As filed with the Securities and Exchange Commission on February 5, 2026
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM F-10
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
SATELLOS BIOSCIENCE INC.
(Exact name of Registrant as specified in its charter)
| |
Canada
|
|
|
2834
|
|
|
Not Applicable
|
|
| |
(Province or other Jurisdiction
of Incorporation or Organization)
|
|
|
(Primary Standard Industrial
Classification Code Number)
|
|
|
(I.R.S. Employer
Identification No.)
|
|
Royal Bank Plaza, South Tower, 200 Bay Street, Suite 2800
Toronto, Ontario, ON M5J 2J3
(647) 660-1780
(Address and telephone number of Registrant’s principal executive offices)
Satellos Bioscience US, Inc.
6 Liberty Square 2089
Boston, MA 02109
647-660-1780
(Name, address (including zip code) and telephone number (including area code) of agent for service in the United States)
Copies to:
| |
John Rudy
Alok A. Choksi
Allyson Wilkinson
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
(617) 542-6000
|
|
|
Cheryl Reicin
Matthew Imrie
Mintz LLP
Royal Bank Plaza, South Tower,
200 Bay Street, Suite 2800
Toronto, Ontario M5J 2J3
Canada
(647) 499-2828
|
|
|
Frank Gleeson, MBA
Satellos Bioscience Inc.
Royal Bank Plaza, South Tower,
200 Bay Street, Suite 2800
Toronto, Ontario M5J 2J3
Canada
(647) 660-1780
|
|
|
Nathan Ajiashvili
Adam J. Gelardi
Latham & Watkins LLP
1271 Avenue of the Americas
New York, NY 10020
(212) 906-1200
|
|
|
Brian Pukier
Jeff Hershenfield
Stikeman Elliott LLP
5300 Commerce Court West
199 Bay Street
Toronto, Ontario M5L 1B9
(416) 869-5500
|
|
Approximate date of commencement of proposed sale of the securities to the public:
From time to time after this Registration Statement becomes effective.
Province of Ontario, Canada
(Principal jurisdiction regulating this offering)
It is proposed that this filing shall become effective (check appropriate box):
A. ☒
Upon filing with the Commission, pursuant to Rule 467(a) (if in connection with an offering being made contemporaneously in the United States and Canada).
B. ☐
At some future date (check the appropriate box below):
1. ☐
pursuant to Rule 467(b) on (date) at (time).
2. ☐
pursuant to Rule 467(b) on (date) at (time) because the securities regulatory authority in the review jurisdiction has issued a receipt or notification of clearance on (date).
3. ☐
pursuant to Rule 467(b) as soon as practicable after notification of the Commission by the Registrant or the Canadian securities regulatory authority of the review jurisdiction that a receipt or notification of clearance has been issued with respect hereto.
4. ☐
after the filing of the next amendment to this Form (if preliminary material is being filed).
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to the home jurisdiction’s shelf prospectus offering procedures, check the following box. ☒
PART I
INFORMATION REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS
The information in this preliminary prospectus supplement and the accompanying base shelf prospectus is not complete and may be changed. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. This preliminary prospectus supplement and the accompanying base shelf prospectus are not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to completion, dated February 5, 2026
PRELIMINARY PROSPECTUS SUPPLEMENT
To the Short Form Base Shelf Prospectus dated October 29, 2025
New Issue , 2026
SATELLOS BIOSCIENCE INC.
US$
Common Shares or Pre-Funded Warrants
Price: $ per Common Share or $ per Pre-Funded Warrant
Satellos Bioscience Inc. (the “Company” or “Satellos” or “we” or “our”) is hereby qualifying the distribution of common shares of the Company (the “Common Shares”) at a public offering price of $ per Common Share (the “Common Share Offering Price” and such Common Shares, the “Offered Shares”) for aggregate gross proceeds of $ (the “Offering”). In lieu of an Offered Share, purchasers may elect to purchase one pre-funded common share purchase warrant of the Company (each, a “Pre-Funded Warrant”) at a price of $ per Pre-Funded Warrant (the “Pre-Funded Warrant Offering Price”, and together with the Common Share Offering Price, the “Offering Price”). Each Pre-Funded Warrant will entitle the holder thereof to acquire, subject to adjustment in certain circumstances, one Common Share in the capital of the Company (each, a “Warrant Share”). The Pre-Funded Warrants will not expire until exercised in full. The Pre-Funded Warrants will have a nominal exercise price of Cdn$0.00001 per Warrant Share. The Pre-Funded Warrants may be exercised on a “net” or “cashless” basis.
The Offering is being made concurrently in Canada under the terms of this prospectus supplement (the “Prospectus Supplement”) and the accompanying base shelf prospectus dated October 29, 2025 (the “Base Shelf Prospectus” and, as supplemented by this Prospectus Supplement, collectively this “Prospectus”) and in the United States under the terms of our registration statement on Form F-10 (File No. ) (as amended, the “Registration Statement”) filed with the U.S. Securities and Exchange Commission (the “SEC”) under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”).
The distribution of the Offered Shares and Pre-Funded Warrants qualified by this Prospectus is referred to herein as the “Offering”. See “Description of Securities Being Distributed”.
The Offering is made on an underwritten basis pursuant to the terms and conditions of an underwriting agreement (the “Underwriting Agreement”) entered into between Leerink Partners LLC (the “Lead Underwriter”), as representative of the several underwriters named on Schedule A thereto (collectively, the “Underwriters”) (collectively, the “Underwriters”) and the Company. The Offering Price was determined by arm’s length negotiation between the Company and the Lead Underwriter. See “Plan of Distribution”.
The Company may be considered a “connected issuer” of Bloom Burton Securities Inc. under applicable Canadian securities laws. Bloom Burton Securities Inc. is an affiliate of Bloom Burton Development Company and Bloom Burton & Co. Inc., each of whom either beneficially owns or exercises control and direction over securities of the Company. In addition, Brian Bloom, a director of the Company, is also an officer and director of Bloom Burton Securities Inc. and, together with Jolyon Burton, exercises joint control and direction over all Bloom Burton entities. The Bloom Burton entities and Brian Bloom together, hold approximately 7.33% of the issued and outstanding common shares of Satellos and approximately 5.46% on a fully diluted basis. See “Relationship Between the Company and the Underwriter”.
The outstanding Common Shares are listed and posted for trading on the Toronto Stock Exchange (the “TSX”) under the symbol “MSCL”. On February 4, 2026, the last trading day on the TSX prior to the date of this Prospectus Supplement, the closing price of the Common Shares on the TSX was Cdn$16.69.
The Company has applied to list the Offered Shares and Warrant Shares on the TSX. Listing is subject to the approval of the TSX in accordance with applicable listing requirements. The Company has also applied to list the Common Shares on The Nasdaq Stock Market LLC (“Nasdaq”) under the symbol “MSLE”. The listing of the Common Shares on Nasdaq is dependent upon satisfaction of all necessary listing requirements. The Company does not intend to apply to list the Pre-Funded Warrants on any securities exchange. There will be no market through which the Pre-Funded Warrants may be sold and purchasers may not be able to resell the Pre-Funded Warrants purchased in the Offering. This may affect the pricing of the Pre-Funded Warrants in the secondary market, the transparency and availability of trading prices, the liquidity of the Pre-Funded Warrants and the extent of issuer regulation. See “Risk Factors”.
The Company is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), and the U.S. Securities Exchange Act of 1934, as amended (the “U.S. Exchange Act”), and as such, has elected to comply with certain reduced U.S. public company reporting requirements for this Prospectus Supplement and its other filings with the SEC.
An investment in the securities offered hereunder is speculative and involves a high degree of risk. The risk factors identified in this Prospectus and the documents incorporated by reference herein should be carefully reviewed and evaluated by prospective investors before purchasing the securities being offered hereunder. See “Risk Factors” in this Prospectus and the documents incorporated by reference herein.
| |
|
|
Price to
the Public
|
|
|
Underwriters’
Discounts and
Commissions(1)
|
|
|
Net Proceeds to the
Company (before
expenses)(2)
|
|
|
Per Offered Share
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
Per Pre-Funded Warrant
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
Total
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
Notes:
(1)
The Company has agreed to pay the Underwriters, on the Closing Date, discounts and commissions (the “Underwriters’ Commission”) equal to 7% of the aggregate gross proceeds raised on such Closing Date.
(2)
After deducting the Underwriters’ Commission, but before deducting expenses of the Offering (including listing fees) estimated to be approximately $ , which will be paid from the gross proceeds of the Offering.
(3)
The Company granted to the Underwriters an over-allotment option (the “Over-Allotment Option”) exercisable in whole or in part, in the sole discretion of the Underwriters, at any time prior to 5:00 p.m. (Toronto time) on the date that is the 30th day following the date of this Prospectus Supplement, to purchase up to an additional Common Shares (the “Additional Shares”) at the Common Share Offering Price solely to cover over-allotments, if any, and for market stabilization purposes. If the Over-Allotment Option is exercised in full, the total price to the public, the Underwriters’ Commission and net proceeds to the Company (before deducting expenses of the Offering) will be $ , $ and $ , respectively. This Prospectus Supplement and the accompanying Base Shelf Prospectus qualifies the grant of the Over-Allotment Option and the distribution of any Additional Shares. A purchaser who acquires Additional Shares forming part of the Underwriters’ over-allocation position acquires such securities under this Prospectus Supplement and the accompanying Base Shelf Prospectus, regardless of whether the over-allocation position is ultimately filled through the exercise of the Over-Allotment Option or secondary market purchases. See “Plan of Distribution”.
Leerink PartnersGuggenheim SecuritiesOppenheimer & Co.
The date of this prospectus supplement is , 2026.
The following table sets forth the maximum number of Additional Shares that may be issued by the Company pursuant to the Over-Allotment Option:
| |
Underwriters’ Position
|
|
|
Maximum Number of
Additional Shares
|
|
|
Exercise Period
|
|
|
Exercise Price
|
|
| |
Over-Allotment Option
|
|
|
Additional Shares
|
|
|
At any time and from time to time up to 30 days following the date of this Prospectus Supplement
|
|
|
$ per Additional Share
|
|
Unless the context otherwise requires, all references to “Offered Shares” in this Prospectus Supplement includes reference to Additional Shares that may be issued pursuant to the Over-Allotment Option.
The Underwriters, as principals, conditionally offer the Offered Shares and Pre-Funded Warrants, subject to prior sale, if, as and when issued by the Company and accepted by the Underwriters in accordance with the conditions contained in the Underwriting Agreement referred to under “Plan of Distribution” and subject to the approval of certain legal matters relating to the Offering on behalf of the Company by Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., with respect to U.S. legal matters, and by Mintz LLP, with respect to Canadian legal matters, and on behalf of the Underwriters by Latham & Watkins LLP, with respect to U.S. legal matters, and by Stikeman Elliott LLP, with respect to Canadian legal matters.
Pursuant to the terms and conditions contained in the Underwriting Agreement, the Underwriters have agreed to purchase as principals, on an underwritten basis, the Offered Shares and/or Pre-Funded Warrants from the Company and the Company has agreed to issue and sell to the Underwriters all, but not less than all, of the Offered Shares and/or Pre-Funded Warrants. The Offering is being made concurrently in the United States and in each of the provinces of British Columbia, Alberta and Ontario. The Offered Shares and Pre-Funded Warrants will be offered in the United States through the Leerink Partners LLC, Guggenheim Securities, LLC and Oppenheimer & Co. Inc., either directly or indirectly, through their U.S. broker-dealer affiliates or agents. The Offered Shares and Pre-Funded Warrants will be offered in each of the provinces of British Columbia, Alberta and Ontario, through Bloom Burton Securities Inc., or through such other Canadian registered dealers as may be designated by the Underwriters. Leerink Partners LLC, Guggenheim Securities, LLC and Oppenheimer & Co. Inc. are not registered as investment dealers in any Canadian jurisdiction and, accordingly, will only sell the Offered Shares and Pre-Funded Warrants into the United States and will not, directly or indirectly, solicit offers to purchase or sell the Offered Shares or Pre-Funded Warrants in Canada. See “Plan of Distribution”.
Subscriptions for the Offered Shares and Pre-Funded Warrants will be received subject to rejection or allotment, in whole or in part, and the Underwriters reserve the right to close the subscription books at any time without notice. It is expected that the closing of the Offering will occur on or about , 2026 (or “T+1” based on Canadian and U.S. business days) or such other date as mutually agreed upon by the Underwriters and the Company (the “Closing Date”), but in any event not later than , 2026. It is expected that the Company will arrange for the instant deposit of the Offered Shares under the book-based system of registration, to be registered to The Depository Trust Company (“DTC”) and deposited with DTC on the Closing Date. No certificates evidencing the Offered Shares will be issued to purchasers of the Offered Shares. Purchasers of the Offered Shares will receive only a customer confirmation from the Underwriters or other registered dealers who are DTC participants and from or through whom a beneficial interest in the Offered Shares is purchased. See “Plan of Distribution”. Certificates representing the Pre-Funded Warrants will be in definitive form and available for delivery to purchasers on the Closing Date. The Company expects that delivery of the Pre-Funded Warrants will be made against payment therefor on or about the Closing Date.
The Underwriters and members of the selling group (if any) may, in connection with the Offering, over-allot or effect transactions which stabilize or maintain the market price of the Common Shares on the TSX and/or Nasdaq at levels above those which might otherwise prevail in the open market, in compliance with applicable securities laws. Such stabilizing transactions, if commenced, may be discontinued at any time. See “Plan of Distribution”.
The Underwriters propose to offer the Offered Shares and Pre-Funded Warrants initially at the applicable Offering Price. After the Underwriters have made a reasonable effort to sell all of the Offered Shares and Pre-Funded Warrants at the Offering Price, the Underwriters may offer the Offered Shares and Pre-Funded Warrants at prices lower than the Offering Price. Notwithstanding any reduction by the
Underwriters in the Offering Price, any such reduction will not affect the net proceeds received by the Company. See “Plan of Distribution”.
An investment in the Offered Shares and/or Pre-Funded Warrants involves certain risks that are described under the heading “Risk Factors” and elsewhere in this Prospectus Supplement, including in the documents incorporated herein by reference and should be considered by any prospective purchaser of the Offered Shares and/or Pre-Funded Warrants.
The Company is permitted, under a multijurisdictional disclosure system adopted by the securities regulatory authorities in Canada and the United States (“MJDS”), to prepare the Base Shelf Prospectus and this Prospectus Supplement in accordance with the disclosure requirements of Canada. Prospective purchasers in the United States should be aware that such requirements are different from those of the United States. The financial statements included or incorporated by reference herein have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS Accounting Standards”) and may not be comparable to financial statements of United States companies. The audit of such financial statements may be subject to Canadian generally accepted auditing standards. The Company may also be subject to auditor independence standards in Canada and the United States.
The enforcement by purchasers of civil liabilities under the United States federal securities laws may be affected adversely by the fact that the Company is governed by the laws of Canada, that some or all of its officers and directors are residents of a country other than the United States, that some or all of the experts named in the Base Shelf Prospectus and this Prospectus Supplement are residents of a country other than the United States, and a substantial portion of the assets of the Company and said persons may be located outside of the United States. See “Enforceability of Civil Liabilities”.
THE OFFERED SHARES AND PRE-FUNDED WARRANTS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE OR CANADIAN SECURITIES COMMISSION OR REGULATORY AUTHORITY NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY OR CANADIAN SECURITIES COMMISSION OR REGULATORY AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THE BASE SHELF PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.
Trades in the secondary market generally are required to settle in one business day, unless the parties to the trade expressly agree otherwise. Accordingly, purchasers who wish to trade the Offered Shares or Pre-Funded Warrants on any date prior to the business day before delivery will be required, by virtue of the fact that the Offered Shares and Pre-Funded Warrants will settle on T+1 based on trading days for The Nasdaq Global Market, to specify an alternative settlement cycle at the time of any such trade to prevent a failed settlement. Purchasers who wish to trade Offered Shares or Pre-Funded Warrants on any date prior to the business day before delivery should consult their own advisors.
Any investment in securities of the Company involves significant risks that should be carefully considered by prospective investors before purchasing the Offered Shares or Pre-Funded Warrants. The risks outlined in this Prospectus Supplement, the Base Shelf Prospectus, and in the documents incorporated by reference herein and therein, should be carefully reviewed and considered by prospective investors in connection with any investment in the Offered Shares or Pre-Funded Warrants. Prospective investors should carefully read the “Risk Factors” section in this Prospectus Supplement, the Base Shelf Prospectus and the documents incorporated by reference herein and therein, as well as the information under the heading “Special Note Regarding Forward-Looking Information” in this Prospectus Supplement and consider such notes and information in connection with an investment in the Offered Shares or Pre-Funded Warrants.
Prospective investors should be aware that the acquisition of the securities described herein may have tax consequences that depend on each prospective investor’s specific circumstances. Such consequences may not be described fully in this Prospectus Supplement or the accompanying Base Shelf Prospectus, including the Canadian federal income tax consequences applicable to a foreign controlled Canadian corporation that acquires the Offered Shares or Pre-Funded Warrants. Investors should read the tax discussion in this Prospectus Supplement and consult their own tax advisors with respect to their own particular circumstances. See “Certain Canadian Federal Income Tax Considerations”, “Eligibility for Investment” and “Risk Factors”.
You should rely only on the information contained or incorporated by reference in this Prospectus. The Company and the Underwriters have not authorized anyone to provide purchasers with information different from that contained or incorporated by reference in this Prospectus and the documents incorporated by
reference herein. Information contained on the website of the Company shall not be deemed to be a part of this Prospectus or incorporated herein by reference and should not be relied upon by prospective investors for the purpose of determining whether to invest under the Offering.
Prospective investors should be aware that the acquisition or disposition of the Offered Shares or Pre-Funded Warrants described herein may have tax consequences in Canada. This Prospectus may not describe these tax consequences fully. You should consult and rely on your own tax advisor with respect to your own particular circumstances. See “Certain Canadian Federal Income Tax Considerations” in this Prospectus.
Geoff MacKay, Stephanie Brown, Selwyn Ho, Franklin M. Berger, Iris Loew-Friedrich and Adam Mostafa, all being directors of the Company, reside outside of Canada (the “Non-Resident Directors”). The Non-Resident Directors have appointed the following agent for service of process:
|
Name of the Non-Resident Director
|
|
|
Name and Address of Agent
|
|
|
Geoff MacKay
|
|
|
Satellos Bioscience Inc.
|
|
|
Stephanie Brown
|
|
|
Royal Bank Plaza, South Tower
|
|
|
Selwyn Ho
|
|
|
200 Bay St., Suite 2800
|
|
|
Adam Mostafa
|
|
|
Toronto, Ontario
|
|
|
Franklin M. Berger
|
|
|
M5J 2J3
|
|
|
Iris Loew-Friedrich
|
|
|
|
|
Purchasers are advised that it may not be possible for investors to enforce judgements obtained in Canada against any person or company that is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction or resides outside of Canada, even if the party has appointed an agent for service of process. See “Risk Factors”.
Unless otherwise noted, all currency amounts in this Prospectus Supplement are stated in U.S. dollars.
The Company’s head and registered office is located at Royal Bank Plaza, South Tower, 200 Bay St., Suite 2800, Toronto, Ontario, M5J 2J1 and its telephone number is (416) 708-0522.
TABLE OF CONTENTS
Prospectus Supplement
| |
|
|
Page
|
|
|
|
|
|
|
|
S-1
|
|
|
|
|
|
|
|
|
S-1
|
|
|
|
|
|
|
|
|
S-2
|
|
|
|
|
|
|
|
|
S-6
|
|
|
|
|
|
|
|
|
S-7
|
|
|
|
|
|
|
|
|
S-8
|
|
|
|
|
|
|
|
|
S-8
|
|
|
|
|
|
|
|
|
S-9
|
|
|
|
|
|
|
|
|
S-14
|
|
|
|
|
|
|
|
|
S-32
|
|
|
|
|
|
|
|
|
S-33
|
|
|
|
|
|
|
|
|
S-35
|
|
|
|
|
|
|
|
|
S-36
|
|
|
|
|
|
|
|
|
S-38
|
|
|
|
|
|
|
|
|
S-43
|
|
|
|
|
|
|
|
|
S-44
|
|
|
|
|
|
|
|
|
S-45
|
|
|
|
|
|
|
|
|
S-54
|
|
|
|
|
|
|
|
|
S-55
|
|
|
|
|
|
|
|
|
S-55
|
|
|
|
|
|
|
|
|
S-55
|
|
|
|
|
|
|
|
|
S-56
|
|
|
|
|
|
|
|
|
S-56
|
|
|
|
|
|
|
|
|
S-56
|
|
|
|
CERTIFICATE OF THE COMPANY
|
|
|
|
|
SC-0 |
|
|
|
CERTIFICATE OF THE PROMOTER
|
|
|
|
|
SC-0 |
|
|
|
CERTIFICATE OF THE UNDERWRITERS
|
|
|
|
|
SC-0 |
|
|
Base Shelf Prospectus
| |
|
|
Page
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
8
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
19
|
|
|
|
CERTIFICATE OF THE COMPANY
|
|
|
|
|
C-0 |
|
|
|
CERTIFICATE OF THE PROMOTER
|
|
|
|
|
C-0 |
|
|
NOTICE TO READER
This document is in two parts. The first part is this Prospectus Supplement, which describes the specific terms of the Offering and also adds to and updates certain information contained in the Base Shelf Prospectus and the documents incorporated by reference herein and therein. The second part, the Base Shelf Prospectus, gives more general information about securities the Company may offer from time to time, some of which may not apply to the Offering. Both documents contain important information investors should consider when making an investment decision. This Prospectus Supplement may add, update or change information contained in the Base Shelf Prospectus. Before investing, purchasers of the Offered Shares or Pre-Funded Warrants pursuant to the Offering should carefully read both this Prospectus Supplement and the Base Shelf Prospectus together with the additional information about the Company referred to in the section of this Prospectus Supplement titled “Documents Incorporated by Reference”. This Prospectus Supplement is deemed to be incorporated by reference into the Base Shelf Prospectus solely for the purposes of the Offering. Other documents are also incorporated or deemed to be incorporated by reference into this Prospectus Supplement and into the Base Shelf Prospectus. See “Documents Incorporated by Reference”.
Purchasers of Offered Shares or Pre-Funded Warrants pursuant to the Offering should rely only on the information contained in or incorporated by reference into this Prospectus Supplement and the Base Shelf Prospectus. If information in this Prospectus Supplement is inconsistent with the Base Shelf Prospectus or the information incorporated by reference therein, you should rely on this Prospectus Supplement. The Company has not authorized any other person to provide purchasers with additional or different information. If anyone provides purchasers with additional or different information, such purchasers should not rely on it.
The Company and the Underwriters are offering to sell, and seeking offers to buy, these securities only in jurisdictions where offers and sales are permitted. Purchasers should assume that the information appearing in this Prospectus Supplement and the Base Shelf Prospectus, as well as information the Company has previously filed with the securities regulatory authorities in the Provinces of British Columbia, Alberta and Ontario that is incorporated herein and in the Base Shelf Prospectus by reference, is accurate as of their respective dates only. The Company’s business, financial condition, results of operations and prospects may have changed since those dates. The Company does not undertake to update the information contained or incorporated by reference in this Prospectus Supplement or the Base Shelf Prospectus, except as required by applicable securities laws. This Prospectus Supplement shall not be used by anyone for any purpose other than in connection with the Offering.
This Prospectus Supplement, the Base Shelf Prospectus and the documents incorporated by reference therein are part of the Registration Statement. This Prospectus Supplement and the Base Shelf Prospectus do not contain all of the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the SEC, or the schedules or exhibits that are part of the Registration Statement. Investors in the United States should refer to the Registration Statement and the exhibits thereto for further information with respect to the Company, the Offered Shares and the Pre-Funded Warrants.
References in this Prospectus Supplement to “Satellos”, “we”, “us” or “our” refer to the Company and its direct and indirect wholly-owned subsidiaries, unless the context indicates otherwise.
CURRENCY PRESENTATION AND EXCHANGE RATE INFORMATION
All dollar amounts in this Prospectus Supplement are expressed in U.S. dollars unless otherwise indicated. References to “Cdn$” are to Canadian dollars.
The following table sets out, for the period indicated, certain exchange rates based upon the exchange rates published by the Bank of Canada during the respective periods. The rates are set out as Canadian dollars per US$1.00.
| |
|
|
Nine Months Ended
September 30, 2025
|
|
|
12 Months Ended
December 31, 2024
|
|
|
12 Months Ended
December 31, 2023
|
|
|
12 Months Ended
December 31, 2022
|
|
|
Closing
|
|
|
|
$ |
1.3921 |
|
|
|
|
$ |
1.4389 |
|
|
|
|
$ |
1.3226 |
|
|
|
|
$ |
1.3544 |
|
|
|
High
|
|
|
|
$ |
1.4603 |
|
|
|
|
$ |
1.4416 |
|
|
|
|
$ |
1.3875 |
|
|
|
|
$ |
1.3856 |
|
|
|
Low
|
|
|
|
$ |
1.3558 |
|
|
|
|
$ |
1.3316 |
|
|
|
|
$ |
1.3128 |
|
|
|
|
$ |
1.2451 |
|
|
|
Average
|
|
|
|
$ |
1.3988 |
|
|
|
|
$ |
1.3698 |
|
|
|
|
$ |
1.3497 |
|
|
|
|
$ |
1.3011 |
|
|
On February 4, 2026, the daily average exchange rate for Canadian dollars in terms of United States dollars, as quoted by the Bank of Canada was US$1.00 = $1.3668.
SPECIAL NOTE REGARDING FORWARD-LOOKING AND OTHER STATEMENTS
This Prospectus Supplement and the Base Shelf Prospectus, and the documents incorporated herein by reference, contain certain forward-looking statements that relate to the Company’s current internal expectations, estimates, projections, assumptions, beliefs and views of future events. In some cases, these forward-looking statements can be identified by words or phrases such as “may”, “might”, “will”, “expect”, “anticipate”, “estimate”, “intend”, “plan”, “indicate”, “seek”, “believe”, “predict” or “likely”, or the negative or grammatical variations of these terms, or other similar expressions intended to identify forward-looking statements. The Company has based these forward-looking statements on its current expectations and projections about future events and financial trends that it believes might affect its financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, among other things, statements relating to:
•
our proposed use of the net proceeds from this Offering;
•
the anticipated listing of the Offered Shares and Warrant Shares on the TSX and Nasdaq;
•
there is no established market for certain securities, and we do not know whether an active market will develop for Common Shares on The Nasdaq Global Market if the Common Shares are listed;
•
our belief that the Company will be successful in raising additional capital to continue as a going concern;
•
the expected research and development timelines, therapeutic benefits, effectiveness and safety of our product candidates;
•
our belief that the Company’s products and research and development efforts are targeting diseases and conditions with significant unmet medical treatment needs;
•
our belief that the Company has made, and will continue to make progress towards the achievement of certain milestones or objectives;
•
our expectation with respect to meeting milestones and the minimum amount of funds the Company expects to need to raise in order to achieve such milestones and garner additional funding;
•
our expectations regarding future enrollment into clinical trials and the timing of future enrollment into clinical trials for our product candidates;
•
the initiation, timing, cost, progress, outcomes, resource needs and success of our research and development activities, plans and programs;
•
our expectations regarding our ability to design, test and patent novel drug products suitable for advancement into clinical trials and the anticipated timelines surrounding such clinical trials;
•
our belief that we will not receive substantive comments on our Investigational New Drug (“IND”) or equivalent applications;
•
our expectations that the AAK1 protein within the Notch pathway (as further described herein) represents a viable drug target for the safe treatment of Duchenne muscular dystrophy (“Duchenne” or “DMD”) and other degenerative conditions;
•
our expectations that modulation of the AAK1 protein within the Notch pathway represents a drug development opportunity similar or superior to modulation of the EGFR signaling pathway;
•
our intentions of developing inhibitors to AAK1 (including but not limited to SAT-3247) and in showing that such potential inhibitors have desirable effects in relevant models of DMD and in other indications, such as other degenerative muscle diseases, muscle injury or trauma, or muscle regeneration generally;
•
our expectations that our lead drug candidate SAT-3247 has the potential to be a safe and therapeutically beneficial modulator of AAK1 in humans living with DMD or other degenerative conditions;
•
our expectations that we will identify predictive biomarkers as discussed herein which will translate into or be useful in conducting human clinical trials;
•
our belief that the results of Satellos’ research and development activities, preclinical studies, safety studies or clinical trials have the potential to be commercially competitive with research and development activities, preclinical studies, safety studies or clinical trials conducted by other parties;
•
discoveries we have made in muscle stem cell regulation having the potential to represent insights into a potential root cause of degenerative muscle disorders which has previously not been recognized and which may be therapeutically relevant in the treatment of degenerative muscle disorders;
•
our belief that the Company’s technology can be commercialized, and that such commercialization could be done as effectively or more effectively than other technologies to treat degenerative muscle disorders and conditions or other medical disorders or conditions, or at all;
•
our ability to discover, optimize, select and advance into clinical development therapeutic drug development candidates in a timely, cost-efficient and effective manner, or at all;
•
our ability to translate our discoveries in muscle stem cell regulation into safe and therapeutically effective drug products and the broad applicability of such products;
•
our ability to enter into research and/or commercial development collaborations or partnerships to successfully and profitably advance our drug development candidates;
•
our ability and that of our partners (if any) to advance identified drug development candidates into, and successfully complete, clinical trials;
•
our intention to identify and nominate one or more back-up drug candidates and the potential benefits of having such back-ups;
•
our plans to utilize and deploy MyoRegenXTM in our programs and our continued relationship with OHRI (as defined below);
•
our ability to develop the Company’s novel discoveries into viable therapeutic treatments suitable for clinical development, including, but not limited to, our ability to determine appropriate dosing regimens;
•
the ability of our products to effectively and safely treat Duchenne and other degenerative muscle disorders and conditions or other medical disorders or conditions and the applicability of our products to other disorders and conditions;
•
our belief that our approach may reduce the risk, time and cost of developing therapeutics by avoiding some of the uncertainty associated with certain research and preclinical stages of drug development;
•
our ability to establish and maintain relationships with collaborators with acceptable preclinical and/or clinical research and development capability and regulatory and commercialization expertise to enable the development and future commercialization of our technology or products and the benefits to be derived from such collaborative efforts;
•
our ability to enter into agreements or partnerships with pharmaceutical or biotechnology companies that have research and clinical development and/or sales and marketing capabilities and the expected benefits that could be derived therefrom;
•
our ability to generate and protect our intellectual property;
•
our ability to operate our business without infringing upon the intellectual property rights of others;
•
our ability to engage third party services with specialized domain expertise for the drafting and submitting of regulatory applications to conduct clinical trials in humans;
•
our ability to establish suitable chemistry, manufacturing and controls and good manufacturing procedures protocols;
•
the manufacturing capacity of third-party manufacturers for our product candidates;
•
our expectations regarding federal, provincial and foreign regulatory requirements;
•
the timing of, and the costs of obtaining and maintaining, regulatory approvals in the United States, Australia, Europe, Serbia, Canada and other jurisdictions;
•
the rate and degree of market acceptance and clinical utility of our future products, if any;
•
existing and future corporate alliances and licensing transactions with third parties, and the receipt and timing of any payments to be made by us or to us pursuant to such arrangements;
•
the implementation and execution of our commercial and operational strategy;
•
our ability to engage and retain the consultants or employees required to grow our business;
•
the potential revenue that may be generated from our products, pricing and reimbursement of the patient cost of our drug products by insurers or national health systems, as the case may be, in those jurisdictions where the Company intends to sell its drug products and our ability to achieve profitability;
•
developments relating to our competitors and our industry, including the success of competing therapies that are or become available;
•
the potential growth of the market and demand for our products as well as the estimated pricing and subsequent revenue generation of any potential therapeutics we discover;
•
our future financial performance, including projected expenditures, future revenue, capital requirements and our needs for additional financing; and
•
general business and economic conditions and the evolving regulatory landscape.
Such forward-looking statements reflect our current views with respect to future events, are subject to risks and uncertainties and are necessarily based upon a number of estimates and assumptions that, while considered reasonable by Satellos as of the date of such statements, are inherently subject to significant medical, scientific, business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause our actual results, performance, achievements, prospects or opportunities to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. In making the forward-looking statements included in this Prospectus, the Company has made various material assumptions, including, but not limited to:
•
obtaining positive results from our research and development activities, including clinical trials;
•
our ability to obtain regulatory approvals;
•
assumptions regarding general business, market, economic and regulatory conditions;
•
assumptions regarding the cost and timing of each study;
•
the Company’s ability to successfully advance its preclinical and clinical development programs and execute its plans substantially as currently envisioned;
•
the Company’s ability to identify and advance suitable drug candidates;
•
assumptions related to the pricing and reimbursement of its drug products in jurisdictions in which the Company intends to sell its drug products;
•
the Company’s current positive relationships with third parties will be maintained and the potential to develop new partnerships;
•
our ability to continue to use existing licenses for the development of our product(s);
•
the availability (and sources) of financing on reasonable terms;
•
future expenditures to be incurred by the Company, including research and development and operating costs;
•
the Company’s ability to attract and retain skilled consultants and employees;
•
assumptions regarding market competition, market capture and pricing;
•
the products and technology offered by the Company’s competitors; and
•
the Company’s ability to protect patents and proprietary rights.
In evaluating forward-looking statements, current and prospective shareholders should specifically consider various factors, including the risks outlined herein under the heading “Risk Factors”. Certain risks and uncertainties that could cause such actual events or results expressed or implied by such forward-looking statements and information to differ materially from any future events or results expressed or implied by such statements and information include, but are not limited to:
•
risks related to the early stage of our products;
•
uncertainties related to preclinical product development activities and clinical trial outcomes;
•
uncertainties related to current economic conditions;
•
risks related to rapid technological change;
•
uncertainties related to forecasts and timing of clinical trials and regulatory approval;
•
competition in the market for therapeutic products, including those to treat Duchenne and related diseases;
•
risks related to potential product liability claims;
•
availability of financing and access to capital and the risks associated with the Company’s ability to continue as a going concern;
•
market acceptance and commercialization of products;
•
the availability, costs and supply of materials;
•
risks related to the effective management of our growth;
•
risks related to the reliance on partnerships and licensing agreements;
•
risks related to our reliance on key personnel;
•
risks related to the regulatory approval process for the manufacture and sale of therapeutic products;
•
risks related to the reimbursement process in various jurisdictions where the Company plans to sell its drug products; and
•
our ability to secure and protect our intellectual property.
Although the Company has attempted to identify important factors that could cause actual actions, events, or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Although the forward-looking statements contained in this Prospectus are based upon what the Company’s management believes to be reasonable assumptions, the Company cannot assure readers that actual results will be consistent with these forward-looking statements.
There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The reader is cautioned not to place undue reliance on forward-looking statements.
The Company disclaims any intention or obligation to revise forward-looking statements whether as a result of new information, future developments, or otherwise, except as required by law.
All forward-looking statements are expressly qualified in their entirety by this cautionary statement.
MARKET AND INDUSTRY DATA
Certain independent third party and industry data contained (or incorporated by reference) in this Prospectus Supplement is based upon information from government or other independent industry or scientific publications and reports or based on estimates derived from such publications and reports.
Government and industry publications and reports generally indicate that they have obtained their information from sources believed to be reliable, but neither the Company nor its representatives, have conducted their own independent verification of such information. While the Company believes this information to be reliable, third-party information is subject to variations and cannot be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process, and other limitations and uncertainties inherent in any statistical or scientific survey. In addition, this third-party information has been prepared as of a specific date and therefore does not contemplate changes in facts and circumstances following such date. Neither the Company nor any of its representatives has independently verified any of the research, findings or data from independent third-party sources referred to in this Prospectus Supplement or ascertained the underlying assumptions relied upon by such sources. Unless specifically stated, none of the third-party information cited in this Prospectus Supplement is incorporated by reference herein. All third-party information source references are provided for the reader’s convenience only and do not form a part of this Prospectus Supplement.
DOCUMENTS INCORPORATED BY REFERENCE
This Prospectus Supplement is deemed to be incorporated by reference into the Base Shelf Prospectus solely for the purpose of the Offering. Other documents are also incorporated, or deemed to be incorporated, by reference in the Base Shelf Prospectus and reference should be made to the Base Shelf Prospectus for full particulars thereof.
Information has been incorporated by reference in the Base Shelf Prospectus and this Prospectus Supplement from documents filed with or delivered to securities commissions or similar authorities in each of the Provinces of British Columbia, Alberta and Ontario. Copies of the documents incorporated herein by reference or a copy of the permanent information record may be obtained on request without charge from the Chief Financial Officer of the Company at Royal Bank Plaza, South Tower, 200 Bay St., Suite 2800, Toronto, ON M5J 2J3, Telephone (647) 660-1780 or by accessing the disclosure documents available through the internet on the System for Electronic Document Analysis and Retrieval+ (“SEDAR+”), which can be accessed at www.sedarplus.ca.
As at the date hereof, the following documents of the Company, filed with or delivered to the securities commissions or similar authorities in each of the Provinces of British Columbia, Alberta and Ontario, and filed as exhibits to the Registration Statement, of which the Base Shelf Prospectus and this Prospectus Supplement form a part, are specifically incorporated by reference into and form an integral part of this Prospectus Supplement, provided that such documents are not incorporated by reference to the extent that their contents are modified or superseded by a statement contained in this Prospectus Supplement or in any other subsequently filed document that is also incorporated by reference in this Prospectus Supplement, as further described below:
•
•
•
•
•
•
•
•
•
Any document of the type referred to in the preceding paragraph (excluding confidential material change reports), and all other documents of the type required by National Instrument 44-101 — Short Form Prospectus Distributions of the Canadian Securities Administrators to be incorporated by reference in the Base Shelf Prospectus or this Prospectus Supplement, filed by the Company with a securities commission or similar regulatory authority in Canada after the date of this Prospectus Supplement and prior to the termination of any offering of Offered Shares or Pre-Funded Warrants hereunder shall be deemed to be incorporated by reference into this Prospectus Supplement.
To the extent that any document or information incorporated by reference into this Prospectus Supplement as described above is included in any report furnished to the SEC by the Company on Form 6-K (to the extent such incorporation by reference is expressly set forth therein), it shall be deemed to be incorporated by reference as an exhibit to the Registration Statement. In addition, any document or information included in any report on Form 6-K, Form 40-F, Form 20-F, Form 10-K, Form 10-Q or Form 8-K (or any respective successor form) that is filed with or furnished to the SEC, as applicable, pursuant to the U.S. Exchange Act, after the date of this Prospectus Supplement, shall be deemed to be incorporated by reference into the Registration Statement (in the case of Form 6-K, if and to the extent such incorporation by reference is expressly set forth therein).
Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded, for purposes of the Base Shelf Prospectus and this Prospectus Supplement, to the extent that a statement contained herein or in any other subsequently filed document that also is or is deemed to be incorporated by reference herein modifies or supersedes that statement. Any such modifying or superseding statement need not state that it has modified or superseded a prior statement or include any other information set forth in the document that it modifies or supersedes. The making of a modifying or superseding statement shall not be deemed an admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made. Any statement so modified or superseded shall not be considered in its unmodified or superseded form to constitute part of the Base Shelf Prospectus or this Prospectus Supplement; rather only such statement as so modified or superseded shall be considered to constitute part of the Base Shelf Prospectus and this Prospectus Supplement.
Upon a new annual information form and the related annual consolidated financial statements being filed by the Company with, and where required, accepted by, the applicable securities regulatory authorities during the currency of this Prospectus and any previous annual information form, including all amendments thereto, the previous annual consolidated financial statements and all interim unaudited consolidated financial statements (including any management’s discussion and analysis related thereto), material change reports and information circulars filed prior to the commencement of the fiscal year in which the new annual information form is filed, shall no longer be deemed to be incorporated into this Prospectus for purposes of future offers and sales of the Offered Shares or Pre-Funded Warrants hereunder.
References to the Company’s website in any documents that are incorporated by reference into this Prospectus Supplement and/or the Base Shelf Prospectus do not incorporate by reference the information on such website into this Prospectus and the Company disclaims any such incorporation by reference, except as specifically set forth herein.
MARKETING MATERIALS
Any “template version” of any “marketing materials” (as such terms are defined under applicable Canadian securities laws) that are used in connection with the Offering are not part of this Prospectus Supplement to the extent that the contents of the template version of the marketing materials have been modified or superseded by a statement contained in this Prospectus Supplement. Any template version of
any marketing materials that has been, or will be, filed under the Company’s profile on SEDAR+ at www.sedarplus.ca before the termination of the distribution under the Offering (including any amendments to, or an amended version of, any template version of any marketing materials) is deemed to be incorporated by reference into this Prospectus Supplement.
DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT
The following documents have been or will be filed with the SEC and form part of the Registration Statement and the exhibits thereto: (1) the documents listed under “Documents Incorporated by Reference”; (2) the powers of attorney from our directors and officers, as applicable; (3) the consents of Mintz LLP, PricewaterhouseCoopers LLP and MNP LLP; (4) the Underwriting Agreement; and (5) the other documents filed as part of the Registration Statement as described in the Base Shelf Prospectus. Documents filed with, or furnished to, the SEC are available through EDGAR at www.sec.gov.
AVAILABLE INFORMATION
The Company has filed the Registration Statement with the SEC with respect to the Offered Shares and Pre-Funded Warrants offered pursuant to this Prospectus Supplement. This Prospectus Supplement, which constitutes a part of the Registration Statement, does not contain all of the information required to be contained in the Registration Statement, certain items of which are contained in the exhibits to the Registration Statement as permitted by the rules and regulations of the SEC.
The Company is subject to the continuous disclosure requirements of applicable Canadian securities legislation and, in accordance therewith, files reports and other information with the applicable securities regulators in Canada. The Company is also subject to the information requirements of the U.S. Exchange Act and files reports and information with the SEC. Under the MJDS adopted by the United States and Canada, documents and other information that the Company files with or furnishes to the SEC may be prepared in accordance with the disclosure requirements of Canada, which are different from those of the United States. As a foreign private issuer within the meaning of rules made under the U.S. Exchange Act, the Company is exempt from the rules under the U.S. Exchange Act prescribing the furnishing and content of proxy statements, and the Company’s officers, directors and principal shareholders are exempt from the insider reporting and short swing profit recovery provisions contained in Section 16 of the U.S. Exchange Act. Effective March 18, 2026, the Company’s officers and directors will no longer be exempt from the insider reporting provisions of Section 16. In addition, the Company is not required to publish financial statements as promptly as United States companies, its financial statements may be prepared under IFRS Accounting Standards rather than U.S. generally accepted accounting principles, and they may be audited under Canadian generally accepted auditing standards.
The SEC maintains an internet site at www.sec.gov that makes available reports and other information that the Company files or furnishes electronically with it. A prospective purchaser may also read and download any public document that the Company has filed with the Canadian securities regulatory authorities under the Company’s profile on SEDAR+ at www.sedarplus.ca. The Company’s internet site can be found at www.satellos.com/. Information contained or otherwise accessed through the Company’s website or any other website, other than those documents incorporated by reference herein and filed on the SEDAR+ website and EDGAR, does not form part of the Base Shelf Prospectus or this Prospectus Supplement, and any reference to the Company’s website in the Base Shelf Prospectus or this Prospectus Supplement is an inactive textual reference only.
THE COMPANY
The following description of the Company is derived from selected information about the Company contained in the documents incorporated by reference and does not contain all of the information about the Company and its business that should be considered before investing in the Offered Shares or Pre-Funded Warrants. This Prospectus Supplement, the Base Shelf Prospectus and the documents incorporated by reference herein and therein should be reviewed and considered by prospective purchasers in connection with their investment in the Offered Shares or Pre-Funded Warrants. This Prospectus Supplement may add to, update or change information in the Base Shelf Prospectus. You should carefully read this entire Prospectus Supplement and the Base Shelf Prospectus, including the risks and uncertainties discussed in the section titled “Risk Factors”, and the information incorporated by reference in this Prospectus Supplement, including the Company’s consolidated financial statements, before making an investment decision.
Summary Description of the Business
Satellos Bioscience Inc. was incorporated under the Canada Business Corporations Act (the “CBCA”) on July 27, 2012 (“Pre-Arrangement Satellos”). iCo Therapeutics Inc. (“iCo”) was incorporated under the Business Corporations Act (British Columbia) on April 20, 2006 and completed a reverse take-over transaction by way of statutory arrangement onto the TSX Venture Exchange.
On August 13, 2021, Pre-Arrangement Satellos and iCo completed a plan of arrangement (the “Arrangement”) under section 192 of the CBCA, pursuant to which, among other things, iCo acquired all of the issued and outstanding shares of Pre-Arrangement Satellos. In connection with the Arrangement, iCo (now, Satellos): (a) was continued under the CBCA; (b) amalgamated with Satellos to form the Company as it now exists, which continues to carry on the pre-Arrangement business of Pre-Arrangement Satellos and iCo; and (c) consolidated its outstanding Common Shares on a 20:1 basis.
As announced on February 14, 2024, the Company commenced trading on the TSX on February 15, 2024 under the symbol “MSCL”, and was delisted from the TSX Venture Exchange effective as of the close of the market on February 14, 2024.
On January 27, 2026, the Company filed articles of amendment to effect a consolidation of its issued and outstanding Common Shares on a 12:1 basis effective January 30, 2026 (the “Consolidation”).
The Company has two wholly owned subsidiaries, Satellos Bioscience Australia Pty Ltd. (an entity incorporated under the laws of Australia) and Satellos Bioscience US, Inc. (an entity incorporated under the laws of Delaware, USA).
The Company’s head office is located at Royal Bank Plaza, South Tower, 200 Bay St., Suite 2800, Toronto, Ontario, M5J 2J3, and the Company’s registered and records office is located at Royal Bank Plaza, South Tower, 200 Bay St., Suite 2800, Toronto, Ontario, M5J 2J3.
Satellos is a clinical-stage drug development company dedicated to developing life-improving medicines to treat degenerative muscle diseases. Satellos has invented SAT-3247 as a first-of-its-kind, orally administered small molecule drug designed to restore skeletal muscle regeneration initially in Duchenne muscular dystrophy (“DMD”). Satellos has generated evidence in preclinical models of DMD to support its hypothesis that correcting muscle stem cell polarity through treatment with SAT-3247 has the potential to restore skeletal muscle regeneration, thereby enhancing repair and increasing muscle strength. SAT-3247 is the Company’s lead drug candidate. SAT-3247 is currently in clinical development in two clinical trials: CL-201, known as BASECAMP, and LT-001, known as TRAILHEAD. Additionally, Satellos continues to leverage its research and proprietary discovery platform MyoReGenX™, to identify additional degenerative muscle diseases where deficits in muscle regeneration may occur that are amenable to therapeutic intervention for future development.
Intellectual Property
Intellectual property, including patents, trade secrets, trademarks and copyrights, is important to our business. Our commercial success depends in part on our ability to obtain and maintain proprietary intellectual property protection for our current product candidate, SAT-3247, as well as for future product
candidates and novel discoveries, product development technologies, and know-how. Our commercial success also depends in part on our ability to operate without infringing on the proprietary rights of others and to prevent others from infringing our proprietary rights. We seek to maintain our proprietary position by, among other means, filing United States and foreign patent application to obtain issued patents that cover our product candidates, technology, inventions, and improvements that are important to the development and implementation of our business. We also license from third parties certain patent rights and proprietary know-how that we believe to be necessary or useful to our business. Additionally, we protect our proprietary know-how that may not be patentable, and other confidential information, by maintaining and implementing appropriate policies and procedures for ensuring secrecy and confidentiality.
Our patent portfolio is built with a goal of establishing broad protection that generally includes claims directed to the composition of matter of our product candidates, pharmaceutical compositions or formulations, salts and solid forms of our product candidates, methods of synthesis, and methods of treatment using our product candidates. We are currently seeking and maintaining patent protection in the United States and key foreign jurisdictions, or intend to seek and maintain patent protection in key foreign jurisdictions, where we intend to market our product candidates, and plan to do so with respect to any of our future product candidates. Our patent portfolio includes a combination of patents and pending patent applications solely owned by us and patents and pending patent applications licensed from the Ottawa Hospital Research Institute (“OHRI”).
As of February 2, 2026, our owned and exclusively licensed patent estate contains 11 patent families comprising 3 issued U.S. patents, 18 issued patents in Canada, France, Germany, Italy, Japan, Spain, Switzerland, and the United Kingdom, 8 pending U.S. non-provisional patent applications, and 7 pending patent applications in various jurisdictions outside of the U.S., as further described below.
With regard to SAT-3247, we own 3 pending U.S. non-provisional patent applications, 1 pending PCT international application, and 1 pending patent application in Taiwan relating to SAT-3247 composition of matter, which if issued are expected to expire in 2044. We also own 1 pending U.S. non-provisional patent application, 1 pending PCT international application, and 1 pending patent application in Taiwan relating to salts and solid forms of SAT-3247, which, if issued, are expected to expire in 2045. We further own 2 patent families directed to methods of treating muscular dystrophy with SAT-3247, with 1 pending U.S. non-provisional patent application, 1 pending PCT international application, and 5 pending U.S. provisional applications, which, if issued, are expected to expire between 2045 and 2046. The foregoing expiration dates do not account for potentially available patent term adjustments or extensions and terminal disclaimers, and assume payment of all appropriate maintenance, renewal, and annuity fees.
Further, we have and will continue to pursue trademark protection for our company SATELLOS and other brands. As of February 2, 2026, we own 55 registered trademarks in foreign jurisdictions and 6 pending trademark applications in the United States and foreign jurisdictions.
Board of Directors and Committee Composition
Board of Directors
The following table sets forth the names and positions of our board of directors as of February 1, 2025:
|
Name
|
|
|
Position
|
|
|
Geoff MacKay
|
|
|
Non-Executive Director and Chairman
|
|
|
Franklin Berger, CFA
|
|
|
Non-Executive Director
|
|
|
Brian Bloom
|
|
|
Non-Executive Director
|
|
|
Stephanie Brown, MBA
|
|
|
Non-Executive Director
|
|
|
Iris Loew-Friedrich, M.D., Ph.D.
|
|
|
Non-Executive Director
|
|
|
Selwyn Ho, MBBS
|
|
|
Non-Executive Director
|
|
|
Frank Gleeson, MBA
|
|
|
President, Chief Executive Officer, and Director
|
|
|
Adam Mostafa
|
|
|
Non-Executive Director
|
|
|
Mark Nawacki, MBA CPA
|
|
|
Non-Executive Director
|
|
Audit Committee
The members of our audit committee are three of our non-executive directors, Adam Mostafa, Selwyn Ho, MBBS, and Stephanie Brown, MBA. Each of these members is an “independent director” as such term is defined in Rule 10A-3 under the U.S. Exchange Act. Mr. Mostafa serves as chair of the audit committee and is a financial expert as contemplated by the rules of the SEC implementing Section 407 of the Sarbanes Oxley Act (2002).
Compensation Committee
The members of the compensation committee are three of our non-executive directors, Geoff MacKay, Stephanie Brown, MBA, and Adam Mostafa. Each of these non-executive director members is a non-employee director as defined in Rule 166-3 under the U.S. Exchange Act. Mr. MacKay serves as chair of the compensation committee.
Nominating and Corporate Governance Committee
The members of the nominating and corporate governance committee are Franklin Berger, CFA, Iris Loew-Friedrich, M.D., Ph.D., and Selwyn Ho, MBBS. Mr. Berger serves as chair of the nominating and corporate governance committee.
Nasdaq Corporate Governance Exemptions
As a “foreign private issuer,” as defined by the SEC, we are permitted to follow certain Canadian corporate governance practices in lieu of the Nasdaq requirements applicable to domestic issuers. Although we expect to voluntarily comply with most Nasdaq corporate governance rules, we intend to rely on the following exemptions available to foreign private issuers:
•
Exemption from Nasdaq Rule 5605(b)(2), which requires that independent directors regularly meet in executive sessions where only independent directors are present. Our independent directors may choose to meet in executive sessions at their discretion.
•
Exemption from Nasdaq Rule 5605(d)(1) regarding certain requirements enumerated in the compensation committee charter. Such requirements are not required under the laws of Canada; however, we do maintain a compensation committee charter that complies with the laws of Canada.
•
Exemption from Nasdaq Rule 5620(c) regarding quorum requirements applicable to meetings of shareholders. Such quorum requirements are not required under the laws of Canada. Our organizational documents provide alternative quorum requirements that are generally applicable to meetings of shareholders.
Accordingly, our shareholders will not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of Nasdaq. We may utilize these exemptions for as long as we continue to qualify as a foreign private issuer. We intend to take all actions necessary for us to maintain compliance as a foreign private issuer under the applicable corporate governance requirements of the Sarbanes-Oxley Act (2002), the rules adopted by the SEC, and the Nasdaq corporate governance rules and listing standards.
Recent Developments
Except as set out below, there have been no material developments in the business of the Company since the date of the Interim Financial Statements, which have not been disclosed in this Prospectus Supplement, the Base Shelf Prospectus or the documents incorporated by reference herein and therein.
On October 10, 2025, at the 30th Annual Congress of the World Muscle Society in Vienna, Austria, the Company announced new clinical trial data from the Company’s Phase 1b clinical trial of SAT-3247 in adults (aged 20-27 years) with DMD further demonstrating potential tolerability and providing a preliminary indication of potential for therapeutic efficacy of SAT-3247 following treatment over a period of 28 days.
Individuals treated with SAT-3247 over a 28-day period demonstrated an increase in grip strength far greater than seen in the Duchenne natural history in this age group. Specifically, a 118.6% mean improvement
in maximum grip strength was observed in the dominant hand and 97.9% mean improvement in the non-dominant hand, representing an approximate doubling of grip strength from ~2 kg to ~4 kg. These improvements are inconsistent with published natural history and were correlated with higher drug concentrations on Day 15 and higher baseline creatinine (a surrogate for increased muscle mass), which we believe indicates our drug is having the desired impact on muscle. The increases in grip strength seen in 3 of the 5 patients after 28 days appear to be moving into “white space”, strength measures not seen in the natural history for patients in this age demographic. Improvements of this nature (if sustained) may provide an opportunity for early approval consideration of SAT-3247.
Furthermore, participants exhibited a 5.8% mean improvement of predicted forced vital capacity; such an increase is also inconsistent with natural history with declines about 5% annually among adults with Duchenne. All other measures remained stable over the study period. No drug-related adverse events of moderate severity or higher were observed in either study, and no dose-limiting toxicities occurred.
Data presented at the meeting also demonstrated that SAT-3247 was safe and well-tolerated with a desirable pharmacokinetic (PK) profile across the Phase 1a portion of the study conducted in 72 healthy adult human volunteers.
On October 21, 2025, the Company announced that the first patient had been dosed in the Company’s open-label, long-term follow-up study (LT-001 or TRAILHEAD) involving 11 additional months of SAT-3247 treatment of adult DMD patients previously treated in the Phase 1b study noted above.
On November 14, 2025, the Company announced that it had appointed Mark Nawacki, co-founder, president and former CEO of Searchlight Pharma, to its board of directors.
On December 9, 2025, the Company announced that it received IND clearance by the United States Food and Drug Administration (“FDA”), as well as other global regulatory agencies, to conduct SAT-3247-CL-201 (aka BASECAMP), a three-month, randomized, double-blind, placebo-controlled, proof-of-concept, Phase 2 study of SAT-3247 in 51 ambulatory children with DMD. In addition to the FDA clearance, the United Kingdom’s Medicine and Healthcare products Regulatory Agency granted authorization of the Company’s Clinical Trial Application (“CTA”); Australia’s Human Research Ethics Committee accepted the Therapeutic Goods Administration’s Clinical Trial Notification scheme for regulatory authorization; and the Medicines and Medical Devices Agency of Serbia approved the CTA. On December 12, 2025, the CTA was approved in Canada and on January 22, 2026, the CTA was approved by the European Union. The Company is currently cleared to proceed with 60mg and 120mg doses of SAT-3247 in the UK, Australia, Serbia and the European Union. The FDA and Health Canada cleared the Company to proceed with the 60mg dose but require the Company to provide additional pharmacokinetic data in pediatric patients before being cleared to proceed with the 120mg dose.
The Company anticipates providing an update in the first quarter of 2026 from the BASECAMP study related to the numbers of trial sites that have been initiated and the number of patients enrolled. In the second, third and fourth quarters the Company currently anticipates providing further updates on patient enrollment with potential completion of enrollment by the end of the third quarter of 2026. As progress allows and the Company believes is warranted, interim data readouts may be provided prior to the completion of enrollment on a blinded, masked basis.
The ongoing TRAILHEAD study has enrolled 4 patients returning from the previous Phase 1b study and is currently enrolling up to 6 additional adults for a total of up to 10 patients in Australia. The TRAILHEAD study will assess the long-term safety, tolerability and potential efficacy of a 60 mg dose of SAT-3247 with a weekday regimen in a 12-month, open-label study (n.b., the returning patients would only be dosed for a further 11 months). The Company intends to apply for regulatory approval to initiate the TRAILHEAD study in the United States and enroll up to an additional 20 participants. It is anticipated that the Company will provide updates on grip strength, FVC and biomarkers each quarter throughout 2026. In addition, the Company anticipates providing MRI results from the study in the second and fourth quarters of 2026.
On January 28, 2026, the Company announced that it had completed a consolidation of its outstanding common shares (the “Common Shares”) on the basis of one post-consolidation Common Share for every 12 pre-consolidation Common Shares. The Consolidation took effect at market open on the TSX on January 30, 2026.
On January 29, 2026, the Company announced the appointment of Antoinette Paone as Chief Development Officer and Head of Regulatory Affairs. Ms. Paone brings extensive experience leading regulatory strategy from clinical development through approval, including her work on Kalydeco and Orkambi at Vertex Pharmaceuticals (Nasdaq: VRTX). She joins Satellos from Generation Bio (Nasdaq: GBIO), where she most recently served as Chief Operating Officer
Upon successful completion of the Offering the Company intends to initiate a Phase 2 clinical trial in Facioscapulohumeral muscular dystrophy (“FSHD”). The planned objectives and endpoints of the study would include safety, drug concentration, fluid-based biomarkers and efficacy. The Company anticipates that the study would enroll approximately 50 adult participants with FSHD in a three-month placebo-controlled study with a nine month long term extension. The Company currently anticipates filing the necessary regulatory documents to initiate a Phase 2 clinical trial in the United States and Canada in the second quarter of 2026.
RISK FACTORS
An investment in the Offered Shares or Pre-Funded Warrants is subject to a number of risks, including those set forth in the AIF, and in the management’s discussion and analysis for the Company’s most recently completed financial year and in the Base Shelf Prospectus under “Risk Factors”. The occurrence of any of these risks could have a material adverse effect on the Company’s business, financial condition, results of operations and prospects. In these circumstances, the market price of the Common Shares could decline, and you may lose all or part of your investment. These risks are not the only risks the Company faces; risks and uncertainties not currently known to the Company or that it currently deems to be immaterial may also materially and adversely affect the Company’s business, financial condition, results of operations and prospects. Investors should also refer to the other information set forth or incorporated by reference in this Prospectus Supplement and the Base Shelf Prospectus. This Prospectus Supplement also contains forward-looking statements that involve risks and uncertainties. The Company’s actual results could differ materially from those anticipated in the forward-looking statements as a result of a number of factors. See “Special Note Regarding Forward-Looking Information”. Prospective investors should carefully consider these risks in addition to information contained in this Prospectus Supplement and the information incorporated by reference herein, as well as the following risk factors, before purchasing Offered Shares or Pre-Funded Warrants:
Risk Factors Relating to the Business of the Company
Investing in the Company’s securities is speculative and involves a high degree of risk
You should carefully consider the risks set out below and under the heading “Risk Factors” in the AIF, and the other documents incorporated by reference in this Prospectus that summarize the risks that may materially affect the Company’s business before making an investment in the Company’s securities. Please see “Documents Incorporated by Reference”. If any of these risks occur, the Company’s business, results of operations or financial condition could be materially adversely affected. In that case, the trading price of the securities could decline, and you may lose all or part of your investment. The risks set out in the documents indicated above are not the only risks the Company faces. You should also refer to the other information set forth in this Prospectus as well as those incorporated by reference herein and therein, including financial statements and the related notes.
The Company has a history of negative operating cash flow
The Company had negative operating cash flow for the financial year ended December 31, 2024 and the nine months ended September 30, 2025. The Company anticipates that it will have negative operating cash flow for the foreseeable future and that it will need to allocate a portion of its cash reserves to fund such negative cash flow. The Company may also be required to raise additional funds through the issuance of equity or debt securities. There can be no assurance that additional capital or other types of financing will be available when needed or that these financings will be on terms favorable to the Company.
Risk Factors Related to the Offering and the Offered Shares and Pre-Funded Warrants
There can be no assurance that the Offering will be completed
The completion of the Offering is subject to the completion of definitive binding documentation and satisfaction of a number of conditions. There can be no certainty that the Offering will be completed.
There will be no market for the Pre-Funded Warrants
The Company has not applied and does not intend to apply to list the Pre-Funded Warrants on any securities exchange. There will be no market through which the Pre-Funded Warrants may be sold and purchasers may not be able to resell the Pre-Funded Warrants purchased in the Offering. This may affect the pricing of the Pre-Funded Warrants in the secondary market, the transparency and availability of trading prices, the liquidity of the Pre-Funded Warrants, and the extent of issuer regulation. The Pre-Funded Warrant Offering Price was determined by negotiation between the Company and the Lead Underwriter.
Holders of Pre-Funded Warrants have no rights as a shareholder, except as provided in the Pre-Funded Warrants
Until a holder of Pre-Funded Warrants acquires Common Shares upon exercise of Pre-Funded Warrants, such holder of Pre-Funded Warrants will have no rights with respect to the Common Shares underlying such Pre-Funded Warrants except as provided in the Pre-Funded Warrants. Upon exercise of the Pre-Funded Warrants, such holder will be entitled to exercise the rights of a common shareholder only as to matters for which the record date occurs after the exercise date.
