230, ARDMORE, PA 19003 TRANSFER AGENT BY: AUTHORIZED SIGNATURE SECRETARY CHIEF EXECUTIVE OFFICER PROOF 29592 -017PROOF €€€€€€€€€ 04Dec2020 PROOF 08:37 €€€€ PROOF QTA € €€€€€ PROOF Page 25 PROOF PROOF
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - .Custodian TEN ENT - as tenants by the entireties (Cust) (Minor) JT TEN - as joint tenants with right of under Uniform Gifts to Minors survivorship and not as tenants Act in common (State) Additional abbreviations may also be used though not in the above list. For Value Received, hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE (PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) Shares of the stock represented by the within Certificate, and do hereby irrevocably constitute and appoint Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises. Dated NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE Signature(s) Guaranteed OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER. By The Signature(s) must be guaranteed by an eligible guarantor institution (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions with membership in an approved Signature Guarantee Medallion Program), pursuant to SEC Rule 17Ad-15. COLUMBIA PRINTING SERVICES, LLC - www.stockinformation.com
Exhibit 5.1
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Blake, Cassels & Graydon LLP Barristers & Solicitors Patent & Trade-mark Agents 595 Burrard Street, P.O. Box 49314 Suite 2600, Three Bentall Centre Vancouver BC V7X 1L3 Canada Tel: 604-631-3300 Fax: 604-631-3309 |
December 7, 2020
AbCellera Biologics Inc.
2215 Yukon St.
Vancouver, B.C. V5Y 0A1
Canada
RE: |
Initial Public Offering of AbCellera Biologics Inc. |
We have acted as Canadian counsel to AbCellera Biologics Inc. (the Company), a corporation incorporated under the laws of the province of British Columbia, in connection with the offer and sale by the Company of up to 26,450,000 common shares in the capital of the Company, including 3,450,000 common shares issuable upon exercise of an option to purchase additional common shares granted to the underwriters (the Shares), pursuant to a Registration Statement on Form S-1 (Registration No. 333-250838)(the Registration Statement) filed by the Company with the SEC.
The offer and sale of the Shares will be made pursuant to an underwriting agreement (the Underwriting Agreement), to be entered into by the Company, Credit Suisse Securities (USA) LLC, Stifel, Nicolaus & Company, Incorporated, Berenberg Capital Markets LLC, SVB Leerink LLC and BMO Capital Markets Corp.
In connection with giving this opinion, we have examined the Registration Statement (including exhibits thereto). We have also examined originals, certified or otherwise identified to our satisfaction, of such public and corporate records, certificates, instruments and other documents as we have considered necessary in order to express the opinion set out below. With respect to the accuracy of factual matters material to this opinion, we have relied upon certificates or comparable documents and representations of public officials and of officers and representatives of the Company.
In giving this opinion, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to original documents of all documents submitted to us as copies, certified or otherwise identified to our satisfaction. We have also considered such questions of law as we have deemed relevant and necessary as a basis for the opinion hereinafter expressed.
The opinion expressed herein is limited to matters governed by the laws of the Province of British Columbia and the laws of Canada applicable therein.
Based and relying upon and subject to the foregoing, we are of the opinion that the offer and sale of the Shares has been duly authorized by the Company and, when the Shares are issued and paid for in accordance with the terms of the Underwriting Agreement, the Shares will be validly issued, fully paid and non-assessable shares in the capital of the Company.
We hereby consent to the reference to our firm under the caption Legal Matters in the prospectus forming part of the Registration Statement and to the filing of this opinion letter as an exhibit to the Registration Statement.
This opinion is effective as at the date hereof and is based upon laws in effect and facts in existence as at the date hereof. We express no opinion as to the effect of future laws or judicial decisions on the subject matter hereof, nor do we undertake any duty to modify this opinion to reflect subsequent facts or developments concerning the Company or developments in the law occurring after the date hereof.
Yours truly,
/s/ Blake, Cassels & Graydon LLP
Exhibit 10.8
August 1, 2019
Private & Confidential
By Electronic Mail
Dr. Carl Hansen
Dear Carl:
Re: Employment Agreement
I am pleased to offer you a full-time position as Chief Executive Officer at AbCellera Biologics Inc. (the Company). This letter agreement contains the complete terms and conditions of your employment with the Company (the Agreement).
The terms of this agreement will take effect on September 1, 2019 (the Effective Date), and will continue until terminated in accordance with the provisions of this Agreement. The Company will continue to recognize your original start date (the Start Date) with the Company in connection with determining any rights and benefits related to length of service. Please review the terms of this Agreement carefully. If you wish to accept these terms of employment, please sign and return a copy of this agreement to Veronique Lecault at .
In consideration for the compensation provided under this Agreement and other good and valuable consideration, you agree as follows:
1. |
Employment |
The terms of your employment will be as follows:
(a) |
Position and Responsibilities: You will be employed by the Company in the position of Chief Executive Officer, reporting to the Board. You will perform or fulfill all duties and responsibilities of your position, subject to applicable laws, and the duties and responsibilities that the Company may reasonably assign to you from time to time. You will at all times conform to the reasonable and lawful instructions and directions of the Board. You will adhere to all applicable policies of the Company as established and amended from time to time. |
(b) |
Duties: During your employment you will devote the whole of your time, attention and abilities to your duties, which you agree to carry out faithfully, honestly, diligently and to the best of your ability. You agree to give the Company the full benefit of your knowledge, expertise, skill and ingenuity, and exercise the degree of care, diligence and skill that a prudent professional would exercise in comparable circumstances. You may not engage in other work or business activities without the Companys prior written consent. The Company hereby consents to the work and business activities set out in Schedule A. |
(c) |
Base Compensation: You will earn a base salary in the amount of CAD $300,000 per annum, less statutory and other required deductions for all work and services you perform for the Company, paid to you bi-monthly in 24 equal payments, in arrears (the Base Salary). Your base salary compensation will be reviewed periodically by the Company compensation committee elected by the Board (the Compensation Committee), which shall determine and recommend any adjustments to your annual base salary compensation. |
(d) |
Vacation Entitlement: You will continue to be eligible to earn up to five (5) weeks paid vacation per annum, pro-rated for any partial year of employment. Your vacation must be taken at a time or times acceptable to the Company and in accordance with the Companys vacation policy in effect from time to time. It is your responsibility to schedule and take your vacation at a time or times acceptable to the Company and in accordance with the Companys vacation policy in effect from time to time. |
(e) |
Benefits: You will be eligible to participate in applicable employee benefits plans such as the Company offers its Canadian-based employees from time to time (the Employee Benefits) The Company reserves the right to amend, eliminate, substitute or otherwise change the Employee Benefits at its sole discretion, at any time and without notice, including but not limited to changes to cost sharing, premium amounts, terms of benefits and deductibles. Details of the Employee Benefits will be provided to you once in place and, thereafter, when changes are made to the Employee Benefits. |
(f) |
Incentive Program: You will continue to be eligible to participate in the Companys Annual Employee Incentive Program. The incentive target for your position is 30% of Base Salary based on the Compensation Committees assessment of your performance and achievement of annual goals that have been approved by the Board. |
(g) |
Stock Options: You may be eligible to earn stock options pursuant to the Companys Incentive Stock Option Plan as amended from time to time (the Plan) subject to the discretion of the Board and the terms of grant (the Option). The Option is granted under the terms of the Plan. Your Stock Option compensation will be reviewed by the Compensation Committee annually. The Compensation Committee shall evaluate your performance and, based on such evaluation, may determine and recommend the granting of Stock Options. |
(h) |
Signing Bonus: You will receive a one-time signing bonus of one pair of Air Jordan basketball shoes which shall be used on a regular basis to maintain your physical vigor and for one-on-one battles with the CFO. You will also receive a one-time signing bonus of CAD $5,392.02. |
(i) |
Business Expenses: The Company will reimburse you for all authorized travelling and out-of-pocket expenses actually, exclusively and necessarily incurred by you in connection with your duties under this Agreement, provided that you first furnish statements with accompanying receipts or vouchers for all such expenses to the Company and otherwise comply with the Companys expense policies as in effect from time to time. |
(j) |
Travel: You will be expected to travel frequently, as business needs require, in the course of performing your duties. |
(k) |
Offer of Comparable Employment by Affiliate: You agree that if an Affiliated Company offers you comparable employment on terms substantially similar to the terms of this Agreement, you will accept such offer and take up employment with the Affiliate of the Company. You will receive equal credit for your length of service with the Company and all probation and benefit-qualifying periods will be waived where in the Affiliate Companys power to do so. |
2. |
Obligations of Employment |
In addition to your employment obligations at common law, you covenant and agree as follows:
(a) |
Loyalty to the Company: Throughout your employment you will well and faithfully serve the Company and use your best efforts to promote the Business of the Company. You will act honestly and in good faith, and in the best interests of the Company. |
(b) |
Business of the Company: You will not, during your employment with the Company, engage in any business, enterprise or activity that is contrary to or detracts from the due performance of the Business of the Company. You will not engage in any other employment without the written consent of the Company. |
(c) |
No Personal Benefit: You will not receive or accept for your own benefit or for any other Persons benefit, either directly or indirectly, any commission, rebate, discount, gratuity or profit from any Person having or proposing to have one or more business transactions with the Company, without the prior approval of the Company. You will comply with the Companys Code of Ethics and Conduct policies as in effect from time to time. |
(d) |
Business Opportunities: During your employment you will communicate and channel to the Company all knowledge, business and customer contacts and any other information that could concern or be in any way beneficial to the Business of the Company. Any such information communicated to the Company as aforesaid will be and remain the property of the Company notwithstanding any subsequent termination of your employment. |
(e) |
Return of Company Property: Upon termination of your employment, or at any time upon request, you will promptly return to the Company all Company property including all written information, tapes, discs or memory devices and copies thereof, and any other material on any medium in your possession or control pertaining to the Business of the Company, without retaining any copies or records of any Confidential Information whatsoever. You will also return any keys, pass cards, identification cards, equipment or other property belonging to the Company or the Companys customers. |
(f) |
Pre-existing Obligations: You are hereby requested and directed by the Company to comply with any existing common law, contractual or statutory obligations to your former employer and to any other Person. The Company is not employing you to obtain the confidential information or business opportunities of your former employer or any other Person. |
(g) |
Policies and Procedures: You are required to comply with the Companys policies and procedures as established and amended from time to time; however such policies and procedures do not form contractual terms and may be amended without notice. You are required to comply with all lawful directions of the Company, and follow all workplace policies and procedures and with the Companys rules, regulations, policies, practices, and procedures, as amended from time to time. The Companys policy and procedures manuals are available through Human Resources and on the Companys network. It is your responsibility to familiarize yourself with the Companys policies and procedures. |
(h) |
Use of Company Resources: The Companys equipment, tools and communication devices are for business purposes only. The Company may, at any time and without further notice or consent, access, monitor and review you usage of Company information and resources, including without limitation, computers, computer software, electronic mail (including web-based email or electronic communications applications or services), instant messaging, on-line services (including the Internet), voice mail, facsimile machines, telephones and photocopiers and any of the contents of any of the foregoing. Accordingly, you should have no expectation of privacy in connection with the use of Company resources, and your use of any of the foregoing Company resources will be regarded as your waiver to any right to privacy in such use and your express consent to your use of resources being monitored, accessed by and reviewed by the Company. |
(i) |
Legal Obligations Concerning Privacy: You agree that you will not collect, use or disclose the personal information of any employees, contractors or customers of the Company other than as authorized in the course of your duties. You agree that you will adhere to and comply with all Company policies and laws governing the protection of personal information. |
(j) |
No Use of Unauthorized Software: You agree that you will not download any unauthorized software onto any Company device, nor knowingly make use of any unauthorized software in the performance of your duties. |
3. |
Confidential Information |
(a) |
Non-Disclosure of Confidential Information: At all times during your employment and subsequent to the termination of your employment with the Company, you will keep the Confidential Information in strictest confidence and trust. You will take all necessary precautions against unauthorized disclosure of the Confidential Information, and you will not directly or indirectly disclose, allow access to, transmit or transfer the Confidential Information to a third party, nor will you copy or reproduce the Confidential Information except as may be reasonably required for you to perform your duties for the Company. |
(b) |
You represent and warrant that, in performing your duties under this Agreement, you will not disclose or use the confidential information of any other person or business in violation of the Companys contractual or legal obligations to that other person or business. |
(c) |
You agree to indemnify the Company for any costs, fees, expenses, damages or penalties imposed upon the Company with respect to your unauthorized disclosure or misuse of such confidential information. |
(d) |
Restricted Use of Confidential Information: |
(i) |
At all times during and subsequent to the termination of your employment with the Company, you will not use the Confidential Information in any manner except as reasonably required for you to perform your duties for the Company. |
(ii) |
Without limiting your obligations under subsection 3(a), you agree that at all times during and subsequent to the termination of your employment with the Company, you will not use or take advantage of the Confidential Information for creating, maintaining or marketing, or aiding in the creation, maintenance, marketing or selling, of any Products which are competitive with the Products of the Company. |
(iii) |
Upon the request of the Company, and in any event upon the termination of your employment with the Company, you will immediately return to the Company all materials, including all copies in whatever form, containing the Confidential Information which are in your possession or under your control. |
(e) |
Ownership of Confidential Information and Developments: |
(i) |
You acknowledge and agree that you will not acquire any right, title or interest in or to the Confidential Information or the Developments. |
(ii) |
You agree to make full disclosure to the Company of each Development promptly after its creation. You hereby irrevocably assign and transfer to the Company, and agree that the Company will be the exclusive owner of, all of your right, title and interest in and to each Development throughout the world, including all trade secrets, patent rights, copyrights trademarks, industrial designs and all other intellectual property rights therein, whether realized within or beyond the scope of your employment, and regardless of the true purpose of the employment relationship, and you irrevocably waive all moral rights you may have in these Developments. You further agree to cooperate fully at all times during and subsequent to your employment with respect to signing further documents and doing such acts and other things reasonably requested by the Company to confirm such transfer of ownership of rights, including intellectual property rights, effective at or after the time the Development is created and to obtain patents or copyrights or the like covering the Developments. You agree that the obligations in this section will continue beyond the termination of your employment with the Company with respect to Developments created during your employment with the Company. |
(iii) |
You agree that the Company, its successors, its assignees and their licensees are not required to designate you as the author of any Developments. You hereby waive in whole all moral rights which you may have in the Developments in favour of the Company, including the right to disclose the Developments to the public, retract the developments from the public, the right to the integrity of the Developments, the right to be associated with the Developments, the right to restrain or claim damages for any distortion, mutilation or other modification of the Developments, and the right to restrain use or reproduction of the Developments in any context and in connection with any product, service, cause or institution. In the event of having any other right in and to the Developments that cannot be assigned to the Company, you hereby unconditionally and irrevocably waive the enforcement of all such rights, and all claims and causes of action of any kind with respect to any of the foregoing (including moral rights) against the Company, its successors, distributors, licensees, sublicensees and customers, whether now known or hereafter to become known, and you agree, at the request and expense of the Company and its respective successors and assigns, to consent to and join in any action to enforce such rights and to procure a waiver of such rights from the holders of such rights; |
(iv) |
You agree, in the event of having any rights in and to the Developments that cannot be assigned to the Company and cannot be waived, you hereby grant to the Company and its respective successors and assigns, an irrevocable, unconditional, perpetual, exclusive, worldwide, transferable, fully-paid and royalty-free license, with rights to sublicense throughout multiple levels of sublicensees, to use in any way whatsoever the Developments and the intellectual property rights embodied therein. |
(v) |
In performing your duties in the course of your employment with the Company, you agree to avoid designing or developing any Development, in part or in whole, that intentionally infringes any intellectual property rights of any third party or that incorporates the intellectual property of any third party. If you become aware of any such possible infringement in the course of your employment, you agree to immediately notify the Company in writing of all particulars of the same. Without limiting the forgoing, you agree that in working on any Development, you will not take any action that creates any obligation on behalf of the Company to any third party, and you will not incorporate any third party or publically available software, in whole or in part, into any Development, and you will not use any such software, in whole or in part, in a manner that may subject any Development to any license obligations of any third party. |
4. |
Restrictive Covenants |
(a) |
Non-Competition: You agree that while you are employed by the Company, and for a period of one (1) year following the termination of your employment with the Company, you will not become engaged, directly or indirectly, as an employee, consultant, partner, principal, agent, officer, director, proprietor, shareholder (other than a holding of shares listed on a stock exchange that does not exceed 2% of the outstanding shares so listed) or advisor, in any Competitive Business that is located or operates within Canada or the United States. |
(b) |
Non-Solicitation of Clients: You agree that while you are employed by the Company, and for one (1) year following the termination of your employment with the Company, you will not, directly or indirectly, contact or solicit any Clients of the Company for the purpose of selling or supplying to these Clients of the Company any products or services which are competitive with the products or services sold or supplied by the Company at the time of your termination. The term Client of the Company in the preceding sentence means any Person that: |
(i) |
was a client of the Company at the time of the termination of your employment with the Company; or |
(ii) |
the Company actively solicited within the twelve months prior to the termination of your employment. |
(c) |
Non-Solicitation of Employees: You agree that while you are employed by the Company, and for one (1) year following the termination of your employment with the Company, without the prior written consent of the Company, you will not directly or indirectly hire any employees of or consultants or contractors to the Company, nor will you solicit or induce or attempt to induce any persons who are employees of or consultants to the Company to terminate their employment or consulting agreement with the Company. |
5. |
Reasonableness of the Restrictive Covenants |
(a) |
You confirm that the obligations in Section 4 are fair and reasonable, given that, among other reasons: |
(i) |
the nature of the Business is such that you could relatively easily and effectively compete with the Business, and you therefore agree that the geographic scope of the obligation in Section 4 is reasonable; |
(ii) |
the Company operates in a relatively small but highly competitive market, in which there is intense competition from competing businesses; and (iii) you will have access to Confidential Information concerning the Business, including information concerning the Products and Developments and prospective Products which the Company is contemplating developing, producing, marketing, licensing or selling; |
and
(b) |
You agree that the obligations in Section 4, together with your other obligations under this Agreement, are reasonably necessary for the protection of the Companys proprietary interests, and you acknowledge and agree that your obligations contained in this Agreement will not preclude you from becoming gainfully employed in a similar capacity, following a termination of your employment with the Company, given your training, general knowledge and experience. |
6. |
Termination |
(a) |
Resignation: If for any reason you should wish to leave the Company, you will provide the Company with three (3) months prior written notice of your intention (the Resignation Period). The Parties hereby agree that in order to protect the Companys interests, the Company may, in its sole and unfettered discretion, waive the Resignation Period and end your employment immediately by delivering to you a written notice followed by payment of your Base Salary due to you during the remainder of the Resignation Period. |
(b) |
Termination for Cause: The Company may terminate your employment at any time for Cause, effective upon delivery by the Company to you of a written notice of termination of your employment for Cause. You will not be entitled to receive any further pay or compensation (except for pay, if any, accrued and owing under this Agreement up to the date of termination of your employment), severance pay, notice, payment in lieu of notice, benefits or damages of any kind, and for clarity, without limiting the foregoing, you will not be entitled to any bonus or pro rata bonus payment that has not already been awarded by the Company. |
(c) |
Termination Without Cause: The Company may terminate your employment without cause at any time upon providing you with severance equal to base salary for a period of 6 months plus an additional month for every year of service rendered to the Company from the date of incorporation of the Company, up to a maximum of 18 months. |
(d) |
Termination following Change of Control: Notwithstanding any other provision in this Agreement, if within twelve (12) months following a Change of Control of the Company (as defined below), the Employees employment is terminated by the Company without cause, the Employee shall receive severance of twenty-four (24) months of base salary and benefits continuation as at that date, and full vesting acceleration of all unvested stock options or other equity grants made to the Employee as at that date. For all purposes of this Agreement, Change of Control means: |
(i) |
the acquisition, directly or indirectly, by any person or group of persons acting jointly or in concert, as such terms are defined in the Securities Act, British Columbia, of common shares of the Company which, when added to all other common shares of the Company at the time held directly or indirectly by such person or persons acting jointly or in concert constitutes for the first time in the aggregate 51% or more of the outstanding common shares of the Company; or |
(ii) |
the removal, by extraordinary resolution of the shareholders of the Company, of more than 51% of the then incumbent Board of the Company, or the election of a majority of Board members to the Companys board who were not nominees of the Companys incumbent board at the time immediately preceding such election; or |
(iii) |
consummation of a sale of all or substantially all of the assets of the Company; or |
(iv) |
the consummation of a reorganization, plan of arrangement, merger, or other transaction which has substantially the same effect as to above. |
(e) |
Garden Leave: Once notice of resignation or termination has been given by you or the Company, the Company may excuse you from the performance of your duties and/or exclude you from any premises of the Company or any Affiliated Company. Base Salary and other contractual benefits shall continue to be paid or provided to you until the last day of the notice period, subject to the terms of the governing agreements or plans. During any period where you are excused from your duties and/or excluded from the Companys premises, you shall not, without the prior written consent of the Company, contact (either directly or indirectly) any clients, customers, suppliers or employees of the Company or any Affiliated Company. At any time, the Company may require you to return to the Company all property in your possession or under your control belonging to the Company or any Affiliated Company. |
(f) |
Repurchase of Founder Shares upon Resignation or Termination for Cause: For a period of 23 months after the Effective Date, if you cease to be employed by the Company due to resignation or termination for Cause, then, for a period of 12 months following the resignation or termination for Cause, the Company will have the right to repurchase: |
(i) |
50% of the Founder Shares at a price of 50% of the Series A Preferred Price if the resignation or termination occurs within the first 11 months; |
(ii) |
25% of the Founder Shares at a price of 50% of the Series A Preferred Price if the resignation or termination occurs between 12 months and 23 months after the Effective Date; and |
Notwithstanding the above, the Company will not have the right to repurchase your Founder Shares in the event that you cease to be employed because of your death, or in the case of termination or resignation for reasons of physical or mental disability.
(g) |
No Implied Entitlement: Other than as expressly provided herein, you will not be entitled to receive any further pay or compensation, severance pay, notice, payment in lieu of notice, incentives, bonuses, benefits or damages of any kind. |
(h) |
Continued Effect: Notwithstanding any changes in the terms and conditions of your employment which may occur in the future, including any changes in position, duties or compensation, the termination provisions in this Agreement will continue to be in effect for the duration of your employment with the Company unless otherwise amended in writing and signed by the Company. |
(i) |
Authorization to Deduct Debts: If, on the date you leave employment, you owe the Company any money, you hereby authorize the Company to deduct any such debt from your final salary payment or any other payment due to you. Any remaining debt will be immediately payable to the Company and you agree to satisfy such debt within 14 days of any demand for repayment. |
7. |
Severability |
If any part, article, section, clause, paragraph or subparagraph of this Agreement is held to be indefinite, invalid, illegal or otherwise voidable or unenforceable for any reason, the entire Agreement will not fail on the account thereof and the validity, legality and enforceability of the remaining provisions will in no way be affected or impaired thereby. Further, if any provision of this Agreement is held by a court of competent jurisdiction to be excessively broad as to duration, activity, geography, or subject, said court will deem and interpret such provision to be valid and enforceable to the maximum duration, activity, geographic extent, and subject permissible under applicable law.
8. |
Entire Agreement |
This Agreement constitutes the entire agreement between you and the Company with respect to the subject matter herein and cancels and supersedes all previous invitations, proposals, letters, correspondence, negotiations, promises, agreements, covenants, conditions, representations and warranties with respect to the subject matter of this Agreement. There is no representation, warranty, collateral term or condition affecting this Agreement for which any Party can be held responsible in any way, other than as expressed in writing in this Agreement. No change or modification of this Agreement will be valid unless it is in writing and signed by both Parties.
9. |
Non-waiver |
No failure or delay by you or the Company in exercising any power or right under this Agreement will operate as a waiver of such power or right. Any consent or waiver by any Party to this Agreement to any breach or default under this Agreement will be effective only in the specific instance and for the specific purpose for which it was given.
10. |
Survival of Terms |
The provisions of sections 2(e), 3, 4, 6(h), 7, 8, 9, 10, 11, 12, 13, 14, 15 and 16 of this Agreement will survive the termination of your employment, as well as any other provisions herein that are necessary for the post termination protection of the Company or its Confidential Information or intellectual property.
11. |
Further Assistance |
The Parties will execute and deliver any documents and perform any acts necessary to carry out the intent of this Agreement.
12. |
Equitable Remedies |
You hereby acknowledge and agree that a breach of your obligations under this Agreement would result in damages to the Company that could not be adequately compensated for by monetary award. Accordingly, in the event of any such breach by you, in addition to all other remedies available to the Company at law or in equity, the Company will be entitled as a matter of right to apply to a Court of competent jurisdiction for such relief by way of restraining order, injunction, decree or otherwise, as may be appropriate to ensure compliance with the provisions of this Agreement.
13. |
Dispute Resolution |
In the event of a dispute arising out of or in connection with this Agreement, or in respect of any legal relationship associated with it or from it, which does not involve the Company seeking a court injunction or other injunctive or equitable relief to protect its business, confidential information or intellectual property, that dispute will be resolved confidentially as follows:
(a) |
Amicable Negotiation The Parties agree that, both during and after the performance of their responsibilities under this Agreement, each of them will make bona fide efforts to resolve any disputes arising between them by amicable negotiations; |
(b) |
Mediation If the Parties are unable to negotiate resolution of a dispute, either Party may refer the dispute to mediation by providing written notice to the other Party. If the Parties cannot agree on a mediator within thirty (30) days of receipt of the notice to mediate, then either Party may make application to the British Columbia Arbitration and Mediation Society to have one appointed. The mediation will be held in Vancouver, BC, in accordance with the British Columbia International Commercial Arbitration Centres (the BCICAC) Commercial Mediation Rules, and each Party will bear its own costs, including one-half share of the mediators fees. |
(c) |
Arbitration If, after mediation, the Parties have been unable to resolve a dispute and the mediator has been inactive for more than 90 days, or such other period agreed to in writing by the Parties, either Party may refer the dispute for final and binding arbitration by providing written notice to the other Party. If the Parties cannot agree on an arbitrator within thirty (30) days of receipt of the notice to arbitrate, then either Party may make application to the British Columbia Arbitration and Mediation Society to appoint one. The arbitration will be held in Vancouver, BC, in accordance with the BCICACs Shorter Rules for Domestic Commercial Arbitration, and each Party will bear its own costs, including one-half share of the arbitrators fees. |
14. |
Definitions |
In this Agreement:
(a) |
Affiliated Company means an affiliate as defined in the Business Corporations Act (BC) or any successor legislation, as amended from time to time. |
(b) |
Board means the board of directors of the Company. |
(c) |
Business means the business of discovering, researching, developing, producing, licensing selling and marketing new antibody molecules for therapeutics, diagnostics and reagents, and such other products and services the Company offers during your employment. |
(d) |
Cause includes i) material and uncured breach of this Agreement that causes damage to the Company, ii) serious infractions such as theft, fraud, dishonesty, assault or harassment of co-workers, conflict of interest, or wilful misconduct, and iii) proven incompetence. |
(e) |
Competitive Business means any business operation, whether a partnership, proprietorship, joint venture, company or otherwise, that develops, produces, licences or markets any products or services that are competitive with the Companys products and services. |
(f) |
Company means AbCellera Biologics Inc., a company with an office at 2215 Yukon Street, Vancouver, British Columbia, V5Y 0A1, and where used in the context of protection of Confidential Information, intellectual property or the Business, Company includes any Affiliated Company. |
(g) |
Confidential Information includes any of the following: |
(i) |
information concerning all Products and Developments (as defined below); |
(ii) |
information regarding the Companys business, operations, financing, strategies, methods and practices, including marketing strategies, product mix, product pricing, sales, margins, pay and compensation for staff, and any other information regarding the financial affairs of the Company; |
(iii) |
the identity of the Companys clients, business partners, licensees, agents and suppliers, and the nature of the Companys relationships with such clients, partners, licensees, agents and suppliers; |
(iv) |
information belonging to the Companys clients, business partners, licensees, agents and suppliers, which is disclosed to you or the Company; and |
(v) |
any other trade secrets or confidential or proprietary information in the possession or control of the Company, |
but does not include information which is or becomes generally available to the public through no fault of your own or which you can establish, through written records, was in your possession prior to its disclosure to you as a result of your work for the Company.
(h) |
Developments includes all: |
(i) |
Products, analyses, compilations, studies, concepts, software, documentation, research, data, designs, reports, flowcharts, training materials, trade-marks, and specifications, and any related works, including any enhancements, modifications or additions to the Products owned, licensed, sold, marketed or used by the Company; |
(ii) |
copyrightable works of authorship including, without limitation, any technical descriptions for Products, user guides, instructions, illustrations and advertising materials; and |
(iii) |
inventions, devices, concepts, ideas, formulae, know-how, processes, techniques, systems, methods and improvements, |
in each case related to the Business, whether patentable or not, developed, created, generated or reduced to practice by you, alone or jointly with others, during your employment with the Company or which result from tasks assigned to you by the Company or which result from the use of the premises or property (including equipment, supplies or Confidential Information) owned, leased or licensed by the Company.
(i) |
Founder Shares means 6,461,383.19 common shares owned outright by Carl Hansen. |
(j) |
Parties means, collectively, you and the Company, and for clarity, a Party means any one of the Parties. |
(k) |
Person means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or company with or without share capital, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, government or governmental agency or entity however designated or constituted. |
(l) |
Products means (i) any products developed by, for or on behalf of the Company for use in its Business or operations, (ii) any intellectual property or assets owned, licensed, sold, marketed or used by the Company in connection with the Business, including enhancements, modifications, additions or other improvements to such intellectual property; and (iii) any other products and services that the Company discovers or develops during your employment. |
(m) |
Series A Preferred Price means in respect of the Founder Shares, USD $3.61 per share. |
(n) |
Start Date means January 1st, 2017. |
15. |
Conflict |
In the event of any conflict between the terms and conditions of this agreement and any other agreement, the terms of this Agreement will prevail.
16. |
Governing Laws |
This Agreement will be governed by and construed in accordance with the laws of British Columbia and the laws of Canada applicable in British Columbia.
17. |
Acknowledgement of Terms and Obligations |
You agree that you have read and understand all of the terms, rights and obligations under this Agreement, that you have had the opportunity to discuss and negotiate these terms, rights and obligations with the Company, and that you have executed this Agreement voluntarily and of your own free will.
18. |
Counterparts |
This Agreement may be executed in two or more counterparts, each of which will be deemed to be an original and all of which will constitute one Agreement.
AbCellera Biologics Inc. | ||
By: | /s/ Véronique Lecault | |
Véronique Lecault
|
I have read, understand, acknowledge and accept the terms and conditions of my employment with the Company as set out above:
/s/ Carl Hansen |
Dr. Carl Hansen |
SCHEDULE A
AUTHORIZED WORK AND BUSINESS ACTIVITIES OUTSIDE THE COMPANY
AbCellera Biologics Inc. (the Company) hereby agrees that you may engage in the following work and business activities:
1. |
Continued participation on the Scientific Advisory Board of Precision Nanosystems Inc. |
2. |
Fulfill your commitment as an Adjunct Professor at the University of British Columbia. |
March 6, 2020
Private & Confidential
By Electronic Mail
Carl Hansen
Dear Carl:
Re: Amendment of Employment Agreement to Increase Base Compensation
In recognition of your performance and excellent contributions to AbCellera, the compensation committee has recommended an increase in your base compensation for your ongoing employment, from CAD $300,000 per annum to CAD $400,000 per annum.
Effective February 1, 2020, your employment agreement will be amended as follows:
Article 1c will be replaced with
(c) |
Base Compensation: You will earn a base salary in the amount of CAD $400,000 per annum, less statutory and other required deductions, for all work and services you perform for the Company, paid to you bi-monthly in 24 equal payments, in arrears (the Base Salary). Your base salary will be reviewed periodically by the Company compensation committee elected by the Board (the Compensation Committee), which shall determine and recommend any adjustments to your annual base salary compensation. |
To accept this amendment please sign and return this letter to . I want to sincerely express my appreciation for your work and contributions to AbCellera.
/s/ John Hamer |
/s/ Carl Hansen |
|||
John Hamer Director |
Carl Hansen |
Exhibit 10.9
April 12, 2019
Private & Confidential
By Electronic Mail
Andrew Booth
Dear Andrew:
Re: |
Employment Agreement |
I am pleased to offer you a full time position as Chief Financial Officer at AbCellera Biologics Inc. (the Company). This letter agreement contains the complete terms and conditions of your employment with the Company (the Agreement).
The terms of this agreement will take effect on August 22nd, 2019 (the Effective Date), and will continue until terminated in accordance with the provisions of this Agreement. Please review the terms of this Agreement carefully. If you wish to accept these terms of employment, please sign and return a copy of this agreement to me at before May 12th, 2019.