Management has indicated its plan for the use of proceeds of the Offering in this Prospectus Supplement, but will ultimately exercise its discretion respecting how such funds are put to use
The Company currently intends to allocate the net proceeds received from the Offering as described in this Prospectus Supplement, however, management will have discretion in the actual application of the net proceeds, and may elect to allocate the net proceeds differently from that described under “Use of Proceeds” if it believes it would be in the Company’s best interests to do so. Shareholders may not agree with the manner in which the Company chooses to allocate and spend the net proceeds of the Offering. The failure by the Company to apply these funds effectively could have a material adverse effect on the Company’s business. Additionally, the Company may not be successful in implementing the Company’s business strategies and the Company may need to reallocate the net proceeds of the Offering to other purposes, including potentially to working capital.
There is no guarantee of any positive return on securities of the Company
There is no guarantee that Offered Shares or Warrant Shares will earn any positive return in the short-term or long-term. A holding of securities is speculative and involves a high degree of risk and should be undertaken only by holders whose financial resources are sufficient to enable them to assume such risks and who have no need for immediate liquidity in their investment. A holding of securities is appropriate only for holders who have the capacity to absorb a loss of some or all of their holdings.
Enforcement of judgments against foreign persons may not be possible
Canadian investors should be aware that each of the Non-Resident Directors resides outside of Canada; as a result, it may not be possible for purchasers of the Offered Shares and/or Pre-Funded Warrants to effect service of process within Canada upon the Non-Resident Directors. All or a substantial portion of the assets of each of the Non-Resident Directors are likely to be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against the Non-Resident Directors in Canada or to enforce a judgment obtained in Canadian courts against the Non-Resident Directors outside of Canada.
The price of the Common Shares in public markets may experience significant fluctuations
The market price for Common Shares may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond the Company’s control, including but not limited to: (i) actual or anticipated fluctuations in the Company’s quarterly results of operations; (ii) recommendations by securities research analysts; (iii) changes in the economic performance or market valuations of other issuers that investors deem comparable to the Company; (iv) addition or departure of the Company’s executive officers and other key personnel; (v) release or expiration of lock-up or other transfer restrictions on Common Shares; (vi) sales or perceived sales of Common Shares; (vii) significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving the Company or its competitors; and (viii) news reports relating to trends, concerns, technological or competitive developments, regulatory changes and other related issues in the Company’s industry or target markets.
If the market price of our Common Shares drops significantly, holders of our Common Shares could institute securities litigation, including class action lawsuits, against us, regardless of the merits of such claims. Such a lawsuit could cause us to incur substantial costs and could divert the time and attention of our management and other resources from our business. In addition, the market price for securities in the stock markets, including the TSX and Nasdaq, have experienced significant price and trading fluctuations,
interest rate changes, inflation, recession concerns, events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, that have in the past and that may in the future lead to market-wide liquidity problems, and other factors. These fluctuations resulted in volatility in the market prices of securities that often has been unrelated or disproportionate to changes in operating performance. Accordingly, broad market fluctuations may adversely affect the market prices of our Common Shares.
Subsequent offerings will result in additional dilution
The Company may sell additional equity securities in subsequent offerings (including through the sale of securities convertible into equity securities) and may issue additional equity securities to finance operations, acquisitions or other projects. The Company cannot predict the size of future issuances of equity securities or the size and terms of future issuances of debt instruments or other securities convertible into equity securities or the effect, if any, that future issuances and sales of our securities will have on the market price of our Common Shares. Any transaction involving the issuance of previously authorized but unissued Common Shares, or securities convertible into Common Shares, would result in dilution, possibly substantial, to securityholders. The Company’s board of directors has the authority to authorize certain offers and sales of additional securities without the vote of, or prior notice to, the Company’s shareholders. Based on the need for additional capital to fund expected expenditures and growth, it is likely that the Company will issue additional securities to provide such capital. Such additional issuances may involve the issuance of a significant number of our Common Shares at prices less than the current market price for the Common Shares. Additionally, holders of stock options and warrants exercisable for Common Shares may elect to exercise their stock options or warrants into Common Shares. Such exercises could further dilute your investment.
We cannot assure you that an active market will develop for our Common Shares on Nasdaq, which may make it difficult for investors to sell their Common Shares
Our Common Shares are listed on the TSX under the symbol “MSCL”, and were approved for listing on Nasdaq on February 5, 2026, under the symbol “MSLE”. Prior to this listing, there had been no prior public trading market for the Common Shares on Nasdaq. We cannot assure you that our listing of the Common Shares on Nasdaq will be maintained, or that an active trading market for the Common Shares will develop on Nasdaq or elsewhere or, if developed, that any market will be sustained. Accordingly, we cannot assure you of the liquidity of any trading market, your ability to sell the Common Shares when desired or the prices that you may obtain for your shares. Listing of our Common Shares on Nasdaq in addition to the TSX may increase price volatility on the TSX and also result in volatility of the trading price on Nasdaq because trading will be in two markets, which may result in less liquidity on both exchanges. In addition, different liquidity levels, volumes of trading, currencies and market conditions on the two exchanges may result in different prevailing trading prices.
U.S. investors may not be able to obtain enforcement of civil liabilities against us
The enforcement by investors of civil liabilities under the U.S. federal or state securities laws may be affected adversely by the fact that we are governed by the CBCA, that the majority of our officers and directors are residents of Canada or otherwise reside outside the United States, and that all, or a substantial portion of their assets and a substantial portion of our assets, are located outside the United States. It may not be possible for investors to effect service of process within the United States on certain of our directors and officers or enforce judgments obtained in the United States courts against us or certain of our directors and officers based upon the civil liability provisions of United States federal securities laws or the securities laws of any state of the United States.
There is some doubt as to whether a judgment of a U.S. court based solely upon the civil liability provisions of U.S. federal or state securities laws would be enforceable in Canada against us or our directors and officers. There is also doubt as to whether an original action could be brought in Canada against us or our directors and officers to enforce liabilities based solely upon U.S. federal or state securities laws.
As a foreign private issuer, we are subject to different U.S. securities laws and rules than a domestic U.S. issuer, which may limit the information publicly available to our U.S. shareholders
We are a foreign private issuer under applicable U.S. federal securities laws and, therefore, we are not required to comply with all the periodic disclosure and current reporting requirements of the U.S. Exchange Act, and related rules and regulations, applicable to U.S. domestic issuers. We do not file all of the same reports that a U.S. domestic issuer would file with the SEC, although we are required to file with or furnish to the SEC the continuous disclosure documents that we are required to file in Canada under Canadian securities laws. In addition, as a foreign private issuer, we are exempt from the proxy rules under the U.S. Exchange Act.
As a foreign private issuer, we are exempt from the rules and regulations under the U.S. Exchange Act related to the furnishing and content of proxy statements. We are also exempt from Regulation FD, which prohibits issuers from making selective disclosures of material non-public information. While we expect to comply with the corresponding requirements relating to proxy statements and disclosure of material non-public information under Canadian securities laws, these requirements may differ from those under the U.S. Exchange Act and Regulation FD and shareholders should not expect to receive in every case the same information at the same time as such information is provided by U.S. domestic companies.
In addition, as a foreign private issuer, we have the option to follow certain Canadian corporate governance practices, except to the extent that such laws would be contrary to U.S. securities laws, and provided that we disclose the requirements we are not following and describe the Canadian practices we follow instead. For example, we do not intend to follow the minimum quorum requirements for shareholder meetings, as well as certain Nasdaq shareholder approval requirements prior to the issuance of securities, as permitted for foreign private issuers. As a result, our shareholders may not have the same protections afforded to shareholders of U.S. domestic companies that are subject to all U.S. corporate governance requirements.
Following the completion of this offering, we may cease to qualify as a foreign private issuer. If we cease to qualify, we will be subject to the same reporting requirements and corporate governance requirements as a U.S. domestic issuer which may increase our costs of being a public company in the United States.
We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses to us
In order to maintain our current status as a foreign private issuer, a majority of our Common Shares must be either directly or indirectly owned by non-residents of the United States unless we also satisfy one of the additional requirements necessary to preserve this status. We may in the future lose our foreign private issuer status if a majority of the Common Shares are held in the United States and we fail to meet the additional requirements necessary to avoid loss of foreign private issuer status. The regulatory and compliance costs to us under U.S. federal securities laws as a U.S. domestic issuer may be significantly more than the costs we incur as a Canadian foreign private issuer eligible to use the MJDS. If we are not a foreign private issuer, we would not be eligible to use the MJDS or other foreign issuer forms and would be required to file periodic and current reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. We may lose the ability to rely upon exemptions from Nasdaq corporate governance requirements that are available to foreign private issuers.
U.S. holders of our shares may suffer adverse tax consequences if we are characterized as a passive foreign investment company
We may be treated as a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes, in which case U.S. holders would be subject to a special, generally adverse tax regime. Generally, for any taxable year in which 75% or more of our gross income is passive income, or at least 50% of the value of our assets (as determined under applicable U.S. Treasury Regulations, which may be determined in part by the market value of our shares, which is subject to change) are held for the production of, or produce, passive income, we would be characterized as a PFIC for U.S. federal income tax purposes. We will be treated as owning the proportionate share of the assets and earning the proportionate share of the income
of any other corporation, the equity of which we own, directly or indirectly, 25% or more (by value). Based on our gross income, the average value of our assets, including goodwill and the nature of our active business, we believe we were a PFIC for U.S. federal income tax purposes for the taxable year ending December 31, 2025. Furthermore, there can be no assurance that we will not be considered a PFIC for our current taxable year ending December 31, 2026 or for any future taxable year.
If we are a PFIC for any year, U.S. holders of our shares may suffer adverse tax consequences. If we are a PFIC in any year with respect to which a U.S. holder owns our 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 our shares, whether or not we remain a PFIC unless such U.S. holder makes a qualified electing fund or mark-to-market election. Gains realized by non-corporate U.S. holders on the sale of our shares would be taxed as ordinary income, rather than as capital gain, and the preferential tax rate applicable to dividends received on our common shares would be lost. Interest charges would also be added to taxes on gains and dividends realized by all U.S. holders. U.S. holders should consult their own tax advisors with respect to their particular circumstances. In order to make either a qualified electing fund or mark-to-market election certain requirements must be met. We cannot provide any assurances that these requirements will be met in order for U.S. holders to be able to make a qualified electing fund or mark-to-market election. U.S. holders should consult their tax advisors regarding the potential application of these rules to their investment in our Common Shares.
The PFIC rules, including the rules governing any elections that may potentially be made by a U.S. Holder, are extremely complex. Each U.S. holder should consult its own tax advisor regarding our potential PFIC status and how the PFIC rules (including elections that may be available thereunder) would affect the U.S. federal income tax consequences of the acquisition, ownership and disposition of our Common Shares.
If a U.S. holder is treated as owning at least 10% of our Common Shares, such U.S. holder may be subject to adverse U.S. federal income tax consequences
If a U.S. holder is treated as owning, directly, indirectly or constructively, at least 10% of the value or voting power of our Common Shares, such U.S. holder may be treated as a “United States shareholder” with respect to each “controlled foreign corporation” in our group, if any. Generally, a non-U.S. corporation is deemed as a controlled foreign corporation if more than 50% of its stock (by voting power or value) is owned (directly, indirectly or constructively) by U.S. shareholders. We will generally be classified as a controlled foreign corporation if more than 50% of our outstanding shares, measured by reference to voting power or value, are owned (directly, indirectly or by attribution) by U.S. shareholders. In addition, since our group includes one or more U.S. subsidiaries, certain of our non-U.S. subsidiaries could be treated as controlled foreign corporations, regardless of whether we are treated as a controlled foreign corporation. If we or any of our non-U.S. subsidiaries are treated as controlled foreign corporations, a U.S. shareholder would be required to annually report and include in its U.S. taxable income its pro rata share of “Subpart F income,” “global intangible low-taxed income” and investments in U.S. property by the controlled foreign corporation, regardless of whether we make any distributions, and generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a U.S. shareholder of a U.S. corporation. In addition, failure to comply with certain reporting obligations may subject a U.S. shareholder to monetary penalties and may prevent the statute of limitations with respect to such shareholder’s U.S. federal income tax return for the year for which reporting was due from starting. We cannot provide any assurances that we will assist our investors in determining whether any of our non-U.S. subsidiaries are treated as a controlled foreign corporation or whether such investor is treated as a U.S. shareholder with respect to any of such controlled foreign corporations. Further, we cannot provide any assurances that we will furnish to any U.S. shareholder information that may be necessary to comply with the reporting and tax paying obligations described in this risk factor. U.S. holders should consult their tax advisors regarding the potential application of these rules to their investment in our Common Shares.
We are an emerging growth company and intend to rely on and take advantage of reduced disclosure requirements applicable to emerging growth companies, which could make our Common Shares less attractive to investors
We are an “emerging growth company” as defined in the JOBS Act and Section 3(a) of the U.S. Exchange Act, and we will continue to qualify as an emerging growth company until the earliest to occur of:
(a) the last day of the fiscal year during which we have total annual gross revenues of $1,235,000,000 (as such amount is indexed for inflation every five years by the SEC) or more; (b) the last day of the fiscal year of our company following the fifth anniversary of the date of the first sale of common equity securities of our company pursuant to an effective registration statement under the U.S. Securities Act; (c) the date on which we have, during the previous three year period, issued more than $1,000,000,000 in non-convertible debt; and (d) the date on which we are deemed to be a “large accelerated filer”, as defined in Rule 12b-2 under the U.S. Exchange Act. We will qualify as a “large accelerated filer” under the rules of the SEC (and would cease to be an emerging growth company) at such time when on the last business day of its second fiscal quarter of such year the aggregate worldwide market value of our common equity held by non-affiliates will be $700,000,000 or more. For so long as we remain an emerging growth company, we are permitted to and intend to rely upon exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act (2002), as amended. We cannot predict whether investors will find the Common Shares less attractive because we rely upon certain of these exemptions. If some investors find the Common Shares less attractive as a result, there may be a less active trading market for the Common Shares and the Common Share price may be more volatile. On the other hand, if we no longer qualify as an emerging growth company, we would be required to divert additional management time and attention from our development and other business activities and incur increased legal and financial costs to comply with the additional associated reporting requirements, which could negatively impact our business, financial condition and results of operations.
Risks Related to Our Intellectual Property
We rely on patents and other intellectual property rights to protect our product candidates, the enforcement, defense and maintenance of which may be challenging and costly. Failure to enforce or protect these rights adequately could harm our ability to compete and impair our business
Our commercial success depends in part on obtaining and maintaining patents and other forms of intellectual property rights for our product candidates, including SAT-3247, any future therapeutic candidates, any methods used to manufacture the underlying drug substances, and the methods for treating patients using those substances, or on licensing in such rights. Failure to obtain, maintain, protect, enforce or extend adequate patent and other intellectual property rights could materially adversely affect our ability to develop and market our product candidates and any future therapeutic candidates. We also rely on trade secrets and know-how to develop and maintain our proprietary and intellectual property position. Any failure to protect our trade secrets and know-how could adversely affect our operations and prospects.
We cannot be certain that patents will be issued or granted with respect to patent applications that are currently pending, or that issued or granted patents will not later be found to be invalid or unenforceable. The patent position of companies like ours is generally uncertain because it involves complex legal and factual considerations. The standards applied by the European Patent Office, the United States Patent and Trademark Office (“USPTO”), and foreign patent offices in granting patents are not always applied uniformly or predictably. For example, there is no uniform worldwide policy regarding patentable subject matter or the scope of claims allowable in pharmaceutical patents. Consequently, patents may not issue from our pending patent applications, and even if they do issue, such patents may not issue in a form that effectively prevents others from developing or commercializing competing treatments. As such, we do not know the degree of future protection that we will have on our proprietary treatments.
The patent prosecution process is expensive, complex and time-consuming, and we and our current or future third party partners, licensors, licensees, or collaboration partners may not be able to prepare, file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we or our licensors, licensees or collaboration partners will fail to identify patentable aspects of inventions made in the course of research, development or commercialization activities before it is too late to pursue patent protection on them. In addition, although we enter into non-disclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of our research and development output, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors, and other third parties, any of these parties may breach the agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to
seek patent protection. Furthermore, 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 18 months after filing, or in some cases not published until and unless granted. Therefore, we cannot be certain that we were the first to make the inventions claimed in our patents or pending patent applications, or that we were the first to file for patent protection of such inventions. Similarly, we cannot be certain that for any licensed patents or pending patent applications, the named applicant(s) were the first to make the inventions claimed in such patents or pending patent applications or that the named applicant(s) were the first to file for patent protection for such inventions.
Further, the issuance, scope, validity, enforceability and commercial value of our and our current or future licensors’, licensees’ or collaboration partners’ patent rights are highly uncertain. Our and our licensors’ pending and future patent applications may not result in patents being issued that protect our treatments, in whole or in part, or that effectively prevent others from commercializing competitive technologies and treatments.
Moreover, in some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology that we license from or license to third parties and are reliant on our licensors, licensees or collaboration partners. If our current or future licensors, licensees or collaboration partners fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be reduced or eliminated. If our licensors, licensees or collaboration partners are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised.
The patent examination process may require us or our licensors, licensees or collaboration partners to narrow the scope of the claims of our or our licensors’, licensees’ or collaboration partners’ pending and future patent applications, which may limit the scope of patent protection that may be obtained. We cannot assure you that all of the potentially relevant prior art relating to our patents and patent applications has been found. If such prior art exists, it can invalidate a patent or prevent a patent from issuing from a pending patent application.
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents may be challenged in the courts or patent offices in the United States and abroad. Even if patents do successfully issue and even if such patents cover our product candidates and any future therapeutic candidates, third parties may initiate an opposition, interference, re-examination, post-grant review, inter partes review, nullification or derivation proceedings in court or before patent offices, or similar proceedings challenging the validity, enforceability or scope of such patents, which may result in the patent claims being narrowed or invalidated.
We may be forced to litigate to enforce or defend our intellectual property rights
We may be forced to litigate to enforce or defend our intellectual property rights against infringement by competitors, and to protect our know-how against unauthorized use, but we may not be able to detect or prevent, alone or with our licensors, infringement, misappropriation or other violation of our intellectual property rights. In so doing, we may place our intellectual property at risk of being invalidated, rendered unenforceable or limited or narrowed in scope such that we may no longer be able to adequately prevent the manufacture, sale or import of competitive product. In an infringement proceeding, a court may decide that a patent we own or a patent we may license in the future is invalid or unenforceable or may refuse to stop the other party from using the invention at issue. Even if we establish infringement, the court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may or may not be an adequate remedy. Further, an adverse result in any litigation or other proceedings before government agencies such as the USPTO, may place pending applications at risk of non-issuance or limitations in scope. Further, derivation proceedings, ex parte reexamination, inter partes review, post grant review and opposition proceedings provoked by third parties or brought by the USPTO or any foreign patent authority may be used to challenge the inventorship, ownership, claim scope or validity of our patents. Additionally, because of the substantial amount of discovery typically required in connection with intellectual property litigation, there is a risk that some of our confidential and proprietary information or know-how could be compromised by disclosure during this type of litigation. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments,
and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the value of the company. Such litigation or proceedings could substantially increase our operating losses, reduce the resources available for development activities or any future sales, marketing or distribution activities and distract our personnel from their normal responsibilities. 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 patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
If we become involved in patent litigation or other proceedings related to a determination of rights, we could incur substantial costs and expenses, substantial liability for damages or be required to stop our product development and commercialization efforts
Our commercial success depends in part on our ability and the ability of any of our future partners to develop, manufacture, market and sell our product candidates and use our proprietary technologies without infringing on the intellectual proprietary rights of third parties. There is a substantial amount of litigation and patent office proceedings, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, oppositions, ex parte reexaminations, post-grant review, inter partes review and interference proceedings before the USPTO and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are pursuing product candidates.
Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to compositions, formulations, methods of manufacture or methods for treatment relating to our product candidates, their manufacture or use. Because patent applications can take many years to issue, there may be pending patent applications which may later result in issued patents that our product candidates may be alleged to infringe. In addition, third parties may obtain patents in the future and then claim that our technologies infringe upon these patents. We cannot guarantee that any of our or our licensors’ patent searches or analyses, including the identification of relevant patents, the scope of patent claims or the expiration of relevant patents, are or will be complete or thorough, nor can we be certain that we or our licensors have identified or will identify each and every third party patent and pending patent application in the United States and abroad that is relevant to or necessary for the commercialization of our current and future products and product candidates in any jurisdiction. Our interpretation of the relevance or the scope of a patent or a pending patent application may be incorrect, which may negatively impact our ability to market our products. We may incorrectly determine that our products or product candidates are not covered by a third party patent or may incorrectly predict whether a third party’s pending patent application will issue with claims of relevant scope. Alternatively, we may incorrectly determine that the Hatch-Waxman Amendments are a defense for a safe harbor to infringement of a patent we consider relevant to the research or clinical development of our product candidates. Our determination of the expiration date of any patent in the United States or abroad that we consider relevant may be incorrect, and we may incorrectly conclude that a third party patent is invalid and unenforceable or not infringed. Our failure to identify and correctly interpret relevant patents may negatively impact our ability to develop and market our products and product candidates. If we fail to identify and correctly interpret relevant patents, we may be subject to infringement claims. As the number of competitors in the market grows and the number of patents issued in this area increases, the possibility of patent infringement claims escalates. Defense of infringement and other claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business.
In such cases, we may not be in a position to develop or commercialize such product candidates unless we successfully pursue litigation to invalidate the third-party intellectual property right concerned, or enter into a license agreement with the intellectual property right holder, which may not be available on commercially reasonable terms or at all. In the event that a patent has not expired at the time of approval of such product candidate and the patent owner were to bring an infringement action against us, we may have to argue that our product candidates or the manufacture or use of the underlying therapeutic substances do not
infringe a valid claim of the patent in question. Alternatively, if we were to challenge the validity of any issued U.S. patent in court, we would need to overcome a statutory presumption of validity that attaches to every U.S. patent. This means that in order to prevail, we would need to present clear and convincing evidence as to the invalidity of the patent’s claims. The same applies to other jurisdictions. Even if we believe third-party intellectual property claims are without merit, there is no assurance that a court would find in our favor on questions of infringement, validity, enforceability, or priority. In the event that a third party successfully asserts its patent against us such that such third party’s patent is found to be valid and enforceable and infringed by our product candidates, unless we obtain a license to such patent, which may not be available on commercially reasonable terms or at all, we could be prevented from continuing to commercialize our product candidates.
If we are unsuccessful defending a claim of infringement and obtaining a license, in addition to being forced to pay damages, we may be temporarily or permanently prohibited from commercializing any of our product candidates that were held to be infringing. If possible, we might be forced to redesign our product candidates so that we no longer infringe the intellectual property rights of third parties. Even if we or our licensors or collaboration partners obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us or our licensors or collaboration partners and it could require us to make significant licensing and royalty payments. In addition, we could be found liable for significant monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property right. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar material adverse effect on our business, financial condition, results of operations, and prospects. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.
Our rights to develop and commercialize our product candidates are, and in the future, may be subject to the terms and conditions of licenses granted to us by others. If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties, or these agreements are terminated, or we otherwise experience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business
We are dependent on patent rights, know-how and proprietary technology licensed from third parties, including through a license agreement with the Ottawa Hospital Research Institute. We may also enter into additional license agreements with third parties in the future. Our current and future license agreements may impose diligence, development and commercialization timelines, milestone payments, royalties, indemnification, insurance or other obligations on us. If we fail to comply with our obligations to our licensors or collaborators, our counterparties may have the right to terminate these agreements. Termination of these agreements or reduction or elimination of our rights under these agreements may result in us 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 that are necessary for our business.
Our success will depend in part on the ability of our licensors to obtain, maintain and enforce patent protection for our licensed intellectual property. We may have limited control over our licensors’ activities or use or licensing of any other intellectual property that may be related to our in-licensed intellectual property. Our licensors may not successfully prosecute the patent applications we license. Even if patents issue from these patent applications, our licensors may fail to maintain these patents, may determine not to pursue litigation against other companies that are infringing these patents, or may pursue such litigation less aggressively than we would. If any of our licensors or licensees having rights to file, prosecute, maintain and defend our patent rights fail to conduct these activities for patents or patent applications covering any of our product candidates, our ability to develop and commercialize those product candidates may be adversely affected and we may not be able to prevent competitors or other third parties from making, using or selling competing products. In addition, we may sublicense certain of our rights under various third-party licenses to our strategic collaborators. Any impairment of these sublicensed rights could result in reduced revenues under our strategic collaboration agreements or result in termination of an agreement by one or more of our strategic collaborators. In addition, intellectual property rights that we may in-license in the future may be sublicensed 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 develop and commercialize our product candidates may be materially harmed.
We cannot be certain that such activities by our licensors have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents or other intellectual property rights. Pursuant to the terms of the license agreements with our licensors, such licensors may have the right to control enforcement of our licensed patents or defense of any claims asserting the invalidity of such patents and, even if we are permitted to pursue such enforcement or defense, we cannot ensure the cooperation of our licensors or, in some cases, other necessary parties, such as any co-owners of patents or other intellectual property from which we have not yet obtained a license. We cannot be certain that our licensors will allocate sufficient resources or prioritize their or our enforcement of such patents or defense of such claims to protect our interests in the licensed patents. Even if we are not a party to these legal actions, an adverse outcome could harm our business because it might prevent us from continuing to license intellectual property that we may need to operate our business. In addition, even when we have the right to control patent prosecution of licensed patents and patent applications, enforcement of licensed patents, or defense of claims asserting the invalidity of those patents, we may still be adversely affected or prejudiced by actions or inactions of our licensors and their counsel that took place prior to or after assuming control.
Our current or future license agreements may not provide exclusive or sufficient rights to use such intellectual property and technology in all relevant fields of use and in all territories in which we may wish to develop or commercialize our product candidates in the future. Some licenses granted to us may be subject to certain preexisting rights held by the licensors or certain third parties. As a result, we may not be able to prevent third parties from developing and commercializing competitive products in certain territories or fields.
In the event that our third party licensors determine that, in spite of our efforts, we have materially breached a license agreement or have failed to meet certain obligations thereunder, it may elect to terminate the license agreement or, in some cases, one or more license(s) under the applicable license agreement. Such termination could result in us losing the ability to develop and commercialize product candidates and technology covered by the licensed intellectual property. In the event of such termination of a third-party in-license, or if the underlying patent rights under a third-party in-license fail to provide the intended exclusivity, third parties may be able to seek regulatory approval of, and to market, products identical to ours and we may be required to cease the development and commercialization of our product candidates. 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 licensor’s rights. Any of these events could have a material adverse effect on our competitive position, business, financial conditions, results of operations and prospects.
In addition, the agreements under which we license intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant patents, know-how and proprietary technology, or increase what we believe to be our financial or other obligations under the relevant agreement. Disputes may also arise between us and our licensors regarding intellectual property subject to a license agreement, including: the scope of rights granted under the license agreement and other interpretation-related issues; whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; our right to sublicense patent and other rights to third parties under collaborative development relationships; our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our product candidates, and what activities satisfy those diligence obligations; and the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our strategic collaborators.
If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on favorable terms, we may be unable to successfully develop and commercialize the affected product candidates.
We are generally also subject to all of the same risks with respect to protection of intellectual property that we license, as we are for intellectual property that we own, which are described below. If we or our licensors fail to adequately protect this intellectual property, our ability to commercialize products could suffer.
Any of our future collaboration arrangements may not be successful, which could adversely affect our ability to develop and commercialize our products
We may seek to collaborate on the development or commercialization of our product candidates. Any of our future collaborations may not be successful. The success of our collaboration arrangements will depend heavily on the efforts and activities of our collaborators. Collaborations are subject to numerous risks, which may include that:
•
collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates;
•
collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on trial or test results, changes in their strategic focus due to the acquisition of competitive products, availability of funding, or other external factors, such as a business combination that diverts resources or creates competing priorities;
•
disputes may arise between us and a collaborator that causes the delay or termination of the research, development or commercialization of our current or future products or that results in costly litigation or arbitration that diverts management attention and resources;
•
collaborators have significant discretion in determining the efforts and resources that they will apply to collaborations;
•
a collaborator with marketing, manufacturing and distribution rights to one or more products may not commit sufficient resources to or otherwise not perform satisfactorily in carrying out these activities;
•
we could grant exclusive rights to our collaborators that would prevent us from collaborating with others;
•
collaborators may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability or business risk;
•
collaborations may be terminated, and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable current or future products or products; and
•
collaborators may own or co-own intellectual property covering our product candidates that results from our collaborating with them, and in such cases, we would not have the exclusive right to develop or commercialize such intellectual property; and a collaborator’s sales and marketing activities or other operations may not be in compliance with applicable laws resulting in civil or criminal proceedings.
We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property
We may be subject to claims that former employees, collaborators or other third parties have an ownership interest in our patents or other intellectual property. Ownership disputes may arise, for example, from conflicting obligations of consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we 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, valuable intellectual property. Such an outcome could have a material adverse impact on our business. 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.
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. Such claims could have a material adverse effect on our business, financial condition, results of operations and prospects.
If we enter into future arrangements involving government funding, and we make inventions as a result of such funding, our intellectual property rights to such discoveries may be subject to the applicable provisions of the Bayh Dole Act of 1980
If we enter into future arrangements involving government funding, and we make inventions as a result of such funding, our intellectual property rights to such discoveries may be subject to the applicable provisions of the Bayh Dole Act of 1980 (the “Bayh Dole Act”). To the extent any of our current and future intellectual property is generated through the use of U.S. government funding, the provisions of the Bayh Dole Act may similarly apply. Any exercise by the government of certain of its rights could harm our competitive position, business, financial condition, results of operations and growth prospects.
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 governmental purposes. In addition, the U.S. government would have the right to require us to grant exclusive, partially exclusive or non-exclusive licenses to any of these inventions to a third party if the government 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, which we refer to as march-in rights. The U.S. government would also have the right to take title to these inventions if we fail, or the applicable licensor fails, to disclose the invention to the government, elect title and file an application to register the intellectual property within specified time limits. 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. 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.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment 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 patents or applications will be due to be paid to the USPTO and various non-U.S. patent agencies in several stages over the lifetime of the patents or applications. The USPTO and non-U.S. patent agencies also 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. In such an event, our competitors might be able to enter the market and this circumstance would have a material adverse impact on our business.
In addition, public health pandemics, geopolitical instability, natural disasters, or similar events may impair our and our licensors’ ability to comply with these procedural, document submission, fee payment, and other requirements imposed by government patent agencies, which may materially and adversely affect our ability to obtain or maintain patent protection for our product candidates. There could also be delays
at the USPTO caused by staffing cuts and other U.S. government actions as a result of the U.S. Department of Government Efficiency or other executive actions to reduce the size of the U.S. government.
The USPTO and various non-U.S. government agencies require compliance with certain foreign filing requirements during the patent application process. For example, in some countries, including the United States, China, India and some European countries, a foreign filing license is required before certain patent applications are filed. The foreign filing license requirements vary by country and depend on various factors, including where the inventive activity occurred, citizenship status of the inventors, the residency of the inventors and the invention owner, the place of business for the invention owner and the nature of the subject matter to be disclosed (e.g., items related to national security or national defense). In some, but not all cases, for example in China and India, a foreign filing license cannot be obtained retroactively in accordance with the applicable rules. There are situations, however, in which non-compliance can result in abandonment of a pending patent application or can be grounds for revoking or invalidating an issued patent, resulting in the loss of patent rights in the relevant jurisdiction. In such an event, potential competitors might be able to enter the relevant markets with similar or identical products or technology, which could have a material adverse effect on our business, financial condition, results of operations and prospects. We may also be dependent on our licensors to take the necessary actions to comply with these requirements with respect to our licensed intellectual property.
If we do not obtain sufficient patent term for our product candidates, our business may be materially harmed
Patents have a limited term. The terms of individual patents depend upon the legal term for patents in the countries in which they are granted. In most countries, including the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from the earliest non-provisional filing date in the applicable country. However, the actual protection afforded by a patent varies from country to country, and also depends upon many factors, including the type of patent, the scope of coverage, the availability of regulatory related extensions, the availability of extensions for patent office delays during the examination process, the availability of legal remedies in a particular country and the validity and enforceability of the patent, and whether a portion of the patent term has been terminally disclaimed based on other patents. Various extensions including patent term extension and patent term adjustment may be available, but the lives of such extensions, and the protections they afford, are limited in the United States. Even if patents covering our product candidates are obtained, once the patent life has expired for a product candidate, we may be open to competition from generics or biosimilars.
Depending upon the timing, duration and specifics of FDA regulatory approval of our product candidates, one or more patents issued from U.S. patent applications that we or a future licensor files may be eligible for limited patent term restoration under the Drug Price Competition and Patent Term Restoration Act of 1984 (the “Hatch-Waxman Amendments”). The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during the FDA regulatory review process based on the first regulatory approval for a particular drug or biologic. A maximum of one patent may be extended per FDA-approved drug as compensation for the patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of drug approval, and only those claims covering such approved drug product, a method for using it or a method for manufacturing it may be extended. Patent term extension may also be available in certain foreign countries upon regulatory approval of our product candidates.
Despite the possibility of an extension, we may not be granted an extension in the United States or another jurisdiction because of, for example, failure to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time or the scope of patent protection afforded could be less than we request.
If we are unable to obtain patent term extension or restoration, or the foreign equivalent, or the term of any such extension is less than we request, our competitors or other third parties may obtain approval of competing drugs following our patent expiration, and our revenue could be reduced, possibly materially. Further, if this occurs, our competitors or other third parties may take advantage of our investment in development and trials by referencing our clinical and preclinical data and launch their drug earlier than
might otherwise be the case. Any of the foregoing could materially harm our business, financial condition, results of operations and growth prospects.
We may enjoy only limited geographical protection with respect to certain patents and we may not be able to protect our intellectual property rights throughout the world
Filing and prosecuting patent applications and defending patents covering our product candidates in all countries throughout the world would be prohibitively expensive. Competitors may use our technologies and innovations in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, but enforcement rights are not as strong as those in the United States or Europe. These products may compete with our product candidates, and our and our licensors’ future patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
In addition, we may decide to abandon national and regional patent applications before they are granted. The examination of each national or regional patent application is an independent proceeding. As a result, patent applications in the same family may issue as patents in some jurisdictions, such as in the United States, but may issue as patents with claims of different scope or may even be refused in other jurisdictions. Furthermore, the requirements for patentability differ in certain jurisdictions and countries. Some countries do not grant claims directed to methods of treatment or have additional restrictions on the scope of method of treatment claims compared to the United States. Accordingly, depending on the country, the scope of patent protection may vary for the same product candidate.
While we intend to protect our intellectual property rights in our expected significant markets, we cannot ensure that we will be able to initiate or maintain protection efforts in all such markets. Additionally, the prosecution of patent applications in other jurisdictions is often a longer process and patents may be granted at a later date than in the United States, potentially delaying our ability to assert such patents against competitors. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate, which may have an adverse effect on our ability to successfully commercialize our product candidates in all of our expected significant foreign markets. If we encounter difficulties in protecting, or are otherwise precluded from effectively protecting, the intellectual property rights important for our business in such jurisdictions, the value of these rights may be diminished, and we may face additional competition in those jurisdictions.
The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws or rules and regulations in the United States and Europe, and many companies have encountered significant difficulties in protecting and defending such rights in such jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property rights, which could make it difficult for us to stop the infringement of any patents we obtain or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in other jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put any patents we obtain at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing as patents, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. 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.
Some countries also have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, some countries limit the enforceability of patents against government agencies or government contractors. In those countries, the patent owner may have limited remedies, which could materially diminish the value of such patents. If we are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired.
In Europe, a new unitary patent system took effect on June 1, 2023, which may significantly impact European patents, including those granted before the introduction of the new system. Under the new system, applicants can, upon grant of a European patent, opt for that patent to become a unitary patent which
will be subject to the jurisdiction of a new unitary patent court (“UPC”). During the first seven years of the UPC’s existence, patents granted before the implementation of the new system can be opted out of UPC jurisdiction, and validated as national patents in any one or more of the UPC countries. We may decide to opt out our future European patents from the UPC, but doing so may preclude us from realizing the benefits of the UPC. Moreover, if we do not meet all of the formalities and requirements for opt-out under the UPC, our future European patents could remain under the jurisdiction of the UPC. Patents that are under the jurisdiction of the UPC may be challenged in a single UPC-based revocation proceeding that, if successful, could invalidate the patent in all countries who are signatories to the UPC. The UPC will provide our competitors with a new forum to centrally revoke our European patents, and allow for the possibility of a competitor to obtain pan-European injunction. Further, because the UPC is a new court system and there is no precedent for the court’s laws, there is increased uncertainty regarding the outcome of any patent litigation. We are unable to predict what impact the new patent regime may have on our ability to exclude competitors in the European market. In addition to changes in patents laws, geopolitical dynamics, such as Russia’s incursion into Ukraine, may also impact our ability to obtain and enforce patents in particular jurisdictions, such as the enforcement of patent rights in Russia. If we are unable to obtain and enforce patents as needed in particular markets, our ability to exclude competitors in those markets may be reduced.
Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our products
As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining, defending, maintaining and enforcing patents in the biopharmaceutical industry involves both technological and legal complexity and is therefore costly, time consuming and inherently uncertain. Changes in either the patent laws or interpretation of the patent laws in the United States and in other major jurisdictions could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents, and may diminish our ability to protect our inventions, obtain, maintain, enforce and protect our intellectual property rights and, more generally, could affect the value of our intellectual property or narrow the scope of our future owned and licensed patents.
In addition, the patent positions of companies in the development and commercialization of pharmaceuticals are particularly uncertain. Recent rulings from the U.S. Supreme Court and the Court of Appeals for the Federal Circuit have narrowed the scope of patent protection available in specified circumstances and weakened the rights of patent owners in specified situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts and the USPTO and the relevant law-making bodies in other countries, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we or our licensors might obtain in the future. We cannot predict how future decisions by the federal courts, the U.S. Congress or the USPTO may impact the value of our patents. Any similar adverse change in the patent laws of other jurisdictions could also adversely affect our business, financial condition, results of operations and prospects.
For our U.S. patent applications, which contain claims entitled to priority date after March 16, 2013, there is a greater level of uncertainty due to the Leahy-Smith America Invents Act (the “Leahy-Smith Act”), signed into law on September 16, 2011. The Leahy-Smith Act included a number of significant changes to U.S. patent law. These included provisions that affect the way patent applications are prosecuted, redefine prior art and provide more efficient and cost-effective avenues for competitors to challenge the validity of patents. The USPTO has promulgated regulations and developed procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, did not come into effect until March 16, 2013. The Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
An important change introduced by the Leahy-Smith Act is that, as of March 16, 2013, the United States transitioned to a “first-to-file” system for deciding which party should be granted a patent when
two or more patent applications are filed by different parties claiming the same invention. This requires us to be cognizant of the time from invention to filing of a patent application. Furthermore, our ability to obtain and maintain valid and enforceable patents depends on whether the differences between our technology and the prior art allow our technology to be patentable over the prior art. Since patent applications in the United States and most other countries are confidential for a period of time after filing, we cannot be certain that we were the first to either: (i) file any patent application related to our product candidates or (ii) invent any of the inventions claimed in our patents or patent applications.
Among some of the other changes introduced by the Leahy-Smith Act are changes that limit where a patentee may file a patent infringement suit and new procedures providing opportunities for third parties to challenge any issued patent in the USPTO. These new post grant challenges include post grant review and inter partes review proceedings before the Patent Trial and Appeal Board at the USPTO. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in U.S. federal court 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 patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. However, recent changes at the USPTO have resulted in many fewer inter partes review proceedings being instituted, and the USPTO has proposed modifications to the rules of practice for implementing inter partes review proceedings. The proposed modifications, if adopted, could impact the ability of third parties, including us, to challenge the validity of granted U.S. patents before the USPTO.
Geopolitical actions in the United States and in foreign countries could increase the uncertainties and costs surrounding the prosecution or maintenance of patent applications and the maintenance, enforcement or defense of issued patents. For example, the United States and foreign government actions related to Russia’s invasion of Ukraine resulted in Russia issuing Decree No. 299 that effectively nullifies the enforcement of Russian patents owned by entities and individuals in “unfriendly” countries, including the United States.
Similarly, changes in patent law and regulations in other countries or jurisdictions or changes in the governmental bodies that enforce them or changes in how the relevant governmental authority enforces patent laws or regulations may weaken our ability to obtain new patents or to enforce patents that we have licensed or that we may obtain in the future.
Any trademarks we have obtained or may obtain may be infringed or otherwise violated, or successfully challenged. If our trademarks and trade names are not adequately protected, or if we are unable to obtain desired trademarks or trade names, then we may not be able to build brand name recognition in our markets of interest and our business may be adversely affected
We expect to rely on trademarks as one means to distinguish our product candidates, if approved for marketing, from third-party products. Once we select new trademarks and apply to register them, our trademark applications may not be approved. During trademark registration proceedings in the United States and foreign jurisdictions, we may receive rejections. We are given an opportunity to respond to those rejections, but we may not be able to overcome such rejections.
We have also not yet registered trademarks for any of our product candidates in any jurisdiction. Any trademark applications we file may be rejected and registered trademarks may not be obtained, maintained or enforced. If we do not successfully register our trademarks, we may encounter difficulty in enforcing, or be unable to enforce, our trademark rights against third parties, which could adversely affect our business and our ability to effectively compete in the marketplace.
In addition, any proprietary name we propose to use with any of our product candidate in the United States will need to be approved by the FDA, regardless of whether we have registered, or applied to register, the proposed proprietary name as a trademark. The FDA conducts a review of proposed proprietary names, including an evaluation of potential for confusion with other products’ proprietary names, as part of the biologics license application review process. If the FDA objects to any of our proposed proprietary product names, we may be required to expend significant additional resources in an effort to identify a suitable
proprietary name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA.
In addition, our unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on, misappropriating or violating other marks. In the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademark registrations may not survive such proceedings. In the event that our trademarks are successfully challenged, we could be forced to rebrand our product candidates, which could result in loss of brand recognition and could require us to devote resources to advertising and marketing new brands. At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion.
Our competitors may also infringe or otherwise violate our trademarks and we may not have adequate resources to enforce our trademarks. We may not be able to protect our rights to our trademarks and trade names, which we need to build name recognition among potential collaborators or customers in our markets of interest. Any of the foregoing events may have a material adverse effect on our business.
Furthermore, in many countries, owning and maintaining a trademark registration may not provide an adequate defense against a subsequent infringement claim asserted by the owner of a senior trademark. Over the long term, if we are unable to successfully register our trademarks and trade names and establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively, and our business may be adversely affected. Our efforts to enforce or protect our proprietary rights related to trademarks, trade names, domain names or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could adversely impact our financial condition or results of operations.
Intellectual property rights do not necessarily address all potential threats
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 it to maintain our competitive advantage. For example:
•
our product candidates, if approved, may eventually become commercially available in generic or biosimilar product forms;
•
others may be able to make similar molecules to our product candidates that are not covered by the claims of the patents that we license or own now or in the future;
•
we, or current or future licensors or collaborators, might not have been the first to file patent applications covering certain of our or their inventions, potentially resulting in the invalidation of such patents or refusal of such applications;
•
we, or current or future licensors or collaborators, might not have been the first to make the inventions covered by the issued patent or pending patent application that we license or own now or in the future.
•
we, or current or future licensors or collaborators, may fail to meet our obligations to the U.S. government regarding any patents and patent applications funded by U.S. government grants, leading to the loss or unenforceability of patent rights;
•
others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing on our owned or licensed intellectual property rights;
•
it is possible that our pending patent applications or those that we may own or license in the future will not lead to issued patents;
•
it is possible that there are prior public disclosures that could invalidate our patents;
•
it is possible that there are unpublished patent applications that may later issue with claims covering our product candidates or technology similar to ours;
•
it is possible that our patents or patent applications omit individual(s) that should be listed as inventor(s) or include individual(s) that should not be listed as inventor(s), which may cause these patents or patents issuing from these patent applications to be held invalid or unenforceable or result in a change in ownership;
•
issued patents to which we hold rights may be held invalid, unenforceable or narrowed in scope, including as a result of legal challenges;
•
the claims of our issued patents or patent applications, if and when issued, may not cover our product candidates or narrowly cover them in such a way that competitors may be able to design around to avoid infringement allegations;
•
the laws of foreign countries may not protect our proprietary rights or the proprietary rights of current or future licensors or collaborators to the same extent as the laws of the United States;
•
the inventors of our patents or patent applications may become involved with competitors, develop products or processes that are similar to or alternative to those claimed in our patent filings or become hostile to our patents or patent applications on which they are named as inventors;
•
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;
•
we have engaged in scientific collaborations in the past and we intend to continue to do so in the future, and our collaborators may develop adjacent or competing products that are outside the scope of our patents;
•
we may not develop additional proprietary technologies that are patentable;
•
the product candidates we develop may be covered by third-party patents or other intellectual property rights;
•
the patents of others may prohibit or otherwise harm our ability to conduct our business; or
•
we may choose not to file a patent in order to maintain certain know-how, and a third party may subsequently commercialize the technology and/or 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 growth prospects.
CONSOLIDATED CAPITALIZATION
Since September 30, 2025, the date of the Interim Financial Statements, there have been no material changes in the Company’s consolidated share and loan capital other than as outlined under “Prior Sales” below.
The following table shows the effect of the Offering on the issued capital of the Company. The following table should be read in conjunction with the Interim Financial Statements incorporated by reference in this Prospectus Supplement:
|
Description
|
|
|
Outstanding as at
September 30, 2025(1)
|
|
|
Outstanding as at September 30, 2025
after giving effect to the Offering,
and the transactions outlined
under “Prior Sales”(1)(2)
|
|
|
Outstanding as at September 30, 2025
after giving effect to the Offering,
and the transactions outlined
under “Prior Sales”(1)(3)
|
|
|
Common Shares
|
|
|
|
|
15,424,465 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
|
|
2,189,214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
|
|
|
|
|
Nil |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Debt
|
|
|
|
|
Nil |
|
|
|
|
|
Nil |
|
|
|
|
|
Nil |
|
|
|
Pre-Funded Warrants
|
|
|
|
|
3,159,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
(1)
Presented on a post-Consolidation basis.
(2)
Assuming no exercise of the Over-Allotment Option and no Pre-Funded Warrants are issued in connection with the Offering.
(3)
Assuming full exercise of the Over-Allotment Option and no Pre-Funded Warrants are issued in connection with the Offering.
CHANGE IN PRESENTATION CURRENCY
Effective January 1, 2025, the Company changed its presentation currency from Cdn$ to USD. In accordance with IFRS Accounting Standards, the amounts for all the periods presented in the quarterly financial statements issued for the periods ended March 31, 2025, June 30, 2025 and September 30, 2025 have been translated to the USD presentation currency. For comparative balances, amounts have been translated into the presentation currency at the rate of exchange prevailing at the reporting date, or at the exchange rate prevailing at the date of the transactions. The Company has presented the unaudited effects of the change in presentation currency below for the statements of loss and comprehensive loss and cash flows for the year ended December 31, 2024:
| |
|
|
December 31, 2024
USD$
|
|
|
December 31, 2024
Cdn$
|
|
| |
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
Research and development expenses
|
|
|
|
|
14,359 |
|
|
|
|
|
19,603 |
|
|
|
General and administrative expenses
|
|
|
|
|
6,039 |
|
|
|
|
|
8,205 |
|
|
|
LOSS FROM OPERATING ACTIVITIES
|
|
|
|
|
(20,398) |
|
|
|
|
|
(27,808) |
|
|
|
OTHER INCOME AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income
|
|
|
|
|
1,003 |
|
|
|
|
|
1,371 |
|
|
|
Impairment of intangible asset
|
|
|
|
|
(2,905) |
|
|
|
|
|
(3,961) |
|
|
|
Loss on derivative financial instruments
|
|
|
|
|
(2) |
|
|
|
|
|
(2) |
|
|
|
Foreign exchange gain
|
|
|
|
|
1,668 |
|
|
|
|
|
2,301 |
|
|
|
NET LOSS FOR THE PERIOD
|
|
|
|
|
(20,634) |
|
|
|
|
|
(28,099) |
|
|
|
OTHER COMPREHENSIVE LOSS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
|
|
(2,099) |
|
|
|
|
|
(202) |
|
|
|
TOTAL COMPREHENSIVE LOSS
|
|
|
|
|
(22,733) |
|
|
|
|
|
(28,301) |
|
|
| |
|
|
December 31, 2024
USD$
|
|
|
December 31, 2024
Cdn$
|
|
| |
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
CASH AND CASH EQUIVALENTS PROVIDED BY (USED IN):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year
|
|
|
|
|
(20,634)
|
|
|
|
|
|
(28,099) |
|
|
|
Items not affecting cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of AmpB assets
|
|
|
|
|
2,905
|
|
|
|
|
|
3,961 |
|
|
|
Depreciation of property and equipment
|
|
|
|
|
15
|
|
|
|
|
|
20 |
|
|
|
Stock-based compensation
|
|
|
|
|
1,641
|
|
|
|
|
|
2,113 |
|
|
|
Loss on derivative financial instruments
|
|
|
|
|
2
|
|
|
|
|
|
2 |
|
|
|
Non-cash finance income
|
|
|
|
|
(358)
|
|
|
|
|
|
(488) |
|
|
|
Unrealized foreign exchange gain
|
|
|
|
|
(1,071)
|
|
|
|
|
|
(1,459) |
|
|
|
Net change in non-cash working capital balances:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales tax and other receivables
|
|
|
|
|
(32)
|
|
|
|
|
|
(43) |
|
|
|
Prepaid expenses and deposits
|
|
|
|
|
(1,733)
|
|
|
|
|
|
(2,360) |
|
|
|
Accounts payable and accrued liabilities
|
|
|
|
|
1,012
|
|
|
|
|
|
1,378 |
|
|
| |
|
|
|
|
(18,253) |
|
|
|
|
|
(24,975) |
|
|
| |
|
|
December 31, 2024
USD$
|
|
|
December 31, 2024
Cdn$
|
|
| |
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of warrants, net of costs
|
|
|
|
|
595
|
|
|
|
|
|
833 |
|
|
|
Proceeds from Common Share issuance, net of costs
|
|
|
|
|
30,057
|
|
|
|
|
|
42,802 |
|
|
|
Proceeds from Pre-Funded Warrant issuance, net of costs
|
|
|
|
|
6,917
|
|
|
|
|
|
9,850 |
|
|
| |
|
|
|
|
37,569 |
|
|
|
|
|
53,485 |
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of short-term investments
|
|
|
|
|
(27,417)
|
|
|
|
|
|
(37,336) |
|
|
|
Maturities of short-term investments
|
|
|
|
|
32,076
|
|
|
|
|
|
43,680 |
|
|
|
Purchase of property and equipment
|
|
|
|
|
(4)
|
|
|
|
|
|
(6) |
|
|
| |
|
|
|
|
4,655 |
|
|
|
|
|
6,338 |
|
|
|
Effect of foreign currency exchange rates on cash and cash equivalents
|
|
|
|
|
(579) |
|
|
|
|
|
744 |
|
|
|
INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
|
|
23,392 |
|
|
|
|
|
35,592 |
|
|
|
CASH AND CASH EQUIVALENTS – Beginning of period
|
|
|
|
|
16,681 |
|
|
|
|
|
22,067 |
|
|
|
CASH AND CASH EQUIVALENTS – End of period
|
|
|
|
|
40,073 |
|
|
|
|
|
57,659 |
|
|
| |
USE OF PROCEEDS
The net proceeds of the Offering, before giving effect to any exercise of the Over-Allotment Option, are estimated to be $ after deducting the Underwriters’ Commission of $ and the expenses of the Offering (estimated to be $ ). If the Over-Allotment Option is exercised in full, the net proceeds of the Offering are estimated to be $ after deducting the Underwriters’ Commission of $ and the expenses of the Offering (estimated to be $ ).
Principal Purposes
The Company currently anticipates using the net proceeds of the Offering as set forth in the following table:
|
Use
|
|
|
Allocation of
Net Proceeds
|
|
|
Clinical development of SAT-3247 and supporting activities
|
|
|
|
$ |
|
|
|
|
General corporate and administrative expenses
|
|
|
|
$ |
|
|
|
|
TOTAL
|
|
|
|
$ |
|
|
|
The net proceeds from the exercise of the Over-Allotment Option, if any, are expected to be used for general corporate and administrative expenses.
The Company intends to spend the funds available to it as stated above. However, there may be circumstances where, for sound business reasons, a reallocation of the net proceeds may be necessary or appropriate. The actual amount that the Company spends in connection with each of the intended uses of proceeds will depend on a number of factors, including those referred to under “Risk Factors” in this Prospectus.
Based on the Company’s current plans, the Company will require additional capital to advance SAT-3247 through required clinical trials for DMD, FSHD and other indications, to advance development of any additional product candidates and to commercialize any of its product candidates if the Company receives regulatory approval. Due to the numerous risks and uncertainties associated with product development, including risks and uncertainties with respect to successful enrollment and completion of clinical trials, at this time the Company cannot reasonably estimate the amount of additional funding that will be necessary to complete the clinical development of any of its product candidates. Accordingly, the Company will be required to obtain further funding through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources.
The Company had negative operating cash flow for the nine months ended September 30, 2025. To the extent the Company has negative cash flows in future periods, the Company may use a greater portion of its general working capital to fund such negative cash flow than it would use if it had positive cash flows.
Business Objectives and Milestones
The Company expects to accomplish the following business objectives and milestones using the net proceeds of the Offering (assuming no exercise of the Over-Allotment Option and no Pre-Funded Warrants are exercised in connection with this Offering):
|
Business Objective
|
|
|
Milestone(s) that must occur for Business
Objective to be Accomplished
|
|
|
Anticipated Timing
to Achieve Business
Objective
|
|
|
Estimated Cost
|
|
|
Clinical development of
SAT-3247
|
|
|
Complete enrollment in BASECAMP
|
|
|
2H2026
|
|
|
|
$ |
|
|
|
| |
File IND and initiate TRAILHEAD in the USA
|
|
|
1H 2026
|
|
|
|
$ |
|
|
|
| |
File IND and initiate Phase 2 clinical trial in 2nd
indication (i.e., other than DMD)
|
|
|
1H 2026
|
|
|
|
$ |
|
|
|
While the Company believes that it has the skills and resources necessary to accomplish these business objectives, there is no certainty that the Company will be able to do so within the timelines indicated above, or at all. See “Risk Factors”. In addition to the net proceeds of the Offering, the Company expects to finance the above noted milestones through revenues from operations and additional financings, if required.
DESCRIPTION OF SECURITIES BEING DISTRIBUTED
Offered Shares
The authorized capital of the Company consists of an unlimited number of Common Shares. The holders of Common Shares (including Offered Shares and Warrant Shares) are entitled to receive notice of and to attend all annual and special meetings of the Company’s shareholders and to one vote in respect of each Common Share held at the record date for each such meeting. The holders of Common Shares are entitled, at the discretion of the Company’s board of directors, to receive out of any or all of the Company’s profits or surplus properly available for the payment of dividends, any dividend declared by the Company’s board of directors and payable by the Company on the Common Shares. The holders of the Common Shares will participate pro rata in any distribution of the assets of the Company upon liquidation, dissolution or winding-up or other distribution of the assets of the Company. Such participation will be subject to the rights, privileges, restrictions and conditions attached to any of the Company’s securities issued and outstanding at such time ranking in priority to the Common Shares upon the liquidation, dissolution or winding-up of the Company. Common Shares are issued only as fully paid and are non-assessable.
As at February 4, 2026, the Company had 15,458,903 Common Shares issued and outstanding on a post-Consolidation basis. After giving effect to the Offering (assuming Offered Shares and no Pre-Funded Warrants are sold), the Company would have Common Shares issued and outstanding on a post-Consolidation basis (assuming no further exercises or issuances of convertible securities and that the Over-Allotment Option is not exercised). After giving effect to the Offering and if the Over-Allotment Option is exercised in full (assuming Offered Shares and no Pre-Funded Warrants are sold), the Company would have Common Shares issued and outstanding on a post-Consolidation basis (assuming no further exercises or issuances of convertible securities).
Pre-Funded Warrants
The Pre-Funded Warrants issued under the Offering will be issued in certificated form. The following description is subject to the detailed provisions of the form of certificate for the Pre-Funded Warrants (the “Warrant Certificate”). Reference should be made to the Warrant Certificate for the full text of attributes of the Pre-Funded Warrants.
Each whole Pre-Funded Warrant will entitle the holder to acquire, subject to adjustment as summarized below, one Warrant Share. The Pre-Funded Warrants will not expire until exercised in full. The Pre-Funded Warrants will have a nominal exercise price of Cdn$0.00001 per Pre-Funded Warrant. The Pre-Funded Warrants will be exercisable, at the option of each holder, in whole or in part, by delivering to the Company a duly executed exercise notice, thereby canceling all or a portion of such holder’s Pre-Funded Warrants. The Pre-Funded Warrants may be exercised on a “net” or “cashless” basis.
The Warrant Certificate will provide that the share ratio and exercise price of the Pre-Funded Warrants will be subject to adjustment in the event of certain share dividends or distributions or of a subdivision or consolidation of the Common Shares or similar events. If the Company makes any dividend or other pro rata distribution to the holders of Common Shares (a “Distribution”) (other than share dividends resulting in an adjustment described above, or the grant, issue or sale of Purchase Rights as described below), then a holder of Pre-Funded Warrants will be entitled to receive such securities and/or other property (including cash) as if the holder had exercised the Pre-Funded Warrants immediately before the record date for such Distribution (without regard to any restrictions on exercise of the Pre-Funded Warrants as described below; provided that if the Distribution would cause the holder’s beneficial ownership of Common Shares to exceed the Specified Percentage, then the relevant portion of the Distribution will be held in abeyance until such time as the Specified Percentage would not be exceeded). If the Company completes a rights offering or similar grant, issuance or sale of options or convertible securities or rights to purchase securities to the holders of the Common Shares on a pro rata basis (“Purchase Rights”), then a holder of Pre-Funded Warrants will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the holder could have acquired if the holder had exercised the Pre-Funded Warrants immediately before the record date for such grant, issuance of sale of the Purchase Rights (without regard to any restrictions on exercise of the Pre-Funded Warrants as described below; provided that if the holder’s right to participate in the Purchase Rights would cause the holder’s beneficial ownership of Common
Shares to exceed the Specified Percentage, then the holder will not be entitled to participate in the Purchase Rights to that extent, and at the holder’s election, in its sole discretion, either (i) such right to participate will be held in abeyance until such time as the Specified Percentage would not be exceeded or (ii) the Company will offer the holder the right upon exercise of such Purchase Right to acquire a security (e.g., a pre-funded warrant) that would not result in the holder’s beneficial ownership of Common Shares exceeding the Specified Percentage but will otherwise to the extent possible have economic and other rights, preferences and privileges substantially consistent and on par with the securities or other property issuable upon exercise of the originally offered Purchase Rights). If the Company reorganizes, consolidates, amalgamates or merges with any other body corporate, if the Company reclassifies its Common Shares or the Common Shares are effectively converted or exchanged for other securities, cash or property (other than a subdivision, consolidation or share dividend resulting in an adjustment as described above), if holders of shares of the Company representing more than 50% of the voting power of the shares of the Company tender their shares in a take-over bid, tender offer, exchange offer or pursuant to a stock purchase agreement or other business combination, or the Company transfers all or substantially all of its assets (in each case, and as may be described in further detail in the terms of the Warrant Certificate, a “Fundamental Transaction”), then a holder of Pre-Funded Warrants, upon exercise of the Pre-Funded Warrants, will be entitled to receive such securities and/or other property (including cash) as if the holder had exercised the Pre-Funded Warrants before such Fundamental Transaction (without regard to any restrictions on exercise of the Pre-Funded Warrants as described below).
The Warrant Certificate will also provide that, during the period in which the Pre-Funded Warrants are exercisable, it will give notice to holders of Pre-Funded Warrants of certain stated events (including any voluntary or involuntary dissolution, liquidation; winding-up; a stock dividend or other distribution upon the Common Shares; or a Fundamental Transaction), at least 10 days (or in some cases 30 days) prior to the record date or effective date, as the case may be, of such events.
There is currently no market through which the Pre-Funded Warrants may be sold, and purchasers may not be able to resell the Pre-Funded Warrants purchased under this Prospectus. The Warrant Certificate will provide that notwithstanding any other terms thereof, the Company shall not effect the exercise of any portion of the Pre-Funded Warrants, and the holder of Pre-Funded Warrants shall not have the right to exercise any portion of the Pre-Funded Warrants, and any such exercise shall be null and void ab initio and treated as if the exercise had not been made, to the extent that immediately prior to or following such exercise, the holder of the Pre-Funded Warrants, together with its affiliates and other “attribution parties” as may be defined in the Warrant Certificate, beneficially owns or would beneficially own a number of Common Shares in excess of a specified percentage (typically 4.99% or 9.99%, to be determined at the Closing Time) (the “Specified Percentage”) of the number of Common Shares outstanding immediately after giving effect to the issuance of Common Shares upon exercise of such Pre-Funded Warrants. Notwithstanding the foregoing, subject to applicable TSX and Nasdaq policies, a holder of Pre-Funded Warrants, upon notice to the Company at least 61 days in advance, may increase or decrease the Specified Percentage subject to certain restrictions. These restrictions include the requirement that a holder wishing to increase the Specified Percentage above 9.99% shall be required to deliver personal information form(s) as required by any recognized stock exchange on which the Common Shares are then listed and such personal information form(s) must have been approved by the stock exchange, as applicable. In addition, the Specified Percentage may not exceed 19.99% of the number of Common Shares outstanding immediately after giving effect to the issuance of Common Shares upon exercise of such Pre-Funded Warrants. No fractional Warrant Shares will be issuable upon the exercise of any Pre-Funded Warrants. In lieu of any fractional shares that would otherwise be issuable, the number of Warrant Shares to be issued shall be rounded down to the next whole number and the Company shall pay the holder in cash the fair market value for any such fractional shares. Holders of Pre-Funded Warrants will not have any voting or pre-emptive rights or any other rights which a holder of Common Shares would have.
The Company has not applied and does not intend to apply to list the Pre-Funded Warrants on any securities exchange. There will be no market through which the Pre-Funded Warrants may be sold and purchasers may not be able to resell the Pre-Funded Warrants purchased in the Offering. This may affect the pricing of the Pre-Funded Warrants in the secondary market, the transparency and availability of trading prices, the liquidity of the Pre-Funded Warrants, and the extent of issuer regulation.
PLAN OF DISTRIBUTION
Leerink Partners LLC is acting as representative of each of the underwriters named below and as joint bookrunning manager for this offering. Subject to the terms and conditions set forth in the Underwriting Agreement among us and the Underwriters, we have agreed to sell to the Underwriters, and each of the Underwriters has agreed, severally and not jointly, to purchase from us, the number of Common Shares and Pre-Funded Warrants set forth opposite its name below.
|
Underwriter
|
|
|
Number of
Shares
|
|
|
Number of
Pre-Funded
Warrants
|
|
|
Leerink Partners LLC
|
|
|
|
|
|
|
|
|
Guggenheim Securities, LLC
|
|
|
|
|
|
|
|
|
Oppenheimer & Co. Inc.
|
|
|
|
|
|
|
|
|
Bloom Burton Securities Inc.
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
This Offering is being made concurrently in Canada under the terms of the Base Shelf Prospectus and this Prospectus Supplement and in the United States under the terms of the registration statement, of which the Base Shelf Prospectus and this Prospectus Supplement form a part, through the Underwriters and/or affiliates thereof registered to offer the Common Shares and Pre-Funded Warrants for sale in such jurisdictions in accordance with applicable securities laws and such other registered dealers as may be designated by the Underwriters. Subject to applicable law, the Underwriters, their affiliates, or such other registered dealers as may be designated by the Underwriters, may offer our Common Shares and Pre-Funded Warrants outside of Canada and the United States. The offered Common Shares and Pre-Funded Warrants will be offered in the United States through Leerink Partners LLC, Guggenheim Securities, LLC and Oppenheimer & Co. Inc., either directly or indirectly, through their U.S. broker-dealer affiliates or agents. The offered Common Shares and Pre-Funded Warrants will be offered in each of the provinces of British Columbia, Alberta and Ontario, through Bloom Burton Securities Inc., or through such other Canadian registered dealers as may be designated by the underwriters. Leerink Partners LLC, Guggenheim Securities, LLC and Oppenheimer & Co. Inc. are not registered as investment dealers in any Canadian jurisdiction and, accordingly, will only sell the offered Common Shares and Pre-Funded Warrants into the United States and will not, directly or indirectly, solicit offers to purchase or sell the offered Common Shares and Pre-Funded Warrants in Canada.
Subject to the terms and conditions set forth in the Underwriting Agreement, the Underwriters have agreed, severally and not jointly, to purchase all of the Common Shares and Pre-Funded Warrants sold under the Underwriting Agreement if any of the Common Shares and Pre-Funded Warrants are purchased. If an Underwriter defaults, the Underwriting Agreement provides that the purchase commitments of the non-defaulting Underwriters may be increased or the Underwriting Agreement may be terminated.
We have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the U.S. Securities Act, or to contribute to payments the Underwriters may be required to make in respect of those liabilities.
The Underwriters are offering the Common Shares and Pre-Funded Warrants, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the Common Shares and Pre-Funded Warrants, and subject to other conditions contained in the Underwriting Agreement, such as the receipt by the Underwriters of officers’ certificates and legal opinions. The Underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
Discounts and Commissions
The Lead Underwriter has advised us that the Underwriters propose initially to offer the Common Shares and Pre-Funded Warrants to the public at the initial applicable Offering Price and to dealers at that price less a concession not in excess of $ per Common Share and $ per Pre-Funded
Warrant. After the initial offering of the Common Shares and Pre-Funded Warrants, the applicable Offering Price, concession or any other term of this Offering may be changed by the Lead Underwriter.
The following table shows the initial Offering Price, underwriting discounts and commissions and proceeds, before expenses, to us. The information assumes either no exercise or full exercise by the Underwriters of the Over-Allotment Option to purchase Additional Shares.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
| |
|
|
Per Share
|
|
|
Per Pre-Funded
Warrant
|
|
|
Without
Option
|
|
|
With
Option
|
|
|
Initial Offering Price
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
Underwriting discounts and commissions
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
Proceeds, before expenses, to us
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
We estimate expenses payable by us in connection with this Offering, other than the underwriting discounts and commissions referred to above, will be approximately $ . We also have agreed to reimburse the Underwriters for certain of their expenses in an amount up to $30,000.
Over-Allotment Option to Purchase Additional Shares
We have granted an option to the underwriters, exercisable for 30 days after the date of this Prospectus Supplement, to purchase up to additional shares at the Common Share Offering Price, less underwriting discounts and commissions. If the Underwriters exercise this option, each Underwriter will be obligated, subject to the conditions contained in the Underwriting Agreement, to purchase a number of Additional Shares proportionate to that Underwriter’s initial amount reflected in the above table. The Underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the Offering of the Common Shares under this Prospectus Supplement.
No Sales of Similar Securities
We, and our executive officers and directors have agreed not to sell or transfer any Common Shares or securities convertible into or exchangeable or exercisable for Common Shares, for 90 days after the date of this Prospectus Supplement without first obtaining the written consent of Leerink Partners LLC on behalf of the Underwriters. Specifically, we and these other persons have agreed, with certain limited exceptions, not to directly or indirectly:
•
offer, pledge, sell or contract to sell any Common Shares;
•
sell any option or contract to purchase any Common Shares;
•
purchase any option or contract to sell any Common Shares;
•
grant any option, right or warrant for the sale of any Common Shares;
•
otherwise dispose of or transfer any Common Shares;
•
request or demand that we file a registration statement related to the Common Shares; or
•
enter into any swap or other agreement or any transaction that transfers, in whole or in part, the economic consequence of ownership of any Common Shares, whether any such swap, agreement or transaction is to be settled by delivery of Common Shares or other securities, in cash or otherwise.
The lock-up provisions apply to Common Shares and to securities convertible into or exchangeable or exercisable for Common Shares. They also apply to Common Shares owned now or acquired later by the person executing the lock-up agreement or for which the person executing the lock-up agreement later acquires the power of disposition.
Nasdaq Global Market Listing
We have applied to list our Common Shares on The Nasdaq Global Market, subject to notice of issuance, under the symbol “MSLE.”
Price Stabilization, Short Positions and Penalty Bids
Until the distribution of the Common Shares and Pre-Funded Warrants is completed, SEC rules may limit Underwriters and selling group members from bidding for and purchasing our Common Shares. However, the Lead Underwriter may engage in transactions that stabilize the price of the Common Shares, such as bids or purchases to peg, fix or maintain that price.
Pursuant to policy statements of certain securities regulators, the Underwriters may not, throughout the period of distribution, bid for or purchase Common Shares. The foregoing restriction is subject to certain exceptions including a bid or purchase permitted under the rules of applicable Canadian regulatory authorities and the TSX including the Universal Market Integrity Rules for Canadian Marketplaces administered by the Canadian Investment Regulatory Organization, such as: (a) a bid or purchase in connection with market stabilization or market balancing activities made in accordance with such rules, (b) a bid or purchase on behalf of a client where the order was not solicited, or if the order was solicited, the solicitation occurred prior to the commencement of the applicable restricted period, or (c) a bid or purchase to cover a short position entered into prior to the commencement of the applicable restricted period. In connection with this distribution, the Underwriters may over-allot or effect transactions that stabilize or maintain the market price of the Common Shares at levels other than those which otherwise might prevail on the open market. If these activities are commenced, they may be discontinued by the Underwriters at any time. The Underwriters may carry out these transactions on the TSX, Nasdaq or otherwise. Stabilizing transactions consist of bids or purchases made for the purpose of preventing or delaying a decline in the market price of the Common Shares while this Offering is in progress. Short sales involve the sale by the Underwriters of a greater number of Common Shares and Pre-Funded Warrants than they are required to purchase in this Offering. Short sales may be “covered short sales”, which are short positions in an amount not greater than the Underwriters’ option to purchase Additional Shares, or may be “naked short sales”, which are short positions in excess of that amount.
The Underwriters may also impose a penalty bid. This occurs when a particular Underwriter repays to the Underwriters a portion of the underwriting discount received by it because the Lead Underwriter has repurchased Common Shares sold by or for the account of such Underwriter in stabilizing or short covering transactions.
Similar to other purchase transactions, the Underwriters’ purchases to cover the syndicate short sales 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 our 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. The Underwriters may conduct these transactions on The Nasdaq Global Market, in the over-the-counter market or otherwise.
Neither we nor any of the Underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our Common Shares. In addition, neither we nor any of the Underwriters make any representation that the Lead Underwriter will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.
Electronic Distribution
In connection with this Offering, certain of the Underwriters or securities dealers may distribute prospectuses by electronic means, such as e-mail.
Other Relationships
The Underwriters and certain of their 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. Some of the Underwriters and certain of their affiliates may in the future engage in investment banking and other commercial dealings in the ordinary course of business with us and our affiliates, for which they may in the future receive customary fees, commissions and expenses.
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. Such 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
Notice to Prospective Investors in the European Economic Area
In relation to each Member State of the European Economic Area (each, a “Relevant State”), no securities have been offered or will be offered pursuant to the Offering to the public in that Relevant State prior to the publication of a prospectus in relation to the securities which has been approved by the competent authority in that Relevant State or, where appropriate, approved in another Relevant State and notified to the competent authority in that Relevant State, all in accordance with the Prospectus Regulation, except that securities may be offered to the public in that Relevant State at any time:
A.
to any legal entity which is a qualified investor as defined under Article 2 of the Prospectus Regulation;
B.
to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the Prospectus Regulation), subject to obtaining the prior consent of the representatives for any such offer; or
C.
in any other circumstances falling within Article 1(4) of the Prospectus Regulation,
provided that no such offer of securities shall require us or any of the representatives to publish a prospectus pursuant to Article 3 of the Prospectus Regulation, supplement a prospectus pursuant to Article 23 of the Prospectus Regulation, or publish an Annex IX document pursuant to Article 1(4) of the Prospectus Regulation.
For the purposes of this provision, the expression an “offer to the public” in relation to any securities in any Relevant State means the communication in any form and by any means of sufficient information on the terms of the offer and any securities to be offered so as to enable an investor to decide to purchase or subscribe for any securities, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129, as amended.
Notice to Prospective Investors in the United Kingdom
No securities have been offered or will be offered pursuant to the Offering to the public in the United Kingdom prior to the publication of a prospectus in relation to the securities which has been approved by the Financial Conduct Authority, except that the securities may be offered to the public in the United Kingdom at any time:
A.
where the offer is conditional on the admission of the securities to trading on the London Stock Exchange plc’s main market (in reliance on the exception in paragraph 6(a) of Schedule 1 of the POATR);
B.
to any qualified investor as defined under paragraph 15 of Schedule 1 of the POATR;
C.
to fewer than 150 persons (other than qualified investors as defined under paragraph 15 of Schedule 1 of the POATR), subject to obtaining the prior consent of the Lead Underwriter for any such offer; or
D.
in any other circumstances falling within Part 1 of Schedule 1 of the POATR,
For the purposes of this provision, the expression an “offer to the public” in relation to the securities in the United Kingdom means the communication to any person which presents sufficient information on: (a) the securities to be offered; and (b) the terms on which they are to be offered, to enable an investor to decide to buy or subscribe for the securities and the expressions “POATR” means the Public Offers and Admissions to Trading Regulations 2024.
TRADING PRICE AND VOLUME
Common Shares
The outstanding Common Shares are traded on the TSX under the trading symbol “MSCL” and were previously traded on the TSX Venture Exchange until February 15, 2024. The following table sets forth the reported trading prices (in Cdn$) and monthly aggregate trading volumes of the Common Shares for the 12-month period prior to the date of this Prospectus Supplement (Source: TMX):
|
Period
|
|
|
High
Trading Price(1)
|
|
|
Low
Trading Price(1)
|
|
|
Volume(1)
|
|
|
January 2025
|
|
|
Cdn$10.68
|
|
|
Cdn$ 9.36
|
|
|
138,104
|
|
|
February 2025
|
|
|
Cdn$10.56
|
|
|
Cdn$ 8.64
|
|
|
420,844
|
|
|
March 2025
|
|
|
Cdn$11.28
|
|
|
Cdn$ 8.64
|
|
|
291,837
|
|
|
April 2025
|
|
|
Cdn$ 9.00
|
|
|
Cdn$ 6.84
|
|
|
252,670
|
|
|
May 2025
|
|
|
Cdn$ 9.12
|
|
|
Cdn$ 7.32
|
|
|
301,142
|
|
|
June 2025
|
|
|
Cdn$ 8.28
|
|
|
Cdn$ 6.24
|
|
|
317,051
|
|
|
July 2025
|
|
|
Cdn$ 8.40
|
|
|
Cdn$ 6.36
|
|
|
181,172
|
|
|
August 2025
|
|
|
Cdn$ 7.56
|
|
|
Cdn$ 6.36
|
|
|
204,062
|
|
|
September 2025
|
|
|
Cdn$ 8.88
|
|
|
Cdn$ 7.20
|
|
|
831,134
|
|
|
October 2025
|
|
|
Cdn$10.32
|
|
|
Cdn$ 8.04
|
|
|
289,907
|
|
|
November 2025
|
|
|
Cdn$ 9.72
|
|
|
Cdn$ 8.04
|
|
|
220,684
|
|
|
December 2025
|
|
|
Cdn$ 8.64
|
|
|
Cdn$ 7.56
|
|
|
297,645
|
|
|
January 2026
|
|
|
Cdn$16.44
|
|
|
Cdn$ 8.16
|
|
|
1,103,998
|
|
|
February 1 – 4, 2026
|
|
|
Cdn$17.00
|
|
|
Cdn$15.40
|
|
|
71,887
|
|
Note:
(1)
Presented on a post-Consolidation basis.
The Company has applied to list the Common Shares on The Nasdaq Global Market. Listing is subject to the Company fulfilling all of the requirements of The Nasdaq Global Market.
PRIOR SALES
The following table sets forth the details regarding all issuances of Common Shares, including issuances of all securities convertible or exchangeable into Common Shares, during the 12-month period before the date of this Prospectus Supplement:
|
Date
|
|
|
Type of Security
|
|
|
Issue/Exercise
Price — Cdn$
|
|
|
Number of
Securities
|
|
|
January 8, 2025
|
|
|
Warrants Exercised(4)
|
|
|
|
$ |
7.20 |
|
|
|
|
|
416 |
|
|
|
January 9, 2025
|
|
|
Stock Options Issued(2)
|
|
|
|
$ |
10.08 |
|
|
|
|
|
81,548 |
|
|
|
February 10, 2025
|
|
|
Stock Options Issued(2)
|
|
|
|
$ |
9.48 |
|
|
|
|
|
711,328 |
|
|
|
April 30, 2025
|
|
|
Warrants Exercised(3)
|
|
|
|
$ |
6.00 |
|
|
|
|
|
1,715 |
|
|
|
May 2, 2025
|
|
|
Warrants Exercised(3)
|
|
|
|
$ |
6.00 |
|
|
|
|
|
3,333 |
|
|
|
May 13, 2025
|
|
|
Warrants Exercised(3)
|
|
|
|
$ |
6.00 |
|
|
|
|
|
39,799 |
|
|
|
May 13, 2025
|
|
|
Pre-Funded Warrants Exercised
|
|
|
|
$ |
0.00 |
|
|
|
|
|
549,991 |
|
|
|
May 14, 2025
|
|
|
Warrants Exercised(3)
|
|
|
|
$ |
6.00 |
|
|
|
|
|
4,850 |
|
|
|
May 15, 2025
|
|
|
Warrants Exercised(4)
|
|
|
|
$ |
7.20 |
|
|
|
|
|
3,125 |
|
|
|
May 16, 2025
|
|
|
Warrants Exercised(3)
|
|
|
|
$ |
6.00 |
|
|
|
|
|
3,891 |
|
|
|
May 20, 2025
|
|
|
Warrants Exercised(3)
|
|
|
|
$ |
6.00 |
|
|
|
|
|
266,666 |
|
|
|
June 18, 2025
|
|
|
Stock Options Issued(2)
|
|
|
|
$ |
6.60 |
|
|
|
|
|
73,757 |
|
|
|
August 15, 2025
|
|
|
Stock Options Issued(2)
|
|
|
|
$ |
6.96 |
|
|
|
|
|
224,091 |
|
|
|
August 25, 2025
|
|
|
Stock Options Issued(2)
|
|
|
|
$ |
7.08 |
|
|
|
|
|
12,500 |
|
|
|
September 3, 2025
|
|
|
Warrants Exercised(4)
|
|
|
|
$ |
7.20 |
|
|
|
|
|
4,166 |
|
|
|
September 5, 2025
|
|
|
Warrants Exercised(4)
|
|
|
|
$ |
7.20 |
|
|
|
|
|
11,666 |
|
|
|
September 9, 2025
|
|
|
Warrants Exercised(4)
|
|
|
|
$ |
7.20 |
|
|
|
|
|
16,666 |
|
|
|
September 10, 2025
|
|
|
Warrants Exercised(4)
|
|
|
|
$ |
7.20 |
|
|
|
|
|
18,229 |
|
|
|
September 11, 2025
|
|
|
Warrants Exercised(4)
|
|
|
|
$ |
7.20 |
|
|
|
|
|
25,520 |
|
|
|
September 12, 2025
|
|
|
Warrants Exercised(4)
|
|
|
|
$ |
7.20 |
|
|
|
|
|
19,375 |
|
|
|
September 15, 2025
|
|
|
Warrants Exercised(4)
|
|
|
|
$ |
7.20 |
|
|
|
|
|
49,166 |
|
|
|
September 16, 2025
|
|
|
Pre-Funded Warrants Exercised
|
|
|
|
$ |
0.00 |
|
|
|
|
|
587,560 |
|
|
|
October 8, 2025
|
|
|
Stock Options Exercised
|
|
|
|
$ |
6.00 |
|
|
|
|
|
34,463 |
|
|
|
November 14, 2025
|
|
|
Stock Options Issued(2)
|
|
|
|
$ |
9.36 |
|
|
|
|
|
57,026 |
|
|
|
January 22, 2026
|
|
|
Stock Options Issued(2)
|
|
|
|
$ |
12.84 |
|
|
|
|
|
77,294 |
|
|
Notes:
(1)
Presented on a post-Consolidation basis.
(2)
Granted under the stock option plan of the Company.
(3)
Exercise of broker warrants issued on May 17, 2023 as part of a public offering.
(4)
Exercise of warrants issued on September 13, 2022 as part of a public offering.
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Mintz LLP, counsel to the Company, and Stikeman Elliott LLP, counsel to the Underwriters, the following is, as of the date hereof, a summary of the principal Canadian federal income tax considerations generally applicable under the Income Tax Act (Canada) (the “Tax Act”) and the regulations thereunder (the “Regulations”) to the acquisition, holding and disposition of Offered Shares, Warrant Shares or Pre-Funded Warrants by a holder who acquires Offered Shares or Pre-Funded Warrants pursuant to this Prospectus or acquires Warrant Shares upon the exercise of the Pre-Funded Warrants. For the purposes of this summary, the term “Common Shares” shall also include the Offered Shares and any Warrant Shares acquired upon the exercise of the Pre-Funded Warrants, unless the context otherwise requires. This summary is applicable to a holder who, for the purposes of the Tax Act and at all relevant times, deals at arm’s length with, and is not affiliated with the Company and the Underwriters and holds Common Shares and Pre-Funded Warrants, and will hold the Warrant Shares, as capital property. Generally, the Common Shares, the Warrant Shares or Pre-Funded Warrants will be considered to be capital property to a holder provided that the holder does not hold such Common Shares, Warrant Shares or Pre-Funded Warrants in the course of carrying on a business of trading or dealing in securities and has not acquired them in one or more transactions considered to be an adventure or concern in the nature of trade (“Holder” and collectively, the “Holders”).
This summary is not applicable to a Holder: (i) that is a “financial institution” for purposes of the “mark-to-market” rules in the Tax Act; (ii) that is a “specified financial institution” within the meaning of the Tax Act; (iii) that reports its “Canadian tax results” within the meaning of the Tax Act in a currency other than Canadian currency; (iv) an interest in which is, a “tax shelter investment” within the meaning of the Tax Act; (v) that has entered or will enter into a “derivative forward agreement” or “synthetic disposition arrangement”, each within the meaning of the Tax Act, in respect of Common Shares and/or Pre-Funded Warrants; (vi) that receives dividends on Common Shares under or as part of a “dividend rental arrangement” within the meaning of the Tax Act; or (vii) a Holder that is a corporation resident in Canada (for purposes of the Tax Act) and is, or becomes, or does not deal at arm’s length for purposes of the Tax Act with a corporation resident in Canada (for purposes of the Tax Act) that is or becomes, as part of a transaction or event or series of transactions or events that includes the acquisition of the Offered Shares, Warrant Shares or Pre-Funded Warrants, controlled by a non-resident person or group of non-resident persons who do not deal at arm’s length with each other, for the purposes of the foreign affiliate dumping rules in section 212.3 of the Tax Act. This summary does not address the deductibility of interest by a Holder who has borrowed money to acquire the Offered Shares, Warrant Shares or Pre-Funded Warrants or the tax consequences for an individual Holder who acquired Offered Shares, Warrant Shares or Pre-Funded Warrants as a benefit from employment. All such Holders should consult with their own tax advisors with respect to their own particular circumstances.
This summary is based upon the current provisions of the Tax Act and the Regulations thereunder in force as of the date hereof, all specific proposals to amend the Tax Act and Regulations thereunder (the “Tax Proposals”) which have been announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof, and counsel’s understanding of the current administrative policies and assessing practices of the Canada Revenue Agency (the “CRA”) which have been made publicly available prior to the date hereof. This summary assumes that the Tax Proposals will be enacted in the form proposed and does not take into account or anticipate any other changes in law or in the administrative policies or assessing practices of the CRA, whether by way of judicial, legislative or governmental decision or action, nor does it take into account provincial, territorial or foreign income tax legislation or considerations, which may differ from the Canadian federal income tax considerations discussed herein. No assurances can be given that the Tax Proposals will be enacted as proposed or at all, or that legislative, judicial or administrative changes will not modify or change the statements expressed herein.
This summary is not exhaustive of all possible Canadian federal income tax considerations applicable to an investment in Common Shares or Pre-Funded Warrants. Accordingly, 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 investor. Investors should consult their own tax advisors for advice with respect to the tax consequences of an investment in Common Shares and Pre-Funded Warrants, based on their particular circumstances.
Currency Conversion
For purposes of the Tax Act, all amounts relating to the acquisition, holding or disposition of Common Shares and Pre-Funded Warrants (including dividends, adjusted cost base and proceeds of disposition) must generally be expressed in Canadian Dollars. Amounts denominated in any other currency must be converted into Canadian Dollars generally based on the exchange rate quoted by the Bank of Canada on the date such amounts arise or such other rate of exchange as is acceptable to the Minister of National Revenue (Canada).
Acquisition of Common Shares and Pre-Funded Warrants
When Common Shares (including an Offered Share) or Pre-Funded Warrants are acquired by a Holder who already owns Common Shares or Pre-Funded Warrants, the cost of newly acquired Common Shares or Pre-Funded Warrants will be averaged with the adjusted cost base of all Common Shares or Pre-Funded Warrants, respectively, owned by the Holder as capital property before that time for the purpose of determining the Holder’s adjusted cost base of all Common Shares and Pre-Funded Warrants, as the case may be, held by such person.
Exercise of Warrants
The exercise of a Pre-Funded Warrant to acquire a Warrant Share will be deemed not to constitute a disposition of property for purposes of the Tax Act and consequently no gain or loss will be realized by a Holder upon such an exercise. When a Pre-Funded Warrant is exercised, the Holder’s cost of the Warrant Share acquired thereby will be equal to the aggregate of the Holder’s adjusted cost base of such Pre-Funded Warrant and the exercise price paid for the Warrant Share. The Holder’s adjusted cost base of the Warrant Share so acquired will be determined by averaging such cost with the adjusted cost base to the Holder of all other Common Shares owned by the Holder and held as capital property immediately prior to such acquisition.
Holders Resident in Canada
The following section of this summary is generally applicable to a Holder who, for purposes of the Tax Act and any applicable tax treaty or convention, is or is deemed to be resident in Canada at all relevant times (a “Resident Holder”). Certain Resident Holders who might not otherwise be considered to hold Common Shares as capital property may, in certain circumstances, be entitled to have such Common Shares (but, for avoidance of doubt, not Pre-Funded Warrants) and all other “Canadian securities” as defined in the Tax Act owned by them in the year in which the election is made and all subsequent taxation years treated as capital property by making an irrevocable election under subsection 39(4) of the Tax Act. This election will not be available for Pre-Funded Warrants. Resident Holders contemplating such an election should consult their own advisors.
Expiry of Pre-Funded Warrants
The Pre-Funded Warrants will not expire. However, if the Pre-Funded Warrants do have an expiry date, in the event of the expiry of an unexercised Pre-Funded Warrant, the Resident Holder will realize a capital loss equal to the Resident Holder’s adjusted cost base of such Pre-Funded Warrant. The tax treatment of capital gains and losses is discussed in greater detail below under the subheading “Capital Gains and Losses”.
Dividends
Taxable dividends received or deemed to be received on the Common Shares will be included in computing the Resident Holder’s income. In the case of a Resident Holder that is an individual (other than certain trusts) such dividends will be subject to the gross-up and dividend tax credit rules applicable in respect of taxable dividends received from “taxable Canadian corporations” (as defined in the Tax Act). An enhanced gross-up and dividend tax credit will generally be available to a Resident Holder that is an individual in respect of dividends designated by the Company as “eligible dividends” in accordance with the rules of the Tax Act. There may be limitations on the ability of the Company to designate dividends as “eligible
dividends” and the Company has made no commitments in this regard. Resident Holders who are individuals (other than certain trusts) may be subject to alternative minimum tax in respect of taxable dividends.
In the case of a Resident Holder that is a corporation, the amount of any such taxable dividends that is included in its income for a taxation year received or deemed to be received on the Common Shares will generally be deductible in computing its taxable income for that taxation year. In certain circumstances, subsection 55(2) of the Tax Act will treat a taxable dividend received (or deemed to be received) by a Resident Holder that is a corporation as proceeds of disposition or a capital gain. Resident Holders that are corporations should consult their own tax advisors having regard to their own circumstances.
Resident Holders that are “private corporations” (as defined in the Tax Act) or “subject corporations” (as defined in the Tax Act) may be subject to a refundable tax under Part IV of the Tax Act on dividends received (or deemed to be received) on the Common Shares to the extent such dividends are deductible in computing the Resident Holder’s taxable income for the year. This refundable tax generally will be refunded to a Resident Holder that is a corporation when sufficient taxable dividends are paid to its shareholders while it is a private corporation or subject corporation.
A Resident Holder that is throughout its taxation year a “Canadian-controlled private corporation”, or that is a “substantive CCPC” at any time in the year, as those terms are defined in the Tax Act, may be liable for an additional tax (refundable in certain circumstances) on its “aggregate investment income”, which is defined in the Tax Act to include dividends received or deemed to be received in respect of Common Shares, but not dividends or deemed dividends that are deductible in computing the dividend recipient’s taxable income.
Disposition of Common Shares and Pre-Funded Warrants
A disposition or deemed disposition by a Resident Holder of Common Shares (other than to the Company that is otherwise than a purchase by the Company of Common Shares in the open market in a manner in which such shares would normally be purchased by any member of the public in the open market) or Pre-Funded Warrants (which, as discussed above, does not include an exercise of Pre-Funded Warrants to acquire such Warrant Shares and other than on the expiry of Pre-Funded Warrants, which is discussed above under the subheading “Expiry of Pre-Funded Warrants”) will generally give rise to a capital gain (or capital loss) equal to the amount by which the proceeds of disposition, net of reasonable costs of disposition, are greater (or less) than such Resident Holder’s adjusted cost base of such Common Shares or Pre-Funded Warrants, as the case may be, immediately before the disposition or deemed disposition.
The tax treatment of capital gains and losses is discussed in greater detail below under the subheading “Capital Gains and Losses”.
Capital Gains and Losses
Generally, one-half of any capital gain will be included in the Resident Holder’s income as a taxable capital gain and one-half of any capital loss must normally be deducted as an allowable capital loss against taxable capital gains realized in the taxation year of disposition or deemed disposition to the extent and under the circumstances described in the Tax Act. Any unused allowable capital losses may be applied to reduce net taxable capital gains realized in the three preceding taxation years or any subsequent taxation year to the extent and in the circumstances prescribed in the Tax Act.
If the Resident Holder is a corporation, any capital loss arising on the disposition or deemed disposition of a Common Share may, in certain circumstances, be reduced by the amount of any dividends previously received or deemed to have been previously received on the Common Share to the extent and under the circumstances specified by the Tax Act. Similar rules may apply to reduce any capital loss in respect of the disposition or deemed disposition of Common Shares held by a trust or partnership of which a corporation, partnership or trust is a member or beneficiary. Resident Holders to whom these rules may be relevant should consult their own tax advisors.
A Resident Holder that is throughout its taxation year a “Canadian-controlled private corporation” (as defined in the Tax Act) or a “substantive CCPC” (as defined in the Tax Act) at any time in the year may be required to pay an additional tax (refundable in certain circumstances) on its “aggregate investment income”
(as defined in the Tax Act) for the year, including taxable capital gains. Resident Holders who are individuals (other than certain trusts) may be subject to alternative minimum tax in respect of capital gains.
Holders Not Resident in Canada
The following section of this summary is generally applicable to Holders who for the purposes of the Tax Act and any applicable tax treaty or convention and at all relevant times (i) have not been and will not be deemed to be resident in Canada at any time while they hold the Common Shares or Pre-Funded Warrants; and (ii) do not use or hold the Common Shares or Pre-Funded Warrants in carrying on a business in Canada (“Non-Resident Holders”).
Special rules, which are not discussed in this summary, may apply to a Non-Resident Holder that is an insurer carrying on business in Canada and elsewhere or an “authorized foreign bank” (as defined in the Tax Act). Such Non-Resident Holders should consult their own tax advisors.
Dividends
Dividends paid or credited or deemed to be paid or credited to a Non-Resident Holder by the Company will be subject to Canadian withholding tax at the rate of 25% on the gross amount of the dividend unless such rate is reduced by the terms of an applicable tax treaty. Under the Canada-United States Tax Convention (1980), as amended (the “Treaty”), the rate of withholding tax on dividends paid or credited to a Non-Resident Holder who is resident in the United States for purposes of the Treaty and fully entitled to benefits under the Treaty (a “U.S. Holder”) is generally limited to 15% of the gross amount of the dividend (or 5% in the case of a U.S. Holder that is a company beneficially owning at least 10% of the Company’s voting shares).
Dispositions of Common Shares and Pre-Funded Warrants
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 or a Pre-Funded Warrant, nor will capital losses arising therefrom be recognized under the Tax Act, unless the Common Share or Pre-Funded Warrant constitutes “taxable Canadian property” to the Non-Resident Holder for purposes of the Tax Act, and the gain is not exempt from tax pursuant to the terms of an applicable tax treaty.
Provided the Common Shares are listed on a “designated stock exchange”, as defined in the Tax Act (which includes the TSX), at the time of disposition, the Common Shares and Pre-Funded Warrants generally will not constitute taxable Canadian property of a Non-Resident Holder at that time, unless at any time during the 60 month period immediately preceding the disposition the following two conditions are met concurrently: (i) the Non-Resident Holder, persons with whom the Non-Resident Holder did not deal at arm’s length, partnerships in which the Non-Resident Holder or such non-arm’s length person holds a membership interest (either directly or indirectly through one or more partnerships), or the Non-Resident Holder together with all such persons, owned 25% or more of the issued shares of any class or series of shares of the Company; and (ii) more than 50% of the fair market value of the Common Shares of the Company was derived directly or indirectly from one or any combination of real or immovable property situated in Canada, “Canadian resource properties” (as defined in the Tax Act), “timber resource properties” (as defined in the Tax Act) or an option, an interest or right in such property, whether or not such property exists. Notwithstanding the foregoing, a Common Share or Pre-Funded Warrant may otherwise be deemed to be taxable Canadian property to a Non-Resident Holder for purposes of the Tax Act in certain circumstances. A Non-Resident Holder’s capital gain (or capital loss) in respect of a disposition of Common Shares or Pre-Funded Warrants that constitute or are deemed to constitute taxable Canadian property to a Non-Resident Holder (and are not “treaty-protected property” as defined in the Tax Act) will generally be computed in the manner described above under the subheading “Holders Resident in Canada — Disposition of Common Shares and Pre-Funded Warrants”. Non-Resident Holders whose Common Shares or Pre-Funded Warrants are taxable Canadian property should consult their own tax advisors regarding the tax and compliance considerations that may be relevant to them.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain material U.S. federal income tax considerations applicable to a U.S. Holder (as defined below) arising from the acquisition, ownership and disposition of the Common Shares or Pre-Funded Warrants purchased pursuant to the Offering. This summary is for general information purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax considerations that may apply to a U.S. Holder as a result of the acquisition, ownership and disposition of the Common Shares or Pre-Funded Warrants. In addition, this summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the U.S. federal income tax consequences to such U.S. Holder, including specific tax consequences to a U.S. Holder under an applicable tax treaty. Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S. federal income tax advice with respect to any particular U.S. Holder. In addition, this summary does not address the U.S. federal alternative minimum, U.S. federal estate and gift, U.S. federal net investment income, U.S. state and local, or non-U.S. tax consequences of the acquisition, ownership and disposition of the Common Shares or Pre-Funded Warrants. Except as specifically set forth below, this summary does not discuss applicable tax reporting requirements. Each prospective U.S. Holder should consult its own tax advisor regarding all U.S. federal, U.S. state and local and non-U.S. tax consequences of the acquisition, ownership and disposition of Common Shares or Pre-Funded Warrants.
No opinion from U.S. legal counsel or ruling from the Internal Revenue Service (the “IRS”) has been requested, or will be obtained, regarding the U.S. federal income tax consequences of the acquisition, ownership and disposition of the Common Shares or Pre-Funded Warrants pursuant to the Offering. This summary is not binding on the IRS, and the IRS is not precluded from taking a position that is different from, and contrary to, any position taken in this summary. In addition, because the authorities upon which this summary is based are subject to various interpretations, the IRS and the U.S. courts could disagree with one or more of the positions taken in this summary.
Scope of This Disclosure
Authorities
This summary is based on the Internal Revenue Code of 1986, as amended (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 (the “Canada-U.S. Tax Convention”), 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 a material and adverse manner at any time, and any such change could be applied on a retroactive or prospective basis which could affect the U.S. federal income tax considerations described in this summary. This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation that, if enacted, could be applied on a retroactive or prospective basis.
U.S. Holders
For purposes of this summary, the term “U.S. Holder” means a beneficial owner of the Common Shares or Pre-Funded Warrants purchased pursuant to the Offering that is for U.S. federal income tax purposes
•
an individual who is a citizen or resident of the U.S.;
•
a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the U.S., any state thereof or the District of Columbia;
•
an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
•
a trust that (a) is subject to the primary supervision of a court within the U.S. and the control of one or more U.S. persons for all substantial decisions or (b) has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.
U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed
This summary does not address the U.S. federal income tax considerations of the acquisition, ownership and disposition of the Common Shares or Pre-Funded Warrants by U.S. Holders that are subject to special provisions under the Code, including, but not limited to, the following: (a) tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts; (b) financial institutions, underwriters, insurance companies, real estate investment trusts, or regulated investment companies; (c) broker-dealers, dealers, or traders in securities or currencies that elect to apply a “mark-to-market” accounting method; (d) U.S. Holders that have a “functional currency” other than the U.S. dollar; (e) U.S. Holders that own the Common Shares or Pre-Funded Warrants as part of a straddle, hedging transaction, conversion transaction, constructive sale, or other integrated transaction; (f) U.S. Holders that acquire the Common Shares or Pre-Funded Warrants in connection with the exercise of employee stock options or otherwise as compensation for services; (g) U.S. Holders that hold the Common Shares or Pre-Funded Warrants other than as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment purposes); (h) U.S. Holders that are subject to special tax accounting rules; (i) U.S. Holders that are partnerships or other pass through entities; or (j) U.S. Holders that own directly, indirectly, or by attribution, 10% or more, by voting power or value, of the outstanding stock of the Company. This summary also does not address the U.S. federal income tax considerations applicable to U.S. Holders who are: (a) U.S. expatriates or former long-term residents of the U.S.; (b) persons that have been, are, or will be a resident or deemed to be a resident in Canada for purposes of the Income Tax Act (Canada); (c) persons that use or hold, will use or hold, or that are or will be deemed to use or hold the Common Shares or Pre-Funded Warrants in connection with carrying on a business in Canada; (d) persons whose the Common Shares or Pre-Funded Warrants constitute “taxable Canadian property” under the Income Tax Act (Canada); or (e) persons that have a permanent establishment in Canada for purposes of the Canada-U.S. Tax Convention. U.S. Holders that are subject to special provisions under the Code, including U.S. Holders described immediately above, should consult their own tax advisors regarding all U.S. federal, U.S. state and local, and non-U.S. tax consequences (including the potential application and operation of any income tax treaties) relating to the acquisition, ownership and disposition of the Common Shares or Pre-Funded Warrants.
If an entity or arrangement that is classified as a partnership (or other “pass-through” entity) for U.S. federal income tax purposes holds the Common Shares or Pre-Funded Warrants, the U.S. federal income tax consequences to such partnership and the partners (or other owners or participants) of such entity or arrangement of the acquisition, ownership and disposition of the Common Shares or Pre-Funded Warrants generally will depend on the activities of the entity or arrangement and the status of such partners (or other owners or participants). This summary does not address the U.S. federal income tax consequences for any such partner or partnership (or other “pass-through” entity or its owners or participants). Owners or participants of entities and arrangements that are classified as partnerships (or other “pass-through” entities) for U.S. federal income tax purposes should consult their own tax advisors regarding the U.S. federal income tax consequences of the acquisition, ownership and disposition of the Common Shares or Pre-Funded Warrants.
Treatment of Pre-Funded Warrants
Although not entirely free from doubt, each Pre-Funded Warrant generally is expected to be treated as one Common Share for U.S. federal income tax purposes, and a U.S. Holder of Pre-Funded Warrants generally is expected to be taxed in the same manner as a U.S. Holder of Common Shares, as described below. Accordingly, no gain or loss should be recognized upon the exercise of a Pre-Funded Warrant, and the holding period of a Pre-Funded warrant should carry over to the Common Share received. Similarly, the tax basis of a Pre-Funded Warrant should carry over to the Common Shares received upon exercise, increased by the exercise price of Cdn$0.00001 per Common Share. However, such characterization is not binding on the IRS, and the IRS may treat the Pre-Funded Warrants as warrants to acquire Common Shares. If so, the amount and character of a U.S. Holder’s gain with respect to an investment in Pre-Funded Warrants could change.
Each U.S. Holder should consult their tax advisors regarding the risks associated with an investment in Pre-Funded Warrants pursuant to this offering (including potential alternative characterizations). The
remainder of this discussion generally assumes that the Pre-Funded Warrants will be treated as identical to Common Shares and references to Common Shares in the remainder of this discussion also refer to Pre-Funded Warrants unless stated otherwise.
Certain Adjustments to the Pre-Funded Warrants
Under Section 305 of the Code, an adjustment to the number of Common Shares that will be issued on the exercise of the Pre-Funded Warrants, or an adjustment to the exercise price of the Pre-Funded Warrants, may be treated as a constructive distribution to a U.S. Holder of the Pre-Funded Warrants if, and to the extent that, such adjustment has the effect of increasing your proportionate interest in our earnings and profits or assets, depending on the circumstances of such adjustment (for example, if such adjustment is to compensate for a distribution of cash or other property to our shareholders). Any such adjustment that is treated as a constructive distribution would be treated as a dividend to the extent described below under “Distribution on the Common Shares.” U.S. Holders should consult their tax advisor regarding the proper tax treatment of any such adjustment.
Lapse of Pre-Funded Warrants
If a U.S. Holder allows a Pre-Funded Warrant to expire unexercised, such U.S. Holder will recognize a capital loss in an amount equal to such U.S. Holder’s tax basis in the Pre-Funded Warrant. Any such loss generally will be a long-term capital loss if the Pre-Funded Warrant is held for more than one year. The deductibility of capital losses is subject to certain limitations.
Distributions on the Common Shares
Subject to the Passive Foreign Investment Company (“PFIC”) rules discussed below (see “Passive Foreign Investment Company Rules” below), a U.S. Holder that receives a distribution, including a constructive distribution, with respect to the 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 the current or accumulated “earnings and profits” of the Company, as computed for U.S. federal income tax purposes. To the extent that a distribution exceeds the current and accumulated “earnings and profits” of the Company, such distribution will be treated first as a tax-free return of capital to the extent of a U.S. Holder’s tax basis in the Common Shares and thereafter as gain from the sale or exchange of such Common Shares (see “Sale or Other Taxable Disposition of the Common Shares” below). However, the Company may not maintain calculations of earnings and profits in accordance with U.S. federal income tax principles, and each U.S. Holder should therefore assume that any distribution by the Company with respect to the Common Shares will constitute a dividend. Dividends received on the Common Shares generally will not be eligible for the “dividends received deduction” available to U.S. corporate shareholders receiving dividends from U.S. corporations. If the Company is eligible for the benefits of the Canada-U.S. Tax Convention or its shares are readily tradable on an established securities market in the U.S., dividends paid by the Company to non-corporate U.S. Holders generally will be eligible for the preferential tax rates applicable to long-term capital gains, provided certain holding period and other conditions are satisfied, including that the Company not be classified as a PFIC in the tax year of distribution or in the preceding tax year. The dividend rules are complex, and each U.S. Holder should consult its own tax advisor regarding the application of such rules.
Sale or Other Taxable Disposition of the Common Shares
Subject to the PFIC rules discussed below, upon the sale or other taxable disposition of the Common Shares, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between the amount of cash plus the fair market value of any property received and such U.S. Holder’s tax basis in the Common Shares sold or otherwise disposed of. Any capital gain or loss realized on a sale or other taxable disposition of the Common Shares will be long-term capital gain or loss if, at the time of the sale or other taxable disposition, the Common Shares have been held for more than one year. Preferential tax rates apply to long- term capital gains of non-corporate U.S. Holders. There are currently no preferential tax rates for long-term capital gains of a U.S. Holder that is a corporation. Deductions for capital losses are subject to
significant limitations under the Code. A U.S. Holder’s tax basis in the Common Shares generally will be such U.S. Holder’s U.S. dollar cost for such Common Shares.
Passive Foreign Investment Company Rules
If the Company were to constitute a PFIC for any year during a U.S. Holder’s holding period, then certain potentially adverse rules would affect the U.S. federal income tax consequences to a U.S. Holder resulting from the acquisition, ownership and disposition of Common Shares. Based on our gross income, the average value of our assets, including goodwill and the nature of our active business, we believe we were a PFIC for U.S. federal income tax purposes for the taxable year ending December 31, 2025. Furthermore, there can be no assurance that we will not be considered a PFIC for our current taxable year ending December 31, 2026 or for any future taxable year. No opinion of legal counsel or ruling from the IRS concerning the status of the Company as a PFIC has been obtained or is currently planned to be requested. However, PFIC classification is fundamentally factual in nature, generally cannot be determined until the close of the tax year in question and is determined annually. Additionally, the analysis depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations. Consequently, there can be no assurance that the Company has never been and will not become a PFIC for any tax year during which U.S. Holders hold Common Shares.
In any year in which the Company is classified as a PFIC, a U.S. Holder will be required to file an annual report with the IRS containing such information as Treasury Regulations and/or other IRS guidance may require. In addition to penalties, a failure to satisfy such reporting requirements may result in an extension of the time period during which the IRS can assess a tax. U.S. Holders should consult their own tax advisors regarding the requirements of filing such information returns under these rules, including the requirement to file an IRS Form 8621 annually.
The Company generally will be a PFIC if, after the application of certain “look-through” rules with respect to subsidiaries in which the Company holds at least a 25% interest by value, for a tax year, (a) 75% or more of the gross income of the Company for such tax year is passive income (the “income test”) or (b) 50% or more of the value of the Company’s assets either produce passive income or are held for the production of passive income (the “asset test”), based on the quarterly average of the fair market value of such assets. “Gross income” generally includes all sales revenues less the cost of goods sold, plus income from investments and from incidental or outside operations or sources, and “passive income” generally includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions.
If the Company were a PFIC in any tax year during which a U.S. Holder held Common Shares, such holder generally would be subject to special rules with respect to “excess distributions” made by the Company on the Common Shares and with respect to gain from the disposition of Common Shares. An “excess distribution” generally is defined as the excess of distributions with respect to the Common Shares received by a U.S Holder in any tax year over 125% of the average annual distributions such U.S. Holder has received from the Company during the shorter of the three preceding tax years, or such U.S. Holder’s holding period for the Common Shares. Generally, a U.S. Holder would be required to allocate any excess distribution or gain from the disposition of the Common Shares ratably over its holding period for the Common Shares. Such amounts allocated to the year of the disposition or excess distribution would be taxed as ordinary income, and amounts allocated to prior tax years would be taxed as ordinary income at the highest tax rate in effect for each such year and an interest charge generally applicable to underpayments of tax would be imposed on the tax attributable to each such prior year.
If the Company were a PFIC for the taxable year in which a dividend is paid or in the preceding taxable year, the dividend would not be eligible for the preferential tax rates applicable to qualified dividends. Special rules also apply to foreign tax credits that a U.S. Holder may claim on a distribution from a PFIC.
If the Company is a PFIC for any taxable year during which a U.S. Holder holds the Common Shares, the Company will continue to be treated as a PFIC with respect to such U.S. Holder for any subsequent taxable year in which such U.S. Holder continues to hold the Common Shares, regardless of whether the Company ceases to meet either the income test or asset test described above in one or more subsequent taxable years. A U.S. Holder may terminate this continued PFIC status in a year in which the Company does
not meet either the income test or the asset test by making a purging election which will result in current taxation under the PFIC rules. U.S. Holders should consult their own tax advisors regarding the potential application of the PFIC rules to the ownership and disposition of Common Shares.
While there are U.S. federal income tax elections that can sometimes be made to mitigate the adverse tax consequences of PFIC status (including the “QEF Election” under Section 1295 of the Code (an election to include in income on a current basis a U.S. Holder’s pro rata share of our income for the year, whether or not distributed) and the “Mark-to-Market Election” under Section 1296 of the Code (an election by a U.S. Holder to include as ordinary income each year the excess, if any, of the fair market value of its Common Shares at the end of its tax year over the adjusted basis in its Common Shares)), such elections are available in limited circumstances and must be made in a timely manner.
Moreover, U.S. Holders should be aware that, for each tax year, if any, that the Company is a PFIC, the Company can provide no assurances that it will satisfy the record keeping requirements or make available to U.S. Holders the information such U.S. Holders require to make a QEF Election with respect to the Company or any non-U.S. subsidiary that is also classified as a PFIC.
Certain additional adverse rules may apply with respect to a U.S. Holder if the Company is a PFIC, regardless of whether the U.S. Holder makes a QEF Election. These rules include special rules that apply to the amount of foreign tax credit that a U.S. Holder may claim on a distribution from a PFIC. U.S. Holders should consult their own tax advisors regarding the potential application of the PFIC rules to the ownership and disposition of Common Shares, and the availability of certain U.S. tax elections under the PFIC rules.
Foreign Tax Credit
Subject to the PFIC rules discussed above, a U.S. Holder that pays (whether directly or through withholding) Canadian income tax in connection with the acquisition, ownership or disposition of the Common Shares may be entitled, at the election of such U.S. Holder, to receive either a deduction or a credit for such Canadian income tax paid. Generally, a credit will reduce a U.S. Holder’s U.S. federal income tax liability on a dollar-for-dollar basis, whereas a deduction will reduce a U.S. Holder’s income subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to all creditable foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a year. The foreign tax credit rules are complex and involve the application of rules that depend on a U.S. Holder’s particular circumstances; in some circumstances the amount of foreign tax credit that can be claimed may be limited. Accordingly, each U.S. Holder should consult its own U.S. tax advisor regarding the foreign tax credit rules.
Receipt of Foreign Currency
The amount of any distribution or proceeds paid in Canadian dollars to a U.S. Holder in connection with the ownership of the Common Shares, or on the sale or other taxable disposition of the Common Shares, will be included in the gross income of a U.S. Holder as translated into U.S. dollars calculated by reference to the exchange rate prevailing on the date of actual or constructive receipt of the payment, regardless of whether the Canadian dollars are converted into U.S. dollars at that time. If the Canadian dollars received are not converted into U.S. dollars on the date of receipt, a U.S. Holder will have a basis in the Canadian dollars equal to their U.S. dollar value on the date of receipt. Any U.S. Holder who receives payment in Canadian dollars and engages in a subsequent conversion or other disposition of the Canadian dollars 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 with respect to foreign currency. Each U.S. Holder should consult its own U.S. tax advisor regarding the U.S. federal income tax consequences of receiving, owning, and disposing of Canadian dollars.
Information Reporting; Backup Withholding
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 non-U.S. 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 threshold amounts. The definition of “specified
foreign financial assets” includes not only financial accounts maintained in non-U.S. financial institutions, but also, if held for investment and not in an account maintained by certain financial institutions, any stock or security issued by a non-U.S. person, any financial instrument or contract that has an issuer or counterparty other than a U.S. person and any interest in a non-U.S. entity. A U.S. Holder may be subject to these reporting requirements unless such U.S. Holder’s 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 on IRS Form 8938, and, if applicable, filing obligations relating to the PFIC rules, including possible reporting on IRS Form 8621. Distributions on the Common Shares, and proceeds arising from the sale or other taxable disposition of the Common Shares, generally will be subject to information reporting.
In the case of any payments made by a U.S. middleman or other U.S. payor of distributions on the Common Shares or proceeds arising from the sale or other taxable disposition of the Common Shares backup withholding, currently at a rate of 24%, may apply to such payments if a U.S. Holder (a) fails to furnish such U.S. Holder’s 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, 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. 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 rules will be allowed as a credit against a U.S. Holder’s 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 information reporting and backup withholding rules may apply even if, under the Canada-U.S. Tax Convention, payments are exempt from the dividend withholding tax or otherwise eligible for a reduced withholding rate.
The discussion of reporting requirements set forth above is not intended to constitute an exhaustive 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 advisor regarding the information reporting and backup withholding rules.
THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL U.S. TAX CONSIDERATIONS APPLICABLE TO U.S. HOLDERS WITH RESPECT TO THE OWNERSHIP AND DISPOSITION OF SHARES. U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO THEM IN THEIR PARTICULAR CIRCUMSTANCES.
RELATIONSHIP BETWEEN THE COMPANY AND THE UNDERWRITER
The Company may be considered a “connected issuer” of Bloom Burton Securities Inc. under applicable Canadian securities laws. Bloom Burton Securities Inc. is an affiliate of Bloom Burton Development Company and Bloom Burton & Co. Inc., each of whom either beneficially owns or exercises control and direction over securities of the Company. In addition, Brian Bloom, a director of the Company is also an officer and director of Bloom Burton Securities Inc. and, together with Jolyon Burton, exercises joint control and direction over all Bloom Burton entities. The Bloom Burton entities and Brian Bloom together, hold approximately 7.33% of the issued and outstanding Common Shares of Satellos and approximately 5.46% on a fully diluted basis.
The Company has agreed to pay the Underwriters, on the Closing Date, the Underwriters’ Commission equal to % of the aggregate gross proceeds raised on such Closing Date. Bloom Burton Securities Inc. will not receive any of the proceeds of the Offering, other than its portion of the Underwriters’ Commission.
ELIGIBILITY FOR INVESTMENT
In the opinion of Mintz LLP, counsel for the Company, and Stikeman Elliott LLP, counsel to the Underwriters, based on the provisions of the Tax Act and the Regulations in force as of the date hereof,
•
the Offered Shares and Warrant Shares will, if issued on the date hereof, be qualified investments for trusts governed by registered retirement savings plans (each a “RRSP”), registered education savings plans (each a “RESP”), registered retirement income funds (each a “RRIF”), registered disability savings plans (each a “RDSP”), deferred profit sharing plans, first home savings accounts (each a “FHSA”) and tax-free savings accounts (each a “TFSA”), all within the meaning of the Tax Act (collectively, “Plans”) provided that the Offered Shares and Warrant Shares are, on the date hereof, listed on a “designated stock exchange” as defined in the Tax Act (which includes the TSX); and
•
the Pre-Funded Warrants will, if issued on the date hereof, be qualified investments for Plans provided that the Warrant Shares are, on the date hereof, listed on a “designated stock exchange” as defined in the Tax Act (which includes the TSX) and the Company is not, and deals at arm’s length with each person who is, an annuitant, a beneficiary, an employer or a subscriber under or a holder of such Plan.
Notwithstanding the foregoing, if the Offered Shares, Warrant Shares or Pre-Funded Warrants held by a TFSA, FHSA, RRSP, RRIF, RDSP or RESP are “prohibited investments” for purposes of the Tax Act, the holder of the TFSA, FHSA or RDSP, the annuitant of the RRSP or RRIF or the subscriber of the RESP will be subject to a penalty tax as set out in the Tax Act. As of the date hereof, the Offered Shares, Warrant Shares and Pre-Funded Warrants will be a “prohibited investment” if the holder of a TFSA, FHSA or RDSP, the annuitant of a RRSP or RRIF or the subscriber of the RESP, as the case may be: (i) does not deal at arm’s length with the Company for purposes of the Tax Act; or (ii) has a “significant interest” (within the meaning of the Tax Act) in the Company. In addition, the Offered Shares, Warrant Shares and Pre-Funded Warrants will not be a “prohibited investment” if the Offered Shares, Warrant Shares and Pre-Funded Warrants are “excluded property”, as defined in the Tax Act, for a TFSA, FHSA, RRSP, RRIF, RDSP or RESP. Holders who intend to hold Offered Shares, Warrant Shares or Pre-Funded Warrants in a TFSA, FHSA, RRSP, RRIF, RDSP or RESP should consult their own tax advisors in this regard.
LEGAL MATTERS & INTEREST OF EXPERTS
Certain legal matters relating to the Offering and the validity of the securities offered by this Prospectus Supplement are being passed upon on behalf of the Company by Mintz LLP, with respect to matters of Canadian law, and Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., with respect to matters of U.S. law, and on behalf of the Underwriters by Stikeman Elliott LLP, with respect to matters of Canadian law, and Latham & Watkins LLP, with respect to matters of U.S. law.
As of the date hereof, the “designated professionals” (as such term is defined in Form 51-102F2 — Annual Information Form) of each of Mintz LLP and Stikeman Elliott LLP beneficially own, directly or indirectly, less than 1% of the Company’s issued and outstanding securities.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Shares is Computershare Investor Services Inc., 510 Burrard Street, 3rd Floor, Vancouver, British Columbia, V6C 3B9.
AUDITORS
The Company’s auditors are PricewaterhouseCoopers LLP, Chartered Professional Accountants. PricewaterhouseCoopers LLP has advised the Company that they are independent with respect to the Company within the meaning of the relevant rules and related interpretations prescribed by the relevant professional bodies in Canada, including the Chartered Professional Accountants of Ontario CPA Code of Professional Conduct and any applicable legislation or regulations and the rules and regulations adopted by the SEC and Public Company Accounting Oversight Board (United States).
The Company’s former auditors are MNP LLP, Chartered Professional Accountants, of Toronto, Ontario. MNP LLP has advised the Company that it is independent with respect to the Company within the meaning of the Chartered Professional Accountants of Ontario Code of Professional Conduct and any applicable legislation or regulations and the rules and regulations adopted by the SEC and Public Company Accounting Oversight Board (United States).
ENFORCEABILITY OF CIVIL LIABILITIES
The Company is governed by the laws of Canada and its principal place of business is outside the United States. The majority of the directors and officers of the Company and the experts named herein are resident outside of the United States and a substantial portion of the Company’s assets and the assets of such persons are located outside of the United States. Consequently, it may be difficult for United States purchasers to effect service of process within the United States on the Company, its directors or officers or such experts, or to realize in the United States on judgments of courts of the United States predicated on civil liabilities under the U.S. Securities Act. Purchasers should not assume that Canadian courts would enforce judgments of United States courts obtained in actions against the Company or such persons predicated on the civil liability provisions of the United States federal securities laws or the securities or “blue sky” laws of any state within the United States or would render judgments, in original actions, for liabilities against the Company or such persons predicated on the United States federal securities or any such state securities or “blue sky” laws.
The Company has filed with the SEC, in connection with the Registration Statement, an appointment of agent for service of process on Form F-X. Under the Form F-X, the Company appointed Satellos Bioscience US, Inc. as its agent for service of process in the United States in connection with any investigation or administrative proceeding conducted by the SEC, and any civil suit or action brought against or involving the Company in a United States court, arising out of or related to or concerning the Registration Statement.
AGENTS FOR SERVICE OF PROCESS IN CANADA
Geoff MacKay, Stephanie Brown, Selwyn Ho, Franklin M. Berger, Iris Loew-Friedrich and Adam Mostafa, all being directors of the Company, reside outside of Canada, and have appointed Satellos Bioscience Inc. (Address: Royal Bank Plaza, South Tower, 200 Bay St., Suite 2800, Toronto, ON M5J 2J3) as their agent for service of process. Purchasers are advised that it may not be possible for investors to enforce judgments obtained in Canada against any person that resides outside of Canada, even if the party has appointed an agent for service of process.
PROMOTER
Frank Gleeson may be considered to be a “promoter” of the Company within the meaning of applicable Canadian securities laws (each, a “Promoter”). Mr. Gleeson currently owns, or exercises control or direction over, 331,366 Common Shares representing approximately 2.14% of the issued and outstanding Common Shares on a non-diluted basis. Mr. Gleeson receives compensation from the Company for his services as Chief Executive Officer of the Company and has been granted 516,308 options pursuant to the Company’s stock option plan. The statement as to the number of Common Shares beneficially owned, or over which a Promoter exercises control or direction, directly or indirectly, not being within the knowledge of the Company, has been obtained from the System for Electronic Disclosure by Insiders (SEDI).
No Promoter of the Company is, as at the date of this Prospectus, or has been within 10 years prior to the date of this Prospectus, a director, chief executive officer, or chief financial officer of any person or company, that:
(a)
was subject to a cease trade order, an order similar to a cease trade order, or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days that was issued while the Promoter was acting in such capacity; or
(b)
was subject to a cease trade order, an order similar to a cease trade order, or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days that was issued after the Promoter ceased to act in such capacity and which resulted from an event that occurred while the Promoter was acting in such capacity.
No Promoter of the Company is, as at the date of this Prospectus, or has been within the 10 years prior to the date of this Prospectus, a director or executive officer of any person or company that, while the Promoter was acting in that capacity, or within a year of that person ceasing to act in that capacity, became
bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets.
No Promoter of the Company has, within the 10 years prior to the date of this Prospectus, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the Promoter.
This short form base shelf prospectus has been filed under legislation in each of the provinces of British Columbia, Alberta and Ontario that permits certain information about these securities to be determined after this prospectus has become final and that permits the omission from this prospectus of that information. The legislation requires the delivery to purchasers of a prospectus supplement containing the omitted information within a specified period of time after agreeing to purchase any of these securities, except in cases where an exemption from such delivery requirement is available.
No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. This short form prospectus constitutes a public offering of these securities only in those jurisdictions where they may be lawfully offered for sale and therein only by persons permitted to sell such securities. See “Plan of Distribution”.
Information has been incorporated by reference in this short form prospectus from documents filed with securities commissions or similar authorities in the Canadian provinces of British Columbia, Alberta and Ontario. Copies of the documents incorporated herein by reference may be obtained on request without charge from the Chief Financial Officer of Satellos Bioscience Inc. at Royal Bank Plaza, South Tower, 200 Bay St., Suite 2800, Toronto, ON M5J 2J3, Telephone (647) 660-1780, and are also available electronically at www.sedarplus.ca.
SHORT FORM BASE SHELF PROSPECTUS
New IssueOctober 29, 2025
SATELLOS BIOSCIENCE INC.
US$150,000,000
Common Shares
Preferred Shares
Warrants
Units
Subscription Receipts
Debt Securities
This short form base shelf prospectus (“Prospectus”) relates to the offering for sale by Satellos Bioscience Inc. (“Satellos” or the “Company”) from time to time, during the 25-month period that this Prospectus, including any amendments thereto, remains valid, of up to US$150,000,000 in the aggregate of: (i) common shares in the capital of the Company (“Common Shares”); (ii) preferred shares in the capital of the Company (“Preferred Shares”); (iii) warrants (“Warrants”) to purchase other Securities (as defined below) of the Company; (iv) units (“Units”) composed of one or more of the other Securities; (v) subscription receipts (“Subscription Receipts”); and (vi) debt securities of the Company (the “Debt Securities” and together with the Common Shares, Preferred Shares, Warrants, Units and Subscription Receipts, collectively referred to herein as the “Securities”). The Securities may be offered separately or together, in amounts, at prices and on terms determined based on market conditions at the time of the sale and as set forth in an accompanying prospectus supplement (a “Prospectus Supplement”). This Prospectus is not intended to qualify “novel” securities as such term is defined in National Instrument 44-102 — Shelf Distributions.
All shelf information permitted under applicable laws to be omitted from this Prospectus will be contained in one or more Prospectus Supplements that will be delivered to purchasers together with this Prospectus. Each Prospectus Supplement containing the specific terms of any Securities will be incorporated by reference into this Prospectus for the purposes of securities legislation as of the date of the Prospectus Supplement and only for the purposes of the distribution of the Securities to which the Prospectus Supplement pertains.