In consideration for the compensation provided under this Agreement and other good and valuable consideration, you agree as follows:
1. |
Employment |
The terms of your employment will be as follows:
(a) |
Position and Responsibilities: You will be employed by the Company in the position of Chief Financial Officer, reporting to the CEO and the Board. In this position you will have primary responsibility for managing the Companys finances, including financial planning, management of financial risks, record-keeping, and financial reporting. You will work closely with the CEO and Chief Operating Officer on a broad range of strategic and operational matters relating to budget management, business strategy development, cost-benefit analysis, forecasting needs, and securing of new financing. You will supervise the finance team, which will include the Companys Controller, and you will be the financial spokesperson for the Company. You will perform or fulfill all duties and responsibilities of your position, subject to applicable laws, and the duties and responsibilities that the Company may reasonably assign to you from time to time. You will at all times conform to the reasonable and lawful instructions and directions of the Board. You will adhere to all applicable policies of the Company as established and amended from time to time. |
(b) |
Duties: During your employment you will devote the whole of your time, attention and abilities to your duties, which you agree to carry out faithfully, honestly, diligently and to the best of your ability. You agree to give the Company the full benefit of your knowledge, expertise, skill and ingenuity, and exercise the degree of care, diligence and skill that a prudent professional would exercise in comparable circumstances. You may not engage in other work or business activities without the Companys prior written consent. The Company hereby consents to the work and business activities set out in Schedule A. |
(c) |
Base Compensation: You will earn a base salary in the amount of CAD $350,000 per annum, less statutory and other required deductions for all work and services you perform for the Company, paid to you bi-monthly in 24 equal payments, in arrears (the Base Salary). Your base salary compensation will be reviewed periodically by the Company compensation committee elected by the Board (the Compensation Committee), which shall determine and recommend any adjustments to your annual base salary compensation. |
(d) |
Vacation Entitlement: You will be eligible to earn up to five (5) weeks paid vacation per annum, pro-rated for any partial year of employment. Your vacation must be taken with prior notice and at a time or times acceptable to the CEO. |
(e) |
Benefits: You will be eligible to participate in applicable employee benefits plans such as the Company offers its Canadian-based employees from time to time (the Employee Benefits). The Employee Benefits will be fair to market and will include extended health benefits, RRSP benefits, short- and long-term disability benefits, and company life insurance benefits. If any of these benefits are not yet in place at the Effective Date, you will, in collaboration with the Chief Operating Officer, review existing Employee Benefits and either put in place or modify benefits as deemed necessary to ensure fair market rates. You hereby acknowledge that some of these benefits, including short- and long-term disability benefits, are not currently part of the Employee Benefits and that you will be responsible for putting in place private coverage, including disability insurance, in the interim period between acceptance of this offer and establishing these benefits at the Company. Notwithstanding the above, the Company generally reserves the right to amend, eliminate, substitute or otherwise change the Employee Benefits at any time and without notice, including but not limited to changes to cost sharing, premium amounts, terms of benefits and deductibles. |
(f) |
Incentive Program: You will continue to be eligible to participate in the Companys Annual Employee Incentive Program. The incentive target for your position is 20% of Base Salary based on the Compensation Committees assessment of your performance and achievement of annual goals that have been approved by the Board. |
(g) |
Stock Options: You will be eligible to earn stock options pursuant to the Companys Incentive Stock Option Plan as amended from time to time (the Plan) subject to the discretion of the Board and the terms of grant (the Option). As part of your compensation package as an officer of the Company, you will receive a grant of 555,000 new stock options. Of these, 355,000 options will vest over a 4 year period with a one-year cliff: the first 88,750 options will vest on the first anniversary of your start date, and the remaining 266,250 options will vest at a rate of 22,187.5 options (266,250 ÷ 3 ÷ 4 = 22,187.5) every three months thereafter. The remaining 200,000 options will vest on the date of closing of a Series B financing in the amount of $30M USD or greater. The Option is granted under the terms of the Plan. In addition to newly granted options, all options that were previously granted in connection with your role on AbCelleras Board, including approximately 45,000 options that will be yet unvested at the Effective Date, will remain in place and in good standing, and will continue to vest according to their original vesting schedule. |
(h) |
Signing Bonus: You will receive a one-time signing bonus of CAD $20,000, and exclusive use of one pair of size 10 Air Jordan basketball shoes which shall be used on a regular basis to maintain your physical vigor and for one-on-one battles with the CEO. |
(i) |
Business Expenses: The Company will reimburse you for all authorized travelling and out-of-pocket expenses actually, exclusively and necessarily incurred by you in connection with your duties under this Agreement, provided that you first furnish statements with accompanying receipts or vouchers for all such expenses to the Company and otherwise comply with the Companys expense policies as in effect from time to time. |
(j) |
Travel: You will be expected to travel frequently, as business needs require, in the course of performing your duties. |
(k) |
Offer of Comparable Employment by Affiliate: You agree that if an Affiliated Company offers you comparable employment on terms substantially similar to the terms of this Agreement, you will accept such offer and take up employment with the Affiliate of the Company. You will receive equal credit for your length of service with the Company and all probation and benefit-qualifying periods will be waived where in the Affiliate Companys power to do so. |
2. |
Obligations of Employment |
In addition to your employment obligations at common law, you covenant and agree as follows:
(a) |
Loyalty to the Company: Throughout your employment you will well and faithfully serve the Company and use your best efforts to promote the Business of the Company. You will act honestly and in good faith, and in the best interests of the Company. |
(b) |
Business of the Company: You will not, during your employment with the Company, engage in any business, enterprise or activity that is contrary to or detracts from the due performance of the Business of the Company. You will not engage in any other employment without the written consent of the Company. |
(c) |
No Personal Benefit: You will not receive or accept for your own benefit or for any other Persons benefit, either directly or indirectly, any commission, rebate, discount, gratuity or profit from any Person having or proposing to have one or more business transactions with the Company, without the prior approval of the Company. You will comply with the Companys Code of Ethics and Conduct policies as in effect from time to time. |
(d) |
Business Opportunities: During your employment you will communicate and channel to the Company all knowledge, business and customer contacts and any other information that could concern or be in any way beneficial to the Business of the Company. Any such information communicated to the Company as aforesaid will be and remain the property of the Company notwithstanding any subsequent termination of your employment. |
(e) |
Return of Company Property: Upon termination of your employment, or at any time upon request, you will promptly return to the Company all Company property including all written information, tapes, discs or memory devices and copies thereof, and any other material on any medium in your possession or control pertaining to the Business of the Company, without retaining any copies or records of any Confidential Information whatsoever. You will also return any keys, pass cards, identification cards, equipment or other property belonging to the Company or the Companys customers. |
(f) |
Pre-existing Obligations: You are hereby requested and directed by the Company to comply with any existing common law, contractual or statutory obligations to your former employer and to any other Person. The Company is not employing you to obtain the confidential information or business opportunities of your former employer or any other Person. |
(g) |
Policies and Procedures: You are required to comply with the Companys policies and procedures as established and amended from time to time; however such policies and procedures do not form contractual terms and may be amended without notice. You are required to comply with all lawful directions of the Company, and follow all workplace policies and procedures and with the Companys rules, regulations, policies, practices, and procedures, as amended from time to time. The Companys policy and procedures manuals are available through Human Resources and on the Companys network. It is your responsibility to familiarize yourself with the Companys policies and procedures. |
(h) |
Use of Company Resources: The Companys equipment, tools and communication devices are for business purposes only. The Company may, at any time and without further notice or consent, access, monitor and review you usage of Company information and resources, including without limitation, computers, computer software, electronic mail (including web-based email or electronic communications applications or services), instant messaging, on-line services (including the Internet), voice mail, facsimile machines, telephones and photocopiers and any of the contents of any of the foregoing. Accordingly, you should have no expectation of privacy in connection with the use of Company resources, and your use of any of the foregoing Company resources will be regarded as your waiver to any right to privacy in such use and your express consent to your use of resources being monitored, accessed by and reviewed by the Company. |
(i) |
Legal Obligations Concerning Privacy: You agree that you will not collect, use or disclose the personal information of any employees, contractors or customers of the Company other than as authorized in the course of your duties. You agree that you will adhere to and comply with all Company policies and laws governing the protection of personal information. |
(j) |
No Use of Unauthorized Software: You agree that you will not download any unauthorized software onto any Company device, nor knowingly make use of any unauthorized software in the performance of your duties. |
3. |
Confidential Information |
(a) |
Non-Disclosure of Confidential Information: At all times during your employment and subsequent to the termination of your employment with the Company, you will keep the Confidential Information in strictest confidence and trust. You will take all necessary precautions against unauthorized disclosure of the Confidential Information, and you will not directly or indirectly disclose, allow access to, transmit or transfer the Confidential Information to a third party, nor will you copy or reproduce the Confidential Information except as may be reasonably required for you to perform your duties for the Company. |
(b) |
You represent and warrant that, in performing your duties under this Agreement, you will not disclose or use the confidential information of any other person or business in violation of the Companys contractual or legal obligations to that other person or business. |
(c) |
You agree to indemnify the Company for any costs, fees, expenses, damages or penalties imposed upon the Company with respect to your unauthorized disclosure or misuse of such confidential information. |
(d) |
Restricted Use of Confidential Information: |
(i) |
At all times during and subsequent to the termination of your employment with the Company, you will not use the Confidential Information in any manner except as reasonably required for you to perform your duties for the Company. |
(ii) |
Without limiting your obligations under subsection 3(a), you agree that at all times during and subsequent to the termination of your employment with the Company, you will not use or take advantage of the Confidential Information for creating, maintaining or marketing, or aiding in the creation, maintenance, marketing or selling, of any Products which are competitive with the Products of the Company. |
(iii) |
Upon the request of the Company, and in any event upon the termination of your employment with the Company, you will immediately return to the Company all materials, including all copies in whatever form, containing the Confidential Information which are in your possession or under your control. |
(e) |
Ownership of Confidential Information and Developments: |
(i) |
You acknowledge and agree that you will not acquire any right, title or interest in or to the Confidential Information or the Developments. |
(ii) |
You agree to make full disclosure to the Company of each Development promptly after its creation. You hereby irrevocably assign and transfer to the Company, and agree that the Company will be the exclusive owner of, all of your right, title and interest in and to each Development throughout the world, including all trade secrets, patent rights, copyrights trademarks, industrial designs and all other intellectual property rights therein, whether realized within or beyond the scope of your employment, and regardless of the true purpose of the employment relationship, and you irrevocably waive all moral rights you may have in these Developments. You further agree to cooperate fully at all times during and subsequent to your employment with respect to signing further documents and doing such acts and other things reasonably requested by the Company to confirm such transfer of ownership of rights, including intellectual property rights, effective at or after the time the Development is created and to obtain patents or copyrights or the like covering the Developments. You agree that the obligations in this section will continue beyond the termination of your employment with the Company with respect to Developments created during your employment with the Company. |
(iii) |
You agree that the Company, its successors, its assignees and their licensees are not required to designate you as the author of any Developments. You hereby waive in whole all moral rights which you may have in the Developments in favour of the Company, including the right to disclose the Developments to the public, retract the developments from the public, the right to the integrity of the Developments, the right to be associated with the Developments, the right to restrain or claim damages for any distortion, mutilation or other modification of the Developments, and the right to restrain use or reproduction of the Developments in any context and in connection with any product, service, cause or institution. In the event of having any other right in and to the Developments that cannot be assigned to the Company, you hereby unconditionally and irrevocably waive the enforcement of all such rights, and all claims and causes of action of any kind with respect to any of the foregoing (including moral rights) against the Company, its successors, distributors, licensees, sublicensees and customers, whether now known or hereafter to become known, and you agree, at the request and expense of the Company and its respective successors and assigns, to consent to and join in any action to enforce such rights and to procure a waiver of such rights from the holders of such rights; |
(iv) |
You agree, in the event of having any rights in and to the Developments that cannot be assigned to the Company and cannot be waived, you hereby grant to the Company and its respective successors and assigns, an irrevocable, unconditional, perpetual, exclusive, worldwide, transferable, fully-paid and royalty-free license, with rights to sublicense throughout multiple levels of sublicensees, to use in any way whatsoever the Developments and the intellectual property rights embodied therein. |
(v) |
In performing your duties in the course of your employment with the Company, you agree to avoid designing or developing any Development, in part or in whole, that intentionally infringes any intellectual property rights of any third party or that incorporates the intellectual property of any third party. If you become aware of any such possible infringement in the course of your employment, you agree to immediately notify the Company in writing of all particulars of the same. Without limiting the forgoing, you agree that in working on any Development, you will not take any action that creates any obligation on behalf of the Company to any third party, and you will not incorporate any third party or publically available software, in whole or in part, into any Development, and you will not use any such software, in whole or in part, in a manner that may subject any Development to any license obligations of any third party. |
4. |
Restrictive Covenants |
(a) |
Non-Competition: You agree that while you are employed by the Company, and for a period of one (1) year following the termination of your employment with the Company, you will not become engaged, directly or indirectly, as an employee, consultant, partner, principal, agent, officer, director, proprietor, shareholder (other than a holding of shares listed on a stock exchange that does not exceed 2% of the outstanding shares so listed) or advisor, in any Competitive Business that is located or operates within Canada or the United States without the prior written consent of the Company. |
(b) |
Non-Solicitation of Clients: You agree that while you are employed by the Company, and for one (1) year following the termination of your employment with the Company, you will not, directly or indirectly, contact or solicit any Clients of the Company for the purpose of selling or supplying to these Clients of the Company any products or services which are competitive with the products or services sold or supplied by the Company at the time of your termination. The term Client of the Company in the preceding sentence means any Person that: |
(i) |
was a client of the Company at the time of the termination of your employment with the Company; or |
(ii) |
the Company actively solicited within the twelve months prior to the termination of your employment. |
(c) |
Non-Solicitation of Employees: You agree that while you are employed by the Company, and for one (1) year following the termination of your employment with the Company, without the prior written consent of the Company, you will not directly or indirectly hire any employees of or consultants or contractors to the Company, nor will you solicit or induce or attempt to induce any persons who are employees of or consultants to the Company to terminate their employment or consulting agreement with the Company. |
5. |
Reasonableness of the Restrictive Covenants |
(a) |
You confirm that the obligations in Section 4 are fair and reasonable, given that, among other reasons: |
(i) |
the nature of the Business is such that you could relatively easily and effectively compete with the Business, and you therefore agree that the geographic scope of the obligation in Section 4 is reasonable; |
(ii) |
the Company operates in a relatively small but highly competitive market, in which there is intense competition from competing businesses; and |
(iii) |
you will have access to Confidential Information concerning the Business, including information concerning the Products and Developments and prospective Products which the Company is contemplating developing, producing, marketing, licensing or selling; |
and
(b) |
You agree that the obligations in Section 4, together with your other obligations under this Agreement, are reasonably necessary for the protection of the Companys proprietary interests, and you acknowledge and agree that your obligations contained in this Agreement will not preclude you from becoming gainfully employed in a similar capacity, following a termination of your employment with the Company, given your training, general knowledge and experience. |
6. |
Termination |
(a) |
Resignation: If for any reason you should wish to leave the Company, you will provide the Company with three (3) months prior written notice of your intention (the Resignation Period). The Parties hereby agree that in order to protect the Companys interests, the Company may, in its sole and unfettered discretion, waive the Resignation Period and end your employment immediately by delivering to you a written notice followed by payment of your Base Salary due to you during the remainder of the Resignation Period. |
(b) |
Termination for Cause: The Company may terminate your employment at any time for Cause, effective upon delivery by the Company to you of a written notice of termination of your employment for Cause. You will not be entitled to receive any further pay or compensation (except for pay, if any, accrued and owing under this Agreement up to the date of termination of your employment), severance pay, notice, payment in lieu of notice, benefits or damages of any kind, and for clarity, without limiting the foregoing, you will not be entitled to any bonus or pro rata bonus payment that has not already been awarded by the Company. |
(c) |
Termination Without Cause: The Company may terminate your employment without cause at any time upon providing you with severance equal to base salary for a period of 6 months plus an additional month for every year of service rendered to the Company, up to a maximum of 12 months. |
(d) |
Termination following Change of Control: Notwithstanding any other provision in this Agreement, if within twelve (12) months following a Change of Control of the Company (as defined below), the Employees employment is terminated by the Company without cause, the Employee shall receive severance of twenty-four (24) months of base salary and benefits continuation as at that date, and full vesting acceleration of all unvested stock options or other equity grants made to the Employee as at that date. For all purposes of this Agreement, Change of Control means: |
(i) |
the acquisition, directly or indirectly, by any person or group of persons acting jointly or in concert, as such terms are defined in the Securities Act, British Columbia, of common shares of the Company which, when added to all other common shares of the Company at the time held directly or indirectly by such person or persons acting jointly or in concert constitutes for the first time in the aggregate 51% or more of the outstanding common shares of the Company; or |
(ii) |
the removal, by extraordinary resolution of the shareholders of the Company, of more than 51% of the then incumbent Board of the Company, or the election of a majority of Board members to the Companys board who were not nominees of the Companys incumbent board at the time immediately preceding such election; or |
(iii) |
consummation of a sale of all or substantially all of the assets of the Company; or |
(iv) |
the consummation of a reorganization, plan of arrangement, merger, or other transaction which has substantially the same effect as to above. |
(e) |
Garden Leave: Once notice of resignation or termination has been given by you or the Company, the Company may excuse you from the performance of your duties and/or exclude you from any premises of the Company or any Affiliated Company. Base Salary and other contractual benefits shall continue to be paid or provided to you until the last day of the notice period, subject to the terms of the governing agreements or plans. During any period where you are excused from your duties and/or excluded from the Companys premises, you shall not, without the prior written consent of the Company, contact (either directly or indirectly) any clients, customers, suppliers or employees of the Company or any Affiliated Company. At any time, the Company may require you to return to the Company all property in your possession or under your control belonging to the Company or any Affiliated Company. |
(f) |
No Implied Entitlement: Other than as expressly provided herein, you will not be entitled to receive any further pay or compensation, severance pay, notice, payment in lieu of notice, incentives, bonuses, benefits or damages of any kind. |
(g) |
Continued Effect: Notwithstanding any changes in the terms and conditions of your employment which may occur in the future, including any changes in position, duties or compensation, the termination provisions in this Agreement will continue to be in effect for the duration of your employment with the Company unless otherwise amended in writing and signed by the Company. |
(h) |
Authorization to Deduct Debts: If, on the date you leave employment, you owe the Company any money, you hereby authorize the Company to deduct any such debt from your final salary payment or any other payment due to you. Any remaining debt will be immediately payable to the Company and you agree to satisfy such debt within 14 days of any demand for repayment. |
7. |
Severability |
If any part, article, section, clause, paragraph or subparagraph of this Agreement is held to be indefinite, invalid, illegal or otherwise voidable or unenforceable for any reason, the entire Agreement will not fail on the account thereof and the validity, legality and enforceability of the remaining provisions will in no way be affected or impaired thereby. Further, if any provision of this Agreement is held by a court of competent jurisdiction to be excessively broad as to duration, activity, geography, or subject, said court will deem and interpret such provision to be valid and enforceable to the maximum duration, activity, geographic extent, and subject permissible under applicable law.
8. |
Entire Agreement |
This Agreement constitutes the entire agreement between you and the Company with respect to the subject matter herein and cancels and supersedes all previous invitations, proposals, letters, correspondence, negotiations, promises, agreements, covenants, conditions, representations and warranties with respect to the subject matter of this Agreement. There is no representation, warranty, collateral term or condition affecting this Agreement for which any Party can be held responsible in any way, other than as expressed in writing in this Agreement. No change or modification of this Agreement will be valid unless it is in writing and signed by both Parties.
9. |
Non-waiver |
No failure or delay by you or the Company in exercising any power or right under this Agreement will operate as a waiver of such power or right. Any consent or waiver by any Party to this Agreement to any breach or default under this Agreement will be effective only in the specific instance and for the specific purpose for which it was given.
10. |
Survival of Terms |
The provisions of sections 2(e), 3, 4, 6(h), 7, 8, 9, 10, 11, 12, 13, 14, 15 and 16 of this Agreement will survive the termination of your employment, as well as any other provisions herein that are necessary for the post termination protection of the Company or its Confidential Information or intellectual property.
11. |
Further Assistance |
The Parties will execute and deliver any documents and perform any acts necessary to carry out the intent of this Agreement.
12. |
Equitable Remedies |
You hereby acknowledge and agree that a breach of your obligations under this Agreement would result in damages to the Company that could not be adequately compensated for by monetary award. Accordingly, in the event of any such breach by you, in addition to all other remedies available to the Company at law or in equity, the Company will be entitled as a matter of right to apply to a Court of competent jurisdiction for such relief by way of restraining order, injunction, decree or otherwise, as may be appropriate to ensure compliance with the provisions of this Agreement.
13. |
Dispute Resolution |
In the event of a dispute arising out of or in connection with this Agreement, or in respect of any legal relationship associated with it or from it, which does not involve the Company seeking a court injunction or other injunctive or equitable relief to protect its business, confidential information or intellectual property, that dispute will be resolved confidentially as follows:
(a) |
Amicable Negotiation The Parties agree that, both during and after the performance of their responsibilities under this Agreement, each of them will make bona fide efforts to resolve any disputes arising between them by amicable negotiations; |
(b) |
Mediation If the Parties are unable to negotiate resolution of a dispute, either Party may refer the dispute to mediation by providing written notice to the other Party. If the Parties cannot agree on a mediator within thirty (30) days of receipt of the notice to mediate, then either Party may make application to the British Columbia Arbitration and Mediation Society to have one appointed. The mediation will be held in Vancouver, BC, in accordance with the British Columbia International Commercial Arbitration Centres (the BCICAC) Commercial Mediation Rules, and each Party will bear its own costs, including one-half share of the mediators fees. |
(c) |
Arbitration If, after mediation, the Parties have been unable to resolve a dispute and the mediator has been inactive for more than 90 days, or such other period agreed to in writing by the Parties, either Party may refer the dispute for final and binding arbitration by providing written notice to the other Party. If the Parties cannot agree on an arbitrator within thirty (30) days of receipt of the notice to arbitrate, then either Party may make application to the British Columbia Arbitration and Mediation Society to appoint one. The arbitration will be held in Vancouver, BC, in accordance with the BCICACs Shorter Rules for Domestic Commercial Arbitration, and each Party will bear its own costs, including one-half share of the arbitrators fees. |
14. |
Definitions |
In this Agreement:
(a) |
Affiliated Company means an affiliate as defined in the Business Corporations Act (BC) or any successor legislation, as amended from time to time. |
(b) |
Board means the board of directors of the Company. |
(c) |
Business means the business of discovering, researching, developing, producing, licensing selling and marketing new antibody molecules for therapeutics, diagnostics and reagents, and such other products and services the Company offers during your employment. |
(d) |
Cause includes i) material and uncured breach of this Agreement that causes damage to the Company, ii) serious infractions such as theft, fraud, dishonesty, assault or harassment of co-workers, conflict of interest, or wilful misconduct, and iii) proven incompetence. |
(e) |
Competitive Business means any business operation, whether a partnership, proprietorship, joint venture, company or otherwise, that develops, produces, licences or markets any products or services that are competitive with the Companys products and services. |
(f) |
Company means AbCellera Biologics Inc., a company with an office at 2215 Yukon Street, Vancouver, British Columbia, V5Y 0A1, and where used in the context of protection of Confidential Information, intellectual property or the Business, Company includes any Affiliated Company. |
(g) |
Confidential Information includes any of the following: |
(i) |
information concerning all Products and Developments (as defined below); |
(ii) |
information regarding the Companys business, operations, financing, strategies, methods and practices, including marketing strategies, product mix, product pricing, sales, margins, pay and compensation for staff, and any other information regarding the financial affairs of the Company; |
(iii) |
the identity of the Companys clients, business partners, licensees, agents and suppliers, and the nature of the Companys relationships with such clients, partners, licensees, agents and suppliers; |
(iv) |
information belonging to the Companys clients, business partners, licensees, agents and suppliers, which is disclosed to you or the Company; and |
(v) |
any other trade secrets or confidential or proprietary information in the possession or control of the Company, |
but does not include information which is or becomes generally available to the public through no fault of your own or which you can establish, through written records, was in your possession prior to its disclosure to you as a result of your work for the Company.
(h) |
Developments includes all: |
(i) |
Products, analyses, compilations, studies, concepts, software, documentation, research, data, designs, reports, flowcharts, training materials, trade-marks, and specifications, and any related works, including any enhancements, modifications or additions to the Products owned, licensed, sold, marketed or used by the Company; |
(ii) |
copyrightable works of authorship including, without limitation, any technical descriptions for Products, user guides, instructions, illustrations and advertising materials; and |
(iii) |
inventions, devices, concepts, ideas, formulae, know-how, processes, techniques, systems, methods and improvements, |
in each case related to the Business, whether patentable or not, developed, created, generated or reduced to practice by you, alone or jointly with others, during your employment with the Company or which result from tasks assigned to you by the Company or which result from the use of the premises or property (including equipment, supplies or Confidential Information) owned, leased or licensed by the Company.
(i) |
Parties means, collectively, you and the Company, and for clarity, a Party means any one of the Parties. |
(j) |
Person means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or company with or without share capital, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, government or governmental agency or entity however designated or constituted. |
(k) |
Products means (i) any products developed by, for or on behalf of the Company for use in its Business or operations, (ii) any intellectual property or assets owned, licensed, sold, marketed or used by the Company in connection with the Business, including enhancements, modifications, additions or other improvements to such intellectual property; and (iii) any other products and services that the Company discovers or develops during your employment. |
15. |
Conflict |
In the event of any conflict between the terms and conditions of this agreement and any other agreement, the terms of this Agreement will prevail.
16. |
Governing Laws |
This Agreement will be governed by and construed in accordance with the laws of British Columbia and the laws of Canada applicable in British Columbia.
17. |
Acknowledgement of Terms and Obligations |
You agree that you have read and understand all of the terms, rights and obligations under this Agreement, that you have had the opportunity to discuss and negotiate these terms, rights and obligations with the Company, and that you have executed this Agreement voluntarily and of your own free will.
18. |
Counterparts |
This Agreement may be executed in two or more counterparts, each of which will be deemed to be an original and all of which will constitute one Agreement.
AbCellera Biologics Inc. | ||
By: |
/s/ Carl L. Hansen |
|
Carl L. Hansen CEO & President |
I have read, understand, acknowledge and accept the terms and conditions of my employment with the Company as set out above:
/s/ Andrew Booth |
Andrew Booth |
SCHEDULE A
AUTHORIZED WORK AND BUSINESS ACTIVITIES OUTSIDE THE COMPANY
AbCellera Biologics Inc. (the Company) hereby agrees that you may engage in the following work and business activities:
1. |
Fulfill your commitment to serve as Chairman & Director of Precision Nanosystems until the earlier of December 2021 or the acquisition of Precision Nanosystems; |
2. |
Fulfill your commitment to serve as Director of the BC Tech Association until the end of your 4-year term; |
3. |
Fulfill your commitment to serve as Director of the Canadian Manufacturers and Exporters until the end of your 2-year term; and |
4. |
If requested by STEMCELL following resignation from your current position, continue to serve in an advisory capacity to STEMCELL or the Eaves Family Office. |
Exhibit 10.10
July 10, 2019
Private & Confidential
By Electronic Mail
Tryn T. Stimart, Esq.
Dear Tryn:
Re: Employment Agreement
I am pleased to offer you a full-time position at Lineage Biosciences Inc. (Lineage), a wholly-owned US subsidiary of AbCellera Biologics Inc. (AbCellera)
This letter agreement contains the complete terms and conditions of your employment with Lineage (the Agreement). The terms, covenants, and conditions of the Agreement will extend to AbCellera and its Affiliates, collectively the (Company).
The terms of this agreement will take effect on August 22nd 2019 (the Effective Date), and will continue until terminated in accordance with the provisions of this Agreement. Please review the terms of this Agreement carefully. If you wish to accept these terms of employment, please sign and return a copy of this agreement to me at before July 12, 2019.
In consideration for the compensation provided under this Agreement and other good and valuable consideration, you agree as follows:
1. |
Employment |
The terms of your employment will be as follows:
(a) |
Position and Responsibilities: You will be employed by Lineage in the position of General Counsel to the Company, reporting to the CEO and the Board. In this position you will have primary responsibility for overseeing the Companys legal matters, developing and executing company intellectual property strategy and competitive intelligence, overseeing regulatory matters related to clinical trials and product approval, supporting business development activities and contracting, overseeing legal matters connected with company financings and other business dealings, managing external legal services, providing training to the Company on substantive legal and ethical issues, providing legal counsel to the CEO and Board on disputes that may lead to litigation and in consultation with the CEO and Board representing or overseeing the representation of the Company in litigation, settlements, administrative hearings, and arbitrations, and working closely with the CEO, executives, and management to define and execute new business initiatives and internal policies and procedures. You will perform or fulfill all duties and responsibilities of your position, subject to applicable laws, and the duties and responsibilities that the Company may reasonably assign to you from time to time. You will at all times conform to the reasonable and lawful instructions and directions of the Board. You will adhere to all applicable policies of the Company as established and amended from time to time. |
(b) |
Duties: During your employment you will devote the whole of your time, attention and abilities to your duties, which you agree to carry out faithfully, honestly, diligently and to the best of your ability. You agree to give the Company the full benefit of your knowledge, expertise, skill and ingenuity, and exercise the degree of care, diligence and skill that a prudent professional would exercise in comparable circumstances. You may not engage in other work or business activities without the Companys prior written consent. |
(c) |
Base Compensation: You will earn a base salary in the amount of USD $320K per annum, less statutory and other required deductions for all work and services you perform for the Company, paid to you bi-monthly in 24 equal payments, in arrears (the Base Salary). Your base salary compensation will be reviewed periodically by the Company compensation committee elected by the Board (the Compensation Committee), which shall determine and recommend any adjustments to your annual base salary compensation. |
(d) |
Vacation Entitlement: You will be eligible to earn up to five (5) weeks paid vacation per annum pro-rated for any partial year of employment. Your vacation must be taken with prior notice and at a time or times acceptable to the CEO. |
(e) |
Benefits: You will be eligible to participate in applicable employee benefits plans such as, or comparable with, those the Company offers its Canadian-based employees from time to time (the Employee Benefits). The Employee Benefits will be fair to market and will include extended health benefits, short- and long-term disability benefits, and life insurance benefits. If at the time of your employment an extended health benefits plan is not in place for US-based employees of Lineage, you will secure suitable private health care coverage (medical and dental) which will be reimbursed by the Company. You further hereby acknowledge that some benefits, including short- and long-term disability benefits, will be put in place before the end of 2019 and are therefore not currently part of the Employee Benefits at the Company, and that you will be responsible for putting in place private coverage, including disability insurance, in the interim period between acceptance of this offer and establishing these benefits at the Company. Notwithstanding the above, the Company generally reserves the right to amend, eliminate, substitute or otherwise change the Employee Benefits at any time and without notice, including but not limited to changes to cost sharing, premium amounts, terms of benefits and deductibles. |
(f) |
Incentive Program: You will continue to be eligible to participate in the Companys Annual Employee Incentive Program. The incentive target for your position is 20% of Base Salary based on the Compensation Committees assessment of your performance and achievement of annual goals that have been approved by the Board. |
(g) |
Stock Options: You will be eligible to earn stock options pursuant to the Companys Incentive Stock Option Plan as amended from time to time (the Plan) subject to the discretion of the Board and the terms of grant (the Option). As part of your compensation package as an officer of the Company, you will receive a grant of 200,000 new stock options in AbCellera Biologics Inc. that will vest over a 4-year period with a one-year cliff: the first 50,000 options will vest on the first anniversary of your start date, and the remaining 150,000 options will vest at a rate of 12,500 options (150,000 ÷ 3 ÷ 4 = 12,500) every three months thereafter. The Option is granted under the terms of the Plan. |
(h) |
Relocation Expenses and Pre-Paid Performance Bonus: It is understood that your work will be performed primarily from AbCelleras main offices located at 2215 Yukon Street in Vancouver, British Columbia V5Y 0AI. The Company will reimburse you for out-of-pocket expenses, up to a maximum of $30,000 USD, that are incurred by you in connection with relocation of you and your family provided that you first furnish statements with accompanying receipts or vouchers for all such expenses to the Company. In connection with you relocating and the purchase of a new home, you will also receive a one-time Prepaid Performance Bonus of $200,000 USD. |
(i) |
Transition Period Work and Expenses: It is understood that upon acceptance of employment that you will undertake the necessary steps to relocate yourself and family. The Company understands that exact timing for relocation is uncertain and dependent on the sale of your home and obtaining a new residence. In the interim, you understand that you will be required to perform your work obligations from AbCelleras main office and will also be permitted to perform your work obligations remotely in agreement with the CEO. During remote work you agree to maintain regular work hours commensurate with the Companys hours and be accessible as you otherwise would be while in the main offices for meetings, phone calls, and other necessary business matters. You further agree to maintain, at your own expense, an office in your remote location whereby you will have access to all necessary tools to perform your daily duties including internet, a computer, and telephone access. In the event there are meetings that you are asked to attend in person while working remotely during the transition period, you agree to travel to the meeting(s) with reimbursement consistent with the Companys policies as set forth herein. Said meetings may occur anywhere in the United States or Canada or elsewhere as circumstances may require. You further agree that as an Officer of the Company that you will make yourself available to the Company and CEO during normal business hours and outside normal business hours as necessary and as requested. During the transition period, the Company will reimburse you for all authorized travelling and hotel expenses incurred in connection with your duties under this Agreement provided that you first furnish statements with accompanying receipts and otherwise comply with the Companys expense policies as in effect from time to time. |
(j) |
Business Expenses: The Company will reimburse you for all authorized travelling and out-of-pocket expenses actually, exclusively and necessarily incurred by you in connection with your duties under this Agreement, provided that you first furnish statements with accompanying receipts or vouchers for all such expenses to the Company and otherwise comply with the Companys expense policies as in effect from time to time. |
(k) |
Travel: You will be expected to travel frequently, as business needs require, in the course of performing your duties. |
(l) |
Offer of Comparable Employment by Affiliate: You agree that if an Affiliated Company offers you comparable employment on terms substantially similar to the terms of this Agreement, you will accept such offer and take up employment with the Affiliate of the Company. You will receive equal credit for your length of services with the Company and all probation and benefit-qualifying periods will be waived where in the Affiliate Companys power to do so. |
2. |
Obligations of Employment |
In addition to your employment obligations at common law, you covenant and agree as follows:
(a) |
Loyalty to the Company: Throughout your employment you will well and faithfully serve the Company and use your best efforts to promote the Business of the Company. You will act honestly and in good faith, and in the best interests of the Company. |
(b) |
Business of the Company: You will not, during your employment with the Company, engage in any business, enterprise or activity that is contrary to or detracts from the due performance of the Business of the Company. You will not engage in any other employment without the written consent of the Company. |
(c) |
No Personal Benefit: You will not receive or accept for your own benefit or for any other Persons benefit, either directly or indirectly, any commission, rebate, discount, gratuity or profit from any Person having or proposing to have one or more business transactions with the Company, without the prior approval of the Company. You will comply with the Companys Code of Ethics and Conduct policies as in effect from time to time. |
(d) |
Business Opportunities: During your employment you will communicate and channel to the Company all knowledge, business and customer contacts and any other information that could concern or be in any way beneficial to the Business of the Company. Any such information communicated to the Company as aforesaid will be and remain the property of the Company notwithstanding any subsequent termination of your employment. |
(e) |
Return of Company Property: Upon termination of your employment, or at any time upon request, you will promptly return to the Company all Company property including all written information, tapes, discs or memory devices and copies thereof, and any other material on any medium in your possession or control pertaining to the Business of the Company, without retaining any copies or records of any Confidential Information whatsoever. You will also return any keys, pass cards, identification cards, equipment or other property belonging to the Company or the Companys customers. |
(f) |
Pre-existing Obligations: You are hereby requested and directed by the Company to comply with any existing common law, contractual or statutory obligations to your former employer and to any other Person. The Company is not employing you to obtain the confidential information or business opportunities of your former employer or any other Person. |
(g) |
Policies and Procedures: You are required to comply with the Companys policies and procedures as established and amended from time to time; however, such policies and procedures do not form contractual terms and may be amended without notice. You are required to comply with all lawful directions of the Company, and follow all workplace policies and procedures and with the Companys rules, regulations, policies, practices, and procedures, as amended from time to time. The Companys policy and procedures manuals are available through Human Resources and on the Companys network. It is your responsibility to familiarize yourself with the Companys policies and procedures. |
(h) |
Use of Company Resources: The Companys equipment, tools and communication devices are for business purposes only. The Company may, at any time and without further notice or consent, access, monitor and review your usage of Company information and resources, including without limitation, computers, computer software, electronic mail (including web-based email or electronic communications applications or services), instant messaging, on-line services (including the Internet), voice mail, facsimile machines, telephones and photocopiers and any of the contents of any of the foregoing. Accordingly, you should have no expectation of privacy in connection with the use of Company resources, and your use of any of the foregoing Company resources will be regarded as your waiver to any right to privacy in such use and your express consent to your use of resources being monitored, accessed by and reviewed by the Company. |
(i) |
Legal Obligations Concerning Privacy: You agree that you will not collect, use or disclose the personal information of any employees, contractors or customers of the Company other than as authorized in the course of your duties. You agree that you will adhere to and comply with all Company policies and laws governing the protection of personal information. |
(j) |
No Use of Unauthorized Software: You agree that you will not download any unauthorized software onto any Company device, nor knowingly make use of any unauthorized software in the performance of your duties. |
3. |
Confidential Information |
(a) |
Non-Disclosure of Confidential Information: At all times during your employment and subsequent to the termination of your employment with the Company, you will keep the Confidential Information in strictest confidence and trust. You will take all necessary precautions against unauthorized disclosure of the Confidential Information, and you will not directly or indirectly disclose, allow access to, transmit or transfer the Confidential Information to a third party, nor will you copy or reproduce the Confidential Information except as may be reasonably required for you to perform your duties for the Company. |
(b) |
You represent and warrant that, in performing your duties under this Agreement, you will not disclose or use the confidential information of any other person or business in violation of the Companys contractual or legal obligations to that other person or business. |
(c) |
You agree to indemnify the Company for any costs, fees, expenses, damages or penalties imposed upon the Company with respect to your unauthorized disclosure or misuse of such confidential information. |
(d) |
Restricted Use of Confidential Information: |
(i) |
At all times during and subsequent to the termination of your employment with the Company, you will not use the Confidential Information in any manner except as reasonably required for you to perform your duties for the Company. |
(ii) |
Without limiting your obligations under subsection 3(a), you agree that at all times during and subsequent to the termination of your employment with the Company, you will not use or take advantage of the Confidential Information for creating, maintaining or marketing, or aiding in the creation, maintenance, marketing or selling, of any Products which are competitive with the Products of the Company. |
(iii) |
Upon the request of the Company, and in any event upon the termination of your employment with the Company, you will immediately return to the Company all materials, including all copies in whatever form, containing the Confidential Information which are in your possession or under your control. |
(e) |
Ownership of Confidential Information and Developments: |
(i) |
You acknowledge and agree that you will not acquire any right, title or interest in or to the Confidential Information or the Developments. |
(ii) |
You agree to make full disclosure to the Company of each Development promptly after its creation. You hereby irrevocably assign and transfer to the Company, and agree that the Company will be the exclusive owner of, all of your right, title and interest in and to each Development throughout the world, including all trade secrets, patent rights, copyrights trademarks, industrial designs and all other intellectual property rights therein, whether realized within or beyond the scope of your employment, and regardless of the true purpose of the employment relationship, and you irrevocably waive all moral rights you may have in these Developments. You further agree to cooperate fully at all times during and subsequent to your employment with respect to signing further documents and doing such acts and other things reasonably requested by the Company to confirm such transfer of ownership of rights, including intellectual property rights, effective at or after the time the Development is created and to obtain patents or copyrights or the like covering the Developments. You agree that the obligations in this section will continue beyond the termination of your employment with the Company with respect to Developments created during your employment with the Company. |
(iii) |
You agree that the Company, its successors, its assignees and their licensees are not required to designate you as the author of any Developments. You hereby waive in whole all moral rights which you may have in the Developments in favour of the Company, including the right to disclose the Developments to the public, retract the developments from the public, the right to the integrity of the Developments, the right to be associated with the Developments, the right to restrain or claim damages for any distortion, mutilation or other modification of the Developments, and the right to restrain use or reproduction of the Developments in any context and in connection with any product, services, cause or institution. In the event of having any other right in and to the Developments that cannot be assigned to the Company, you hereby unconditionally and irrevocably waive the enforcement of all such rights, and all claims and causes of action of any kind with respect to any of the foregoing (including moral rights) against the Company, its successors, distributors, licensees, sublicensees and customers, whether now known or hereafter to become known, and you agree, at the request and expense of the Company and its respective successors and assigns, to consent to and join in any action to enforce such rights and to procure a waiver of such rights from the holders of such rights; |
(iv) |
You agree, in the event of having any rights in and to the Developments that cannot be assigned to the Company and cannot be waived, you hereby grant to the Company and its respective successors and assigns, an irrevocable, unconditional, perpetual, exclusive, worldwide, transferable, fully-paid and royalty-free license, with rights to sublicense throughout multiple levels of sublicensees, to use in any way whatsoever the Developments and the intellectual property rights embodied therein. |
(v) |
In performing your duties in the course of your employment with the Company, you agree to avoid designing or developing any Development, in part or in whole, that intentionally infringes any intellectual property rights of any third party or that incorporates the intellectual property of any third party. If you become aware of any such possible infringement in the course of your employment, you agree to immediately notify the Company in writing of all particulars of the same. Without limiting the forgoing, you agree that in working on any Development, you will not take any action that creates any obligation on behalf of the Company to any third party, and you will not incorporate any third party or publicly available software, in whole or in part, into any Development, and you will not use any such software, in whole or in part, in a manner that may subject any Development to any license obligations of any third party. |
4. |
Restrictive Covenants |
(a) |
Non-Competition: You agree that while you are employed by the Company, and for a period of one (1) year following the termination of your employment with the Company, you will not become engaged, directly or indirectly, as an employee, consultant, partner, principal, agent, officer, director, proprietor, shareholder (other than a holding of shares listed on a stock exchange that does not exceed 2% of the outstanding shares so listed) or advisor, in any Competitive Business that is located or operates within Canada or the United States without the prior written consent of the Company. |
(b) |
Non-Solicitation of Clients: You agree that while you are employed by the Company, and for one (1) year following the termination of your employment with the Company, you will not, directly or indirectly, contact or solicit any Clients of the Company for the purpose of selling or supplying to these Clients of the Company any products or services which are competitive with the products or services sold or supplied by the Company at the time of your termination. The term Client of the Company in the preceding sentence means any Person that: |
(i) |
was a client of the Company at the time of the termination of your employment with the Company; or |
(ii) |
the Company actively solicited within the twelve months prior to the termination of your employment. |
(c) |
Non-Solicitation of Employees: You agree that while you are employed by the Company, and for one (1) year following the termination of your employment with the Company, without the prior written consent of the Company, you will not directly or indirectly hire any employees of or consultants or contractors to the Company, nor will you solicit or induce or attempt to induce any persons who are employees of or consultants to the Company to terminate their employment or consulting agreement with the Company. |
5. |
Reasonableness of the Restrictive Covenants |
(a) |
You confirm that the obligations in Section 4 are fair and reasonable, given that, among other reasons: |
(i) |
the nature of the Business is such that you could relatively easily and effectively compete with the Business, and you therefore agree that the geographic scope of the obligation in Section 4 is reasonable; |
(ii) |
the Company operates in a relatively small but highly competitive market, in which there is intense competition from competing businesses; and |
(iii) |
you will have access to Confidential Information concerning the Business, including information concerning the Products and Developments and prospective Products which the Company is contemplating developing, producing, marketing, licensing or selling; |
and
(b) |
You agree that the obligations in Section 4, together with your other obligations under this Agreement, are reasonably necessary for the protection of the Companys proprietary interests, and you acknowledge and agree that your obligations contained in this Agreement will not preclude you from becoming gainfully employed in a similar capacity, following a termination of your employment with the Company, given your training, general knowledge and experience. |
6. |
Termination |
(a) |
Resignation: If for any reason you should wish to leave the Company, you will provide the Company with three (3) months prior written notice of your intention (the Resignation Period). The Parties hereby agree that in order to protect the Companys interests, the Company may, in its sole and unfettered discretion, waive the Resignation Period and end your employment immediately by delivering to you a written notice followed by payment of your Base Salary due to you during the remainder of the Resignation Period. |
(b) |
Termination for Cause: The Company may terminate your employment at any time for Cause, effective upon delivery by the Company to you of a written notice of termination of your employment for Cause. You will not be entitled to receive any further pay or compensation (except for pay, if any, accrued and owing under this Agreement up to the date of termination of your employment), severance pay, notice, payment in lieu of notice, benefits or damages of any kind, and for clarity, without limiting the foregoing, you will not be entitled to any bonus or pro rata bonus payment that has not already been awarded by the Company. |
(c) |
Termination Without Cause: The Company may terminate your employment without cause at any time upon providing you with severance equal to base salary- for a period of 6 months plus an additional month for every year of service rendered to the Company, up to a maximum of 12 months. |
(d) |
Garden Leave: Once notice of resignation or termination has been given by you or the Company, the Company may excuse you from the performance of your duties and/or exclude you from any premises of the Company or any Affiliated Company. Base Salary and other contractual benefits shall continue to be paid or provided to you until the last day of the notice period, subject to the terms of the governing agreements or plans. During any period where you are excused from your duties and/or excluded from the Companys premises, you shall not, without the prior written consent of the Company, contact (either directly or indirectly) any clients, customers, suppliers or employees of the Company or any Affiliated Company. At any time, the Company may require you to return to the Company all property in your possession or under your control belonging to the Company or any Affiliated Company. |
(e) |
No Implied Entitlement: Other than as expressly provided herein, you will not be entitled to receive any further pay or compensation, severance pay, notice, payment in lieu of notice, incentives, bonuses, benefits or damages of any kind. |
(f) |
Continued Effect: Notwithstanding any changes in the terms and conditions of your employment which may occur in the future, including any changes in position, duties or compensation, the termination provisions in this Agreement will continue to be in effect for the duration of your employment with the Company unless otherwise amended in writing and signed by the Company. |
(g) |
Authorization to Deduct Debts: If, on the date you leave employment, you owe the Company any money, you hereby authorize the Company to deduct any such debt from your final salary payment or any other payment due to you. Any remaining debt will be immediately payable to the Company and you agree to satisfy such debt within 14 days of any demand for repayment. |
7. |
Severability |
If any part, article, section, clause, paragraph or subparagraph of this Agreement is held to be indefinite, invalid, illegal or otherwise voidable or unenforceable for any reason, the entire Agreement will not fail on the account thereof and the validity, legality and enforceability of the remaining provisions will in no way be affected or impaired thereby. Further, if any provision of this Agreement is held by a court of competent jurisdiction to be excessively broad as to duration, activity, geography, or subject, said court will deem and interpret such provision to be valid and enforceable to the maximum duration, activity, geographic extent, and subject permissible under applicable law.