The specific terms of any Securities offered will be described in a Prospectus Supplement, including, where applicable: (i) in the case of Common Shares, the number of Common Shares offered, the offering price (in the event the offering is a fixed price distribution), the manner of determining the offering price(s) (in the event the offering is a non-fixed price distribution) and any other specific terms; (ii) in the case of Preferred Shares, the designation of the particular class and/or series of Preferred Shares, the number of Preferred Shares offered, liquidation rights, the issue price, the dividend rate or method of determining the dividend rate, the dividend payment dates, any terms for redemption at the option of the Company or the holder, any conversion or exchange rights and any other specific terms; (iii) in the case of Warrants, the number of Warrants being offered, the offering price (in the event the offering is a fixed price distribution), the manner of determining the offering price(s) (in the event the offering is a non-fixed price distribution, the designation, number and terms of the other Securities purchasable upon exercise of the Warrants, and any procedures that will result in the adjustment of those numbers, the exercise price, the dates and periods of exercise and any other specific terms; (iv) in the case of Units, the number of Units offered, the offering price (in the event the offering is a fixed price distribution), the manner of determining the offering price(s) (in the event the offering is a non-fixed price distribution), the designation, number and terms of the other Securities comprising the Units, and any other specific terms; (v) in the case of Subscription Receipts, the number of Subscription Receipts being offered, the offering price (in the event the offering is a fixed price distribution), the manner of determining the offering price(s) (in the event the offering is a non-fixed price distribution), the terms, conditions and procedures for the conversion of the Subscription Receipts into other Securities, the designation, number and terms of such other Securities, and any other specific terms; and (vi) in the case of Debt Securities, the designation of the Debt Securities, the aggregate principal amount of the Debt Securities being offered, the currency or currency unit in which the Debt Securities may be purchased, authorized denominations, whether payment on the Debt Securities will be senior or subordinated to the Company’s other liabilities and obligations, the nature and priority of any security for the Debt Securities, any limit on the aggregate principal amount of the Debt Securities of the series being offered, the issue and delivery date, the maturity date, the offering price (at par, discount or at a premium), the interest rate or method of determining the interest rate, the interest payment date(s), any conversion or exchange rights that are attached to the Debt Securities, any redemption provisions, any repayment provisions, any arrangements with the trustee for the Debt Securities and any other specific terms. A Prospectus Supplement relating to a particular offering of Securities may include terms pertaining to the Securities being offered thereunder that are not within the terms and parameters described in this Prospectus.
The Company may offer and sell the Securities to or through underwriters or dealers purchasing as principals and may also sell directly to one or more purchasers or through agents or pursuant to applicable statutory exemptions. See “Plan of Distribution”. The Prospectus Supplement relating to a particular offering of Securities will identify each underwriter, dealer or agent, as the case may be, engaged by the Company in connection with the offering and sale of the Securities, and will set forth the terms of the offering of such Securities, including, to the extent applicable, any fees, discounts or any other compensation payable to underwriters, dealers or agents in connection with the offering, the method of distribution of the Securities, the initial issue price (in the event that the offering is a fixed price distribution), the proceeds that the Company will receive and any other material terms of the plan of distribution.
The Securities may be sold from time to time in one or more transactions at a fixed price or prices or at non-fixed prices. If offered on a non-fixed price basis, the Securities may be offered at market prices prevailing at the time of sale, at prices determined by reference to the prevailing price of a specified security in a specified market or at prices to be negotiated with purchasers, in which case the compensation payable to an underwriter, dealer or agent in connection with any such sale will be decreased by the amount, if any, by which the aggregate price paid for the Securities by the purchasers is less than the gross proceeds paid by the underwriter, dealer or agent to the Company. The price at which the Securities will be offered and sold may vary from purchaser to purchaser and during the period of distribution.
In connection with any offering of Securities, the underwriters, dealers, or agents, as the case may be, may over-allot or effect transactions which stabilize, maintain or otherwise affect the market price of the Securities at a level other than those which otherwise might prevail on the open market. Such transactions may be commenced, interrupted, or discontinued at any time. See “Plan of Distribution”.
Unless otherwise specified in the applicable Prospectus Supplement, each series or issue of Securities (other than Common Shares) will be a new issue of Securities with no established trading market. Accordingly, there is currently no market through which the Securities (other than Common Shares) may be sold, and purchasers may not be able to resell such Securities purchased under this Prospectus. This may affect the pricing of such Securities in the secondary market, the transparency and availability of trading prices, the liquidity of such Securities and the extent of issuer regulation. See “Risk Factors”.
Prospective investors should be aware that the purchase of Securities may have tax consequences that may not be fully described in this Prospectus or in any Prospectus Supplement, and should carefully review the tax discussion, if any, in the applicable Prospectus Supplement and in any event consult with a tax adviser.
An investment in the Securities is subject to a number of risks. See “Risk Factors” for a more complete discussion of these risks.
No person is authorized by the Company to provide any information or to make any representation other than as contained in this Prospectus in connection with the issue and sale of the Securities offered hereunder.
No underwriter has been involved in the preparation of this Prospectus or performed any review of the contents hereof.
The Company is not making an offer of the Securities in any jurisdiction where such offer is not permitted.
Geoff MacKay, Stephanie Brown, Selwyn Ho, Franklin M. Berger, Iris Loew-Friedrich and Adam Mostafa, all being directors of the Company, reside outside of Canada (the “Non-Resident Directors”). The Non-Resident Directors have appointed the following agent for service of process:
|
Name of the Non-Resident Director
|
|
|
Name and Address of Agent
|
|
|
Geoff MacKay
|
|
|
Satellos Bioscience Inc.
|
|
|
Stephanie Brown
|
|
|
Royal Bank Plaza, South Tower
|
|
|
Selwyn Ho
|
|
|
200 Bay St., Suite 2800
|
|
|
Adam Mostafa
|
|
|
Toronto, Ontario
|
|
|
Franklin M. Berger
|
|
|
M5J 2J3
|
|
|
Iris Loew-Friedrich
|
|
|
|
|
Purchasers are advised that it may not be possible for investors to enforce judgements obtained in Canada against any person or company that is incorporated, continued or otherwise organized under the laws of a foreign jurisdiction or resides outside of Canada, even if the party has appointed an agent for service of process. See “Risk Factors”.
The Company’s registered office and head office is located at Royal Bank Plaza, South Tower, 200 Bay St., Suite 2800, Toronto, Ontario, M5J 2J3 and its telephone number is (647) 660-1780.
TABLE OF CONTENTS
| |
|
|
|
|
|
1
|
|
|
| |
|
|
|
|
|
1
|
|
|
| |
|
|
|
|
|
6
|
|
|
| |
|
|
|
|
|
6
|
|
|
| |
|
|
|
|
|
8
|
|
|
| |
|
|
|
|
|
9
|
|
|
| |
|
|
|
|
|
9
|
|
|
| |
|
|
|
|
|
9
|
|
|
| |
|
|
|
|
|
9
|
|
|
| |
|
|
|
|
|
9
|
|
|
| |
|
|
|
|
|
10
|
|
|
| |
|
|
|
|
|
11
|
|
|
| |
|
|
|
|
|
11
|
|
|
| |
|
|
|
|
|
12
|
|
|
| |
|
|
|
|
|
13
|
|
|
| |
|
|
|
|
|
13
|
|
|
| |
|
|
|
|
|
14
|
|
|
| |
|
|
|
|
|
14
|
|
|
| |
|
|
|
|
|
14
|
|
|
| |
|
|
|
|
|
15
|
|
|
| |
|
|
|
|
|
16
|
|
|
| |
|
|
|
|
|
18
|
|
|
| |
|
|
|
|
|
18
|
|
|
| |
|
|
|
|
|
18
|
|
|
| |
|
|
|
|
|
18
|
|
|
| |
|
|
|
|
|
18
|
|
|
| |
|
|
|
|
|
19
|
|
|
| |
CERTIFICATE OF THE COMPANY
|
|
|
|
|
C-0 |
|
|
| |
CERTIFICATE OF THE PROMOTER
|
|
|
|
|
C-0 |
|
|
IMPORTANT NOTICE ABOUT THE INFORMATION IN THIS PROSPECTUS
Prospective investors should rely only on the information contained in or incorporated by reference in this Prospectus or any applicable Prospectus Supplement. References to this “Prospectus” include documents incorporated by reference herein. The Company has not authorized anyone to provide any information that is different. The information in or incorporated by reference into this Prospectus is current only as of the date of this Prospectus or the date on the front of such other documents. It should not be assumed that the information contained in this Prospectus is accurate as of any other date. The Company is not making an offer of these Securities in any jurisdiction where the offer is not permitted by law.
Before purchasing any Securities, prospective investors should carefully read both this Prospectus and any accompanying Prospectus Supplement prepared by the Company, together with the additional information described under the headings “Documents Incorporated by Reference”.
When used in this Prospectus and in any Prospectus Supplement, the terms “Satellos” and “the Company” refer to Satellos Bioscience Inc. and its subsidiaries, unless otherwise specified or the context otherwise requires. The term “management” in this Prospectus means those persons acting, from time to time, in the capacities of executive officers of the Company. Any statements in this Prospectus made by or on behalf of management are made in such persons’ capacities as officers of the Company and not in their personal capacities.
The Company may, from time to time, sell any combination of the Securities described in this Prospectus in one or more offerings up to an aggregate amount of US$150,000,000. This Prospectus provides a general description of the Securities that the Company may offer. All information permitted under applicable laws to be omitted from this Prospectus will be contained in one or more Prospectus Supplements that will be delivered to purchasers together with this Prospectus. Each Prospectus Supplement will be incorporated by reference into this Prospectus for the purposes of securities legislation as of the date of the Prospectus Supplement and only for the purposes of the distribution of those Securities to which the Prospectus Supplement pertains.
In this Prospectus and any Prospectus Supplement, all references to “$” or “US$” are in United States dollars. All references to “C$” or “Canadian dollars” are used to indicate Canadian dollar values.
SPECIAL NOTE REGARDING FORWARD-LOOKING AND OTHER STATEMENTS
This Prospectus contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company and its subsidiaries, or the industry in which they operate to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. All statements contained herein that are not clearly historical in nature are forward-looking, and the words such as “plan”, “expect”, “is expected”, “budget”, “scheduled”, “estimate”, “predict”, “continue”, “project”, “forecast”, “target”, “goal”, “contemplate”, “intend”, “anticipate”, “seek”, “future”, “likely”, “potential”, “possible” or “believe” or similar expressions (including negative and grammatical variations) of such words and phrases, or statements that certain actions, events or results “may”, “could”, “can”, “would”, “should”, “might”, “shall” or “will” be taken, occur or be achieved and similar expressions are generally intended to identify forward-looking statements. Forward-looking statements in this Prospectus include, but are not limited to, statements with respect to:
•
our belief that the Company will be successful in raising additional capital to continue as a going concern;
•
the expected research and development timelines, therapeutic benefits, effectiveness and safety of our product candidates;
•
our belief that the Company’s products and research and development efforts are targeting diseases and conditions with significant unmet medical treatment needs;
•
our belief that the Company has made, and will continue to make progress towards the achievement of certain milestones or objectives;
•
our expectation with respect to meeting milestones and the minimum amount of funds the Company expects to need to raise in order to achieve such milestones and garner additional funding;
•
the initiation, timing, cost, progress, outcomes, resource needs and success of our research and development activities, plans and programs;
•
our expectations regarding our ability to design, test and patent novel drug products suitable for advancement into clinical trials and the anticipated timelines surrounding such clinical trials;
•
our belief that we will not receive substantive comments on our Investigational New Drug (“IND”) or equivalent applications;
•
our expectations that the Notch pathway and AAK1 drug target (both as further described herein) represent drug development opportunities similar or superior to modulation of the EGFR signaling pathway;
•
our intentions of developing inhibitors to AAK1 (including but not limited to SAT-3247 and SAT-3153) and in showing that such potential inhibitors have desirable effects in relevant models of Duchenne muscular dystrophy (“Duchenne”) and in other indications, such as other degenerative muscle diseases, muscle injury or trauma, or muscle regeneration generally;
•
our expectations that we will identify predictive biomarkers which will translate into or be useful in conducting human clinical trials;
•
our belief that the results of Satellos’ research and development activities, preclinical studies, safety studies or clinical trials have the potential to be commercially competitive with research and development activities, preclinical studies, safety studies or clinical trials conducted by other parties;
•
discoveries we have made in muscle stem cell regulation having the potential to represent insights into a potential root cause of degenerative muscle disorders which has previously not been recognized and which may be therapeutically relevant in the treatment of degenerative muscle disorders;
•
our belief that the Company’s technology can be commercialized, and that such commercialization could be done as effectively or more effectively than other technologies to treat degenerative muscle disorders and conditions or other medical disorders or conditions, or at all;
•
our ability to discover, optimize, select and advance into clinical development therapeutic drug development candidates in a timely, cost-efficient and effective manner, or at all;
•
our ability to translate our discoveries in muscle stem cell regulation into safe and therapeutically effective drug products and the broad applicability of such products;
•
our ability to enter into research and/or commercial development collaborations or partnerships to successfully and profitably advance our drug development candidates;
•
our ability and that of our partners (if any) to advance identified drug development candidates into, and successfully complete, clinical trials;
•
our intention to identify and nominate one or more back-up drug candidates and the potential benefits of having such back-ups;
•
our plans to utilize and deploy MyoRegenXTM in our programs and our continued relationship with the Ottawa Hospital Research Institute (“OHRI”);
•
our ability to develop the Company’s novel discoveries into viable therapeutic treatments suitable for clinical development, including, but not limited to, our ability to determine appropriate dosing regimens;
•
the ability of our products to effectively and safely treat Duchenne and other degenerative muscle disorders and conditions or other medical disorders or conditions and the applicability of our products to other disorders and conditions;
•
our expectations regarding future enrollment into clinical trials and the timing of future enrollment into clinical trials for our product candidates;
•
our belief that our approach may reduce the risk, time and cost of developing therapeutics by avoiding some of the uncertainty associated with certain research and preclinical stages of drug development;
•
our ability to establish and maintain relationships with collaborators with acceptable preclinical and/or clinical research and development capability and regulatory and commercialization expertise to enable the development and future commercialization of our technology or products and the benefits to be derived from such collaborative efforts;
•
our ability to enter into agreements or partnerships with pharmaceutical or biotechnology companies that have research and clinical development and/or sales and marketing capabilities and the expected benefits that could be derived therefrom;
•
our ability to generate and protect our intellectual property;
•
our ability to operate our business without infringing upon the intellectual property rights of others;
•
our ability to engage third party services with specialized domain expertise for the drafting and submitting of regulatory applications to conduct clinical trials in humans;
•
our ability to establish suitable Chemistry, manufacturing and controls and Good manufacturing procedures protocols;
•
the manufacturing capacity of third-party manufacturers for our product candidates;
•
our expectations regarding federal, provincial and foreign regulatory requirements;
•
the timing of, and the costs of obtaining and maintaining, regulatory approvals in the United States, Australia, Europe, Serbia and other jurisdictions;
•
the rate and degree of market acceptance and clinical utility of our future products, if any;
•
existing and future corporate alliances and licensing transactions with third parties, and the receipt and timing of any payments to be made by us or to us pursuant to such arrangements;
•
the implementation and execution of our commercial and operational strategy;
•
our ability to engage and retain the consultants or employees required to grow our business;
•
the potential revenue that may be generated from our products, pricing and reimbursement of the patient cost of our drug products by insurers or national health systems, as the case may be, in those jurisdictions where the Company intends to sell its drug products and our ability to achieve profitability;
•
developments relating to our competitors and our industry, including the success of competing therapies that are or become available;
•
the potential growth of the market and demand for our products as well as the estimated pricing and subsequent revenue generation of any potential therapeutics we discover;
•
our future financial performance, including projected expenditures, future revenue, capital requirements and our needs for additional financing; and
•
general business and economic conditions and the evolving regulatory landscape.
Such forward-looking statements reflect our current views with respect to future events, are subject to risks and uncertainties and are necessarily based upon a number of estimates and assumptions that, while considered reasonable by Satellos as of the date of such statements, are inherently subject to significant medical, scientific, business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause our actual results, performance, achievements, prospects or opportunities to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. In making the forward-looking statements included in this Prospectus, the Company has made various material assumptions, including, but not limited to:
•
obtaining positive results from our research and development activities, including clinical trials;
•
our ability to obtain regulatory approvals;
•
assumptions regarding general business, market, economic and regulatory conditions;
•
assumptions regarding the cost and timing of each study;
•
the Company’s ability to successfully advance its preclinical and clinical development programs and execute its plans substantially as currently envisioned;
•
the Company’s ability to identify and advance suitable drug candidates;
•
assumptions related to the pricing and reimbursement of its drug products in jurisdictions in which the Company intends to sell its drug products;
•
the Company’s current positive relationships with third parties will be maintained and the potential to develop new partnerships;
•
our ability to continue to use existing licenses for the development of our product(s);
•
the availability (and sources) of financing on reasonable terms;
•
future expenditures to be incurred by the Company, including research and development and operating costs;
•
the Company’s ability to attract and retain skilled consultants and employees;
•
assumptions regarding market competition, market capture and pricing;
•
the products and technology offered by the Company’s competitors; and
•
the Company’s ability to protect patents and proprietary rights.
In evaluating forward-looking statements, current and prospective shareholders should specifically consider various factors, including the risks outlined herein under the heading “Risk Factors”. Certain risks and uncertainties that could cause such actual events or results expressed or implied by such forward-looking statements and information to differ materially from any future events or results expressed or implied by such statements and information include, but are not limited to:
•
risks related to the early stage of our products;
•
uncertainties related to preclinical product development activities and clinical trial outcomes;
•
uncertainties related to current economic conditions;
•
risks related to rapid technological change;
•
uncertainties related to forecasts and timing of clinical trials and regulatory approval;
•
competition in the market for therapeutic products, including those to treat Duchenne and related diseases;
•
risks related to potential product liability claims;
•
availability of financing and access to capital and the risks associated with the Company’s ability to continue as a going concern;
•
market acceptance and commercialization of products;
•
the availability, costs and supply of materials;
•
risks related to the effective management of our growth;
•
risks related to the reliance on partnerships and licensing agreements;
•
risks related to our reliance on key personnel;
•
risks related to the regulatory approval process for the manufacture and sale of therapeutic products;
•
risks related to the reimbursement process in various jurisdictions where the Company plans to sell its drug products; and
•
our ability to secure and protect our intellectual property.
Although the Company has attempted to identify important factors that could cause actual actions, events, or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Although the forward-looking statements contained in this Prospectus are based upon what the Company’s management believes to be reasonable assumptions, the Company cannot assure readers that actual results will be consistent with these forward-looking statements.
There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The reader is cautioned not to place undue reliance on forward-looking statements.
The Company disclaims any intention or obligation to revise forward-looking statements whether as a result of new information, future developments, or otherwise, except as required by law.
All forward-looking statements are expressly qualified in their entirety by this cautionary statement.
MARKET AND INDUSTRY DATA
Certain independent third party and industry data contained (or incorporated by reference) in this Prospectus is based upon information from government or other independent industry or scientific publications and reports or based on estimates derived from such publications and reports. Government and industry publications and reports generally indicate that they have obtained their information from sources believed to be reliable, but the Company nor its representatives, have conducted their own independent verification of such information. While the Company believes this information to be reliable, third-party information is subject to variations and cannot be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process, and other limitations and uncertainties inherent in any statistical or scientific survey. In addition, this third-party information has been prepared as of a specific date and therefore does not contemplate changes in facts and circumstances following such date. Neither the Company nor any of its representatives has independently verified any of the research, findings or data from independent third-party sources referred to in this Prospectus or ascertained the underlying assumptions relied upon by such sources. Unless specifically stated, none of the third-party information cited in this Prospectus is incorporated by reference herein. For the avoidance of doubt, nothing stated in this paragraph operates to relieve the Company from liability for any misrepresentation contained in this Prospectus under applicable Canadian securities laws.
DOCUMENTS INCORPORATED BY REFERENCE
Information has been incorporated by reference in this Prospectus from documents filed with or delivered to securities commissions or similar authorities in Canada. Copies of the documents incorporated herein by reference or a copy of the permanent information record may be obtained on request without charge from the Chief Financial Officer of the Company at Royal Bank Plaza, South Tower, 200 Bay St., Suite 2800, Toronto, Ontario, M5J 2J3, Telephone: (647) 660-1780 or by accessing the disclosure documents available through the internet on SEDAR+, which can be accessed at www.sedarplus.ca.
As at the date hereof, the following documents of the Company, filed with or delivered to securities commissions or similar authorities in the provinces of British Columbia, Alberta and Ontario, are specifically incorporated by reference into and form an integral part of this Prospectus, provided that such documents are not incorporated by reference to the extent that their contents are modified or superseded by a statement contained in this Prospectus or in any other subsequently filed document that is also incorporated by reference in this Prospectus, as further described below:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
Any document of the type referred to in the preceding paragraph (excluding confidential material change reports), and all other documents of the type required by National Instrument 44-101 — Short Form Prospectus Distributions of the Canadian Securities Administrators to be incorporated by reference in this Prospectus, filed by the Company with a securities commission or similar regulatory authority in Canada after the date of this Prospectus and prior to the termination of any offering of Securities hereunder shall be deemed to be incorporated by reference into this Prospectus.
Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded, for purposes of this Prospectus, to the extent that a statement contained herein or in any other subsequently filed document that also is or is deemed to be incorporated by reference herein modifies or supersedes that statement. Any such modifying or superseding statement need not state that it has modified or superseded a prior statement or include any other information set forth in the document that it modifies or supersedes. The making of a modifying or superseding statement shall not be deemed an admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made. Any statement so modified or superseded shall not be considered in its unmodified or superseded form to constitute part of this Prospectus; rather only such statement as so modified or superseded shall be considered to constitute part of this Prospectus.
Upon a new annual information form and the related annual consolidated financial statements being filed by the Company with, and where required, accepted by, the applicable securities regulatory authorities during the currency of this Prospectus, any previous annual information form, including all amendments thereto, the previous annual consolidated financial statements and all interim unaudited consolidated financial statements (including any management’s discussion and analysis related thereto), any information circulars filed prior to the commencement of the fiscal year in which the new annual information is filed and material change reports filed prior to the end of the fiscal year in which the new annual information is filed, shall no longer be deemed to be incorporated into this Prospectus for purposes of future offers and sales of Securities hereunder.
A Prospectus Supplement containing the specific terms of any Securities offered thereunder will be delivered to purchasers of such Securities together with this Prospectus to the extent required under applicable securities laws and will be deemed to be incorporated by reference into this Prospectus as of the date of such Prospectus Supplement solely for the purposes of the Securities offered hereunder and thereunder.
In addition, certain marketing materials (as that term is defined in applicable Canadian securities legislation) may be used in connection with a distribution of Securities under this Prospectus and the applicable Prospectus Supplement(s). Any “template version” of “marketing materials” (as those terms are defined in applicable Canadian securities legislation) pertaining to a distribution of Securities and filed by the Company after the date of the Prospectus Supplement for the distribution and before termination of the distribution of such Securities, will be deemed to be incorporated by reference in that Prospectus Supplement for the purposes of the distribution of Securities to which the Prospectus Supplement pertains.
THE COMPANY
The following is a summary of information pertaining to the Company and does not contain all the information about the Company that may be important to prospective investors. Prospective investors should read the more detailed information including, but not limited to, the sections of the AIF, the financial statements, related notes, and management’s discussion and analysis that are incorporated by reference into and are considered to be a part of this Prospectus.
Satellos Bioscience Inc. was incorporated under the Canada Business Corporations Act (the “CBCA”) on July 27, 2012 (“Pre-Arrangement Satellos”). iCo Therapeutics Inc. (“iCo”) was incorporated under the Business Corporations Act (British Columbia) on April 20, 2006 and completed a reverse take-over transaction by way of statutory arrangement onto the TSX Venture Exchange.
On August 13, 2021, Pre-Arrangement Satellos and iCo completed a plan of arrangement (the “Arrangement”) under section 192 of the CBCA, pursuant to which, among other things, iCo acquired all of the issued and outstanding shares of Pre-Arrangement Satellos. In connection with the Arrangement, iCo (now, Satellos): (a) was continued under the CBCA; (b) amalgamated with Satellos to form the Company as it now exists, which continues to carry on the pre-Arrangement business of Pre-Arrangement Satellos and iCo; and (c) consolidated its outstanding Common Shares on a 20:1 basis.
As announced on February 14, 2024, the Company commenced trading on the Toronto Stock Exchange (the “TSX”) on February 15, 2024 under the symbol “MSCL”, and was delisted from the TSX Venture Exchange effective as of the close of the market on February 14, 2024.
The Company has two wholly owned subsidiaries, Satellos Bioscience Australia Pty Ltd. (an entity incorporated under the laws of Australia) and Satellos Bioscience US, Inc. (an entity incorporated under the laws of Delaware, USA).
The Company’s head office is located at Royal Bank Plaza, South Tower, 200 Bay St., Suite 2800, Toronto, Ontario, M5J 2J3, and the Company’s registered and records office is located at Royal Bank Plaza, South Tower, 200 Bay St., Suite 2800, Toronto, Ontario, M5J 2J3.
Satellos is a clinical-stage drug development company dedicated to developing life-improving medicines to treat degenerative muscle diseases. Satellos has invented SAT-3247 as a first-of-its-kind, orally administered small molecule drug designed to restore skeletal muscle regeneration initially in Duchenne muscular dystrophy (“DMD”). Satellos has generated evidence in preclinical models of DMD to support its hypothesis that correcting muscle stem cell polarity through treatment with SAT-3247 has the potential to restore skeletal muscle regeneration, thereby enhancing repair and increasing muscle strength. The Company’s lead drug candidate, SAT-3247, is currently in clinical development as a potential disease-modifying treatment for DMD. Additionally, Satellos continues to leverage its research and proprietary discovery platform MyoReGenX™, to identify additional degenerative muscle diseases where deficits in muscle regeneration may occur that are amenable to therapeutic intervention for future development.
Recent Developments
Except as set out below, there have been no material developments in the business of the Company since the date of the Interim Financial Statements, which have not been disclosed in this Prospectus or the documents incorporated by reference herein.
On July 16, 2025, the Company announced the appointment of Wildon Farwell, M.D., MPH, as chief medical officer of the Company.
On September 22, 2025, the Company announced the submission of an IND application to the U.S. Food and Drug Administration, along with parallel regulatory filings in the United Kingdom, Europe, Serbia and Australia, to initiate a Phase 2 clinical trial of SAT-3247 in ambulatory children with DMD.
On October 10, 2025, the Company announced new data further demonstrating tolerability and initial efficacy of SAT-3247 in adults (aged 20 – 27 years) with DMD at the 30th Annual Congress of the World Muscle Society in Vienna, Austria.
On October 21, 2025, the Company announced that the first patient had been dosed in the Company’s open-label, long-term follow-up study (LT-001) of SAT-3247 in adult males with DMD.
Concurrently with the filing of this Prospectus, the Company has withdrawn its base shelf prospectus dated April 7, 2024.
CONSOLIDATED CAPITALIZATION
Since June 30, 2025, the date of the Interim Financial Statements, except for the exercise of 1,737,500 Common Share purchase warrants, the issuance of 7,050,731 Common Shares upon the net exercise of 7,050,840 pre-funded warrants and the expiration of 1,726,500 Common Share purchase warrants, which expired on September 13, 2025, there have been no material changes, to the Company’s share and loan capitalization. The applicable Prospectus Supplement will describe any material change, and the effect of such material change, on the Company’s share and loan capitalization that will result from the issuance of Securities pursuant to such Prospectus Supplement.
EARNINGS COVERAGE RATIOS
The applicable Prospectus Supplement will provide, as required, the earnings coverage ratios with respect to the issuance of Securities pursuant to such Prospectus Supplement.
DESCRIPTION OF SECURITIES
The following is a brief summary of certain general terms and provisions of the Securities as at the date of this Prospectus. The summary does not purport to be complete and is indicative only. The specific terms of any Securities to be offered under this Prospectus, and the extent to which the general terms described in this Prospectus apply to such Securities, will be set forth in the applicable Prospectus Supplement. Moreover, a Prospectus Supplement relating to a particular offering of Securities may include terms pertaining to the Securities being offered thereunder that are not within the terms and parameters described in this Prospectus. This Prospectus is not intended to qualify “novel” securities as such term is defined in National Instrument 44-102 — Shelf Distributions.
Description of Common Shares
The following is a brief summary of the material attributes of the Common Shares. This summary does not purport to be complete. For full particulars and additional details on the Common Shares, reference should be made to the Company’s articles of amalgamation, a copy of which is available on SEDAR+ at www.sedarplus.ca.
The authorized capital of the Company consists of an unlimited number of Common Shares. The holders of Common Shares are entitled to dividends, if, as and when declared by the Board of Directors, to one vote per Common Share at meetings of the shareholders of the Company and, upon liquidation, to share equally in such assets of the Company as are distributable to the holders of Common Shares. There are no pre-emptive or conversion rights on the Common Shares. All of the issued and outstanding Common Shares are fully paid and are non-assessable.
Description of Preferred Shares
The following is a brief summary of the material attributes of the Preferred Shares. The particular terms and provisions of a class or series of Preferred Shares offered by a Prospectus Supplement, and the extent to which the general terms and provisions described below may apply thereto, will be described in such Prospectus Supplement.
The Company is not currently authorized to issue Preferred Shares. Each class or series of Preferred Shares shall consist of such number of Preferred Shares and shall have such rights, privileges, restrictions and conditions as may be approved by the Company’s shareholders, or if the Company’s shareholders authorize the Board of Directors to do so with respect to a class of Preferred Shares, as determined by the Company’s Board of Directors. Such rights, privileges, restrictions and conditions may include rights to receive dividends (which may be cumulative or non-cumulative and variable or fixed) or the means of
determining such dividends, the dates of payment thereof, any terms or conditions of redemption or purchase, any conversion or exchange rights, any retraction rights, any rights on the Company’s liquidation, dissolution or winding-up and any sinking fund or other provisions attached to the Preferred Shares of a class or series.
Holders of Preferred Shares, except as otherwise provided in the terms specific to a class or series of Preferred Shares or as required by law, are not entitled to vote at meetings of holders of the Company’s shares, and are not entitled to vote separately as a class upon a proposal to amend the Company’s articles in the case of certain amendments related to the Common Shares. With respect to the payment of dividends and distribution of assets in the event of liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the Preferred Shares are entitled to a preference over the Common Shares and any other shares ranking junior to the Preferred Shares from time to time with respect to the payment of paid-up capital remaining after the payment of all outstanding debts on a pro-rata basis for the Preferred Shares within each class and the payment of any or all declared but unpaid cumulative dividends or any or all declared but unpaid dividends on the Preferred Shares, and may also be given such other preferences over the Common Shares and any other shares ranking junior to the Preferred Shares as may be determined at the time of creation of such class or series of Preferred Shares.
Description of Warrants
The following is a brief summary of certain general terms and provisions of the Warrants that may be offered pursuant to this Prospectus. This summary does not purport to be complete. The particular terms and provisions of the Warrants as may be offered pursuant to this Prospectus will be set forth in the applicable Prospectus Supplement pertaining to such offering of Warrants, and the extent to which the general terms and provisions described below may apply to such Warrants will be described in the applicable Prospectus Supplement.
Warrants may be offered separately or together with other Securities, as the case may be. Each series of Warrants may be issued under a separate warrant indenture or warrant agency agreement to be entered into between the Company and one or more banks or trust companies acting as Warrant agent or may be issued as stand-alone contracts. The applicable Prospectus Supplement will include details of the Warrant agreements, if any, governing the Warrants being offered. The Warrant agent, if any, will be expected to act solely as the agent of the Company and will not assume a relationship of agency with any holders of Warrant certificates or beneficial owners of Warrants. The following sets forth certain general terms and provisions of the Warrants that may be offered under this Prospectus. The specific terms of the Warrants, and the extent to which the general terms described in this section apply to those Warrants, will be set forth in the applicable Prospectus Supplement.
A copy of any warrant indenture or any warrant agency agreement relating to an offering of Warrants will be filed by the Company with the relevant securities regulatory authorities in Canada after it has been entered into by the Company.
Each applicable Prospectus Supplement will set forth the terms and other information with respect to the Warrants being offered thereby, which may include, without limitation, the following (where applicable):
•
the designation of the Warrants;
•
the aggregate number of Warrants offered and the offering price;
•
the designation, number and terms of the other Securities purchasable upon exercise of the Warrants, and procedures that will result in the adjustment of those numbers;
•
the exercise price of the Warrants;
•
the dates or periods during which the Warrants are exercisable;
•
the designation and terms of any securities with which the Warrants are issued;
•
if the Warrants are issued as a unit with another Security, the date on and after which the Warrants and the other Security will be separately transferable;
•
any minimum or maximum amount of Warrants that may be exercised at any one time;
•
whether such Warrants will be listed on any securities exchange;
•
any terms, procedures and limitations relating to the transferability, exchange, or exercise of the Warrants;
•
certain material Canadian tax consequences of owning the Warrants; and
•
any other material terms and conditions of the Warrants.
Description of Units
The following is a brief summary of certain general terms and provisions of the Units that may be offered pursuant to this Prospectus. This summary does not purport to be complete. The particular terms and provisions of the Units as may be offered pursuant to this Prospectus will be set forth in the applicable Prospectus Supplement pertaining to such offering of Units, and the extent to which the general terms and provisions described below may apply to such Units will be described in the applicable Prospectus Supplement.
The Company may issue Units comprised of one or more of the other Securities described herein in any combination.
Each Unit may be issued so that the holder of the Unit is also the holder of each Security included in the Unit. Thus, the holder of a Unit may have the rights and obligations of a holder of each included Security. Any Unit agreement under which a Unit may be issued may provide that the Securities included in the Unit may not be held or transferred separately at any time or at any time before a specified date.
Each applicable Prospectus Supplement will set forth the terms and other information with respect to the Units being offered thereby, which may include, without limitation, the following (where applicable):
•
the designation, number, and terms of the Units and of the Securities comprising the Units, including whether and under what circumstances those Securities may be held or transferred separately;
•
the price at which the Units will be offered;
•
any provisions for the issuance, payment, settlement, transfer, or exchange of the Units or of the Securities comprising the Units;
•
certain material Canadian tax consequences of owning the Securities comprising the Units; and
•
any other material terms and conditions of the Units.
The preceding description and any description of Units in an applicable Prospectus Supplement does not purport to be complete and is subject to and is qualified in its entirety by reference to any Unit agreement and, if applicable, collateral arrangements and depositary arrangements relating to such Units.
Description of Subscription Receipts
The following is a brief summary of certain general terms and provisions of the Subscription Receipts that may be offered pursuant to this Prospectus. This summary does not purport to be complete. The particular terms and provisions of the Subscription Receipts as may be offered pursuant to this Prospectus will be set forth in the applicable Prospectus Supplement pertaining to such offering of Subscription Receipts, and the extent to which the general terms and provisions described below may apply to such Subscription Receipts will be described in the applicable Prospectus Supplement.
Subscription Receipts may be offered separately or together with other Securities, as the case may be. The Subscription Receipts may be issued under a subscription receipt agreement.
The applicable Prospectus Supplement will include details of any subscription receipt agreement covering the Subscription Receipts being offered. A copy of any subscription receipt agreement relating to an offering of Subscription Receipts will be filed by the Company with the relevant securities regulatory authorities in Canada after the Company has entered into it. The specific terms of the Subscription
Receipts, and the extent to which the general terms described in this section apply to those Subscription Receipts, will be set forth in the applicable Prospectus Supplement. This description may include, without limitation, the following (where applicable):
•
the number of Subscription Receipts;
•
the price at which the Subscription Receipts will be offered;
•
the terms, conditions and procedures for the conversion of the Subscription Receipts into other Securities;
•
the designation, number and terms of the other Securities that may be exchanged upon conversion of each Subscription Receipt;
•
the designation, number and terms of any other Securities with which the Subscription Receipts will be offered, if any, and the number of Subscription Receipts that will be offered with each Security;
•
terms applicable to the gross or net proceeds from the sale of the Subscription Receipts plus any interest earned thereon;
•
certain material Canadian tax consequences of owning the Subscription Receipts; and
•
any other material terms and conditions of the Subscription Receipts.
Description of Debt Securities
The following is a brief summary of certain general terms and provisions of the Debt Securities that may be offered pursuant to this Prospectus. This summary does not purport to be complete. The particular terms and provisions of the Debt Securities as may be offered pursuant to this Prospectus will be set forth in the applicable Prospectus Supplement pertaining to such offering of Debt Securities, and the extent to which the general terms and provisions described below may apply to such Debt Securities will be described in the applicable Prospectus Supplement.
The Debt Securities may be offered separately or together with other Securities, as the case may be. The Debt Securities will be issued in one or more series under an indenture (the “Indenture”) to be entered into between the Company and one or more trustees that will be named in a Prospectus Supplement for a series of Debt Securities. The applicable Prospectus Supplement will include details of the Indenture governing the Debt Securities being offered. A copy of the Indenture relating to an offering of Debt Securities will be filed by the Company with the relevant securities regulatory authorities in Canada after the Company has entered into it. The description of certain provisions of the Indenture in this section do not purport to be complete and are subject to, and are qualified in their entirety by reference to, the provisions of the Indenture. The particular terms relating to Debt Securities offered by a Prospectus Supplement will be described in the related Prospectus Supplement. This description may include, but may not be limited to, any of the following, if applicable:
•
the specific designation of the Debt Securities;
•
the price or prices at which the Debt Securities will be issued;
•
any limit on the aggregate principal amount of the Debt Securities;
•
the date or dates, if any, on which the Debt Securities will mature and the portion (if less than all of the principal amount) of the Debt Securities to be payable upon declaration of acceleration of maturity;
•
the rate or rates (whether fixed or variable) at which the Debt Securities will bear interest, if any, the date, or dates from which any such interest will accrue and on which any such interest will be payable and the record dates for any interest payable on the Debt Securities that are in registered form;
•
the terms and conditions under which the Company may be obligated to redeem, repay, or purchase the Debt Securities pursuant to any sinking fund or analogous provisions or otherwise;
•
the terms and conditions upon which the Company may redeem the Debt Securities, in whole or in part, at the Company’s option;
•
the covenants and events of default applicable to the Debt Securities;
•
the terms and conditions for any conversion or exchange of the Debt Securities for any other securities of the Company;
•
whether the Debt Securities will be issuable in registered form or bearer form or both, and, if issuable in bearer form, the restrictions as to the offer, sale and delivery of the Debt Securities which are in bearer form and as to exchanges between registered form and bearer form;
•
whether the Debt Securities will be issuable in the form of registered global securities (“Global Securities”), and, if so, the identity of the depositary for such registered Global Securities;
•
the denominations in which registered Debt Securities will be issuable;
•
each office or agency where payments on the Debt Securities will be made and each office or agency where the Debt Securities may be presented for registration of transfer or exchange;
•
the currency in which the Debt Securities are denominated or the currency in which the Company will make payments on the Debt Securities;
•
any index, formula or other method used to determine the amount of payments of principal of (and premium, if any) or interest, if any, on the Debt Securities; and
•
any other terms of the Debt Securities which apply solely to the Debt Securities.
Each series of Debt Securities may be issued at various times with different maturity dates, may bear interest at different rates and may otherwise vary.
The terms on which a series of Debt Securities may be convertible into or exchangeable for Common Shares or other securities of the Company will be described in the applicable Prospectus Supplement. These terms may include provisions as to whether conversion or exchange is mandatory, at the option of the holder or at the option of the Company and may include provisions pursuant to which the number of Common Shares or other securities to be received by the holders of such series of Debt Securities would be subject to adjustment.
To the extent any Debt Securities are convertible into Common Shares or other securities of the Company, prior to such conversion the holders of such Debt Securities will not have any of the rights of holders of the securities into which the Debt Securities are convertible, including the right to receive payments of dividends or the right to vote such underlying securities.
This Prospectus does not qualify for issuance Debt Securities in respect of which the payment of principal, premium and/or interest may be determined, in whole or in part, by reference to one or more underlying interests, including, for example, an equity or debt security, a statistical measure of economic or financial performance including, but not limited to, any currency, consumer price or mortgage index, or the price or value of one or more commodities, indices or other items, or any other item or formula, or any combination or basket of the foregoing items. For greater certainty, this Prospectus may qualify for issuance Debt Securities in respect of which the payment of principal, premium and/or interest may be determined, in whole or in part, by reference to published rates of a central banking authority or one or more financial institutions, such as a prime rate, or to recognized market benchmark interest rates.
PRIOR SALES
Information in respect of prior sales of the Common Shares or other Securities distributed under this Prospectus and for securities that are convertible or exchangeable into Common Shares or such other Securities within the previous 12-month period will be provided, as required, in a Prospectus Supplement with respect to the issuance of the Common Shares or other Securities pursuant to such Prospectus Supplement.
TRADING PRICE AND VOLUME
Information regarding trading price and volume of the Securities will be provided as required for all of the Company’s issued and outstanding Securities that are listed on any securities exchange, as applicable, in each Prospectus Supplement.
DIVIDENDS
The Company has not previously paid any dividends on its Common Shares. While the Company is not restricted from paying dividends other than pursuant to certain solvency tests prescribed under the CBCA, the Company does not intend to pay dividends on any of its Common Shares in the foreseeable future.
USE OF PROCEEDS
Unless otherwise indicated in a Prospectus Supplement, the net proceeds that the Company receives from the sale of the Securities offered by this Prospectus are expected to be used for (i) ongoing research and development activities, (ii) working capital and general corporate purposes, which may include advancing the development of SAT-3247 through the various stages of clinical trials (Phase 2 to Phase 3) or clinical trials of SAT-3247 in other indications, and (iii) investment in other discovery stage or pre-clinical development programs (including evaluation of additional dystrophies). Specific information about the use of net proceeds will be set out in the applicable Prospectus Supplement.
While the Company intends to use the net proceeds that it receives from the sale of the Securities offered under this Prospectus as outlined above and in the applicable Prospectus Supplement, the timing and actual use of the net proceeds may vary depending on operating and capital needs, the progress and outcome of the Company’s non-clinical activities, clinical trials and research and development programs and business and operations circumstances. There may be circumstances where, on the basis of results obtained or for other sound business reasons, a re-allocation of funds may be necessary or prudent. Accordingly, management of the Company will have broad discretion in the application of the proceeds of an offering of Securities. The actual amount the Company spends in connection with each intended use of proceeds may vary significantly from the amounts specified in the applicable Prospectus Supplement and will depend on a number of factors, including those referred to under “Risk Factors” in the AIF and any other factors set forth in the applicable Prospectus Supplement.
The Company has not allocated any portion of the net proceeds for any particular use as of the date of this Prospectus, nor has it entered into any negotiations regarding any potential future transaction or signed any letter of intent or initiated due diligence on any such future transaction. The net proceeds may be invested temporarily until they are used for their stated purpose.
The Company has a history of negative operating cash flows and is reliant on the continued availability of financing to fund its operating activities. To the extent that the Company has negative operating cash flows in future periods, the Company may need to deploy a portion of its existing working capital to fund such negative cash flow at such time. As of August 31, 2025, the Company had cash and cash equivalents and short-term investments on hand of approximately $34.9 million and working capital of approximately $35.3 million. See “Risk Factors — Negative Operating Cash Flow”.
PLAN OF DISTRIBUTION
The Company may from time to time during the 25-month period that this Prospectus, including any amendments and supplements hereto, remains valid, offer for sale and issue up to an aggregate of US$150,000,000 in Securities hereunder.
The Company may offer and sell the Securities to or through underwriters or dealers purchasing as principals and may also sell directly to one or more purchasers or through agents or pursuant to applicable statutory exemptions. The Prospectus Supplement relating to a particular offering of Securities will identify each underwriter, dealer or agent, as the case may be, engaged by the Company in connection with the offering and sale of the Securities, and will set forth the terms of the offering of such Securities, including, to the extent applicable, any fees, discounts or any other compensation payable to underwriters, dealers or agents in connection with the offering, the method of distribution of the Securities, the initial issue price (in the event that the offering is a fixed price distribution), the proceeds that the Company will receive and any other material terms of the plan of distribution. Any initial offering price and discounts, concessions or commissions allowed or re-allowed or paid to dealers may be changed from time to time.
The Securities may be sold from time to time in one or more transactions at a fixed price or prices or at non-fixed prices. If offered on a non-fixed price basis, the Securities may be offered at market prices prevailing
at the time of sale, at prices determined by reference to the prevailing price of a specified security in a specified market or at prices to be negotiated with purchasers, in which case the compensation payable to an underwriter, dealer or agent in connection with any such sale will be decreased by the amount, if any, by which the aggregate price paid for the Securities by the purchasers is less than the gross proceeds paid by the underwriter, dealer or agent to the Company. The price at which the Securities will be offered and sold may vary from purchaser to purchaser and during the period of distribution.
In connection with the sale of the Securities, underwriters, dealers or agents may receive compensation from the Company or from other parties, including in the form of underwriters’, dealers’ or agents’ fees, commissions or concessions. Underwriters, dealers, and agents that participate in the distribution of the Securities may be deemed to be underwriters for the purposes of applicable Canadian securities legislation and any such compensation received by them from the Company and any profit on the resale of the Securities by them may be deemed to be underwriting commissions.
In connection with any offering of Securities, the underwriters, dealers or agents, as the case may be, may over-allot or effect transactions which stabilize, maintain or otherwise affect the market price of the Securities at a level other than those which otherwise might prevail on the open market. Such transactions may be commenced, interrupted, or discontinued at any time.
Underwriters, dealers or agents who participate in the distribution of the Securities may be entitled, under agreements to be entered into with the Company, to indemnification by the Company against certain liabilities, including liabilities under Canadian securities legislation, or to contribution with respect to payments, which such underwriters, dealers or agents may be required to make in respect thereof. Such underwriters, dealers and agents may be customers of, engage in transactions with, or perform services for, the Company in the ordinary course of business.
Unless otherwise specified in the applicable Prospectus Supplement, each series or issue of Securities (other than Common Shares) will be a new issue of Securities with no established trading market. Accordingly, there is currently no market through which the Securities (other than Common Shares) may be sold and purchasers may not be able to resell such Securities purchased under this Prospectus. This may affect the pricing of such Securities in the secondary market, the transparency and availability of trading prices, the liquidity of such Securities and the extent of issuer regulation. The Company may elect to list any of the Securities on one or more exchanges, but unless otherwise specified in the applicable Prospectus Supplement, the Company shall not be obligated to do so. In addition, underwriters will not be obligated to make a market in any securities. No assurance can be given regarding the activity of trading in, or liquidity of, any Securities. See “Risk Factors”.
This Prospectus constitutes a public offering of these Securities only in those jurisdictions where they may be lawfully offered for sale and therein only by persons permitted to sell such Securities. Unless otherwise specified in the applicable Prospectus Supplement, the Securities may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons, unless the Securities are registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration requirements is available. Each underwriter, dealer and agent who participates in the distribution will agree not to sell or offer to sell or to solicit any offer to buy any Securities within the United States or to, or for the account or benefit of, a U.S. person, except in compliance with the registration requirements of the U.S. Securities Act and applicable state securities laws, or pursuant to an exemption therefrom. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of these Securities in the United States.
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
The applicable Prospectus Supplement may describe certain Canadian federal income tax consequences to a purchaser who is a non-resident of Canada or to a purchaser who is a resident of Canada of acquiring, owning and disposing of any of the Securities offered thereunder.
RISK FACTORS
Before deciding to invest in any Securities, prospective purchasers of the Securities should consider carefully the risk factors and the other information contained and incorporated by reference in this Prospectus and the applicable Prospectus Supplement relating to a specific offering of Securities before purchasing the Securities. An investment in the Securities offered hereunder is speculative and involves a high degree of risk. Information regarding the risks affecting the Company and its business is provided in the documents incorporated by reference in this Prospectus, including in the AIF and MD&A under the heading “Risk Factors”. See “Documents Incorporated by Reference”.
No Assurance of Active or Liquid Market
No assurance can be given that an active or liquid trading market for the Common Shares will be sustained. If an active or liquid market for the Common Shares fails to be sustained, the prices at which such Securities trade may be adversely affected. Whether or not the Common Shares will trade at lower prices depends on many factors, including the liquidity of the Common Shares, prevailing interest rates, the markets for similar securities, general economic conditions and the Company’s financial condition, historic financial performance, and future prospects.
There is currently no market through which the Securities (other than the Common Shares) may be sold and purchasers may not be able to resell such securities. This may affect the pricing of such Securities in the secondary market, the transparency and availability of trading prices, the liquidity of such securities and the extent of issuer regulation.
Public Markets and Share Prices
The market price of the Common Shares and any other Securities offered hereunder that become listed and posted for trading on the TSX or any other stock exchange could be subject to significant fluctuations in response to variations in the Company’s operating results or other factors. In addition, fluctuations in the stock market may adversely affect the market price of the Common Shares and any other Securities offered hereunder that become listed and posted for trading on the TSX or any other stock exchange regardless of the operating performance of the Company. Securities markets have also experienced significant price and volume fluctuations from time to time. In some instances, these fluctuations have been unrelated or disproportionate to the operating performance of issuers. Market fluctuations may adversely impact the market price of the Common Shares and any other Securities offered hereunder that become listed and posted for trading on the TSX or any other stock exchange. There can be no assurance of the price at which the Common Shares and any other Securities offered hereunder that become listed and posted for trading on the TSX or any other stock exchange will trade.
Use of the Net Proceeds from an Offering
Management of the Company will have broad discretion with respect to the application of net proceeds received by the Company from the sale of Securities under this Prospectus or a future Prospectus Supplement and may spend such proceeds in ways that do not improve the Company’s results of operations or enhance the value of the Common Shares, or its other securities issued and outstanding from time to time. Any failure by management to apply these funds effectively could result in financial losses that could have a material adverse effect on the Company’s business or cause the price of the securities of the Company issued and outstanding from time to time to decline.
Negative Operating Cash Flow
To date, the Company has had negative cash flow from operating activities. As of August 31, 2025, the Company had cash and cash equivalents and short term investments on hand of approximately $34.9 million and working capital of approximately $35.3 million. Although the Company anticipates it will have positive cash flow from operating activities in future periods, it expects it will require additional working capital to fund operating activities. To the extent that the Company has negative cash flow in any future period, certain or all of the net proceeds from any future offering may be used to fund such negative cash flow from operating activities. Accordingly, the Company expects its primary use of the net proceeds of any
future offering of Securities and its other available cash will be to fund its operating activities. The Company expects to require additional financing to fund its operations to the point where it is generating positive cash flows. Continued negative cash flow may restrict the Company’s ability to pursue its business objectives. The Company has historically financed its working capital requirements primarily through equity financings. While the Company has been successful in raising financing in the past, there is no assurance that it will be able to obtain additional financing or that such financing will be available on reasonable terms.
Additional Issuances and Dilution
The Company may issue and sell additional securities of the Company to finance its operations. The Company cannot predict the size or type of future issuances of securities of the Company or the effect, if any, that future issuances and sales of securities will have on the market price of any securities of the Company issued and outstanding from time to time. Sales or issuances of substantial amounts of securities of the Company, or the perception that such sales could occur, may adversely affect prevailing market prices for securities of the Company issued and outstanding from time to time. With any additional sale or issuance of securities of the Company, holders will suffer dilution with respect to voting power and may experience dilution in the Company’s earnings per share. Moreover, this Prospectus may create a perceived risk of dilution resulting in downward pressure on the price of the Company’s issued and outstanding Common Shares, which could contribute to progressive declines in the prices of such securities.
No Dividends have been paid on the Common Shares
The Company has paid no cash dividends on any of its Common Shares to date and currently intends to retain its future earnings, if any, to fund the development growth of its businesses. In addition, the terms of any future debt or credit facility may preclude the Company from paying any dividends unless certain consents are obtained, and certain conditions are met.
Enforcement of Judgments Against Foreign Persons may not be Possible
Canadian investors should be aware that each of the non-resident members of the Board of Directors and management resides outside of Canada (“Non-Resident Persons”). While Non-Resident Directors have appointed an agent for service of process, it may be difficult for holders to effect service of process within Canada upon the Non-Resident Persons. All or a substantial portion of the assets of each of the Non-Resident Persons are likely to be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against the Non-Resident Persons in Canada or to enforce a judgment obtained in Canadian courts against the Non-Resident Persons outside of Canada.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Shares is Computershare Investor Services Inc., 510 Burrard Street, 3rd Floor, Vancouver, British Columbia, V6C 3B9.
AUDITORS
The Company’s auditors are PricewaterhouseCoopers LLP, Chartered Professional Accountants. PricewaterhouseCoopers LLP has advised the Company that they are independent with respect to the Company within the meaning of the relevant rules and related interpretations prescribed by the relevant professional bodies in Canada, including the Chartered Professional Accountants of Ontario CPA Code of Professional Conduct and any applicable legislation or regulations.
The Company’s former auditors are MNP LLP, Chartered Professional Accountants, of Toronto, Ontario. MNP LLP has advised the Company that it is independent with respect to the Company within the meaning of the Chartered Professional Accountants of Ontario Code of Professional Conduct.
EXPERTS
Unless otherwise specified in a Prospectus Supplement relating to any Securities offered, certain legal matters in connection with the offering of Securities will be passed upon on behalf of the Company by Mintz LLP. In addition, certain legal matters in connection with any offering of Securities will be passed upon for any underwriters, dealers, or agents by counsel to be designated at the time of the offering by such underwriters, dealers or agents, as the case may be.
As of the date hereof, the “designated professionals” (as such term is defined in Form 51-102F2 — Annual Information Form) of Mintz LLP beneficially own, directly or indirectly, less than 1% of the Company’s issued and outstanding securities.
AGENTS FOR SERVICE OF PROCESS IN CANADA
Geoff MacKay, Stephanie Brown, Selwyn Ho, Franklin M. Berger, Iris Loew-Friedrich and Adam Mostafa, all being directors of the Company, reside outside of Canada, and have appointed Satellos Bioscience Inc. (Address: Royal Bank Plaza, South Tower, 200 Bay St., Suite 2800, Toronto, ON M5J 2J3) as their agent for service of process. Purchasers are advised that it may not be possible for investors to enforce judgments obtained in Canada against any person that resides outside of Canada, even if the party has appointed an agent for service of process.
PROMOTER
Frank Gleeson may be considered to be a “promoter” of the Company within the meaning of applicable Canadian securities laws (each, a “Promoter”). Mr. Gleeson, currently owns, or exercises control or direction over, 3,976,389 Common Shares representing approximately 2.15% of the issued and outstanding Common Shares on a non-diluted basis. Mr. Gleeson receives compensation from the Company for his services as Chief Executive Officer of the Company and has been granted 6,195,691 options pursuant to the Company’s stock option plan. The statement as to the number of Common Shares beneficially owned, or over which a Promoter exercises control or direction, directly or indirectly, not being within the knowledge of the Company, has been obtained from the System for Electronic Disclosure by Insiders.
No Promoter of the Company is, as at the date of this Prospectus, or has been within 10 years prior to the date of this Prospectus, a director, chief executive officer, or chief financial officer of any person or company, that:
•
was subject to a cease trade order, an order similar to a cease trade order, or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days that was issued while the Promoter was acting in such capacity; or
•
was subject to a cease trade order, an order similar to a cease trade order, or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a
period of more than 30 consecutive days that was issued after the Promoter ceased to act in such capacity and which resulted from an event that occurred while the Promoter was acting in such capacity.
No Promoter of the Company is, as at the date of this Prospectus, or has been within the 10 years prior to the date of this Prospectus, a director or executive officer of any person or company that, while the Promoter was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets.
No Promoter of the Company has, within the 10 years prior to the date of this Prospectus, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the Promoter.
PURCHASERS’ STATUTORY RIGHTS AND CONTRACTUAL RIGHTS OF WITHDRAWAL AND RESCISSION
Securities legislation in certain of the provinces and territories of Canada provides purchasers with the right to withdraw from an agreement to purchase securities. This right may be exercised within two business days after receipt or deemed receipt of a prospectus and any amendment. In several of the provinces and territories, the securities legislation further provides a purchaser with remedies for rescission or, in some jurisdictions, revision of the price or damages if the prospectus and any amendment contains a misrepresentation or is not delivered to the purchaser, provided that the remedies for rescission, revision of the price or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for the particulars of these rights or consult with a legal adviser.
In addition, original purchasers of convertible, exchangeable or exercisable Securities (other than an offering of Warrants where such Warrants may reasonably be regarded as incidental to the offering as a whole) will have a contractual right of rescission against the Company in respect of the conversion, exchange or exercise of the convertible, exchangeable or exercisable Security. The contractual right of rescission will be further described in any applicable Prospectus Supplement, but will, in general, entitle such original purchasers to receive the amount paid for the applicable convertible, exchangeable or exercisable Security (and any additional amount paid upon conversion, exchange or exercise) upon surrender of the underlying securities acquired thereby, in the event that this Prospectus (as supplemented or amended) contains a misrepresentation, provided that: (i) the conversion, exchange or exercise takes place within 180 days of the date of the purchase of the convertible, exchangeable or exercisable Security under this Prospectus; and (ii) the right of rescission is exercised within 180 days of the date of the purchase of the convertible, exchangeable or exercisable security under this Prospectus.
In an offering of convertible, exchangeable or exercisable Preferred Shares, Subscription Receipts, Warrants or convertible, exchangeable or exercisable Debt Securities (or Units comprised partly thereof), investors are cautioned that the statutory right of action for damages for a misrepresentation contained in the prospectus is limited, in certain provincial and territorial securities legislation, to the price at which convertible, exchangeable or exercisable Preferred Shares, Subscription Receipts, Warrants or convertible, exchangeable or exercisable Debt Securities (or Units comprised partly thereof) are offered to the public under the prospectus offering. This means that, under the securities legislation of certain provinces and territories, if the purchaser pays additional amounts upon the conversion, exchange or exercise of the Security, those amounts may not be recoverable under the statutory right of action for damages that applies in those provinces or territories. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province for the particulars of this right of action for damages or consult with a legal advisor.
PART II
INFORMATION NOT REQUIRED TO BE DELIVERED TO OFFEREES OR PURCHASERS
Indemnification of Directors and Officers
Section 124 of the Canada Business Corporations Act as amended, provides, in part, as follows:
Indemnification
124 (1) A corporation may indemnify a director or officer of the corporation, a former director or officer of the corporation or another individual who acts or acted at the corporation’s request as a director or officer, or an individual acting in a similar capacity, of another entity, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the individual in respect of any civil, criminal, administrative, investigative or other proceeding in which the individual is involved because of that association with the corporation or other entity.
Advance of costs
(2) A corporation may advance moneys to a director, officer or other individual for the costs, charges and expenses of a proceeding referred to in subsection (1). The individual shall repay the moneys if the individual does not fulfil the conditions of subsection (3).
Limitation
(3) A corporation may not indemnify an individual under subsection (1) unless the individual
(a) acted honestly and in good faith with a view to the best interests of the corporation, or, as the case may be, to the best interests of the other entity for which the individual acted as director or officer or in a similar capacity at the corporation’s request; and
(b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the individual had reasonable grounds for believing that the individual’s conduct was lawful.
Indemnification in derivative actions
(4) A corporation may with the approval of a court, indemnify an individual referred to in subsection (1), or advance moneys under subsection (2), in respect of an action by or on behalf of the corporation or other entity to procure a judgment in its favor, to which the individual is made a party because of the individual’s association with the corporation or other entity as described in subsection (1) against all costs, charges and expenses reasonably incurred by the individual in connection with such action, if the individual fulfils the conditions set out in subsection (3).
Right to indemnity
(5) Despite subsection (1), an individual referred to in that subsection is entitled to indemnity from the corporation in respect of all costs, charges and expenses reasonably incurred by the individual in connection with the defence of any civil, criminal, administrative, investigative or other proceeding to which the individual is subject because of the individual’s association with the corporation or other entity as described in subsection (1), if the individual seeking indemnity
(a) was not judged by the court or other competent authority to have committed any fault or omitted to do anything that the individual ought to have done; and
(b) fulfils the conditions set out in subsection (3).
Insurance
(6) A corporation may purchase and maintain insurance for the benefit of an individual referred to in subsection (1) against any liability incurred by the individual
(a) in the individual’s capacity as a director or officer of the corporation; or
(b) in the individual’s capacity as a director or officer, or similar capacity, of another entity, if the individual acts or acted in that capacity at the corporation’s request.
Application to court
(7) A corporation, an individual or an entity referred to in subsection (1) may apply to a court for an order approving an indemnity under this section and the court may so order and make any further order that it sees fit.
Notice to Director
(8) An applicant under subsection (7) shall give the Director notice of the application and the Director is entitled to appear and be heard in person or by counsel.
Other notice
(9) On an application under subsection (7) the court may order notice to be given to any interested person and the person is entitled to appear and be heard in person or by counsel.
Nothing in the articles of incorporation, by-laws or resolutions of the Registrant limits the right of any person entitled to claim indemnity apart from the indemnity provided pursuant to Section 124 of the Canada Business Corporations Act.
The Registrant maintains a policy of directors’ and officers’ liability insurance which insures, subject to certain exclusions, directors and officers for losses as a result of claims against the directors and officers of the Registrant in their capacity as directors and officers and also reimburses the Registrant for payments made pursuant to the indemnity provisions under the by-laws of the Registrant and the Securities Act of 1933, as amended (the “Securities Act”).
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Registrant pursuant to the foregoing provisions, the Registrant has been informed that in the opinion of the U.S. Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
PART III
UNDERTAKING AND CONSENT TO SERVICE OF PROCESS
Item 1.
Undertaking
The Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the U.S. Securities and Exchange Commission (“SEC”) staff, and to furnish promptly, when requested to do so by the SEC staff, information relating to the securities registered pursuant to Form F-10 or to transactions in such securities.
Item 2.
Consent to Service of Process
Concurrently with the filing of this Registration Statement on Form F-10, the Registrant is filing with the SEC a written irrevocable consent and power of attorney on Form F-X.
Any change to the name or address of the Registrant’s agent for service shall be communicated promptly to the SEC by amendment to the Form F-X referencing the file number of this Registration Statement.
Exhibits
The following exhibits have been filed as part of the Registration Statement:
| |
Exhibit No.
|
|
|
Description
|
|
| |
3.1
|
|
|
Form of Underwriting Agreement (to be filed by Amendment)
|
|
| |
4.1
|
|
|
|
|
| |
4.2
|
|
|
|
|
| |
4.3
|
|
|
|
|
| |
4.4
|
|
|
|
|
| |
4.5
|
|
|
|
|
| |
4.6
|
|
|
|
|
| |
4.7
|
|
|
|
|
| |
4.8
|
|
|
|
|
| |
4.9
|
|
|
|
|
| |
4.10
|
|
|
|
|
| |
4.11
|
|
|
|
|
| |
4.12
|
|
|
|
|
| |
4.13
|
|
|
|
|
| |
5.1
|
|
|
|
|
| |
5.2
|
|
|
|
|
| |
5.3
|
|
|
|
|
| |
6.1
|
|
|
|
|
| |
107
|
|
|
|
|
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-10 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Toronto, Ontario, Canada, on February 5, 2026.
SATELLOS BIOSCIENCE INC.
By:
/s/ Elizabeth Williams, CPA, CA
Name:
Elizabeth Williams, CPA, CA
Title:
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature appears below hereby constitutes and appoints Frank Gleeson, MBA and Elizabeth Williams, CPA, CA, and each of them, with full power to act without the other, his or her true and lawful agent, proxy and attorney-in-fact, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments, including post effective amendments, and supplements to this Registration Statement on Form F-10, and registration statements filed pursuant to Rule 429 under the Securities Act, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents 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 or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
| |
Signature
|
|
|
Title
|
|
|
Date
|
|
| |
/s/ Frank Gleeson, MBA
Frank Gleeson, MBA
|
|
|
President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
February 5, 2026
|
|
| |
/s/ Elizabeth Williams, CPA, CA
Elizabeth Williams, CPA, CA
|
|
|
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
|
|
February 5, 2026
|
|
| |
/s/ Geoff Mackay
Geoff Mackay
|
|
|
Chairman of the Board of Directors
|
|
|
February 5, 2026
|
|
| |
/s/ Franklin Berger CFA
Franklin Berger, CFA
|
|
|
Director
|
|
|
February 5, 2026
|
|
| |
/s/ Brian Bloom
Brian Bloom
|
|
|
Director
|
|
|
February 5, 2026
|
|
| |
/s/ Stephanie Brown, MBA
Stephanie Brown, MBA
|
|
|
Director
|
|
|
February 5, 2026
|
|
| |
/s/ Iris Loew-Friedrich, M.D., Ph.D.
Iris Loew-Friedrich, M.D., Ph.D.
|
|
|
Director
|
|
|
February 5, 2026
|
|
| |
/s/ Selwyn Ho, MBBS
Selwyn Ho, MBBS
|
|
|
Director
|
|
|
February 5, 2026
|
|
| |
/s/ Adam Mostafa
Adam Mostafa
|
|
|
Director
|
|
|
February 5, 2026
|
|
| |
/s/ Mark Nawacki, MBA, CPA
Mark Nawacki, MBA, CPA
|
|
|
Director
|
|
|
February 5, 2026
|
|
AUTHORIZED REPRESENTATIVE
Pursuant to the requirements of Section 6(a) of the Securities Act, this Registration Statement on Form F-10 has been signed by the undersigned, solely in its capacity as the duly authorized representative of the Registrant in the United States, on February 5, 2026.
SATELLOS BIOSCIENCE US, INC.
(Authorized Representative in the United States)
By:
/s/ Frank Gleeson, MBA
Name:
Frank Gleeson, MBA
Title:
President and Chief Executive Officer
Exhibit 4.1
SATELLOS BIOSCIENCE INC.
ANNUAL INFORMATION FORM
For the Year Ended
December 31, 2024
March 26, 2025
TABLE OF CONTENTS
| INTRODUCTION |
3 |
| |
|
| CAUTION REGARDING FORWARD-LOOKING STATEMENTS AND RISK
FACTORS |
3 |
| |
|
| CORPORATE STRUCTURE |
6 |
| |
|
| GENERAL DEVELOPMENT OF THE BUSINESS |
7 |
| |
|
| DESCRIPTION OF THE BUSINESS |
11 |
| |
|
| RISK FACTORS |
24 |
| |
|
| DIVIDENDS AND DISTRIBUTIONS |
41 |
| |
|
| DESCRIPTION OF CAPITAL STRUCTURE |
41 |
| |
|
| MARKET FOR SECURITIES |
42 |
| |
|
| ESCROWED SECURITIES |
44 |
| |
|
| DIRECTORS AND OFFICERS |
44 |
| |
|
| AUDIT COMMITTEE INFORMATION |
50 |
| |
|
| PROMOTERS |
51 |
| |
|
| LEGAL PROCEEDINGS AND REGULATORY ACTIONS |
52 |
| |
|
| INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS |
52 |
| |
|
| TRANSFER AGENT AND REGISTRAR |
52 |
| |
|
| MATERIAL CONTRACTS |
52 |
| |
|
| INTERESTS OF EXPERTS |
53 |
| |
|
| ADDITIONAL INFORMATION |
53 |
| |
|
| SCHEDULE “A” CHARTER OF THE AUDIT COMMITTEE |
A-1 |
INTRODUCTION
In this
annual information form (“Annual Information Form” or “AIF”), unless the context requires otherwise,
references to the “Company”, “Satellos”, “we”, “us”, “our” and similar words
refer to Satellos Bioscience Inc. or any predecessor thereto and all subsidiaries of the Company, as the context requires. All dollar
amounts in this Annual Information Form are in Canadian dollars, except where otherwise indicated.
The information
in this Annual Information Form is presented as of December 31, 2024, unless otherwise indicated.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
AND RISK FACTORS
Certain statements and information in this Annual
Information Form contain forward-looking statements or forward- looking information under applicable Canadian securities legislation
that may not be based on historical fact, including, without limitation, statements containing the words “believe”, “may”,
“plan”, “will”, “estimate”, “continue”, “anticipate”, “intend”,
“expect”, “predict”, “project”, “potential”, “pursue”, “ongoing”,
“could”, “would”, “seek”, “views”, “attempt”, “target”, “goal”,
and “foresee” or any derivation or negative thereof or other comparable terminology, although not all forward-looking statements
contain these words and similar expressions.
Forward-looking
statements are necessarily based on estimates and assumptions made by us in light of our experience and perception of historical trends,
current conditions and expected future developments, as well as factors that we believe are appropriate. Forward-looking statements in
this Annual Information Form include, but are not limited to, statements relating to:
| · | our
belief that the Company will be successful in raising additional capital to continue as a
going concern; |
| · | the
expected research and development timelines, therapeutic benefits, effectiveness and safety
of our product candidates; |
| · | our
belief that the Company’s products and research and development efforts are targeting
diseases and conditions with significant unmet medical treatment needs; |
| · | our
belief that the Company has made, and will continue to make progress towards the achievement
of certain milestones or objectives; |
| · | our
expectation with respect to meeting milestones and the minimum amount of funds the Company
expects to need to raise in order to achieve such milestones and garner additional funding; |
| · | the
initiation, timing, cost, progress, outcomes, resource needs and success of our research
and development activities, plans and programs; |
| · | our
expectations regarding our ability to design, test and patent novel drug products suitable
for advancement into Investigational New Drug (“IND”) enabling studies
and clinical trials and the anticipated timelines surrounding such enabling studies; |
| · | our
belief that we will not receive substantive comments on our IND applications; |
| · | our
expectations that the Notch pathway and AAK1 drug target (both as further described herein)
represent drug development opportunities similar or superior to modulation of the epidermal
growth factor receptor signaling pathway; |
| · | our
intentions of developing inhibitors to AAK1 (including but not limited to SAT-3247 and SAT-3153)
and in showing that such potential inhibitors have desirable effects in relevant models of
Duchenne (as defined below) and in other indications, such as other degenerative muscle diseases,
muscle injury or trauma, or muscle regeneration generally; |
| · | our
expectations that we will identify predictive biomarkers as discussed herein which will translate
into or be useful in conducting human clinical trials; |
| · | our
belief that the results of Satellos’ research and development activities, preclinical
studies, safety studies or clinical trials have the potential to be commercially competitive
with research and development activities, preclinical studies, safety studies or clinical
trials conducted by other parties; |
| · | discoveries
we have made in muscle stem cell regulation having the potential to represent insights into
a potential root cause of degenerative muscle disorders which has previously not been recognized
and which may be therapeutically relevant in the treatment of degenerative muscle disorders; |
| · | our
belief that the Company’s technology can be commercialized, and that such commercialization
could be done as effectively or more effectively than other technologies to treat degenerative
muscle disorders and conditions or other medical disorders or conditions, or at all; |
| · | our
ability to discover, optimize, select and advance into clinical development our therapeutic
drug development candidates in a timely, cost-efficient and effective manner, or at all; |
| · | our
ability to translate our discoveries in muscle stem cell regulation into safe and therapeutically
effective drug products and the broad applicability of such products; |
| · | our
ability to enter into research and/or commercial development collaborations or partnerships
to successfully and profitably advance our drug development candidates; |
| · | our
ability and that of our partners (if any) to advance identified drug development candidates
into, and successfully complete, clinical trials; |
| · | our
intention to identify and nominate one or more back-up drug candidates and the potential
benefits of having such back-ups; |
| · | our
plans to utilize and deploy MyoRegenXTM in our programs and our continued relationship
with OHRI (as defined below); |
| · | our
ability to develop the Company’s novel discoveries into viable therapeutic treatments
suitable for clinical development, including, but not limited to, our ability to determine
appropriate dosing regimens; |
| · | the
ability of our products to effectively and safely treat Duchenne and other degenerative muscle
disorders and conditions or other medical disorders or conditions and the applicability of
our products to other disorders and conditions; |
| · | our
expectations regarding future enrolment into clinical trials and the timing of future enrolment
into clinical trials for our product candidates; |
| · | our
belief that our approach may reduce the risk, time and cost of developing therapeutics by
avoiding some of the uncertainty associated with certain research and preclinical stages
of drug development; |
| · | our
ability to establish and maintain relationships with collaborators with acceptable preclinical
and/or clinical research and development capability, and regulatory and commercialization
expertise to enable the development and future commercialization of our technology or products,
and the benefits to be derived from such collaborative efforts; |
| · | our
ability to enter into agreements or partnerships with pharmaceutical or biotechnology companies
that have research and clinical development and/or sales and marketing capabilities and the
expected benefits that could be derived therefrom; |
| · | our
ability to generate and protect our potential intellectual property; |
| · | our
ability to operate our business without infringing upon the intellectual property rights
of others; |
| · | our
ability to engage third party services with specialized domain expertise for the drafting
and submitting of regulatory applications to conduct clinical trials in humans; |
| · | our
ability to establish suitable CMC and GMP protocols as further described herein; |
| · | the
manufacturing capacity of third-party manufacturers for our product candidates; |
| · | our
expectations regarding federal, provincial and foreign regulatory requirements; |
| · | the
timing of, and the costs of obtaining and maintaining, regulatory approvals in the United
States, Canada and other jurisdictions; |
| · | our
plans to meet with the United States Food and Drug Administration (the “FDA”),
file an application to obtain drug designations and initiate studies; |
| · | the
rate and degree of market acceptance and clinical utility of our future products, if any; |
| · | existing
and future corporate alliances and licensing transactions with third parties, and the receipt
and timing of any payments to be made by us or to us pursuant to such arrangements; |
| · | the
implementation and execution of our commercial and operational strategy; |
| · | our
ability to engage and retain the consultants or employees required to grow our business; |
| · | the
potential revenue that may be generated from our products, pricing and reimbursement of the
patient cost of our drug products by insurers or national health systems, as the case may
be, in those jurisdictions where the Company intends to sell its drug products and our ability
to achieve profitability; |
| · | developments
relating to our competitors and our industry, including the success of competing therapies
that are or become available; |
| · | the
potential growth of the market and demand for our products as well as the estimated pricing
and subsequent revenue generation of any potential therapeutics we discover; |
| · | our
belief that any discoveries by the Rudnicki Lab (as defined below) have the potential to
have a positive impact on Satellos and our work; |
| · | our
future financial performance, including projected expenditures, future revenue, capital requirements
and our needs for additional financing; and |
| · | general
business and economic conditions and outlook including but not limited to foreign exchange
rates and rates of inflation and the evolving regulatory or geo-political landscape. |
Such forward-looking statements reflect our current
views with respect to future events, are subject to risks and uncertainties and are necessarily based upon a number of estimates and
assumptions that, while considered reasonable by Satellos as of the date of such statements, are inherently subject to significant medical,
scientific, business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause our actual
results, performance, achievements, prospects or opportunities to be materially different from any future results, performance or achievements
that may be expressed or implied by such forward-looking statements. In making the forward-looking statements included in this Annual
Information Form, the Company has made various material assumptions, including, but not limited to:
| · | obtaining
positive results from our research and development activities, including clinical trials; |
| · | our
ability to obtain regulatory approvals; |
| · | assumptions
regarding general business, market and economic conditions; |
| · | assumptions
regarding the cost and timing of each study; |
| · | the
Company’s ability to successfully advance its preclinical and clinical development
programs and execute its plans substantially as currently envisioned; |
| · | the
Company’s ability to identify and advance a suitable drug candidate; |
| · | assumptions
related to the pricing and reimbursement of its drug products in jurisdictions in which the
Company intends to sell its drug products; |
| · | the
Company’s current positive relationships with third parties will be maintained and
the potential to develop new partnerships; |
| · | our
ability to continue to use existing licenses for the development of our product(s); |
| · | the
availability (and sources) of financing on reasonable terms; |
| · | future
expenditures to be incurred by the Company, including research and development and operating
costs; |
| · | the
Company’s ability to attract and retain skilled consultants and employees; |
| · | assumptions
regarding market competition, market capture and pricing; |
| · | the
products and technology offered by the Company’s competitors; and |
| · | the
Company’s ability to protect patents and proprietary rights. |
In evaluating forward-looking statements, current
and prospective shareholders should specifically consider various factors, including the risks outlined herein under the heading “Risk
Factors”. Certain risks and uncertainties that could cause such actual events or results expressed or implied by such forward-looking
statements and information to differ materially from any future events or results expressed or implied by such statements and information
include, but are not limited to:
| · | risks
related to the early stage of our products; |
| · | uncertainties
related to preclinical product development activities and clinical trial outcomes; |
| · | uncertainties
related to current economic conditions; |
| · | risks
related to rapid technological change; |
| · | uncertainties
related to forecasts and timing of clinical trials and regulatory approval; |
| · | competition
in the market for therapeutic products, including those to treat Duchenne and related diseases; |
| · | risks
related to potential product liability claims; |
| · | availability
of financing and access to capital and the risks associated with the Company’s ability
to continue as a going concern; |
| · | market
acceptance and commercialization of products; |
| · | the
availability, costs and supply of materials; |
| · | risks
related to the effective management of our growth; |
| · | risks
related to the reliance on partnerships and licensing agreements; |
| · | risks
related to our reliance on key personnel; |
| · | risks
related to the regulatory approval process for the manufacture and sale of therapeutic products; |
| · | risks
related to the reimbursement process in various jurisdictions where the Company plans to
sell its drug products; and |
| · | our
ability to secure and protect our intellectual property. |
The Company cautions that the foregoing list
of important factors and assumptions is not exhaustive. Although the Company has attempted to identify on a reasonable basis important
factors and assumptions related to forward-looking statements, there can be no assurance that forward-looking statements will prove to
be accurate, as events or circumstances or other factors could cause actual results to differ materially from those estimated or projected
and expressed in, or implied by, these forward-looking
statements. Should one or more of these risks or uncertainties, or a risk that is not currently known to us, materialize, or should assumptions
underlying those forward-looking statements prove incorrect, actual results may vary materially from those described herein. The forward-looking
statements made herein are made as of the date of this Annual Information Form and we do not intend, and do not assume any obligation,
to update these forward-looking statements except as required by applicable securities laws. Readers are cautioned that forward-looking
statements are not guarantees of future performance and are inherently uncertain. Accordingly, readers should not put undue reliance
on forward-looking statements.
CORPORATE STRUCTURE
General
Satellos Bioscience Inc. was incorporated under
the Canada Business Corporation Act (the “CBCA”) on July 27, 2012 as Adurant Therapeutics Inc. (“Pre-Arrangement
Satellos”). On February 22, 2018, Pre-Arrangement Satellos filed Articles of Amendment changing its name to Satellos Bioscience
Inc. Pre-Arrangement Satellos then amended its capital structure by filing Articles of Amendment on March 28, 2018.
iCo Therapeutics Inc. (“iCo”)
was incorporated under the Business Corporations Act (British Columbia) on April 20, 2006 under the name “Beanstalk
Capital Corporation”. iCo changed its name to “Beanstalk Capital Ltd.” in connection with its Qualifying Transaction
(as this term is defined in Policy 2.4 of the TSX Venture Exchange (the “TSXV”)). iCo’s Qualifying Transaction
involved a reverse take-over transaction by way of statutory arrangement involving a wholly- owned subsidiary of iCo known as 4448073
Canada Inc. and a company formerly known as iCo Therapeutics Inc.
On August 13, 2021, Pre-Arrangement
Satellos and iCo completed a plan of arrangement (the “Arrangement”) under section 192 of the CBCA, pursuant to
which, among other things, iCo acquired all of the issued and outstanding shares of Pre-Arrangement Satellos. In connection with the
Arrangement, iCo (now, Satellos): (a) was continued under the CBCA; (b) amalgamated with Satellos to form the Company as
it now exists, which continues to carry on the pre- Arrangement business of Pre-Arrangement Satellos and iCo; and
(c) consolidated its outstanding Common Shares (as defined below) on a 20:1 basis.
Following the Arrangement, the common shares
of the Company (the “Common Shares”) traded on the TSXV under the trading symbol “MSCL”. The Company commenced
trading on the Toronto Stock Exchange (the “TSX”) on February 15, 2024, under the symbol "MSCL", and
was delisted from the TSXV effective as of the close of the market on February 14, 2024.
The Company has three wholly owned subsidiaries,
Amphotericin B Technologies, Inc. (an entity incorporated under the Business Corporations Act (British Columbia)) (“Amp
B”), Satellos Bioscience Australia Pty Ltd. (an entity incorporated under the laws of Australia) and Satellos Bioscience US, Inc.
(incorporated under the laws of Delaware, USA).
The Company’s
head office is located at Royal Bank Plaza, South Tower, 200 Bay St., Suite 2800, Toronto, Ontario, M5J 2J1, and the Company’s
registered and records office is located at Royal Bank Plaza, South Tower, 200 Bay St., Suite 2800, Toronto, Ontario, M5J 2J1.
Incorporate Relationships
The following is a current corporate organizational
chart of the Company:
Notes:
| (1) | The Company is the registered owner of 100% of the issued and outstanding
shares of Satellos Bioscience US, Inc. |
| (2) | The Company is the registered owner of 100% of the issued &
outstanding shares of Satellos Bioscience Australia Pty Ltd. |
| (3) | The Company is the registered owner of 100% of the issued and outstanding
shares of Amphotericin B Technologies, Inc. |
GENERAL DEVELOPMENT OF THE BUSINESS
Three-Year History
A general description of the Company’s
products and services is included below in “Description of the Business – General”. Below is a
description of the relevant history of the Company and its predecessor entities over the last three completed financial years:
2022
Effective January 3, 2022, Satellos entered into a scientific
research agreement with Université de Sherbrooke. This agreement is no longer active.
Effective February 4, 2022, the Company and University of Toronto
entered into a sponsored research and collaboration agreement (the “UT SRA”) to apply its formulation technology to
sleep aid products in connection with the JDA (as defined below).
On March 3, 2022, the Company and NW PharmaTech
announced their intent to pursue the development of Oral CBD. As disclosed in further detail below, the Company is no longer incurring
development costs associated with the development of Oral CBD nor does it anticipate doing so in the future. For further information,
see: “Legacy Asset”.
On March 15, 2022, the Company announced
the invention of three unique and proprietary chemical series or classes of small molecule compounds with the potential to modulate muscle
stem cell polarity. The Company is currently focused on the development of SAT-3247 as its lead compound.
On June 17, 2022, the Company announced
that its Co-founder and Chief Discovery Officer Dr. Michael Rudnicki had been named one of only three 2022 recipients of a grant
awarded from Defeat Duchenne Canada, the country’s only national charity dedicated to ending Duchenne.
On June 17, 2022, the Company
announced the admission of Dr. Michael Rudnicki as a Fellow of the Royal Society, the UK’s national science academy founded
in 1660, joining an exclusive collective of Fellows including some of the most influential and respected scientists of all time, including
Sir Isaac Newton and Charles Darwin.
On June 30,
2022, the Company announced that it had licensed a provisional patent application filed with the United States Patent and Trademark Office
and titled “MODULATION OF SATELLITE CELL POLARITY AND ASYMMETRIC CELL DIVISION,” from the OHRI. For further information,
see: “Description of the Business – The Satellos Portfolio: Intellectual Property”.
On July 13, 2022, the Company announced that Dr. Michael
Rudnicki had new research published in Nature Communications.
On September 7,
2022, the Company announced the closing of an offering of common shares and common share purchase warrants (the “Units”),
whereby an aggregate of 8,750,000 Units were issued at a price of $0.40 per Unit, raising gross proceeds of $3,500,000 (the “Unit
Offering”). Each Unit consisted of one Common Share and one-half of one Common Share purchase warrant, with each whole warrant
entitling the holder to purchase a Common Share for a period of 36 months from the date issued.
On September 28, 2022, the Company announced
that its board of directors appointed Philip Lambert, Ph.D., as Chief Technology Officer of the Company, effective September 27,
2022. Dr. Lambert is now the Chief Scientific Officer of the Company with Dr. Rudnicki assuming the title of Chief Discovery
Officer.
On October 6, 2022, the Company
announced that its Common Shares commenced trading on the OTCQB Venture Market (“OTCQB”) under the symbol “MSCLF”
while continuing to trade on the TSXV (now TSX) under the symbol MSCL.
On October 6, 2022, the Company announced
that AmpB Tech and NW PharmaTech established a company, NW Micelle Therapeutics Inc. (“NWMT”), for the purpose of
developing Oral CBD. As disclosed in further detail below, the Company is no longer incurring development costs associated with the development
of Oral CBD nor does it anticipate doing so in the future. For further information, see “Legacy Asset”.
On October 11,
2022, the Company announced it would be presenting preliminary preclinical proof of concept data in a second rare disease, Congenital
muscular dystrophy type 1A in a poster presentation at the World Muscle Society Congress from October 11-15, 2022.
On October 11, 2022, the Company announced
the advancement of novel small molecule drug candidates into further preclinical studies with the aim of selecting a pre-IND development
candidate by the end of 2022.
2023
On January 3, 2023, Satellos nominated SAT-3153
as its then pre-IND lead development candidate. Throughout 2023 the Company continued its drug development efforts. As part of its ongoing
efforts to advance SAT-3153 into clinical development on a timely basis and generate back-up compounds as detailed below, the Company
generated additional relevant information and made new observations or discoveries informing the properties and characteristics the Company
determined would be most beneficial, based on its new learnings, for the purpose of developing an inhibitor of AAK1 (as further described
below) designed to modulate the muscle stem cell driven regenerative process. Through these efforts, as further described below, the
Company identified a new molecule, SAT-3247, which it believes has the potential to be a superior compound to SAT-3153 for the intended
purpose noted herein. Consequently, on November 14, 2023, SAT-3247 was promoted as lead development candidate with SAT-3153 becoming
the back-up development candidate
On February 6, 2023, the Company announced results from preclinical
studies in the Mdx model of Duchenne indicating positive effects of modulating stem cell polarity with drug on muscle size and
function.
On March 9, 2023, the Company announced
preclinical results using the Company’s lead drug candidate SAT-3153 in the Mdx model of Duchenne indicating positive effects
on stem cell polarity and muscle function, as well as an update on certain drug-like characteristics.
On March 24, 2023, the Company closed the
“Debenture Offering” pursuant to which the Company issued 2,385 Debenture Units and raised gross proceeds $2,385,000.
On August 14, 2023, the Company exercised its option to repay the Debentures. Each Debenture Unit was comprised of: (i) $1,000
principal amount of unsecured non-convertible debentures of the Company (the “Debentures”); and (ii) for no additional
consideration, such number of Common Shares in the capital of the Company (each whole Common Share, a “Bonus Share”,
and collectively, the “Bonus Shares”) as is equal to $100 divided by $0.355, being the closing market price of the
Common Shares of the Company on the TSX Venture Exchange on March 15, 2023, rounded to the nearest whole share. The Debentures would
mature on September 24, 2024, and bear interest on the principal amount at a rate of 10% per annum payable quarterly in arrears
in cash. Accordingly, 671,825 Bonus Shares were issued in connection with the Debenture Units at a value of $0.355.
On May 17, 2023, the Company closed the
“May 2023 Equity Offering”, issuing either Common Shares at $0.50 per Common Share or pre-funded Common Share
purchase warrants (Pre-Funded Warrants) with no expiry date for $0.49999 per Pre-Funded Warrant. Investors purchased 70,297,220 Common
Shares and 39,702,780 Pre-Funded Warrants for gross proceeds of $55 million. Each Pre-Funded Warrant is exercisable for one Common Share
at an exercise price of $0.00001 per share. 7,383,919 compensation warrants were granted to the agents with each such compensation warrant
is exercisable into one Common Share at an exercise price of $0.50 until expiry on May 17, 2025.
On June 7, 2023, Satellos announced
the appointment of Alan K. Jacobs, MD as Chief Medical Officer (“CMO”) of the Company.
On August 2, 2023, Satellos
announced that the FDA granted Orphan Drug Designation and Rare Pediatric Disease Designation to SAT-3153 for the potential treatment
of Duchenne muscular dystrophy as described in more detail below.
On September 5, 2023, Satellos announced
the appointment of Elizabeth Williams, CPA, CA as Chief Financial Officer (“CFO”) of the Company. Ms. Williams
has nearly 20 years of experience in biotech, working with publicly listed entities in both Canada and the United States.
On November 14, 2023, the Company
disclosed for the first time that the drug target for the Duchenne program is AAK1 (formerly K9), a protein kinase in the Notch
pathway, which the Company discovered can be modulated to enable muscle regeneration. Satellos also announced that SAT-3247 would be
nominated as the lead development candidate based on results generated by the Company during its preclinical studies. Preclinical
data generated by Satellos demonstrated that SAT-3153 and SAT-3247 have a similar capacity to affect muscle regeneration and
functional benefit in the mdx mouse model of Duchenne. SAT-3247 also exhibited improved oral bioavailability, target specificity and
tissue distribution when compared directly to SAT-3153 in preclinical studies. Henceforth, Satellos is conducting IND-enabling
studies with SAT- 3247.
In addition, on November 14, 2023, Satellos
announced the appointment of Ms. Courtney Wells as Senior Vice President of Clinical Development Operations to lead and implement
the clinical trial plans. Ms. Wells has more than 20 years of experience in clinical development for large pharmaceutical companies
and innovative biotech companies, including orphan diseases and Duchenne.
2024
On January 23, 2024, the Company announced the departure of Alan
Jacobs, M.D., as CMO and the appointment of Jordan Dubow, M.D. as Chief Medical Advisor.
On February 13,
2024, the Company announced positive preliminary data showing SAT-3247 can improve skeletal muscle function in a mouse model of facioscapulohumeral
muscular dystrophy (“FSHD”). FSHD, an adult-onset muscular dystrophy that results in the progressive destruction of
muscle tissue, is the third most common muscular dystrophy behind Duchenne (& Beckers) and myotonic dystrophy. In research conducted
under a grant from the FSHD Canada Foundation, Satellos demonstrated that treatment with SAT-3247 successfully improved the phenotype
of FSHD mice.
On February 14, 2024, the Company announced that it would commence
trading on the TSX on February 15, 2024 under the symbol "MSCL", and delist from the TSXV effective as of the close of
the market on February 14, 2024.
On March 4, 2024, Satellos announced positive
preclinical data presented at the Muscular Dystrophy Association Clinical and Scientific Conference showing that SAT-3247 can improve
skeletal muscle function in multiple mouse models of muscle degeneration. We believe that the preclinical data presented show the broad
potential of SAT-3247 to improve skeletal muscle function as has been demonstrated in three mouse models of muscle degeneration: the
mdx model of Duchenne, the FLExDUX4 model of FSHD, and a muscle injury model in wildtype mice. In all instances, treatment with SAT-3247
over a three-to-four-week period resulted in a statistically significant improvement in muscle force versus animals receiving placebo.
During Q1, 2024, the Company engaged a contract
research organization (“CRO”) to design and implement its planned Phase 1a clinical trial for SAT-3247, initiated requisite
GLP toxicology studies in two species with SAT-3247and carried out GMP manufacturing and tablet formulation of SAT-3247.
On May 28, 2024, Satellos announced the formation of a distinguished
Clinical Advisory Board to support the advancement of SAT-3247 in clinical trial development for DMD.
On June 27, 2024, the Company announced
that Frank Gleeson, Satellos CEO, would join leading members of the Duchenne medical and scientific community during a panel discussion
at PPMD’s 30th Annual Conference being held from June 27–29, 2024 in Orlando, Florida.
On July 2, 2024, Satellos announced data
in a canine model of DMD showing improved muscle repair and regeneration and improved muscle force from SAT-3247 treatment. After treatment
with SAT-3247 the animals showed an increase in Regenerative Index (RI), a measure of the number of newly regenerated muscle fibers versus
the number of damaged and dying muscle fibers, suggesting that muscle repair and regeneration is occurring. These results were further
updated on August 12, 2024 and October 1, 2024.
On July 11, 2024, the Company announced
submission of a clinical research proposal to a Human Research Ethics Committee (HREC) in Australia seeking regulatory authorization
under their Therapeutic Goods Administration’s (TGA’s) Clinical Trial Notification (CTN) scheme to conduct a first-in-human
Phase 1 clinical trial of SAT-3247. Satellos announced on August 19, 2024 that the HREC submission had been approved.
On August 7, 2024, Satellos announced that
the U.S. Food and Drug Administration (FDA) had granted Rare Pediatric Disease Designation to SAT-3247 for the potential treatment of
DMD after receiving Orphan Drug Designation earlier this year.
On September 19, 2024, Satellos
announced that the first participant in the first-in-human Phase 1 clinical trial had been dosed. The Phase 1 clinical trial will
comprise two components. In the first component, 72 healthy volunteers will be enrolled in a blinded, randomized,
placebo-controlled, staggered, parallel design study to assess the safety and pharmacokinetic properties of SAT-3247. Participants
will be randomized across five single-ascending dose (“SAD”) cohorts, four multiple-ascending dose (MAD) cohorts,
and one food effect dose cohort. In the second component, which began on December 11, 2024, up to 10 adult volunteers with
genetically confirmed DMD will be enrolled in a 28-day, open-label, single dose cohort to assess safety and pharmacokinetic
properties in patients and explore potential pharmacodynamic markers.
On October 1, 2024, Satellos announced data
to be presented at the 29th Annual Congress of the World Muscle Society taking place October 8-12, 2024, in Prague. The presentation
provided an overview of key data collected during the open- label pilot study of SAT-3247 in a canine model of DMD. The data presented
from the pilot study demonstrated that treatment of DMD Canines with SAT-3247 improved measures of strength to near normal levels.
On November 14, 2024, the Company announced
the appointment of Stephanie Brown to its Board of Directors. Ms. Brown brings over 30 years of biopharma industry experience, having
held numerous executive roles contributing to groundbreaking achievements in product commercialization and organizational transformation.
On December 11, 2024, the Company announced
the first participant with DMD has been dosed in the Phase 1b safety and pharmacokinetics (“PK”) trial in DMD patients.
Satellos expects to enroll up to 10 adult participants with genetically confirmed DMD in a 28-day, open-label, single dose cohort to
assess safety and PK properties in patients and explore potential pharmacodynamic markers.
On December 20, 2024, Satellos announced
that it closed an equity offering, issuing a total of 63,285,000 equity securities for gross proceeds of approximately $57 million (USD$40
million) (the “December 2024 Public Offering”).
Subsequent Events – 2025
On February 10, 2025, the Company announced
it completed enrollment of all four Multiple-Ascending Dose (“MAD”) cohorts for the phase 1 clinical trial of SAT-3247 in
healthy volunteers.
On March 19, 2025, the Company announced
initial Phase 1 data in an oral presentation at the 2025 Muscular Dystrophy Association (MDA) Clinical & Scientific Conference.
In the Phase 1a, designed to assess the safety
and tolerability of SAT-3247, 72 healthy volunteers were randomized across five SAD cohorts (including one food effect cohort) with single
oral doses of up to 400 mg, and four MAD cohorts with daily oral doses up to 240 mg/day for 7 days. As of February 20, 2025, data
cut-off:
| · | Phase
1a data showed that SAT-3247 was safe and well tolerated across all healthy volunteer cohorts.
At predicted human efficacious dose levels, SAT-3247 did not display adverse clinical findings
on any parameter measured, including clinical labs, vital signs, ECG’s, and physical
exams. No moderate or greater drug-related adverse events were reported at any dose studied. |
| · | Phase
1a PK data demonstrated consistency with results from the Company’s preclinical studies.
These PK results confirm post-dose plasma concentrations of SAT-3247 are sustained at levels
and time courses, which findings suggest are most likely to yield a therapeutic effect on
muscle regeneration and strength. |
Satellos expects to report full Phase 1a and
Phase 1b data in Q2 2025.
Significant Acquisitions
The Company did not complete any significant
acquisitions (within the meaning of National Instrument 51-102 – Continuous Disclosure Obligations) in the financial
year ended December 31, 2024.
DESCRIPTION OF THE BUSINESS
The Company’s primary goal is the development
of disease modifying therapeutic drugs for the treatment of severe muscle conditions of unmet medical need. Our core technology is based
on discoveries by the Company’s scientific founder and Chief Discovery Officer, Dr. Michael Rudnicki, into understanding and
modulating muscle stem cell function and its role in muscle regeneration. Multiple peer reviewed publications from Dr. Rudnicki’s
lab (the “Rudnicki Lab”) at the Ottawa Hospital Research Institute (the “OHRI”) have advanced the
understanding of the identity and behavior of muscle stem cells including their role in health and disease. For instance, the Rudnicki
Lab was the first to define so called muscle stem cells (a.k.a. ‘satellite stem cells’) and characterize a sub-population
as bona fide multipotent stem cells capable of both self-renewal and regeneration (Source: Kuang et al., 2007, Cell). Dr. Rudnicki
was also first to demonstrate that such stem cells exist as a special body of cells capable of regeneration, and subsequently elucidate
their biological mechanism of action and identify means to modulate their activity. He further linked deficiencies in muscle stem cell
function directly to the pathology of Duchenne as a potential causal factor in the progressive muscle destruction that occurs in this
lethal disease (Source: Dumont et al., 2015, Nature Medicine). The basic principle governing how muscle stem cells functionally contribute
to muscle regeneration and homeostasis is depicted below in Figure 1.
Figure 1: Muscle stem cells undergo symmetric
or asymmetric divisions in response to injury stimuli. Muscle progenitor cells are generated to produce new muscle tissue or repair injured
muscle.
Fundamentally, symmetric divisions result in
two identical copies of the stem cell through the process of self-renewal. Asymmetric stem cell divisions, by contrast, result in one
stem cell being produced and one daughter cell, committed to eventual differentiation, called a progenitor muscle cell. Progenitor muscle
cells undergo normal mitosis to generate potentially thousands of cells that ultimately incorporate into functional muscle tissue. Findings
from the research of Dr. Rudnicki have linked deficits in either symmetric or asymmetric division to multiple muscle wasting and
degenerative diseases. Related to this research, the Company has licensed issued patents and pending patent applications from the OHRI
pursuant to a license agreement (the “License Agreement”).
To advance and expand our therapeutic development
programs for degenerative muscle conditions or disorders, Satellos employs a proprietary discovery platform developed by the Rudnicki
laboratory at OHRI called, MyoReGenX™. An automated microscopy system, MyoReGenX™ recapitulates the muscle stem cell environment
ex-vivo (i.e., outside the body) and enables Satellos to identify molecular regulators of stem cell polarity that are capable
of rescuing the defective regeneration process by tracking, classifying and quantitating the divisions of individual muscle stem cells
in response to stimuli such as drug candidates or small interfering ribonucleic acid (“siRNA”).
Lead Development Program: Duchenne
The Company’s first application of its
technology (the “Lead Program”) is directed towards the discovery and development of a small molecule drug for the
treatment of Duchenne, the most common fatal genetic disorder diagnosed in childhood affecting approximately one in 4,000 male births
per year, worldwide. As depicted in the below graphic, early signs of motor impairment and delays in motor related milestones emerge
in Duchenne between the ages of two to five years. Rapid disease progression and muscle weakening typically ensue, resulting in patients
generally being wheelchair bound by the age of 12. By the third decade of life, these patients often experience respiratory distress
and heart failure, the leading causes of death in Duchenne. There is no known cure for Duchenne.
Duchenne is caused by a change or mutation in
the dystrophin gene that results in impairment to or loss of the dystrophin protein. Dr. Rudnicki demonstrated that muscle stem
cells require the dystrophin protein to properly and efficiently divide in an asymmetric fashion to generate muscle progenitor cells
and enable muscle regeneration. As a direct result of the loss of the dystrophin protein, their innate role in regenerating muscle is
severely impaired (Source: Dumont et al. 2015, Nature Medicine.). These findings suggest that, in addition to its commonly recognized
role in stabilizing muscle, the dystrophin protein has a second, previously unrecognized role as a signal transduction molecule. Consequently,
Satellos’ therapeutic strategy is to restore this signaling role of dystrophin by drug treatment and reset the muscle regeneration
process. We have identified a protein kinase drug target called AAK1 (further discussed in the below paragraph) which we believe from
our scientific work, when inhibited by drug, has the capacity to compensate for the loss of the signaling role of the dystrophin protein.
Deploying MyoReGenX™ to build on the identification
and discovery of this previously unreported signaling role of dystrophin, in collaboration with the Rudnicki lab, Satellos undertook
a systematic assessment of molecular pathways for their potential to rescue asymmetric stem cell divisions. The Company then evaluated
and prioritized these pathways and further evaluated potential drug targets therein based on their capacity to safely and effectively
regulate muscle stem cell driven regeneration. From this exercise conducted over a multi-year period, the Company identified and selected
a particular protein kinase in the molecular signaling pathway known as “Notch”. For reasons of competitive secrecy
and confidentiality this protein kinase was previously codenamed as “K9” but, on November 13, 2023, was disclosed
by the Company to be Adaptor Associated Kinase 1 (aka “AAK1”). We have shown in our preclinical studies in the mdx
mouse model of Duchenne that modulating the Notch molecular signaling pathway via inhibition of AAK1 has the potential to impact muscle
regeneration and increase muscle force and thus we believe represents a potential novel therapeutic approach for the treatment of Duchenne
in humans.
Supporting our assertion that dysregulation of
muscle stem cells is relevant to Duchenne pathogenesis, it was reported that amongst a large cohort of over 400 Duchenne patients –
some of whom maintained ambulation for a decade or longer than the majority of their peers – genetic factors implicating effects
on polarity and the regulation of muscle stem cell regeneration were identified within the ambulatory population (Source: Flanigan
et al. European Journal of Human Genetics). In further independent case reports, which we also believe support our thesis, Drs. L.
Kunkel and M. Zatz have postulated that random genetic mutations affecting Notch signaling may be responsible for the existence of Duchenne
humans who exhibit a milder disease course and who have continued to ambulate into their twenties despite the complete absence of the
dystrophin protein (Sources: Zatz et al., Neuromuscular Disorders, 11/2014; Kunkel and Zatz (unpublished). They also have previously
associated Notch signaling with muscle regeneration as published in the journal Cell in 2015 by Vieira et al in a paper titled
“Jagged 1 Rescues the Duchenne Muscular Dystrophy Phenotype”. The authors associated Jagged 1, a ligand (or binder/activator)
of Notch signaling, with the process of regeneration and as explaining how two (2) Golden Retriever Muscular Dystrophy dogs were
able to escape the Duchenne phenotype and live a normal life.
Satellos has generated Proof of Concept (“POC”)
preclinical data in the Mdx mouse, a gold standard research model bearing the same genetic defect as patients with Duchenne, demonstrating
that treatment of these research mice via the Notch pathway through inhibition of AAK1 with SAT-3247 has potential to restore the process
by which stem cells enable ongoing muscle regeneration.
AAK1
Program in Duchenne
From
preliminary experimental work by the Company, in which AAK1 was inhibited using genetic means, we demonstrated that modulation of
Notch signaling in muscle stem cells via AAK1 inhibition could be achieved, leading to restoration of asymmetric divisions, muscle
stem cell polarity and regeneration of skeletal muscle. Of interest to Satellos from a de-risking perspective, small molecule
inhibitors of AAK1 have previously been described for non-muscle related disease indications by an independent 3rd party
company and have demonstrated what appear to be acceptable safety profiles thus far in two Phase 1 and two Phase 2 human clinical
trials spanning hundreds of patients (Lexicon Pharmaceuticals Inc. 2022 10K filing pages 5&6 filed March 2, 2023). Not
only do we believe this provides some initial indications of the potential safety of AAK1 inhibition, but the existence of small
molecule inhibitors of AAK1 indicated to the Company that (a) it may be possible to develop its own, proprietary small molecule
inhibitors of AAK1 to suit its purpose as well as (b) it may also be able to quickly generate useful POC data.
The Company, in collaboration with the OHRI,
filed patent applications to provide intellectual property protection for selected pathways, prospective drug targets and inhibitors
related thereto. On June 29, 2022, the Company amended its License Agreement with OHRI to add a specific patent application related
to Notch, AAK1 (previously described as K9) and inhibitors thereof for the purpose of regeneration. Furthermore, the Company has subsequently
filed, in consultation with its IP counsel, for distinct patent protection of its novel small molecule inhibitors of AAK1, including
but not limited to SAT-3247.
In the year
ended December 31, 2024, Satellos advanced its AAKI inhibitor, SAT-3247, through Phase 1 IND enabling studies, GMP manufacturing
and substantially completed a Phase 1 clinical trial. Further details on the development history of SAT-3247 are below.
On March 4, 2024, Satellos announced positive
preclinical data presented at the Muscular Dystrophy Association Clinical and Scientific Conference showing that SAT-3247 can improve
skeletal muscle function in multiple mouse models of muscle degeneration. The preclinical data presented show the broad potential of
SAT-3247 to improve skeletal muscle function as has been demonstrated in three mouse models of muscle degeneration: mdx model of Duchenne,
FLExDUX4 model of FSHD, and a muscle injury model in wildtype mice. In all instances, treatment with SAT-3247 over a three-to- four-week
period resulted in a statistically significant improvement in muscle force versus animals receiving placebo.
On August 7, 2024, Satellos announced that
that the FDA had granted Rare Pediatric Disease Designation to SAT-3247 for the potential treatment of DMD after receiving Orphan Drug
Designation earlier this year. The FDA grants Orphan Drug Designation to support development of medicines for underserved patient populations,
or rare disorders, that affect fewer than 200,000 people in the U.S. Orphan Drug Designation provides certain benefits, including the
potential for a seven-year market exclusivity upon regulatory approval, exemption from FDA application fees, tax credits for qualified
clinical trials, and a priority review voucher. The FDA grants Rare Pediatric Disease Designation for serious and life- threatening diseases
that primarily affect children ages 18 years or younger and fewer than 200,000 people in the United States. The Rare Pediatric Disease
Priority Review Voucher Program is intended to address the challenges that drug companies face when developing treatments for these unique
patient populations. Under this program, a sponsor who receives an approval for a drug or biologic for a “rare pediatric disease”
may be eligible for a voucher that can be redeemed to receive priority review of a subsequent marketing application for a different product
or sold to another sponsor for priority review of their marketing application.
On July 11, 2024, the Company announced
submission of a clinical research proposal to a Human Research Ethics Committee (HREC) in Australia seeking regulatory authorization
under their Therapeutic Goods Administration’s (TGA’s) Clinical Trial Notification (CTN) scheme to conduct a first-in-human
Phase 1 clinical trial of SAT-3247. Satellos announced on August 19, 2024 that the HREC submission had been approved and on September 19,
2024, Satellos announced that the first participant in the first-in-human Phase 1 clinical trial had been dosed.
The Phase 1 clinical trial is comprised of two
components. In the first component, 72 healthy volunteers were enrolled in a blinded, randomized, placebo-controlled, staggered, parallel
design study to assess the safety and pharmacokinetic properties of SAT-3247. Participants were randomized across five SAD cohorts, four
multiple-ascending dose (MAD) cohorts, and one food effect dose cohort. In the second component, 10 adult volunteers with genetically
confirmed DMD will be enrolled in a 28-day, open-label, single dose cohort to assess safety and pharmacokinetic properties in patients
and explore potential pharmacodynamic markers.
On October 1, 2024, Satellos announced data
to be presented at the 29th Annual Congress of the World Muscle Society taking place October 8-12, 2024, in Prague. The presentation
provided an overview of key data collected during the open- label pilot study of SAT-3247 in a canine model of DMD. The data presented
from the pilot study demonstrates that treatment of two DMD Canines with SAT-3247 improved measures of strength to near normal levels.
On February 10, 2025, the Company announced
it completed enrollment of all four MAD cohorts for the phase 1 clinical trial of SAT-3247 in healthy volunteers.
On March 19, 2025, the Company announced
initial Phase 1 data in an oral presentation at the 2025 Muscular Dystrophy Association (MDA) Clinical & Scientific Conference.
In the Phase 1a, designed to assess the safety
and tolerability of SAT-3247, 72 healthy volunteers were randomized across five SAD cohorts (including one food effect cohort) with single
oral doses of up to 400 mg, and four MAD cohorts with daily oral doses up to 240 mg/day for 7 days. As of February 20, 2025, data
cut-off:
| · | Phase
1a data showed that SAT-3247 was safe and well tolerated across all healthy volunteer cohorts.
At predicted human efficacious dose levels, SAT-3247 did not display adverse clinical findings
on any parameter measured, including clinical labs, vital signs, ECG, and physical exam.
No moderate or greater drug-related adverse events were reported at any dose studied. |
| · | Phase
1a PK data demonstrated consistency with results from the Company’s preclinical studies.
These PK results confirm post-dose plasma concentrations of SAT-3247 are sustained at levels
and time courses, which findings suggest are most likely to yield a therapeutic effect on
muscle regeneration and strength. |
Satellos expects to report full Phase 1a and
Phase 1b data in Q2 2025.
Satellos intends to submit one or more IND applications
in 1H 2025for the purpose of obtaining authorization to initiate the conduct of one or more Phase 2 clinical trials in non-adult DMD
patients.
It is anticipated that following successful completion
of a Phase clinical 2 study, the Company may be in position to consider licensing the program to one or more potential partners with
the capacity to continue further clinical development and commercialization of SAT-3247. Alternatively, the Company may elect to raise
additional capital to fund further Phase 2 and/or Phase 3 clinical trials in order to seek regulatory authorization to advance SAT-3247
to market itself. A decision of this nature would be dependent on numerous factors at the time, including the data generated in the clinical
trials, the capital markets conditions at the time, the attractiveness of licensing opportunities and shareholder expectations, among
others.
The Company would expect the completion of clinical
development through obtaining regulatory authorization, if undertaken by the Company, to last through at least 2027, with a projected
aggregate cost of approximately US$150 million in addition to the capital currently on hand. Additional time and capital would also be
required to obtain pre-market approval for SAT-3247 and to complete business development, marketing and other pre-commercialization activities
related to commercial launch.
Drug Discovery and Development: Infrastructure
Satellos is building on its science and discoveries
to create the first ever therapy intended to regulate muscle stem cell driven regeneration capacity and, potentially, address what we
believe to be a potential root cause of the progressively degenerating nature of Duchenne. Specifically, our goal is the development
of a first-in-class, small molecule orally administered drug.
To achieve this goal, Satellos has established
an in-house team of drug development professionals to oversee its workplan and manage its infrastructure. This includes personnel with
expertise in pre-clinical development, chemistry, manufacturing and controls (“CMC”) and clinical development. This
in-house team is focused on managing a network of specialized contract research organizations (“CROs”). We rely on
these CRO’s to complete, under our supervision, the pre-clinical and IND enabling studies, CMC activities as well as execution
of the planned clinical development program.
In addition to our internal team, we have outsourced
ongoing research discovery efforts under our agreement with OHRI and utilize expert consultants in certain areas including regulatory
strategy.
Current Status - Summary
Our lead product candidate, SAT-3247 is currently
in the Phase 1 ‘clinical’ stage of development (refer to below section titled “Regulatory Process” for explanation
of clinical stages of development).
The Company’s Phase 1 clinical trial is
comprised of two components. In the first component, Phase 1a, 72 healthy volunteers have been enrolled in a blinded, randomized, placebo-controlled,
staggered, parallel design study to assess the safety and pharmacokinetic properties of SAT-3247. Participants were randomized across
five SAD cohorts, four MAD cohorts, and one food effect dose cohort. The second component, Phase 1b, the Phase 1b portion of the trial,
is currently ongoing. Up to 10 adult volunteers with genetically confirmed DMD will be enrolled in a 28-day, open-label, single dose
cohort to assess safety and pharmacokinetic properties in patients and explore potential pharmacodynamic markers. Satellos intends to
submit one or more IND applications in 1H 2025for the purpose of obtaining authorization to initiate the conduct of one or more Phase
2 clinical trials in non-adult DMD patients.
Follow-On Program
There are more than 30 types of muscular dystrophy
that affect humans. Each of these dystrophies has different causes that manifest into conditions ranging in severity from benign, small
impairments to motor function, to the full loss of ambulation, or even death. Satellos has conducted proof of concept preclinical studies
in relevant animal disease models showing potential for benefit by restoring the muscle regeneration process in Lama-2 Related Muscular
Dystrophy (prevalence estimates between one in 50,000 and one in 400,000 births), Collagen-VI Related Muscular Dystrophy (prevalence
of severe form of the disease estimated to be one in 1,000,000 births) and FSHD (prevalence of 4 per 100,000 individuals). These represent
potential follow-on disease indications or programs for Satellos to consider in the future. The Company also plans to evaluate additional
dystrophies as part of its ongoing research and development efforts.
Exclusivity Development Strategy
As a developer of therapeutics to treat a number
of rare diseases, Satellos is eligible and intends to apply for specific US government sponsored development programs that have potential
in certain circumstances to accelerate approval timelines and enhance market exclusivity. These programs include (but may not be limited
to):
| (1) | Orphan Drug Designation |
The Orphan Drug Designation program of the FDA
provides status to drugs which are defined as those intended for the treatment, prevention or diagnosis of a rare disease or condition,
such as Duchenne. Benefits for drugs that are bestowed ‘orphan status’ may include tax credits on clinical testing, waiving
of the new drug application (“NDA”) user fee, and eligibility for a seven-year market exclusivity upon approval of
the drug. Orphan Drug Designation applications are often submitted alongside applications for Rare Pediatric Disease Designations. On
August 8, 2024, Satellos announced that the FDA awarded SAT-3247 with Orphan Drug Designation.
| (2) | Rare Pediatric Disease Designation |
As a developer of a therapeutic for Duchenne,
a rare pediatric disease, Satellos is eligible and intends to apply for Rare Pediatric Disease Designation. Benefits for this designation
include the potential for receiving a priority review voucher that is awarded after approval of the drug. This priority review voucher
can be utilized to reduce the review process timeframe for a separate future drug development program. There is also an aftermarket for
these vouchers which have been monetized by others for substantial sums. On August 8, 2024, Satellos announced that the FDA awarded
SAT-3247 with Rare Pediatric Disease Designation.
The FDA instituted
its Accelerated Approval Program to allow for earlier approval of drugs that treat serious conditions, and that fill an unmet medical
need based on a surrogate endpoint. A surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical
sign or other measure that is thought to predict clinical benefit but, is not itself a measure of clinical benefit. The use of a surrogate
endpoint can considerably shorten the time required prior to receiving FDA approval. It is unknown at this time whether the Company will
be eligible for accelerated approval.
Drug companies are still required to conduct
studies to confirm the anticipated clinical benefit. These studies are known as phase 4 confirmatory trials. If the confirmatory trial
shows that the drug actually provides a clinical benefit, then the FDA grants traditional approval for the drug. If the confirmatory
trial does not show that the drug provides clinical benefit, FDA has regulatory procedures in place that could lead to removing the drug
from the market.
Regulatory Process
Government authorities in the United States,
including federal, state, and local authorities, and in other countries, extensively regulate, among other things, the manufacturing,
research and clinical development, marketing, labeling and packaging, storage, distribution, post-approval monitoring and reporting,
advertising and promotion, and export and import of biological products, such as those we are developing. The process of obtaining regulatory
approvals and the subsequent compliance with appropriate federal, state, local, and foreign statutes and regulations require the expenditure
of substantial time and financial resources. Securing final regulatory approval for the manufacture and sale of drug products in the
US, Europe, Canada and other commercial territories, is a long and costly process that is controlled by that particular territory’s
regulatory agency. The regulatory agency in the US is the FDA, in Canada it is Health Canada (“HC”), and in Europe
it is the European Medicines Agency. Other regulatory agencies have similar regulatory approval processes, but each regulatory agency
has its own approval processes. Approval in the US, Canada or Europe does not assure approval by other regulatory agencies, although
often test results from one country may be used in applications for regulatory approval in another country.
None of our products have been developed or tested
in a clinical trial and, therefore, it will be many years before we are in a position to seek final regulatory approval to market any
of our products. The time required to obtain approval by such regulatory authorities is unpredictable but typically takes many years
following the commencement of preclinical studies and clinical trials and will require significant additional capital.
US Government Regulations
In the US, the FDA regulates drugs under the
Federal Food, Drug, and Cosmetic Act, (“FDCA”), and the Public Health Service Act (“PHSA”), and
their implementing regulations. FDA approval is required before any new unapproved drug or biologic or dosage form, including a new use
of a previously approved drug, can be marketed in the United States. Drugs and biologics are also subject to other federal, state, and
local statutes and regulations. If we fail to comply with applicable FDA or other requirements at any time during the product development
process, clinical testing, the approval process or after approval, we may become subject to administrative or judicial sanctions. These
sanctions could include the FDA’s refusal to approve pending applications, license suspension or revocation, withdrawal of an approval,
warning letters, product recalls, product seizures, total or partial suspension of production or distribution, civil monetary penalties
or criminal prosecution. Any FDA enforcement action could have a material adverse effect on us. The process required by the FDA before
product candidates may be approved for marketing in the United States generally involves the following:
| · | completion
of nonclinical laboratory tests, preclinical animal studies, and formulation studies in accordance
with FDA’s good laboratory practice requirements and other applicable regulations; |
| · | submission
to the FDA of an IND application, which must become effective before human clinical trials
may begin; |
| · | approval
by an independent institutional review board (IRB)/ethics committee (EC), either centralized
or with respect to each clinical site, before each clinical trial may be initiated; |
| · | performance
of adequate and well-controlled human clinical trials in accordance with good clinical practice
(GCP) requirements to establish the safety and efficacy of the proposed drug for its intended
use; |
| · | submission
to the FDA of a New Drug Application (NDA) after completion of necessary and applicable supportive and registrational clinical trials;
|
| · | determination
by the FDA within 60 days of its receipt of an NDA to accept the filing for substantive review; |
| · | satisfactory
completion of an FDA advisory committee review, if determined necessary by the agency; |
| · | FDA
inspection, if requested, of the manufacturing facility or facilities at which the drug is
produced to assess compliance with cGMP requirements to ensure that the facilities, methods
and controls are adequate to preserve the drug’s identity, strength, quality, and purity,
and of selected company locations or clinical investigation sites to assess compliance with
GCP guidelines, protocol adherence, and data integrity ; and |
| · | FDA
review and approval of the NDA to permit commercial marketing of the product for particular
indications for use in the United States. |
Accordingly, prior to beginning its first
clinical trial with SAT-3247 in the United States, Satellos must submit an IND to the FDA. As a reminder, an IND is a request for
authorization from the FDA to administer an investigational new drug product to humans. The central focus of an IND submission is on
the general investigational plan and the protocol(s) for clinical studies. The IND also includes results of in vitro or in vivo
preclinical studies assessing the toxicology, PK, pharmacology, and pharmacodynamic characteristics of the product; chemistry,
manufacturing, and controls information; and any available human data such as from prior clinical trials in another regulatory
jurisdiction, or any relevant literature to support the use of the investigational product. An IND must become effective before
human clinical trials may begin. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within
the 30-day time period, raises safety concerns or questions about the proposed clinical trial. In such a case, the IND may be placed
on clinical hold until the IND sponsor and the FDA resolve any outstanding concerns or questions. Submission of an IND therefore may
or may not result in FDA authorization to begin a clinical trial.
Clinical trials involve the administration of
the investigational product to human subjects under the supervision of qualified investigators in accordance with the International Conference
on Harmonization GCP guidelines, which include the requirement that all research subjects, or parent/legal guardians of research subjects
if appropriate for the population studied, provide their informed consent for their participation in any clinical trial. Clinical trials
are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety
and the effectiveness criteria to be evaluated. A separate submission to the existing IND must be made for each successive clinical trial
conducted during product development and for any subsequent protocol amendments. Furthermore, a central IRB or an independent IRB for
each site proposing to conduct the clinical trial must review and approve the protocol for any clinical trial and its informed consent
form before the clinical trial begins at that site and must provide ethical oversight for the study until it’s completed. Regulatory
authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects
are being exposed to an unacceptable health risk or that the clinical trial is unlikely to meet its stated objectives. Some trials also
include oversight by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring
board, which may review data and endpoints at designated check points, make recommendations, and/or halt the clinical trial if it determines
that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy. There are also requirements
governing the reporting of ongoing clinical studies and clinical trial results to public registries (e.g., clinicaltrials.gov).
Human clinical trials are typically conducted
in three sequential phases that may overlap or be combined:
Phase 1: The product candidate is initially
introduced into healthy human subjects or patients with the target disease or condition. These studies are designed to test the safety,
dosage tolerance, absorption, metabolism, and distribution of the investigational product in humans, the side effects associated with
increasing doses, and, if possible, to gain early evidence on effectiveness. In the case of some products for severe or life-threatening
diseases, especially when the product may be too inherently toxic to ethically administer to healthy human subjects, the initial human
testing is often conducted in patients.
Phase 2: The product candidate is administered
to a limited patient population with a specified disease or condition to evaluate the preliminary efficacy, optimal dosages, and dosing
schedule and to identify possible adverse side effects and safety risks. Multiple Phase 2 clinical trials may be conducted to obtain
information prior to beginning larger and more expensive Phase 3 clinical trials.
Phase 3: The product candidate is
administered to an expanded patient population to further evaluate dosage, to provide statistically significant evidence of clinical
efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial sites. These clinical trials
are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product
approval.
Post-approval clinical trials, sometimes referred
to as Phase 4 studies, may be conducted after initial marketing approval. These clinical trials are used to gain additional experience
from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase
4 clinical trials as a condition of approval of an NDA.
The FDA or the sponsor may suspend a
clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an
unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical
trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected
serious harm to patients. In addition, some clinical trials are overseen by an independent group of qualified experts organized by
the sponsor, known as a data safety monitoring board or committee. Depending on its charter, this group may determine whether a
clinical trial may move forward at designated check points or when particular criteria are met, based on access to certain data from
the clinical trial.
During the development of a new drug, sponsors
are given opportunities to meet with the FDA at certain points. These points may be prior to submission of an IND, at the end of Phase
2, and before an NDA is submitted. Meetings at other times may be requested. These meetings can provide an opportunity for the sponsor
to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and the FDA to reach agreement
on the next phase of development. Sponsors typically use the meetings at the end of the Phase 2 clinical trial to discuss Phase 2 clinical
results and present plans for the pivotal Phase 3 clinical trials that they believe will support approval of the new drug. Fast Track
Status or Breakthrough Designation provide opportunities for sponsor to have more frequent interaction with the FDA.
Phase I, Phase II, and Phase III clinical testing
may not be completed successfully within a specified period, if at all, and there can be no assurance that the data collected will support
FDA approval of a product candidate. Concurrent with clinical trials, companies usually complete additional animal studies and must also
develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing
the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently
producing quality batches of the product candidate and, among other things, the manufacturer must develop methods for testing the identity,
strength, quality, and purity of the final drug. In addition, appropriate packaging must be selected and tested, and stability studies
must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.
While the IND is active and before approval,
progress reports summarizing the results of the clinical trials and nonclinical studies performed since the last progress report must
be submitted at least annually to the FDA, and written IND safety reports must be submitted to the FDA and investigators for serious
and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the same or similar
drugs, findings from animal or in vitro testing suggesting a significant risk to humans, and any clinically important increased incidence
of a serious suspected adverse reaction compared to that listed in the protocol or investigator brochure.
NDA Review and Approval Process
Assuming successful completion of all required
testing in accordance with all applicable regulatory requirements, the results of product development nonclinical studies and clinical
trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug, proposed labeling
and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the product. The submission of
an NDA is subject to the payment of substantial user fees; a waiver of such fees may be obtained under certain limited circumstances.
Additionally, no user fees are assessed on NDAs for products designated as orphan drugs, unless the product also includes a non-orphan
indication.
The FDA reviews an NDA to determine, among
other things, whether a product is safe and effective for its intended use and whether its manufacturing is cGMP-compliant to assure
and preserve the product’s identity, strength, quality, and purity. Under the Prescription Drug User Fee Act (PDUFA),
guidelines that are currently in effect, the FDA has a goal of ten months from the date of “filing” of a standard NDA
for a new molecular entity to review and act on the submission. This review typically takes 12 months from the date the NDA is
submitted to FDA because the FDA has approximately two months to make a “filing” decision after the application is
submitted. The FDA conducts a preliminary review of all NDAs within the first 60 days after submission, before accepting them for
filing, to determine whether they are sufficiently complete to permit substantive review. The FDA may request additional information
rather than accept an NDA for filing; in this event, the NDA must be resubmitted with the additional information. The resubmitted
application is also subject to review before the FDA accepts it for filing.