8. |
Entire Agreement |
This Agreement constitutes the entire agreement between you and the Company with respect to the subject matter herein and cancels and supersedes all previous invitations, proposals, letters, correspondence, negotiations, promises, agreements, covenants, conditions, representations and warranties with respect to the subject matter of this Agreement. There is no representation, warranty, collateral term or condition affecting this Agreement for which any Party can be held responsible in any way, other than as expressed in writing in this Agreement. No change or modification of this Agreement will be valid unless it is in writing and signed by both Parties.
9. |
Non-waiver |
No failure or delay by you or the Company in exercising any power or right under this Agreement will operate as a waiver of such power or right. Any consent or waiver by any Party to this Agreement to any breach or default under this Agreement will be effective only in the specific instance and for the specific purpose for which it was given.
10. |
Survival of Terms |
The provisions of sections 2(e), 3, 4, 6(h), 7, 8, 9, 10, 11, 12, 13, 14, 15 and 16 of this Agreement will survive the termination of your employment, as well as any other provisions herein that are necessary for the post termination protection of the Company or its Confidential Information or intellectual property.
11. |
Further Assistance |
The Parties will execute and deliver any documents and perform any acts necessary to carry- out the intent of this Agreement.
12. |
Equitable Remedies |
You hereby acknowledge and agree that a breach of your obligations under this Agreement would result in damages to the Company that could not be adequately compensated for by monetary award. Accordingly, in the event of any such breach by you, in addition to all other remedies available to the Company at law or in equity, the Company will be entitled as a matter of right to apply to a Court of competent jurisdiction for such relief by way of restraining order, injunction, decree or otherwise, as may be appropriate to ensure compliance with the provisions of this Agreement.
13. |
Dispute Resolution |
In the event of a dispute arising out of or in connection with this Agreement, or in respect of any legal relationship associated with it or from it, which does not involve the Company seeking a court injunction or other injunctive or equitable relief to protect its business, confidential information or intellectual property, that dispute will be resolved confidentially as follows:
(a) |
Amicable Negotiation The Parties agree that, both during and after the performance of their responsibilities under this Agreement, each of them will make bona fide efforts to resolve any disputes arising between them by amicable negotiations; |
(b) |
Mediation If the Parties are unable to negotiate resolution of a dispute, either Party may refer the dispute to mediation by providing written notice to the other Party. If the Parties cannot agree on a mediator within thirty (30) days of receipt of the notice to mediate, then either Party may make application to the British Columbia Arbitration and Mediation Society to have one appointed. The mediation will be held in Vancouver, BC, in accordance with the British Columbia International Commercial Arbitration Centres (the BCICAC) Commercial Mediation Rules, and each Party will bear its own costs, including one-half share of the mediators fees. |
(c) |
Arbitration If, after mediation, the Parties have been unable to resolve a dispute and the mediator has been inactive for more than 90 days, or such other period agreed to in writing by the Parties, either Party may refer the dispute for final and binding arbitration by providing written notice to the other Party. If the Parties cannot agree on an arbitrator within thirty (30) days of receipt of the notice to arbitrate, then either Party may make application to the British Columbia Arbitration and Mediation Society to appoint one. The arbitration will be held in Vancouver, BC, in accordance with the BCICACs Shorter Rules for Domestic Commercial Arbitration, and each Party will bear its own costs, including one-half share of the arbitrators fees. |
14. |
Definitions |
In this Agreement:
(a) |
Affiliated Company means an affiliate as defined in the Business Corporations Act (BC) or any successor legislation, as amended from time to time. |
(b) |
Board means the board of directors of the Company. |
(c) |
Business means the business of discovering, researching, developing, producing, licensing selling and marketing new antibody molecules for therapeutics, diagnostics and reagents, and such other products and services the Company offers during your employment. |
(d) |
Cause includes i) material and uncured breach of this Agreement that causes damage to the Company, ii) serious infractions such as theft, fraud, dishonesty, assault or harassment of co-workers, conflict of interest, or wilful misconduct, and iii) proven incompetence. |
(e) |
Competitive Business means any business operation, whether a partnership, proprietorship, joint venture, company or otherwise, that develops, produces, licences or markets any products or services that are competitive with the Companys products and services. |
(f) |
Company means AbCellera Biologics Inc., a company with an office at 2215 Yukon Street, Vancouver, British Columbia, V5Y 0A1, and includes any Affiliated Company. |
(g) |
Confidential Information includes any of the following: |
(i) |
information concerning all Products and Developments (as defined below); |
(ii) |
information regarding the Companys business, operations, financing, strategies, methods and practices, including marketing strategies, product mix, product pricing, sales, margins, pay and compensation for staff, and any other information regarding the financial affairs of the Company; |
(iii) |
the identity of the Companys clients, business partners, licensees, agents and suppliers, and the nature of the Companys relationships with such clients, partners, licensees, agents and suppliers; |
(iv) |
information belonging to the Companys clients, business partners, licensees, agents and suppliers, which is disclosed to you or the Company; and |
(v) |
any other trade secrets or confidential or proprietary information in the possession or control of the Company, but does not include information which is or becomes generally available to the public through no fault of your own or which you can establish, through written records, was in your possession prior to its disclosure to you as a result of your work for the Company. |
(h) |
Developments includes all: |
(i) |
Products, analyses, compilations, studies, concepts, software, documentation, research, data, designs, reports, flowcharts, training materials, trade-marks, and specifications, and any related works, including any enhancements, modifications or additions to the Products owned, licensed, sold, marketed or used by the Company; |
(ii) |
copyrightable works of authorship including, without limitation, any technical descriptions for Products, user guides, instructions, illustrations and advertising materials; and |
(iii) |
inventions, devices, concepts, ideas, formulae, know-how, processes, techniques, systems, methods and improvements, |
in each case related to the Business, whether patentable or not, developed, created, generated or reduced to practice by you, alone or jointly with others, during your employment with the Company or which result from tasks assigned to you by the Company or which result from the use of the premises or property (including equipment, supplies or Confidential Information) owned, leased or licensed by the Company.
(i) |
Parties means, collectively, you and the Company, and for clarity, a Party means any one of the Parties. |
(j) |
Person means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or company with or without share capital, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, government or governmental agency or entity however designated or constituted. |
(k) |
Products means (i) any products developed by, for or on behalf of the Company for use in its Business or operations, (ii) any intellectual property or assets owned, licensed, sold, marketed or used by the Company in connection with the Business, including enhancements, modifications, additions or other improvements to such intellectual property; and (iii) any other products and services that the Company discovers or develops during your employment. |
15. |
Conflict |
In the event of any conflict between the terms and conditions of this agreement and any other agreement, the terms of this Agreement will prevail.
16. |
Governing Laws |
This Agreement will be governed by and construed in accordance with the laws of British Columbia and the laws of Canada applicable in British Columbia.
17. |
Acknowledgement of Terms and Obligations |
You agree that you have read and understand all of the terms, rights and obligations under this Agreement, that you have had the opportunity to discuss and negotiate these terms, rights and obligations with the Company, and that you have executed this Agreement voluntarily and of your own free will.
18. |
Counterparts |
This Agreement may be executed in two or more counterparts, each of which will be deemed to be an original and all of which will constitute one Agreement.
Lineage Biosciences Inc. | ||
By: |
/s/ Carl L. Hansen |
|
Carl L. Hansen | ||
CEO & President |
I have read, understand, acknowledge and accept the terms and conditions of my employment with the Company as set out above:
/s/ Tryn T. Stimart |
Tryn T. Stimart, Esq. |
Exhibit 10.11
Dec 20, 2016
Private & Confidential
By Electronic Mail
Véronique Lecault
Dear Véronique:
Re: |
Employment Agreement |
I am pleased to offer you full time employment with AbCellera Biologics Inc. (the Company). This letter agreement contains the complete terms and conditions of your employment with the Company (the Agreement).
Your employment under this Agreement will start on December 16, 2016 (the Start Date), and will continue until terminated in accordance with the provisions of this Agreement. Please review the terms of this Agreement carefully. If you wish to accept the these terms of employment, please sign and return a copy of this agreement to Carl Hansen at before January 15, 2017. Please also copy on this response.
Background Check: Your employment under this Agreement is conditional upon the successful completion of a background check. By signing this agreement, you consent to the Company carrying out a comprehensive background check, which may include the use of third-party service providers. If the information collected in the course of the background check would have or could have affected the Companys decision to hire, then the Agreement will terminate without notice or compensation of any kind and you will be paid all accrued and unpaid pay to your last day.
In consideration for the compensation provided under this Agreement and other good and valuable consideration, you agree as follows:
1. |
Employment |
The terms of your employment will be as follows:
(a) |
Position and Responsibilities: You will be employed by the Company in the position of Lead of Finance and Operations, reporting to the CEO or his or her designate. You will perform or fulfil all duties and responsibilities of your position, subject to applicable laws, and the duties and responsibilities that the Company may reasonably assign to you from time to time. You will at all times conform to the reasonable and lawful instructions and directions of the Company and its managers. You will adhere to all applicable policies of the Company as established and amended from time to time. You acknowledge and agree that as a developing company in Canada, you will need to be flexible in performing duties the Company asks you to perform from time to time, and in the position you occupy, your place of work and the person or position you report to. As the Company changes and grows, you may be required to change the scope of your position and duties, move to another location, change your title, and/or report to a different level of management. Such changes will not involve a reduction in compensation and you agree that no such changes will amount to a repudiation of this Agreement, constructive dismissal or termination of your employment. |
(b) |
Duties: During your employment you will devote the whole of your time, attention and abilities to your duties, which you agree to carry out faithfully, honestly, diligently and to the best of your ability. You agree to give the Company the full benefit of your knowledge, expertise, skill and ingenuity, and exercise the degree of care, diligence and skill that a prudent professional would exercise in comparable circumstances. You may not engage in other work or business activities without the Companys prior written consent. |
(c) |
Base Compensation: You will earn a base salary in the amount of CAD $90,000.00 per annum, less statutory and other required deductions, for all work and services you perform for the Company, paid to you bi-monthly in 24 equal payments, in arrears (the Base Salary). The Base Salary is based on a fifty (50) hour workweek, consisting of forty (40) regular hours per week at the rate of CAD $31.49 per hour and ten (10) hours of prepaid overtime at the time-and-a-half rate of CAD $47.21 per hour. Your hours of work and schedule may change from time to time depending on operational needs, and you may be required to work evenings and weekends. You must obtain prior approval from a manager before working any unscheduled hours. You must accurately report all unscheduled hours you work, whether approved or not, in the pay period in which you work such hours. |
(d) |
Signing Bonus: As part of your offer you will receive a one-time signing bonus of CAD $16,250. |
(e) |
Overtime. You: |
(i) |
agree to accurately record all hours worked in the manner directed by the Company on a daily basis; and |
(ii) |
are not permitted to work more than ten (10) hours per day or fifty (50) hours per week without obtaining the prior written authorization of a manager. |
In the event that you perform additional overtime work in excess of the regular weekly amount (Additional Overtime). You are required to submit a record of the hours worked to payroll during the pay period in which the Additional Overtime was worked.
(f) |
Prepaid Overtime Bank. The ten (10) hours of prepaid overtime accrued by you every week will form a prepaid overtime bank (Paid Overtime Bank) against which all Additional Overtime you work will be debited. Additional Overtime worked and reported by you will be debited against the Paid Overtime Bank. In the event the Paid Overtime Bank has no accrued overtime, the Additional Overtime will be credited to you and deducted from subsequent prepaid overtime. At the end of the calendar year, the Paid Overtime Bank will be accounted for as follows: |
(i) |
If your prepaid overtime hours exceed the actual overtime hours you worked, the deficit position in the Paid Overtime Bank will be waived by the Company; and |
(ii) |
If your prepaid overtime hours do not meet or exceed the actual overtime hours you worked, the Company will pay the accrued unpaid overtime amount to you or provide you with time off in lieu. |
(g) |
Probation: Given your long-time association with AbCellera, your offer is for permanent employment and will not include any probationary period. |
(h) |
Vacation Entitlement: You will be eligible to earn up to at least fifteen (15) days paid vacation per annum, pro-rated for any partial year of employment. An unlimited number of additional paid vacation days may be approved subject to the effective execution of your duties and coordination of responsibilities with other members of the AbCellera team. Your vacation must be taken at a time or times acceptable to the Company and in accordance with the Companys vacation policy in effect from time to time. It is your responsibility to schedule and take your vacation at a time or times acceptable to the Company and in accordance with the Companys vacation policy in effect from time to time. |
(i) |
Benefits: Effective on the Start Date, you will be eligible to participate in applicable employee benefits plans, including the extended health and dental plan, that the Company offers its Canadian-based employees from time to time (the Employee Benefits). The Company reserves the right to amend, eliminate, substitute or otherwise change the Employee Benefits at its sole discretion, at any time and without notice, including but not limited to changes to cost sharing, premium amounts, terms of benefits and deductibles. Details of the Employee Benefits will be provided to you once in place and, thereafter, when changes are made to the Employee Benefits. |
(j) |
Stock Options: You are eligible to earn stock options pursuant to the Companys Incentive Stock Option Plan as amended from time to time (the Plan) subject to the discretion of the Board and the terms of grant (the Option). As part of your starting compensation package the CEO will recommend to the Board that you be granted a total of 200,000 stock options, with the first 33,333.33 options vesting upon the first anniversary of your employment, and the remaining 166,666,67 options vesting equally over the subsequent five year period following the first anniversary of your employment. If approved by the Board the options will granted under the terms of the Plan. |
(k) |
Business Expenses: The Company will reimburse you for all authorized travelling and out-of- pocket expenses actually, exclusively and necessarily incurred by you in connection with your duties under this Agreement, provided that you first furnish statements with accompanying receipts or vouchers for all such expenses to the Company and otherwise comply with the Companys expense policies as in effect from time to time; |
(l) |
Travel: You will be expected to travel from time to time as business needs require in the course of performing your duties. You will not be required to travel more than 25% time within any calendar quarter. |
(m) |
Offer of Comparable Employment by Affiliate: You agree that if an Affiliated Company offers you comparable employment on terms substantially similar to the terms of this Agreement, you will accept such offer and take up employment with the Affiliate of the Company. You will receive equal credit for your length of service with the Company and all probation and benefit-qualifying periods will be waived where in the Affiliate Companys power to do so. |
2. |
Obligations of Employment |
In addition to your employment obligations at common law, you covenant and agree as follows:
(a) |
Loyalty to the Company: Throughout your employment you will well and faithfully serve the Company and use your best efforts to promote the Business of the Company. You will act honestly and in good faith, and in the best interests of the Company. |
(b) |
Business of the Company: You will not, during your employment with the Company, engage in any business, enterprise or activity that is contrary to or detracts from the due performance of the Business of the Company. You will not engage in any other employment without the written consent of the Company. |
(c) |
No Personal Benefit: You will not receive or accept for your own benefit or for any other Persons benefit, either directly or indirectly, any commission, rebate, discount, gratuity or profit from any Person having or proposing to have one or more business transactions with the Company, without the prior approval of the Company. |
(d) |
Business Opportunities: During your employment you will communicate and channel to the Company all knowledge, business and customer contacts and any other information that could concern or be in any way beneficial to the Business of the Company. Any such information communicated to the Company as aforesaid will be and remain the property of the Company notwithstanding any subsequent termination of your employment. |
(e) |
Return of Company Property: Upon termination of your employment, or at any time upon request, you will promptly return to the Company all Company property including all written information, tapes, discs or memory devices and copies thereof and any other material on any medium in your possession or control pertaining to the Business of the Company, without retaining any copies or records of any Confidential Information whatsoever. You will also return any keys, pass cards, identification cards, equipment or other property belonging to the Company or the Companys customers. |
(f) |
Pre-existing Obligations: You are hereby requested and directed by the Company to comply with any existing common law, contractual or statutory obligations to your former employer and to any other Person. The Company is not employing you to obtain the confidential information or business opportunities of your former employer or any other Person. |
(g) |
Policies and Procedures: You are required to comply with the Companys policies and procedures as established and amended from time to time; however such policies and procedures do not form contractual terms and may be amended without notice. You are required to comply with all lawful directions of the Company, and follow all workplace policies and procedures and with the Companys rules, regulations, policies, practices, and procedures, as amended from time to time. |
(h) |
Use of Company Resources: The Companys equipment, tools and communication devices are for business purposes only. The Company may, at any time and without further notice or consent, access, monitor and review you usage of Company information and resources, including without limitation, computers, computer software, electronic mail (including web-based email or electronic communications applications or services), instant messaging, on-line services (including the Internet), voicemail, facsimile machines, telephones and photocopiers and any of the contents of any of the foregoing. Accordingly, you should have no expectation of privacy in connection with the use of Company resources, and your use of any of the foregoing Company resources will be regarded as your waiver to any right to privacy in such use and your express consent to your use of resources being monitored, accessed by and reviewed by the Company. |
(i) |
Legal Obligations Concerning Privacy: You agree that you will not collect, use or disclose the personal information of any employees, contractors or customers of the Company other than as authorized in the course of your duties. You agree that you will adhere to and comply with all Company policies and laws governing the protection of personal information. |
(j) |
No use of Unauthorized Software: You agree that you will not download any unauthorized software onto any Company device, nor knowingly make use of any unauthorized software in the performance of your duties. |
3. |
Confidential Information |
(a) |
Non-Disclosure of Confidential Information: At all times during your employment and subsequent to the termination of your employment with the Company, you will keep the Confidential Information in strictest confidence and trust. You will take all necessary precautions against unauthorized disclosure of the Confidential Information, and you will not directly or indirectly disclose, allow access to, transmit or transfer the Confidential Information to a third party, nor will you copy or reproduce the Confidential Information except as may be reasonably required for you to perform your duties for the Company. |
(b) |
You represent and warrant that, in performing your duties under this Agreement, you will not disclose or use the confidential information of any other person or business in violation of the Companys contractual or legal obligations to that other person or business. |
(c) |
You agree to indemnify the Company for any costs, fees, expenses, damages or penalties imposed upon the Company with respect to your willful unauthorized disclosure or misuse of such confidential information. |
(d) |
Restricted Use of Confidential Information: |
(i) |
At all times during and subsequent to the termination of your employment with the Company, you will not use the Confidential Information in any manner except as reasonably required for you to perform your duties for the Company. |
(ii) |
Without limiting your obligations under subsection 3(a), you agree that at all times during and subsequent to the termination of your employment with the Company, you will not use or take advantage of the Confidential Information for creating, maintaining or marketing, or aiding in the creation, maintenance, marketing or selling, of any Products which are competitive with the Products of the Company. |
(iii) |
Upon the request of the Company, and in any event upon the termination of your employment with the Company, you will immediately return to the Company all materials, including all copies in whatever form, containing the Confidential Information which are in your possession or under your control. |
(e) |
Ownership of Confidential Information and Developments: |
(i) |
You acknowledge and agree that you will not acquire any right, title or interest in or to the Confidential Information or the Developments. |
(ii) |
You agree to make full disclosure to the Company of each Development promptly after its creation. You hereby irrevocably assign and transfer to the Company, and agree that the Company will be the exclusive owner of, all of your right, title and interest in and to each Development throughout the world, including all trade secrets, patent rights, copyrights trademarks, industrial designs and all other intellectual property rights therein, whether realized within or beyond the scope of your employment, and regardless of the true purpose of the employment relationship, and you irrevocably waive all moral rights you may have in these Developments. You further agree to cooperate fully at all times during and subsequent to your employment with respect to signing further documents and doing such acts and other things reasonably requested by the Company to confirm such transfer of ownership of rights, including intellectual property rights, effective at or after the time the Development is created and to obtain patents or copyrights or the like covering the Developments. You agree that the obligations in this section will continue beyond the termination of your employment with the Company with respect to Developments created during your employment with the Company. |
(iii) |
You agree that the Company, its successors, its assignees and their licensees are not required to designate you as the author of any Developments. You hereby waive in whole all moral rights which you may have in the Developments in favour of the Company, including the right to disclose the Developments to the public, retract the developments from the public, the right to the integrity of the Developments, the right to be associated with the Developments, the right to restrain or claim damages for any distortion, mutilation or other modification of the Developments, and the right to restrain use or reproduction of the Developments in any context and in connection with any product, service, cause or institution. In the event of having any other right in and to the Developments that cannot be assigned to the Company, you hereby unconditionally and irrevocably waive the enforcement of all such rights, and all claims and causes of action of any kind with respect to any of the foregoing (including moral rights) against the Company, its successors, distributors, licensees, sublicensees and customers, whether now known or hereafter to become known, and you agree, at the request and expense of the Company and its respective successors and assigns, to consent to and join in any action to enforce such rights and to procure a waiver of such rights from the holders of such rights; |
(iv) |
You agree, in the event of having any rights in and to the Developments that cannot be assigned to the Company and cannot be waived, you hereby grant to the Company and its respective successors and assigns, an irrevocable, unconditional, perpetual, exclusive, worldwide, transferable, fully-paid and royalty-free license, with rights to sublicense throughout multiple levels of sublicensees, to use in any way whatsoever the Developments and the intellectual property rights embodied therein. |
(v) |
In performing your duties in the course of your employment with the Company, you agree to avoid designing or developing any Development, in part or in whole, that intentionally infringes any intellectual property rights of any third party or that incorporates the intellectual property of any third party. If you become aware of any such possible infringement in the course of your employment, you agree to immediately notify the Company in writing of all particulars of the same, Without limiting the forgoing, you agree that in working on any Development, you will not take any action that creates any obligation on behalf of the Company to any third party, and you will not incorporate any third party or publically available software, in whole or in part, into any Development, and you will not use any such software, in whole or in part, in a manner that may subject any Development to any license obligations of any third party. |
4. |
Restrictive Covenants |
(a) |
Non-Competition: You agree that while you are employed by the Company, and for a period of 1 year following the termination of your employment with the Company, you will not, without first getting written approval from AbCelleras board of directors, which will not be unreasonably withheld, become engaged, directly or indirectly, as an employee, consultant, partner, principal, agent, officer, director, proprietor, shareholder (other than a holding of shares listed on a stock exchange that does not exceed 2% of the outstanding shares so listed) or advisor, in any Competitive Business that is located or operates within Canada or the United States. |
(b) |
Non-Solicitation of Clients: You agree that while you are employed by the Company, and for one (1) year following the termination of your employment with the Company, you will not, directly or indirectly, contact or solicit any Clients of the Company for the purpose of selling or supplying to these Clients of the Company any products or services which are competitive with the products or services sold or supplied by the Company at the time of your termination. The term Client of the Company in the preceding sentence means any Person that: |
(i) |
was a client of the Company at the time of the termination of your employment with the Company; or |
(ii) |
the Company actively solicited within the twelve months prior to the termination of your employment. |
(c) |
Non-Solicitation of Employees: You agree that while you are employed by the Company, and for one (1) year following the termination of your employment with the Company , without the prior written consent of the Company, you will not directly or indirectly hire any employees of or consultants or contractors to the Company, nor will you solicit or induce or attempt to induce any persons who are employees of or consultants to the Company to terminate their employment or consulting agreement with the Company. |
5. |
Reasonableness of the Restrictive Covenants |
(a) |
You confirm that the obligations in Section 4 are fair and reasonable, given that, among other reasons: |
(i) |
the nature of the Business is such that you could relatively easily and effectively compete with the Business, and you therefore agree that the geographic scope of the obligation in Section 4 is reasonable; |
(ii) |
the Company operates in a relatively small but highly competitive market, in which there is intense competition from competing businesses; and |
(iii) |
you will have access to Confidential Information concerning the Business, including information concerning the Products and Developments and prospective Products which the Company is contemplating developing, producing, marketing, licensing or selling; |
and
(b) |
You agree that the obligations in Section 4, together with your other obligations under this Agreement, are reasonably necessary for the protection of the Companys proprietary interests, and you acknowledge and agree that your obligations contained in this Agreement will not preclude you from becoming gainfully employed in a similar capacity, following a termination of your employment with the Company, given your training, general knowledge and experience. |
6. |
Termination |
(a) |
Resignation: If for any reason you should wish to leave the Company, you will provide the Company with one (1) months prior written notice of your intention (the Resignation Period). The Parties hereby agree that in order to protect the Companys interests, the Company may, in its sole and unfettered discretion, waive the Resignation Period and end your employment immediately by delivering to you a written notice followed by payment of your Base Salary due to you during the remainder of the Resignation Period. |
(b) |
Termination for Cause: The Company may terminate your employment at any time for Cause, effective upon delivery by the Company to you of a written notice of termination of your employment for Cause. You will not be entitled to receive any further pay or compensation (except for pay, if any, accrued and owing under this Agreement up to the date of termination of your employment), severance pay, notice, payment in lieu of notice, benefits or damages of any kind, and for clarity, without limiting the foregoing, you will not be entitled to any bonus or pro rata bonus payment that has not already been awarded by the Company. |
(c) |
Termination During Probation Period: The Company may terminate your employment at any time during the Probation Period in accordance with Section 1(f). |
(d) |
Termination Without Cause: After your Probation Period, the Company may terminate your employment without cause at any time upon providing you with the greater of: |
(i) |
written notice of the termination of your employment, or pay in lieu of notice, or a combination of notice and pay in lieu of notice pursuant to the Employment Standards Act; or |
(ii) |
written notice of the termination of your employment, or Base Salary in lieu of notice, or a combination of notice and Base Salary in lieu of notice in the following amount: |
A. |
One month for up to 24 consecutive months of employment; |
B. |
Two months after 36 consecutive months of employment; or |
C. |
Four months after 6 consecutive years of employment, plus 1 additional week for each additional year of employment, up to a combined maximum of eight months ; |
(the Severance Period)
Any payment in lieu of the Severance Period provided to you will be inclusive of any termination or severance pay owing to you under the Employment Standards Act and subject to statutory withholdings. You will not be entitled to receive any further pay or compensation (except for pay, if any, accrued and owing under this Agreement up to the date of termination of your employment), and for clarity, without limiting the foregoing, you will not be entitled to any bonus or pro rata bonus payment that has not already been awarded to you by the Company.
(e) |
Garden Leave: Once notice of resignation or termination has been given by you or the Company, the Company may excuse you from the performance of your duties and/or exclude you from any premises of the Company or any Affiliated Company. Base Salary and other contractual benefits shall continue to be paid or provided to you until the last day of the notice period, subject to the terms of the governing agreements or plans. During any period where you are excused from your duties and/or excluded from the Companys premises, you shall not, without the prior written consent of the Company, contact (either directly or indirectly) any clients, customers, suppliers or employees of the Company or any Affiliated Company. At any time, the Company may require you to return to the Company all property in your possession or under your control belonging to the Company or any Affiliated Company. |
(f) |
No Implied Entitlement: Other than as expressly provided herein, you will not be entitled to receive any further pay or compensation, severance pay, notice, payment in lieu of notice, incentives, bonuses, benefits or damages of any kind. |
(g) |
Continued Effect: Notwithstanding any changes in the terms and conditions of your employment which may occur in the future, including any changes in position, duties or compensation, the termination provisions in this Agreement will continue to be in effect for the duration of your employment with the Company unless otherwise amended in writing and signed by the Company. |
(h) |
Authorization to Deduct Debts: If, on the date you leave employment, you owe the Company any money, you hereby authorize the Company to deduct any such debt from your final salary payment or any other payment due to you. Any remaining debt will be immediately payable to the Company and you agree to satisfy such debt within 14 days of any demand for repayment. |
7. |
Severability |
If any part, article, section, clause, paragraph or subparagraph of this Agreement is held to be indefinite, invalid, illegal or otherwise voidable or unenforceable for any reason, the entire Agreement will not fail on the account thereof and the validity, legality and enforceability of the remaining provisions will in no way be affected or impaired thereby. Further, if any provision of this Agreement is held by a court of competent jurisdiction to be excessively broad as to duration, activity, geography, or subject, said court will deem and interpret such provision to be valid and enforceable to the maximum duration, activity, geographic extent, and subject permissible under applicable law.
8. |
Entire Agreement |
This Agreement constitutes the entire agreement between you and the Company with respect to the subject matter herein and cancels and supersedes all previous invitations, proposals, letters, correspondence, negotiations, promises, agreements, covenants, conditions, representations and warranties with respect to the subject matter of this Agreement. There is no representation, warranty, collateral term or condition affecting this Agreement for which any Party can be held responsible in any way, other than as expressed in writing in this Agreement. No change or modification of this Agreement will be valid unless it is in writing and signed by both Parties.
9. |
Non-waiver |
No failure or delay by you or the Company in exercising any power or right under this Agreement will operate as a waiver of such power or right. Any consent or waiver by any Party to this Agreement to any breach or default under this Agreement will be effective only in the specific instance and for the specific purpose for which it was given.
10. |
Survival of Terms |
The provisions of sections 2(e), 3, 4, 6(h), 7, 8, 9, 10, 11, 12, 13, 14, 15 and 16 of this Agreement will survive the termination of your employment, as well as any other provisions herein that are necessary for the post termination protection of the Company or its Confidential Information or intellectual property.
11. |
Further Assistance |
The Parties will execute and deliver any documents and perform any acts necessary to carry out the intent of this Agreement.
12. |
Equitable Remedies |
You hereby acknowledge and agree that a breach of your obligations under this Agreement would result in damages to the Company that could not be adequately compensated for by monetary award. Accordingly, in the event of any such breach by you, in addition to all other remedies available to the Company at law or in equity, the Company will be entitled as a matter of right to apply to a Court of competent jurisdiction for such relief by way of restraining order, injunction, decree or otherwise, as may be appropriate to ensure compliance with the provisions of this Agreement.
13. |
Dispute Resolution |
In the event of a dispute arising out of or in connection with this Agreement, or in respect of any legal relationship associated with it or from it, which does not involve the Company seeking a court injunction or other injunctive or equitable relief to protect its business, confidential information or intellectual property, that dispute will be resolved confidentially as follows:
(a) |
Amicable Negotiation The Parties agree that, both during and after the performance of their responsibilities under this Agreement, each of them will make bona fide efforts to resolve any disputes arising between them by amicable negotiations; |
(b) |
Mediation If the Parties are unable to negotiate resolution of a dispute, either Party may refer the dispute to mediation by providing written notice to the other Party. If the Parties cannot agree on a mediator within thirty (30) days of receipt of the notice to mediate, then either Party may make application to the British Columbia Arbitration and Mediation Society to have one appointed. The mediation will be held in Vancouver, BC, in accordance with the British Columbia International Commercial Arbitration Centres (the BCICAC) Commercial Mediation Rules, and each Party will bear its own costs, including one-half share of the mediators fees. |
(c) |
Arbitration If, after mediation, the Parties have been unable to resolve a dispute and the mediator has been inactive for more than 90 days, or such other period agreed to in writing by the Parties, either Party may refer the dispute for final and binding arbitration by providing written notice to the other Party. If the Parties cannot agree on an arbitrator within thirty (30) days of receipt of the notice to arbitrate, then either Party may make application to the British Columbia Arbitration and Mediation Society to appoint one. The arbitration will be held in Vancouver, BC, in accordance with the BCICACs Shorter Rules for Domestic Commercial Arbitration, and each Party will bear its own costs, including one-half share of the arbitrator s fees. |
14. |
Definitions |
In this Agreement:
(a) |
Affiliated Company means an affiliate as defined in the Business Corporations Act (BC) or any successor legislation, as amended from time to time. |
(b) |
Board means the board of directors of the Company. |
(c) |
Business means the business of discovering, researching, developing, producing, licensing selling and marketing new antibody molecules for therapeutics, diagnostics and reagents, and such other products and services the Company offers during your employment. |
(d) |
Cause includes, without limitation, breach of this Agreement and the usual meaning of cause under the common law or the laws of British Columbia. |
(e) |
Competitive Business means any business operation, whether a partnership, proprietorship, joint venture, company or otherwise, that develops, produces, licences or markets any products or services that are competitive with the Companys products and services in the following fields antibody discovery and antibody product development, contract research services in antibody discovery and antibody product development, T cell analysis, and immune profiling. |
(f) |
Company means AbCellera Biologics Inc., a company with an office at 305 - 2125 East Mall, Vancouver, British Columbia V6T 1Z4, and where used in the context of protection of Confidential Information, intellectual property or the Business, Company includes any Affiliated Company. |
(g) |
Confidential Information includes any of the following: |
(i) |
information concerning all Products and Developments (as defined below); |
(ii) |
information regarding the Companys business, operations, financing, strategies, methods and practices, including marketing strategies, product mix, product pricing, sales, margins, pay and compensation for staff, and any other information regarding the financial affairs of the Company; |
(iii) |
the identity of the Companys clients, business partners, licensees, agents and suppliers, and the nature of the Companys relationships with such clients, partners, licensees, agents and suppliers; |
(iv) |
information belonging to the Companys clients, business partners, licensees, agents and suppliers, which is disclosed to you or the Company; and |
(v) |
any other trade secrets or confidential or proprietary information in the possession or control of the Company, |
but does not include information which is or becomes generally available to the public through no fault of your own or which you can establish, through written records, was in your possession prior to its disclosure to you as a result of your work for the Company.
(h) |
Developments includes all: |
(i) |
Products, analyses, compilations, studies, concepts, software, documentation, research, data, designs, reports, flowcharts, training materials, trade-marks, and specifications, and any related works, including any enhancements, modifications or additions to the Products owned, licensed, sold, marketed or used by the Company; |
(ii) |
copyrightable works of authorship including, without limitation, any technical descriptions for Products, user guides, instructions, illustrations and advertising materials; and |
(iii) |
inventions, devices, concepts, ideas, formulae, know-how, processes, techniques, systems, methods and improvements, |
which are related to the companies Business or research and development activities, whether patentable or not, developed, created, generated or reduced to practice by you, alone or jointly with others, during your employment with the Company or which result from tasks assigned to you by the Company or which result from the use of the premises or property (including equipment, supplies of Confidential Information) owned, leased or licensed by the Company.
(i) |
Parties means, collectively, you and the Company, and for clarity, a Party means any one of the Parties. |
(j) |
Person means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or company with or without share capital, unincorporated association, trust, trustee, executor, administrator or other legal personal representative, regulatory body or agency, government, or governmental agency or entity however designated or constituted. |
(k) |
Products means (i) any products developed by, for or on behalf of the Company for use in its Business or operations, (ii) any intellectual property or assets owned, licensed, sold, marketed or used by the Company in connection with the Business, including enhancements, modifications, additions or other improvements to such intellectual property; and (iii) any other products and services that the Company discovers or develops during your employment. |
15. |
Conflict |
In the event of any conflict between the terms and conditions of this agreement and any other agreement, the terms of this Agreement will prevail.
16. |
Governing Laws |
This Agreement will be governed by and construed in accordance with the laws of British Columbia and the laws of Canada applicable in British Columbia.
17. |
Acknowledgement of Terms and Obligations |
You agree that you have read and understand all of the terms, rights and obligations under this Agreement, that you have had the opportunity to discuss and negotiate these terms, rights and obligations with the Company, and that you have executed this Agreement voluntarily and of your own free will.
18. |
Counterparts |
This Agreement may be executed in two or more counterparts, each of which will be deemed to be an original and all of which will constitute one Agreement.
AbCellera Biologics Inc.
By: |
||
/s/ Carl L. Hansen, Ph.D. | ||
Carl L. Hansen, PhD. CEO & President |
I have read, understand, acknowledge and accept the terms and conditions of my employment with the Company as set out above:
/s/ Véronique Lecault |
Véronique Lecault |
January 1, 2019
Private & Confidential
By Electronic Mail
Veronique Lecault
Dear Veronique:
Re: |
Amendment of Employment Agreement to Increase Base Salary Compensation |
In recognition of your performance and excellent contributions to AbCellera, I would like to offer you an increase in your base compensation for your ongoing employment, from CAD $150,000 per annum to CAD $180,000 per annum.
Effective January 1, 2019, your employment agreement will be amended as follows:
Article 1a will be replaced with
(a) |
Position and Responsibilities: You will be employed by the Company in the position of Chief Operating Officer, reporting to the CEO or his or her designate. You will perform or fulfil all duties and responsibilities of your position, subject to applicable laws, and the duties and responsibilities that the Company may reasonably assign to you from time to time. You will at all times conform to the reasonable and lawful instructions and directions of the Company and its managers. You will adhere to all applicable policies of the Company as established and amended from time to time. You acknowledge and agree that as a developing company in Canada, you will need to be flexible in performing duties the Company asks you to perform from time to time, and in the position you occupy, your place of work and the person or position you report to. As the Company changes and grows, you may be required to change the scope of your position and duties, move to another location, change your title, and/or report to a different level of management. Such changes will not involve a reduction in compensation and you agree that no such changes will amount to a repudiation of this Agreement, constructive dismissal or termination of your employment. |
Article 1c will be replaced with
(c) |
Base Compensation: You will earn a base salary in the amount of CAD $180,000 per annum, less statutory and other required deductions, for all work and services you perform for the Company, paid to you bi-monthly in 24 equal payments, in arrears (the Base Salary). The Base Salary is based on a fifty (50) hour workweek, consisting of forty (40) regular hours per week at the rate of CAD $62.94 per hour and ten (10) hours of prepaid overtime at the time-and-a-half rate of CAD $94.41 per hour. Your hours of work and schedule may change from time to time depending on operational needs, and you may be required to work evenings and weekends. You must obtain prior approval from a manager before working any unscheduled hours. You must accurately report all unscheduled hours you work, whether approved or not, in the pay period in which you work such hours. |
Article 1n will be added
(n) |
Incentive Program: You will continue to be eligible to participate in the Companys Annual Employee Incentive Program. The incentive target for your position is 20% of Base Salary based on the Compensation Committees assessment of your performance and achievement of annual goals that have been approved by the Board. |
To accept this amendment please sign and return this letter to . I want to sincerely express my appreciation for your work and contributions to AbCellera.
/s/ Carl Hansen | /s/ Véronique Lecault | |||
Carl Hansen President & CEO |
Veronique Lecault |
Exhibit 10.12
ABCELLERA BIOLOGICS INC.
SIXTH AMENDED AND RESTATED STOCK OPTION PLAN
Approved by the Board on November 18, 2020
Approved by the Shareholders on December 1, 2020
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS AND INTERPRETATION |
1 | |||||
1.1 |
Definitions |
1 | ||||
1.2 |
Choice of Law |
4 | ||||
1.3 |
Headings |
4 | ||||
ARTICLE 2 PURPOSE AND PARTICIPATION |
4 | |||||
2.1 |
Purpose |
4 | ||||
2.2 |
Participation |
4 | ||||
2.3 |
Notification of Award |
5 | ||||
2.4 |
Copy of Plan |
5 | ||||
2.5 |
Limitation |
5 | ||||
ARTICLE 3 TERMS AND CONDITIONS OF OPTIONS |
5 | |||||
3.1 |
Board to Issue Common Shares |
5 | ||||
3.2 |
Number of Common Shares |
5 | ||||
3.3 |
Term of Option |
6 | ||||
3.4 |
Termination |
6 | ||||
3.5 |
Exercise Price |
9 | ||||
3.6 |
Additional Terms |
9 | ||||
3.7 |
Going Public Agreements |
10 | ||||
3.8 |
Assignment of Options |
10 | ||||
3.9 |
Adjustments |
10 | ||||
3.10 |
Option Grant and Vesting Terms |
10 | ||||
3.11 |
U.S. Participants |
11 | ||||
3.12 |
Australian Participants | 11 | ||||
ARTICLE 4 EXERCISE OF OPTION |
12 | |||||
4.1 |
Exercise of Option |
12 | ||||
4.2 |
Amended and Restated Voting Agreement and Amended and Restated ROFR and Co-Sale Agreement |
12 | ||||
4.3 |
Execution of Amended and Restated Voting Agreement and Amended and Restated ROFR and Co-Sale Agreement |
12 | ||||
4.4 |
Issue of Shares |
12 | ||||
4.5 |
Condition of Issue |
13 | ||||
ARTICLE 5 ADMINISTRATION |
13 | |||||
5.1 |
Administration |
13 | ||||
5.2 |
Interpretation |
13 | ||||
ARTICLE 6 AMENDMENT, TERMINATION AND NOTICE |
13 | |||||
6.1 |
Prospective Amendment |
13 |
i
6.2 |
Retrospective Amendment |
13 | ||||
6.3 |
Approvals |
14 | ||||
6.4 |
Termination |
14 | ||||
6.5 |
Agreement |
14 | ||||
6.6 |
Notice |
14 | ||||
SCHEDULE A |
A-1 | |||||
SCHEDULE B |
B-1 | |||||
SCHEDULE C |
C-1 |
ii
SIXTH AMENDED AND RESTATED STOCK OPTION PLAN
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1 |
Definitions |
As used herein, unless there is something in the subject matter or context inconsistent therewith, the following terms will have the meanings set forth below:
(a) |
Administrator means, initially, the President of the Company and thereafter will mean such director or other senior officer or employee of the Company as may be designated as Administrator by the Board from time to time. |
(b) |
Amended and Restated ROFR and Co-Sale Agreement means the Amended and Restated Right of First Refusal and Co-Sale Agreement, dated as of March 23, 2020, between the Company and certain shareholders from time to time party thereto. |
(c) |
Amended and Restated Voting Agreement means the Amended and Restated Voting Agreement, dated as of March 23, 2020, between the Company and certain shareholders from time to time party thereto. |
(d) |
Award Date means the date on which the Board awards a particular Option or such other effective award date determined by the Board. |
(e) |
Board means the board of directors of the Company, or any committee thereof to which the board of directors of the Company has delegated the power to administer and grant Options under the Plan. |
(f) |
Cause means: |
(i) |
Cause as such term is defined in the written employment agreement between the Company and the Option Holder; or |
(ii) |
in the event there is no written employment agreement between the Company and the Option Holder or Cause is not defined therein, the usual meaning of just cause under the common law or the laws of the jurisdiction in which the Option Holder is employed. |
(g) |
Code has the meaning given to that term under section 3.11 |
(h) |
Common Share or Common Shares means, as the case may be, one or more common shares without par value in the capital of the Company. |
(i) |
Consultant means any individual, such as a service provider pursuant to a consulting or services agreement, as may, from time to time, be permitted or not precluded by the rules and policies of the applicable Regulatory Authorities to be granted Options. |
(j) |
Company means AbCellera Biologics Inc. |
(k) |
Compensation Committee means the compensation committee of the Company, if and as constituted from time to time. |
(l) |
Convertible Shares has the meaning given to that term under section 3.4(f). |
(m) |
Director means any individual holding the office of director of the Company. |
(n) |
Employee means any individual regularly employed on a full-time basis by the Company or any of its subsidiaries as may, from time to time, be permitted or not precluded by the rules and policies of the applicable Regulatory Authorities to be granted Options. |
(o) |
Equity Securities means: |
(i) |
Shares or any other security of the Company that carries the residual right to participate in the earnings of the Company and, on liquidation, dissolution or winding-up, in the assets of the Company, whether or not the security carries voting rights; |
(ii) |
any warrants, options or rights entitling the holders thereof to purchase or acquire any such securities; or |
(iii) |
any securities issued by the Company which are convertible or exchangeable into such securities. |
(p) |
Exercise Notice means the notice respecting the exercise of an Option, in the form set out as Schedule B hereto, duly executed by the Option Holder. |
(q) |
Exercise Period means the period during which a particular Option may be exercised and is the period from and including the Award Date through to and including the Expiry Date. |
(r) |
Exercise Price means the price at which an Option may be exercised as determined in accordance with section 3.5. |
(s) |
Expiry Date means the date determined in accordance with section 3.4 and after which a particular Option cannot be exercised. |
(t) |
Fixed Expiry Date has the meaning given to that term under section 3.4. |
(u) |
IPO means the offering and sale to the public of securities of the Company in connection with which the securities of the Company are listed or quoted on an organized trading facility. |
(v) |
ISO has the meaning given to that term under section 3.11. |
(w) |
Market Value means the market value of the Common Shares as determined in accordance with section 3.5. |
(x) |
Option means an option to acquire Common Shares, awarded to a Director, Employee or Consultant under the Plan. |
2
(y) |
Option Assignor has the meaning given to that term under section 3.4(a). |
(z) |
Option Certificate means the certificate, in the form set out as Schedule A hereto, evidencing an Option. |
(aa) |
Option Direction has the meaning given to that term under section 2.3. |
(bb) |
Option Holder means a (i) Director, Employee or Consultant, or (ii) former Director, Employee or Consultant, or (ii) Permitted Assignee of any of the Persons referenced in clauses (i) or (ii) of this definition, in each case who holds an unexercised and unexpired Option or, where applicable, the Personal Representative of such person. |
(cc) |
Permitted Assignee means the Person identified to the Company in an Option Direction who in all circumstances may be granted Options by the Company pursuant to a prospectus exemption under applicable securities laws and regulations, as determined by the Company to its sole satisfaction. |
(dd) |
Person means any individual, partnership, joint venture, syndicate, sole proprietorship, company or corporation with or without share capital, trust, trustee, executor, administrator, or other legal personal representatives, regulatory body or agency, government or governmental agency, authority or entity howsoever designated or constituted. |
(ee) |
Personal Representative means: |
(i) |
in the case of a deceased Option Holder, the executor or administrator of the deceased duly appointed by a court or public authority having jurisdiction to do so; and |
(ii) |
in the case of an Option Holder who for any reason is unable to manage his or her affairs, the person entitled by law to act on behalf of such Option Holder. |
(ff) |
Plan means this stock option plan. |
(gg) |
Purchaser has the meaning given to that term under section 3.4(f). |
(hh) |
Regulatory Authorities means all stock exchanges, inter-dealer quotation networks and other organized trading facilities on which the Shares are listed and all securities commissions or similar securities regulatory bodies having jurisdiction over the Company. |
(ii) |
Selling Shareholders has the meaning given to that term under section 3.4(f). |
(jj) |
Share or Shares means, as the case may be, one or more Common Shares or shares of any other class in the share capital of the Company from time to time. |
(kk) |
Substantial Sale has the meaning given to that term under section 3.4(f). |
(ll) |
Termination Date means: |
3
(i) |
in the case of the resignation of the Option Holders, or Option Assignors, as the case may be, employment or the termination of the Option Holders, or Option Assignors, as the case may be, consulting or service contract by the Option Holder, the date that the Option Holder or the Option Assignor, as the case may be, provides notice of such resignation or termination to the Company; or |
(ii) |
in the case of the termination of the Option Holders, or Option Assignors, as the case may be, employment or consulting or service contract by the Company for any reason other than death or disability, the date that the Company delivers written notice of termination of the Option Holders, or Option Assignors, as the case may be, employment or consulting or service contract to the Option Holder or the Option Assignor, as the case may be; or |
(iii) |
in the case of the expiry of a fixed-term employment or consulting or service contract that is not renewed or extended, the last day of the term. |
(mm) |
Transfer includes any sale, exchange, assignment, gift, bequest, disposition, mortgage, charge, pledge, encumbrance, grant of a security interest or other arrangement by which possession, legal title or beneficial ownership passes from one Person to another, or to the same Person in a different capacity, whether or not voluntarily and whether or not for value, and any agreement to effect any of the foregoing, including any sale or exchange pursuant to a plan of arrangement, merger, consolidation, acquisition or similar transaction; and the words Transferred, Transferring and similar words have corresponding meanings. |
(nn) |
US Participant has the meaning given to that term under section 3.11. |
1.2 |
Choice of Law |
The Plan is established under, and the provisions of the Plan will be subject to and interpreted and construed in accordance with, the laws of the Province of British Columbia.
1.3 |
Headings |
The headings used herein are for convenience only and are not to affect the interpretation of the Plan.
ARTICLE 2
PURPOSE AND PARTICIPATION
2.1 |
Purpose |
The purpose of the Plan is to provide the Company with a share-related mechanism to attract, retain and motivate qualified Directors, Employees and Consultants, to reward such of those Directors, Employees and Consultants as may be awarded Options under the Plan by the Board from time to time for their contributions toward the long term goals of the Company and to enable and encourage such Directors, Employees and Consultants to acquire Common Shares as long term investments.
2.2 |
Participation |
Prior to the date immediately preceding the closing of the initial public offering of the Common Shares, the Compensation Committee will, from time to time, recommend to the Board those Directors, Employees and Consultants, if any, to whom Options should be awarded and the Board will, from time to time and in its sole discretion, taking into account any recommendations of the Compensation Committee, determine those Directors, Employees and Consultants, if any, to whom Options are to be awarded. Following the closing of the initial public offering of the Common Shares, the Compensation Committee and Board shall make no further grants of Options under this Plan.
4
2.3 |
Notification of Award |
Following the approval by the Board of the awarding of an Option, the Administrator will notify the Director, Employee and Consultant in writing of the award and will, subject to the following sentence of this section 2.3, enclose with such notice the Option Certificate representing the Option so awarded. Upon notification of the proposed Option award by the Company but prior to the granting of such Option, the Director, Employee or Consultant to whom the Options are to be granted may, pursuant to an irrevocable direction delivered to the Company by such Director, Employee or Consultant, in the form set out as Schedule C hereto (the Option Direction), direct the Company to grant such Options to such Directors, Employees or Consultants Permitted Assignee and to register the corresponding Option Certificate in the name of such Directors, Employees or Consultants Permitted Assignee.
2.4 |
Copy of Plan |
Each Option Holder, concurrently with the notice of the award of the Option, will be provided with a copy of the Plan. A copy of any amendment to the Plan will be promptly provided by the Administrator to each Option Holder.
2.5 |
Limitation |
The Plan does not give any Option Holder that is a Director, nor any Option Assignor (as defined below) who is a Director, the right to serve or continue to serve as a Director of the Company nor does it give any Option Holder that is an Employee, nor any Option Assignor who is an Employee, the right to be or to continue to be employed with the Company, nor does it give any Option Holder that is a Consultant, nor any Option Assignor who is a Consultant, the right to have a consulting relationship with the Company or provide services to the Company.
ARTICLE 3
TERMS AND CONDITIONS OF OPTIONS
3.1 |
Board to Issue Common Shares |
The Common Shares to be issued to Option Holders upon the exercise of Options will be authorized and unissued Common Shares the issuance of which will have been authorized by the Board.
3.2 |
Number of Common Shares |
Subject to adjustment as provided for in section 3.9 of the Plan, the number of Common Shares that will be available for Option Holders to acquire pursuant to Options granted under the Plan will be the number of Common Shares allocated to previously granted Options on the date immediately preceding the closing of the initial public offering of the Common Shares. For greater certainty, if any Option expires or otherwise terminates for any reason without having been exercised in full, the number of Common Shares in respect of which the Option was not exercised will not again be available for the purposes of the Plan.
5
3.3 |
Term of Option |
An Option Holder may exercise an Option in whole or in part at any time or from time to time during the Exercise Period. Any Option or part thereof not exercised within the Exercise Period will terminate and become null, void and of no effect as of 5:00 p.m. local time in Vancouver, British Columbia on the Expiry Date.
3.4 |
Termination |
The Expiry Date of an Option will be the earlier of: (i) the date that is the tenth anniversary of the Award Date of such Option, or (ii) such other date so fixed by the Board at the time the particular Option is awarded provided that such date will be no later than the tenth anniversary of the Award Date of such Option (the Fixed Expiry Date), or the date established, if applicable, in subsections (a) to (f) below:
(a) |
Death |
In the event that the Option Holder should die while he or she is a Director (if he or she holds his or her Option as a Director) or Employee (if he or she holds his or her Option as an Employee) or Consultant (if he or she holds his or her Option as a Consultant), the Expiry Date for any vested portion or portions of the Option will be the date that is twelve months after the date of the Option Holders death. The Expiry Date for any unvested portion of the Option will be the date of the Option Holders death. In the event that the Option Holder is a Permitted Assignee and the Director, Employee or Consultant, as the case may be, who delivered the Option Direction in respect of such Permitted Assignee (the Option Assignor) should die while he or she is a Director, Employee or Consultant, as the case may be, (i) the Expiry Date for any vested portion or portions of such Permitted Assignees Option will be the date that is twelve months after the date of the death of the Option Assignor and (ii) the Expiry Date for any unvested portion of the Option will be the date of the death of Option Assignor.
(b) |
Disability |
In the event that the Option Holder becomes permanently disabled while he or she is a Director (if he or she holds his or her Option as a Director) or Employee (if he or she holds his or her Option as an Employee) or Consultant (if he or she holds his or her Option as a Consultant) and ceases to be a Director, Employee or Consultant as a result of the permanent disability, the Expiry Date for any vested portion or portions of the Option will be the date that is six months after the date that the Option Holder ceases to be a Director, Employee or Consultant, as the case may be. The Expiry Date for any unvested portion of the Option will be the date that the Option Holder ceases to be a Director, Employee or Consultant, as the case may be. In the event that the Option Holder is a Permitted Assignee and the Option Assignor becomes permanently disabled while he or she is a Director, Employee or Consultant, as the case may be, and ceases to be a Director, Employee or Consultant as a result of the permanent disability, (i) the Expiry Date for any vested portion or portions of the Option will be the date that is six months after the date that the Option Assignor ceases to be a Director, Employee or Consultant, as the case may be, and (ii) the Expiry Date for any unvested portion of the Option will be the date of the date the Option Assignor ceases to be a Director, Employee or Consultant, as the case may be.
6
(c) |
Ceasing to Hold Office |
In the event that the Option Holder holds his or her Option as a Director of the Company and such Option Holder ceases to be a Director of the Company, or in the event that the Option Holder is a Permitted Assignee and the Option Assignor ceases to be a Director, in either case other than by reason of death or permanent disability, the Expiry Date for any vested portion or portions of the Option will be, unless otherwise provided for in the Option Certificate, the 90th day following the date that the Option Holder or the Option Assignor, as applicable, ceases to be a Director of the Company unless the Option Holder or the Option Assignor, as applicable, ceases to be a Director of the Company as a result of:
(i) |
ceasing to meet the qualifications required under applicable laws; |
(ii) |
being removed from office in accordance with applicable laws; or |
(iii) |
an order made by any Regulatory Authority having jurisdiction to so order, |
in which case the Expiry Date will be the date that the Option Holder or the Option Assignor, as applicable, ceases to be a Director of the Company. The Expiry Date for any unvested portion of the Option will be the date that the Option Holder or the Option Assignor, as applicable, ceases to be a Director of the Company.
(d) |
Ceasing to be an Employee or Consultant |
In the event that the Option Holder holds his or her Option as an Employee or Consultant of the Company and such Option Holder ceases to be an Employee or Consultant of the Company, or in the event that the Option Holder is a Permitted Assignee and the Option Assignor ceases to be an Employee or Consultant of the Company, in either case other than by reason of death or permanent disability, the Expiry Date of any vested portion or portions of the Option will be the 90th day following the Termination Date unless the Option Holder or the Option Assignor, as applicable, ceases to be an Employee or Consultant of the Company as a result of:
(i) |
termination of employment for Cause (if he or she holds his or her Option as an Employee or delivered the Option Direction in respect of such Option while an Employee of the Company, as the case may be); or |
(ii) |
termination for failure to fulfil services pursuant to a consulting or services agreement (if he or she holds his or her Option as a Consultant or delivered the Option Direction in respect of such Option while a Consultant of the Company, as the case may be); or |
(iii) |
an order made by any Regulatory Authority having jurisdiction to so order, |
in which case the Expiry Date will be the Termination Date. The Expiry Date for any unvested portion of the Option will be the Termination Date.
7
(e) |
Initial Public Offering |
Prior to completion of an IPO, the Board or the Regulatory Authorities or the underwriter may require that there be no outstanding Options and the Company may deliver a notice to the Option Holder to this effect, in which case the unvested portion of the Option held by the Option Holder, if any, will immediately vest and the Expiry Date of the Option will be the 30th day following the date of the notice. In the event that the Company does not complete the IPO, the Company will, to the extent reasonably practicable, grant to the Option Holder an Option equivalent (including the original vesting terms, if any) to the Option cancelled or exercised, provided that in the case of an Option that was exercised, the Option Holder surrenders for cancellation the Common Shares acquired upon the exercise of the Option.
(f) |
Substantial Sale |
If security holders of the Company (the Selling Shareholders) have agreed to Transfer to a Person, or Persons acting jointly or in concert, (a Purchaser), Equity Securities representing more than 66 2/3% of the Common Shares (a Substantial Sale) and the Purchaser also offers to buy the Options of an Option Holder, then the Option Holder must sell his or her Options to the Purchaser at a price equal to:
The number of Shares then Exercisable under the Option |
X | The price per Share being paid by the Purchaser to the Selling Shareholder minus the exercise price per Share under the Option |
and on otherwise similar terms and conditions as are applicable under the Substantial Sale. If the Selling Shareholders have agreed to sell Equity Securities which are convertible into Shares only (Convertible Shares), the price per Share applicable in the above formula will be calculated on an as converted basis (and if there is more than one conversion rate applicable to different classes or series of Convertible Shares outstanding, the conversion will be computed on a pro rata basis based upon the ratio of the number of Shares which holders of each class or series of Convertible Shares may acquire to the total number of Shares which all holders of all classes and series of Convertible Shares may acquire).
If the Purchaser offers to buy the Options of an Option Holder and the Option Holder does not sell the Option Holders Options to the Purchaser as contemplated above, then that Option Holders Options will expire, terminate and be cancelled on completion of the Substantial Sale.
Notwithstanding section 3.4(f) above, the Board may, in a manner no less favourable from a financial point of view to an Option Holder than the treatment provided in section 3.4(f) above, determine the manner in which all unexercised Options granted under this Plan will be treated in the event of a Substantial Sale.
Notwithstanding anything else contained in the Plan, the Board may in its discretion and without approval of the Companys shareholders (a) extend the Expiry Date of any Option, provided that in no case will an Option be exercisable later than the tenth anniversary of the Award Date of the Option; or (b) accelerate the vesting terms applicable to an Option.
8
3.5 |
Exercise Price |
The price at which an Option Holder may purchase a Common Share upon the exercise of an Option will be as set forth in the Option Certificate issued in respect of such Option and in any event will not be less than the Market Value of the Common Shares as of the Award Date. The Market Value of the Common Shares for a particular Award Date will be determined as follows:
(a) |
for each organized trading facility on which the Common Shares are listed, Market Value will be determined by a resolution of the Board and must be either: |
(i) |
the closing trading price of the Common Shares on the last trading day immediately preceding the Award Date; or |
(ii) |
a value that is within the parameters set by the guidelines or policies of such organized trading facility; |
(b) |
if the Common Shares trade on an organized trading facility outside of Canada, then the Market Value determined for that organized trading facility will be converted into Canadian dollars at a conversion rate determined by the Administrator having regard for the published conversion rates as of the Award Date; |
(c) |
if the Common Shares are listed on more than one organized trading facility, then Market Value will be the greatest of the Market Values determined for each organized trading facility on which those Common Shares are listed as determined for each organized trading facility in accordance with subsections (a) and (b) above; |
(d) |
if the Common Shares are listed on one or more organized trading facility but have not traded during the ten trading day period immediately preceding the Award Date, then the Market Value will be, subject to the necessary approvals of the applicable Regulatory Authorities, such value as is determined by resolution of the Board; and |
(e) |
if the Common Shares are not listed on any organized trading facility, then the Market Value will be, subject to the necessary approvals of the applicable Regulatory Authorities, such value as is determined by the Board. |
Notwithstanding anything else contained herein, in no case will the Market Value be less than the minimum prescribed by each of the organized trading facilities as would apply to the Award Date in question.
3.6 |
Additional Terms |
Subject to all applicable securities laws and regulations and the rules and policies of all applicable Regulatory Authorities, the Board may attach other terms and conditions to the grant of a particular Option, such terms and conditions to be referred to in a schedule attached to the Option Certificate. These terms and conditions may include, but are not necessarily limited to, the following:
(a) |
providing that an Option expires on a date other than as provided for herein, provided that in no case will an Option be exercisable later than the tenth anniversary of the Award Date of the Option; |
(b) |
providing that a portion or portions of an Option vest after certain periods of time or upon the occurrence of certain events, or expire after certain periods of time or upon the occurrence of certain events other than as provided for herein; and |
9
(c) |
providing that an Option be exercisable immediately, in full, notwithstanding that it has vesting provisions, upon the occurrence of certain events, such as a friendly or hostile takeover bid for the Company. |
3.7 |
Going Public Agreements |
If the Company proceeds to list its Shares on a public stock exchange or commences a public offering, each Option Holder will promptly enter into all such escrow, pooling or other agreements as are required by the securities regulatory authorities, the exchange, the agents or the underwriters in connection with such listing or public offering.
3.8 |
Assignment of Options |
Options may not be assigned or transferred, provided however that the Personal Representative of an Option Holder may, to the extent permitted by section 4.1, exercise the Option within the Exercise Period. Notwithstanding the foregoing, nothing in this section 3.8 shall (i) restrict a Director, Employee or Consultant from delivering an Option Direction to the Company or (ii) prohibit the Company from granting the Option referenced in such Option Direction to such Directors, Employees or Consultants Permitted Assignee and from registering the corresponding Option Certificate in the name of such Directors, Employees or Consultants Permitted Assignee, in each case as contemplated in section 2.3.
3.9 |
Adjustments |
If prior to the complete exercise of an Option the Common Shares are consolidated, subdivided, converted, exchanged or reclassified or in any way substituted for (collectively, the Event), an Option, to the extent that it has not been exercised, will be adjusted by the Board in accordance with such Event in the manner the Board deems appropriate. No fractional Common Shares will be issued upon the exercise of an Option and accordingly, if as a result of the Event, an Option Holder would become entitled to a fractional Common Share, such Option Holder will have the right to purchase only the next lowest whole number of Common Shares and no payment or other adjustment will be made with respect to the fractional interest so disregarded.
3.10 |
Option Grant and Vesting Terms |
Unless otherwise determined by the Board in accordance with the terms and conditions of this Plan, Options will be granted by the Board and an Option granted to an Option Holder will vest over a three year period of which one-quarter of such Option will vest immediately and of the remaining unvested options will vest in equal portions over three years such that one-third will vest on the first, second and third anniversary of the Award Date.
For clarity, the Board may deviate from the terms of this section 3.10 with respect to the grant of Options provided that such grant is made in accordance with the other terms of this Plan.
Unless otherwise determined by the Board in accordance with the terms and conditions of this Plan and subject to applicable laws, the vesting schedule for an Option Holders Option shall be suspended during (a) any leave of absence taken by the Option Holder or the Option Assignor, as the case may be, that is approved by the Company or (b) any statutory-protected leave of absence taken by the Option Holder or the Option Holder, as the case may be. Upon expiration of any such leave of absence, the vesting schedule for such Option shall recommence and any applicable vesting dates for such Option shall be recalculated based on the length of such leave of absence.
10
3.11 |
U.S. Participants |
Any Option granted under the Plan to an Option Holder who is a citizen or resident of the United States (including its territories, possessions and all areas subject to the jurisdiction) (a U.S. Participant) may be an incentive stock option (an ISO) within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, of the United States (the Code), but only if so designated by the Company in the agreement evidencing such Option. No provision of this Plan, as it may be applied to a U.S. Participant with respect to Options which are designated as ISOs, shall be construed so as to be inconsistent with any provision of Section 422 of the Code or the Treasury Regulations thereunder. Grants of Options to U.S. Participants which are not designated as or otherwise do not qualify as ISOs will be treated as nonstatutory stock options for U.S. federal tax purposes. Notwithstanding anything in this Plan contained to the contrary, the following provisions shall apply to ISOs granted to each U.S. Participant:
(a) |
ISOs shall only be granted to individual U.S. Participants who are, at the time of grant, employees of the Company within the meaning of the Code. Any Director who is a U.S. Participant shall be ineligible to vote upon the granting of such Option; |
(b) |
the aggregate fair market value (determined as of the time an ISO is granted) of the Common Shares subject to ISOs exercisable for the first time by a U.S. Participant during any calendar year under this Plan and all other stock option plans, within the meaning of Section 422 of the Code, of the Company shall not exceed One Hundred Thousand Dollars in U.S. funds (U.S.$100,000); |
(c) |
the Exercise Price for Common Shares under each ISO granted to a U.S. Participant pursuant to this Plan shall be not less than fair market value of such Common Shares at the time the Option is granted, as determined in good faith by the Board at such time (unless such ISO is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code); |
(d) |
if any U.S. Participant to whom an ISO is to be granted under the Plan at the time of the grant of such ISO is the owner of shares possessing more than ten percent (10%) of the total combined voting power of all classes of shares of the Company, then the following special provisions shall be applicable to the ISO granted to such individual: |
(i) |
the Exercise Price (per Common Share) subject to such ISO shall not be less than one hundred ten percent (110%) of the fair market value of one Common Share at the time of grant; and |
(ii) |
for the purposes of this section 3.11 only, the Exercise Period shall not exceed five (5) years from the date of grant; |
(e) |
no ISO may be granted hereunder to a U.S. Participant following the expiration of ten (10) years after the date on which this Plan is adopted by the Company or the date on which the Plan is approved by the shareholders of the Company, whichever is earlier; and |
(f) |
no ISO granted to a U.S. Participant under the Plan shall become exercisable unless and until the Plan shall have been approved by the shareholders of the Company. |
3.12 |
Australian Participants |
For purposes of any Option granted under the Plan to a grantee who is a resident of Australia or subject to taxation in Australia under the Income Tax Assessment Act 1997 (Cth) (an Australian Participant), it is stated that Subdivision 83A-C of the Income Tax Assessment Act 1997 (Cth) (the Income Tax Assessment Act) applies to any grants of Options under the Plan (subject to the requirements of that Income Tax Assessment Act), such that Options granted to Australian participants are intended to qualify for deferred taxation under that Subdivision.
11
ARTICLE 4
EXERCISE OF OPTION
4.1 |
Exercise of Option |
An Option may be exercised only by the Option Holder or the Personal Representative of the Option Holder. An Option Holder or the Personal Representative of the Option Holder may exercise the vested portion or portions of an Option in whole or in part at any time or from time to time during the Exercise Period up to 5:00 p.m. local time in Vancouver, British Columbia on the Expiry Date by delivering to the Administrator an Exercise Notice, the applicable Option Certificate and a certified cheque or bank draft payable to AbCellera Biologics Inc. in an amount equal to the aggregate Exercise Price of the Common Shares to be purchased pursuant to the exercise of the Option.
4.2 |
Amended and Restated Voting Agreement and Amended and Restated ROFR and Co-Sale Agreement |
It is a condition of the Plan that an Option Holder who wishes to exercise an Option in whole or in part prior to the completion of an IPO must, if required by the Board, be a party to the Amended and Restated Voting Agreement, the Amended and Restated ROFR and Co-Sale Agreement, or any other agreement, instrument or document to which any of the Companys shareholders are party and which relate to rights and obligations with respect to the holding or sale of Common Shares, by executing a joinder agreement substantially in the form provided by the Company. The Amended and Restated Voting Agreement and Amended and Restated ROFR and Co-Sale Agreement establish certain rights and obligations with respect to the holding and sale of all Common Shares purchased from time to time by the Option Holder upon the exercise of Options.
4.3 |
Execution of Amended and Restated Voting Agreement and Amended and Restated ROFR and Co-Sale Agreement |
Prior to the completion of an IPO, as soon as practicable following the receipt of the Exercise Notice, the Administrator will establish whether the Option Holder is a party to the Amended and Restated Voting Agreement, the Amended and Restated ROFR and Co-Sale Agreement or any other agreement, instrument or document to which any of the Companys shareholders are party and which relate to rights and obligations with respect to the holding or sale of Common Shares. If the Option Holder is not a party to the Amended and Restated Voting Agreement, the Amended and Restated ROFR and Co-Sale Agreement, or any other agreement, instrument or document to which any of the Companys shareholders are party and which relate to rights and obligations with respect to the holding or sale of Common Shares, and if so required by the Board, the Administrator will cause to be delivered to the Option Holder a joinder agreement substantially in the form provided by the Company for execution by the Option Holder and return to the Administrator.
4.4 |
Issue of Shares |
As soon as practicable following the receipt of the Exercise Notice, the Administrator will, in his sole discretion, cause to be delivered to the Option Holder a certificate for the Common Shares purchased by the Option Holder or a copy of such certificate and the original of such certificate will be placed in the minute book of the Company or cause to be delivered to the Option Holder other evidence of ownership of such Common Shares. If the number of Common Shares in respect of which the Option was exercised is less than the number of Common Shares subject to the Option Certificate surrendered, the Administrator will forward a new Option Certificate to the Option Holder concurrently with delivery of the share certificate or other evidence of ownership of Common Shares for the balance of the Common Shares available under the Option.
12
4.5 |
Condition of Issue |
The Options and the issue of Common Shares by the Company pursuant to the exercise of Options are subject to the terms and conditions of the Plan and compliance with the rules and policies of all applicable Regulatory Authorities with respect to the granting of such Options and the issuance and distribution of such Common Shares, and to all applicable securities laws and regulations. The Option Holder agrees to comply with all such laws, regulations, rules and policies and agrees to furnish to the Company any information, reports or undertakings required to comply with, and to fully cooperate with, the Company in complying with such laws, regulations, rules and policies.
ARTICLE 5
ADMINISTRATION
5.1 |
Administration |
The Plan will be administered by the Administrator on the instructions of the Board. The Compensation Committee may, from time to time, recommend to the Board how the Plan should be administered. The Board may make, amend and repeal at any time and from time to time such policies not inconsistent with the Plan as it may deem necessary or advisable for the proper administration and operation of the Plan and such policies will form part of the Plan. The Board may delegate to the Administrator or any director, officer or employee of the Company such administrative duties and powers as it may see fit.
5.2 |
Interpretation |
The interpretation by the Board of any of the provisions of the Plan and any determination by it pursuant thereto will be final and conclusive and will not be subject to any dispute by any Option Holder. No member of the Board or any person acting pursuant to authority delegated by it hereunder will be liable for any action or determination in connection with the Plan made or taken in good faith and each member of the Board and each such person will be entitled to indemnification with respect to any such action or determination in the manner provided for by the Company.
ARTICLE 6
AMENDMENT, TERMINATION AND NOTICE
6.1 |
Prospective Amendment |
The Board may, from time to time and in accordance with any third party obligations of the Company, amend the Plan and the terms and conditions of any Option thereafter to be granted and, without limiting the generality of the foregoing, may make such amendment for the purpose of meeting any changes in any relevant law, rule or regulation applicable to the Plan, any Option or the Common Shares, or for any other purpose which may be permitted by all relevant laws, regulations, rules and policies provided always that any such amendment (with the exception of an amendment pursuant to section 3.4(f)) will not alter the terms or conditions of any Option or impair any right of any Option Holder pursuant to any Option awarded prior to such amendment.
6.2 |
Retrospective Amendment |
The Board may from time to time retrospectively amend the Plan and, with the consent of the affected Option Holders, retrospectively amend the terms and conditions of any Options which have been previously granted.
13
6.3 |
Approvals |
The Plan and any amendments hereto are subject to all necessary approvals of the applicable Regulatory Authorities.
6.4 |
Termination |
The Board may terminate the Plan at any time provided that such termination will not alter the terms or conditions of any Option or impair any right of any Option Holder pursuant to any Option awarded prior to the date of such termination which will continue to be governed by the provisions of the Plan.
6.5 |
Agreement |
The Company and every Option awarded hereunder will be bound by and subject to the terms and conditions of the Plan. By accepting an Option granted hereunder, the Option Holder has expressly agreed with the Company to be bound by the terms and conditions of the Plan.
6.6 |
Notice |
All notices, requests, demands and other communications required or permitted to be given under this Plan and the Options granted under this Plan shall be in writing and shall be either served personally on the party to whom notice is to be given, in which case notice shall be deemed to have been duly given on the date of such service; emailed, in which case notice shall be deemed to have been given on the date the email was sent; faxed, in which case notice shall be deemed to have been duly given on the date the fax is sent; or mailed to the party to whom notice is to be given, by first class mail, registered or certified, return receipt requested, postage prepaid, and addressed to the party at his or its most recent known address, in which case such notice shall be deemed to have been duly given on the tenth postal delivery day following the date of such mailing.
14
SCHEDULE A
ABCELLERA BIOLOGICS INC.
SIXTH AMENDED AND RESTATED STOCK OPTION PLAN
OPTION CERTIFICATE
This Certificate is issued pursuant to the provisions of the AbCellera Biologics Inc. (the Company) sixth amended and restated stock option plan (the Plan) and evidences that ● is the holder (the Option Holder) of an option (the Option) to purchase up to ● Common Shares Without Par Value (the Common Shares) in the capital stock of the Company. The Exercise Price of the Option is Cdn. $● per Common Share.
Subject to the provisions of the Plan:
(a) |
the Award Date of the Option is ●, ●; and |
(b) |
the Fixed Expiry Date of the Option is ●, ●. |
The vested portion or portions of the Option may be exercised at any time and from time to time from and including the Award Date through to 5:00 p.m. local time in Vancouver, British Columbia on the Expiry Date by delivering to the Administrator of the Plan an Exercise Notice, in the form provided in the Plan, together with this Certificate and a certified cheque or bank draft payable to AbCellera Biologics Inc. in an amount equal to the aggregate of the Exercise Price of the Common Shares in respect of which the Option is being exercised.
Upon receiving the Exercise Notice, the Administrator may deliver a joinder agreement substantially in the form provided by the Company to the Option Holder. The Option and the issue of Common Shares by the Company pursuant to the exercise of the Option are subject to the Option Holder signing and returning to the Administrator a copy of the joinder agreement, if so required by the Administrator.
This Certificate and the Option evidenced hereby are not assignable, transferable or negotiable and are subject to the detailed terms and conditions contained in the Plan, the terms and conditions of which the Option Holder hereby expressly agrees with the Company to be bound by. This Certificate is issued for convenience only and in the case of any dispute with regard to any matter in respect hereof, the provisions of the Plan and the records of the Company will prevail.
The Option is also subject to the terms and conditions contained in the schedules, if any, attached hereto. All terms not otherwise defined in this Certificate will have the meanings given to them under the Plan.
Dated this ● day of ●, ●.
ABCELLERA BIOLOGICS INC. | ||
Per: | ||
Administrator, Stock Option Plan
AbCellera Biologics Inc. |
A-1
OPTION CERTIFICATESCHEDULE
The additional terms and conditions attached to the Option represented by this Certificate are as follows:
1. |
●; and |
2. |
●. |
ABCELLERA BIOLOGICS INC. | ||
Per: | ||
Administrator, Stock Option Plan
AbCellera Biologics Inc. |
A-2
SCHEDULE B
ABCELLERA BIOLOGICS INC.
SIXTH AMENDED AND RESTATED STOCK OPTION PLAN
NOTICE OF EXERCISE OF OPTION
TO: |
The Administrator, Stock Option Plan |
AbCellera Biologics Inc.
2215 Yukon Street
Vancouver, British Columbia, V5Y 0A1
The undersigned hereby irrevocably gives notice, pursuant to the AbCellera Biologics Inc. sixth amended and restated stock option plan (the Plan), of the exercise of the Option to acquire and hereby subscribes for (cross out inapplicable item):
(a) |
all of the Common Shares; or |
(b) |
___________________ of the Common Shares, |
which are the subject of the Option Certificate attached hereto.