The FDA may refer an application for a novel
drug to an advisory committee. An advisory committee is a panel of independent experts, including clinicians and other scientific experts,
that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The
FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.
Before approving an NDA, the FDA will typically
inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that
the manufacturing processes and facilities are in compliance with cGMP and adequate to assure consistent production of the product within
required specifications. Additionally, before approving an NDA, the FDA will typically inspect a sponsor location and one or more clinical
sites to assure compliance with GCP guidelines. If the FDA determines that the application, manufacturing process, or manufacturing facilities,
or conduct of the clinical trials are not acceptable, it will outline the deficiencies in the submission and often will request additional
testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the
application does not satisfy the regulatory criteria for approval.
After the FDA evaluates an NDA, it will issue
an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with prescribing information
for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete, and the application
will not be approved in its present form. A Complete Response Letter usually describes the specific deficiencies in the NDA identified
by the FDA and may require additional clinical data, such as an additional pivotal Phase 3 clinical trial or other significant and time-consuming
requirements related to clinical trials, nonclinical studies, or manufacturing. If a Complete Response Letter is issued, the sponsor
must resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data and
information are submitted, the FDA may decide that the NDA does not satisfy the criteria for approval.
If regulatory approval of a product is granted,
such approval will be granted for particular indications and may entail limitations on the indicated uses for which such product may
be marketed. For example, the FDA may approve the NDA with a risk evaluation and mitigation strategy (REMS) to ensure the benefits of
the product outweigh its risks. A REMS is a safety strategy to manage a known or potential serious risk associated with a medicine and
to enable patients to have continued access to such medicines by managing their safe use. It could include medication guides, physician
communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries, and other risk minimization
tools. The FDA also may offer accelerated approval with postmarketing confirmatory trial requirements or approvals subject to other postmarketing
requirements, including among other things, changes to proposed labeling or the development of adequate controls and specifications.
Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing requirements is not maintained or
if problems occur after the product reaches the marketplace. The FDA may also require one or more Phase 4 post-marketing studies and
surveillance to further assess and monitor the product’s safety and effectiveness after commercialization and may limit further
marketing of the product based on the results of these post-marketing studies. In addition, new government requirements, including those
resulting from new legislation, may be established, or the FDA’s policies may change, which could impact the timeline for regulatory
approval or otherwise impact ongoing development programs.
Intellectual Property: Satellos Portfolio
Satellos has developed a patent, trademark and
regulatory strategy to protect the value and integrity of its assets. Satellos has engaged a top-tier international law firm to strategically
develop and execute its intellectual property assets.
Satellos has in-licensed technology, and has
developed what it believes to be is a strong and defensible intellectual property position for its own proprietary technology in keeping
with industry practices. Satellos places significant importance on patents for the protection of new technologies, products and processes,
and files patent applications to protect its core discoveries and inventions. The Company may also choose to protect its technology with
the use of trade secrets and know-how. Satellos’ success relies on its ability to secure patents or corresponding rights, protect
trade secrets, and operate without infringing on the rights of third parties.
Satellos actively monitors the technology landscape
from a competitive perspective, with the use of proprietary and public databases. This information helps inform Satellos’ intellectual
property strategy to effectively protect its intellectual property assets.
| · | “A
method of stimulating asymmetric division of satellite stem cells” (patents/applications
derived from PCT/US2018/207920); |
| · | “Wnt7a
compositions and methods of using the same” (patents/applications derived from PCT/US2012/055396); |
| · | “Compositions
and methods for modulating stem cells and uses thereof” (patents/applications derived
from PCT/CA2010/000601); |
| · | “Modulation
of satellite stem cell polarity and asymmetric cell division” (patents/applications
derived from PCT/WO2023/230523); and |
| · | “AP2
associated kinase 1 inhibitors and uses thereof” (patents/applications based on PCT/US2024/045579). |
The patent portfolio represents Satellos’
core intellectual property, related to its novel technologies. For clarity, the included in the patent portfolio are composition-of-matter
patent applications for its novel inhibitors of AAK1.
Satellos’ patent strategy involves aggressively
prosecuting and maintaining its existing patents while actively pursuing new patent protection through additional filings for its novel
discoveries, inventions, and related improvements. Satellos seeks to secure intellectual property protection in major markets for its
key intellectual assets to advance its corporate objectives.
Satellos is actively pursuing trademark protection
in various global jurisdictions to protect its brand.
Satellos actively explores strategies to extend
the life of its intellectual property portfolio through follow-on patent filings and patent term extension strategies, along with regulatory
strategies such as Orphan Drug status, to gain accelerated market access or additional market exclusivity for our drug candidates. In
this regard, Satellos was granted Orphan Drug Designation and Rare Pediatric Disease Designation by the FDA in 2024 for SAT-3247. Orphan
Drug Designation supports the development of medicines for underserved patient populations or rare disorders by offering the potential
for seven years of market exclusivity following regulatory approval. Additionally, this designation provides exemptions from FDA regulatory
application fees, tax credits for relevant clinical trials, and a priority review voucher. The Rare Pediatric Disease Designation may
create opportunities for priority marketing reviews of other products. Satellos will continue to leverage these types of mechanisms in
other jurisdictions and as new products and technologies are developed.
License Agreement: Ottawa Hospital Research
Institute
Effective May 1, 2018, Pre-Arrangement Satellos
and the OHRI entered into a license agreement whereby the OHRI granted Pre-Arrangement Satellos an exclusive, world-wide, sublicensable,
royalty bearing right and license to a body of technology and patents comprised of five patent families to develop, make, have made,
import, use, offer for sale, sell and have sold or otherwise commercialize licensed products (the “OHRI License”).
The OHRI License contains provisions describing a process for the ongoing disclosure and potential licensing to Satellos of new discoveries
or inventions which may occur at the OHRI and which may have relevance to the field in which the Company operates as it is defined in
the OHRI License.
Ottawa Hospital Research Institute
Effective May 1, 2018, Pre-Arrangement
Satellos and the OHRI entered into a sponsored research agreement, during the term of which OHRI has agreed to carry out specific
research and development activities according to a prescribed statement of work, as may be amended from time to time, under the
direction of the Company’s co-founder, Dr. Michael A. Rudnicki (the “OHRI SRA”). Under the OHRI SRA,
Dr. Rudnicki leads a dedicated R&D team who are engaged solely to execute the agreed R&D program of Satellos, under his
direction and as defined in the statement of work.
Competitive Conditions
The biotechnology industry which the Company
operates within is intensely competitive in all its phases, and the Company faces immense competition from other companies, some of
which can be expected to have more financial resources and retail, formulation, research, processing, and marketing experience than
the Company. There can be no assurance that potential competitors of the Company, which may have greater financial, formulation,
research, production, sales and marketing experience, and personnel and resources than the Company, are not currently developing, or
will not in the future develop, products and strategies that are equally or more effective and/or economical as any products or
strategies developed by the Company or which would otherwise render the Company’s business, products and strategies, as
applicable, ineffective, or obsolete. Increased competition by larger and better- financed competitors could materially and
adversely affect the business, financial condition and results of operations of the Company.
Market Overview
Since its inception, Satellos’ lead therapeutic
program has been acutely focused on the discovery and development of novel, disease modifying treatments for the lethal pediatric muscle
disease, Duchenne muscular dystrophy (“DMD” or “Duchenne”). DMD is a progressive genetic muscle wasting medical
condition that is predominantly found in boys. Although spontaneous gene mutations can occur, Duchenne is primarily an inherited X-linked
genetic disorder whereby a mutation in the dystrophin gene results in the absence or the severely impaired production of the dystrophin
protein which is essential for muscle structural integrity and the ability of muscle stem cells to properly regenerate injured muscles.
As yet, Duchenne remains uncurable.
Duchenne is the most severe form of dystrophinopathies
and presents as a progressive weakening and degeneration of the heart, respiratory muscles and skeletal muscles in children. The first
symptoms of muscle weakness are typically noticed between the ages of 3 – 5 years and worsen with age to the point of a loss of
ambulation. With continued degeneration and loss of function, the condition causes pre-mature death via cardiovascular complications.
The National Center for Advancing Translational Sciences, part of the National Institutes of Health, estimates that the combined Duchenne
patient population across all ages approaches 300,000 persons globally. The current standard of care and the main focus of investigative
research has been directed toward slowing the progression of the disease or managing its symptoms.
Current treatments for Duchenne are classified
under three main areas: glucocorticoids (steroids), oligonucleotide medicines and gene therapies.
The use of corticosteroid or corticosteroid-derived
medicines [prednisone (1974), branded EMFLAZA® (deflazacort, 2017) and more recently AGAMREE® (vamorolone,
2023), represent the standard of care in the treatment of Duchenne. These medicines have largely been responsible for quality-of-life
improvements since their introduction and have played an important role in alleviating the inflammation associated with this disease
leading to improvements in muscle strength, a slowing of muscle loss and an extension of ambulation. PTC Therapeutics’ revenue
for deflazacort was US$255 million in 2023 with an annual cost of approximately US$80,000; Deflazacort has also been associated with
a significant side effect profile and a failure to treat the fundamental cause of the dystrophinopathy. Santhera Pharmaceuticals launched
AGAMREE® in Germany in January 2024, while its North American partner, Catalyst Pharmaceuticals initiated its launch
of vamorolone in mid-March 2024. Market pricing has not been disclosed though one might expect deflazacort to be used as a reference
point.
A recently approved treatment approach focused
on very specific genetic mutations found within the dystrophin gene is called exon-skipping. In this regard, exon-skipping therapies
seek to skip or pass over a mutated region of the dystrophin gene as it is being read which facilitates some production of the dystrophin
protein. This class of drug is specific to the patient’s gene mutation, Exon 45 mutations specifically require Exon 45 skipping.
Exon 45 skipping therapies will not work in a patient with a mutation of Exon 51 or Exon 53 for example.
While evidence of clinical improvement is minimal,
Sarepta Therapeutics’ approved exon-skipping drug therapies, EXONDYS 51 (eteplirsen, 2016), VYONDYS 53 (golodiresen, 2019) and
AMONDYS 45 (casimersen, 2021) generated approximately $1.05B in 2023. Annual costs for exon-skipping therapy are approximately US$750,000
(Source: Drugs.com). These therapies are only indicated for patients with exon 51, 53 and 45 mutations, which represent approximately
12%, 10% and 9% of the Duchenne population, respectively. A competing product, Exon 51-skipping Viltepso® (viltolarsen)
from NS Pharmaceuticals, was approved in the U.S. in 2020 and generated US$125 million in revenue based on an annual per patient cost
of US$733,000.
A second genetics-based
therapy (alters ribosome activity during translation), TranslarnaTM, (ataluren) is indicated for roughly 12% of the Duchenne
population that carry a nonsense mutation and is currently approved in the EU (2014) and Brazil (2019). In 2023, sales for TranslarnaTM
were US$356 million (Source: PTC Therapeutics 2023 Annual Report) based on an annual per patient cost of US$245,000. The EMA has recently
recommended that the marketing authorization for TranslarnaTM not be renewed (January 2024) due to the lack of benefit
concerns.
A new entrant has recently been approved by
the FDA within the gene therapy segment: Elevidys (delandistrogene moxeparvovec). Developed and marketed by Sarepta Therapeutics,
Elevidys is a gene therapy product that encodes and increases the production of micro-dystrophin in individuals with Duchenne.
Approved by the FDA in June 2023 for the treatment of ambulatory Duchenne patients aged 4 through 5 years old, Elevidys’
FDA approval was based on the expectation that an increased expression of micro-dystrophin was “reasonably likely to predict
clinical benefit” in DMD patients. The label market approval has since been broadened to all patients with a confirmed
diagnosis of DMD, including non-ambulatory individuals. Sales of Elevidys generated US$820.8 million in revenues in 2024. The price
of the single dose infusion of Elevidys is US$3.2 million.
In late-breaking news on March 21, 2024,
the FDA granted marketing approval to Italfarmaco SpA’s givinostat (Duvyzat) for individuals with Duchenne aged 6 years and older.
Duvyzat is the first non-steroidal drug approved to treat patients with all genetic variants of DMD. It has been designed to inhibit
histone deacetylase enzymes. In the phase 3 EPIDYS trial which provided the supporting data for approval, results showed a slower decline
in treated patients on the time to climb 4 stairs in comparison with a placebo group. We believe the approval of a non-steroidal drug
potentially suitable for Duchenne patients regardless of dystrophin mutation status is a positive development for patients and a favourable
portent for Satellos’ development and commercialization planning.
Despite efficacy
considerations and the potential removal of the approved DMD therapy, TranslarnaTM, growth estimates by market analysts remain
quite high, with an estimated compound annual growth rate of ~41% (Source: Grandview Research Market Analysis Report Duchenne Muscular
Dystrophy Drugs Market Size) for these and other products currently in late-stage development. Based on approved product sales data in
the major global pharmaceutical markets, the current market for therapeutics to treat Duchenne is estimated to be US$4.1B in 2024. The
projected growth estimates for both current and expected new therapeutics intended to be disease modifying, such as micro-dystrophin
gene replacement therapies, is projected to reach US$27.4 B by 2030 (US$18.1 B gene therapy/exon skipping; US$5.3 B steroids; US$4.0
B “other”) with US$13.9 B from the United States (Source: Global Industry Analysts, Inc., 2023). It is believed that
these favourable forecasts are due to the lack of effective treatment options and the understandable longing of patients and their families
for relief from this debilitating, progressive and ultimately fatal disease.
Notwithstanding the significant market projections,
all current therapeutic approaches, either approved or currently in development, including exon skipping, gene correction and gene therapy,
predominantly aim to enhance the function and preservation of existing muscle tissues. As a result, these approaches are unlikely to
be effective at addressing the inherent regeneration deficits seen in DMD patients and identified by Satellos which we believe is a root
cause explaining the progressive, ongoing muscle loss that is experienced by people living with Duchenne. Thus, Satellos’ approach,
in attempting to reinstate the ability of muscle to regenerate through the specific pharmaceutical targeting of muscle stem cells, is
unique. It also, being dystrophin-independent and not tied to specific mutations, has potential to be a stand-alone therapy across a
broad spectrum of ambulatory and non-ambulatory patients as well as add-on therapy to other approaches which do not address regeneration.
Based on the potentially transformative and disease
modifying nature of treating a root cause of Duchenne, Satellos anticipates significant market potential for its products. It is estimated
that a novel chronically delivered therapeutic with disease modifying benefits, such as Satellos envisages, could be priced in excess
of US$750,000 annually. This conservative estimate is based on referencing the treatment cost of the exon skipping drugs previously mentioned,
yet with the ability to improve muscle function not simply halt its decline. Based on these estimates, and a significant global patient
pool, the annual revenue potential for an effective, disease modifying drug treatment for Duchenne should exceed $1 billion per year.
Given the precedent of cost approvals of competing
DMD drugs, Satellos believes that the patient per year costs will be covered by insurance providers and/or national health systems. Our
expectation remains that, based on its molecular mechanism of action, our future drug product has the potential to confer several advantages
over existing treatment approaches, including reduced untoward side effects (e.g., diabetes, bone damage, immune reactions), ease of
administration (tablet), and functional benefits from the repair and regeneration of muscle. Thus, with an improved quality of life and
an increased efficiency of care resources, we believe the arguments in favour of general reimbursement for this drug have the potential
to be quite strong.
Business Strategy
To advance SAT-3247 and potentially
accelerate regulatory approvals, Satellos aims to first demonstrate safety, biological activity and the potential for functional
benefit through the treatment of Duchenne patients in different age groups in early clinical trials (i.e., Phases 1 and 2). In
parallel, we intend to file for all applicable FDA designations where criteria can be met that could benefit our workflow including
orphan drug and rare pediatric disease designations as well as accelerated approval, as described above. We believe this represents,
collectively, a sound basis on which to create shareholder value and market demand for our products and technologies. It will inform
and enable our ability to explore and evaluate three broad approaches for optimizing value creation and monetization:
(1) leveraging market demand into development and commercialization partnerships with biopharmaceutical companies in
risk-reward sharing arrangements; (2) continuing to advance development and commercialization of our lead clinical product for
Duchenne; and (3) exploring M&A transactions. The foregoing may include a mix of joint venture arrangements, regional
partnerships or co-development and co-marketing collaborations, depending on clinical trial outcomes, market and environmental
conditions, and risk/reward trade-offs. Through these relationships, Satellos will seek to have its products approved and registered
for sale globally.
Specialized Company Skill and Knowledge
The Company intends to establish itself as a
leader in the research and development of novel therapeutics for the treatment of life-threatening diseases. The Company’s directors
and officers possess a breadth of knowledge and expertise to develop and execute the Company’s business strategy and support its
technical capabilities. In addition, by leveraging the management and operational team’s combined expertise, the Company believes
it possesses the ability to execute its commercial and operational strategy. The Company intends to continue to build out its team with
additional specialists and expert consultants to align with the core business goals and objectives in a time sensitive and cost-effective
manner. The Company’s full and part-time employees and key consultants include 10 individuals with PhD’s, 1 with an M.D.,
4 with an MBA or MSC and 5 with a finance designation.
Business Cycles
The Company’s business is not expected
to be cyclical or seasonal.
Economic Dependence
The Company’s business is not expected
to be economically dependent on any contracts for the foreseeable future.
Changes to Contracts
Other than as disclosed in this Annual Information
Form, Satellos does not reasonably anticipate being materially affected by re-negotiation or termination of contracts or sub-contracts.
Environmental Protection
There are no
financial and operational effects of environmental requirements on the capital expenditures, profit or loss and competitive position
of the Company in the current financial year and none is expected in future years.
Employees
As of December 31, 2024, Satellos,
directly and through its subsidiaries, employed fourteen full-time employees, three part-time employees and ten key consultants in Canada
and the United States.
Dr. Michael Rudnicki is not an employee,
but, pursuant to a consulting contract, provides key services to the Company in the role of Chief Discovery Officer. The Company also
contracts with other consultants on an as-needed basis to provide highly skilled and specialized knowledge in a cost-efficient manner.
Foreign Operations
The Company has three wholly-owned subsidiaries of which two are foreign:
an Australian subsidiary, Satellos Bioscience Australia Pty Ltd. and a United States (Delaware) subsidiary, Satellos Bioscience US, Inc.
Social or Environmental Policies
To date, the Company has not implemented social or environmental policies.
However, the Company is aware that it may need to adopt additional social, environmental and human rights policies in the future.
Reorganizations
On August 13, 2021, Pre-Arrangement Satellos
and iCo completed the Arrangement, a reverse takeover transaction which was completed by way of plan of arrangement under Section 192
the CBCA. Please refer to “Corporate Structure” above for further details.
Legacy Asset
Through its business combination with iCo the
Company acquired the iCo Portfolio including the Oral Amp B Delivery System, a patented oral transport technology licensed exclusively
by iCo from the University of British Columbia (“UBC”) in 2008 (such license, the “UBC License Agreement”).
Amphotericin B Technologies Inc. (“Amp B”) was established as a wholly owned subsidiary of the Company as part of
a renewed strategy to create value and attract partnerships and/or funding. The UBC License Agreement was assigned to Amp B with the
consent of UBC. During the quarter ended September 30, 2024, the UBC License Agreement was mutually terminated.
On August 18, 2021, Satellos announced that
Amp B had entered into a Joint Development Agreement (the “JDA”) with NW PharmaTech Limited (“NW PharmaTech”).
The purpose of the JDA was to collaborate on the development of an oral formulation of cannabidiol to be targeted at the global market
as an over-the-counter sleep aid. Effective February 4, 2022, pursuant to the JDA, Satellos and UT entered into a Sponsored Research
and Collaboration Agreement to develop Amp B Tech’s formulation technology for cannabidiol-based sleep aid products (the “UT
SRA”). Effective October 3, 2023, pursuant to the JDA, Satellos and the University of Toronto (“UT”)
entered into a second Sponsored Research and Collaboration Agreement to develop Amp B Tech’s formulation technology for cannabidiol-based
products (the “UT SRA 2”).
On October 6, 2022, NW Micelle Therapeutics
Inc. (“NWMT”) was established for the purpose of developing an oral formulation of cannabidiol technology for the
treatment of insomnia and other indications relating to mental health (“Oral CBD”). NW PharmaTech holds 85% of the
shares in NWMT and Amp B holds 15%. Amp B is entitled to a seat on the board of NWMT and receives certain anti-dilution protections.
NW PharmaTech Ltd. (“NWPT”) obtained a call option to acquire Amp B from Satellos for US$3 million while Satellos
received a put option to trigger a sale of Amp B to NWPT, also for US$3 million. On October 5, 2024, Satellos exercised its put
option, however, NPWT were not able to fulfil their obligations under the terms of the agreement.
NWMT has agreed to reimburse Satellos for all
amounts due to UT under the UT SRA and SRA 2, and Satellos has granted its rights under UT SRA and UT SRA 2 to NWMT.
The Company is no longer incurring development costs associated with
the iCo Portfolio nor does it anticipate doing so in the future.
RISK FACTORS
Investing in our securities involves a high degree
of risk. Before deciding to invest in our securities, you should carefully consider the risks described below, together with other information
included in or incorporated by reference into this Annual Information Form and filed on SEDAR+ at www.sedarplus.ca. If any
of the following risks materialize, the business, financial condition, results of operation and future prospects of the Company will
likely be materially and adversely affected. This could cause actual future events to differ materially from those described in forward-looking
statements and may cause the trading price of our securities to decline. The following discussion highlights some of the risks and uncertainties
facing the Company.
Risk Factors Relating to the Company
The Company’s principal business is substantively
constituted on the discovery and development of new drug candidates to treat muscle wasting disorders, initially for Duchenne. Due to
the nature of Satellos’ business as a biotechnology company, the Company may be subject to significant risks and uncertainties,
including but not necessarily limited to technical and scientific, regulatory and clinical, and business and financial, which are set
out and discussed below. Readers should carefully consider all such risks and uncertainties set out in the discussion below and be mindful
that additional risks and uncertainties not currently known or reasonably foreseeable may arise.
Satellos may not be able to maintain our operations
and research and development without additional funding, and we may not have access to sufficient capital.
Since its inception, Satellos has incurred significant
losses and we have financed our operations primarily through public offerings of Common Shares, private placements, the issuance of convertible
notes and research tax credits. We have incurred significant operating losses and negative cash flows from operations since inception.
As of December 31, 2024 we had available cash, cash equivalents and short-term investments totaling $69.9 million. Based on management’s
estimate and current level of operations, we believe that our current liquidity position is sufficient to finance our operations through
2026. We will need to raise additional capital to fund our operations and to develop SAT-3247 and our other development candidates. Our
future capital requirements will be substantial and may increase beyond current expectations depending on many factors, such as the duration,
scope, rate of progress, results and costs of any preclinical studies and clinical trials for our current or any future product candidates;
unexpected delays or developments in seeking regulatory approvals and the outcome thereof; the time and cost in preparing, filing, prosecuting,
maintaining, and enforcing patent claims; other unexpected developments encountered in implementing our business development and commercialization
strategies; the outcome of any litigation; and arrangements with collaborators. Further, changing circumstances may cause us to consume
capital significantly faster than we currently anticipate. We have based the foregoing estimates on assumptions that may prove to be
wrong, and we could utilize our available financial resources sooner than we currently expect.
We may seek to raise additional funds through
public or private equity or debt financing, collaborations agreements with other companies and/or from other sources. We have no committed
source of additional capital and additional funding may not be available on terms that are acceptable to us, or at all. If adequate funding
is not available on reasonable terms, we may need to obtain funds on terms less favorable than we would otherwise accept. To the extent
that additional capital is raised through the sale of equity or convertible debt securities, the issuance of those securities could result
in dilution to our shareholders. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we
may have to significantly delay, scale back or discontinue the development or commercialization of SAT-3247 or other future product candidates
or other research and development initiatives. We could be required to seek collaborators for our product candidates at an earlier stage
than otherwise would be desirable or on terms that are less favorable than might otherwise be available or relinquish or license on unfavorable
terms our rights to our product candidates in markets where we otherwise would seek to pursue development or commercialization ourselves.
If we are unable to obtain sufficient funds in a timely manner, we may be forced to scale back our operating plan; delay or discontinue
one or more of our research and development programs; be unable to expand our organization to support our programs; and/or be unable
to capitalize on business opportunities as planned. This may negatively impact our business and ability to execute our operating plan.
No assurance can be given that any such additional
funding will be available or that, if available, it can be obtained on terms favorable to us. The failure to obtain additional financing
on favorable terms, or at all, could have a material adverse effect on our business, financial condition, results of operations and prospects.
It will be many years before the Company expects to generate
revenues from product sales to fund its operations, if ever.
The Company does not expect to have a product
candidate approved for sale for several years as it advances its technology through the various stages of preclinical development, clinical
trial evaluation and regulatory approval process. We have incurred substantial expenses on development efforts today and have generated
operating losses each year since inception. For the years ended December 31, 2024 and 2023 we incurred net losses of $28.1 million
and $15.9 million respectively and an accumulated deficit of $75.6 million as at December 31, 2024 and $47.5 million as at December 31,
2023. We do not expect to generate any revenues from product sales in the immediate future. We may never successfully commercialize any
products. Even if we succeed in developing commercial products, we expect to incur additional operating losses for at least the next
several years.
As a result, and as is typical for biotechnology
companies in such circumstances, the Company anticipates financing its on-going cash requirements for the foreseeable future through
a combination of equity offerings, debt financings, government or other third-party funding, marketing and distribution arrangements
and other collaborations, partnership agreements and licensing arrangements, and government or philanthropic programs. There is considerable
market risk and uncertainties associated with securing such arrangements that may adversely affect the Company’s ability to prosecute
its business plan as intended and negatively impact its stock price.
Risks associated with the Novelty and Early Stage of Development
of the Company’s Technologies and Therapeutic Products or Programs
The Company’s programs are subject
to significant technical risks and scientific unknowns due to their novelty and stage of development.
The Company’s technology is based on highly
original discoveries and hypotheses, and its drug development programs are of an early nature, being in the early clinical development
phase. As such, R&D activities over the next 12 months are expected to focus on filing for and obtaining regulatory approvals in
numerous jurisdictions to initiate and conduct Phase 2 clinical trials in patients with DMD. This may require additional preclinical
development studies to be conducted to support the intended regulatory applications. Technical or scientific setbacks are likely due
to the nature of the scientific process and general uncertainties associated with the drug development process. While the Company has
anticipated the potential for setbacks in its resource and timeline plans, it is possible that serious unforeseen setbacks could occur
in these areas of focus over the next 12 months. Such an eventuality would likely cause the Company to incur additional costs or experience
delays in completing its plans on a timely basis, or, depending on their severity, possibly preclude the development and subsequent commercialization
of its product candidates. Depending on the gravity of delays or cost increases, the share price of the Company may be adversely affected
and potentially, its business operations could be materially harmed.
The Company’s drug product candidates
may display serious adverse or intolerable side effects during ongoing development.
The Company’s lead drug candidate, SAT-3247
is in the early clinical phase of development (i.e., Phase 1). On a statistical basis, drug candidates at this stage of development have
an extremely high risk of failure. It is not uncommon for toxicologic, serious adverse or intolerable side effects to be identified during
the development of the drug product candidates in the biotechnology industry. If such adverse effects arise, the Company may incur additional
costs and/or time delays in attempting to address the underlying issue/s giving rise to the adverse effects. If the Company is unable
to correct the problem on a timely basis or at a reasonable cost, it may need to abandon development of the drug candidate or limit its
development to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less
severe or more acceptable from a risk-benefit perspective. Any or all of these outcomes could adversely affect the value of the Company
and its stock price, and potentially impair its ability to continue operations.
The Company
may not be able to translate its novel discoveries into viable therapeutic treatments suitable for clinical development.
The Company
is pioneering a new approach to treating muscle disorders. The Company’s muscle stem cell discoveries are unique and the mechanisms
of action it has uncovered have never been modulated for therapeutic purposes in muscle regeneration. The pioneering of this new pharmacology
has caused the Company to face certain transaction hurdles. Among other things, the Company will need to determine the appropriate dosing
regimens (including dose levels and frequency/interval of dosing) that elicit desirable effects and for how long such effects endure.
Determining appropriate dosing regimens may involve significant iterative efforts, take longer than anticipated, or not be achievable
at all. Significant delays or a failure to establish the appropriate pharmacological parameters to translate the Company’s discoveries
may severely impede the Company’s product and clinical development progress which may result in materially adverse effects on the
Company’s value and stock price, and could impair its ability to continue operations.
Modulating the Notch pathway via AAK1 may
reveal safety concerns or require additional safety studies.
Ongoing preclinical and clinical studies will
be undertaken by the Company to complement and expand data generated to date for a wide range of drug development reasons. Additionally,
preclinical studies will be designed and conducted as required or requested to satisfy regulatory requirements for the purpose of establishing
safety tolerances for inhibition of AAK1 with SAT-3247 or SAT-3153 and/or to highlight potential issues that may hinder development for
use in humans. While evidence to date suggests to the Company that inhibition of AAK1 at doses anticipated by the Company to be administered
in humans to achieve the desired pharmacological effect will have no serious or adverse safety effects, there can be no guarantee that
results of the Company’s ongoing or future preclinical safety and toxicological studies will not yield a previously unseen or unknown
or unexpected safety concern. Such an outcome could delay expected clinical timelines, introducing additional costs and risk, and may
adversely affect the Company’s value and share price. The Company is also conducting toxicology studies at dose levels significantly
higher than the anticipated therapeutic dose levels; the results of these studies could also delay expected clinical timelines, introducing
additional costs and risk, and may adversely affect the Company’s value and share price
SAT-3247 or our other development candidates may not be suitable
for continuing development in humans.
In addition to safety consideration, preclinical
and early clinical studies are often designed to: determine preferred dosing regimens, route of administration (i.e., oral, injection, etc.)
and drug levels that yield the desired pharmacological effects prior to testing in humans; establish duration of trials to be conducted
in humans; and, consider the effects of drug-drug interactions with other drug prescribed to target patients. The Company is currently
conducting such studies and it is possible that results from such studies may highlight one or more issues which limit the potential
utility of SAT-3247 or SAT-3153 as an oral drug candidate for the treatment of Duchenne. While the Company believes that SAT-3247 and
SAT-3153 have potential as inhibitors of AAK1 to treat Duchenne patients by an orally available pill or tablet at dose levels which it
anticipates could be safe and effective, there can be no guarantee that the results from further preclinical or clinical studies will
substantiate this view. Such an outcome could delay or impede clinical trials, introducing additional costs and risk, and may adversely
affect the Company’s value and share price.
SAT-3247
may exhibit unexpected issues during ongoing studies which delay or prevent or impeded the timely commencement or ongoing conduct of
clinical trials.
Prior to commencing clinical trials in humans
at each stage of development (i.e., Phase1, Phase 2 and Phase 3), successful completion of which are a precondition for ultimately obtaining
a product registration and marketing approval, a sponsoring company must submit prescribed dossiers to regulatory authorities in jurisdictions
in which it is seeking approval to conduct clinical trials. Typical choices include the FDA in the USA, the EMEA in Europe and Health
Canada (“HC”); the filing dossier is known as either an IND submission in the case of the FDA or a CTA in the case
of the EMEA and HC. Prior to submitting an IND/CTA dossier, a body of largely experimental work is undertaken in order to generate the
requisite data set expected by the regulators. During the execution of IND-enabling studies, it is possible that untoward effects that
had not previously been seen in preclinical studies, such as a dose-limiting toxicity or a manufacturing issue, will manifest. Such findings
may introduce material delays or add additional costs to the Company’s timelines and budgets for commencing clinical trials. Additional
financing may be required which may cause dilution to shareholders. Depending on the severity of the issues, the Company’s share
price may be negatively affected and the competitive viability of its Duchenne program impaired.
SAT-3247 and our other development candidates
may not be patentable.
The Company has made efforts to ensure the novelty
of its chemistries and believes SAT-3247 and related compounds are novel inhibitors of AAK1. However, the Company is aware of other inhibitors
of AAK1 and it is possible that the Company’s chemical structures could infringe the patents of others. This may not be known for
some time. Should this occur, depending on the severity of the possible infringement, the Company’s share price may be negatively
affected and the competitive viability of its Duchenne program impaired.
Risks to the Company associated with Clinical
and Regulatory Processes
There can be no guarantee that
the Company will obtain the required regulatory authorization(s) to commence the Phase 2 clinical trial program on a timely basis,
or at all.
Prior to obtaining regulatory approval to register
and begin marketing a new drug candidate, a sponsoring company must conduct exhaustive clinical trials in humans, often over many years,
to evaluate and determine the safety and efficacy of its drug candidates. Generally, sponsoring companies will seek authorization to
conduct clinical trials in humans in one or more jurisdictions such as with the FDA in the USA, the EMEA in Europe or Health Canada once
it has completed the requisite preclinical development work. Securing FDA or Health Canada authorization to commence human clinical testing
requires the submission of extensive preclinical and supporting information to the FDA or Health Canada for each product candidate to
be tested. The process of obtaining authorization to commence human clinical testing, both in the United States and Canada, as well as
abroad, is expensive and lengthy and can vary substantially based upon a variety of factors, including the type, complexity and novelty
of the product candidates involved. Regulators such as the FDA or Health Canada have substantial discretion in the authorization process
and may refuse to accept any application or may decide that the submitting company’s data is insufficient for approval to commence
human clinical testing and/or require additional preclinical or other studies. In addition, varying interpretations of the data obtained
from preclinical testing could delay, limit or completely prevent authorization to commence human clinical testing of a product candidate.
Efficacy or other positive results of the
Company’s drug candidate(s) seen in preclinical animal model testing may not translate to and be seen in human clinical trials
which would have a deleterious effect on the clinical development and potential for regulatory approval of the Company’s drug candidates.
Evaluating drug candidates in human clinical
testing can be very costly, challenging to design and implement, and take significant time to complete. These trials are done in a stepped
fashion from Phase I to Phase II to Phase III with the intent to show safety on a continuing, progressive basis through exposure to increased
populations of healthy and then patient volunteers while in parallel, exploring and demonstrating the potential for beneficial therapeutic
effect. Clinical trials are inherently risky and there can be no assurance that the desired outcomes will be achieved nor that a drug
candidate will progress smoothly from one step to the next. It is not uncommon in the biotechnology industry that positive efficacy or
other beneficial therapeutic results seen in preclinical testing in animal models of a disease, as has been demonstrated with SAT-3247
and SAT-3153, do not translate in an equivalent manner, or at all, to humans during clinical trial testing as animals are not always
predictive of humans. This is true in Duchenne as well, where numerous therapeutic approaches which showed promise in preclinical developments
did not demonstrate sufficient promise in human clinical testing to warrant continued development or market approval. There can be no
assurance that positive or beneficial results shown by the Company’s drug candidates in preclinical animal model testing will translate
to meaningful benefits in humans which are sufficient to justify and support continued clinical development. Such an outcome could potentially
lead to the cessation of clinical development of the drug candidate(s) and adversely affecting the Company’s market value
and possible viability.
Clinical trials in humans may exhibit previously
undetected side-effects which may cause additional costs or delays in conducting clinical trials and possibly impede the Company’s
ability to complete clinical development of its drug candidate(s).
Unexpected or more severe adverse side effects
than seen from preclinical safety testing can occur in human clinical testing as the number patients treated or duration of treatments
increase. There can be no assurance that Company’s product candidates will not be shown in human clinical testing to have unacceptable
side effects or toxicities not seen or predicted from preclinical safety assessments. If clinical trials of SAT-3247 fail to demonstrate
adequate safety to the satisfaction of Health Canada and the FDA (or similar regulatory authorities outside the US) on a progressive
basis through the phases of clinical development, the Company may incur additional costs or experience delays in completing, or ultimately
be unable to complete the clinical development of its product candidate(s). Such an outcome may severely impair the Company’s value
and ability to continue operations.
Clinical trials of SAT-3247 or other development
candidates may be protracted due to a limited number of patients available for recruitment and may not be completed on a timely basis.
Duchenne muscular dystrophy is a rare disease,
with an estimated total prevalence in the US of 6,000 persons and therefore represents a disease with a small patient pool for clinical
testing. This patient pool is further reduced to approximately 1,000 persons when considering the most widely utilized age range of patients
between 5 and 9 years which are often enrolled in studies where effects on ambulation are to be evaluated. Although Duchenne patients
are often motivated to participate in clinical trials, the small number of patients available, compounded with the growing number of
drug candidates entering clinical testing, creates competition for patient enrollment during clinical studies. Failure to enroll sufficient
numbers of patients in a reasonable amount of time in a clinical trial can significantly delay the time to completion of the trial, subsequent
outcome analysis of the trial, as well as any future trials that rely on the outcomes of these studies. Such delays or lack of patient
enrollment in clinical trials may cause the Company to incur additional costs or experience delays in completing, or ultimately to be
unable to complete the clinical development of its product candidate(s). Such an outcome may severely impair the Company’s value
and ability to continue operations.
The FDA has not established a set of required
or recommended clinical outcome measurements for studies in Duchenne.
The FDA has produced guidance on the
development of drugs for the treatment of Duchenne, however there are no generally accepted criteria for how to design, implement,
or evaluate clinical outcome measures that would provide any guarantee of a favorable review for the purpose of drug approval. The
FDA has suggested that it will consider the use of existing outcomes measures developed for other clinical trials in Duchenne or
related muscular dystrophies, as well as proposals for the use of novel outcome measures that are capable of measuring clinically
meaningful effects in patients. The FDA encourages sponsors to engage with them early to discuss use of previously utilized measures
or the proposition of novel measures prior to submitting official clinical trial designs. The FDA suggests that sponsors should
include an assessment of multiple efficacy endpoints, when feasible, to characterize the breadth of effects on dystrophin-related
pathologies, including skeletal, respiratory, and cardiac muscle function, even if the primary endpoint is only one of these
measures. The open-ended nature of these suggestions may result in selection of inappropriate endpoints that do not yield meaningful
results, or a large number of endpoints that significantly increase the cost of clinical trials. Implementing open ended trial
designs with multiple endpoints or having to redesign and execute additional trials due to inappropriate selection of clinical
endpoints that do not yield meaningful results may cause the Company to incur additional costs or experience delays in completing,
or ultimately be unable to complete the clinical development of its product candidate(s). Such an outcome may impair the
Company’s value and ability to continue operations. In addition, as there are not generally accepted biomarkers that have been
approved as surrogate endpoints for DMD, and functional outcomes are not necessarily expected to change in a rapid fashion, based on
the mechanism of the disease, studies may have to be long in duration to generate positive efficacy data. The functional outcomes in
this population are subjective in nature and therefore placebo- controlled study designs will likely be required despite
availability of robust natural history data in this orphan indication as multiple prior studies have demonstrated a placebo-arm that
behaves differently than natural history data. There is precedence from multiple other sponsors that lead us to assume we’ll
have to conduct placebo-controlled studies, thus increasing the number of patients required for our studies and associated costs and
timelines which could have a negative impact on the price of our Common Shares.
Interim, topline and preliminary data from
our clinical trials and preclinical studies that we announce or publish from time to time may change as more patient data become available
and are subject to audit and verification procedures that could result in material changes in the final data.
From time to time, we may also disclose interim
data from our preclinical studies and clinical trials. Interim data from clinical trials that we may complete are subject to the risk
that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available
or as patients from our clinical trials continue other treatments for their disease. Adverse differences between preliminary, topline
or interim data and final data could significantly harm our business prospects.
From time to time, we may publicly disclose preliminary
or topline data from our clinical trials and preclinical studies, which is based on a preliminary analysis of then-available data, and
the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the
particular trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not
have received or had the opportunity to fully and carefully evaluate all data. As a result, the preliminary or topline results that we
report may differ from future results of the same trials, or different conclusions or considerations may qualify such results, once additional
data have been received and fully evaluated. Topline and preliminary data also remain subject to audit and verification procedures that
may result in the final data being materially different from the data we previously published. As a result, topline and preliminary data
should be viewed with caution until the final data are available.
If the Company is unable to enroll DMD
patients in clinical trials, it will be unable to complete its clinical trials on a timely basis.
Patient enrollment, a significant factor in the
timing of clinical trials, is affected by many factors including the size and nature of the patient population, the proximity of subjects
to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, the ability to obtain and maintain patient
consents, the risk that enrolled subjects will drop out before completion, competing clinical trials, and clinicians’ and patients’
perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any new drugs
that may be approved for the indications the Company is investigating. Furthermore, the Company relies on CROs and clinical trial sites
to ensure the proper and timely conduct of its clinical trials, and while it has agreements governing their committed activities, the
Company has limited influence over their actual performance.
If the Company experiences delays in the completion
or termination of any clinical trial of its product candidates or any future product candidates, the development timelines will be delayed
which could increase the overall cost of the clinical development program and reduce the anticipated cash runway of the Company. Any
delays in completing clinical trials will increase costs, slow down product candidate development and approval processes and may shorten
any periods during which the Company may have the exclusive right to commercialize its product candidates, if approved, all of which
may allow the Company’s competitors to bring products to market before it does.
Risks Related to the Company’s Dependence on Third-Party
Service Providers
The Company depends on timely access to highly
skilled experts to conduct its drug discovery and development activities including in the areas of drug discovery, preclinical drug development,
chemistry, manufacturing and controls, developing and submitting regulatory submissions necessary to obtain approval to conduct clinical
trials, and conducting clinical trials. Many of these expert skills are quite specialized, expensive to hire and challenging to recruit,
particularly at scale. The Company believes its core skills to be in muscle stem cell biology and the professional management of the
drug development process. As high-quality expert resources are widely available in the biotechnology industry on a fee- for-service basis
through third-party CROs, the Company intends to maintain a lean infrastructure focused on its core capabilities and engage CROs wherever
it deems technically advantageous, timely and cost-effective to advance its drug discovery, and preclinical and clinical development
activities.
The Company will engage specialized CROs
on a fee-for-service basis to conduct its drug discovery and preclinical development including pharmacology and IND-enabling studies;
those third parties may not perform satisfactorily, including failing to meet deadlines.
By engaging CROs, the Company is implicitly relying
on third-party entities to execute the agreed workplans and deliverables therein to a high skill level, on time and within budget. While
the Company intends to use due care in the selection, evaluating and contracting of only the highest quality CROs with reputations for
successfully meeting client needs, it is possible that one or more CROs may not meet their contractual obligations on a timely basis
or at all. It may not be possible for the Company to effectively redirect their activities or resources to achieve the desired outcomes
on time, within budget or to the expected standard, thereby adding further uncertainty. Depending on the severity of the delays, performance
deficiencies or cost overruns, the Company may be forced to change to a different CRO or CROs, which can be disruptive. If required to
switch or add new CROs, management’s attention and resources may be redirected and constrained until alternative service providers
are in place. These changes may have undesirable knock-on effects to other components of the R&D plan and have the very real potential
to extend timelines and increase costs by significant amounts.
The Company will rely on fee-for-service
CROs to develop and submit its regulatory filings and to conduct and report on clinical trials for SAT-3247, or other development candidates,
and those third parties may not perform satisfactorily, including failing to meet deadlines.
To submit regulatory applications to obtain
approval for and to conduct clinical trials in humans for SAT-3247, the Company has engaged third-party service providers with
specialized domain expertise for: (i) drafting and submitting IND and CTA submission and interactions with key regulatory
authorities including the FDA and Health Canada; and/or (ii) planning, executing, providing data management and analysis, and
reporting of clinical trials with particular expertise in therapies to treat Duchenne. These may and likely will be different
entities and could include academic institutions, CROs, hospitals, clinics, and other third-party collaborators. Should the Company
be unable to maintain or enter into agreements with these third parties on acceptable terms, or if any such engagement is terminated
prematurely, the Company may be unable to enroll patients on a timely basis or otherwise conduct the desired clinical trials in the
manner and timeframe originally intended. There is no guarantee that these third parties will devote adequate time and resources to
the Company’s clinical studies or perform as required by the agreed terms in the contract or in accordance with regulatory
requirements. If these third parties fail to meet expected deadlines, fail to transfer the Company’s regulatory information in
a timely manner, fail to adhere to protocols or act in accordance with regulatory requirements, fail to perform in accordance with
the agreed contract terms, or if they otherwise perform in a substandard manner or in a way that compromises the quality or accuracy
of their activities or the data they obtain, then clinical trials of the Company’s development candidates may be extended or
delayed with additional costs incurred, or the clinical trial data may be rejected by the FDA, Health Canada or other regulatory
agencies. Such delays, cost increases or rejections could impede or harm SAT-3247’s development and market potential and
impair the market value and stock price of the Company.
We rely completely on one third-party contract
manufacturer to manufacture SAT-3247 and our other development candidates and we intend to rely on third parties to produce non-clinical,
clinical and commercial supplies of SAT- 3247 and any other future product candidates.
We do not currently have, nor do we plan to acquire,
the infrastructure or capability to internally manufacture our clinical drug supply of SAT-3247, or any other product candidates we may
develop in the future, for use in the conduct of our research and development activities, preclinical studies and clinical trials, and
we lack the internal resources and the capability to manufacture any product candidates on a clinical or commercial scale.
We plan to continue to rely on contract manufacturers
for the foreseeable future to produce quantities of products and substances necessary for research and development, preclinical studies,
clinical trials and product commercialization, and to perform their obligations in a timely manner and in accordance with applicable
government regulations. While we intend to contract for the commercial manufacture of our product candidates, we may not be able to identify
and qualify contractors or obtain favorable contracting terms. If any of the third parties with whom we engage, contract research organizations
or other third parties experience shutdowns or other business disruptions, including staffing shortages, production slowdowns or stoppages,
or other similar disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially
and negatively impacted.
Additionally, if our current or future third-party
manufacturers do not perform as agreed, experience business disruptions as previously described, or breach or terminate their agreements
with us, significant additional time and costs would be required to effect a transition to a new contract manufacturer. If we are unable
to retain our current contractors, or are unable to secure arrangements with new contractors to provide manufacturing services in a timely
manner and on acceptable terms as needed, it will delay or prevent the development, promotion, marketing, or sale of SAT-3247, if approved,
or any other future product candidates we may develop, and have a negative effect on our operations and financial condition. Moreover,
if a replacement to our current or future contract manufacturers is required, the ability to establish second-sourcing or find a replacement
manufacturer may be difficult due to the lead times generally required to manufacture drug products and the need for regulatory compliance
inspections and approvals of any replacement manufacturer, all of which factors could result in production delays and additional costs.
Failure by CRO’s to meet regulatory
requirements, guidelines and standards could be injurious to the Company.
The Company and its CROs are required to comply
with Good Laboratory Practices (“GLP”) and current Good Clinical Practices (“cGCP”) regulations
and guidelines enforced by the FDA, Health Canada, and comparable foreign regulatory authorities. Regulatory authorities enforce these
GLP/cGCP regulations through periodic inspections of CRO laboratories, clinical services CROs, principal investigators and clinical trial
sites. Failure to comply with applicable cGCP regulations may result in the clinical data generated in clinical trials being deemed unreliable.
In addition, clinical trials must typically be conducted with products produced under the cGMP regulations per FDA, Health Canada and
other regulatory authorities. Failure to comply with these regulations may impede ongoing clinical development and ultimately, submission
of marketing applications may be delayed. Depending on the gravity of the non-compliance, the FDA, HC or other regulatory authorities
may demand that clinical trials be repeated, which would cause significant delays and cost increases. If any of the clinical trial sites
terminate for any reason, the follow-up information on patients enrolled in an ongoing clinical trial may be lost unless the Company
is successfully able to transfer the care of those patients to another qualified clinical trial site, which is not guaranteed. Further,
if the Company must terminate the agreements with any of its CROs, it may not be possible to enter into arrangements with alternative
CROs on a timely basis or on commercially reasonable terms, or at all. Redoing clinical trials and/or switching CROs during a clinical
trial would impose serious pressures on management and could severely delay development and market potential of the Company’s drug
candidates, as well as adversely affect its market value and stock price.
Risks Related to Competitive Environment,
Drug Development, Challenges, Partnering, Market Access Issues, and Registration and Reimbursement of the Company’s muscle regeneration
drug candidates.
There
are multiple therapeutic approaches and product candidates currently in clinical development for the treatment of Duchenne including
but not limited to gene correction and gene therapy. These or other approaches not yet in clinical development may be approved faster
or achieve far better results than anticipated or than the Company’s product candidates.
The Company faces competition from
pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies as well as academic institutions,
government agencies and other public and private research organizations that conduct research in Duchenne. Many of these competitors
or potential competitors have greater financial resources and development and selling and marketing capabilities than the Company.
Numerous therapeutic approaches and product candidates including but not limited to: exon skipping, gene therapy and CRISPR-CAS,
anti- fibrosis, myostatin inhibition, mitochondrial and metabolic modulation, and others are in or close to commencing clinical
development in humans. While the Company believes its approach is distinctive and may well complement other approaches due to its
different mechanism of action, there can be no guarantee that this proves to be the case and one or more competing products may get
to market faster with better outcomes for patients, thus reducing the market opportunity for the Company’s product candidates.
If the Company’s products are ultimately not competitive, the Company’s revenue and financial results, and general
business prospects including market value would be adversely affected.
Satellos may not achieve its publicly announced milestones according
to schedule, or at all.
From time to time, Satellos may announce the
timing of certain events expected to occur, such as the anticipated timing of initiation of clinical development for SAT-3247 or results
from a clinical trials. These statements are forward-looking and are based on the best estimates of management at the time relating to
the occurrence of such events. However, the actual timing of such events may differ from what has been publicly disclosed. The timing
of events such as initiation or completion of a clinical trial, filing of an application to obtain regulatory approval or announcement
of additional clinical trials for a drug candidate may ultimately vary from what is publicly disclosed. These variations in timing may
occur as a result of different events, including the ability to recruit patients in a clinical trial in a timely manner, the nature of
results obtained during a clinical trial or during a research phase, problems with a contract manufacturing organization or a contract
research organization, or any other event having the effect of delaying the publicly announced timeline. The Company undertakes no obligation
to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as otherwise
required by law. Any variation in the timing of previously announced milestones could have a material adverse effect on the business
plan, financial condition or operating results and the trading price of the Common Shares.
If sufficient beneficial advantages
for patients are not shown in clinical trials, the Company may be unable to secure development partners on favourable terms, or at all.
The Company may pursue development and commercialization
partnership arrangements with third parties. Potential partners for any clinical development, co-marketing, licensing or broader arrangements
may include large and mid- size pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies. Often partnership
agreements are made to obtain up-front capital, offset development costs, increase the probability of success from leveraging the skill
sets of a more experienced partner, and secure a royalty annuity. In return the partner generally receives downstream commercialization
rights (or co-rights) on a region-by-region basis, or globally. The Company may benefit from such a partnership particularly given the
pediatric nature of Duchenne, complexity of disease progression and its sequalae, and the specialization of the medical centers which
treat patients. Failure to demonstrate sufficient patient benefit may make it more difficult or preclude the Company from being successful
in establishing these agreements should it choose to do so. This may increase the Company’s business costs and risks, delay commercialization
activities and revenue generation, and potentially impair the business.
Despite launching products in the future,
the Company may experience limits in market access, unfavorable reimbursement or pricing, or healthcare policy reform initiatives, which
would limit the value of the products.
The Company’s ability to commercialize
any products successfully will depend, in part, on the extent to which coverage and reimbursement for these products and related treatments
will be available from government healthcare programs, private health insurers, managed care plans, and other organizations. Government
authorities and third- party payors, such as private health insurers and health maintenance organizations, decide which medications they
will pay for and establish reimbursement levels. A primary trend in the United States healthcare industry is cost containment. Government
authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular
medications. Increasingly, third party payors are requiring that drug companies provide them with predetermined discounts from list prices
and are challenging the prices charged for medical products. The Company cannot be sure that coverage and reimbursement will be available
on a timely basis for any product that it, or any of its partners, commercializes and, if reimbursement is available, the level of reimbursement
may be reduced. Access to reimbursement may impact the demand for, or the price of, any product candidate for which the Company or its
partner/s obtains marketing approval. If reimbursement is not available on a timely basis or is available only to limited levels or is
delayed, the commercial potential for any product candidate for which the Company or its partner has obtained marketing approval may
be reduced. Such an outcome could adversely affect the Company’s profitability and share price.
Product liability lawsuits could cause
reputational damage and legal liabilities for the Company, limiting the commercial prospects for its products.
There is an inherent risk of product
liability exposure related to the future evaluation of the Company’s product candidates in human clinical trials. The
Company’s current product candidates have not been tested in human clinical trials, and therefore, safety data is limited and
the data which has been generated to-date may not translate to humans. If the Company cannot successfully defend itself against
claims that its product candidates or products caused injuries, it will incur substantial liabilities. Regardless of merit or
eventual outcome, liability claims may result in decreased demand for any product candidates or products that it may develop,
reputational injury and negative attention, withdrawal of clinical trial participants, significant costs to defend the related
litigation, potential monetary awards to trial participants or patients, and lost or delayed product revenues. Such outcomes would
be injurious to the Company’s business.
Liability Insurance may not be adequate.
The Company does not yet hold clinical trial
liability insurance coverage, and any coverage that may be obtained in the future may not be adequate to cover all liabilities that it
may incur. When the Company begins to commercialize its product candidates, it will need to increase its insurance coverage, which is
increasingly expensive. The Company may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy
any liability that may arise.
Risks Related to the Company’s Intellectual
Property and Privacy Legislation
If the
Company fails to comply with its obligations under its intellectual property licenses with third parties, it could lose license rights
that are important to its business.
The Company is party to intellectual property
license agreements with the OHRI and expects to enter into additional license agreements in the future. The Company’s existing
license agreements impose, and future license agreements will most likely impose, various milestone payments, royalties, insurance, indemnification
and other obligations on the Company.
The Company’s current agreement with the
OHRI requires the Company to maintain its patents and pay annual license fees and research fees. If the Company fails to comply with
its obligations under this license, the OHRI may have the right to terminate this license agreement. In such event, the Company might
not be able to market any product that is covered by such license, or to convert such license to a non-exclusive license. This could
materially adversely affect the value of the product candidate being developed under the OHRI License. Termination of any license agreement
or reduction or elimination of the Company’s licensed rights may result in the Company having to negotiate new or reinstated licenses
with less favorable terms.
If the
Company is unable to obtain and maintain patent protection for its technology and products, or if the Company’s partners or licensors
are unable to obtain and maintain patent protection for the technology or products that it licenses from them, or if the scope of the
patent protection obtained is not sufficiently broad, the Company’s competitors could develop and commercialize technology and
products similar or identical to that of the Company, and its ability to successfully commercialize its technology and products may be
adversely affected.
The Company’s success will depend on its
ability to obtain and maintain patent and other intellectual property protection with respect to its product candidates. The Company
and its licensors have sought to protect the Company’s proprietary position by filing patent applications in the United States,
Canada, and abroad related to its novel technologies and products that are important to its business. This process is expensive and time-consuming,
and the Company may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely
manner. In addition, patents might not be issued or granted with respect to the Company’s patent applications that are currently
pending, and issued or granted patents might later be found to be invalid or unenforceable, be interpreted in a manner that does not
adequately protect the Company’s current product or any future products or fail to otherwise provide us with any competitive advantage.
The patent position of biotechnology and pharmaceutical companies is generally uncertain because it involves complex legal and factual
considerations and in recent years has been the subject of much litigation. The standards applied by the United States Patent and Trademark
Office and foreign patent offices in granting patents are not always applied uniformly or predictably. As a result, the issuance, scope,
validity, enforceability and commercial value of the Company’s and its partners’ or licensors’ patent rights are highly
uncertain. The degree of future protection that the Company will have on its proprietary products and technology, if any, is uncertain
and a failure to obtain adequate intellectual property protection with respect to the Company’s product candidates and proprietary
technology could have a material adverse impact on the success of its business.
Even if the Company’s owned and
licensed patent applications issue as patents, they may not issue in a form that will provide the Company with any meaningful
protection, prevent competitors from competing with the Company or otherwise provide the Company with any competitive advantage,
including not being listed in the FDA’s Approved Drug Products With Therapeutic Equivalence Evaluations publication (commonly
known as, the Orange Book). The Company’s competitors may be able to circumvent its owned or licensed patents by developing
similar or alternative technologies or products in a non-infringing manner. The issuance of a patent is not conclusive as to its
scope, validity or enforceability, and the Company’s owned and licensed patents may be challenged in the courts or patent
offices in Canada, the United States and abroad. Such challenges may result in patent claims being narrowed, invalidated or held
unenforceable, which could limit the Company’s ability to or stop or prevent the Company from stopping others from using or
commercializing similar or identical technology and products, or limit the duration of the patent protection of its technology and
products. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents
protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, the Company’s
owned and licensed patent portfolio may not provide it with sufficient rights to exclude others from commercializing products
similar or identical to the Company’s.
The Company may become involved in lawsuits
to protect or enforce its patents, which could be expensive, time consuming and whether successful or unsuccessful, limit the commercial
value of the Company’s product or have a material adverse effect on the Company’s business.
Competitors may infringe any of the Company’s
current or future patents. To counter infringement or unauthorized use, the Company may be required to file expensive and time-consuming
infringement claims. Also, the court may decide in an infringement proceeding that a specific patent held by the Company is not valid
or enforceable or may refuse to stop the other party from using the Company’s intellectual technology at issue on the grounds that
its patents do not cover the intellectual property being disputed. An adverse result in any litigation proceeding could put one or more
of the Company’s patents at risk of being invalidated or interpreted narrowly. Additionally, due to the substantial amount of discovery
required in connection with intellectual property litigation, there is a risk that some of the Company’s confidential information
could be compromised by disclosure during this type of litigation. In addition, the Company’s licensor may have rights to file
and prosecute such claims and it is reliant on them.
The Company’s commercial successes depend
upon its ability and the ability of its partners and other collaborators to develop, manufacture, market and sell its product candidates
and use its proprietary technologies without infringing the proprietary rights of third parties. Third parties may assert infringement
claims against the Company based on existing patents or patents that may be granted in the future which at this time cannot be known
to the Company. The Company may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual
property rights with respect to its products and technology, including interference proceedings before the United States Patent and Trademark
Office or other similar regulatory authorities. If the third party is successful and the Company is found to infringe on their intellectual
property rights, the Company could be forced to negotiate the rights to the third party’s intellectual property in order to continue
to develop and market the Company’s products and technology. There is no guarantee that the Company will be able to obtain any
required license on commercially reasonable terms or at all. Even if the Company was able to obtain a license, it could be non-exclusive,
thereby giving its competitors access to the same technologies licensed to the Company. If the Company is not able to obtain a license
for the rights to their technology, the Company could be forced, including by court order, to cease commercializing the infringing technology
or product. In addition, the Company could be found liable for additional monetary damages. A finding of infringement could prevent the
Company from commercializing its product candidates, or delay commercialization during adjudication of a patent dispute, including a
30-month injunction, or force the Company to cease some of its business operations, pay royalties and/or damages to companies holding
the patents that were infringed, all of which could materially harm the Company’s business. Claims that the Company has misappropriated
the confidential information or trade secrets of third parties could have a similar negative impact on its business.
Litigation or other legal proceedings relating
to intellectual property claims may cause the Company to incur significant expenses and could distract the Company’s employees
from their normal responsibilities, even if it is resolved in the Company’s favour. Also, any public announcements of the results
of hearings, motions or other interim proceedings or developments could be perceived to be negative by securities analysts or investors,
leading to a potential adverse effect on the price of the Common Shares. These types of litigation or proceedings could substantially
increase the Company’s operating losses and reduce the resources available for product development activities. The Company may
not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of the Company’s competitors
may be able to sustain the costs of such litigation or proceedings more effectively than it can because of their greater financial resources.
Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse
effect on the Company’s ability to compete in the marketplace.
The Company may be subject to claims that
its employees have wrongfully used or disclosed alleged trade secrets of their former employers.
The Company
makes efforts to ensure that its employees do not use the proprietary information or know-how of others in their work for the Company;
however, the Company may nonetheless be subject to claims that it or these employees have used or disclosed IP, including trade secrets
or other proprietary information, of any such employee’s former employer. This would most likely result in the Company having to
enter litigation to defend against these claims. If the Company fails in defending any such claims, in addition to paying monetary damages,
it may lose valuable intellectual property rights and/or personnel. Even if the Company is successful in defending against such claims,
litigation could result in substantial costs and be a distraction to management.
If the Company is unable to protect the
confidentiality of its trade secrets, the Company’s innovative capacity and competitive position could be harmed.
The Company relies on trade secrets, including
unpatented know-how, technology and other proprietary information, to maintain its competitive position, in addition to filing patents
for some of its technology and products. The types of protections available for trade secrets are particularly important with respect
to the Company’s proprietary MyoRegenXTM technology platform, which involves significant unpatented know-how. The Company
seeks to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access
to them, such as the Company’s employees, corporate collaborators, outside scientific collaborators, sponsored researchers, contract
manufacturers, consultants, advisors and other third parties. The Company also enters into confidentiality and invention or patent assignment
agreements with its employees and consultants. Despite these efforts, any of these parties may breach the agreements and disclose the
Company’s proprietary information, including its trade secrets, and the Company may not be able to obtain adequate remedies for
such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming,
and the outcome is unpredictable. In addition, courts in certain jurisdictions are less willing or unwilling to protect trade secrets.
If any of the Company’s trade secrets were to be lawfully obtained or independently developed by a competitor, it would have no
right to prevent them from using that technology or information to compete with the Company. If any of the Company’s trade secrets
were to be disclosed to or independently developed by a competitor, its competitive position would be harmed.
The Company
must protect and manage confidential personal health information, including reporting from marketed product adverse event reporting and
clinical trials. Accidental release of information could harm the Company.
As the Company’s programs advance in development,
the Company expects to generate or otherwise obtain clinical data that may include personal information and personal health information.