The undersigned tenders herewith a certified cheque or bank draft (circle one) payable to AbCellera Biologics Inc. in an amount equal to the aggregate Exercise Price of the aforesaid Common Shares and directs the Company to issue the certificate evidencing said Common Shares in the name of the undersigned to be mailed to the undersigned at the following address:
__________________________________
__________________________________
__________________________________
The undersigned acknowledges that upon receiving the Exercise Notice, the Administrator may deliver a joinder agreement substantially in the form provided by the Company to the undersigned. The Option and the issue of Common Shares by the Company pursuant to the exercise of the Option are subject to the undersigned signing and returning to the Administrator a copy of the joinder agreement, if so required by the Administrator.
By executing this Notice of Exercise of Option the undersigned hereby confirms that the undersigned has read the Plan and agrees to be bound by the provisions of the Plan, including without limitation section 4.2. All terms not otherwise defined in this Notice of Exercise of Option will have the meanings given to them under the Option Certificate.
DATED the ________ day of ____________________, __________.
__________________________________
Signature of Option Holder
B-1
SCHEDULE C
FORM OF OPTION DIRECTION
IRREVOCABLE OPTION DIRECTION
(this Direction)
TO: |
AbCellera Biologics Inc. (the Company) |
Reference is made herein to the Companys sixth amended and restated stock option plan, as amended, restated, modified and supplemented from time to time (the Plan). All capitalized terms used but not defined herein shall have the meaning ascribed to such term as set out in the Plan.
This Direction constitutes an Option Direction under the Plan.
Pursuant to section 2.3 of the Plan, the Company is hereby irrevocably directed to grant the following Option as follows:
Name of Permitted Assignee |
Address for Registration |
Number of Options |
Delivery Instructions | |||
[] |
[] |
[] |
[] |
The undersigned hereby confirms to the Company that the grantee of the Option set forth above is a Permitted Assignee.
[Remainder of page intentionally left blank signature on following page]
C-1
DATED the ________ day of ____________________, __________.
__________________________________
[Signature of Option Assignor]
C-2
Exhibit 10.13
ABCELLERA BIOLOGICS INC.
2020 SHARE OPTION AND INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the AbCellera Biologics Inc. 2020 Share Option and Incentive Plan (the Plan). The purpose of the Plan is to encourage and enable the officers, employees, Non-Employee Directors and Consultants of AbCellera Biologics Inc. (the Company) and its Affiliates upon whose judgment, initiative and efforts the Company largely depends for the successful conduct of its business to acquire a proprietary interest in the Company. It is anticipated that providing such persons with a direct stake in the Companys welfare will assure a closer identification of their interests with those of the Company and its shareholders, thereby stimulating their efforts on the Companys behalf and strengthening their desire to remain with the Company or one of its Affiliates.
The following terms shall be defined as set forth below:
Act means the U.S. Securities Act of 1933, as amended, and the rules and regulations thereunder.
Administrator means either the Board or the compensation committee of the Board or a similar committee performing the functions of the compensation committee and which is comprised of not less than two Non-Employee Directors who are independent.
Affiliate means, at the time of determination, any parent or subsidiary of the Company as such terms are defined in Rule 405 of the Act. The Board will have the authority to determine the time or times at which parent or subsidiary status is determined within the foregoing definition.
Award or Awards, except where referring to a particular category of grant under the Plan, shall include Incentive Share Options, Non-Qualified Share Options, Share Appreciation Rights, Restricted Share Units, Restricted Share Awards, Unrestricted Share Awards, Cash-Based Awards, and Dividend Equivalent Rights.
Award Certificate means a written or electronic document setting forth the terms and provisions applicable to an Award granted under the Plan. Each Award Certificate is subject to the terms and conditions of the Plan.
Board means the Board of Directors of the Company.
Canadian Employees means officers, employees, and Non-Employee Directors of the Company, or a corporation that does not deal at arms length with the Company for purposes of the Tax Act, who are residents of Canada for purposes of the Tax Act.
Cash-Based Award means an Award entitling the recipient to receive a cash-denominated payment.
Code means the U.S. Internal Revenue Code of 1986, as amended, and any successor Code, and related rules, regulations and interpretations.
Consultant means a consultant or adviser who provides bona fide services to the Company or an Affiliate as an independent contractor and who qualifies as a consultant or advisor under Instruction A.1.(a)(1) of Form S-8 under the Act.
Dividend Equivalent Right means an Award entitling the grantee to receive credits based on cash dividends that would have been paid on the Shares specified in the Dividend Equivalent Right (or other award to which it relates) if such Shares had been issued to and held by the grantee.
Effective Date means the date on which the Plan becomes effective as set forth in Section 19.
Exchange Act means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.
Fair Market Value of the Shares on any given date means the fair market value of the Shares determined in good faith by the Administrator; provided, however, that if the Shares are listed on the National Association of Securities Dealers Automated Quotation System (NASDAQ), Nasdaq Global Market, The New York Stock Exchange or another national securities exchange or traded on any established market, the determination shall be made by reference to market quotations. If there are no market quotations for such date, the determination shall be made by reference to the last date preceding such date for which there are market quotations; provided further, however, that if the date for which Fair Market Value is determined is the Registration Date, the Fair Market Value shall be the Price to the Public (or equivalent) set forth on the cover page for the final prospectus relating to the Companys initial public offering.
Incentive Share Option means any Share Option designated and qualified as an incentive stock option as defined in Section 422 of the Code.
Non-Employee Director means a member of the Board who is an employee for purposes of the Tax Act, but is not otherwise an employee of the Company or any Subsidiary.
Non-Qualified Share Option means any Share Option that is not an Incentive Share Option.
Option or Share Option means any option to purchase Shares granted pursuant to Section 5.
Registration Date means the date upon which the registration statement on Form S-1 that is filed by the Company with respect to its initial public offering is declared effective by the U.S. Securities and Exchange Commission.
Restricted Shares means the Shares underlying a Restricted Share Award that remain subject to a risk of forfeiture or the Companys right of repurchase.
2
Restricted Shares Award means an Award of Restricted Shares subject to such restrictions and conditions as the Administrator may determine at the time of grant.
Restricted Share Units means an Award of share units subject to such restrictions and conditions as the Administrator may determine at the time of grant.
Sale Event shall mean (i) the sale of all or substantially all of the assets of the Company on a consolidated basis to an unrelated person or entity, (ii) a merger, reorganization or consolidation pursuant to which the holders of the Companys outstanding voting power and outstanding shares immediately prior to such transaction do not own a majority of the outstanding voting power and outstanding shares or other equity interests of the resulting or successor entity (or its ultimate parent, if applicable) immediately upon completion of such transaction, (iii) the sale of all of the Shares of the Company to an unrelated person, entity or group thereof acting in concert, or (iv) any other transaction in which the owners of the Companys outstanding voting power immediately prior to such transaction do not own at least a majority of the outstanding voting power of the Company or any successor entity immediately upon completion of the transaction other than as a result of the acquisition of securities directly from the Company.
Sale Price means the value as determined by the Administrator of the consideration payable, or otherwise to be received by shareholders, per Share pursuant to a Sale Event.
Section 409A means Section 409A of the Code and the regulations and other guidance promulgated thereunder.
Service Relationship means any relationship as an employee, director or Consultant of the Company or any Affiliate (e.g., a Service Relationship shall be deemed to continue without interruption in the event an individuals status changes from full-time employee to part-time employee or Consultant).
Shares means the common shares of the Company, subject to adjustments pursuant to Section 3.
Share Appreciation Right means an Award entitling the recipient to receive Shares (or cash, to the extent explicitly provided for in the applicable Award Certificate) having a value equal to the excess of the Fair Market Value of the Shares on the date of exercise over the exercise price of the Share Appreciation Right multiplied by the number of Shares with respect to which the Share Appreciation Right shall have been exercised.
Subsidiary means any corporation or other entity (other than the Company) in which the Company has at least a 50 percent interest, either directly or indirectly.
Tax Act means the Income Tax Act (Canada), as amended, including any applicable regulations and guidance thereunder.
Ten Percent Owner means an employee who owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10 percent of the combined voting power of all classes of shares of the Company or any parent or subsidiary corporation.
3
Termination Date means, subject to any minimum applicable requirements contained in applicable employment standards legislation, the earlier of:
(i) if the grantees Service Relationship is terminated by the Company or Affiliate for any reason (whether lawful or unlawful), the earlier of (a) the date designated, if any, by the Company or Affiliate as the date on which the grantees Service Relationship ceases, or (b) the grantees last day of actual and active employment with or service to the Company or Affiliate, whether such day is selected by agreement with the grantee or unilaterally by the Company or Affiliate or otherwise; and, for the avoidance of doubt, in case of either (a) or (b), without regard to any period of notice of termination, pay in lieu of notice of termination, severance pay or other damages paid or payable to the grantee, under contract or common law, in or in respect of a period which follows the grantees last day of actual and active employment with or service to the Company or Affiliate;
(ii) if the grantee dies, the date of death; or
(iii) if the grantees Service Relationship is terminated by the grantee, the date on which the grantee provides notice of resignation to the Company or Affiliate; or
(iv) if the grantee ceases to be eligible to participate in the Plan for any reason not contemplated above, the date determined by the Company as the date the Service Relationship ends.
Unrestricted Share Award means an Award of Shares free of any restrictions.
SECTION 2. ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT GRANTEES AND DETERMINE AWARDS
(a) Administration of Plan. The Plan shall be administered by the Administrator.
(b) Powers of Administrator. The Administrator shall have the power and authority to grant Awards consistent with the terms of the Plan, including the power and authority:
(i) to select the individuals to whom Awards may from time to time be granted;
(ii) to determine the time or times of grant, and the extent, if any, of Incentive Share Options, Non-Qualified Share Options, Share Appreciation Rights, Restricted Share Awards, Restricted Share Units, Unrestricted Share Awards, Cash-Based Awards, and Dividend Equivalent Rights, or any combination of the foregoing, granted to any one or more grantees;
(iii) to determine the number of Shares to be covered by any Award;
(iv) to determine and modify from time to time the terms and conditions, including restrictions, not inconsistent with the terms of the Plan, of any Award, which terms and conditions may differ among individual Awards and grantees, and to approve the forms of Award Certificates;
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(v) to accelerate at any time the exercisability or vesting of all or any portion of any Award;
(vi) subject to the provisions of Section 5(c), to extend at any time the period in which Share Options may be exercised and subject to the provisions of Section 6(d), to extend at any time the period in which any Share Appreciation Rights may be exercised provided that no Option or Share Appreciation Right shall be extended if such extension would violate Section 409A of the Code; and
(vii) at any time to adopt, alter and repeal such rules, guidelines and practices for administration of the Plan and for its own acts and proceedings as it shall deem advisable; to interpret the terms and provisions of the Plan and any Award (including related written instruments); to make all determinations it deems advisable for the administration of the Plan; to decide all disputes arising in connection with the Plan; and to otherwise supervise the administration of the Plan.
All decisions and interpretations of the Administrator shall be binding on all persons, including the Company and Plan grantees.
(c) Delegation of Authority to Grant Awards. Subject to applicable law, the Administrator, in its discretion, may delegate to a committee consisting of one or more officers of the Company including the Chief Executive Officer of the Company all or part of the Administrators authority and duties with respect to the granting of Awards to individuals who are (i) not subject to the reporting and other provisions of Section 16 of the Exchange Act and (ii) not members of the delegated committee. Any such delegation by the Administrator shall include a limitation as to the amount of Shares underlying Awards that may be granted during the period of the delegation and shall contain guidelines as to the determination of the exercise price and the vesting criteria. The Administrator may revoke or amend the terms of a delegation at any time but such action shall not invalidate any prior actions of the Administrators delegate or delegates that were consistent with the terms of the Plan.
(d) Award Certificate. Awards under the Plan shall be evidenced by Award Certificates that set forth the terms, conditions and limitations for each Award which may include, without limitation, the term of an Award and the provisions applicable in the event the Service Relationship terminates.
(e) Indemnification. Neither the Board nor the Administrator, nor any member of either or any delegate thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with the Plan, and the members of the Board and the Administrator (and any delegate thereof) shall be entitled in all cases to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including, without limitation, reasonable attorneys fees) arising or resulting therefrom to the fullest extent permitted by law and/or under the Companys articles or bylaws or any directors and officers liability insurance coverage which may be in effect from time to time and/or any indemnification agreement between such individual and the Company.
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(f) Foreign Award Recipients. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries in which the Company and its Affiliates operate or have employees or other individuals eligible for Awards, the Administrator, in its sole discretion, shall have the power and authority to: (i) determine which Affiliates shall be covered by the Plan; (ii) determine which individuals outside the United States or Canada are eligible to participate in the Plan; (iii) modify the terms and conditions of any Award granted to individuals outside the United States or Canada to comply with applicable foreign laws; (iv) establish subplans and modify exercise procedures and other terms and procedures, to the extent the Administrator determines such actions to be necessary or advisable (and such subplans and/or modifications shall be incorporated into and made part of this Plan); provided, however, that no such subplans and/or modifications shall increase the share limitations contained in Section 3(a) hereof; and (v) take any action, before or after an Award is made, that the Administrator determines to be necessary or advisable to obtain approval or comply with any local governmental regulatory exemptions or approvals. Notwithstanding the foregoing, the Administrator may not take any actions hereunder, and no Awards shall be granted, that would violate the Exchange Act or any other applicable United States securities law, the Code, or any other applicable United States governing statute or law.
(g) Currency. All dollar figures stated in this Plan are in US dollars.
SECTION 3. SHARES ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
(a) Shares Issuable. The maximum number of Shares reserved and available for issuance under the Plan shall be 21,280,000 shares (the Initial Limit), subject to adjustment as provided in this Section 3, plus on January 1, 2022 and each January 1 thereafter, the number of Shares reserved and available for issuance under the Plan shall be cumulatively increased by 5 percent (5%) of the number of Shares issued and outstanding on the immediately preceding December 31 (the Annual Increase) or such lesser amount as determined by the Administrator. Subject to such overall limitation, the maximum aggregate number of Shares that may be issued in the form of Incentive Share Options shall not exceed the Initial Limit cumulatively increased on January 1, 2022 and on each January 1 thereafter by the lesser of the Annual Increase for such year or 21,280,000 Shares, subject in all cases to adjustment as provided in this Section 3. For purposes of this limitation, the Shares underlying any Awards under the Plan and under the Companys Sixth Amended and Restated Share Option Plan that are forfeited, canceled, held back upon exercise of an Option or settlement of an Award to cover the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without the issuance of Shares or otherwise terminated (other than by exercise) shall be added back to the Shares available for issuance under the Plan and, to the extent permitted under Section 422 of the Code and the regulations promulgated thereunder, the Shares that may be issued as Incentive Share Options. In the event the Company repurchases Shares on the open market, such shares shall not be added to the Shares available for issuance under the Plan. Subject to such overall limitations, Shares may be issued up to such maximum number pursuant to any type of Award. The shares available for issuance under the Plan may be authorized but unissued Shares or Shares reacquired by the Company.
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(b) Changes in Shares. Subject to Section 3(c) hereof, if, as a result of any reorganization, recapitalization, reclassification, share dividend, share split, reverse share split or other similar change in the Companys capital share, the outstanding Shares are increased or decreased or are exchanged for a different number or kind of shares or other securities of the Company, or additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such Shares or other securities, or, if, as a result of any merger or consolidation, sale of all or substantially all of the assets of the Company, the outstanding Shares are converted into or exchanged for securities of the Company or any successor entity (or a parent or subsidiary thereof), the Administrator shall make an appropriate or proportionate adjustment in (i) the maximum number of shares reserved for issuance under the Plan, including the maximum number of shares that may be issued in the form of Incentive Shares Options, (ii) the number and kind of shares or other securities subject to any then outstanding Awards under the Plan, (iii) the repurchase price, if any, per share subject to each outstanding Restricted Share Award, and (iv) the exercise price for each share subject to any then outstanding Share Options and Share Appreciation Rights under the Plan, without changing the aggregate exercise price (i.e., the exercise price multiplied by the number of shares subject to Share Options and Share Appreciation Rights) as to which such Share Options and Share Appreciation Rights remain exercisable and in accordance with Section 422 and 409A of the Code. The Administrator shall also make equitable or proportionate adjustments in the number of shares subject to outstanding Awards and the exercise price and the terms of outstanding Awards to take into consideration cash dividends paid other than in the ordinary course or any other extraordinary corporate event. The adjustment by the Administrator shall be final, binding and conclusive. No fractional Shares shall be issued under the Plan resulting from any such adjustment, but the Administrator in its discretion may make a cash payment in lieu of fractional Shares.
(c) Mergers and Other Transactions. In the case of and subject to the consummation of a Sale Event, the parties thereto may cause the assumption or continuation of Awards theretofore granted by the successor entity, or the substitution of such Awards with new Awards of the successor entity or parent thereof, with appropriate adjustment as to the number and kind of Shares and, if appropriate, the per Share exercise prices, as such parties shall agree. To the extent the parties to such Sale Event do not provide for the assumption, continuation or substitution of Awards, upon the effective time of the Sale Event, the Plan and all outstanding Awards granted hereunder shall terminate. In such case, except as may be otherwise provided in the relevant Award Certificate, all Options and Share Appreciation Rights with time-based vesting conditions or restrictions that are not vested and/or exercisable immediately prior to the effective time of the Sale Event shall become fully vested and exercisable as of the effective time of the Sale Event, all other Awards with time-based vesting, conditions or restrictions shall become fully vested and nonforfeitable as of the effective time of the Sale Event, and all Awards with conditions and restrictions relating to the attainment of performance goals may become vested and nonforfeitable in connection with a Sale Event in the Administrators discretion or to the extent specified in the relevant Award Certificate. In the event of such termination, (i) the Company shall have the option (in its sole discretion) to make or provide for a payment, in cash or in kind, to the grantees holding Options and Share Appreciation Rights, in exchange for the cancellation thereof, in an amount equal to the difference between (A) the Sale Price multiplied by the number of Shares subject to outstanding Options and Share Appreciation Rights (to the extent then exercisable at prices not in excess of the Sale Price) and (B) the aggregate exercise price of all such outstanding Options and Share Appreciation Rights (provided that, in the case of an Option or Share Appreciation Right with an exercise price equal to or greater than the Sale Price, such Option or Share Appreciation Right shall be cancelled for no consideration); or (ii) each grantee shall be permitted, within a specified period of time prior to the consummation of the Sale Event as determined by the Administrator, to exercise all outstanding Options and Share Appreciation Rights (to the extent then exercisable) held by such grantee. The Company shall also have the option (in its sole discretion) to make or provide for a payment, in cash or in kind, to the grantees holding other Awards in an amount equal to the Sale Price multiplied by the number of vested Shares under such Awards.
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SECTION 4. ELIGIBILITY
Grantees under the Plan will be such employees, Non-Employee Directors or Consultants of the Company and its Affiliates as are selected from time to time by the Administrator in its sole discretion; provided that Awards may not be granted to employees, Non-Employee Directors or Consultants who are providing services only to any parent of the Company, as such term is defined in Rule 405 of the Act, unless (i) the Shares underlying the Awards is treated as service recipient stock under Section 409A or (ii) the Company has determined that such Awards are exempt from or otherwise comply with Section 409A.
SECTION 5. SHARE OPTIONS
(a) Award of Share Options. The Administrator may grant Share Options under the Plan. Any Share Option granted under the Plan shall be in such form as the Administrator may from time to time approve.
Share Options granted under the Plan may be either Incentive Share Options or Non-Qualified Share Options. Incentive Share Options may be granted only to employees of the Company or any Subsidiary that is a subsidiary corporation within the meaning of Section 424(f) of the Code and individuals who are subject to U.S. income tax. To the extent that any Option does not qualify as an Incentive Share Option, it shall be deemed a Non-Qualified Share Option.
Share Options granted pursuant to this Section 5 shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable. If the Administrator so determines, Share Options may be granted to a grantee who is not a Canadian Employee in lieu of cash compensation at the grantees election, subject to such terms and conditions as the Administrator may establish.
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(b) Exercise Price. The exercise price per Share covered by a Share Option granted pursuant to this Section 5 shall be determined by the Administrator at the time of grant but shall not be less than 100 percent of the Fair Market Value on the date of grant. In the case of an Incentive Share Option that is granted to a Ten Percent Owner, the exercise price of such Incentive Share Option shall be not less than 110 percent of the Fair Market Value on the date of grant. Notwithstanding the foregoing but subject to the following sentence, Share Options may be granted with an exercise price per Share that is less than 100 percent of the Fair Market Value on the date of grant (i) pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code, (ii) to individuals who are not subject to U.S. income tax on the date of grant or (iii) if the Share Option is otherwise compliant with Section 409A. Notwithstanding the foregoing, the exercise price of any Share Options granted to a Canadian Employee shall under no circumstances be less than 100 percent of the Fair Market Value on the grant date.
(c) Option Term. The term of each Share Option shall be fixed by the Administrator, but no Share Option shall be exercisable more than ten years after the date the Share Option is granted. In the case of an Incentive Share Option that is granted to a Ten Percent Owner, the term of such Share Option shall be no more than five years from the date of grant.
(d) Exercisability; Rights of a Shareholder. Share Options shall become exercisable at such time or times, whether or not in installments, as shall be determined by the Administrator at or after the date of grant. The Administrator may at any time accelerate the exercisability of all or any portion of any Share Option. A grantee shall not have any rights as a shareholder of the Company until and unless the grantee is issued Shares upon the exercise of a Share Option and not as to unexercised Share Options.
(e) Method of Exercise. Share Options may be exercised in whole or in part, by giving written or electronic notice of exercise to the Company (in a form to be provided by the Company), specifying the number of Shares to be purchased. Payment of the purchase price may be made by one or more of the following methods except to the extent otherwise provided in the Award Certificate:
(i) In cash, by certified or bank check or other instrument acceptable to the Administrator;
(ii) Through the delivery (or attestation to the ownership following such procedures as the Company may prescribe) of Shares that are not then subject to restrictions under any Company plan. Such surrendered shares shall be valued at Fair Market Value on the exercise date;
(iii) By the grantee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company for the purchase price; provided that in the event the grantee chooses to pay the purchase price as so provided, the grantee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Company shall prescribe as a condition of such payment procedure; or
(iv) With respect to Share Options that are not Incentive Share Options, by a net exercise arrangement pursuant to which a grantee surrenders Share Options to the Company in consideration for the Company issuing the number of Shares issuable upon exercise of such Share Options, less the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price of such Share Options; provided, however, that the Company will accept a cash or other payment from the grantee to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued. Shares will no longer be subject to a Share Option and will not be exercisable thereafter to the extent that (A) Shares otherwise issuable upon exercise are used to pay the exercise price pursuant to the net exercise, (B) Shares are delivered to the grantee as a result of such exercise, and (C) Shares otherwise issuable are withheld to satisfy tax withholding obligations.
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Payment instruments will be received subject to collection. The transfer to the grantee on the records of the Company or of the transfer agent of the Shares to be purchased pursuant to the exercise of a Share Option will be contingent upon receipt from the grantee (or a purchaser acting in his stead in accordance with the provisions of the Share Option) by the Company of the full purchase price for such Shares and the fulfillment of any other requirements contained in the Award Certificate or applicable provisions of laws (including the satisfaction of any withholding taxes that the Company is obligated to withhold with respect to the grantee). In the event a grantee chooses to pay the purchase price by previously-owned Shares through the attestation method, the number of Shares transferred to the grantee upon the exercise of the Share Option shall be net of the number of attested shares. In the event that the Company establishes, for itself or using the services of a third party, an automated system for the exercise of Share Options, such as a system using an internet website or interactive voice response, then the paperless exercise of Share Options may be permitted through the use of such an automated system.
(f) Annual Limit on Incentive Share Options. To the extent required for incentive stock option treatment under Section 422 of the Code, the aggregate Fair Market Value (determined as of the time of grant) of the Shares with respect to which Incentive Share Options granted under this Plan and any other plan of the Company or its parent and subsidiary corporations become exercisable for the first time by a grantee during any calendar year shall not exceed $100,000. To the extent that any Share Option exceeds this limit, it shall constitute a Non-Qualified Share Option.
(g) Australian Participants. For purposes of any Share Option granted under the Plan to a grantee who is a resident of Australia or subject to taxation in Australia under the Income Tax Assessment Act 1997 (Cth) (an Australian Participant), it is stated that Subdivision 83A-C of the Income Tax Assessment Act 1997 (Cth) (the Income Tax Assessment Act) applies to any grants of Share Options under the Plan (subject to the requirements of that Income Tax Assessment Act), such that Share Options granted to Australian participants are intended to qualify for deferred taxation under that Subdivision.
SECTION 6. SHARE APPRECIATION RIGHTS
(a) Award of Share Appreciation Rights. The Administrator may grant Share Appreciation Rights under the Plan. A Share Appreciation Right is an Award entitling the recipient to receive Shares (or cash, to the extent explicitly provided for in the applicable Award Certificate) having a value equal to the excess of the Fair Market Value of a Share on the date of exercise over the exercise price of the Share Appreciation Right multiplied by the number of Shares with respect to which the Share Appreciation Right shall have been exercised.
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(b) Exercise Price of Share Appreciation Rights. The exercise price of a Share Appreciation Right shall not be less than 100 percent of the Fair Market Value of the Shares on the date of grant. Notwithstanding the foregoing, Share Appreciation Rights may be granted with an exercise price per share that is less than 100 percent of the Fair Market Value on the date of grant (i) pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code, (ii) to individuals who are not subject to U.S. income tax on the date of grant, or (iii) if the Share Appreciation Right is otherwise compliant with Section 409A.
(c) Grant and Exercise of Share Appreciation Rights. Share Appreciation Rights may be granted by the Administrator independently of any Share Option granted pursuant to Section 5 of the Plan.
(d) Terms and Conditions of Share Appreciation Rights. Share Appreciation Rights shall be subject to such terms and conditions as shall be determined on the date of grant by the Administrator. The term of a Share Appreciation Right may not exceed ten years. The terms and conditions of each such Award shall be determined by the Administrator, and such terms and conditions may differ among individual Awards and grantees.
SECTION 7. RESTRICTED SHARE AWARDS
(a) Nature of Restricted Share Awards. The Administrator may grant Restricted Share Awards under the Plan. A Restricted Share Award is any Award of Restricted Shares subject to such restrictions and conditions as the Administrator may determine at the time of grant. Conditions may be based on continuing employment (or other Service Relationship) and/or achievement of pre-established performance goals and objectives.
(b) Rights as a Shareholder. Upon the grant of the Restricted Share Award and payment of any applicable purchase price, a grantee shall have the rights of a shareholder with respect to the voting of the Restricted Shares and receipt of dividends; provided that if the lapse of restrictions with respect to the Restricted Share Award is tied to the attainment of vesting conditions, any dividends paid by the Company during the vesting period shall accrue and shall not be paid to the grantee until and to the extent the vesting conditions are met with respect to the Restricted Share Award. Unless the Administrator shall otherwise determine, (i) uncertificated Restricted Shares shall be accompanied by a notation on the records of the Company or the transfer agent to the effect that they are subject to forfeiture until such Restricted Shares are vested as provided in Section 7(d) below, and (ii) certificated Restricted Shares shall remain in the possession of the Company until such Restricted Shares are vested as provided in Section 7(d) below, and the grantee shall be required, as a condition of the grant, to deliver to the Company such instruments of transfer as the Administrator may prescribe.
(c) Restrictions. Restricted Shares may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as specifically provided herein or in the Restricted Share Award Certificate. Except as may otherwise be provided by the Administrator either in the Award Certificate or, subject to Section 16 below, in writing after the Award is issued, if a grantees employment (or other Service Relationship) with the Company and its Subsidiaries terminates for any reason, any Restricted Shares that have not vested at the time of termination shall automatically and without any requirement of notice to such grantee from or other action by or on behalf of, the Company be deemed to have been reacquired by the Company at its original purchase price (if any) from such grantee or such grantees legal representative simultaneously with such termination of employment (or other Service Relationship), and thereafter shall cease to represent any ownership of the Company by the grantee or rights of the grantee as a shareholder. Following such deemed reacquisition of Restricted Shares that are represented by physical certificates, a grantee shall surrender such certificates to the Company upon request without consideration.
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(d) Vesting of Restricted Shares. The Administrator at the time of grant shall specify the date or dates and/or the attainment of pre-established performance goals, objectives and other conditions on which the non-transferability of the Restricted Shares and the Companys right of repurchase or forfeiture shall lapse. Subsequent to such date or dates and/or the attainment of such pre-established performance goals, objectives and other conditions, the shares on which all restrictions have lapsed shall no longer be Restricted Shares and shall be deemed vested.
SECTION 8. RESTRICTED SHARE UNITS
(a) Nature of Restricted Share Units. The Administrator may grant Restricted Share Units under the Plan. A Restricted Share Unit is an Award of share units that may be settled in Shares (or cash, to the extent explicitly provided for in the Award Certificate) upon the satisfaction of such restrictions and conditions at the time of grant. Conditions may be based on continuing employment (or other Service Relationship) and/or achievement of pre-established performance goals and objectives. The terms and conditions of each such Award shall be determined by the Administrator, and such terms and conditions may differ among individual Awards and grantees. Except in the case of Restricted Share Units with a deferred settlement date that complies with Section 409A and except where the grantee is a Canadian Employee, at the end of the vesting period, the Restricted Share Units, to the extent vested, shall be settled in the form of Shares. Restricted Share Units with deferred settlement dates are subject to Section 409A and shall contain such additional terms and conditions as the Administrator shall determine in its sole discretion in order to comply with the requirements of Section 409A. Notwithstanding anything to the contrary, the vesting period for Restricted Share Units granted to a Canadian Employee shall, in all cases, be in compliance with the requirements pertaining to the exception to the application of the salary deferral arrangement rules in paragraph (k) of the definition of salary deferral arrangement in subsection 248(1) of the Tax Act, as such subsection may be amended or enacted from time to time.
(b) Election to Receive Restricted Share Units in Lieu of Compensation. The Administrator may, in its sole discretion, permit a grantee to elect to receive a portion of future cash compensation otherwise due to such grantee in the form of an award of Restricted Share Units. Any such election shall be made in writing and shall be delivered to the Company no later than the date specified by the Administrator and in accordance with Section 409A and such other rules and procedures established by the Administrator. Any such future cash compensation that the grantee elects to defer shall be converted to a fixed number of Restricted Share Units based on the Fair Market Value of Shares on the date the compensation would otherwise have been paid to the grantee if such payment had not been deferred as provided herein. The Administrator shall have the sole right to determine whether and under what circumstances to permit such elections and to impose such limitations and other terms and conditions thereon as the Administrator deems appropriate. Any Restricted Share Units that are elected to be received in lieu of cash compensation shall be fully vested, unless otherwise provided in the Award Certificate.
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(c) Rights as a Shareholder. A grantee shall not have any rights as a shareholder of the Company until and unless the grantee is issued Shares upon settlement of Restricted Share Units; provided, however, that the grantee may be credited with Dividend Equivalent Rights with respect to the units underlying his or her Restricted Share Units, subject to the provisions of Section 11 and such terms and conditions as the Administrator may determine.
(d) Termination. Except as may otherwise be provided by the Administrator either in the Award Certificate or, subject to Section 16 below, in writing after the Award is issued, a grantees right in all Restricted Share Units that have not vested shall automatically terminate on the grantees Termination Date.
(e) Canadian Employees. All Restricted Share Units granted to Canadian Employees shall be in compliance with the requirements pertaining to the exception to the application of the salary deferral arrangement rules in paragraph (k) of the definition of salary deferral arrangement in subsection 248(1) of the Tax Act, as such subsection may be amended or enacted from time to time.
SECTION 9. UNRESTRICTED SHARE AWARDS
Grant or Sale of Unrestricted Share. The Administrator may grant (or sell at such purchase price determined by the Administrator) an Unrestricted Share Award under the Plan. An Unrestricted Share Award is an Award pursuant to which the grantee may receive Shares free of any restrictions under the Plan. Unrestricted Share Awards may be granted in respect of past services or other valid consideration, or in lieu of cash compensation due to such grantee.
SECTION 10. CASH-BASED AWARDS
Grant of Cash-Based Awards. The Administrator may grant Cash-Based Awards under the Plan. A Cash-Based Award is an Award that entitles the grantee to a payment in cash upon the attainment of specified performance goals. The Administrator shall determine the maximum duration of the Cash-Based Award, the amount of cash to which the Cash-Based Award pertains, the conditions upon which the Cash-Based Award shall become vested or payable, and such other provisions as the Administrator shall determine. Each Cash-Based Award shall specify a cash-denominated payment amount, formula or payment ranges as determined by the Administrator. Payment, if any, with respect to a Cash-Based Award shall be made in accordance with the terms of the Award and may be made in cash.
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SECTION 11. DIVIDEND EQUIVALENT RIGHTS
(a) Dividend Equivalent Rights. The Administrator may grant Dividend Equivalent Rights under the Plan. A Dividend Equivalent Right is an Award entitling the grantee to receive credits based on cash dividends that would have been paid on the Shares specified in the Dividend Equivalent Right (or other Award to which it relates) if such Shares had been issued to the grantee. A Dividend Equivalent Right may be granted hereunder to any grantee as a component of an award of Restricted Share Units or as a freestanding award. The terms and conditions of Dividend Equivalent Rights shall be specified in the Award Certificate. Dividend equivalents credited to the holder of a Dividend Equivalent Right may be paid currently or may be deemed to be reinvested in additional Shares, which may thereafter accrue additional equivalents. Any such reinvestment shall be at Fair Market Value on the date of reinvestment or such other price as may then apply under a dividend reinvestment plan sponsored by the Company, if any. Dividend Equivalent Rights may be settled in cash or Shares or a combination thereof, in a single installment or installments. A Dividend Equivalent Right granted as a component of an Award of Restricted Share Units shall provide that such Dividend Equivalent Right shall be settled only upon settlement or payment of, or lapse of restrictions on, such other Award, and that such Dividend Equivalent Right shall expire or be forfeited or annulled under the same conditions as such other Award.
(b) Termination. Except as may otherwise be provided by the Administrator either in the Award Certificate or, subject to Section 16 below, in writing after the Award is issued, a grantees rights in all Dividend Equivalent Rights shall automatically terminate on the grantees Termination Date.
SECTION 12. TRANSFERABILITY OF AWARDS
(a) Transferability. Except as provided in Section 12(b) below, during a grantees lifetime, his or her Awards shall be exercisable only by the grantee, or by the grantees legal representative or guardian in the event of the grantees incapacity. No Awards shall be sold, assigned, transferred or otherwise encumbered or disposed of by a grantee other than by will or by the laws of descent and distribution or pursuant to a domestic relations order. No Awards shall be subject, in whole or in part, to attachment, execution, or levy of any kind, and any purported transfer in violation hereof shall be null and void.
(b) Administrator Action. Notwithstanding Section 12(a), the Administrator, in its discretion, may provide either in the Award Certificate regarding a given Award or by subsequent written approval that the grantee (who is an employee or Non-Employee Director) may transfer his or her Non-Qualified Share Options to his or her immediate family members, to trusts for the benefit of such family members, or to partnerships in which such family members are the only partners, provided that the transferee agrees in writing with the Company to be bound by all of the terms and conditions of this Plan and the applicable Award Certificate. In no event may an Award be transferred by a grantee for value.
(c) Family Member. For purposes of Section 12(b), family member shall mean a grantees child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the grantees household (other than a tenant of the grantee), a trust in which these persons (or the grantee) have more than 50 percent of the beneficial interest, a foundation in which these persons (or the grantee) control the management of assets, and any other entity in which these persons (or the grantee) own more than 50 percent of the voting interests.
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(d) Designation of Beneficiary. To the extent permitted by the Company and valid under applicable law, each grantee to whom an Award has been made under the Plan may designate a beneficiary or beneficiaries to exercise any Award or receive any payment under any Award payable on or after the grantees death. Any such designation shall be on a form provided for that purpose by the Administrator and shall not be effective until received by the Administrator. If no beneficiary has been designated by a deceased grantee, or if the designated beneficiaries have predeceased the grantee, the beneficiary shall be the grantees estate or legal heirs.
SECTION 13. TAX WITHHOLDING
(a) Payment by Grantee. Each grantee shall, no later than the date as of which the value of an Award or of any Shares or other amounts received thereunder first becomes includable in the gross income of the grantee for federal or provincial income tax purposes, pay to the Company or any applicable Affiliate, or make arrangements satisfactory to the Administrator regarding payment of, any U.S. and non-U.S. federal, state, provincial or local taxes of any kind required by law to be withheld by the Company or any applicable Affiliate with respect to such income. The Company and its Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the grantee. The Companys obligation to deliver evidence of book entry (or share certificates) to any grantee is subject to and conditioned on tax withholding obligations being satisfied by the grantee.
(b) Payment in Shares. Except as provided in the Award Certificate, the Administrator may require the tax withholding obligation of the Company or any applicable Affiliate to be satisfied, in whole or in part, by the Company withholding from Shares to be issued pursuant to any Award a number of shares with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due; provided, however, that the amount withheld does not exceed the maximum statutory tax rate or such lesser amount as is necessary to avoid liability accounting treatment. For purposes of share withholding, the Fair Market Value of withheld shares shall be determined in the same manner as the value of Shares includible in income of the grantees. The Administrator may also require any tax withholding obligation of the Company or any applicable Affiliate to be satisfied, in whole or in part, by an arrangement whereby a certain number of Shares issued pursuant to any Award are immediately sold and proceeds from such sale are remitted to the Company or any applicable Affiliate in an amount that would satisfy the withholding amount due.
SECTION 14. SECTION 409A AWARDS
Awards are intended to be exempt from Section 409A to the greatest extent possible and to otherwise comply with Section 409A. The Plan and all Awards shall be interpreted in accordance with such intent. To the extent that any Award is determined to constitute nonqualified deferred compensation within the meaning of Section 409A (a 409A Award), the Award shall be subject to such additional rules and requirements as specified by the Administrator from time to time in order to comply with Section 409A. In this regard, if any amount under a 409A Award is payable upon a separation from service (within the meaning of Section 409A) to a grantee who is then considered a specified employee (within the meaning of Section 409A), then no such payment shall be made prior to the date that is the earlier of (i) six months and one day after the grantees separation from service, or (ii) the grantees death, but only to the extent such delay is necessary to prevent such payment from being subject to interest, penalties and/or additional tax imposed pursuant to Section 409A. Further, the settlement of any 409A Award may not be accelerated except to the extent permitted by Section 409A.
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SECTION 15. TERMINATION OF SERVICE RELATIONSHIP, TRANSFER, LEAVE OF ABSENCE, ETC.
(a) Termination of Service Relationship. If the grantees Service Relationship is with an Affiliate and such Affiliate ceases to be an Affiliate, the grantee shall be deemed to have terminated his or her Service Relationship for purposes of the Plan.
(b) For purposes of the Plan, the following events shall not be deemed a termination of a Service Relationship:
(i) a transfer to the Service Relationship of the Company from an Affiliate or from the Company to an Affiliate, or from one Affiliate to another; or
(ii) an approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the employees right to such leave is protected either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Administrator otherwise so provides in writing.
SECTION 16. AMENDMENTS AND TERMINATION
The Board may at any time, in its sole discretion, amend, suspend, discontinue, or terminate the Plan or any portion thereof, and the Administrator may, at any time, amend or cancel any outstanding Award for the purpose of compliance with applicable law or stock exchange requirements, satisfying changes in law or for any other lawful purpose, but no such action shall materially and adversely affect rights under any outstanding Award without the holders consent. Except as provided in Section 3(b) or 3(c), without prior shareholder approval, in no event may the Administrator exercise its discretion to reduce the exercise price of outstanding Share Options or Share Appreciation Rights or effect repricing through cancellation and re-grants or cancellation of Share Options or Share Appreciation Rights in exchange for cash or other Awards. To the extent required under the rules of any securities exchange or market system on which the Shares are listed, to the extent determined by the Administrator to be required by the Code to ensure that Incentive Share Options granted under the Plan are qualified under Section 422 of the Code, Plan amendments shall be subject to approval by Company shareholders. Nothing in this Section 16 shall limit the Administrators authority to take any action permitted pursuant to Section 3(b) or 3(c).
SECTION 17. STATUS OF PLAN
With respect to the portion of any Award that has not been exercised and any payments in cash, Shares or other consideration not received by a grantee, a grantee shall have no rights greater than those of a general creditor of the Company unless the Administrator shall otherwise expressly determine in connection with any Award or Awards. In its sole discretion, the Administrator may authorize the creation of trusts or other arrangements to meet the Companys obligations to deliver Shares or make payments with respect to Awards hereunder, provided that the existence of such trusts or other arrangements is consistent with the foregoing sentence.
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SECTION 18. GENERAL PROVISIONS
(a) No Distribution. The Administrator may require each person acquiring Shares pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring the Shares without a view to distribution thereof.
(b) Issuance of Shares. To the extent certificated, share certificates to grantees under this Plan shall be deemed delivered for all purposes when the Company or a share transfer agent of the Company shall have mailed such certificates in the mail, addressed to the grantee, at the grantees last known address on file with the Company. Uncertificated Shares shall be deemed delivered for all purposes when the Company or a Shares transfer agent of the Company shall have given to the grantee by electronic mail (with proof of receipt) or by United States mail, addressed to the grantee, at the grantees last known address on file with the Company, notice of issuance and recorded the issuance in its records (which may include electronic book entry records). Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any evidence of book entry or certificates evidencing Shares pursuant to the exercise or settlement of any Award, unless and until the Administrator has determined, with advice of counsel (to the extent the Administrator deems such advice necessary or advisable), that the issuance and delivery is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any exchange on which the Shares are listed, quoted or traded. Any Shares issued pursuant to the Plan shall be subject to any stop-transfer orders and other restrictions as the Administrator deems necessary or advisable to comply with federal, state or foreign jurisdiction, securities or other laws, rules and quotation system on which the Shares are listed, quoted or traded. The Administrator may place legends on any Share certificate or notations on any book entry to reference restrictions applicable to the Shares. In addition to the terms and conditions provided herein, the Administrator may require that an individual make such reasonable covenants, agreements, and representations as the Administrator, in its discretion, deems necessary or advisable in order to comply with any such laws, regulations, or requirements. The Administrator shall have the right to require any individual to comply with any timing or other restrictions with respect to the settlement or exercise of any Award, including a window-period limitation, as may be imposed in the discretion of the Administrator.
(c) Shareholder Rights. Until Shares are deemed delivered in accordance with Section 18(b), no right to vote or receive dividends or any other rights of a shareholder will exist with respect to Shares to be issued in connection with an Award, notwithstanding the exercise of a Share Option or any other action by the grantee with respect to an Award.
(d) Other Compensation Arrangements; No Employment Rights. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, including trusts, and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of this Plan and the grant of Awards do not confer upon any employee any right to continued employment with the Company or any Affiliate. Except if and as required by applicable employment standards legislation, no grantee will be entitled to any damages or other compensation for any Award that does not vest or is not awarded or settled due to termination of the grantees employment with the Company or Affiliate for any reason.
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(e) Trading Policy Restrictions. Option exercises and other Awards under the Plan shall be subject to the Companys insider trading policies and procedures, as in effect from time to time.
(f) Clawback Policy. Notwithstanding any other terms of the Plan, Awards under the Plan may be subject to potential cancellation, recoupment, rescission, payback or other action in accordance with the terms of the Companys clawback policy, as in effect from time to time, or applicable share exchange rules.
(g) Tax Act Elections. In the sole discretion of the Administrator, the Company may make an election under subsection 110(1.1) of the Tax Act where applicable.
(h) Waiver of Damages. A grantee, who is a Canadian Employee, waives any and all rights to any Awards and to any compensation or damages in respect or in lieu thereof as a consequence of termination of the grantees Service Relationship for any reason, or otherwise for any reason whatsoever insofar as those rights arise or may arise from the grantee ceasing to have rights with respect to such Awards upon a termination such grantees Service Relationship.
SECTION 19. EFFECTIVE DATE OF PLAN
This Plan shall become effective upon the date immediately preceding the Registration Date subject to prior shareholder approval in accordance with applicable state law, the Companys bylaws and articles of incorporation, and applicable share exchange rules. No grants of Share Options and other Awards may be made hereunder after the tenth anniversary of the Effective Date and no grants of Incentive Share Options may be made hereunder after the tenth anniversary of the date the Plan is approved by the Board.
SECTION 20. GOVERNING LAW
This Plan and all Awards and actions taken thereunder shall be governed by, and construed in accordance with the Province of British Columbia as to matters within the scope thereof, and as to all other matters shall be governed by and construed in accordance with the internal laws of the Province of British Columbia applied without regard to conflict of law principles.
DATE APPROVED BY BOARD OF DIRECTORS: November 18, 2020
DATE APPROVED BY SHAREHOLDERS: December 1, 2020
18
INCENTIVE SHARE OPTION AGREEMENT
UNDER THE ABCELLERA BIOLOGICS INC.
2020 SHARE OPTION AND INCENTIVE PLAN
Name of Optionee: |
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|
No. of Option Shares: | ||
Option Exercise Price per Share: | $ | |
[FMV on Grant Date (110% of FMV if a 10% owner)] | ||
Grant Date: | ||
Vesting Commencement Date: | ||
Expiration Date: | ||
[up to 10 years (5 years if a 10% owner)] |
Pursuant to the AbCellera Biologics Inc. 2020 Share Option and Incentive Plan as amended through the date hereof (the Plan), AbCellera Biologics Inc. (the Company) hereby grants to the Optionee named above an option (the Share Option) to purchase on or prior to the Expiration Date specified above all or part of the number of common shares, no par value (the Shares), of the Company specified above at the Option Exercise Price per Share specified above subject to the terms and conditions set forth herein and in the Plan.
1. Exercisability Schedule. No portion of this Share Option may be exercised until such portion shall have become exercisable. Except as set forth below, and subject to the discretion of the Administrator (as defined in Section 2 of the Plan) to accelerate the exercisability schedule hereunder, this Share Option shall be exercisable with respect to the following number of Option Shares on the dates indicated so long as the Optionee continues to have a Service Relationship with the Company or a Subsidiary on such dates:
Incremental Number of
Option Shares Exercisable* |
Exercisability Date | |
_____________ (___%) | ||
_____________ (___%) | ||
_____________ (___%) | ||
_____________ (___%) | ||
_____________ (___%) |
* |
Max. of $100,000 per yr. |
Once exercisable, this Share Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date, subject to the provisions hereof and of the Plan.
2. Manner of Exercise.
(a) The Optionee may exercise this Share Option only in the following manner: from time to time on or prior to the Expiration Date of this Share Option, the Optionee may give written notice to the Administrator of his or her election to purchase some or all of the Option Shares purchasable at the time of such notice. This notice shall specify the number of Option Shares to be purchased.
Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or other instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of Shares that have been purchased by the Optionee on the open market or that are beneficially owned by the Optionee and are not then subject to any restrictions under any Company plan and that otherwise satisfy any holding periods as may be required by the Administrator; or (iii) by the Optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure; or (iv) a combination of (i), (ii) and (iii) above. Payment instruments will be received subject to collection.
The transfer to the Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingent upon (i) the Companys receipt from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillment of any other requirements contained herein or in the Plan or in any other agreement or provision of laws, and (iii) the receipt by the Company of any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Shares to be purchased pursuant to the exercise of Share Options under the Plan and any subsequent resale of the Shares will be in compliance with applicable laws and regulations. In the event the Optionee chooses to pay the purchase price by previously-owned Shares through the attestation method, the number of Shares transferred to the Optionee upon the exercise of the Share Option shall be net of the Shares attested to.
(b) The Shares purchased upon exercise of this Share Option shall be transferred to the Optionee on the records of the Company or of the transfer agent upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or regulations in connection with such transfer and with the requirements hereof and of the Plan. The determination of the Administrator as to such compliance shall be final and binding on the Optionee. The Optionee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any Shares subject to this Share k Option unless and until this Share Option shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred the shares to the Optionee, and the Optionees name shall have been entered as the shareholder of record on the books of the Company. Thereupon, the Optionee shall have full voting, dividend and other ownership rights with respect to such Shares.
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(c) The minimum number of shares with respect to which this Share Option may be exercised at any one time shall be 100 shares, unless the number of shares with respect to which this Share Option is being exercised is the total number of shares subject to exercise under this Share Option at the time.
(d) Notwithstanding any other provision hereof or of the Plan, no portion of this Share Option shall be exercisable after the Expiration Date hereof.
3. Termination of Service Relationship. If the Optionees Service Relationship with the Company or a Subsidiary (as defined in the Plan) terminates, the period within which to exercise the Share Option may be subject to earlier termination as set forth below.
(a) Termination Due to Death. If the Optionees Service Relationship with the Company or a Subsidiary terminates by reason of the Optionees death, any portion of this Share Option outstanding on such date, to the extent exercisable on the date of death, may thereafter be exercised by the Optionees legal representative or legatee for a period of 12 months from the date of death or until the Expiration Date, if earlier. Any portion of this Share Option that is not exercisable on the date of death shall terminate immediately and be of no further force or effect.
(b) Termination Due to Disability. If the Optionees Service Relationship with the Company or a Subsidiary terminates by reason of the Optionees disability (as determined by the Administrator), any portion of this Share Option outstanding on such date, to the extent exercisable on the date of such termination, may thereafter be exercised by the Optionee for a period of 12 months from the date of disability or until the Expiration Date, if earlier. Any portion of this Share Option that is not exercisable on the date of disability shall terminate immediately and be of no further force or effect.
(c) Termination for Cause. If the Optionees Service Relationship with the Company or a Subsidiary terminates for Cause, any portion of this Share Option outstanding on such date shall terminate immediately and be of no further force and effect. For purposes hereof, Cause shall mean, unless otherwise provided in an employment or service agreement between the Company and the Optionee, a determination by the Administrator that the Optionee shall be dismissed as a result of (i) any material breach by the Optionee of any agreement between the Optionee and the Company; (ii) the conviction of, indictment for or plea of nolo contendere by the Optionee to a felony or a crime involving moral turpitude; or (iii) any material misconduct or willful and deliberate non-performance (other than by reason of disability) by the Optionee of the Optionees duties to the Company.
(d) Other Termination. If the Optionees Service Relationship with the Company or a Subsidiary terminates for any reason other than the Optionees death, the Optionees disability, or Cause, and unless otherwise determined by the Administrator, any portion of this Share Option outstanding on such date may be exercised, to the extent exercisable on the date of termination, for a period of three months from the date of termination or until the Expiration Date, if earlier. Any portion of this Share Option that is not exercisable on the date of termination shall terminate immediately and be of no further force or effect.
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The Administrators determination of the reason for termination of the Optionees Service Relationship with the Company or a Subsidiary shall be conclusive and binding on the Optionee and his or her representatives or legatees.
4. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Share Option shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.
5. Transferability. This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution. This Share Option is exercisable, during the Optionees lifetime, only by the Optionee, and thereafter, only by the Optionees legal representative or legatee.
6. Status of the Share Option. This Share Option is intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the Code), but the Company does not represent or warrant that this Share Option qualifies as such. The Optionee should consult with his or her own tax advisors regarding the tax effects of this Share Option and the requirements necessary to obtain favorable income tax treatment under Section 422 of the Code, including, but not limited to, holding period requirements and that this Share Option must be exercised within three months after termination of employment as an employee (or 12 months in the case of death or disability) to qualify as an incentive stock option. To the extent any portion of this Share Option does not so qualify as an incentive stock option, such portion shall be deemed to be a non-qualified share option. If the Optionee intends to dispose or does dispose (whether by sale, gift, transfer or otherwise) of any Option Shares within the one-year period beginning on the date after the transfer of such shares to him or her, or within the two-year period beginning on the day after the grant of this Share Option, he or she will so notify the Company within 30 days after such disposition. Further, to the extent this Share Option and any other incentive share options of the Optionee having an aggregate fair market value in excess of $100,000 (determined as of the grant date of such options) first become exercisable in any year, such options will not qualify as incentive stock options under Section 422 of the Code.
7. Tax Withholding. The Optionee shall, not later than the date as of which the exercise of this Share Option becomes a taxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to be withheld on account of such taxable event. The Company shall have the authority to cause the required tax withholding obligation to be satisfied, in whole or in part, by (i) withholding from Shares to be issued to the Optionee a number of Shares with an aggregate Fair Market Value that would satisfy the withholding amount due; or (ii) causing its transfer agent to sell from the number of Shares to be issued to the Optionee, the number of Shares necessary to satisfy the Federal, state and local taxes required by law to be withheld from the Optionee on account of such transfer.
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8. No Obligation to Continue Service Relationship. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue the Optionees Service Relationship with the Company or a Subsidiary and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate the Optionees Service Relationship with the Company or a Subsidiary at any time.
9. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Share Option and supersedes all prior agreements and discussions between the parties concerning such subject matter.
10. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the Relevant Companies) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the Relevant Information). By entering into this Agreement, the Optionee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Optionee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Optionee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
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11. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Optionee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.
ABCELLERA BIOLOGICS INC. | ||
By: |
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|
Title: |
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Companys instructions to the Optionee (including through an online acceptance process) is acceptable.
Dated: |
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Optionees Signature | ||||
Optionees name and address: | ||||
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6
NON-QUALIFIED SHARE OPTION AGREEMENT
FOR NON-EMPLOYEE DIRECTORS
UNDER THE ABCELLERA BIOLOGICS INC.
2020 SHARE OPTION AND INCENTIVE PLAN
Name of Optionee: |
|
|
No. of Option Shares: | ||
Option Exercise Price per Share: | $ | |
[FMV on Grant Date] | ||
Grant Date: | ||
Vesting Commencement Date: | ||
Expiration Date: | ||
[No more than 10 years] |
Pursuant to the AbCellera Biologics Inc. 2020 Share Option and Incentive Plan as amended through the date hereof (the Plan), AbCellera Biologics Inc. (the Company) hereby grants to the Optionee named above, who is a Non-Employee Director of the Company but is not an employee of the Company, an option (the Share Option) to purchase on or prior to the Expiration Date specified above all or part of the number of common shares, no par value (the Shares), of the Company specified above at the Option Exercise Price per Share specified above subject to the terms and conditions set forth herein and in the Plan. This Share Option is not intended to be an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended.
1. Exercisability Schedule. No portion of this Share Option may be exercised until such portion shall have become exercisable. Except as set forth below, and subject to the discretion of the Administrator (as defined in Section 2 of the Plan) to accelerate the exercisability schedule hereunder, this Shares Option shall be exercisable with respect to the following number of Option Shares on the dates indicated so long as the Optionee continues to have a Service Relationship with the Company on such dates:
Incremental Number of
Option Shares Exercisable |
Exercisability Date | |
_____________ (___%) | ||
_____________ (___%) | ||
_____________ (___%) | ||
_____________ (___%) | ||
_____________ (___%) |
Notwithstanding the foregoing, in the event of a Sale Event, 100% of the then-outstanding and unvested Option Shares shall immediately be deemed vested and exercisable on the date of such Sale Event; provided, that the Optionee remains in a Service Relationship until the date of such Sale Event. Once exercisable, this Share Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date, subject to the provisions hereof and of the Plan.
2. Manner of Exercise.
(a) The Optionee may exercise this Share Option only in the following manner: from time to time on or prior to the Expiration Date of this Share Option, the Optionee may give written notice to the Administrator of his or her election to purchase some or all of the Option Shares purchasable at the time of such notice. This notice shall specify the number of Option Shares to be purchased.
Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or other instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of Shares that have been purchased by the Optionee on the open market or that are beneficially owned by the Optionee and are not then subject to any restrictions under any Company plan and that otherwise satisfy any holding periods as may be required by the Administrator; (iii) by the Optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure; (iv) by a net exercise arrangement pursuant to which the Company will reduce the number of Shares issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; or (v) a combination of (i), (ii), (iii) and (iv) above. Payment instruments will be received subject to collection.
The transfer to the Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingent upon (i) the Companys receipt from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillment of any other requirements contained herein or in the Plan or in any other agreement or provision of laws, and (iii) the receipt by the Company of any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Shares to be purchased pursuant to the exercise of Share Options under the Plan and any subsequent resale of the Shares will be in compliance with applicable laws and regulations. In the event the Optionee chooses to pay the purchase price by previously-owned Shares through the attestation method, the number of Shares transferred to the Optionee upon the exercise of the Share Option shall be net of the Shares attested to.
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(b) The Shares purchased upon exercise of this Share Option shall be transferred to the Optionee on the records of the Company or of the transfer agent upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or regulations in connection with such transfer and with the requirements hereof and of the Plan. The determination of the Administrator as to such compliance shall be final and binding on the Optionee. The Optionee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any Shares subject to this Share Option unless and until this Share Option shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred the shares to the Optionee, and the Optionees name shall have been entered as the shareholder of record on the books of the Company. Thereupon, the Optionee shall have full voting, dividend and other ownership rights with respect to such Shares.
(c) The minimum number of shares with respect to which this Share Option may be exercised at any one time shall be 100 shares, unless the number of shares with respect to which this Share Option is being exercised is the total number of shares subject to exercise under this Share Option at the time.
(d) Notwithstanding any other provision hereof or of the Plan, no portion of this Share Option shall be exercisable after the Expiration Date hereof.
3. Termination as a Non-Employee Director. If the Optionee ceases to be a Non-Employee Director of the Company, the period within which to exercise the Share Option may be subject to earlier termination as set forth below.
(a) Termination Due to Death. If the Optionees service as a Non-Employee Director terminates by reason of the Optionees death, any portion of this Share Option outstanding on such date, to the extent exercisable on the date of death, may thereafter be exercised by the Optionees legal representative or legatee for a period of 12 months from the date of death or until the Expiration Date, if earlier. Any portion of this Share Option that is not exercisable on the date of death shall terminate immediately and be of no further force or effect.
(b) Other Termination. If the Optionee ceases to be a Non-Employee Director for any reason other than the Optionees death, any portion of this Share Option outstanding on such date may be exercised, to the extent exercisable on the date the Optionee ceased to be a Non-Employee Director, for a period of 12 months from the date the Optionee ceased to be a Non-Employee Director or until the Expiration Date, if earlier. Any portion of this Share Option that is not exercisable on the date the Optionee ceases to be a Non-Employee Director shall terminate immediately and be of no further force or effect.
4. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Share Option shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.
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5. Transferability. This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution. This Share Option is exercisable, during the Optionees lifetime, only by the Optionee, and thereafter, only by the Optionees legal representative or legatee.
6. No Obligation to Continue as a Non-Employee Director. Neither the Plan nor this Share Option confers upon the Optionee any rights with respect to continuance as a Non-Employee Director.
7. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Share Option and supersedes all prior agreements and discussions between the parties concerning such subject matter.
8. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the Relevant Companies) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the Relevant Information). By entering into this Agreement, the Optionee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Optionee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Optionee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
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9. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Optionee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.
ABCELLERA BIOLOGICS INC. | ||
By: |
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|
Title: |
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Companys instructions to the Optionee (including through an online acceptance process) is acceptable.
Dated: |
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Optionees Signature | ||||
Optionees name and address: | ||||
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5
NON-QUALIFIED SHARE OPTION AGREEMENT
FOR CONSULTANTS
UNDER THE ABCELLERA BIOLOGICS INC.
2020 SHARE OPTION AND INCENTIVE PLAN
Name of Optionee: |
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No. of Option Shares: | ||
Option Exercise Price per Share: | $ | |
[FMV on Grant Date] | ||
Grant Date: | ||
Vesting Commencement Date: | ||
Expiration Date: | ||
[No more than 10 years] |
Pursuant to the AbCellera Biologics Inc. 2020 Share Option and Incentive Plan as amended through the date hereof (the Plan), AbCellera Biologics Inc. (the Company) hereby grants to the Optionee named above an option (the Share Option) to purchase on or prior to the Expiration Date specified above all or part of the number of common shares, no par value (the Shares) of the Company specified above at the Option Exercise Price per Share specified above subject to the terms and conditions set forth herein and in the Plan. This Share Option is not intended to be an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended.
1. Exercisability Schedule. No portion of this Share Option may be exercised until such portion shall have become exercisable. Except as set forth below, and subject to the discretion of the Administrator (as defined in Section 2 of the Plan) to accelerate the exercisability schedule hereunder, this Share Option shall be exercisable with respect to the following number of Option Shares on the dates indicated so long as Optionee continues to have a Service Relationship with the Company or a Subsidiary on such dates:
Incremental Number of
Option Shares Exercisable |
Exercisability Date | |
_____________ (___%) | ||
_____________ (___%) | ||
_____________ (___%) | ||
_____________ (___%) | ||
_____________ (___%) |
Once exercisable, this Share Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date, subject to the provisions hereof and of the Plan.
2. Manner of Exercise.
(a) The Optionee may exercise this Share Option only in the following manner: from time to time on or prior to the Expiration Date of this Share Option, the Optionee may give written notice to the Administrator of his or her election to purchase some or all of the Option Shares purchasable at the time of such notice. This notice shall specify the number of Option Shares to be purchased.
Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or other instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of Shares that have been purchased by the Optionee on the open market or that are beneficially owned by the Optionee and are not then subject to any restrictions under any Company plan and that otherwise satisfy any holding periods as may be required by the Administrator; (iii) by the Optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure; (iv) by a net exercise arrangement pursuant to which the Company will reduce the number of Shares issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; or (v) a combination of (i), (ii), (iii) and (iv) above. Payment instruments will be received subject to collection.
The transfer to the Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingent upon (i) the Companys receipt from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillment of any other requirements contained herein or in the Plan or in any other agreement or provision of laws, and (iii) the receipt by the Company of any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Shares to be purchased pursuant to the exercise of Share Options under the Plan and any subsequent resale of the Shares will be in compliance with applicable laws and regulations. In the event the Optionee chooses to pay the purchase price by previously-owned Shares through the attestation method, the number of Shares transferred to the Optionee upon the exercise of the Share Option shall be net of the Shares attested to.
2
(b) The Shares purchased upon exercise of this Share Option shall be transferred to the Optionee on the records of the Company or of the transfer agent upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or regulations in connection with such transfer and with the requirements hereof and of the Plan. The determination of the Administrator as to such compliance shall be final and binding on the Optionee. The Optionee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any Shares subject to this Share Option unless and until this Share Option shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred the shares to the Optionee, and the Optionees name shall have been entered as the shareholder of record on the books of the Company. Thereupon, the Optionee shall have full voting, dividend and other ownership rights with respect to such Shares.
(c) The minimum number of shares with respect to which this Share Option may be exercised at any one time shall be 100 shares, unless the number of shares with respect to which this Share Option is being exercised is the total number of shares subject to exercise under this Share Option at the time.
(d) Notwithstanding any other provision hereof or of the Plan, no portion of this Share Option shall be exercisable after the Expiration Date hereof.
3. Termination of Service Relationship. Except as may otherwise be provided by the Administrator, if the Optionees Service Relationship with the Company or a Subsidiary (as defined in the Plan) is terminated, the period within which to exercise the Share Option may be subject to earlier termination as set forth below.
(a) Termination Due to Death. If the Optionees Service Relationship with the Company or a Subsidiary terminates by reason of the Optionees death, any portion of this Share Option outstanding on such date, to the extent exercisable on the date of death, may thereafter be exercised by the Optionees legal representative or legatee for a period of 12 months from the date of death or until the Expiration Date, if earlier. Any portion of this Share Option that is not exercisable on the date of death shall terminate immediately and be of no further force or effect.
(b) Termination Due to Disability. If the Optionees Service Relationship with the Company or a Subsidiary terminates by reason of the Optionees disability (as determined by the Administrator), any portion of this Share Option outstanding on such date, to the extent exercisable on the date of such termination, may thereafter be exercised by the Optionee for a period of 12 months from the date of disability or until the Expiration Date, if earlier. Any portion of this Share Option that is not exercisable on the date of disability shall terminate immediately and be of no further force or effect.
(c) Termination for Cause. If the Optionees Service Relationship with the Company or a Subsidiary terminates for Cause, any portion of this Share Option outstanding on such date shall terminate immediately and be of no further force and effect. For purposes hereof, Cause shall mean, unless otherwise provided in a consulting or other service agreement between the Company and the Optionee, a determination by the Administrator that the Optionee shall be dismissed as a result of (i) any material breach by the Optionee of any agreement between the Optionee and the Company; (ii) the conviction of, indictment for or plea of nolo contendere by the Optionee to a felony or a crime involving moral turpitude; or (iii) any material misconduct or willful and deliberate non-performance (other than by reason of disability) by the Optionee of the Optionees duties to the Company.
3
(d) Other Termination. If the Optionees Service Relationship with the Company or a Subsidiary terminates for any reason other than the Optionees death, the Optionees disability or Cause, and unless otherwise determined by the Administrator, any portion of this Share Option outstanding on such date may be exercised, to the extent exercisable on the date of termination, for a period of three months from the date of termination or until the Expiration Date, if earlier. Any portion of this Share Option that is not exercisable on the date of termination shall terminate immediately and be of no further force or effect.
The Administrators determination of the reason for termination of the Optionees Service Relationship with the Company or a Subsidiary shall be conclusive and binding on the Optionee and his or her representatives or legatees.
4. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Share Option shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.
5. Transferability. This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution. This Share Option is exercisable, during the Optionees lifetime, only by the Optionee, and thereafter, only by the Optionees legal representative or legatee.
6. No Obligation to Continue Service Relationship. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue the Optionees Service Relationship with the Company or a Subsidiary and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate the Optionees Service Relationship with the Company or a Subsidiary at any time.
7. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Share Option and supersedes all prior agreements and discussions between the parties concerning such subject matter.
8. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the Relevant Companies) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the Relevant Information). By entering into this Agreement, the Optionee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Optionee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Optionee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
4
9. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Optionee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.
AbCellera Biologics Inc. | ||
By: |
|
|
Title: |
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Companys instructions to the Optionee (including through an online acceptance process) is acceptable.
Dated: |
|
|||
Optionees Signature | ||||
Optionees name and address: | ||||
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5
NON-QUALIFIED SHARE OPTION AGREEMENT
FOR COMPANY EMPLOYEES
UNDER THE ABCELLERA BIOLOGICS INC.
2020 SHARE OPTION AND INCENTIVE PLAN
Name of Optionee: |
|
|
No. of Option Shares: | ||
Option Exercise Price per Share: | $ | |
[FMV on Grant Date] | ||
Grant Date: | ||
Vesting Commencement Date: | ||
Expiration Date: | ||
[No more than 10 years] |
Pursuant to the AbCellera Biologics Inc. 2020 Share Option and Incentive Plan as amended through the date hereof (the Plan), AbCellera Biologics Inc. (the Company) hereby grants to the Optionee named above an option (the Share Option) to purchase on or prior to the Expiration Date specified above all or part of the number of common shares, no par value (the Shares) of the Company specified above at the Option Exercise Price per Share specified above subject to the terms and conditions set forth herein and in the Plan. This Share Option is not intended to be an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended.
1. Exercisability Schedule. No portion of this Share Option may be exercised until such portion shall have become exercisable. Except as set forth below, and subject to the discretion of the Administrator (as defined in Section 2 of the Plan) to accelerate the exercisability schedule hereunder, this Share Option shall be exercisable with respect to the following number of Option Shares on the dates indicated so long as Optionee continues to have a Service Relationship with the Company or a Subsidiary on such dates:
Incremental Number of
Option Shares Exercisable |
Exercisability Date | |
_____________ (___%) | ||
_____________ (___%) | ||
_____________ (___%) | ||
_____________ (___%) | ||
_____________ (___%) |
Once exercisable, this Share Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date, subject to the provisions hereof and of the Plan.
2. Manner of Exercise.
(a) The Optionee may exercise this Share Option only in the following manner: from time to time on or prior to the Expiration Date of this Share Option, the Optionee may give written notice to the Administrator of his or her election to purchase some or all of the Option Shares purchasable at the time of such notice. This notice shall specify the number of Option Shares to be purchased.
Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or other instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of Shares that have been purchased by the Optionee on the open market or that are beneficially owned by the Optionee and are not then subject to any restrictions under any Company plan and that otherwise satisfy any holding periods as may be required by the Administrator; (iii) by the Optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure; (iv) by a net exercise arrangement pursuant to which the Company will reduce the number of Shares issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; or (v) a combination of (i), (ii), (iii) and (iv) above. Payment instruments will be received subject to collection.
The transfer to the Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingent upon (i) the Companys receipt from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillment of any other requirements contained herein or in the Plan or in any other agreement or provision of laws, and (iii) the receipt by the Company of any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Shares to be purchased pursuant to the exercise of Share Options under the Plan and any subsequent resale of the Shares will be in compliance with applicable laws and regulations. In the event the Optionee chooses to pay the purchase price by previously-owned Shares through the attestation method, the number of Shares transferred to the Optionee upon the exercise of the Share Option shall be net of the Shares attested to.
2
(b) The Shares purchased upon exercise of this Share Option shall be transferred to the Optionee on the records of the Company or of the transfer agent upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or regulations in connection with such transfer and with the requirements hereof and of the Plan. The determination of the Administrator as to such compliance shall be final and binding on the Optionee. The Optionee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any Shares subject to this Share Option unless and until this Share Option shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred the shares to the Optionee, and the Optionees name shall have been entered as the shareholder of record on the books of the Company. Thereupon, the Optionee shall have full voting, dividend and other ownership rights with respect to such Shares.
(c) The minimum number of shares with respect to which this Share Option may be exercised at any one time shall be 100 shares, unless the number of shares with respect to which this Share Option is being exercised is the total number of shares subject to exercise under this Share Option at the time.
(d) Notwithstanding any other provision hereof or of the Plan, no portion of this Share Option shall be exercisable after the Expiration Date hereof.
3. Termination of Service Relationship. If the Optionees Service Relationship with the Company or a Subsidiary (as defined in the Plan) terminates, the period within which to exercise the Share Option may be subject to earlier termination as set forth below.
(a) Termination Due to Death. If the Optionees Service Relationship with the Company or a Subsidiary terminates by reason of the Optionees death, any portion of this Share Option outstanding on such date, to the extent exercisable on the date of death, may thereafter be exercised by the Optionees legal representative or legatee for a period of 12 months from the date of death or until the Expiration Date, if earlier. Any portion of this Share Option that is not exercisable on the date of death shall terminate immediately and be of no further force or effect.
(b) Termination Due to Disability. If the Optionees Service Relationship with the Company or a Subsidiary terminates by reason of the Optionees disability (as determined by the Administrator), any portion of this Share Option outstanding on such date, to the extent exercisable on the date of such termination, may thereafter be exercised by the Optionee for a period of 12 months from the date of disability or until the Expiration Date, if earlier. Any portion of this Share Option that is not exercisable on the date of disability shall terminate immediately and be of no further force or effect.
(c) Termination for Cause. If the Optionees Service Relationship with the Company or a Subsidiary terminates for Cause, any portion of this Share Option outstanding on such date shall terminate immediately and be of no further force and effect. For purposes hereof, Cause shall mean, unless otherwise provided in an employment or other service agreement between the Company and the Optionee, a determination by the Administrator that the Optionee shall be dismissed as a result of (i) any material breach by the Optionee of any agreement between the Optionee and the Company; (ii) the conviction of, indictment for or plea of nolo contendere by the Optionee to a felony or a crime involving moral turpitude; or (iii) any material misconduct or willful and deliberate non-performance (other than by reason of disability) by the Optionee of the Optionees duties to the Company.
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(d) Other Termination. If the Optionees Service Relationship with the Company or a Subsidiary terminates for any reason other than the Optionees death, the Optionees disability or Cause, and unless otherwise determined by the Administrator, any portion of this Share Option outstanding on such date may be exercised, to the extent exercisable on the date of termination, for a period of three months from the date of termination or until the Expiration Date, if earlier. Any portion of this Share Option that is not exercisable on the date of termination shall terminate immediately and be of no further force or effect.
The Administrators determination of the reason for termination of the Optionees Service Relationship with the Company or a Subsidiary shall be conclusive and binding on the Optionee and his or her representatives or legatees.
4. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Share Option shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.
5. Transferability. This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution. This Share Option is exercisable, during the Optionees lifetime, only by the Optionee, and thereafter, only by the Optionees legal representative or legatee.
6. Tax Withholding. The Optionee shall, not later than the date as of which the exercise of this Share Option becomes a taxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to be withheld on account of such taxable event. The Company shall have the authority to cause the required tax withholding obligation to be satisfied, in whole or in part, by (i) withholding from Shares to be issued to the Optionee a number of Shares with an aggregate Fair Market Value that would satisfy the withholding amount due; or (ii) causing its transfer agent to sell from the number of Shares to be issued to the Optionee, the number of Shares necessary to satisfy the Federal, state and local taxes required by law to be withheld from the Optionee on account of such transfer.
7. No Obligation to Continue Service Relationship. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue the Optionees Service Relationship with the Company or a Subsidiary and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate the Optionees Service Relationship with the Company or a Subsidiary at any time.
8. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Share Option and supersedes all prior agreements and discussions between the parties concerning such subject matter.
4
9. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the Relevant Companies) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the Relevant Information). By entering into this Agreement, the Optionee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Optionee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Optionee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
10. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Optionee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.
AbCellera Biologics Inc. | ||
By: |
|
|
Title: |
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Companys instructions to the Optionee (including through an online acceptance process) is acceptable.
Dated: |
|
|||
Optionees Signature | ||||
Optionees name and address: | ||||
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5
RESTRICTED SHARE AWARD AGREEMENT
UNDER THE ABCELLERA BIOLOGICS INC.
2020 SHARE OPTION AND INCENTIVE PLAN
Name of Grantee: |
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No. of Shares: | ||||
Grant Date: |
Pursuant to the AbCellera Biologics Inc. 2020 Share Option and Incentive Plan (the Plan) as amended through the date hereof, AbCellera Biologics Inc. (the Company) hereby grants a Restricted Share Award (an Award) to the Grantee named above. Upon acceptance of this Award, the Grantee shall receive the number of common shares, no par value (the Shares) of the Company specified above, subject to the restrictions and conditions set forth herein and in the Plan. The Company acknowledges the receipt from the Grantee of consideration with respect to the par value of the Share in the form of cash, past or future services rendered to the Company by the Grantee or such other form of consideration as is acceptable to the Administrator.
1. Award. The Restricted Shares awarded hereunder shall be issued and held by the Companys transfer agent in book entry form, and the Grantees name shall be entered as the shareholder of record on the books of the Company. Thereupon, the Grantee shall have all the rights of a shareholder with respect to such Shares, including voting and dividend rights, subject, however, to the restrictions and conditions specified in Paragraph 2 below. The Grantee shall (i) sign and deliver to the Company a copy of this Award Agreement and (ii) deliver to the Company a share power endorsed in blank.
2. Restrictions and Conditions.
(a) Any book entries for the Restricted Shares granted herein shall bear an appropriate legend, as determined by the Administrator in its sole discretion, to the effect that such shares are subject to restrictions as set forth herein and in the Plan.
(b) Restricted Shares granted herein may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of by the Grantee prior to vesting.
(c) If the Grantees Service Relationship with the Company or a Subsidiary is voluntarily or involuntarily terminated for any reason (including death) prior to vesting of the Restricted Shares granted herein, all Restricted Shares shall immediately and automatically be forfeited and returned to the Company.
3. Vesting of Restricted Shares. The restrictions and conditions in Paragraph 2 of this Agreement shall lapse on the Vesting Date or Dates specified in the following schedule so long as the Grantee continues to have a Service Relationship with the Company or a Subsidiary on such Dates. If a series of Vesting Dates is specified, then the restrictions and conditions in Paragraph 2 shall lapse only with respect to the number of Restricted Shares specified as vested on such date.
Incremental Number
|
Vesting Date |
|
_____________ (___%) | ||
_____________ (___%) | ||
_____________ (___%) | ||
_____________ (___%) | ||
_____________ (___%) |
Subsequent to such Vesting Date or Dates, the Shares on which all restrictions and conditions have lapsed shall no longer be deemed Restricted Shares. The Administrator may at any time accelerate the vesting schedule specified in this Paragraph 3.
4. Dividends. Dividends on shares of Restricted Shares shall be paid currently to the Grantee.
5. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Award shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.
6. Transferability. This Agreement is personal to the Grantee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution.
7. Tax Withholding. The Grantee shall, not later than the date as of which the receipt of this Award becomes a taxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to be withheld on account of such taxable event. Except in the case where an election is made pursuant to Paragraph 8 below, the Company shall have the authority to cause the required tax withholding obligation to be satisfied, in whole or in part, by (i) withholding from Shares to be issued or released by the transfer agent a number of Shares with an aggregate Fair Market Value that would satisfy the withholding amount due; or (ii) causing its transfer agent to sell from the number of Shares to be issued or released to the Grantee, the number of Shares necessary to satisfy the Federal, state and local taxes required by law to be withheld from the Grantee on account of such transfer.
8. Election Under Section 83(b). The Grantee and the Company hereby agree that the Grantee may, within 30 days following the Grant Date of this Award, file with the Internal Revenue Service and the Company an election under Section 83(b) of the Internal Revenue Code. In the event the Grantee makes such an election, he or she agrees to provide a copy of the election to the Company. The Grantee acknowledges that he or she is responsible for obtaining the advice of his or her tax advisors with regard to the Section 83(b) election and that he or she is relying solely on such advisors and not on any statements or representations of the Company or any of its agents with regard to such election.