These data are required for successful development and commercialization of pharmaceutical products, such as clinical trial data to support
regulatory submissions and pharmacovigilance data to monitor for potential adverse events following product launch. The Company recognizes
the sensitivity of this data and will apply protections to minimize the risk of release, including strict data blinding protocols and
secure information technology infrastructure. However, despite these measures, it is possible that personal information or personal health
information could be released and may expose the Company to substantial reputational risk and legal liabilities. Regardless of merit
or eventual outcome, liability claims may result in decreased demand for any product candidates or products that it may develop, injury
to the Company’s reputation and significant negative media attention, withdrawal of clinical trial participants, significant costs
to defend the related litigation, substantial monetary awards to trial participants or patients, loss of revenue and the inability to
commercialize any products that the Company may develop.
Risks
Related to Regulatory Approval of the Company’s Product Candidates and Other Legal Compliance Matters
The Company’s future product candidates
and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy,
recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by
the FDA, Health Canada and by comparable authorities in other countries.
If the Company, one of its contractors,
or license partners are not able to comply with regulations and guidelines governing pharmaceutical product development (including, but
not limited to GMP, Good Clinical Practices, GLP, quality assurance/quality control, and guidelines set forth by the International Conference
for Harmonization), it could impact the overall development and/or commercialization activities, the timing of development or result
in a supply disruption of commercial product that would negatively impact the business.
The development and manufacturing of
pharmaceutical products is strictly governed by a series of standardized regulations and guidelines to ensure data and product
quality including, but not limited to GMP, GLP, and additional guidelines set forth by the International Conference for
Harmonization. These guidelines are mandatory standards for most regulatory agencies and designed to ensure the highest quality of
research and manufacturing for pharmaceutical products. The Company team has experience in the development and commercialization of
pharmaceutical products under these regulations. The Company aims to put in place infrastructure to ensure compliance with relevant
guidelines, including standard operation procedures and third-party audits. Despite these precautions, it is possible that
activities conducted internally or by a third party may be non-compliant with industry standard regulations, with significant
negative impact on the Company.
During product development, non-compliance with
standard guidelines and regulations may invalidate drug product and/or data such that they are not appropriate to support regulatory
filings. The Company may be required to repeat development activities as a result, incurring additional development risk and costs. Repeating
specific development activities could also delay overall development and commercialization timelines, negatively impacting a product’s
revenue potential. Adverse effects on timing and costs could lead to discontinuation of product development. In the event that non-compliance
with standard guidelines adversely impacts clinical trial activities and trial participants, the Company could also be exposed to substantial
reputational risk and legal liabilities. Regardless of merit or eventual outcome, liability claims may result in decreased demand for
any product candidates or products that it may develop, injury to the Company’s reputation and significant negative media attention,
significant costs to defend the related litigation, substantial monetary awards to trial participants, loss of revenue and the inability
to commercialize any products that the Company may develop.
For commercial products, non-compliance with
standard guidelines and regulations may prevent the Company from releasing product to the market or require the Company to withdraw product
from the market. In either case, the Company would incur manufacturing costs for product without the potential to generate revenues.
In addition, delays in delivery of product to the market could adversely impact long-term product utilization and drive substitution
to competitor products. In the case where product released to the market is retroactively found to be non-compliant with existing guidelines,
the Company could also incur significant costs related to the returns, refunds, and destructions of non-compliant product. Additionally,
the Company could be exposed to substantial reputational risk and legal liabilities with potential negative consequences outlined above.
In any situation of guideline non-compliance,
the Company will be required to undertake a comprehensive investigation and engage in activities to remedy and prevent future deviations.
These activities could impose significant costs on the Company and draw resources away from other Company objectives.
Failure
to obtain regulatory approval in international jurisdictions would prevent the Company’s product candidates from being marketed
abroad. Risk of a rejection, incomplete response, a poor approved label or pricing restrictions by a regulatory authority outside of
the United States may adversely impact the United States market opportunity and limit the value of the asset to the Company.
The Company intends to enter into agreements
with third parties for the marketing of its products outside Canada and the United States. In order to market and sell the Company’s
products in the European Union and many other jurisdictions, the Company or its third parties must obtain separate regulatory approvals
and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional
testing. The time required to obtain approval may differ substantially from that required to obtain FDA or Health Canada approval. The
regulatory approval process outside the United States generally includes all the risks associated with obtaining FDA or Health Canada
approval. In addition, in many countries outside the United States or Canada, it is required that the product be approved for reimbursement
before the product can be approved for sale in that country. The Company may not obtain approvals from regulatory authorities outside
the United States or Canada on a timely basis, if at all. Approval by the FDA or Health Canada does not ensure approval by regulatory
authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States or Canada does not
ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. The Company may not be able to file for
regulatory approvals and may not receive necessary approvals to commercialize its products in any market, thus limiting its revenue potential.
The Company’s direct and indirect
relationships with healthcare customers, government, payors, and reimbursement/contract decision makers, will be subject to applicable
anti-bribery anti-corruption and other healthcare laws and regulations, which could expose the Company to criminal sanctions, civil penalties,
program exclusion, debarment, contractual damages, reputational harm and diminished profits and future earnings.
Healthcare providers, physicians and third-party
payors play a primary role in the recommendation and prescription of any product candidates for which the Company obtains marketing approval.
The Company’s future arrangements with third-party payors and customers may expose the Company to broadly applicable fraud and
abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which
it markets, sells and distributes its products for which it obtains marketing approval. Restrictions under applicable United States federal
and state healthcare laws and regulations that may impact the Company’s activities, include the following:
| · | the
federal healthcare anti-kickback statute prohibits, among other things, persons from knowingly
and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly,
in cash or in kind, to induce or reward either the referral of an individual for, or the
purchase, order or recommendation of, any good or service, for which payment may be made
under federal and state healthcare programs; |
| · | civil
penalties could be imposed against individuals or entities for knowingly presenting, or causing
to be presented, to the federal government, claims for payment that are false or fraudulent
or making a false statement to avoid, decrease or conceal an obligation to pay money to the
federal government; |
| · | criminal
and civil liability could be imposed for executing a scheme to defraud any healthcare benefit
program and also imposes obligations, including mandatory contractual terms, with respect
to safeguarding the privacy, security and transmission of individually identifiable health
information; |
| · | manufacturers
of drugs, devices, biologics and medical supplies are generally required to report information
related to physician payments and other transfers of value and physician ownership and investment
interests; and |
| · | analogous
laws and regulations, such as state anti-kickback and false claims laws, may apply to sales
or marketing arrangements and claims involving healthcare items or services reimbursed by
non-governmental third-party payors, including private insurers, and some laws require pharmaceutical
companies to comply with the pharmaceutical industry’s voluntary compliance guidelines
and the relevant compliance guidance promulgated by the federal government in addition to
requiring drug manufacturers to report information related to payments to physicians and
other health care providers or marketing expenditures. |
Costs will be substantial to ensure that the
Company’s business arrangements with third parties will comply with applicable healthcare laws and regulations in each jurisdiction
when the Company products will eventually be offered. It is possible that governmental authorities will conclude that the Company’s
business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other
healthcare laws and regulations. If the Company’s operations are found to be in violation of any of these laws or any other governmental
regulations that may apply to it, it may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion
from government funded healthcare programs, such as Medicare and Medicaid in the United States, and the curtailment or restructuring
of the Company’s operations. If any of the physicians or other providers or entities with whom the Company expects to do business
are found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including
exclusions from government funded healthcare programs.
Market access, legislative and pricing
policy changes may increase the difficulty and cost for the Company to obtain optimal marketing approval to commercialize its product
candidates and affect the prices it may obtain.
In the United States and other foreign jurisdictions,
there have been legislative and regulatory changes and proposed changes regarding, among other matters, biopharmaceutical product approvals
and pricing that could prevent or delay marketing approval of and commercial prospects for the Company’s product candidates, potentially
having a negative impact on its ability to profitably sell any of its future product candidates. Such an outcome may have a materially
adverse effect on the value and going concern prospects of the Company.
Other Risks
Anticipated changes to economic or geo-political
conditions may impact the Company.
The Company, its operations, plans and its ability
to raise financing may be adversely affected in subsequent fiscal periods as a result of current and future geopolitical events, including
as a result of risks and uncertainties surrounding potential regulatory changes or the establishment of protectionist measures, such
as the imposition of tariffs or modifications to free trade agreements.
The recent election of President Trump may
result in legislative and regulatory changes that could have an adverse effect on the Company and its financial condition. In
particular, there is uncertainty regarding U.S. tariffs and support for existing treaty and trade relationships, including with
Canada. Implementation by the U.S. government of new legislative or regulatory policies could impose additional production costs on
the Company, decrease U.S. demand for the Company’s products, or otherwise negatively impact the Company, which may have a
material adverse effect on the Company’s business, financial condition, and operations. In addition, this uncertainty may
adversely impact: (i) the ability of U.S. companies to transact business with Canadian companies; (ii) the Company’s
profitability; (iii) regulation affecting the Company’s industry; (iv) global stock markets (including the TSX); and
(v) general global economic conditions. All of these factors are outside of the Company’s control but may nonetheless
lead the Company to adjust its strategy in order to compete effectively in global markets.
We are subject to intense competition for
skilled personnel. The loss of key personnel or the inability to attract additional personnel could impair our ability to conduct operations.
We are highly dependent on our management and
staff; the loss of whose services might adversely impact our ability to achieve our objectives. Recruiting and retaining qualified management
and other personnel is critical to our success. Competition for skilled personnel is intense, and the ability to attract and retain qualified
personnel may be affected by such competition. We do not maintain “key person” insurance for any of our key personnel. The
Company also depends on scientific and clinical collaborators and advisors, all of whom have outside commitments that may limit their
availability. The Company has expanded significantly over the past twelve months and will continue to add personnel should SAT-3247 advance
through the various stages of clinical development. This expansion may result in difficulties managing growth, which could disrupt the
Company’s operations.
This growth will also result in significant additional
responsibilities on management, who may need to spend a disproportionate amount of its attention away from the business operations and
spend a substantial amount of time to managing these growth activities. Managing this growth will also require the Company to continue
to implement and improve its managerial, operational, and financial systems, and continue to recruit and train additional qualified personnel.
Due to its limited financial resources, the Company may not be able to effectively manage the expansion of its operations or recruit
and train additional qualified personnel. If the Company is unable to effectively manage this growth, the expenses may increase more
than anticipated and the Company may not be able to effectively implement its business strategy.
Failure to maintain adequate internal controls over financial
processes and reporting may negatively impact the Company’s results of operations or its ability to comply with its reporting obligations.
Effective internal controls are necessary for
the Company to provide reliable financial reports and to help prevent fraud. Although the Company intends to undertake a number of procedures
in order to help ensure the reliability of its financial reports, including those imposed on it under Canadian securities laws, the Company
cannot be certain that such measures will ensure that the Company will maintain adequate control over financial processes and reporting.
Failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm the Company’s
results of operations or cause it to fail to meet its reporting obligations.
Our operations could be adversely affected by events outside
of our control, such as natural disasters, wars or health epidemics.
We may be impacted by business interruptions
resulting from pandemics and public health emergencies, geopolitical actions, including war and terrorism or natural disasters including
earthquakes, typhoons, floods, and fires. An outbreak of infectious disease, a pandemic or a similar public health threat, or a fear
of any of the foregoing, could adversely impact us by causing operating, manufacturing supply chain, clinical trial and project development
delays and disruptions, labor shortages, travel, and shipping disruption and shutdowns (including as a result of government regulation
and prevention measures). It is unknown whether and how we may be affected if such an epidemic persists for an extended period of time.
We may incur expenses or delays relating to such events outside of our control, which could have a material adverse impact on our business,
operating results, and financial condition.
Our Director and Officer (“D&O”) insurance policies
may be inadequate and potentially expose us to unrecoverable risks.
We have limited D&O and commercial
insurance policies. Any significant insurance claims could have a material adverse effect on our financial condition. Insurance
availability, coverage terms and pricing varies with market conditions. We will continue to obtain appropriate insurance coverage
for insurable risks that we identify; however, we may fail to correctly anticipate or quantify these risks, or we may not be able to
obtain appropriate insurance coverage, or insurers may not cover insurable events that may occur as we expect. Conditions in the
insurance markets are rapidly changing including those related to director and officer coverage. These conditions have resulted in
rising premium costs, higher policy deductibles and lower coverage limits. For some risks, we may not be able to maintain insurance
coverage because of cost or availability.
We may incur losses associated with foreign
currency fluctuations.
Our functional and reporting currency is the
Canadian dollar and some of our operations are conducted in currencies other than the Canadian dollar (principally in U.S. dollars) and
a portion of our net monetary assets are denominated in other currencies (principally in U.S. dollars). Inflation in the United States
may have the effect of increasing the Canadian dollar cost of our operations. If the Canadian dollar declines in value in relation to
the U.S. dollar or other currencies, it will become more expensive for us to fund our operations. Similarly, fluctuations in the value
of foreign currencies relative to the Canadian dollar could cause us to incur currency exchange losses.
Our information technology (“IT”)
and infrastructure may fail or suffer security breaches, which could result in significant disruption of our discovery and product development
programs and our ability to operate our business effectively.
Satellos contracts IT services through internet
service, web hosting and data sharing service providers. We also engage with a wide range of collaborators, contractors or consultants,
financial institutions and other business providers or partners. It is possible that any of our systems, whether in-house or contracted,
and those of our current and future collaborators, contractors or consultants, financial institutions and other business providers or
partners may be vulnerable to disruptive elements, including computer viruses, phishing attacks, espionage and hacking programs resulting
in unauthorized access; or be damaged or compromised through natural disasters, terrorism, war and telecommunication or electrical failures.
Although we take such steps to help protect sensitive information from unauthorized access or disclosure, our IT and infrastructure may
be vulnerable in the future to attacks by hackers or viruses, failures, or breaches due to third-party action, employee or contractor
negligence or error, malfeasance, or other incidents or disruptions. If such an event were to occur and cause interruptions in our operations
or result in a loss of or damage to, our data, or inappropriate access to or disclosure of confidential or proprietary information including
trade secrets, Satellos could incur liability, our competitive position could be harmed, our reputation could be damaged, and the further
development and commercialization of our product candidates could be significantly compromised or delayed.
Risks Related to our Securities
The price of our Common Shares has experienced volatility and
may be subject to fluctuation in the future based on market conditions.
The market prices for the securities of biotechnology
companies, including our own, have historically been highly volatile. The market has from time to time experienced significant price
and volume fluctuations that are unrelated to the operating performance of any particular company. In addition, because of the nature
of our business, certain factors such as our announcements, competition from new therapeutic products or technological innovations, government
regulations, fluctuations in our operating results, results of clinical trials, public concern regarding the safety of drugs generally,
general market conditions and developments in patent and proprietary rights can have an adverse impact on the market price of our Common
Shares. For example, from January 1, 2023 through December 31, 2023, the price of the Common Shares on the TSXV has ranged
from a low of $0.25 to a high of $0.85. Any change in the public’s perception of our prospects could cause the price of our listed
securities to change dramatically. Furthermore, any negative change in the public’s perception of the prospects of biotechnology
companies in general or the market in general could depress our share price regardless of our results. Volatility or depression in the
capital markets, particularly with respect to biotechnology stocks, could also affect our ability to raise additional capital.
An active trading market for the Common
Shares may not be sustained.
Although Satellos has listed its Common Shares
on the TSX, an active trading market for the Common Shares may not be sustained. If an active trading market for the Common Shares is
not maintained, the liquidity of the Common Shares and the prices that may be obtained for the Common Shares will be adversely affected.
The average number of shares traded in any given day over the past year has been relatively small compared to the public float. Thus,
the actions of a few shareholders either buying or selling Satellos’ Common Shares may adversely affect the price of the Common
Shares. Historically, securities similar to Satellos’ Common Shares have experienced extreme price and volume fluctuations that
do not necessarily relate to operating performance and could result in rapid and substantial losses for shareholders.
Our shareholders may experience significant
dilution from future sales of our securities.
We anticipate that we will need to raise additional
capital in the future. The sale of additional equity, including warrants or debt securities, if convertible into equity, and including
the recent financing of units, will result in dilution to our existing shareholders. Also, any debt financing, if available, may require
us to pledge our assets as collateral or involve restrictive covenants, such as limitations on our ability to incur additional indebtedness,
limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could negatively
impact our ability to conduct our business. As a result, our net income per share could decrease in future periods and the market price
of our Common Shares could decline. The perceived risk of dilution may negatively impact the price of our shares and may cause our shareholders
to sell their shares, which would contribute to a decline in the price of our Common Shares. Moreover, the perceived risk of dilution
and the resulting downward pressure on our share price could encourage investors to engage in short sales of our Common Shares, which
could further contribute to progressive price declines in our Common Shares.
Satellos may be subject to securities litigation,
which is expensive and could divert management attention.
The market price of the Common Shares may be
volatile, and in the past companies that have experienced volatility in the market price of their shares have been subject to securities
class action litigation. Satellos may be the target of this type of litigation in the future. Litigation of this type could result in
substantial costs and diversion of management’s attention and resources, which could adversely impact Satellos’ business.
Any adverse determination in litigation could also subject Satellos to significant liabilities.
Satellos has never paid dividends on the
Common Shares and Satellos does not anticipate paying any dividends in the foreseeable future. Consequently, any gains from an investment
in the Common Shares will likely depend on whether the price of the Common Shares increases.
Satellos has not paid dividends on the Common
Shares to date and Satellos currently intends to retain Satellos’ future earnings, if any, to fund the development and growth of
Satellos’ business. As a result, capital appreciation, if any, of the Common Shares will be your sole source of gain for the foreseeable
future. Consequently, in the foreseeable future, you will likely only experience a gain from your investment in the Common Shares if
the price of the Common Shares increases.
If equity research analysts do not publish
research or reports about Satellos’ business or if they issue unfavorable commentary or downgrade the Common Shares, the price
of the Common Shares could decline.
The trading market for the Common Shares will
rely in part on the research and reports that equity research analysts publish about Satellos and Satellos’ business. Satellos
does not control these analysts. The price of the Common Shares could decline if one or more equity analysts downgrade the Common Shares
or if analysts issue other unfavorable commentary or cease publishing reports about Satellos or Satellos’ business.
We may be or become a passive foreign investment
company, which could result in adverse U.S. federal income tax consequences to U.S. Holders.
The rules governing passive foreign investment
companies (“PFICs”) can have adverse effects for U.S. federal income tax purposes. The tests for determining PFIC status
for a taxable year depend upon the relative values of certain categories of assets and the relative amounts of certain kinds of income.
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 (such as the valuation of our assets, including goodwill and other intangible assets) and may also be affected
by the application of the PFIC rules, which are subject to differing interpretations. Moreover, our ability to earn specific types of
income that we currently treat as non-passive for purposes of the PFIC rules is uncertain with respect to future years. Based on
our gross income, the average value of our assets, including goodwill and the nature of our active business, it is possible that we would
be treated as a PFIC for U.S. federal income tax purposes for the taxable year ending December 31, 2024, although a complete PFIC
analysis has not been performed. Furthermore, there can be no assurance that we will not be considered a PFIC for our current taxable
year ending December 31, 2025 or for any future taxable year.
If we are a PFIC, a U.S. shareholder would
be subject to adverse U.S. federal income tax consequences, such as ineligibility for any preferred tax rates on capital gains or on
actual or deemed dividends, interest charges on certain taxes treated as deferred, and additional reporting requirements under U.S.
federal income tax laws and regulations. A U.S. shareholder 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 (“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. A U.S. shareholder who makes a QEF election generally must report on a current basis its share of the Company’s net
capital gain and ordinary earnings for any year in which the Company is a PFIC, whether or not the Company distributes any amounts
to its shareholders. However, U.S. shareholders should be aware that in the event that we are a PFIC and a U.S. shareholder wishes
to make a QEF election, we can make no assurances that we will be able to supply U.S. shareholders with information that such U.S.
shareholders require to make a QEF election. If a U.S. shareholder makes a mark-to-market election with respect to its shares, the
U.S. shareholder is required to include annually in its U.S. federal taxable income an amount reflecting any year end increase in
the value of its shares. Investors should consult their own tax advisors regarding all aspects of the application of the PFIC
rules to the shares.
DIVIDENDS AND DISTRIBUTIONS
The Company has not, since its inception, declared
or paid any dividends on its Common Shares. The declaration of dividends on our Common Shares is within the discretion of the Board and
will depend on the assessment of, among other factors, capital requirements, earnings, and the operating and financial condition of the
Company. At the present time, the Company’s anticipated capital requirements are such that Satellos follows a policy of retaining
all available funds and any future earnings in order to finance its technology advancement, business development and corporate growth.
Satellos does not intend to declare or pay cash dividends on its Common Shares within the foreseeable future. See “Risk Factors
– Risks Related to Our Securities – Satellos has never paid dividends on its Common Shares and Satellos does not anticipate
paying any dividends in the foreseeable future”.
DESCRIPTION OF CAPITAL STRUCTURE
Common Shares
The authorized share capital of the Company is
an unlimited number of Common Shares without par value. As at December 31, 2024, the Company had 165,819,872 Common Shares issued
and outstanding as fully paid and non- assessable. All of our Common Shares are of the same class and, once issued, rank equally. The
holders of Common Shares are entitled to dividends, if, as and when declared by the Board, to one vote per Common Share at meetings of
the shareholders of the Company and, upon liquidation, to share equally in such assets of the Company as are distributable to the holders
of Common Shares. There are no pre-emptive or conversion rights.
Prefunded Warrants
The Company has issued and outstanding 51,567,780
pre-funded Common Share purchase warrants (“pre-funded warrants”) exercisable into an equal number of Common Shares of Satellos
for $0.00001 per pre-funded warrant with no expiry date.
Stock Options
The Company
has a stock option plan which authorizes Satellos to grant options to acquire Common Shares (“Options”) to directors,
officers, employees and consultants of Satellos or any of its subsidiaries. The Company’s option plan is an evergreen option plan
whereby the Company is authorized to grant Options under the plan, not to exceed 15% of the Corporation’s total issued and outstanding
shares. As of December 31, 2024, there were 13,879,589 Options outstanding under the Company’s option plan. For more details,
see the Company’s management information circular dated April 10, 2024, for its annual general and special meeting of Shareholders
held on May 14, 2024 (the “2024 Circular”), which attaches the Company’s option plan.
Warrants
As of December 31, 2024, the Company had 10,726,111 Common Share
purchase warrants (“Warrants”) outstanding. Each Warrant is exercisable into one Common Share at the following exercise
prices and expiry dates described below:
| Exercise Price | |
Number of Warrants | | |
Expiry Date | |
| $0.60 | |
| 3,506,500 | | |
| September 13, 2025 | |
| $0.50 | |
| 7,219,611 | | |
| May 17,2025 | |
| Total warrants | |
| 10,726,111 | | |
| | |
MARKET FOR SECURITIES
Trading Price and Volume
During the year ended December 31, 2024,
beginning on February 15, 2024, the Common Shares of the Company were listed for trading on the TSX under the symbol “MSCL”.
Prior to February 15, 2024, the Common Shares of the Company were traded on the TSXV. The following table sets forth the high and
low trading prices and the volume of shares traded on the TSX and TSXV for the Common Shares for each month in 2024.
| Month | |
High | | |
Low | | |
Volume | |
| January | |
$ | 0.61 | | |
$ | 0.45 | | |
| 1,595,858 | |
| February | |
$ | 0.80 | | |
$ | 0.50 | | |
| 2,269,489 | |
| March | |
$ | 0.73 | | |
$ | 0.44 | | |
| 856,887 | |
| April | |
$ | 0.60 | | |
$ | 0.44 | | |
| 1,897,909 | |
| May | |
$ | 0.54 | | |
$ | 0.38 | | |
| 1,048,302 | |
| June | |
$ | 0.64 | | |
$ | 0.49 | | |
| 1,447,727 | |
| July | |
$ | 0.56 | | |
$ | 0.47 | | |
| 949,016 | |
| August | |
$ | 0.56 | | |
$ | 0.45 | | |
| 1,259,962 | |
| September | |
$ | 0.54 | | |
$ | 0.45 | | |
| 1,131,416 | |
| October | |
$ | 0.90 | | |
$ | 0.48 | | |
| 4,816,101 | |
| November | |
$ | 0.89 | | |
$ | 0.67 | | |
| 2,185,287 | |
| December | |
$ | 1.32 | | |
$ | 0.69 | | |
| 4,930,113 | |
Prior Sales
The following table summarizes issuances of Common
Shares and securities convertible or exchangeable into Common Shares during the financial year ended December 31, 2024.
| Date of Issuance | |
Type of Security | |
Number of Securities
Issued | | |
Issuance/Exercise Price
Per Security | |
| January 30, 2024 | |
Options(1) | |
$ | 0.52 | | |
| 280,000 | |
| June 17, 2024 | |
Options(1) | |
$ | 0.54 | | |
| 150,000 | |
| June 21, 2024 | |
Common Shares(2) | |
$ | 0.40 | | |
| 40,531 | |
| July 18, 2024 | |
Common Shares(2) | |
$ | 0.40 | | |
| 6,250 | |
| July 18, 2024 | |
Common Shares(4) | |
$ | 0.50 | | |
| 13,750 | |
| August 20, 2024 | |
Common Shares(2) | |
$ | 0.40 | | |
| 72,500 | |
| August 22, 2024 | |
Common Shares(2) | |
$ | 0.40 | | |
| 214,937 | |
| September 11, 2024 | |
Common Shares(2) | |
$ | 0.40 | | |
| 216,188 | |
| September 12, 2024 | |
Common Shares(2) | |
$ | 0.40 | | |
| 25,000 | |
| Date of Issuance | |
Type of Security | |
Number of Securities
Issued | | |
Issuance/Exercise Price
Per Security | |
| October 29, 2024 | |
Common Shares(3) | |
$ | 0.60 | | |
| 50,000 | |
| November 4, 2024 | |
Common Shares(3) | |
$ | 0.60 | | |
| 110,000 | |
| November 6, 2024 | |
Common Shares(3) | |
$ | 0.60 | | |
| 20,000 | |
| November 7, 2024 | |
Common Shares(3) | |
$ | 0.60 | | |
| 10,000 | |
| November 7, 2024 | |
Common Shares(4) | |
$ | 0.50 | | |
| 10,000 | |
| November 8, 2024 | |
Common Shares(3) | |
$ | 0.60 | | |
| 20,000 | |
| November 12, 2024 | |
Options(1) | |
$ | 0.85 | | |
| 732,500 | |
| November 13, 2024 | |
Common Shares(4) | |
$ | 0.50 | | |
| 66,000 | |
| November 13, 2024 | |
Common Shares(3) | |
$ | 0.60 | | |
| 80,000 | |
| November 15, 2024 | |
Common Shares(3) | |
$ | 0.60 | | |
| 30,000 | |
| November 21, 2024 | |
Common Shares(3) | |
$ | 0.60 | | |
| 3,750 | |
| November 26, 2024 | |
Common Shares(3) | |
$ | 0.60 | | |
| 28,500 | |
| November 29, 2024 | |
Common Shares(3) | |
$ | 0.60 | | |
| 2,500 | |
| December 3, 2024 | |
Common Shares(3) | |
$ | 0.60 | | |
| 6,250 | |
| December 11, 2024 | |
Common Shares(4) | |
$ | 0.50 | | |
| 74,558 | |
| December 11, 2024 | |
Common Shares(3) | |
$ | 0.60 | | |
| 187,500 | |
| December 12, 2024 | |
Common Shares(3) | |
$ | 0.60 | | |
| 155,000 | |
| December 13, 2024 | |
Common Shares(3) | |
$ | 0.60 | | |
| 40,000 | |
| December 17, 2024 | |
Common Shares(3) | |
$ | 0.60 | | |
| 43,500 | |
| December 18, 2024 | |
Common Shares(3) | |
$ | 0.60 | | |
| 35,000 | |
| December 20, 2024 | |
Common Shares(5) | |
$ | 0.90 | | |
| 51,420,000 | |
| December 20, 2024 | |
Common Shares(3) | |
$ | 0.60 | | |
| 46,500 | |
Notes:
| (1) |
Granted under
the stock option plan of the Company. |
| (2) |
Exercise of broker warrants
issued on September 13, 2022 as part of a public offering. |
| (3) |
Exercise of warrants issued
on September 13, 2022 as part of a public offering. |
| (4) |
Exercise of broker warrants
issued on May 17, 2023 as part of a public offering. |
| (5) |
Issued pursuant to the
December 20, 2024 public offering. |
ESCROWED SECURITIES
As of the date of this AIF, to the
knowledge of the Company, the Company has no escrowed securities or securities subject to contractual restriction on transfer.
DIRECTORS AND OFFICERS
The names of the directors and executive
officers of the Company as of the date hereof, their province or state and country of residence, their respective positions with our
Company and the date upon which they were first elected as a director or officer of the Company are set out in the table below. The term
of each director expires on the date of our next annual meeting.
| Name and Residence | |
Position | |
Director or Executive
Officer Since | |
No. of Common Shares
Beneficially Owned or
Controlled(4) | |
Geoff MacKay(1)(2) Maine, USA | |
Board Chair | |
July 2018 | |
| 254,422 | |
Frank Gleeson(3) Ontario, Canada | |
Director, President and Chief Executive Officer (“CEO”) | |
Director since July 2012, CEO since March 2018, and President since April 2018 | |
| 3,976,389 | |
William (Bill) Jarosz(1)(3) Montana, USA | |
Director | |
June 1, 2006 (of iCo) | |
| 1,767,818 | |
Rima Al-awar(2)(3) Ontario, Canada | |
Director | |
December 5, 2021 | |
| Nil | |
Brian Bloom Ontario, Canada | |
Director | |
March 2018 | |
| 10,400,818 | (5) |
Dr. William (Bill) McVicar(1) Massachusetts, USA | |
Director | |
August 13, 2021 | |
| 50,000 | |
Adam Mostafa(1)(2) Massachusetts, USA | |
Director | |
December 5, 2021 | |
| Nil | |
Franklin Berger New York, USA | |
Director | |
June 29, 2023 | |
| 7,879,000 | |
Stephanie Brown(1) (2) Massachusetts, USA | |
Director | |
November 12, 2024 | |
| Nil | |
Dr. Michael Rudnicki Ontario, Canada | |
Chief Discovery Officer | |
August 13, 2021 | |
| 3,097,918 | |
Elizabeth Williams Ontario, Canada | |
Chief Financial Officer | |
September 1, 2023 | |
| 40,000 | |
Dr. Phil Lambert Maryland, USA | |
Chief Scientific Officer | |
September 28, 2022 | |
| Nil | |
Courtney Wells Illinois, USA | |
Senior Vice President, Clinical Development Operations | |
November 13, 2023 | |
| Nil | |
Notes:
| (1) | Member of the Audit Committee. |
| (2) | Member of the Compensation Committee |
| (3) | Member of the Corporate Governance Committee |
| (4) | The information as to principal occupation and shares beneficially
owned or over which control or direction is exercised is not within the knowledge of Satellos,
and therefore has been furnished by each director individually. |
| (5) | 6,022,000 of these Common Shares are held through Bloom Burton Development
Corp, an affiliated company of Bloom Burton and Co. Inc., of which Brian Bloom is co-founder,
Chair and CEO, and 2,900,008 of these Common Shares are held through Bloom Burton &
Co. Inc., of which Brian Bloom is co-founder, Chair and CEO. |
Share Ownership by Directors and Executive
Officers
As at the date of this Annual Information Form,
the current directors and officers of Satellos, as a group, beneficially owned, or controlled or directed, directly or indirectly, an
aggregate of 25,582,197 Common Shares, representing approximately 15.4% of the Company’s issued and outstanding Common Shares.
The information as to the number of Common Shares beneficially owned, or controlled or directed, not being within the knowledge of the
Company, has been furnished by the respective directors and officers of the Company individually.
Biographical Information and Principal Occupations
The following are short biographies of the Company’s
directors and executive officers:
Frank Gleeson, Director, President and Chief
Executive Officer
During his biotechnology career since 2002, Mr. Gleeson
has been a key party to building more than 20 biomedical companies from breakthrough research and technologies and has negotiated numerous
financing and M&A transactions valued in excess of $600 million. In 2018, he co-founded Satellos with Dr. Rudnicki where, as
CEO, he has raised over $125 million, taken the company public on the TSX (MSCL), built a team of 25 professionals, and directed the
company into clinical development with a novel lead drug, SAT-3247. Prior to Satellos, he and Dr. Rudnicki co-founded Verio Therapeutics,
where Mr. Gleeson was CEO and managed its acquisition by Fate Therapeutics (Nasdaq: FATE). Mr. Gleeson has also served as Chief
of Commercial Operations at Centre for Probe Development and Commercialization (CPDC), where he played a principal role in building a
global radiopharmaceutical manufacturing business and supporting the creation of two spin-out companies. Prior to CPDC, he served as
an Executive-in-Residence with the Fight Against Cancer Innovation Trust (FACIT), an innovative nucleator, where he supported or led
the creation, financing and exits of three new entities. Earlier in his career, Mr. Gleeson was founding CEO of MDS Proteomics Inc.,
where he made and integrated three acquisitions, built leading-edge sequencing infrastructure, a 200-person team, and raised in excess
of $100 million. He was also Senior Vice President and Venture Partner with MDS Capital Corp. (now Lumira), where he was lead partner
on a fund with more than $250 million under management focused on creating drug discovery companies based on novel Canadian science.
Prior to his tenure with MDS from 1993-2002, he enjoyed a 17-year operational career with ICI plc (now AstraZeneca), a global chemicals,
pharmaceuticals, and advanced materials company, during which he was involved in technology commercialization in several fields both
in Canada and internationally. Mr. Gleeson has served on numerous boards of private and public companies and not-for-profit entities.
Geoff Mackay, Board Chair
Mr. MacKay has served as CEO of several
innovative biotech companies over the last 20 years. He is currently CEO of a Versant backed stealth start-up. Previously, he was founding
CEO of AVROBIO Inc., which sold its lead asset to Novartis. Mr. MacKay was also the founding CEO of eGenesis Inc., a biotech dedicated
to applying gene editing to xenotransplantation. During his tenure as CEO of Organogenesis Inc., the company received the first approval
of an allogeneic cell therapy from the FDA’s Center for Biologics Evaluation and Research and treated one million patients with
living cell therapies. Earlier in his career, Mr. MacKay spent 11 years at Novartis in senior leadership positions, culminating
as Vice-President Transplantation & Immunology. Past activities include Chairman of the Board of MassBio, Chairman of the Board
of the Alliance of Regenerative Medicine, and a member of the advisory council to the Health Policy Commission for Massachusetts.
Dr. Rima Al-awar, Director
Dr. Al-awar is an accomplished pharmaceutical
executive with expertise spanning target discovery to lead identification and clinical candidate nomination. Dr. Al-awar had a 13-year
career with Eli Lilly and Company. Hired as a senior organic chemist, Dr. Al-awar progressed through multiple positions of increasing
breadth and responsibility, culminating as Head in the Route Selection Group, Chemical Product Research and Development at the Lilly
Corporate Center in Indiana. Currently, Dr. Al-awar is a Senior Advisor at the Ontario Institute for Cancer Research (OICR), a collaborative
research institute that conducts and enables high-impact translational cancer research. After joining the OICR in 2008, Dr. Al-awar
established the Drug Discovery Program. The Drug Discovery Program’s purpose is to seek out and translate the most promising ideas
from Ontario’s academic community into new therapeutic treatments for the benefit of cancer patients. Under Dr. Al-awar’s
leadership, the group has grown to a team of more than 40 multi-disciplinary researchers who have identified and validated two promising
new cancer targets, BCL6 and WDR5, invented and advanced lead drug candidates against each target, and, through the OICR’s investment
and commercialization arm FACIT, entered into substantial pharmaceutical development partnerships. Dr. Al-awar earned her Ph.D.
in synthetic organic chemistry from North Carolina State University and did a postdoctoral fellowship at the University of North Carolina
at Chapel Hill before joining Eli Lilly and Company.
Franklin Berger, Director
Mr. Berger has more than 25 years of experience
in capital markets and financial analysis. He serves on the Board of Directors of BELLUS Health sold to GSK, ESSA Pharma, Kezar Life
Sciences, Atreca, Rain Therapeutics and Atea Pharmaceuticals. Mr. Berger served as a senior portfolio manager at Sectoral Asset
Management; additionally, he was co- founder, co-PM on the small-cap focused NEMO Fund at Sectoral, from 2007 through June 2008.
Previously, he was Managing Director, Equity Research and Senior Biotechnology Analyst for J. P. Morgan Securities from 1998 to 2003.
During his time at J.P. Morgan, he was involved with the issuance of more than $12 billion in biotechnology company equity or equity-linked
securities, including the Genentech initial public offering, the largest biotechnology financing to date. From 1997 to 1998, he served
as a Director, Equity Research and Senior Biotechnology Analyst for Salomon Smith Barney and from 1991 to 1997, he served as a sell-side
analyst for Josephthal & Co. The Wall Street Journal selected Mr. Berger as the No. 1 ranked biotechnology analyst
in its All-Star Analyst Survey in 1997 and was ranked No. 2 in the WSJ’s 2000 Survey. In 2002, Institutional Investor
Magazine ranked him on J. P. Morgan’s 3rd-placed All-Star Research Team. Mr. Berger received a B.A. in International Relations,
an M.A. in International Economics from Johns Hopkins University and an MBA from Harvard University. He serves on the Council of Rockefeller
University and was a Founding Fellow of the Biotechnology Study Center at New York University School of Medicine.
Brian Bloom, Director
Mr. Bloom is a co-founder of Bloom Burton &
Co. and serves as the firm’s Chairman and Chief Executive Officer. He serves on the Board of Directors of Satellos Bioscience and
Appili Therapeutics. Mr. Bloom was formerly the Chairman of the Board of Grey Wolf Animal Health and Triumvira Immunologics, a member
of the Life Sciences Advisory Board at the National Research Council Canada, the Dean’s Advisory Board at McMaster University and
on the Board of Directors of BIOTECanada, the Baycrest Foundation and Qing Bile Therapeutics. Before co-founding Bloom Burton in 2008,
he spent six years at an independent investment dealer in the healthcare and biotechnology institutional sales and equity research groups.
Mr. Bloom started his career at New York-based investment banking firms SCO Financial Group and Molecular Securities. He is the
proud recipient of the McMaster University 2017 Distinguished Alumni Award in Science and the co-recipient of the 2023 Life Sciences
Ontario Community Service Award. Mr. Bloom received an Honours Bachelor of Science in Biochemistry from McMaster University and
subsequently studied at the Mount Sinai Graduate School for Biological Sciences of New York University, with a focus in molecular endocrinology
and biophysics.
William (Bill) Jarosz, JD, Director
Mr. Jarosz is a Founding Partner of
Cartesian Capital Group, a global private equity firm managing assets of more than $2.5 billion. Prior to creating Cartesian,
Mr. Jarosz helped establish the third-party global private equity practice of American International Group and practiced
corporate law in the private equity practice of Debevoise & Plimpton. Active in the healthcare and biotechnology sectors
for more than twenty years, Mr. Jarosz has assisted investee companies across the full range of their activities from drug
discovery, to mergers and acquisitions, and capital markets strategies in both the private and public markets. Mr. Jarosz has
held numerous directorships and served as the Chief Executive Officer of iCo Therapeutics from 2020 until its amalgamation with
Satellos in 2022. Mr. Jarosz is a graduate of the University of Montana and received an M.A. in Law and Diplomacy from the
Fletcher School at Tufts University, and a J.D. from Harvard Law School.
William (Bill) McVicar, PhD, Director
Dr. McVicar’s career in the pharmaceutical
industry spans more than 30 years in research and development as a team leader and C-suite executive. He has held numerous high ranking
positions, leading teams at Sandoz, Novartis, RPR Gencell, Sepracor, Inotek Pharmaceuticals, Flex Pharma, and Salarius Pharmaceuticals.
During his career, Dr. McVicar personally oversaw the development of multiple drug candidates from early testing to approval, including
BROVANA®, XOPENEX MDI®, and XOPENEX’s pediatric approval. Dr. McVicar has raised well over $100 million in venture
financing, led numerous licensing transactions, and has successfully executed the merger of Flex and Salarius Pharmaceuticals, where
he remains Chair of the Board of Directors. He is an author of numerous peer-reviewed scientific publications and an inventor on 15 issued
U.S. patents. Dr. McVicar earned his B.S. in chemistry from SUNY College at Oneonta and his Ph.D. in chemistry from the University
of Vermont.
Adam Mostafa, Director
Mr. Mostafa is an accomplished
financial leader in strategic and financial planning in the pharmaceutical industry. Currently, Mr. Mostafa is the Chief
Financial Officer (CFO) of X4 Pharmaceuticals, working closely with the Chief Executive Officer and Board of Directors on all
strategic and financial matters. Notably this includes the close of its 2019 reverse merger with Arsanis and subsequent Nasdaq
public listing and follow-on financings. Mr. Mostafa has served as CFO of Abpro Corporation, a biotechnology company focused on
antibody therapeutics. Previously, Mr. Mostafa was a Managing Director in the healthcare investment banking group at Cantor
Fitzgerald, and a senior banker in the healthcare investment banking group at Needham & Company. Mr. Mostafa has also
held positions of vice president in the investment banking group at CRT Capital Group, portfolio management associate in the global
stock selection group at AQR Capital, and analyst in the healthcare investment banking group at Salomon Smith Barney.
Mr. Mostafa holds an A.B. in economics from Brown University.
Stephanie Brown, Director
Ms. Brown is a seasoned executive leader
with over 30 years of experience in the bio-pharma industry, holding key leadership roles in North America, Europe, and Asia. Known for
her strategic agility and deep operational expertise, Ms. Brown has driven successful business transformations and product launches
across diverse therapeutic areas, from breakthrough biologics to small molecules. She has served in executive roles at top pharmaceutical
companies, including Merck, Genentech, Biogen, Takeda, and Novartis, where she managed high-value product portfolios and led launches
for multiple specialty and rare disease treatments.
Ms. Brown is Past-President of North America
for Santhera Pharmaceuticals, where she oversaw strategic operations and corporate restructuring. Prior to Santhera, she led the Rare
Diseases business at Ipsen Biopharmaceutical North America, managing commercialization strategies and profit growth for in-line and launch
brands. Currently, she serves on the Board of Directors for Resilia, Inc., and has previously held board roles with ObsEva and the
Biotechnology Innovation Organization (BIO). Ms. Brown holds a B.S. in chemistry with biology from Mount Allison University and
an MBA from Edinburgh Business School, Heriot-Watt University.
Michael Rudnicki, OC, PhD, FRS, FRSC, Chief
Discovery Officer
An acknowledged world thought leader and scientific
authority on muscle stem cell function and their role in muscle regeneration. In a landmark 2007 Cell paper, Dr. Rudnicki was the
first to define and characterize a subpopulation as bona fide multipotent stem cells in muscle tissue capable of both self renewal and
regeneration, called muscle stem cells or satellite cells. Building on this seminal work, Dr. Rudnicki has established a continuous
record of foundational findings and discoveries spanning a 25-year research career. In so doing, he has transformed the field’s
understanding of the nature and role muscle stem cells play in the lifelong repair and growth processes of skeletal muscle, the body’s
largest organ. Currently, Dr. Rudnicki is the Scientific Director of the Canadian Stem Cell Network, Director of the Regenerative
Medicine Program at the Ottawa Hospital Research Institute, a Professor in the Faculty of Medicine at the University of Ottawa, and an
Associate Editor of the Journal of Cell Biology. He has published more than 230 scientific articles and authored 17 patents. Dr. Rudnicki’s
contributions have been recognized with numerous honours including being named a Tier 1 Canada Research Chair, a Fellow of both the Royal
Society and the Royal Society of Canada, a past International Research Scholar of the Howard Hughes Medical Institute, and an Officer
of the Order of Canada. Dr. Rudnicki received his Ph.D. at the University of Ottawa and trained at the postdoctoral level at the
Massachusetts Institute of Technology in the Whitehead Institute under Dr. Rudolf Jaenisch.
Dr. Rudnicki works part-time (approximately
20%) as a contractor to Satellos.
Phil Lambert, PhD, Chief Scientific Officer
Dr. Lambert is a neuroscientist by training
and a high-performing preclinical executive with more than 25 years of drug discovery and development expertise in the areas of neuroscience,
ocular, metabolic, inflammatory and orphan diseases. He has supported the advancement of more than 20 therapeutics, both small and large
molecules, into clinical development by providing necessary preclinical data for multiple diseases. Dr. Lambert brings with him
his accomplishments as a well published researcher, his unique senior leadership positions in academia, biotechnology, non-profit, large
pharmaceutical and contract research organizations. As a serial entrepreneur, he was a member of the management team which conducted
the due diligence and sale of Sirtris to GSK in 2008. Additionally, Dr. Lambert co-founded, effectively grew, and sold VivoPath,
a contract research organization to Charles River Laboratories in 2014. Dr. Lambert brings his extensive leadership experience to
Satellos, having held positions at Centogene, Life Biosciences, Sirtris Pharmaceuticals, Forum Pharmaceuticals, ALS Therapy Development
Institute, Regeneron Pharmaceuticals, GSK and Parke Davis. He was a faculty member in the Department of Psychiatry at Emory University
School of Medicine. Dr. Lambert received his Ph.D. in neuroendocrinology from Imperial College, University of London.
Elizabeth Williams, CPA, CA, Chief Financial
Officer
Ms. Williams has more than 20 years of
experience in biotech, working with publicly listed entities in both Canada and the United States. Prior to joining Satellos,
Ms. Williams was CFO of Medicenna (Nasdaq: MDNA), where she was responsible for all financial, legal, and investor relations
functions and led the graduation of the company from the TSXV to the TSX main board and subsequently the Nasdaq. Previous to
Medicenna, she was Vice President of Finance and Administration at Aptose Biosciences Inc. (Nasdaq: APTO), previously Lorus
Therapeutics Inc., a biotechnology company listed on both the TSX and the Nasdaq. While at Aptose, Ms. Williams held several
positions, including Acting CFO, and was responsible for a broad range of activities including financings, financial reporting, and
regulatory compliance. She serves as Director and Chair of the Audit Committee of Triumvira Immunologics Inc. Ms. Williams is a
Chartered Professional Accountant (CPA) and Chartered Accountant (CA).
Courtney Wells, Senior Vice President, Clinical
Development Operations
Ms. Wells has more than 20 years of experience
in drug development, including leading clinical development operations for over a decade at preclinical and clinical stage biotech companies
and overseeing work across clinical operations, clinical development, program management, biostatistics, data management, patient advocacy,
and regulatory affairs. Ms. Wells has expertise in building out operational teams and quality infrastructure to support rapid clinical
development programs as well as clinical trial start-up and execution and comes to the team with prior experience in the pediatric rare
disease space, including spinal muscular atrophy and Duchenne muscular dystrophy. Ms. Wells led the Clinical Operations team at
AveXis to successful approval of Zolgensma®, a gene therapy for the treatment of infants with spinal muscular atrophy; at Avadel
Pharmaceuticals leading to successful approval of Lumryz™, a treatment for patients with narcolepsy; and at Marathon that led to
successful approval of Emflaza® for Duchenne. Ms. Wells has managed multiple large global development programs including nearly
every geographical region, with significant experience in US, Canada, Europe, Australia, and Japan, and has directly contributed to NDA/BLA
filings for four successfully approved products. She also managed pivotal trial programs for four additional products that led to marketing
approvals including the metastatic pancreatic cancer program at Abraxis Bioscience that resulted in approval for an indication expansion
for Abraxane® and the invasive aspergillosis infection program at Astellas that resulted in approval of Cresemba®.
Cease Trade Orders
To the best of our knowledge, no director or
executive officer of the Company, is, or within the ten years prior to the date hereof, has been, a director, chief executive
officer or chief financial officer that: (i) while that person was acting in that capacity was the subject of a cease trade
order or similar order or an order that denied the other issuer access to any exemptions under Canadian securities legislation, that
was in effect for a period of more than thirty consecutive days or, (ii) after that person ceased to act in that capacity, was
the subject of a cease trade order or similar order, or an order that denied the other issuer access to any exemptions under
Canadian securities legislation, that was in effect for a period of more than thirty consecutive days and which resulted from an
event that occurred while that person was acting in that capacity.
Penalties or Sanctions
To the best of our knowledge, no director or
executive officer of the Company, or a shareholder holding a sufficient number of shares of the Company to affect materially the control
of the Company, has been subject to any penalties or sanctions imposed by a court relating to Canadian securities legislation or by a
Canadian securities regulatory authority or has entered into a settlement agreement with a Canadian securities authority, or any other
penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making
an investment decision.
Personal Bankruptcies
Other than as described below, to the best of
our knowledge, no director or executive officer of the Company, or a shareholder holding a sufficient number of shares of the Company
to affect materially the control of the Company, (i) has, during the ten years prior to the date hereof, been a director or executive
officer of any company that, while that person was acting in that capacity, became bankrupt, made a proposal under any legislation relating
to bankruptcy or insolvency, or been subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver,
receiver manager or trustee appointed to hold his, her or its assets or (ii) has, during the ten years prior to the date hereof,
become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or been subject to or instituted any proceedings,
arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold his, her or its assets.
William Jarosz was a director of Waypoint Leasing
Holdings Ltd. (“Waypoint”), a helicopter leasing company, which, along with certain of its subsidiaries, filed voluntary
petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District
of New York (the “Court”) on November 25, 2018. On February 12, 2019, the Court held a hearing in connection
with a sale motion and approved a series of sales to wind down the business of Waypoint. Mr. Jarosz is no longer a director of Waypoint.
Stephanie Brown
was previously a director of ObsEva SA (“ObsEva”). She resigned as a director in June 2023 and has had no further
involvement with ObsEva since that date. On 29 January 2024, the Tribunal de première instance of Geneva granted a temporary
moratorium (sursis provisoire) to ObsEva for a period of four months ending 29 May 2024 and appointed a commissioner (commissaire)
to supervise the company's activities during the process. On February 28, 2024 ObsEva announced that it would wind-down its operations
with the termination of all of its employees and notified the SIX Swiss Exchange's listing authority that there was a substantial risk
that it would be unable to have audited financial statements for 2023 prepared and that it is as a result likely not going to be able
to satisfy the requirements for maintaining its listing on SIX.
Conflicts of Interest
The Company’s directors and officers may
serve as directors or officers of other companies or have significant shareholdings in other companies and, to the extent that such other
companies may participate in ventures in which the Company may participate, the directors and officers of the Company may have a conflict
of interest in negotiating and concluding terms respecting the extent of such participation. In the event that such a conflict of interest
arises at a meeting of the Company’s directors, a director who has such a conflict will disclose his interest in the matter and
abstain from voting for or against the approval of such participation or such terms. In accordance with the laws of Canada, the directors
of the Company are required to act honestly, in good faith and in the best interests of the Company.
The directors
and officers of the Company are aware of the existence of laws governing the accountability of directors and officers for corporate opportunity
and requiring disclosures by the directors of conflicts of interest and the Company will rely upon such laws in respect of any directors’
and officers’ conflicts of interest or in respect of any breaches of duty by any of its directors and officers. All such conflicts
will be disclosed by such directors or officers in accordance with the laws of Canada and they shall govern themselves in respect thereof
to the best of their ability in accordance with the obligations imposed upon them by law. Other than as disclosed under the heading “Interest
of Management and Others in Material Transactions” below, the directors and officers of the Company are not aware of any such
conflicts of interests.
COMMITTEES OF THE BOARD
The following is a description of the current
committees of the Board:
Audit Committee
The mandate of the Audit Committee is to assist the Board in fulfilling
its oversight responsibilities with respect to the financial affairs of the Company, including responsibility to:
| · | oversee
the integrity of the Company’s financial statements and financial reporting process,
audit process, internal accounting controls and procedures and compliance with related legal
and accounting principles; |
| · | oversee
the qualifications and independence of the external auditor; |
| · | oversee
the work of the Company’s financial management, internal audit function (if any) and
external auditor in these areas; and |
| · | provide
an open avenue of communication between the external auditor, the internal auditors (if any),
the Board and the Company’s management. |
In addition, the Committee shall prepare, if
required, an audit committee report for inclusion in the information circular prepared in connection with the Company’s annual
meeting of shareholders, in accordance with applicable rules and regulations. The members of the Audit Committee are Mr. Adam
Mostafa, (Chair), Ms. Stephanie Brown, and Dr. Bill McVicar.
Compensation Committee
The mandate of the Compensation Committee
includes assisting the Board in discharging its responsibilities relating to compensation of the Company’s directors and
executives, oversight of the Company’s overall compensation structure, policies and programs, review of the Company’s
processes and procedures for the consideration and determination of director and executive compensation; and producing a report on
executive compensation for inclusion in the Company’s information circular as required by applicable rules and
regulations. The primary objective of the Committee is to develop and implement compensation policies and plans that ensure the
attraction and retention of key management personnel, the motivation of management to achieve the Company’s corporate goals
and strategies, and the alignment of the interests of management with the long-term interests of the Company’s shareholders.
The members of the Compensation Committee are Mr. Geoff Mackay (Chair), Mr. Adam Mostafa and Ms. Stephanie Brown.
Corporate Governance Committee
The mandate of the Nominating and Corporate Governance
Committee is to support the Board of Directors in exercising its corporate governance functions, including identifying individuals qualified
to become Board members, and recommend that the Board select the director nominees for the next annual meeting of shareholders; and to
develop and recommend to the Board the corporate governance guidelines and processes applicable to the Company, review these guidelines
and processes at least annually and recommend changes to the Board. The members of the Corporate Governance Committee are Mr. Franklin
Berger (Chair), Dr. Rima Al-aware and Mr. Bill Jarosz.
AUDIT COMMITTEE INFORMATION
Audit Committee’s Charter
The Charter of the Audit Committee is attached
hereto as Schedule “A”.
Composition of the Audit Committee
The Audit Committee consists of Adam Mostafa,
William McVicar and Stephanie Brown. All three members of the Audit Committee are considered “financially literate” and “independent”,
as defined in National Instrument 52-110 – Audit Committees (“NI 52-110”).
Relevant Education and Experience
Each member of the Audit Committee has the industry
experience necessary to understand and analyze financial statements of the level of complexity of Satellos, as well as the understanding
of internal controls and procedures necessary for financial reporting. The specific education and experience of each is set out under
their respective names under “Directors and Officers – Biographical Information and Principal Occupations” above.
Audit Committee Oversight
At no time since
the commencement of the Company’s most recently completed financial year was a recommendation of the Audit Committee to nominate
or compensate an external auditor not adopted by the Board.
Reliance on Certain Exemptions
As Satellos
was a “venture issuer”, during the year ended December 31, 2023, Satellos relied on the exemptions provided by Section 6.1
of NI 52-110 with respect to Part 3 – Composition of the Audit Committee and Part 5 – Reporting Obligations.
Satellos graduated to the main Board of the TSX and did not rely on any such exemptions with respect to the year ended December 31,
2024.
Pre-Approval Policies and Procedures
The Audit Committee
will pre-approve the appointment of external auditors for the engagement of non-audit services and may adopt specific pre-approval policies
and procedures for such engagements, as described in the Audit Committee Charter which is attached hereto as Schedule “A”.
External Auditor Service Fees
On November 18, 2024, MNP LLP resigned at
the request of the Corporation as auditor of the Corporation, and PricewaterhouseCoopers LLP (PwC) were appointed as the successor auditor.
The following table sets forth the aggregate fees paid or payable for professional services rendered by the independent external auditors,
PwC, for the fiscal year.
Financial Year
Ending | | |
Audit Fees | | |
Audit Related
Fees | | |
Tax Fees | | |
All Other Fees | |
| | December 31, 2024 | | |
$ | 260,000 | | |
| Nil | | |
| Nil | | |
| Nil | |
| | December 31, 2023 | | |
| Nil | | |
| Nil | | |
| Nil | | |
| Nil | |
“Audit Fees” refers to the aggregate
fees billed by the Company’s external auditors for audit services including interim reviews. “Audit Related Fees” refers
to aggregate fees billed for assurance and related services by the Company’s external auditors that are reasonably related to the
performance of the audit or review of the Company’s financial statements and not reported under Audit Fees, including the provision
of comfort letters and consents, the consultation concerning financial accounting and reporting of specific issues and the review of
documents filed with regulatory authorities. “Tax Fees” includes fees for professional services rendered by the Company’s
external auditors for tax compliance, tax advice and tax planning. “All Other Fees” includes all fees billed by the Company’s
external auditors for services not covered in the other three categories.
Prior to PwC, the Company’s auditor was MNP LLP. Fees paid for
services rendered for the fiscal year 2023 and for fees paid or payable for services rendered in 2024 up to and until their resignation
were as follows.
Financial Year
Ending | |
Audit Fees | | |
Audit Related
Fees | | |
Tax Fees | | |
All Other Fees | |
| December 31, 2024 | |
$ | 77,040 | | |
$ | 65,125 | | |
$ | 22,804 | | |
| Nil | |
| December 31, 2023 | |
$ | 187,250 | | |
$ | 62,060 | | |
$ | 15,408 | | |
$ | 53,500 | |
“Audit Fees” refers to the aggregate
fees billed by the Company’s external auditors for audit services including interim reviews. “Audit Related Fees” refers
to aggregate fees billed for assurance and related services by the Company’s external auditors that are reasonably related to the
performance of the audit or review of the Company’s financial statements and not reported under Audit Fees, including the provision
of comfort letters and consents, the consultation concerning financial accounting and reporting of specific issues and the review of
documents filed with regulatory authorities. “Tax Fees” includes fees for professional services rendered by the Company’s
external auditors for tax compliance, tax advice and tax planning. “All Other Fees” includes all fees billed by the Company’s
external auditors for services not covered in the other three categories.
PROMOTERS
Frank Gleeson may be considered to be a “promoter”
of the Company within the meaning of applicable Canadian securities laws (each, a “Promoter”). Mr. Gleeson currently
owns, or exercises control or direction over, 3,976,389 Common Shares representing approximately 2.4% of the issued and outstanding Common
Shares on a non-diluted basis. Mr. Gleeson receives compensation from the Company for his services as Chief Executive Officer of
the Company and as of the date hereof, has been granted 6,195,691 options pursuant to the Company’s stock option plan. The statement
as to the number of Common Shares beneficially owned, or over which a Promoter exercises control or direction, directly or indirectly,
not being within the knowledge of the Company, has been obtained from the System for Electronic Disclosure by Insiders.
LEGAL PROCEEDINGS AND REGULATORY ACTIONS
There are no pending or contemplated legal proceedings
to which the Company is a party or of which any of our properties is the subject.
As of December 31, 2024, the Company is
not subject to:
| (1) | any penalties or sanctions imposed against the Company by a
court relating to securities legislation or by a securities regulatory authority during the financial year ended December 31, 2024;
or |
| | | |
| (2) | any other penalties or sanctions imposed by a court or regulatory
body against the Company that would likely be considered important to a reasonable investor in making an investment decision; or |
| | | |
| (3) | settlement agreements the Company entered into before a court
relating to securities legislation or with a securities regulatory authority during the financial year ended December 31, 2024. |
The Company is unaware of any condition of default
under any debt, regulatory, exchange related or other contractual obligation.
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL
TRANSACTIONS
Except as described below, no director, officer
or principal shareholder of the Company, or any associate or affiliate of any of the foregoing persons or entities, has any direct or
indirect material interest in any transaction within three years of the date of this Annual Information Form or in any proposed
transaction of the Company that has materially affected or will materially affect the Company or any of our subsidiaries.
BBSI acted as the lead agent for the Unit Offering
and in connection therewith received a portion of the agency fee (aggregate agency fee equal to 7.0% of the gross proceeds of the Unit
Offering), as well as a portion of the Compensation Warrants (aggregate Compensation Warrants equal to 7.0% of the total number of the
Units sold pursuant to the Unit Offering). BBSI received a total of 208,688 Compensation Warrants as the lead agent for the Unit Offering.
The Company engaged BBSI in a consulting agreement
in November of 2022. The Company recorded $40 thousand in expenses during the three month period ended December 31, 2022 and
a further $60 thousand in the three month period ended March 31, 2023 for work completed under this agreement. This agreement is
completed and there are no amounts owing to BBSI as of December 31, 2024.
On May 17, 2023, the Company completed the
May 2023 Equity Offering for gross proceeds of $55 million. BBSI acted as exclusive agent and book running manager and as compensation
the Company issued 6,560,474 compensation warrants, paid approximately $3.3 million in commissions and reimbursed BBSI for $176 thousand
in legal and related fees related to the May 2023 Equity Offering.
On December 20, 2024, the Company completed
the December 2024 Public Offering for gross proceeds of $57 million. BBSI acted as lead agent for the December 2024 Public
Offering and in connection therewith received a portion of the agency fee (aggregate agency fee equal to 7.0% of the gross proceeds,
less shares subscribed by insiders).
TRANSFER AGENT AND REGISTRAR
The registrar
and transfer agent for the Common Shares is Computershare Investor Services Inc., 510 Burrard Street, 3rd Floor, Vancouver, British Columbia,
V6C 3B9.
MATERIAL CONTRACTS
The following are the material contracts that
the Company or a subsidiary of the Company have entered into during the financial year ended December 31, 2024, or prior thereto
but still in effect and that are required to be filed under National Instrument 51-102 Continuous Disclosure Obligations:
(1) OHRI
License, as amended.
INTERESTS OF EXPERTS
As of September 30, 2022, the
Company’s auditor was MNP LLP, of Toronto, Ontario. MNP LLP has advised the Company that it is independent with respect to the
Company within the meaning of the relevant rules and related interpretations prescribed by the relevant professional bodies in
Canada and any applicable legislation or regulations, and also that they are independent accountants with respect to the Company
under all relevant U.S. professional and regulatory standards. On November 18, 2024, MNP LLP resigned at the request of the
Corporation as auditor of the Corporation, and PricewaterhouseCoopers LLP were appointed as the successor auditor.
The Corporation’s independent auditors
are PricewaterhouseCoopers LLP, Chartered Professional Accountants, who have prepared an independent auditor’s report dated March 25,
2025 in respect of the Corporation’s consolidated financial statements as at December 31, 2024 and for the year then ended.