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9. No Obligation to Continue Service Relationship. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue the Grantee in a Service Relationship with the Company or a Subsidiary and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate the Grantees Service Relationship with the Company or a Subsidiary at any time.
10. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Award and supersedes all prior agreements and discussions between the parties concerning such subject matter.
11. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the Relevant Companies) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the Relevant Information). By entering into this Agreement, the Grantee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Grantee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Grantee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
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12. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Grantee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.
AbCellera Biologics Inc. | ||
By: |
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Title: |
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Companys instructions to the Grantee (including through an online acceptance process) is acceptable.
Dated: |
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Grantees Signature | ||||||
Grantees name and address: | ||||||
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4
RESTRICTED SHARE UNIT AWARD AGREEMENT
FOR CONSULTANTS
UNDER THE ABCELLERA BIOLOGICS INC.
2020 SHARE OPTION AND INCENTIVE PLAN
Name of Grantee: |
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No. of Restricted Share Units: | ||||
Grant Date: | ||||
Vesting Commencement Date: |
Pursuant to the AbCellera Biologics Inc. 2020 Share Option and Incentive Plan as amended through the date hereof (the Plan), AbCellera Biologics Inc. (the Company) hereby grants an award of the number of Restricted Share Units listed above (an Award) to the Grantee named above. Each Restricted Share Unit shall relate to one common share, no par value (the Shares) of the Company.
1. Restrictions on Transfer of Award. This Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of by the Grantee, and any Shares issuable with respect to the Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of until (i) the Restricted Share Units have vested as provided in Paragraph 2 of this Agreement and (ii) Shares have been issued to the Grantee in accordance with the terms of the Plan and this Agreement.
2. Vesting of Restricted Share Units. The restrictions and conditions of Paragraph 1 of this Agreement shall lapse on the Vesting Date or Dates specified in the following schedule so long as the Grantee continues to have a Service Relationship with the Company or a Subsidiary on such Dates. If a series of Vesting Dates is specified, then the restrictions and conditions in Paragraph 1 shall lapse only with respect to the number of Restricted Share Units specified as vested on such date.
Incremental Number of Restricted Share Units Vested |
Vesting Date |
|||
_____________ (___%) | ||||
_____________ (___%) | ||||
_____________ (___%) | ||||
_____________ (___%) |
The Administrator may at any time accelerate the vesting schedule specified in this Paragraph 2.
3. Termination of Service Relationship. If the Grantees Service Relationship with the Company or a Subsidiary terminates for any reason (including death or disability) prior to the satisfaction of the vesting conditions set forth in Paragraph 2 above, any Restricted Share Units that have not vested as of such date shall automatically and without notice terminate and be forfeited, and neither the Grantee nor any of his or her successors, heirs, assigns, or personal representatives will thereafter have any further rights or interests in such unvested Restricted Share Units.
4. Issuance of Shares. As soon as practicable following each Vesting Date (but in no event later than two and one-half months after the end of the year in which the Vesting Date occurs), the Company shall issue to the Grantee the number of Shares equal to the aggregate number of Restricted Share Units that have vested pursuant to Paragraph 2 of this Agreement on such date and the Grantee shall thereafter have all the rights of a shareholder of the Company with respect to such shares.
5. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Agreement shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.
6. Section 409A of the Code. This Agreement shall be interpreted in such a manner that all provisions relating to the settlement of the Award are exempt from the requirements of Section 409A of the Code as short-term deferrals as described in Section 409A of the Code.
7. No Obligation to Continue Service Relationship. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue the Grantees Service Relationship with the Company or a Subsidiary and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate the Grantees Service Relationship with the Company or a Subsidiary at any time.
8. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Award and supersedes all prior agreements and discussions between the parties concerning such subject matter.
9. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the Relevant Companies) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the Relevant Information). By entering into this Agreement, the Grantee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Grantee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Grantee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
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10. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Grantee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.
ABCELLERA BIOLOGICS INC. | ||
By: |
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Title: |
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Companys instructions to the Grantee (including through an online acceptance process) is acceptable.
Dated: |
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Grantees Signature | ||||||
Grantees name and address: | ||||||
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3
RESTRICTED SHARE UNIT AWARD AGREEMENT
FOR COMPANY EMPLOYEES
UNDER THE ABCELLERA BIOLOGICS INC.
2020 SHARE OPTION AND INCENTIVE PLAN
Name of Grantee: |
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|||
No. of Restricted Share Units: | ||||
Grant Date: |
Pursuant to the AbCellera Biologics Inc. 2020 Share Option and Incentive Plan as amended through the date hereof (the Plan), AbCellera Biologics Inc. (the Company) hereby grants an award of the number of Restricted Share Units listed above (an Award) to the Grantee named above. Each Restricted Share Unit shall relate to one common share, no par value (the Shares) of the Company.
1. Restrictions on Transfer of Award. This Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of by the Grantee, and any Shares issuable with respect to the Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of until (i) the Restricted Share Units have vested as provided in Paragraph 2 of this Agreement and (ii) Shares have been issued to the Grantee in accordance with the terms of the Plan and this Agreement.
2. Vesting of Restricted Share Units. The restrictions and conditions of Paragraph 1 of this Agreement shall lapse on the Vesting Date or Dates specified in the following schedule so long as the Grantee continues to have a Service Relationship with the Company or a Subsidiary on such Dates. If a series of Vesting Dates is specified, then the restrictions and conditions in Paragraph 1 shall lapse only with respect to the number of Restricted Share Units specified as vested on such date.
Incremental Number of
|
Vesting Date |
|||
_____________ (___%) | ||||
_____________ (___%) | ||||
_____________ (___%) | ||||
_____________ (___%) |
The Administrator may at any time accelerate the vesting schedule specified in this Paragraph 2.
3. Termination of Service Relationship. If the Grantees Service Relationship with the Company or a Subsidiary terminates for any reason (including death or disability) prior to the satisfaction of the vesting conditions set forth in Paragraph 2 above, any Restricted Share Units that have not vested as of such date shall automatically and without notice terminate and be forfeited, and neither the Grantee nor any of his or her successors, heirs, assigns, or personal representatives will thereafter have any further rights or interests in such unvested Restricted Share Units.
4. Issuance of Shares. As soon as practicable following each Vesting Date (but in no event later than two and one-half months after the end of the year in which the Vesting Date occurs), the Company shall issue to the Grantee the number of Shares equal to the aggregate number of Restricted Share Units that have vested pursuant to Paragraph 2 of this Agreement on such date and the Grantee shall thereafter have all the rights of a shareholder of the Company with respect to such shares.
5. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Agreement shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.
6. Tax Withholding. The Grantee shall, not later than the date as of which the receipt of this Award becomes a taxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to be withheld on account of such taxable event. The Company shall have the authority to cause the required tax withholding obligation to be satisfied, in whole or in part, by (i) withholding from Shares to be issued to the Grantee a number of Shares with an aggregate Fair Market Value that would satisfy the withholding amount due; or (ii) causing its transfer agent to sell from the number of Shares to be issued to the Grantee, the number of Shares necessary to satisfy the Federal, state and local taxes required by law to be withheld from the Grantee on account of such transfer.
7. Section 409A of the Code. This Agreement shall be interpreted in such a manner that all provisions relating to the settlement of the Award are exempt from the requirements of Section 409A of the Code as short-term deferrals as described in Section 409A of the Code.
8. No Obligation to Continue Service Relationship. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue the Grantees Service Relationship with the Company or a Subsidiary and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate the Grantees Service Relationship with the Company or a Subsidiary at any time.
9. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Award and supersedes all prior agreements and discussions between the parties concerning such subject matter.
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10. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the Relevant Companies) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the Relevant Information). By entering into this Agreement, the Grantee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Grantee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Grantee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
11. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Grantee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.
ABCELLERA BIOLOGICS INC. | ||
By: |
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Title: |
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Companys instructions to the Grantee (including through an online acceptance process) is acceptable.
Dated: |
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Grantees Signature | ||||||
Grantees name and address: | ||||||
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3
RESTRICTED SHARE UNIT AWARD AGREEMENT
FOR NON-EMPLOYEE DIRECTORS
UNDER THE ABCELLERA BIOLOGICS INC.
2020 SHARE OPTION AND INCENTIVE PLAN
Name of Grantee: |
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No. of Restricted Share Units: | ||||
Grant Date: |
Pursuant to the AbCellera Biologics Inc. 2020 Share Option and Incentive Plan as amended through the date hereof (the Plan), AbCellera Biologics Inc. (the Company) hereby grants an award of the number of Restricted Share Units listed above (an Award) to the Grantee named above. Each Restricted Share Unit shall relate to one common share, no par value (the Shares) of the Company.
1. Restrictions on Transfer of Award. This Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of by the Grantee, and any Shares issuable with respect to the Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of until (i) the Restricted Share Units have vested as provided in Paragraph 2 of this Agreement and (ii) Shares have been issued to the Grantee in accordance with the terms of the Plan and this Agreement.
2. Vesting of Restricted Share Units. The restrictions and conditions of Paragraph 1 of this Agreement shall lapse on the Vesting Date or Dates specified in the following schedule so long as the Grantee remains continues to have a Service Relationship with the Company on such Dates. If a series of Vesting Dates is specified, then the restrictions and conditions in Paragraph 1 shall lapse only with respect to the number of Restricted Share Units specified as vested on such date.
Incremental Number of
|
Vesting Date |
|||
_____________ (___%) | ||||
_____________ (___%) | ||||
_____________ (___%) | ||||
_____________ (___%) |
Notwithstanding the foregoing, in the event of a Sale Event, 100% of the then-outstanding and unvested Restricted Share Units shall immediately be deemed vested on the date of such Sale Event; provided, that the Grantee remains in a Service Relationship until the date of such Sale Event. The Administrator may at any time accelerate the vesting schedule specified in this Paragraph 2.
3. Termination of Service as a Non-Employee Director. If the Grantees Service Relationship with the Company and its Subsidiaries terminates for any reason (including death or disability) prior to the satisfaction of the vesting conditions set forth in Paragraph 2 above, any Restricted Share Units that have not vested as of such date shall automatically and without notice terminate and be forfeited, and neither the Grantee nor any of his or her successors, heirs, assigns, or personal representatives will thereafter have any further rights or interests in such unvested Restricted Share Units.
4. Issuance of Shares. As soon as practicable following each Vesting Date (but in no event later than two and one-half months after the end of the year in which the Vesting Date occurs), the Company shall issue to the Grantee the number of Shares equal to the aggregate number of Restricted Share Units that have vested pursuant to Paragraph 2 of this Agreement on such date and the Grantee shall thereafter have all the rights of a shareholder of the Company with respect to such shares.
5. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Agreement shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.
6. Section 409A of the Code. This Agreement shall be interpreted in such a manner that all provisions relating to the settlement of the Award are exempt from the requirements of Section 409A of the Code as short-term deferrals as described in Section 409A of the Code.
7. No Obligation to Continue as a Non-Employee Director. Neither the Plan nor this Award confers upon the Grantee any rights with respect to continuance as a Non-Employee Director.
8. Integration. This Agreement constitutes the entire agreement between the parties with respect to this Award and supersedes all prior agreements and discussions between the parties concerning such subject matter.
9. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the Relevant Companies) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the Relevant Information). By entering into this Agreement, the Grantee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Grantee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Grantee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.
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10. Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Grantee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.
ABCELLERA BIOLOGICS INC. | ||
By: |
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Title: |
The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Companys instructions to the Grantee (including through an online acceptance process) is acceptable.
Dated: |
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Grantees Signature | ||||||
Grantees name and address: | ||||||
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3
Exhibit 10.14
ABCELLERA BIOLOGICS INC.
SENIOR EXECUTIVE CASH INCENTIVE BONUS PLAN
1. |
Purpose |
This Senior Executive Cash Incentive Bonus Plan (the Incentive Plan) is intended to provide an incentive for superior work and to motivate eligible executives of AbCellera Biologics Inc. (the Company) and its subsidiaries toward even higher achievement and business results, to tie their goals and interests to those of the Company and its shareholders and to enable the Company to attract and retain highly qualified executives. The Incentive Plan is for the benefit of Covered Executives (as defined below).
2. |
Covered Executives |
From time to time, the Compensation Committee of the Board of Directors of the Company (the Compensation Committee) may select certain key executives (the Covered Executives) to be eligible to receive bonuses hereunder. Participation in the Incentive Plan does not change the at will nature of a Covered Executives employment with the Company.
3. |
Administration |
The Compensation Committee shall have the sole discretion and authority to administer and interpret the Incentive Plan.
4. |
Bonus Determinations |
(a) Corporate Performance Goals. A Covered Executive may receive a bonus payment under the Incentive Plan based upon the attainment of one or more performance objectives that are established by the Compensation Committee and relate to financial and operational metrics with respect to the Company or any of its subsidiaries (the Corporate Performance Goals), including the following: research, pre-clinical, non-clinical, developmental, publication, clinical or regulatory milestones; scientific or technological advances; R&D or manufacturing capabilities; cash flow (including, but not limited to, operating cash flow and free cash flow); revenue; corporate revenue; earnings before interest, taxes, depreciation and amortization; net income (loss) (either before or after interest, taxes, depreciation and/or amortization); changes in the market price of the Companys common shares; economic value-added; acquisitions, licenses, collaborations or strategic transactions; financing or other capital raising transactions; operating income (loss); return on capital, assets, equity, or investment; shareholder returns; return on sales; total shareholder return; gross or net profit levels; productivity; expense efficiency; margins; operating efficiency; satisfaction of, or other achievement metrics relating to, key third parties; working capital; earnings (loss) per share of the Companys common shares; bookings, new bookings or renewals; sales or market shares; number of prescriptions or prescribing physicians; coverage decisions; leadership development, employee retention, and recruiting and other human resources matters; operating income and/or net annual recurring revenue, any of which may be (A) measured in absolute terms or compared to any incremental increase, (B) measured in terms of growth, (C) compared to another company or companies or to results of a peer group, (D) measured against the market as a whole and/or as compared to applicable market indices and/or (E) measured on a pre-tax or post-tax basis (if applicable). Further, any Corporate Performance Goals may be used to measure the performance of the Company as a whole or a business unit or other segment of the Company, or one or more product lines or specific markets. The Corporate Performance Goals may differ from Covered Executive to Covered Executive.
(b) Calculation of Corporate Performance Goals. At the beginning of each applicable performance period, the Compensation Committee will determine whether any significant element(s) will be included in or excluded from the calculation of any Corporate Performance Goal with respect to any Covered Executive. In all other respects, Corporate Performance Goals will be calculated in accordance with the Companys financial statements, generally accepted accounting principles, or under a methodology established by the Compensation Committee at the beginning of the performance period and which is consistently applied with respect to a Corporate Performance Goal in the relevant performance period.
(c) Target; Minimum; Maximum. Each Corporate Performance Goal shall have a target (i.e., 100 percent attainment of the Corporate Performance Goal) and may also have a minimum hurdle and/or a maximum amount.
(d) Bonus Requirements; Individual Goals. Except as otherwise set forth in this Section 4(d): (i) any bonuses paid to Covered Executives under the Incentive Plan shall be based upon objectively determinable bonus formulas that tie such bonuses to one or more performance targets relating to the Corporate Performance Goals, (ii) bonus formulas for Covered Executives shall be adopted in each performance period by the Compensation Committee and communicated to each Covered Executive at the beginning of each performance period and (iii) no bonuses shall be paid to Covered Executives unless and until the Compensation Committee makes a determination with respect to the attainment of the performance targets relating to the Corporate Performance Goals. Notwithstanding the foregoing, the Compensation Committee may adjust bonuses payable under the Incentive Plan based on achievement of one or more individual performance objectives or pay bonuses (including, without limitation, discretionary bonuses) to Covered Executives under the Incentive Plan based on individual performance goals and/or upon such other terms and conditions as the Compensation Committee may in its discretion determine.
(e) Individual Target Bonuses. The Compensation Committee shall establish a target bonus opportunity for each Covered Executive for each performance period. For each Covered Executive, the Compensation Committee shall have the authority to apportion the target award so that a portion of the target award shall be tied to attainment of Corporate Performance Goals and a portion of the target award shall be tied to attainment of individual performance objectives.
(f) Employment Requirement. Subject to any additional terms contained in a written agreement between the Covered Executive and the Company, the payment of a bonus to a Covered Executive with respect to a performance period shall be conditioned upon the Covered Executives employment by the Company on the bonus payment date, unless otherwise determined by the Compensation Committee. If an executive becomes a Covered Executive and participant in the Incentive Plan during a performance period and was not employed for the entire performance period, the Compensation Committee may pro rate the bonus based on the number of days employed during such period.
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5. |
Timing of Payment |
(a) With respect to Corporate Performance Goals established and measured on a basis more frequently than annually (e.g., quarterly or semi-annually), the Corporate Performance Goals will be measured at the end of each performance period after the Companys financial reports with respect to such period(s) have been published. If the Corporate Performance Goals and/or individual goals for such period are met, payments will be made as soon as practicable following the end of such period, but not later 74 days after the end of the fiscal year in which such performance period ends.
(b) With respect to Corporate Performance Goals established and measured on an annual or multi-year basis, Corporate Performance Goals will be measured as of the end of each such performance period (e.g., the end of each fiscal year) after the Companys financial reports with respect to such period(s) have been published. If the Corporate Performance Goals and/or individual goals for any such period are met, bonus payments will be made as soon as practicable, but not later than 74 days after the end of the relevant fiscal year.
(c) For the avoidance of doubt, bonuses earned at any time in a fiscal year must be paid no later than 74 days after the last day of such fiscal year.
6. |
Amendment and Termination |
The Company reserves the right to amend or terminate the Incentive Plan at any time in its sole discretion.
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Exhibit 10.15
ABCELLERA BIOLOGICS INC.
2020 EMPLOYEE SHARE PURCHASE PLAN
The purpose of the AbCellera Biologics Inc. 2020 Employee Share Purchase Plan (the Plan) is to provide eligible employees of AbCellera Biologics Inc. (the Company) and each Designated Subsidiary (as defined in Section 11) with opportunities to purchase common shares of the Company (the Common Shares). 2,700,000 Common Shares in the aggregate have been approved and reserved for this purpose, plus on each January 1 following the Initial Offering (as such term is defined below) and each January 1 thereafter until the Plan terminates pursuant to Section 20, the number of Common Shares reserved and available for issuance under the Plan shall be cumulatively increased by the lesser of (i) one percent (1%) of the number of Common Shares issued and outstanding on the immediately preceding December 31, (ii) 2,700,000 Common Shares, or (iii) such lesser number of Common Shares as determined by the Administrator (as defined in Section 1).
The Plan includes two components: a Code Section 423 Component (the 423 Component) and a non-Code Section 423 Component (the Non-423 Component). It is intended for the 423 Component to constitute an employee stock purchase plan within the meaning of Section 423(b) of the U.S. Internal Revenue Code of 1986, as amended (the Code), and the 423 Component shall be interpreted in accordance with that intent. Under the Non-423 Component, which does not qualify as an employee stock purchase plan within the meaning of Section 423(b) of the Code, options will be granted pursuant to rules, procedures or sub-plans adopted by the Administrator designed to achieve tax, securities laws or other objectives for eligible employees. Except as otherwise provided herein, the Non-423 Component will operate and be administered in the same manner as the 423 Component. Unless otherwise determined by the Administrator, Participants (as defined in Section 11) who are Canadian residents will participate in the Non-423 Component only.
Unless otherwise defined herein, capitalized terms in this Plan shall have the meaning ascribed to them in Section 11.
1. Administration. The Plan will be administered by the person or persons (the Administrator) appointed by the Companys Board of Directors (the Board) for such purpose. The Administrator has authority at any time to: (i) adopt, alter and repeal such rules, guidelines and practices for the administration of the Plan and for its own acts and proceedings as it shall deem advisable; (ii) interpret the terms and provisions of the Plan; (iii) make all determinations it deems advisable for the administration of the Plan, including to accommodate the specific requirements of local laws, regulations and procedures for jurisdictions outside of Canada or the United States; (iv) decide all disputes arising in connection with the Plan; and (v) otherwise supervise the administration of the Plan. All interpretations and decisions of the Administrator shall be binding on all persons, including the Company and the Participants. No member of the Board or individual exercising administrative authority with respect to the Plan shall be liable for any action or determination made in good faith with respect to the Plan or any option granted hereunder.
2. Offerings. The Company may make one or more offerings to eligible employees to purchase Common Shares under the Plan (Offerings). The initial Offering will begin and end on dates to be determined by the Administrator (the Initial Offering). Thereafter, unless otherwise determined by the Administrator, an Offering will begin on the first business day occurring on or after each June 1st and December 1st and will end on the last business day occurring on or before the following November 30th and May 31st, respectively. The Administrator may, in its discretion, designate a different period for any Offering, provided that no Offering shall exceed 27 months in duration or overlap with any other Offering.
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3. Eligibility. All individuals classified and reflected as employees on the payroll records of the Company and each Designated Subsidiary are eligible to participate in any one or more of the Offerings under the Plan, provided that, except as otherwise determined by the Administrator in advance of any Offering, as of the first day of the applicable Offering (the Offering Date) they are customarily employed by the Company or a Designated Subsidiary for more than 20 hours a week and have completed at least 6 full months of employment. Notwithstanding any other provision herein, individuals who are not contemporaneously classified as employees of the Company or a Designated Subsidiary for purposes of the Companys or applicable Designated Subsidiarys payroll system are not considered to be eligible employees of the Company or any Designated Subsidiary and shall not be eligible to participate in the Plan. In the event any such individuals are reclassified as employees of the Company or a Designated Subsidiary for any purpose, including, without limitation, common law or statutory employees, by any action of any third party, including, without limitation, any government agency, or as a result of any private lawsuit, action or administrative proceeding, such individuals shall, notwithstanding such reclassification, remain ineligible for participation. Notwithstanding the foregoing, the exclusive means for individuals who are not contemporaneously classified as employees of the Company or a Designated Subsidiary on the Companys or Designated Subsidiarys payroll system to become eligible to participate in this Plan is through the adoption of a subplan to this Plan, duly executed by the Company, which specifically renders such individuals eligible to participate herein.
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4. Participation.
(a) Participants in Offerings. An eligible employee who is not a Participant in any prior Offering may participate in a subsequent Offering by submitting an enrollment form to his or her appropriate payroll location at least 15 business days before the Offering Date (or by such other deadline as shall be established by the Administrator for the Offering).
(b) Enrollment. The enrollment form (which may be in an electronic format or such other method as determined by the Company in accordance with the Companys practices) will (a) state a whole percentage to be deducted from an eligible employees Compensation (as defined in Section 11) per pay period, (b) authorize the purchase of Common Shares in each Offering in accordance with the terms of the Plan and (c) specify the exact name or names in which Common Shares purchased for such eligible employee are to be issued pursuant to Section 10. An employee who does not enroll in accordance with these procedures will be deemed to have waived the right to participate. Unless a Participant files a new enrollment form or withdraws from the Plan, such Participants deductions and purchases will continue at the same percentage of Compensation for future Offerings, provided he or she remains an eligible employee.
(c) Notwithstanding the foregoing, participation in the 423 Component of the Plan will neither be permitted nor be denied contrary to the requirements of the Code.
5. Employee Contributions. Each eligible employee may authorize payroll deductions at a minimum of 1 percent up to a maximum of 15 percent of such eligible employees Compensation for each pay period. The Company will maintain book accounts showing the amount of payroll deductions made by each Participant for each Offering. No interest will accrue or be paid on payroll deductions, except as may be required by applicable law.
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6. Deduction Changes. Except as may be determined by the Administrator in advance of an Offering, a Participant may not increase or decrease his or her payroll deduction during any Offering, but may increase or decrease his or her payroll deduction with respect to the next Offering (subject to the limitations of Section 5) by filing a new enrollment form at least 15 business days before the next Offering Date (or by such other deadline as shall be established by the Administrator for the Offering). The Administrator may, in advance of any Offering, establish rules permitting a Participant to increase, decrease or terminate his or her payroll deduction during an Offering.
7. Withdrawal. A Participant may withdraw from participation in the Plan by delivering a written notice of withdrawal to his or her appropriate payroll location. The Participants withdrawal will be effective as of the next business day. Following a Participants withdrawal, the Company will promptly refund such Participants entire account balance under the Plan to him or her (after payment for any Common Shares purchased before the effective date of withdrawal). Partial withdrawals are not permitted. Such a Participant may not begin participation again during the remainder of the Offering, but may enroll in a subsequent Offering in accordance with Section 4, if the Participant remains an eligible employee on the subsequent Offering Date.
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8. Grant of Options. On each Offering Date, the Company will grant to each eligible employee who is then a Participant in the Plan an option (Option) to purchase on the last day of such Offering (the Exercise Date), at the Option Price hereinafter provided for, the lowest of (a) a number of Common Shares determined by dividing such Participants accumulated payroll deductions on such Exercise Date by the Option Price (as defined herein), (b) 3,000 Common Shares; or (c) such other lesser maximum number of shares as shall have been established by the Administrator in advance of the Offering; provided, however, that such Option shall be subject to the limitations set forth below. Each Participants Option shall be exercisable only to the extent of such Participants accumulated payroll deductions on the Exercise Date. The purchase price for each share purchased under each Option (the Option Price) will be eighty-five (85%) of the Fair Market Value of the Common Shares on the Offering Date or the Exercise Date, whichever is less.
Notwithstanding the foregoing, no Participant may be granted an Option hereunder if such Participant, immediately after the Option was granted, would be treated as owning shares possessing 5 percent or more of the total combined voting power or value of all classes of shares of the Company or any Parent or Subsidiary (as defined in Section 11). For purposes of the preceding sentence, the attribution rules of Section 424(d) of the Code shall apply in determining the shares ownership of a Participant, and all shares which the Participant has a contractual right to purchase shall be treated as shares owned by the Participant. In addition, no Participant may be granted an Option which permits his or her rights to purchase shares under the Plan, and any other employee share purchase plan of the Company and its Parents and Subsidiaries, to accrue at a rate which exceeds U.S. $25,000 of the Fair Market Value of such shares (determined on the option grant date or dates) for each calendar year in which the Option is outstanding at any time. The purpose of the limitation in the preceding sentence is to comply with Section 423(b)(8) of the Code and shall be applied taking Options into account in the order in which they were granted.
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9. Exercise of Option and Purchase of Shares. Each eligible employee who continues to be a Participant in the Plan on the Exercise Date shall be deemed to have exercised his or her Option on such date and shall acquire from the Company such number of whole Common Shares reserved for the purpose of the Plan as his or her accumulated payroll deductions on such date will purchase at the Option Price, subject to any other limitations contained in the Plan. Any amount remaining in a Participants account at the end of an Offering solely by reason of the inability to purchase a fractional share will be carried forward to the next Offering and any other balance remaining in a Participants account at the end of an Offering will be refunded to the Participant promptly.
10. Issuance of Certificates. Certificates, or book entries for uncertificated shares, representing Common Shares purchased under the Plan may be issued only in the name of the Participant, in the name of the Participant and another person of legal age as joint tenants with rights of survivorship, or in the name of a broker authorized by the Participant to be his, her or their, nominee for such purpose.
11. Definitions.
The term Compensation means the amount of base pay, prior to salary reduction (such as pursuant to Sections 125, 132(f) or 401(k) of the Code), but excluding overtime, commissions, incentive or bonus awards, allowances and reimbursements for expenses such as relocation allowances or travel expenses, income or gains on the exercise of Company share options, and similar items. The Administrator shall have the discretion to determine the application of this definition to Participants outside of Canada or the United States.
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The term Designated Subsidiary means any present or future Subsidiary (as defined below) that has been designated by the Board to participate in the Plan. The Board may so designate any Subsidiary, or revoke any such designation, at any time and from time to time, either before or after the Plan is approved by the shareholders, and may further designate such companies or Participants as participating in the 423 Component or the Non-423 Component. The Board may also determine which Affiliates or eligible employees may be excluded from participation in the Plan, to the extent consistent with Section 423 of the Code or as implemented under the Non-423 Component, and determine which Designated Subsidiary or Subsidiaries will participate in separate Offerings (to the extent that the Company makes separate Offerings). For purposes of the 423 Component, only the Company and its Subsidiaries may be Designated Subsidiaries; provided, however, that at any given time, a Subsidiary that is a Designated Subsidiary under the 423 Component will not be a Designated Subsidiary under the Non-423 Component. The current list of Designated Subsidiaries is attached hereto as Appendix A.
The term Fair Market Value of the Common Shares on any given date means the fair market value of the Common Shares determined in good faith by the Administrator; provided, however, that if the Common Shares is admitted to quotation on the National Association of Securities Dealers Automated Quotation System (NASDAQ), Nasdaq Global Market or another national securities exchange, the determination shall be made by reference to the closing price on such date. If there is no closing price for such date, the determination shall be made by reference to the last date preceding such date for which there is a closing price.
The term Initial Public Offering means the first underwritten, firm commitment public offering pursuant to an effective registration statement under the U.S. Securities Act of 1933, as amended, covering the offer and sale by the Company of its Common Shares.
The term Parent means a parent corporation with respect to the Company, as defined in Section 424(e) of the Code.
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The term Participant means an individual who is eligible as determined in Section 3 and who has complied with the provisions of Section 4.
The term Registration Date means the date on which the registration statement on Form S-1 that is filed by the Company with respect to its Initial Public Offering is declared effective by the U.S. Securities and Exchange Commission.
The term Subsidiary means a subsidiary corporation with respect to the Company, as defined in Section 424(f) of the Code.
The term Termination Date means, with respect to any Participant who is a Canadian resident, subject to any minimum applicable requirements contained in applicable employment standards legislation, the earlier of:
(i) if the eligible employees employment is terminated by the Company or Designated Subsidiary for any reason (whether lawful or unlawful), the earlier of (a) the date designated, if any, by the Company or Designated Subsidiary as the date on which the eligible employees employment ceases, or (b) the eligible employees last day of actual and active employment with the Company or Designated Subsidiary, whether such day is selected by agreement with the eligible employee or unilaterally by the Company or Designated Subsidiary or otherwise; and, for the avoidance of doubt, in case of either (a) or (b), without regard to any period of notice of termination, pay in lieu of notice of termination, severance pay or other damages paid or payable to the eligible employee, under contract or common law, in or in respect of a period which follows the eligible employees last day of actual and active employment with the Company or Designated Subsidiary;
(ii) if the eligible employee dies, the date of death; or
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(iii) if the eligible employees employment is terminated by the eligible employee, the date on which the eligible employee provides notice of resignation to the Company or Designated Subsidiary; or
(iv) if the Participant ceases to be an eligible employee for any reason not contemplated above, the date determined by the Company as the date the Participant ceases to be an eligible employee for purposes of the Plan.
12. Rights on Termination or Transfer of Employment. If a Participants employment terminates for any reason before the Exercise Date for any Offering, no payroll deduction will be taken from any pay due and owing to the Participant and the balance in the Participants account will be paid to such Participant or, in the case of such Participants death, to his or her designated beneficiary as if such Participant had withdrawn from the Plan under Section 7. A Participant will be deemed to have terminated employment, for this purpose, if the corporation that employs him or her, having been a Designated Subsidiary, ceases to be a Subsidiary, or if the Participant is transferred to any corporation other than the Company or a Designated Subsidiary. Unless otherwise determined by the Administrator, a Participant whose employment transfers between, or whose employment terminates with an immediate rehire (with no break in service) by, Designated Subsidiaries and the Company will not be treated as having terminated employment for purposes of participating in the Plan or an Offering; provided, however, that if a Participant transfers from an Offering under the 423 Component to an Offering under the Non-423 Component, the exercise of the Participants Option will be qualified under the 423 Component only to the extent that such exercise complies with Section 423 of the Code. If a Participant transfers from an Offering under the Non-423 Component to an Offering under the 423 Component, the exercise of the Participants Option will remain non-qualified under the Non-423 Component. Further, a Participant will not be deemed to have terminated employment for this purpose, if the Participant is on an approved leave of absence for military service or sickness or for any other purpose approved by the Company, if the employees right to such leave is protected either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Administrator otherwise provides in writing. A Participant who is a Canadian resident will be deemed to have terminated employment on the Participants Termination Date.
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13. Special Rules. Notwithstanding anything herein to the contrary, the Administrator may adopt special rules applicable to the employees of a particular Designated Subsidiary, whenever the Administrator determines that such rules are necessary or appropriate for the implementation of the Plan in a jurisdiction where such Designated Subsidiary has employees; provided that such rules are consistent with the requirements of Section 423(b) of the Code. Any special rules established pursuant to this Section 13 shall, to the extent possible, result in the employees subject to such rules having substantially the same rights as other Participants in the Plan.
14. Optionees Not Shareholders. Neither the granting of an Option to a Participant nor the deductions from his or her pay shall constitute such Participant a holder of the Common Shares covered by an Option under the Plan until such shares have been purchased by and issued to him or her.
15. Rights Not Transferable. Rights under the Plan are not transferable by a Participant other than by will or the laws of descent and distribution, and are exercisable during the Participants lifetime only by the Participant.
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16. Application of Funds. All funds received or held by the Company under the Plan may be combined with other corporate funds and may be used for any corporate purpose, unless otherwise required under applicable law.
17. Adjustment in Case of Changes Affecting Shares and Transactions.
(a) Adjustment in Case of Changes Affecting Common Shares. If any change is made in the Shares, or subject to any Option under the Plan, without the receipt of consideration by the Company (through merger, consolidation, amalgamation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company), the Plan will be appropriately adjusted in the class(es) and maximum number of Shares subject to the Plan and the share limitation subject to Section 8, if any, and the outstanding Options will be appropriately adjusted in the class(es), number of Shares and share limitations of such outstanding Options. The Board shall make such adjustments, and its determination shall be final, binding and conclusive. (The conversion of any convertible securities of the Company shall not be treated as a transaction that does not involve the receipt of consideration by the Company.)
(b) Corporate Transactions. Without limitation on the preceding provisions, in the event of any corporate transaction, the Board may make such adjustment it deems appropriate to prevent dilution or enlargement of rights in the number and class of Shares which may be delivered under the Plan, in the number, class of or Option Price available for purchase under the Plan and in the number of the Shares which an employee is entitled to purchase and any other adjustments it deems appropriate. Without limiting the Boards authority under this Plan, in the event of any transaction, the Board may elect to have the Options hereunder assumed or such Options substituted by a successor entity, to terminate all outstanding Options (without consent), either prior to their expiration or upon completion of the purchase of Shares on the next Exercise Date, to shorten the Offering by setting a new Exercise Date or to take such other action deemed appropriate by the Board.
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18. Amendment of the Plan. The Board may at any time and from time to time amend the Plan in any respect, except that without the approval within 12 months of such Board action by the shareholders, no amendment shall be made increasing the number of shares approved for the 423 Component of the Plan or making any other change that would require shareholder approval in order for the 423 Component of the Plan, as amended, to qualify as an employee stock purchase plan under Section 423(b) of the Code.
19. Insufficient Shares. If the total number of Common Shares that would otherwise be purchased on any Exercise Date plus the number of shares purchased under previous Offerings under the Plan exceeds the maximum number of shares issuable under the Plan, the shares then available shall be apportioned among Participants in proportion to the amount of payroll deductions accumulated on behalf of each Participant that would otherwise be used to purchase Common Shares on such Exercise Date.
20. Termination of the Plan. The Plan may be terminated at any time by the Board. Upon termination of the Plan, all amounts in the accounts of Participants shall be promptly refunded. Unless terminated earlier, the Plan shall automatically terminate on the ten year anniversary of the Registration Date.
21. Governmental Regulations. The Companys obligation to sell and deliver Common Shares under the Plan subject to obtaining all governmental approvals required in connection with the authorization, issuance, or sale of such shares.
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22. Governing Law. This Plan and all Options and actions taken thereunder shall be governed by, and construed in accordance with the Province of British Columbia as to matters within the scope thereof, and as to all other matters shall be governed by and construed in accordance with the internal laws of the Province of British Columbia applied without regard to conflict of law principles.
23. Issuance of Shares. Shares may be issued upon exercise of an Option from authorized but unissued Common Shares, from shares held in the treasury of the Company, or from any other proper source.
24. Tax Withholding. Participation in the Plan is subject to any minimum required tax withholding on income of the Participant in connection with the Plan. Each Participant agrees, by entering the Plan, that the Company and its Subsidiaries shall have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant, including shares issuable under the Plan.
25. Notification Upon Sale of Shares Under the 423 Component. Each Participant agrees, by entering the 423 Component of the Plan, to give the Company prompt notice of any disposition of shares purchased under the Plan where such disposition occurs within two years after the date of grant of the Option pursuant to which such shares were purchased or within one year after the date such shares were purchased.
26. Effective Date and Approval of Shareholders. The Plan shall take effect on the date immediately preceding the date of the Companys Initial Public Offering, subject to approval by the holders of a majority of the votes cast at a meeting of shareholders at which a quorum is present or by written consent of the shareholders.
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27. Compliance with Employment Standards. The Plan shall not be interpreted as in any way waiving or contracting out of the minimum applicable requirements contained in applicable employment standards legislation and shall be interpreted to achieve compliance with such requirements. It is understood and agreed that all provisions of the Plan are subject to all applicable minimum requirements under applicable employment standards legislation and, in the event that any such minimum requirement provides for superior right or entitlement than provided for under the terms of the Plan, such right or entitlement shall be provided to the Participant, in substitution of the Participants right or entitlement under the Plan. Except if and as required by the minimum applicable requirements of applicable employment standards legislation, no Participant will be entitled to any damages or other compensation in respect of the termination of the Participants participation in the Plan due to termination of the Participants employment with the Company or Designated Subsidiary for any reason.
Date Approved: December 1, 2020
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APPENDIX A
Designated Subsidiaries
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Exhibit 10.16
ABCELLERA BIOLOGICS INC.
EXECUTIVE SEVERANCE PLAN
1. Purpose. AbCellera Biologics Inc., a company incorporated under the Business Corporations Act (British Columbia) (the Company), considers it essential to the best interests of its shareholders to foster the continuous employment of key management personnel. The Board of Directors of the Company (the Board) recognizes, however, that, as is the case with many publicly-held corporations, the possibility of an involuntary termination of employment, either before or after a Change in Control (as defined in Section 2 hereof), exists and that such possibility, and the uncertainty and questions that it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its shareholders. Therefore, the Board has determined that the AbCellera Biologics Inc. Executive Severance Plan (the Plan) should be adopted to reinforce and encourage the continued attention and dedication of the Companys Covered Executives (as defined in Section 2 hereof) to their assigned duties without distraction. Nothing in this Plan shall be construed as creating an express or implied contract of employment and nothing shall alter the at will nature of the Covered Executives employment with the Company, as applicable.
2. Definitions. The following terms shall be defined as set forth below:
(a) Accounting Firm means an independent accounting firm selected by the Company.
(b) Accrued Benefits means any earned but unpaid salary, unpaid expense reimbursements in accordance with Company policy, accrued but unused vacation or leave entitlement, and any vested benefits a Covered Executive may have under any employee benefit plan of the Company in accordance with the terms and conditions of such employee benefit plan as of a Date of Termination.
(c) Administrator means the Board or the Compensation Committee of the Board.
(d) Base Salary means the higher of (i) the annual base salary in effect immediately prior to the Date of Termination or (ii) the annual base salary in effect for the year immediately prior to the year in which the Date of Termination occurs.
(e) Cause means, and shall be limited to, the occurrence of any one or more of the following events:
(i) the Covered Executives unauthorized use or disclosure of the Companys confidential information or trade secrets;
(ii) the Covered Executives material breach of any agreement between the Covered Executive and the Company;
(iii) the Covered Executives material failure to comply with the Companys written policies or rules;
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(iv) the Covered Executives gross negligence or willful misconduct in connection with the Covered Executives performance of his/her duties to the Company;
(v) the Covered Executives continuing failure to perform assigned duties after receiving written notification of the failure from the Company and, if curable, a period of thirty (30) days to cure such failure;
(vi) the conviction of, indictment for or plea of nolo contendere by the Covered Executive to a felony, indictable offence or a crime involving moral turpitude;
(vii) the Covered Executives failure to cooperate in good faith with a governmental or internal investigation of the Company or its directors, officers or employees, if the Company has requested the Covered Executives cooperation;
(viii) any other act or omission by the Covered Executive, which would constitute just cause under applicable common law.
(f) Change in Control means a Sale Event, as defined in the AbCellera Biologics Inc. 2020 Share Option and Incentive Plan, as amended from time to time.
(g) Change in Control Period means the period beginning on the date of a Change in Control and ending on the one-year anniversary of the Change in Control.
(h) Code means the United States Internal Revenue Code of 1986, as amended.
(i) Covered Executives means Tier 1 Executive and those other employees designated by the Administrator in its sole discretion as the Tier 2 Executives, and, in each case, who meet the eligibility requirements set forth in Section 4 of the Plan.
(j) Date of Termination means the date that a Covered Executives employment with the Company (or any successor) ends, which date shall be specified in the Notice of Termination. Notwithstanding the foregoing, a Covered Executives employment shall not be deemed to have been terminated solely as a result of the Covered Executive becoming an employee of any direct or indirect successor to the business or assets of the Company.
(k) Disability means the following: if through any illness, injury, accident or condition of either a physical or psychological nature, the Covered Executive becomes unable to perform substantially all of his duties and responsibilities, with all accommodations required by law, for a period of twenty-six (26) weeks, whether or not consecutive, within a fifty-two (52) week period, and that in the opinion of the Company, acting on the basis of advice from a duly qualified medical practitioner, is likely to continue to a similar degree in the foreseeable future.
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(l) Good Reason means that the Covered Executive has complied with the Good Reason Process following the occurrence of any of the following events:
(i) a material diminution in the Covered Executives annual base salary other than across the board decreases in annual base salary similarly affecting all executives of the Company;
(ii) the Company requiring the Covered Executive to relocate (other than for travel incident to the Covered Executives performance of his or her duties on behalf of the Company and other than as previously agreed upon between the Covered Executive and the Company) a distance of more than fifty (50) miles from the Covered Executives current principal place of business; or
(iii) any material diminution in the Covered Executives position, responsibilities, authority or duties in his or her capacity as an officer, vice president or department head of the Company.
For purposes of Section 2(l)(iii), a change in the reporting relationship, or a change in a title will not, by itself, be sufficient to constitute a material diminution of responsibilities, authority or duty.
(m) Good Reason Process means:
(i) the Covered Executive reasonably determines in good faith that a Good Reason condition has occurred;
(ii) the Covered Executive notifies the Company in writing of the first occurrence of the Good Reason condition within sixty (60) days of the first occurrence of such condition;
(iii) the Covered Executive cooperates in good faith with the Companys efforts, for a period of not less than thirty (30) days following such notice (the Cure Period), to remedy the condition;
(iv) notwithstanding such efforts, the Good Reason condition continues to exist following the Cure Period; and
(v) the Covered Executive terminates his or her employment and provides the Company with a Notice of Termination with respect to such termination, each within sixty (60) days after the end of the Cure Period.
If the Company cures the Good Reason condition during the Cure Period, Good Reason shall be deemed not to have occurred.
(n) Notice of Termination means a written notice which shall indicate the specific termination provision in this Plan relied upon for the termination of a Covered Executives employment and the Date of Termination.
(o) Participation Agreement means an agreement between a Covered Executive and the Company that acknowledges the Covered Executives participation in the Plan.
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(p) Qualified Termination Event means (i) a termination of the Covered Executives employment by the Company other than for Cause, death or Disability or (ii) the Covered Executives resignation from the Company for Good Reason.
(q) Restrictive Covenants Agreement means a confidentiality and proprietary inventions assignment agreement or similar agreement entered into between the Covered Executive and the Company.
(r) Tier 1 Executive means the Companys Chief Executive Officer.
(s) Tier 2 Executives means the individuals designated as such by the Administrator and who are listed in Exhibit A, attached hereto, as such exhibit is amended by the Administrator from time to time.
3. Administration of the Plan.
(a) Administrator. The Plan shall be administered by the Administrator.
(b) Powers of Administrator. The Administrator shall have all powers necessary to enable it properly to carry out its duties with respect to the complete control of the administration of the Plan. Not in limitation, but in amplification of the foregoing, the Administrator shall have the power and authority in its discretion to:
(i) construe the Plan to determine all questions that shall arise as to interpretations of the Plans provisions;
(ii) determine which individuals are and are not Covered Executives, designate an individual as a Tier 2 Executive, determine the benefits to which any Covered Executives may be entitled, the eligibility requirements for participation in the Plan and all other matters pertaining to the Plan;
(iii) adopt amendments to the Plan which are deemed necessary or desirable to comply with all applicable laws and regulations, including but not limited to Code Section 409A and the guidance thereunder;
(iv) make all determinations it deems advisable for the administration of the Plan, including the authority and ability to delegate administrative functions to a third party;
(v) decide all disputes arising in connection with the Plan; and
(vi) otherwise supervise the administration of the Plan.
(c) All decisions and interpretations of the Administrator shall be binding on all persons, including the Company and Covered Executives.
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4. Eligibility. All Covered Executives who have executed and submitted to the Company a Participation Agreement, and satisfied such other requirements as may be determined by the Administrator, are eligible to participate in the Plan. The Administrator may determine at any time that a Covered Executive should no longer be designated as eligible as a result of a material change in such Covered Executives role, and such individual shall cease to be eligible to participate in the Plan upon the Administrator taking action by resolution to update the applicable Exhibit hereto.
5. Termination Benefits Generally. In the event a Covered Executives employment with the Company is terminated for any reason, the Company shall pay or provide to the Covered Executive any Accrued Benefits, within the time required by law but in no event more than sixty (60) days after the Date of Termination.
6. Termination Not in Connection with a Change in Control. In the event of a Qualified Termination Event occurs at any time other than during the Change in Control Period, with respect to such Covered Executive, in addition to the Accrued Benefits, subject to his or her execution of a separation agreement in a form and manner satisfactory to the Company containing, among other provisions, a general release of claims in favor of the Company and related persons and entities, confidentiality, return of property, non-disparagement and reaffirmation of the Restrictive Covenants Agreement(s) (the Separation Agreement and Release) and the Separation Agreement and Release becoming irrevocable, to the extent required, all within the time period set forth in the Separation Agreement and Release but in no event more than sixty (60) days after the Date of Termination, and subject to the Covered Executive complying with the Separation Agreement and Release, the Company shall:
(a) pay the Covered Executive an amount equal eighteen (18) months Base Salary for the Tier 1 Executive and twelve (12) months Base Salary for each Tier 2 Executive; and
(b) (i) for U.S. Covered Executives, if the Covered Executive was participating in the Companys group health plan immediately prior to the Date of Termination and elects COBRA health continuation, then the Company shall pay to the Covered Executive a monthly cash payment in an amount equal to the monthly employer contribution that the Company would have made to provide health insurance to the Covered Executive if the Covered Executive had remained employed by the Company for eighteen (18) months for the Tier 1 Executive and twelve (12) months for each Tier 2 Executive, after the Date of Termination, based on the premiums as of the Date of Termination and (ii) for Canadian Covered Executives, subject to any insurer approval and required exclusions, the Company shall continue all of the Covered Executives health benefits for eighteen (18) months for the Tier 1 Executive and twelve (12) months for each Tier 2 Executive, after the Date of Termination, subject to the terms and conditions of the applicable plan, provided that in no case will a Canadian Covered Executive receive less benefit continuation than is required by applicable employment standards legislation.
The amounts payable and benefits provided under Section 6(a) and (b), as applicable, shall be paid out in a substantially equal installments in accordance with the Companys payroll practice over eighteen (18) months for the Tier 1 Executive and twelve (12) months for the Tier 2 Executive commencing within sixty (60) days after the Date of Termination or such earlier date as is required by applicable employment standards legislation; provided, however, that in respect of Covered Employees who are U.S. taxpayers, if the 60-day period begins in one calendar year and ends in a second calendar year, the amounts, to the extent they qualify as non-qualified deferred compensation within the meaning of Code Section 409A, shall begin to be paid in the second calendar year no later than the last day of such 60-day period; provided further, that the initial payment shall include a catch-up payment to cover amounts retroactive to the day immediately following the Date of Termination. Each payment pursuant to this Plan is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2).
Notwithstanding the foregoing or anything else to the contrary in the Plan, (i) to the extent that the amounts payable and any benefits provided under Section 6(a) and (b) are less than a Canadian Covered Executives minimum entitlements under applicable employment standards legislation in any respect, the Canadian Covered Executive shall receive those amounts and benefits as expressly required by such legislation, and (ii) receipt by a Canadian Covered Executive of any minimum entitlements as expressly required by applicable employment standards legislation shall not be conditional on the Canadian Covered Executives execution of the Separation Agreement and Release.
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7. Termination in Connection with a Change in Control. In the event a Qualified Termination Event occurs within the Change in Control Period, then with respect to such Covered Executive, in addition to the Accrued Benefits, subject to his or her execution and non-revocation of the Separation Agreement and Release, all within the time period set forth in the Separation Agreement and Release, but in no event more than sixty (60) days after the Date of Termination, the Company shall:
(a) cause 100% of the outstanding and unvested equity awards with time-based vesting held by the Covered Executive to immediately become fully vested, exercisable or nonforfeitable as of the Date of Termination; provided, that the performance conditions applicable to any outstanding and unvested equity awards subject to performance conditions will be deemed satisfied at the target level specified in the terms of the applicable award agreement.5 Notwithstanding the foregoing, in the event of a Change in Control where the parties to such Change in Control do not provide for the assumption, continuation or substitution of equity awards of the Company, any and all outstanding and unvested equity awards held by the Covered Executive shall be subject to Section 3(c) of the Companys 2020 Share Option and Incentive Plan, as amended from time to time;
(b) pay to the Covered Executive an amount equal to the sum of (i) 150% of Base Salary for the Tier 1 Executive and 100% of Base Salary for each Tier 2 Executive plus (ii) 150% for the Tier 1 Executive and 100% for each Tier 2 Executive, of the Covered Executives annual target bonus in effect immediately prior to the Qualified Termination Event (or the Covered Executives target bonus in effect immediately prior to the Change in Control, if higher); and
(c) (i) for U.S. Covered Executives, if the Covered Executive was participating in the Companys group health plan immediately prior to the Date of Termination and elects COBRA health continuation, then the Company shall pay to the Covered Executive a lump sum cash payment in an amount equal to the monthly employer contribution that the Company would have made to provide health insurance to the Covered Executive if the Covered Executive had remained employed by the Company for eighteen (18) months for the Tier 1 Executive and twelve (12) months for each Tier 2 Executive, after the Date of Termination, based on the premiums as of the Date of Termination, and (ii) for Canadian Covered Executives, subject to any insurer approval and required exclusions, the Company shall continue all of the Covered Executives health benefits for eighteen (18) months for the Tier 1 Executive and twelve (12) months for each Tier 2 Executive, after the Date of Termination, subject to the terms and conditions of the applicable plan, provided that in no case will a Canadian Covered Executive receive less benefit continuation than is required by applicable employment standards legislation.
The amounts payable and benefits provided under Section 7(b) and (c), as applicable, shall be paid out in a lump sum within sixty (60) days after the Date of Termination or such earlier date as is required by applicable employment standards legislation; provided, however, that in respect of Covered Employees who are U.S. taxpayers, if the 60-day period begins in one calendar year and ends in a second calendar year, the amounts, to the extent they qualify as non-qualified deferred compensation within the meaning of Code Section 409A, shall be paid in the second calendar year no later than the last day of the 60-day period. For the avoidance of doubt, the severance pay and benefits provided in this Section 7 shall apply in lieu of, and expressly supersede, the provisions of Section 6 and no Covered Executive shall be entitled to the severance pay and benefits under both Section 6 and 7 hereof.
Notwithstanding the foregoing or anything else to the contrary in the Plan, (i) to the extent that the amounts payable and any benefits provided under Section 7(a) and (b) are less than a Canadian Covered Executives minimum entitlements under applicable employment standards legislation in any respect, the Canadian Covered Executive shall receive those amounts and benefits as expressly required by such legislation, and (ii) receipt by a Canadian Covered Executive of any minimum entitlements as expressly required by applicable employment standards legislation shall not be conditional on the Canadian Covered Executives execution of the Separation Agreement and Release.
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8. Additional Limitation.
(a) Anything in this Plan to the contrary notwithstanding, in the event that the amount of any compensation, payment or distribution by the Company to or for the benefit of the Covered Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Plan or otherwise, calculated in a manner consistent with Section 280G of the Code and the applicable regulations thereunder (the Aggregate Payments), would be subject to the excise tax imposed by Section 4999 of the Code, then the Aggregate Payments shall be reduced (but not below zero) so that the sum of all of the Aggregate Payments shall be $1.00 less than the amount at which the Covered Executive becomes subject to the excise tax imposed by Section 4999 of the Code; provided that such reduction shall only occur if it would result in the Covered Executive receiving a higher After Tax Amount (as defined below) than the Covered Executive would receive if the Aggregate Payments were not subject to such reduction. In the event of such reduction, the Aggregate Payments shall be reduced in the following order, in each case, in reverse chronological order beginning with the Aggregate Payments that are to be paid the furthest in time from consummation of the transaction that is subject to Section 280G of the Code: (i) cash payments not subject to Section 409A of the Code; (ii) cash payments subject to Section 409A of the Code; (iii) equity-based payments and acceleration; and (iv) non-cash forms of benefits; provided that in the case of all the foregoing Aggregate Payments all amounts or payments that are not subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c) shall be reduced before any amounts that are subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c).
(b) For purposes of this Section 8, the After Tax Amount means the amount of the Aggregate Payments less all federal, state, and local income, excise and employment taxes imposed on the Covered Executive as a result of the Covered Executives receipt of the Aggregate Payments. For purposes of determining the After Tax Amount, the Covered Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation applicable to individuals for the calendar year in which the determination is to be made, and state and local income taxes at the highest marginal rates of individual taxation in each applicable state and locality, net of the maximum reduction in federal income taxes (if any) which could be obtained from deduction of such state and local taxes.
(c) The determination as to whether a reduction in the Aggregate Payments shall be made pursuant to Section 8(a) shall be made by the Accounting Firm, which shall provide detailed supporting calculations both to the Company and the Covered Executive within fifteen (15) business days of the Date of Termination, if applicable, or at such earlier time as is reasonably requested by the Company or the Covered Executive. Any determination by the Accounting Firm shall be binding upon the Company and the Covered Executive.
9. Restrictive Covenants Agreement.
As a condition to participating in the Plan, each Covered Executive shall continue to comply with the terms and conditions contained in the Restrictive Covenants Agreements or similar agreement entered into between the Covered Executive and the Company and such other agreement(s) as designated in the applicable Participation Agreement. If a Covered Executive has not entered into a Restrictive Covenants Agreement or similar agreement with the Company, he or she shall enter into such agreement prior to participating in the Plan.
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10. Withholding. All payments made by the Company under this Plan shall be subject to any tax or other amounts required to be withheld by the Company under applicable law.
11. Section 409A.
(a) Anything in this Plan to the contrary notwithstanding, if at the time of the Covered Executives separation from service within the meaning of Section 409A of the Code, the Company determines that the Covered Executive is a specified employee within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that the Covered Executive becomes entitled to under this Plan would be considered deferred compensation subject to the twenty (20) percent additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (i) six (6) months and one (1) day after the Covered Executives separation from service, or (ii) the Covered Executives death. If any such delayed cash payment is otherwise payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule.
(b) The parties intend that this Plan will be administered in accordance with Section 409A of the Code and that all amounts payable hereunder shall be exempt from the requirements of such section as a result of being short term deferrals for purposes of Section 409A of the Code to the greatest extent possible. To the extent that any provision of this Plan is not exempt from Section 409A of the Code and ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner to comply with Section 409A of the Code. Each payment pursuant to this Plan is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2). The parties agree that this Plan may be amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A of the Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party.
(c) To the extent that any payment or benefit described in this Plan constitutes non-qualified deferred compensation under Section 409A of the Code, and to the extent that such payment or benefit is payable upon the Covered Executives termination of employment, then such payments or benefits shall be payable only upon the Covered Executives separation from service. The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A-1(h).
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(d) All in-kind benefits provided and expenses eligible for reimbursement under this Plan shall be provided by the Company or incurred by the Covered Executive during the time periods set forth in this Plan. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year (except for any lifetime or other aggregate limitation applicable to medical expenses). Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.
(e) The Company makes no representation or warranty and shall have no liability to the Covered Executive or any other person if any provisions of this Plan are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, such Section.
12. Notice and Date of Termination.
(a) Notice of Termination. A termination of the Covered Executives employment shall be communicated by Notice of Termination from the Company to the Covered Executive or vice versa in accordance with this Section 12.
(b) Notice to the Company. Any notices, requests, demands, and other communications provided for by this Plan shall be sufficient if in writing and delivered in person or sent by registered or certified mail, postage prepaid, to a Covered Executive at the last address the Covered Executive has filed in writing with the Company, or to the Company at the following physical or email address:
AbCellera Biologics Inc.
Attention: Chief Legal Officer
2215 Yukon Street
Vancouver, BC A1 V5Y 0A1
Canada
13. No Mitigation. The Covered Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Covered Executive by the Company under this Plan.
14. Benefits and Burdens. This Plan shall inure to the benefit of and be binding upon the Company and the Covered Executives, their respective successors, executors, administrators, heirs and permitted assigns. In the event of a Covered Executives death after a termination of employment but prior to the completion by the Company of all payments due to him or her under this Plan, the Company shall continue such payments to the Covered Executives beneficiary designated in writing to the Company prior to his or her death (or to his or her estate, if the Covered Executive fails to make such designation), subject to applicable laws.
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15. Enforceability. If any portion or provision of this Plan shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Plan, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Plan shall be valid and enforceable to the fullest extent permitted by law.
16. Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any party to require the performance of any term or obligation of this Plan, or the waiver by any party of any breach of this Plan, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.
17. Non-Duplication of Benefits and Effect on Other Plans and Common Law Rights. Notwithstanding any other provision in the Plan to the contrary, the benefits provided hereunder shall be in lieu of, and hereby supersede and replace, any other termination or severance payments and/or benefits provided by the Company, including any such payments and/or benefits pursuant to an employment agreement or offer letter between the Company and the Covered Executive, other than as provided in Section 3(c) of the Companys 2020 Share Option and Incentive Plan, as amended from time to time. Except as set out in the Plan or as required by applicable employment standards legislation, the Covered Executives shall not be entitled to any additional notice, pay in lieu of notice, severance payments, pay in lieu of incentives or other compensation of any kind in respect of the termination of their employment, pursuant to the common law or otherwise.
18. No Contract of Employment. Nothing in this Plan shall be construed as giving any Covered Executive any right to be retained in the employ of the Company or, subject to Section 17, shall affect the terms and conditions of a Covered Executives employment with the Company.
19. Amendment or Termination of Plan. The Company may amend or terminate this Plan at any time or from time to time, but no such action shall adversely affect the rights of any Covered Executive without the Covered Executives written consent.
20. Governing Law. This Plan shall be construed under and be governed in all respects by the laws of British Columbia and the laws of Canada applicable in British Columbia, without giving effect to the conflict of laws principles.
21. Obligations of Successors. In addition to any obligations imposed by law upon any successor to the Company, any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company shall expressly assume and agree to perform this Plan in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
22. Effectiveness and Term. The Executive Severance Plan is effective as of December 4, 2020.
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Exhibit 10.17
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made as of this day of , 2020.
B E T W E E N:
AbCellera Biologics Inc., a corporation incorporated under the Business Corporations Act (British Columbia)
(the Company)
- and -
[]
(the Indemnified Party)
RECITALS:
A. |
The Business Corporations Act (British Columbia) (the BCBCA) permits, and in some cases requires, the Company to indemnify individuals who are or were directors and/or officers of the Company, or who act or acted at the Companys request as directors and/or officers or in a similar capacity of other entities (an Other Entity, a term which, for the purposes of this indemnification agreement (the Agreement) shall include a corporation or other entity that becomes an Other Entity in the future). In this Agreement: |
(i) |
each such individual, duly elected or appointed as a director and/or officer, including acting in a capacity similar to a director and/or officer of an Other Entity and including an individual who has ceased to be a director and/or officer or to act in any such capacity, is referred to as a Director and/or Officer, as appropriate; |
(ii) |
unless the context otherwise requires, words importing the singular include the plural and vice versa and words importing gender include all genders; and |
(iii) |
unless otherwise indicated, references to sections are to sections in this Agreement; |
B. |
The Indemnified Party is at present a Director or Officer or both of the Company; |
C. |
The Company and the Indemnified Party wish to enter into this Agreement, and in so doing affirm that they intend that all the provisions of this Agreement be given legal effect to the full extent permitted by applicable law. |
NOW THEREFORE for good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties agree as follows:
1. |
Subject to Sections 2 and 3, the Company agrees to indemnify and save harmless the Indemnified Party: |
1.1 from and against all costs, charges and expenses reasonably incurred by the Indemnified Party in respect of any civil, criminal, administrative, investigative or other proceeding to which the Indemnified Party is involved by reason of being or having been a Director and/or Officer; and
1.2 to the extent such costs, charges and expenses are not otherwise paid by the Company or Other Entity, as appropriate, from and against all costs, charges and expenses that the Indemnified Party may reasonably incur as a result of carrying out duties as a Director and/or Officer in respect of the Indemnified Partys reasonable and necessary travel, lodging or accommodation costs, charges or expenses.
2. |
Indemnification under Section 1 shall be made only if the Indemnified Party: |
2.1 acted honestly and in good faith with a view to the best interests of either the Company or the Other Entity, as the case may be; and
2.2 in the case of a criminal or administrative proceeding, the Indemnified Party had reasonable grounds for believing that the Indemnified Partys conduct was lawful.
Sections 2.1 and 2.2 are referred to in this Agreement as the Standards of Conduct. For the purposes of the Standards of Conduct and this Agreement generally:
(a) |
for the purposes of any determination hereunder, the Indemnified Party will be deemed, subject to compelling evidence to the contrary, to have acted in good faith and in the best interests of the Company or any Other Entity. The Company will have the burden of establishing the absence thereof; |
(b) |
the knowledge and/or actions, or failure to act, of any other director, officer, agent or employee of the Company or any Other Entity will not be imputed to the Indemnified Party for the purposes of determining the right to indemnification under this Agreement; |
(c) |
the Company will have the burden of establishing that any amount it wishes to challenge is not reasonable; and |
(d) |
the termination of any proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendre or its equivalent shall not, of itself, create a presumption that the Indemnified Party is not entitled to indemnification under this Agreement. |
3. |
In respect of an action by or on behalf of the Company or an Other Entity to procure a judgment in its favour to which the Indemnified Party is made a party by reason of being or having been a Director and/or Officer, indemnification under Section 1 shall be made only after obtaining approval of the court having jurisdiction, provided that the Company shall or shall cause such Other Entity to seek and use all reasonable efforts to obtain that approval as soon as reasonably possible in the circumstances. |
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4. |
For the purposes of this Agreement: |
4.1 proceeding shall include a claim, demand, suit, action, proceeding or investigation, whether threatened in writing, pending, commenced, continuing or completed, and any appeal or appeals therefrom;
4.2 costs, charges and expenses shall include:
4.2.1 subject to Section 10, an amount paid to settle an action or satisfy a judgment, except in respect of an action to which Section 3, above, is applicable;
4.2.2 a fine, penalty, levy or charge paid to any domestic or foreign government (federal, provincial, municipal or otherwise) or to any regulatory authority, agency, commission or board of any domestic or foreign government, or imposed by any court or any other law, regulation or rule-making entity having jurisdiction in the relevant circumstances (collectively, a Governmental Authority), including as a result of a breach or alleged breach of any statutory or common law duty imposed on directors or officers or of any law, statute, rule or regulation or of any provision of the articles or any resolution of the Company or an Other Entity;
4.2.3 an amount paid to satisfy a liability arising as a result of the failure of the Company or an Other Entity to pay wages, vacation pay and any other amounts that may be owing to employees or to make contributions that may be required to be made to any pension plan, retirement income plan or other benefit plan for employees or to remit to any Governmental Authority payroll deductions, income taxes or other taxes, or any other amounts payable by the Company or an Other Entity;
4.2.4 reasonable legal costs on a solicitor and his own client basis, including those incurred in enforcing the Indemnified Partys rights under this Agreement;
4.2.5 costs, transcript costs, fees of experts, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other out-of-pocket disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a proceeding or an appeal resulting from a proceeding; and
4.3 the Indemnified Party shall be considered to be involved in any proceeding if the Indemnified Party has any participation whatsoever in such proceeding, including merely as a witness.
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5. |
Upon the Indemnified Party becoming aware of any proceeding which may give rise to indemnification under this Agreement, the Indemnified Party shall give written notice to the Company, directed to its (a) Chief Executive Officer and (b) Chief Financial Officer as soon as is practicable, provided however that failure to give notice in a timely fashion shall not disentitle the Indemnified Party to indemnification unless the Company suffers actual prejudice by reason of the delay. |
6. |
The Company may conduct any investigation it considers appropriate of any proceeding of which it receives notice under Section 5, and shall pay all costs of that investigation. |
7. |
The parties wish to facilitate the payment by the Indemnified Party of ongoing costs in connection with matters for which indemnification under this Agreement is provided. Accordingly, the parties agree as follows: |
7.1 subject to Section 7.2, the Company shall, upon demand, make advances (Expense Advances) to the Indemnified Party of all reasonable amounts for which the Indemnified Party seeks indemnification under this Agreement before the final disposition of the relevant proceeding. In connection with such demand, the Indemnified Party shall provide the Company with a written affirmation of the Indemnified Partys good faith belief that the Indemnified Party has met the Standards of Conduct, along with sufficient particulars of the costs, charges and expenses to be covered by the proposed Expense Advance to enable the Company to make an assessment of their reasonableness;
7.2 the Company shall make Expense Advances to the Indemnified Party in accordance with the provisions of the BCBCA; and
7.3 the Indemnified Party shall execute a separate undertaking which shall set out the Indemnified Partys acknowledgement and agreement to repay to the Company, upon demand, all Expense Advances in the event that it is subsequently determined by a judgment of a court that the Indemnified Party has not met the Standards of Conduct.
8. |
The indemnities in Section 1 shall not apply in respect of any proceeding initiated by the Indemnified Party: |
8.1 against the Company or an Other Entity, unless it is brought to establish or enforce any right under this Agreement, any other right of indemnity or in connection with any directors and officers liability insurance or similar policy;
8.2 against any Director or Officer unless the Company or the Other Entity, as the case may be, has joined in or consented to the initiation of such proceeding; or
8.3 against any other corporation, partnership, trust, joint venture, unincorporated entity or person, unless it is a counterclaim.
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9. Notwithstanding any provision in this Agreement to the contrary, the Company shall not be obligated under this Agreement to provide the indemnities in Section 1:
9.1 to indemnify for amounts otherwise indemnifiable hereunder (or for which advancement is provided hereunder) if and to the extent that the Indemnified Party has otherwise actually received such amounts under any insurance policy, contract, agreement or otherwise; provided that the foregoing shall not affect the rights of the Indemnified Party or the Secondary Indemnitors as set forth in Section 12 and Section 16.3;
9.2 to indemnify for an accounting of profits made from the purchase and sale (or sale and purchase) by the Indemnified Party of securities of the Company within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of state statutory law or common law, or from the purchase or sale by the Indemnified Party of such securities in violation of Section 306 of the Sarbanes Oxley Act of 2002, as amended; or
9.3 |
to provide any indemnification or advancement of costs, charges and expenses that is prohibited by applicable law (as such law exists at the time payment would otherwise be required pursuant to this Agreement). |
10. |
The Company shall be entitled to participate, at its own expense, in the defence of the Indemnified Party in any proceeding. If the Company so elects after receipt of notice of a proceeding, or the Indemnified Party in that notice so directs, the Company shall assume control of the negotiation, settlement or defence of the proceeding, in which case the defence shall be conducted by counsel chosen by the Company and reasonably satisfactory to the Indemnified Party. If the Company elects to assume control of the defence, the Indemnified Party shall have the right to participate in the negotiation, settlement or defence of the proceeding and to retain counsel to act on the Indemnified Partys behalf, in which case the Company shall reimburse the Indemnified Party for any fees and disbursements of that counsel if a conflict of interest has arisen between the Company and the Indemnified Party. Notwithstanding anything contained herein, the Company shall not be responsible for fees and expenses of more than one counsel in each applicable jurisdiction separate from counsel for the Company for all Directors and Officers in connection with any action or separate but similar or related actions arising out of the same general allegations or circumstances. The Indemnified Party and the Company shall cooperate fully with each other and their respective counsel in the investigation related to, and defence of, any proceeding and shall make available to each other all relevant books, records, documents and files and shall otherwise use their best efforts to assist each others counsel to conduct a proper and adequate defence. |
11. |
In respect of the settlement of any proceeding, the parties agree as follows: |
11.1 the Company may not, without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed) enter into an agreement to settle any proceeding involving the Indemnified Party;
11.2 if the Indemnified Party refuses after requested by the Company, acting reasonably, to give consent to the terms of a proposed settlement in accordance with Section 11.1 which is otherwise acceptable to the Company, the Company may require the Indemnified Party to negotiate or defend the proceeding independently of the Company. In that case, any amount recovered by the claimant in excess of the amount for which settlement could have been made by the Company shall not be recoverable under this Agreement, and the Company will only be responsible for costs, charges and expenses up to the time at which settlement could have been made;
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11.3 the Company shall not be liable for any settlement of any proceeding effected without its prior written consent (which consent shall not be unreasonably withheld or delayed);
11.4 the Indemnified Party shall have the right to negotiate a settlement in respect of any proceeding, provided that unless the Company has approved the settlement, the Indemnified Party shall pay any compensation or other payment to be made under the settlement and the costs of negotiating and implementing the settlement, and shall not seek indemnity from the Company in respect of such compensation, payment or costs; and
11.5 the settlement of a proceeding shall not create a presumption that the Indemnified Party did not meet or would not have met the Standards of Conduct.
12. |
Should any payment made pursuant to this Agreement, including the payment of insurance premiums or any payment made by an insurer under an insurance policy, be deemed to constitute a taxable benefit or otherwise be or become subject to any tax or levy, then the Company shall pay any amount as may be necessary to ensure that the amount received by or on behalf of the Indemnified Party, after the payment of or withholding for such tax, fully reimburses the Indemnified Party for the actual cost, expense or liability incurred by or on behalf of the Indemnified Party. |
13. |
Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity or unenforceability of any such provision or part thereof by a court of competent jurisdiction shall not affect the validity or enforceability of any other provision hereof. To the extent permitted by applicable law, the parties waive any provision of law which renders any provision of this Agreement invalid or unenforceable in any respect. The parties shall engage in good faith negotiations to replace any provision which is declared invalid or unenforceable with a valid and enforceable provision, the economic effect of which comes as close as possible to that of the invalid or unenforceable provision which it replaces. |
14. |
This Agreement shall be governed by and construed in accordance with the laws of the Province of British Columbia and the laws of Canada applicable therein. |
15. |
The obligations of the Company under this Agreement, other than under Section 16, shall continue until the later of: |
(i) |
six (6) years after the Indemnified Party ceases to be a director or officer of the Company or any Other Entity; and |
(ii) |
one (1) year after the final termination of all proceedings with respect to which the Indemnified Party is entitled to claim indemnification under this Agreement. |
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16. |
In respect of insurance and right to indemnification from other parties, the parties agree as follows: |
16.1 The Company shall use its reasonable best efforts to ensure that it has in place at all times a directors and officers liability insurance policy no less favourable to the Indemnified Party (and that has been approved by the Board) under which the Indemnified Party is covered in his or her capacity as a current or former director or officer of the Company or its subsidiaries. In the event the Company is sold or enters into any business combination as a result of which the directors and officers liability insurance policy is terminated and not replaced with a substantially similar policy applicable to the Indemnified Party, the Company shall use its reasonable best efforts to cause run off tail insurance to be purchased for the benefit of the Indemnified Party with substantially the same coverage for not less than a six (6) year term following such termination. The Company shall provide to the Indemnified Party a copy of each policy of insurance providing the coverages contemplated by this section forthwith after coverage is obtained, and shall forthwith notify the Indemnified Party if the insurer cancels, makes material changes to coverage or refuses to renew coverage (or any part of the coverage). In the event that an Indemnified Party is subject to a deductible under any insurance policy contemplated by this Section 16.1, the Company shall pay such deductible for and on behalf of the Indemnified Party.
16.2 In the event that the Director or Officer is covered under a separate insurance policy, that shall not avoid the need for a Company policy under Section 16.1, but the Company shall provide to the Indemnified Party a copy of such policy of insurance forthwith after coverage is obtained, and shall forthwith notify the Indemnified Party if the insurer cancels, makes material changes to coverage or refuses to renew coverage (or any part of the coverage). In the event that an Indemnified Party is subject to a deductible under any such insurance policy contemplated by this Section 16.2, the Company shall pay such deductible for and on behalf of the Indemnified Party.
16.3 The Company hereby acknowledges that the Indemnified Party may have certain rights to indemnification, advancement of costs, charges and expenses and/or insurance provided by an entity or entities other than the Company (collectively, the Secondary Indemnitors). The Company hereby agrees (i) that it is the indemnitor of first resort (i.e., its obligations to the Indemnified Party are primary and any obligation of the Secondary Indemnitors to advance costs, charges and expenses or to provide indemnification for the same costs, charges and expenses or liabilities incurred by the Indemnified Party are secondary), (ii) that it shall be required to advance the full amount of costs, charges and expenses incurred by the Indemnified Party and shall be liable for the full amount of all costs, charges and expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by the terms of this Agreement (or any other agreement between the Company and the Indemnified Party), without regard to any rights the Indemnified Party may have against the Secondary Indemnitors, and (iii) that it irrevocably waives, relinquishes and releases the Secondary Indemnitors from any and all claims against the Secondary Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. The Company further agrees that no advancement or payment by the Secondary Indemnitors on behalf of the Indemnified Party with respect to any claim for which the Indemnified Party has sought indemnification from the Company shall affect the foregoing and the Secondary Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of the Indemnified Party against the Company. The Company and the Indemnified Party agree that the Secondary Indemnitors are express third party beneficiaries of the terms of this Section 16.3.
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16.4 Except as provided in Section 16.3 above, in the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnified Party (other than against the Secondary Indemnitors), who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.
16.5 Except as provided in Section 16.3 above, the Companys obligation to provide indemnification or advancement hereunder to the Indemnified Party who is or was serving at the request of the Company as a director, manager, partner, officer, employee, agent or trustee of any Other Entity shall be reduced by any amount the Indemnified Party has actually received as indemnification or advancement from such Other Entity.
17. |
The Indemnified Party acknowledges having been advised to obtain independent legal advice with respect to entering into this Agreement, has obtained such independent legal advice or has expressly determined not to seek such advice, and that the Indemnified Party is entering into this Agreement with full knowledge of the contents hereof, of the Indemnified Partys own free will and with full capacity and authority to do so. |
18. |
Except as expressly provided in this Agreement, no amendment or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any provision of this Agreement shall constitute a waiver of any other provision nor shall any waiver of any provision of this Agreement constitute a continuing waiver unless otherwise expressly provided. |
19. |
This Agreement shall enure to the benefit of the Indemnified Party and the Indemnified Partys heirs, administrators, executors and personal representatives and shall be binding upon the Company and its successors. |
20. |
This Agreement shall not operate to abridge or exclude any other rights, in law or in equity, to which the Indemnified Party or the Company may be entitled. The right to be indemnified or to the reimbursement or advancement of costs, charges and expenses pursuant to this Agreement is intended to be retroactive and shall be available with respect to events occurring prior to the execution hereof. For greater certainty, the rights of the Indemnified Party hereunder shall vest irrevocably with respect to all activities of the Indemnified Party as a Director or Officer, as and from the date on which the Indemnified Party first became a director or officer of the Company or any Other Entity. |
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21. |
The Company and the Indemnified Party hereby acknowledge and agree that upon execution of this Agreement, any previous indemnity agreement entered into between the Company and the Indemnified Party (the Previous Indemnity Agreement) is terminated and no longer in force and effect and that this Agreement supersedes the Previous Indemnity Agreement and any other previous agreements between the parties hereto relating to the subject matters hereof. |
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Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
The Board of Directors
AbCellera Biologics Inc.
We, KPMG LLP, consent to the use of our report, dated October 2, 2020, except for Note 18, as to which the date is December 7, 2020, with respect to the consolidated financial statements of AbCellera Biologics Inc. included herein and to the reference to our firm under the heading Experts in the prospectus. Our report refers to a change in the method of accounting for leases as of January 1, 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases.
/s/ KPMG LLP
Chartered Professional Accountants
Vancouver, Canada
December 7, 2020
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the inclusion in this registration statement on Amendment No. 2 to Form S-1, File No. 333-250838, of AbCellera Biologics Inc. of our report dated October 26, 2020, with respect to our audits of the financial statements of Trianni, Inc. (the Company), which comprise the balance sheets as of December 31, 2018 and 2019, the related statements of operations, convertible preferred stock and stockholders equity, and cash flows for the years then ended, and the related notes to the financial statements. We also consent to the reference of our firm under the heading Experts in this registration statement.
Our report refers to a change in the Companys method of accounting for revenue due to the adoption of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, as of January 1, 2018.
/s/ Armanino LLP |
San Jose, California
December 7, 2020