PricewaterhouseCoopers LLP has advised that they are independent with respect to the Corporation within the meaning of the relevant rules and
related interpretations prescribed by the relevant professional bodies in Canada, including the CPA Code of Professional Conduct (Ontario),
and any applicable legislation or regulations.
ADDITIONAL INFORMATION
Additional information
with respect to Satellos may be found on its SEDAR+ website at www.sedarplus.ca. Additional financial information is provided
in the Company’s financial statements and Management’s Discussion and Analysis for the year ended December 31, 2024.
Additional information, including directors’
and officers’ remuneration and indebtedness, principal holders of the Company’s securities and securities authorized for
issuance under equity compensation plans, if applicable, is contained in the Company’s management information circular dated April 10,
2024 for its annual general and special meeting of Shareholders held on May 14, 2024 (the “2024 Circular”).
SCHEDULE “A”
CHARTER OF THE
AUDIT COMMITTEE
SATELLOS BIOSCIENCE INC.
(See attached)
SATELLOS BIOSCIENCE
INC.
(the “Company”)
AUDIT COMMITTEE CHARTER
The Audit Committee
(the “Committee”) is a standing committee appointed by the board of directors (the “Board”) of
the Company. The Committee is established to assist the Board in fulfilling its oversight responsibilities with respect to the financial
affairs of the Company, including responsibility to:
| · | oversee
the integrity of the Company’s financial statements and financial reporting process,
audit process, internal accounting controls and procedures and compliance with related legal
and accounting principles; |
| · | oversee
the qualifications and independence of the external auditor; |
| · | oversee
the work of the Company’s financial management, internal audit function (if any) and
external auditor in these areas; and |
| · | provide
an open avenue of communication between the external auditor, the internal auditors (if any),
the Board and the Company’s management. |
In addition, the Committee shall prepare, if
required, an audit committee report for inclusion in the information circular prepared in connection with the Company’s annual
meeting of shareholders, in accordance with applicable rules and regulations.
The function of the Committee is oversight. It
is not the duty or responsibility of the Committee or its members (i) to plan or conduct audits, (ii) to determine that the
Company’s financial statements are complete and accurate and are in accordance with international financial reporting standards
(“IFRS”) or (iii) to conduct other types of auditing or accounting reviews or similar procedures or investigations.
The Committee members and its Chair are members of the Board, appointed to the Committee to provide broad oversight of the financial,
risk and control-related activities of the Company, and are specifically not accountable or responsible for the day-to-day operation
or performance of such activities. In particular, the member or members identified as audit committee financial experts, if any, shall
not be accountable for giving professional opinions on the internal or external audit of the Company’s financial information.
Management is responsible for the preparation,
presentation and integrity of the Company’s financial statements. Management is also responsible for ensuring that adequate systems
of risk assessment and internal controls and procedures are designed and put in place in accordance with the accounting policies determined
by the Committee to provide reasonable assurance that assets are safeguarded and transactions are properly authorized, recorded and reported
and to assure the effectiveness and efficiency of operations, the reliability of financial reporting and compliance with accounting standards
and with applicable laws and regulations. The internal auditor (if any) is responsible for monitoring and reporting on the adequacy and
effectiveness of the system of internal controls. The external auditor is responsible for planning and carrying out an audit of the Company’s
annual financial statements in accordance with IFRS to provide reasonable assurance that, among other things, such financial statements
are in accordance with IFRS.
| 1. | Composition – The Committee shall be comprised of at least
three members. None of the members of the Committee shall be an officer or employee of the
Company or any of its subsidiaries and the membership of the Committee shall satisfy the
independence, experience and financial expertise requirements of any and all securities exchange(s) on
which the securities of the Company are listed and posted for trading and all other applicable
securities and other laws and none of the members shall have participated in the preparation
of the financial statements of the Company or any current subsidiaries of the Company at
any time over the past three years. |
| 2. | Appointment and Replacement of Committee Members – Any member
of the Committee may be removed or replaced at any time by the Board and shall automatically
cease to be a member of the Committee upon ceasing to be a director. The Board may fill vacancies
on the Committee by appointing another director to the Committee. |
The Board shall fill any vacancy if
the membership of the Committee is less than three directors or if the Committee does not have at least one member with accounting or
related financial expertise. Whenever there is a vacancy on the Committee, the remaining members may exercise all its power as long as
a quorum remains in office. Subject to the foregoing, the members of the Committee shall be appointed by the Board annually and each
member of the Committee shall remain on the Committee until the next annual meeting of shareholders after his or her election or until
his or her successor shall be duly elected and qualified.
| 3. | Committee Chair – Unless a Chair of the Committee is designated
by the full Board, the members of the Committee may designate a Chair by majority vote of
the full Committee. The Chair of the Committee shall be responsible for leadership of the
Committee, including preparing the agenda, presiding over the meetings, making committee
assignments and reporting to the Board. |
| 4. | Conflicts of Interest – If a Committee member faces a potential
or actual conflict of interest relating to a matter before the Committee, other than matters
relating to the compensation of directors, that member shall be responsible for alerting
the Chair of the Committee. If the Chair of the Committee faces a potential or actual conflict
of interest, the Chair of the Committee shall advise the Chair of the Board. If the Chair
of the Committee, or the Chair of the Board, as the case may be, concurs that a potential
or actual conflict of interest exists, then the member faced with such conflict shall disclose
to the Committee the member’s interest and shall not participate in consideration of
the matter and shall not vote on the matter. |
| 5. | Compensation of Committee Members – The members of the Committee
shall be entitled to receive such remuneration for acting as members of the Committee as
the Board may from time to time determine. No member of the Committee shall receive from
the Company or any of its affiliates any compensation other than the fees to which he or
she is entitled as a director or a member of the Committee of the Board or any of its affiliates. |
| 6. | Meetings of the Committee |
| (a) | Procedures for Meetings – Subject to any applicable statutory
or regulatory requirements, the articles and by-laws of the Company and the terms of this
Charter, the time at which and place where the meetings of the Committee shall be held and
the calling of Committee meetings and the procedure in all things at such meetings shall
be determined by the Committee, provided that it is understood that the Committee may meet
in person and by telephone or electronic means that permit all persons participating in the
meeting to communicate simultaneously and instantaneously and that the Committee may act
by means of a written resolution signed by all members entitled to vote on the matter. |
| (b) | Calling of Meetings – The Committee shall meet as often
as it deems appropriate to discharge its responsibilities. Notice of the time and place of
every meeting shall be given in writing, by any means of transmitted or recorded communication,
including email, video conferences or other electronic means that produces a written copy,
to each member of the Committee at least 24 hours prior to the time fixed for such meeting.
However, a member may in any manner waive a notice of a meeting. Attendance of a member at
a meeting constitutes a waiver of notice of the meeting, except where a member attends a
meeting for the express purpose of objecting to the transaction of any business on the grounds
that the meeting is not lawfully called. Whenever practicable, the agenda for the meeting
and the meeting materials shall be provided to members before the Committee meeting in sufficient
time to provide adequate opportunity for their review. |
| (c) | Quorum – A majority of the members of the Committee constitute
a quorum for the transaction of Committee business. |
| (d) | Chair of Meetings – If the Chair of the Committee is
not present at any meeting of the Committee, one of the other members of the Committee who
is present shall be chosen by the Committee to preside at the meeting. |
| (e) | Secretary of Meeting – The Chair of the Committee shall
designate a person who need not be a member of the Committee to act as secretary or, if the
Chair of the Committee fails to designate such a person, the secretary of the Company shall
be secretary of the Committee. The agenda of each Committee meeting will be prepared by the
secretary of the Committee and, whenever reasonably practicable, circulated to each member
prior to each meeting. |
| (f) | Separate Executive Meetings – The Committee shall meet
at least once every year, and more often as warranted, with the Chief Executive Officer and
such other officers of the Company as the Committee may determine to discuss any matters
that the Committee or such individuals believes should be discussed privately. |
| (g) | Minutes – Minutes of the proceedings of each Committee
meeting shall be kept in minute books provided for that purpose. The minutes of Committee
meetings shall accurately record the discussions of and decisions made by the Committee,
including all recommendations to be made by the Committee to the Board and shall be distributed
to all Committee members. |
| C. | AUDIT RESPONSIBILITIES OF THE COMMITTEE |
Fundamental Powers
| 7. | Subject to any applicable statutory or regulatory requirements, the articles
and by-laws of the Company and the terms of this Charter, the Committee shall have the following
fundamental powers in addition to any powers set out in this Charter or otherwise specified
by the Board from time to time: |
| (a) | Access – The Committee is entitled to full access to
all books, records, facilities, and personnel of the Company and its subsidiaries. The Committee
may require such officers, directors and employees of the Company and its subsidiaries and
others as it may see fit from time to time to provide any information about the Company and
its subsidiaries it may deem appropriate and to attend and assist at meetings of the Committee. |
| (b) | Delegation – The Committee may delegate from time to
time to any person or committee of persons any of the Committee’s responsibilities
that lawfully may be delegated. |
| (c) | Adoption of Policies and Procedures – The Committee may
adopt policies and procedures for carrying out its responsibilities. |
The Committee shall have the ability
to communicate directly with the external auditor and the Company’s internal auditor, if any.
The Committee has the authority, to
the extent it deems necessary or appropriate, to retain independent legal, accounting or other advisors (“Advisors”).
The Company will provide appropriate funding, as determined by the Committee, for payment of compensation to the external auditors for
the purpose of rendering or issuing an audit report and to any Advisors employed by the Committee.
Selection and Oversight of the External Auditor
| 8. | The external auditor is ultimately accountable to the Committee and the
Board as the representatives of the shareholders of the Company and shall report directly
to the Committee and the Committee shall so instruct the external auditor. The Committee
shall evaluate the performance of the external auditor and make recommendations to the Board
on the appointment, reappointment or replacement of the external auditor of the Company to
be proposed in the Company’s information circular for shareholder approval and shall
have authority to terminate the external auditor. If a change in external auditor is proposed,
the Committee shall review the reasons for the change and any other significant issues related
to the change, including the response of the incumbent auditors, and enquire as to the qualifications
of the proposed auditors before making its recommendation to the Board. |
| 9. | The Committee shall approve in advance the terms of engagement and the
compensation to be paid by the Company to the external auditor with respect to the conduct
of the annual audit. The Committee may approve policies and procedures for the pre-approval
of services to be rendered by the external auditor, which policies and procedures shall include
reasonable detail with respect to the services covered. All non-audit services to be provided
to the Company or any of its affiliates by the external auditor or any of its affiliates
which are not covered by pre-approval policies and procedures approved by the Committee shall
be subject to pre-approval by the Committee. |
| 10. | The Committee shall review the independence of the external auditor and
shall make recommendations to the Board on appropriate actions to be taken which the Committee
deems necessary to protect and enhance the independence of the external auditor. In connection
with such review, the Committee shall: |
| (a) | actively engage in a dialogue with the external auditor about all
relationships or services that may impact the objectivity and independence of the external
auditor; |
| (b) | require that the external auditor submit to it on a periodic basis
and, at least annually, a formal written statement delineating all relationships between
the Company and its subsidiaries, on the one hand, and the external auditor and its affiliates,
on the other hand; |
| (c) | consider whether there should be a regular rotation of the audit partners
responsible for performing the audit and/or of the external audit firm itself; and |
| (d) | consider the auditor independence standards promulgated by applicable
auditing regulatory and professional bodies. |
| 11. | The Committee shall consider whether to prohibit the external auditor
and its affiliates from providing certain non-audit services to the Company and its affiliates. |
| 12. | The Committee shall require the external auditor to provide to the Committee,
and the Committee shall review and discuss with the external auditor, all reports which the
external auditor is required to provide to the Committee or the Board under rules, policies
or practices of professional or regulatory bodies applicable to the external auditor, and
any other reports which the Committee may require. |
| 13. | The Committee is responsible for resolving disagreements between management
and the external auditor regarding financial reporting. |
Appointment and Oversight of Internal Auditors (If Any)
| 14. | The appointment, authority, budget, replacement or dismissal of the internal
auditors, if any, shall be subject to prior review and approval by the Committee. When any
such internal audit function is performed by employees of the Company or its subsidiaries,
the Committee may delegate responsibility for approving the employment, term of employment,
compensation and termination of employees engaged in such function other than the head of
the Company’s internal audit function. |
| 15. | The Committee shall obtain from the internal auditors (if any), and shall
review, summaries of the significant reports to management prepared by any such internal
auditors (or the actual reports if requested by the Committee) and management’s responses
to such reports. |
| 16. | The Committee shall, as it deems necessary, communicate with the internal
auditors (if any) with respect to their reports and recommendations, the extent to which
prior recommendations have been implemented and any other matters that such internal auditors
bring to the attention of the Committee. The head of the internal audit function (if one
exists) shall have unrestricted access to the Committee. |
| 17. | The Committee shall, annually or more frequently as it deems necessary,
evaluate the internal auditors (if any), including their activities, organizational structure
and qualifications and effectiveness. |
Oversight and Monitoring of Audits
| 18. | The Committee shall review with the external auditor, the internal auditors
(if any) and management the audit function generally, the objectives, staffing, locations,
co-ordination, reliance upon management and internal audit (if any) and general audit approach
and scope of proposed audits of the financial statements of the Company and its subsidiaries,
the overall audit plans, the responsibilities of management, the internal auditors (if any)
and the external auditor, the audit procedures to be used and the timing and estimated budgets
of the audits. |
| 19. | The Committee shall meet periodically as it deems necessary with the internal
auditor (if any) to discuss the progress of their activities and any significant findings stemming from internal audits and any difficulties or disputes that arise with management and the adequacy of management's responses in correcting audit-related deficiencies.
|
| 20. | The Committee shall discuss with the external auditor any difficulties
or disputes that arose with management or the internal auditors (if any) during the course
of the audit, any restrictions on the scope of activities or access to requested information
and the adequacy of management’s responses in correcting audit-related deficiencies. |
| 21. | The Committee shall review with management the results of internal
(if any) and external audits. |
| 22. | The Committee shall take such other reasonable steps as it may deem necessary
to satisfy itself that the audit was conducted in a manner consistent with all applicable
legal requirements and auditing standards of applicable professional or regulatory bodies. |
Oversight and Review of Accounting Principles and Practices
| 23. | The Committee shall, as it deems necessary, oversee, review and discuss
with management, the external auditor and the internal auditors (if any): |
| (a) | the quality, appropriateness and acceptability of the Company’s
accounting principles and practices and that of its subsidiaries used in its financial reporting,
changes in the Company’s accounting principles or practices and that of its subsidiaries
and the application of particular accounting principles and disclosure practices by management
to new transactions or events; |
| (b) | all significant financial reporting issues and judgments made in connection
with the preparation of the financial statements, including the effects of alternative methods
within IFRS on the financial statements and any “second opinions” sought by management
from any other auditor firm or advisor with respect to the accounting treatment of a particular
item; |
| (c) | disagreements between management and the external auditor or the internal
auditors (if any) regarding the application of any accounting principles or practices; |
| (d) | any material change to the Company’s auditing and accounting
principles and practices or that of its subsidiaries as recommended by management, the external
auditor or the internal auditors (if any) or which may result from proposed changes to applicable
IFRS; |
| (e) | the effect of regulatory and accounting initiatives on the Company’s
financial statements and other financial disclosures; |
| (f) | any reserves, accruals, provisions, estimates or management programs
and policies, including factors that affect asset and liability carrying values and the timing
of revenue and expense recognition, that may have a material effect upon the financial statements
of the Company; |
| (g) | the use of special purpose entities and the business purpose and economic
effect of off-balance sheet transactions, arrangements, obligations, guarantees and other
relationships of the Company or its subsidiaries and their impact on the financial results
of the Company; |
| (h) | any legal matter, claim or contingency that could have a significant
impact on the financial statements, the Company’s compliance policies and that of its
subsidiaries and any material reports, inquiries or other correspondence received from regulators
or governmental agencies and the manner in which any such legal matter, claim or contingency
has been disclosed in the Company’s financial statements; |
| (i) | the treatment for financial reporting purposes of any significant
transactions which are not a normal part of the Company’s operations or those of its
subsidiaries; |
| (j) | the use of any “pro forma” or “adjusted” information
not in accordance with IFRS; and |
| (k) | management’s determination of goodwill impairment, if any, as
required by applicable accounting standards. |
Oversight and Monitoring of Internal Controls
| 24. | The Committee shall, as it deems necessary, exercise oversight of, review
and discuss with management, the external auditor and the internal auditors (if any): |
| (a) | the adequacy and effectiveness of the Company’s internal accounting
and financial controls and also of its subsidiaries and the recommendations of management,
the external auditor and the internal auditors (if any) for the improvement of accounting
practices and internal controls; |
| (b) | any significant deficiencies or material weaknesses in the internal
control environment, including with respect to computerized information system controls and
security; |
| (c) | any fraud that involves personnel who have a significant role in the
Company’s internal control over financial reporting or that of its subsidiaries; and |
| (d) | management’s compliance with the Company’s processes,
procedures and internal controls. |
Communications with Others
| 25. | The Committee shall establish and monitor procedures for the receipt and
treatment of complaints received by the Company and its subsidiaries regarding accounting,
internal accounting controls or audit matters and the anonymous submission by employees of
concerns regarding questionable accounting or auditing matters and shall review periodically
with management and the internal auditors (if any) these procedures and any significant complaints
received. |
Oversight and Monitoring of the Company’s Financial Disclosures
| (a) | review with the external auditor and with management and shall recommend
to the Board for approval the annual financial statements and the notes and Management’s
Discussion and Analysis accompanying such financial statements and any related press release,
the Company’s annual report and any financial information of the Company contained
in any prospectus or information circular of the Company; and |
| (b) | review and recommend to the Board, as necessary, with the external
auditor and with management each set of interim financial statements and the notes and Management’s
Discussion and Analysis accompanying such financial statements and any related press release
and any other disclosure documents or regulatory filings of the Company containing or accompanying
financial information of the Company. |
Such reviews shall be conducted prior to the release of
any summary of the financial results or the filing of such reports with applicable regulators.
| 27. | The Committee shall review the disclosure with respect to its pre-approval
of audit and nonaudit services provided by the external auditor. |
Oversight of Finance and Financial Risk Matters
| 28. | Appointments of the key financial executives involved in the financial
reporting process of the Company, including the Chief Financial Officer, shall require the
prior review of the Committee. |
| 29. | The Committee shall receive and review (as applicable): |
| (a) | periodic reports on compliance with requirements regarding statutory
deductions and remittances and, in the event of any non-compliance, the nature and extent
of the non-compliance, the reasons therefor and management’s plan and timetable to
correct any deficiencies; |
| (b) | material policies and practices of the Company and its subsidiaries
respecting cash management and material financing strategies or policies or proposed financing
arrangements and objectives of the Company and its subsidiaries; and |
| (c) | material tax policies and tax planning initiatives, tax payments and
reporting and any pending tax audits or assessments. |
| 30. | The Committee shall meet periodically with management to review and discuss
the Company’s major financial risk exposures and the policy steps that management has
taken to monitor and control such exposures, including the use of financial derivatives and
hedging activities and the Company’s insurance programs. |
| 31. | The Committee shall receive and review the financial statements and other
financial information of material subsidiaries of the Company and any auditor recommendations
concerning such subsidiaries. |
| 32. | The Committee shall meet with management to review the process and systems
in place for ensuring the reliability of public disclosure documents that contain audited
and unaudited financial information and their effectiveness. |
Additional Responsibilities
| 33. | The Committee shall review and approve all related party transactions
on an ongoing basis, including to the extent required by any and all securities exchange(s) on
which the securities of the Company are listed and posted for trading. |
| 34. | The Committee shall review and/or approve any other matter specifically
delegated to the Committee by the Board and undertake on behalf of the Board such other activities
as may be necessary or desirable to assist the Board in fulfilling its oversight responsibilities
with respect to financial reporting and the Company’s financial obligations. |
| 35. | The Committee shall review and reassess the adequacy of this Charter periodically
as it deems appropriate and recommend changes to the Board. The performance of the Committee
shall be evaluated with reference to this Charter annually or otherwise periodically as deemed
appropriate by the Board. |
Adopted on January 30, 2024
EXHIBIT 4.2
SATELLOS BIOSCIENCE
INC.
Consolidated Financial
Statements
Years ended December 31,
2023 and 2022
| Independent Auditor’s Report |
 |
| |
|
To the Shareholders of Satellos Bioscience
Inc.:
Opinion
We have audited
the consolidated financial statements of Satellos Bioscience Inc and its subsidiaries (the “Company”), which comprise the consolidated
statements of financial position as at December 31, 2023 and December 31, 2022, and the consolidated statements of loss and
comprehensive loss, changes in shareholders’ equity and cash flows for the years then ended, and notes to the consolidated financial
statements, including a summary of material accounting policies.
In our opinion,
the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the
Company as at December 31, 2023 and December 31, 2022, and its consolidated financial performance and its consolidated cash
flows for the years then ended in accordance with International Financial Reporting Standards.
Basis for Opinion
We conducted our
audits in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described
in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent
of the Company in accordance with the ethical requirements that are relevant to our audits of the consolidated financial statements in
Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters
are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements
of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Valuation,
presentation, and disclosure of asset held for sale
Key Audit Matter
Description
We draw attention
to Note 6 to the consolidated financial statements. The Company has recorded assets held for sale of $3,957,087 as of December 31,
2023, comprising of intangible asset of $3,916,190 and investment in the equity of an unrelated company under a stock purchase agreement
of $40,897. Such intangible asset was recognized as disposal group that is held for sale during the year at the lower of its carrying
amount and fair value.
We considered this
a key audit matter due to the significant judgment made by management in estimating the carrying amount and fair value of the disposal
group and a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence relating
to management’s estimates. This resulted in an increased extent of audit effort.
Audit Response
We responded
to this matter by performing procedures in relation to valuation, presentation, and disclosure of asset held for sale. Our audit work
in relation to this included, but was not restricted to, the following:
| · | Evaluated
the reasonableness of key assumptions in the valuation model, including future cash flows
based on expected operating results, and the discount rate. |
| · | Tested
the mathematical accuracy of management’s valuation model and supporting calculations. |
| · | Assessed the appropriateness of the disclosures relating to the assumptions used in the assessment of carrying amount and fair value of
the disposal group in the notes to the consolidated financial statements. |
| · | Reviewed
all the underlying contracts relevant for the assessment of the disposal group as asset held
for sale. |
| · | With
the assistance of internal valuation specialists, evaluated the reasonableness of the Company’s
valuation model, which included: |
| o | Evaluating
the reasonableness of the discount rates; |
| o | Developing a range of independent estimates
and comparing those to the discount rate selected by management; and |
| o | Performing a sensitivity analysis for validating
the management’s estimates and discount rate. |
Other Information
Management is responsible
for the other information. The other information comprises Management’s Discussion and Analysis.
Our opinion on
the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with
our audits of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audits or
otherwise appears to be materially misstated. We obtained Management’s Discussion and Analysis prior to the date of this auditor’s
report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities
of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible
for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting
Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.
In preparing the
consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either
intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with
governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities
for the Audit of the Consolidated Financial Statements
Our objectives
are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated
financial statements.
As part of an audit
in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism
throughout the audit. We also:
| · | Identify
and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control. |
| · | Obtain
an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control. |
| · | Evaluate
the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management. |
| · | Conclude
on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Company’s ability to continue
as a going concern. If we conclude that a material uncertainty exists, we are required to
draw attention in our auditor’s report to the related disclosures in the consolidated financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause the Company to cease to continue as a going concern. |
| · | Evaluate
the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation. |
We communicate
with those charged with governance regarding, among other matters, the planned scope and timing of the audits and significant audit findings,
including any significant deficiencies in internal control that we identify during our audits.
We also provide
those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to
communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters
communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated
financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
The engagement
partner on the audit resulting in this independent auditor’s report is Ratan Kumar Verma.
| |
 |
| Toronto, Ontario |
Chartered Professional Accountants |
| March 27, 2024 |
Licensed Public Accountants |
SATELLOS BIOSCIENCE INC.
Consolidated Statements of Financial
Position
(Expressed in thousands of Canadian
Dollars)
| As at December 31, | |
Notes | | |
2023 | | |
2022 | |
| | |
| | |
$ | | |
$ | |
| ASSETS | |
| | | |
| | | |
| | |
| Current | |
| | | |
| | | |
| | |
| Cash and cash equivalents | |
| 3 | | |
| 22,067 | | |
| 1,924 | |
| Short-term investments | |
| 4 | | |
| 17,520 | | |
| | |
| Sales tax and other receivables | |
| | | |
| 583 | | |
| 260 | |
| Prepaid expenses and deposits | |
| | | |
| 148 | | |
| 46 | |
| Derivatives, net | |
| 6 | | |
| 4 | | |
| 3 | |
| Total current assets | |
| | | |
| 40,322 | | |
| 2,233 | |
| | |
| | | |
| | | |
| | |
| Equipment | |
| 5 | | |
| 19 | | |
| 8 | |
| | |
| | | |
| | | |
| | |
| Assets held for sale | |
| | | |
| | | |
| | |
| Intangible asset | |
| 6 | | |
| 3,916 | | |
| 3,916 | |
| Investment | |
| 6 | | |
| 41 | | |
| 42 | |
| | |
| | | |
| 3,957 | | |
| 3,958 | |
| | |
| | | |
| | | |
| | |
| TOTAL ASSETS | |
| | | |
| 44,298 | | |
| 6,199 | |
| | |
| | | |
| | | |
| | |
| LIABILITIES | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | |
| Accounts payable and accrued liabilities | |
| 7 | | |
| 3,624 | | |
| 2,830 | |
| Total current liabilities | |
| | | |
| 3,624 | | |
| 2,830 | |
| | |
| | | |
| | | |
| | |
| Total Liabilities | |
| | | |
| 3,624 | | |
| 2,830 | |
| | |
| | | |
| | | |
| | |
| SHAREHOLDERS’ EQUITY | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | |
| Common shares | |
| 9 | | |
| 61,916 | | |
| 30,209 | |
| Pre-Funded Warrants | |
| 9 | | |
| 17,772 | | |
| - | |
| Warrants | |
| 10 | | |
| 3,484 | | |
| 1,092 | |
| Contributed surplus | |
| 11 | | |
| 5,019 | | |
| 3,688 | |
| Accumulated deficit | |
| | | |
| (47,502 | ) | |
| (31,613 | ) |
| Accumulated other comprehensive loss | |
| | | |
| (15 | ) | |
| (7 | ) |
| Total shareholders’ equity | |
| | | |
| 40,674 | | |
| 3,369 | |
| | |
| | | |
| | | |
| | |
| TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY | |
| | | |
| 44,298 | | |
| 6,199 | |
Commitments and Contingencies (Note
13)
The accompanying notes are an integral
part of these consolidated financial statements.
Approved by the Board of Directors:
| (signed) “Geoff MacKay” |
|
|
| |
|
Director |
| |
|
|
| (signed) “Adam Mostafa” |
|
|
| |
|
Director |
SATELLOS BIOSCIENCE INC.
Consolidated Statements of Loss and
Comprehensive Loss
(Expressed in thousands of Canadian
Dollars, except for per share amounts)
| For the years ended December 31, | |
Notes | | |
2023 | | |
2022 | |
| | |
| | | |
$ | | |
$ | |
| OPERATING EXPENSES | |
| | | |
| | | |
| | |
| Research and development | |
| 12 | | |
| 8,817 | | |
| 3,734 | |
| General and administrative | |
| 12 | | |
| 6,646 | | |
| 4,694 | |
| | |
| | | |
| | | |
| | |
| LOSS FROM OPERATING ACTIVITIES: | |
| | | |
| (15,463 | ) | |
| (8,428 | ) |
| | |
| | | |
| | | |
| | |
| OTHER INCOME AND EXPENSES | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | |
| Finance income | |
| | | |
| 1,333 | | |
| 63 | |
| Interest expense | |
| 8 | | |
| (177 | ) | |
| - | |
| Loss on debt extinguishment | |
| 8 | | |
| (426 | ) | |
| - | |
| Gain on derivatives | |
| 6 | | |
| 1 | | |
| 3 | |
| Impairment of intangible asset | |
| 6 | | |
| - | | |
| (2,885 | ) |
| Foreign exchange gain (loss) | |
| | | |
| (1,157 | ) | |
| (70 | ) |
| | |
| | | |
| | | |
| | |
| NET LOSS BEFORE TAX | |
| | | |
| (15,889 | ) | |
| (11,317 | ) |
| | |
| | | |
| | | |
| | |
| Income tax | |
| | | |
| - | | |
| (5 | ) |
| | |
| | | |
| | | |
| | |
| NET LOSS FOR THE YEAR | |
| | | |
| (15,889 | ) | |
| (11,322 | ) |
| | |
| | | |
| | | |
| | |
| OTHER COMPREHENSIVE LOSS | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | |
| Items that may be reclassified to net
loss Foreign currency translation adjustments | |
| | | |
| (8 | ) | |
| (6 | ) |
| | |
| | | |
| | | |
| | |
| TOTAL COMPREHENSIVE LOSS | |
| | | |
| (15,897 | ) | |
| (11,328 | ) |
| | |
| | | |
| | | |
| | |
| Basic and diluted loss per share | |
| | | |
$ | (0.18 | ) | |
$ | (0.32 | ) |
| Weighted average number of common shares | |
| | | |
| 86,404,762 | | |
| 35,680,113 | |
The accompanying notes are an integral
part of these consolidated financial statements.
SATELLOS BIOSCIENCE INC.
Consolidated Statements of Changes in
Shareholders’ Equity
(Expressed in thousands of Canadian
Dollars)
| For
the years ended December 31, 2023 and 2022 | |
| | |
| | |
Common
Shares | | |
Common
Shares | | |
Pre-Funded
Warrants | | |
Pre-Funded
Warrants | | |
Warrants | | |
Contributed
Surplus | | |
Accumulated
Deficit | | |
Accumulated
Other
Comprehensive
Loss | | |
Total
Shareholders’
Equity | |
| | |
Number | | |
$ | | |
Number | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | |
| Balance
– December 31, 2021 | |
32,997,613 | | |
28,316 | | |
- | | |
- | | |
1,218 | | |
1,240 | | |
(20,291 | ) | |
(1 | ) | |
10,482 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Shares
issued for license amendment (Note 9) | |
50,000 | | |
23 | | |
- | | |
- | | |
- | | |
- | | |
- | | |
- | | |
23 | |
| Shares
issued in Unit Offering, net of costs (Note 9) | |
8,750,000 | | |
1,973 | | |
- | | |
- | | |
- | | |
- | | |
- | | |
- | | |
1,973 | |
| Warrants
issued to investors Unit Offering (Note 9) | |
- | | |
- | | |
- | | |
- | | |
779 | | |
- | | |
- | | |
- | | |
779 | |
| Warrants
issued to agents in Unit Offering (Note 9) | |
- | | |
(103 | ) | |
- | | |
- | | |
103 | | |
- | | |
- | | |
- | | |
- | |
| Expiry
of warrants unexercised | |
- | | |
- | | |
- | | |
- | | |
(1,008 | ) | |
1,008 | | |
- | | |
- | | |
- | |
| Stock-based
compensation (Note 11) | |
- | | |
- | | |
- | | |
- | | |
- | | |
1,440 | | |
- | | |
- | | |
1,440 | |
| Net
loss | |
| | |
- | | |
- | | |
- | | |
- | | |
- | | |
(11,322 | ) | |
- | | |
(11,322 | ) |
| Other
comprehensive loss | |
- | | |
- | | |
- | | |
| | |
- | | |
- | | |
- | | |
(6 | ) | |
(6 | ) |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Balance
–December 31, 2022 | |
41,797,613 | | |
30,209 | | |
- | | |
- | | |
1,092 | | |
3,688 | | |
(31,613 | ) | |
(7 | ) | |
3,369 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Balance
- December 31, 2022 | |
41,797,613 | | |
30,209 | | |
- | | |
- | | |
1,092 | | |
3,688 | | |
(31,613 | ) | |
(7 | ) | |
3,369 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Common
Shares issued in Debenture Offering (Note 8) | |
671,825 | | |
238 | | |
- | | |
- | | |
- | | |
- | | |
- | | |
- | | |
238 | |
| Cost of Common Shares issued in Debenture Offering (Note 8) | |
| | |
(12 | ) | |
- | | |
- | | |
- | | |
- | | |
- | | |
- | | |
(12 | ) |
| Exercise
of broker warrants (Note 8) | |
25,000 | | |
14 | | |
- | | |
- | | |
(4 | ) | |
- | | |
- | | |
- | | |
10 | |
| Common Shares issued in Equity Offering, (Note 9) | |
70,297,220 | | |
35,149 | | |
- | | |
- | | |
- | | |
- | | |
- | | |
- | | |
35,149 | |
| Cost
of Common Shares issued in Equity
Offering: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| cost paid in
cash (Note 9) | |
| | |
(2,686 | ) | |
- | | |
- | | |
- | | |
- | | |
- | | |
- | | |
(2,686 | ) |
| cost
paid in warrants (Note 9) | |
| | |
(996 | ) | |
- | | |
996 | | |
- | | |
- | | |
- | | |
- | | |
- | |
| Pre-Funded
Warrants issued in | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Equity
Offering (Note 9) | |
- | | |
- | | |
39,702,780 | | |
19,851 | | |
- | | |
- | | |
- | | |
- | | |
19,851 | |
| Cost
of Pre-Funded Warrants issued in Equity
Offering: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| paid in cash
(Note 9) | |
- | | |
- | | |
- | | |
(1,517 | ) | |
- | | |
- | | |
- | | |
- | | |
(1,517 | ) |
| paid
in warrants (Note 9) | |
- | | |
- | | |
- | | |
(562 | ) | |
562 | | |
- | | |
- | | |
- | | |
- | |
| Expiry
of broker warrants unexercised | |
- | | |
- | | |
- | | |
- | | |
(175 | ) | |
175 | | |
- | | |
- | | |
- | |
| Stock-based
compensation (Note 11) | |
- | | |
- | | |
- | | |
- | | |
- | | |
2,169 | | |
- | | |
- | | |
2,169 | |
| Net
loss | |
- | | |
- | | |
- | | |
- | | |
- | | |
- | | |
(15,889 | ) | |
- | | |
(15,889 | ) |
| Other
comprehensive loss | |
- | | |
- | | |
- | | |
- | | |
- | | |
- | | |
- | | |
(8 | ) | |
(8 | ) |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Balance
–December 31, 2023 | |
112,791,658 | | |
61,916 | | |
39,702,780 | | |
17,772 | | |
3,484 | | |
5,019 | | |
(47,502 | ) | |
(15 | ) | |
40,674 | |
The accompanying notes are an integral
part of these consolidated financial statements.
SATELLOS BIOSCIENCE INC.
Consolidated Statements of Cash Flows
(Expressed in thousands of Canadian
Dollars)
| For the years ended
December 31, | |
Notes | | |
2023 | | |
2022 | |
| | |
| | |
$ | | |
$ | |
| CASH AND CASH EQUIVALENTS PROVIDED BY (USED IN): | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | |
| OPERATING ACTIVITIES | |
| | | |
| | | |
| | |
| Net loss | |
| | | |
| (15,889 | ) | |
| (11,322 | ) |
| Items not affecting cash: | |
| | | |
| | | |
| | |
| Amortization of intangible asset | |
| | | |
| - | | |
| 333 | |
| Depreciation of equipment | |
| | | |
| 7 | | |
| 4 | |
| Stock-based compensation | |
| 11 | | |
| 2,169 | | |
| 1,440 | |
| Investment income | |
| | | |
| - | | |
| (42 | ) |
| Derivatives, net | |
| | | |
| (1 | ) | |
| (3 | ) |
| Impairment of intangible asset | |
| | | |
| - | | |
| 2,886 | |
| Foreign exchange gain(loss) on investments | |
| | | |
| 1 | | |
| - | |
| Foreign exchange gain(loss) | |
| | | |
| (1,157 | ) | |
| 70 | |
| Sales tax and other receivables | |
| | | |
| (323 | ) | |
| 137 | |
| Research and development tax credits
receivable | |
| | | |
| - | | |
| 130 | |
| Prepaid expenses | |
| | | |
| (102 | ) | |
| (2 | ) |
| Accounts payable
and accrued liabilities | |
| | | |
| 794 | | |
| 726 | |
| | |
| | | |
| (14,501 | ) | |
| (5,783 | ) |
| | |
| | | |
| | | |
| | |
| FINANCING ACTIVITIES | |
| | | |
| | | |
| | |
| Proceeds from issuance of Debenture
Units, net of costs | |
| 8 | | |
| 2,244 | | |
| - | |
| Cash interest paid on long term debt | |
| 8 | | |
| (93 | ) | |
| - | |
| Cash repayment premium paid on long
term debt | |
| 8 | | |
| (143 | ) | |
| - | |
| Accrued interest on long term debt | |
| 8 | | |
| 177 | | |
| - | |
| Loss on debt extinguishment | |
| 8 | | |
| 426 | | |
| - | |
| Repayment of Debenture Units | |
| 8 | | |
| (2,385 | ) | |
| - | |
| Proceeds from exercise of warrants,
net of costs | |
| 9 | | |
| 10 | | |
| - | |
| Proceeds from Common Share issuance,
net of costs | |
| 9 | | |
| 32,463 | | |
| - | |
| Proceeds from Pre-Funded Warrant issuance,
net of costs | |
| 9 | | |
| 18,334 | | |
| - | |
| Proceeds from share issuance as consideration
for license amendment | |
| | | |
| - | | |
| 23 | |
| Proceeds from
Unit issuance, net of issuance costs | |
| 9 | | |
| - | | |
| 2,752 | |
| | |
| | | |
| 51,033 | | |
| 2,775 | |
| | |
| | | |
| | | |
| | |
| INVESTING ACTIVITIES | |
| | | |
| | | |
| | |
| Purchases of short-term investments | |
| | | |
| (17,520 | ) | |
| - | |
| Purchase of equipment | |
| | | |
| (18 | ) | |
| (3 | ) |
| | |
| | | |
| (17,538 | ) | |
| (3 | ) |
| | |
| | | |
| | | |
| | |
| Effect of foreign currency exchange
rates on cash and cash equivalents | |
| | | |
| 1,149 | | |
| (76 | ) |
| | |
| | | |
| | | |
| | |
| INCREASE IN CASH AND CASH EQUIVALENTS | |
| | | |
| 20,143 | | |
| (2,947 | ) |
| | |
| | | |
| | | |
| | |
| CASH AND CASH EQUIVALENTS –
Beginning of period | |
| | | |
| 1,924 | | |
| 4,871 | |
| CASH AND CASH EQUIVALENTS –
End of period | |
| | | |
| 22,067 | | |
| 1,924 | |
| | |
| | | |
| | | |
| | |
| Non-Cash transactions | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | |
| Broker
warrants issued | |
| | | |
| 1,558 | | |
| 103 | |
The accompanying notes are an integral
part of these consolidated financial statements.
SATELLOS BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022
(Tabular
amounts expressed in thousands of Canadian Dollars, except for share and per share amounts)
| 1. | Description of Business |
| 1.1 | Description
of Business |
Satellos
Bioscience Inc. (“Satellos” or the “Company”) is a Canadian biotechnology and drug development
company incorporated under the laws of Canada. The head office, principal address, and records of the Company are located at Royal Bank
Plaza, South Tower, 200 Bay Street, Suite 2800, Toronto, Ontario M5J 2J1 Canada and the Company’s common shares (“Common
Shares”) were listed on the TSXV under the symbol “MSCL”. Subsequent to the year end, on February 15, 2024,
the common shares of the Company began trading on the Toronto Stock Exchange (“TSX”).
The
Company has wholly owned subsidiaries in Australia (Satellos Bioscience Australia Pty Ltd) in Canada (Amphotericin B Technologies, Inc.,
hereinafter “AmpB Tech”) and in Delaware, USA (Satellos Bioscience US, Inc.).
To date,
the Company has financed its operations primarily through public offerings of common shares, private placements, the issuance of convertible
notes, and the proceeds from research tax credits. The Company has incurred significant operating losses and negative cash flows from
operations since inception. With current finance income only consisting of interest earned on excess cash, cash equivalents and marketable
securities, losses are expected to continue as the Company’s drug development programs are advanced. The Company plans to finance
its operations through the sale of equity or pursue non- dilutive funding sources available to the Company in the future.
These
consolidated financial statements have been prepared on the basis of accounting principals applicable to a going concern which contemplates
the realization of assets and the discharge of liabilities and commitments in the normal course of business. We believe that our cash,
cash equivalents and investments on hand at December 31, 2023 will be sufficient to finance our operations for at least 12 months
from the date of these consolidated financial statements.
The
ability of the Company to ultimately achieve future profitable operations is dependent upon the successful development of its projects,
our ability to successfully finance development activities, obtaining regulatory approval in various jurisdictions and successful sale
or commercialization of the Company’s products and technologies.
Our
ability to raise additional funds could be affected by adverse market conditions, the status of our product pipeline, and various other
factors and we may be unable to raise capital when needed, or on terms favorable to us. If necessary funds are not available, we may
have to delay, reduce the scope of, or eliminate some of our development programs, potentially delaying the time to market for any of
our product candidates.
| 2. | Material Accounting
Policies |
These
consolidated financial statements for the years ended December 31, 2023 and 2022 have been prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
These
consolidated financial statements of the Company were approved and authorized for issue by the Board of Directors on March 26, 2024.
The
consolidated financial statements have been prepared on a historical cost basis and are presented in Canadian dollars, which is the Company’s
functional currency.
| 2.2 | Basis
of Consolidation |
The
consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at December 31, 2023.
Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the investee. Specifically, the Company controls an investee if, and only if,
the Company has:
| · | Power
over the investee (i.e., existing rights that give it the current ability to direct the relevant
activities of the investee) |
SATELLOS BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022
(Tabular
amounts expressed in thousands of Canadian Dollars, except for share and per share amounts)
| · | Exposure,
or rights, to variable returns from its involvement with the investee |
| · | The
ability to use its power over the investee to affect its returns |
When
necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Company’s
accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between
the Company and its subsidiaries, or between subsidiaries, are eliminated in full-on consolidation.
| 2.3 | Summary
of Material Accounting Policies |
Cash and cash equivalents
Cash
and cash equivalents consist of cash on deposit and highly liquid short-term interest-bearing securities with maturities at the
date of purchase of three months or less. Cash and cash equivalents are held at recognized financial institutions. Interest earned is
recognized in the consolidated statements of loss and comprehensive loss.
Foreign
currency translation
| a) | Functional
and presentation currency |
The
financial statements of subsidiaries that have a functional currency different from that of the Company are translated into Canadian
dollars as follows: assets and liabilities at the closing rate at the date of the balance sheets and income and expenses at the average
rate. All resulting changes are recognized in the other comprehensive loss (gain) as foreign currency translation adjustments.
The
Company has a wholly owned subsidiary in Australia (Satellos Bioscience Australia Pty Ltd, formerly iCo Therapeutics Australia Pty Ltd)
whose functional currency is the Australian dollar ($A) and a wholly owned subsidiary in the US (Satellos Biosciences US, Inc) whose
functional currency is the US dollar.
| b) | Transactions
and balances |
Foreign
currency transactions are translated into Canadian dollars using the exchange rates at the date of the transactions or valuation where
items are remeasured. Foreign exchange gains or losses resulting from the settlement of transactions and from the translation at year-end
rates of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated statements of loss and
comprehensive loss.
Current
and deferred income taxes
The
Company follows the liability method of accounting for income taxes. Under this method, current income taxes are recognized for the estimated
income taxes payable for the current period. Deferred income tax assets and liabilities are recognized in the current period for temporary
differences between the tax and accounting bases of assets and liabilities as well as for the benefit of losses available to be carried
forward to future years for tax purposes. Deferred tax assets are only recognized to the extent that it is considered probable that they
will be realized. Deferred income tax assets and liabilities are measured using substantively enacted tax rates and laws expected to
apply in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates
on deferred income tax assets and liabilities is recognized in operations in the period that includes the substantive enactment.
Financial
instruments
| · | Financial
assets are classified into the following categories at initial recognition: measured at amortized
cost, |
| · | measured
at fair value through other comprehensive income (“FVOCI”) or fair value through
profit or loss (“FVPL”). |
The
classification depends on the Company’s business model for managing the financial assets and the contractual terms of the cash
flow.
SATELLOS BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022
(Tabular
amounts expressed in thousands of Canadian Dollars, except for share and per share amounts)
Financial
instruments classified at amortized cost include cash and cash equivalents, and accounts receivable. Financial instruments classified
at amortized cost are initially measured at fair value adjusted for directly attributable transaction costs and subsequently carried
at amortized cost using the effective interest rate (“EIR”) method, less any expected credit losses or impairment losses.
Interest income, foreign exchange gains and losses and impairment in relation to these types of financial instruments are recognized
in the consolidated statements of loss and comprehensive loss. Short-term investments are classified as FVPL. The changes in fair value
of short-term investments are recognized through profit and loss, with changes in net income.
Financial
liabilities are classified, at initial recognition, as financial liabilities at FVPL, loans and borrowings, payables at amortized cost.
All
financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable
transaction costs.
The
Company’s financial liabilities include accounts payable and accrued liabilities, and loans and borrowings including long-term
debt. The Company’s financial liabilities are subsequently measured at amortized cost using the EIR method. Gains and losses are
recognized in the statements of loss and comprehensive loss when the liabilities are derecognized as well as through the EIR amortization
process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral
part of the EIR. The EIR amortization is included as finance costs in the consolidated statements of loss and comprehensive loss.
A financial
liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing liability is
replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified,
such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The
difference in the respective carrying amounts is recognized in the consolidated statements of loss and comprehensive loss.
Impairment
of non-financial assets
The
Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. An asset’s
recoverable amount is the higher of an asset’s or cash generating unit’s fair value less costs of disposal and its value
in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. When the carrying amount of an asset or cash generating unit exceeds its
recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal,
recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used.
Impairment
losses of continuing operations are included in the statements of loss and comprehensive loss.
An assessment
is made at each reporting date to determine whether there is an indication that previously recognized impairment losses no longer exist
or have decreased. If such an indication exists, the Company estimates the asset’s or cash generating unit’s recoverable
amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the
asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of
the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation,
had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the statements of loss and comprehensive
loss.
SATELLOS BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022
(Tabular
amounts expressed in thousands of Canadian Dollars, except for share and per share amounts)
Equipment
Equipment
is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing
part of the equipment if the recognition criteria are met. When significant parts of equipment are required to be replaced at intervals,
the Company depreciates them separately based on their specific useful lives. All other repair and maintenance costs are recognized in
the consolidated statements of loss and comprehensive loss as incurred.
Depreciation
is calculated on a straight-line basis over the estimated useful life of the equipment, which is 3 to 5 years. The Company reviews the
estimated residual value and expected useful life of equipment at least annually.
Intangible
assets
Intangible
assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in the Arrangement is
their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated
amortization and accumulated impairment losses. Internally generated intangibles are not capitalized and the related expenditure is reflected
in the consolidated statements of loss and comprehensive loss in the period in which the expenditure is incurred.
The
useful lives of intangible assets are assessed as either finite or indefinite.
Intangible
assets with finite lives are amortized over the remaining patent life and assessed for impairment whenever there is an indication that
the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful
life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption
of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are
treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the statement
of loss and comprehensive loss as depreciation and amortization.
An intangible
asset is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising
upon derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset)
is included in the statement of loss and comprehensive loss.
Research
and development
Research
and development expenses include payroll, employee benefits, stock-based compensation, and other headcount- related expenses associated
with product research and other activities. Research and development expenses also include third-party activities and clinical trial
expenses. Such costs related to product development are included in research and development expenses until the point that technological
feasibility is reached, which, for the Company’s products, is generally shortly before the products are approved by the authorities.
Once technological feasibility is reached, such costs are capitalized and amortized to cost of revenue over the estimated lives of the
products.
Expenditures
associated with the maintenance of the licensing are expensed as incurred. Other development expenditures that do not meet the criteria
for capitalization are recognized as an expense when incurred. Costs previously recognized as an expense are not recognized as an asset
in a subsequent period.
Expenditures
on research activities are recognized as an expense in the period in which it is incurred.
An internally-generated
intangible asset arising from development (or from the development phase of an internal project) is recognized if, and only if, all of
the following have been demonstrated:
| · | the
technical feasibility of completing the intangible asset so that it will be available for
use or sale; |
| · | the
intention to complete the intangible asset and use or sell it; |
| · | the
ability to use or sell the intangible asset; |
| · | how
the intangible asset will generate probable future economic benefits; |
| · | the
availability of adequate technical, financial and other resources to complete the development
and to use or sell the intangible asset; and |
| · | the
ability to measure reliably the expenditure attributable to the intangible asset during its
development. |
SATELLOS BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022
(Tabular
amounts expressed in thousands of Canadian Dollars, except for share and per share amounts)
The
amount initially recognized for deferred development costs is the sum of the expenditure incurred from the date when the intangible asset
first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognized, development expenditure
is recognized in profit or loss in the period in which it is incurred.
Subsequent
to initial recognition, deferred development costs are reported at cost less accumulated amortization and accumulated impairment losses.
Amortization is recognized using the straight-line method. The estimated useful life and amortization method are reviewed at the end
of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
Research
tax credits
The
Company is entitled to certain refundable research and development tax credits (“R&D credits”) for qualified scientific
research and experimental development. These R&D credits are recorded as a reduction in the related expenditures when there is reasonable
assurance that such credits will be realized. R&D credits that are related to capitalized expenditures such as deferred development
costs are recognized in the statement of financial position as a reduction to the asset that the tax credit relates.
Share
capital
Common
shares and pre-funded warrants are classified as equity. Incremental costs directly attributable to the issuance of shares and pre-funded
warrants are recognized as a deduction from shareholders’ equity.
Stock-based
compensation
The
Company grants equity-settled options to directors, officers, employees, key employees of academic institutions employed by that institution
on Company-sponsored research and development, consultants and advisors as consideration for work or services performed. The Company
used the Black-Scholes option pricing model to estimate the fair value of each equity-settled option on the grant date. This amount is
recognized as an expense over the period that the option holders unconditionally become entitled to the awards and is adjusted to reflect
the number of awards for which the related service is expected to be met, such that the amount ultimately recognized as an expense is
based on the number of awards that meet the related service conditions at the vesting date.
When
the terms of an equity-settled award are modified, the minimum expense recognized is the grant date fair value of the unmodified award,
provided the original vesting terms of the award are met. An additional expense, measured as at the date of modification, is recognized
for any modification that increases the total fair value of the stock-based compensation transaction, or is otherwise beneficial to the
employee.
Provisions
A provision
is recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow
of economic benefits will be required to settle the obligation, and the amount of the obligation can be reliably estimated. The amount
of a provision is the best estimate of the consideration at the end of the reporting period. Provisions measured using estimated cash
flows required to settle the obligation are determined by discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
Loss
per share
Basic
and diluted loss per share is calculated by dividing net loss for the period attributable to the Company by the weighted average number
of common shares outstanding and the dilutive impact of outstanding warrants and options during the period.
Commitments
and contingencies
The
Company discloses its financial commitments, yet to be incurred, based on the minimum contractual costs at the reporting date. A contingent
liability is disclosed when the possibility is considered more than remote but not yet probable, where the existence of an obligation
will only be confirmed by future events, or where the amount of a present obligation cannot be measured reliably or will likely not result
in an economic outflow. Contingent assets are disclosed if a future economic benefit is probable but are only recorded when recovery
of the contingent asset is considered virtually certain.
SATELLOS BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022
(Tabular
amounts expressed in thousands of Canadian Dollars, except for share and per share amounts)
| 2.4 | New
and Amended Standards and Interpretations |
| a) | New
standards, amendments and interpretations not yet adopted by the Company |
The
amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Company’s consolidated
financial statements are disclosed below. The Company intends to adopt these amended standards and interpretations, if applicable, when
they become effective.
| b) | Amendments
to IAS 1: Classification of Liabilities as Current or Non-current |
In January 2020,
the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the requirements for classifying liabilities as current or non-current.
The amendments are effective for annual reporting periods beginning on or after 1 January 2024 and must be applied retrospectively.
The amendments are not expected to have a material impact on the Company’s consolidated financial statements.
All
other IFRSs and amendments issued but not yet effective have been assessed by the Company and are not expected to have a material impact
on the financial statements.
| c) | Definition
of Accounting Estimates - Amendments to IAS 8 |
In February 2021,
the IASB issued amendments to IAS 8, in which it introduces a definition of ‘accounting estimates’. The amendments clarify
the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors. Also, they clarify
how entities use measurement techniques and inputs to develop accounting estimates.
The
amendments are effective for annual reporting periods beginning on or after 1 January 2023 and apply to changes in accounting policies
and changes in accounting estimates that occur on or after the start of that period. Earlier application is permitted as long as this
fact is disclosed. The amendments are not expected to have a material impact on the Company’s consolidated financial statements.
| 2.5 | Material
Accounting Judgements, Estimates, and Assumptions |
The
preparation of financial statements in accordance with IFRS requires management to make judgements, estimates, and assumptions that affect
the application of accounting policies and reported amounts of assets, liabilities, revenues and expenses. Actual results may differ
from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized
in the period in which the estimates are revised and in any future periods affected. Management has applied significant judgements, estimates
and assumptions to the following:
| a) | Intangible
assets held for sale |
Management
uses judgement in reviewing the probability of completing its plan of selling its assets that are reported as held for sale and recorded
at their estimated fair value. Management considers internal discussions and discussions with the counterparty with whom the Company
has a time-limited option to compel the counterparty to acquire the assets held for sale at the recorded fair value. Management also
considers discussions it has had with other interested parties in the technology to confirm the reasonableness of its fair value.
| b) | Valuation
of stock-based compensation and warrants |
Management
measures the costs for stock-based compensation and warrants using Black-Scholes option valuation techniques. Assumptions are made and
estimates are used in applying the valuation techniques. These include estimating the future volatility of the share price, expected
dividend yield, expected risk-free interest rate, future employee turnover rates, future exercise behaviors and corporate performance.
Such estimates and assumptions are inherently uncertain. Changes in these assumptions affect the fair value estimates of stock-based
compensation and warrants.
| c) | Valuation
of derivatives |
Management
measures the derivatives using Black Scholes option valuation techniques. Assumptions are made and estimates are used in applying the
valuation techniques. These include estimating the future volatility of the share price, expected dividend yield, expected risk-free
interest rate and corporate performance. Such estimates and assumptions are inherently uncertain. Changes in these assumptions affect
the fair value estimates of derivatives.
SATELLOS BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022
(Tabular
amounts expressed in thousands of Canadian Dollars, except for share and per share amounts)
| d) | Estimate
of prepaid expenses and accruals for research and development activities |
The
Company records expenses for research and development activities based on Management’s estimates of services received and efforts
expended pursuant to contracts with vendors that conduct research and development on the Company’s behalf. The financial terms
vary from contract to contract and may result in uneven payment flows as compared with services performed or products delivered. This
impacts the amount of accrued expenses and prepaid balances related to research and developments activities as of each reporting period.
Management estimates the amount of work completed at the end of a reporting period by assessing the status of open contracts through
discussions with the Company’s personnel and vendors. Management makes significant judgments and estimates in determining the accrued
and prepaid balances at the end of each reporting period.
| e) | Impairment
of Intangible Assets |
Intangible
assets are reviewed for impairment upon the occurrence of events or changes to circumstances indicating that the carrying value of the
asset may not be recoverable. For the purpose of measuring recoverable assets, assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cash-generating units). The recoverable amount is the highest of an asset’s fair value
less costs to sell and value in use (being the present value of the expected future cash flows of the relevant asset or cash generating
unit). An impairment is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. Management
evaluates impairment losses for potential reversals when events or circumstances warrant such consideration.
| 2.6 | Functional
and presentation currency |
Items
included in the consolidated financial statements of the Company are measured using the currency of the primary economic environment
in which the Company operates (the functional currency). These consolidated financial statements are presented in Canadian Dollars (“Cdn”),
which is the Company’s functional and presentation currency for all periods presented.
| 3. | Cash and Cash Equivalents |
Cash
and cash equivalents consist of the following:
| | |
December 31,
2023 | | |
December 31,
2022 | |
| | |
| $ | | |
| $ | |
| Cash balances with banks: | |
| 609 | | |
| 813 | |
| Short-term cashable instruments | |
| 21,458 | | |
| - | |
| Cashable Guaranteed Investment Certificates | |
| - | | |
| 1,111 | |
| Total cash and cash equivalents | |
| 22,067 | | |
| 1,924 | |
Short-term
investments with initial maturities greater than three months and less than one year consist of the following:
| | |
December 31,
2023 | | |
December 31,
2022 | |
| | |
| $ | | |
| $ | |
| Short-term investments with initial terms of greater than three months
and less than one year with yields from 5.20%-5.35% | |
| 17,520 | | |
| - | |
| Total short-term investments | |
| 17,520 | | |
| - | |
SATELLOS BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022
(Tabular
amounts expressed in thousands of Canadian Dollars, except for share and per share amounts)
Equipment
consists of furniture and office equipment and computer hardware. Furniture and office equipment is depreciated on a straight-line basis
over five years. Computer equipment is depreciated on a straight-line basis over three years.
Furniture and Office Equipment
| | |
December 31,
2023 | | |
December 31,
2022 | |
| | |
$ | | |
$ | |
| Cost | |
| | | |
| | |
| Balance, beginning of year | |
| 3 | | |
| 3 | |
| Additions | |
| - | | |
| - | |
| Balance, end of year | |
| 3 | | |
| 3 | |
| Accumulated amortization | |
| | | |
| | |
| Balance, beginning of year | |
| 2 | | |
| 1 | |
| Depreciation | |
| 1 | | |
| 1 | |
| Balance, end of year | |
| 3 | | |
| 2 | |
| Net book value, beginning of year | |
| 1 | | |
| 2 | |
| Net book value, end of year | |
| - | | |
| 1 | |
Computer Hardware
| | |
December 31,
2023 | | |
December 31,
2022 | |
| | |
$ | | |
$ | |
| Cost | |
| | | |
| | |
| Balance, beginning of year | |
| 11 | | |
| 7 | |
| Additions | |
| 20 | | |
| 4 | |
| Disposals | |
| (2 | ) | |
| | |
| Balance, end of year | |
| 29 | | |
| 11 | |
| Accumulated amortization | |
| | | |
| | |
| Balance, beginning of year | |
| 3 | | |
| - | |
| Depreciation | |
| 7 | | |
| 3 | |
| Balance, end of year | |
| 10 | | |
| 3 | |
| Net book value, beginning of year | |
| 7 | | |
| 7 | |
| Net book value, end of year | |
| 19 | | |
| 7 | |
| 6. | Intangible
Asset and Asset Held for Sale |
| a) | Intangible
asset consists of the Oral AmpB Delivery System held by AmpB Tech (“OralTrans”),
which consists of (a) a license to three patents from the University of British Columbia;
(b) title to several patents and patent applications; and (c) clinical and pre-clinical
data. This intangible asset has a finite useful life that is estimated to run until the latest
expected expiry date of the patent that is expected to issue from the latest-filed patent
application either licensed to or filed by the Company. |
On Oct
6, 2022, the Company licensed the OralTrans technology to NW Micelle Therapeutics (NWMT) in exchange for 15% of NWMT. Further, the Company
entered into an agreement with NW Pharmatech Limited (“NWPT”), the entity that owns 85% of NWMT, in which NWPT acquired a
time-limited option to acquire AmpB Tech from the Company for US$3.0 million subject to certain conditions (the “Call Option”);
and the Company acquired a time- limited option (with the same term as the Call Option) to compel NWPT to acquire AmpB Tech from the
Company for US$3.0 million subject to certain conditions (the “Put Option”).
Due to
the prospect of sale within one year, AmpB Tech (and its component assets, OralTrans and the investment in NWMT), are considered assets
available for sale. Accordingly, the asset was recorded at its fair value, determined to be $3.9 million as of 31 December 2022,
and no longer amortized.
SATELLOS BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022
(Tabular
amounts expressed in thousands of Canadian Dollars, except for share and per share amounts)
In determining
the fair value of the asset, the Company considered it likely that AmpB Tech would be sold to NWPT within one year of the transaction,
i.e. on or by October 06, 2023. Resulting from a challenging biotech funding environment along with negative macroeconomic factors
during the one year period, the expected sale had not happened. In light of this, the Company has reassessed the likelihood of a sale
of the asset within one year, and the Company continues to consider it likely that AmpB Tech will be sold under the terms of the Call
Option, which expires on November 05, 2024. Evaluation of the present value of the exercise price of the Call Option indicates that
it does not differ materially from the current valuation and therefore the Company will continue to hold this valuation at $3.9 million.
| b) | Investments
consist of the minority equity investment in NWMT, and have the following balances as of
the years ending: |
| | |
December 31,
2023 | | |
December 31,
2022 | |
| | |
$ | | |
$ | |
| Investment in NWMT | |
| 41 | | |
| 42 | |
The Company
does not have control nor significant influence over NWMT and therefore has accounted for the investment in NWMT as an asset held at
fair value. As of December 31, 2022, the fair value of the investment in NWMT was determined to be approximately $42 thousand. For
the year ending December 31, 2023, the Company has concluded that there was no change in the fair value of the investment in NWMT
however the fair value of the investment in NWMT is measured in US dollars and therefore a currency adjustment was applied at the end
of the period.
| c) | The
Company has recognized the net value of the fair values of the Put Option and the Call Option
on the Statement of Financial Position as Derivatives, net. The exercise price of both the
Call Option and the Put Option is US$3 million, and the Company considers it highly probable
that the Call Option will be exercised within its term which expires on November 5,
2024. |
The table
below presents the Derivative Asset and Derivative Liability:
| | |
December 31,
2023 | | |
December 31,
2022 | |
| | |
$ | | |
$ | |
| Fair value of Put Option | |
| 1,191 | | |
| 1,025 | |
| Fair value of Call Option | |
| 1,187 | | |
| 1,022 | |
| Derivatives, net | |
| 4 | | |
| 3 | |
The
fair value of the derivative asset and liability was estimated using the Black-Scholes option pricing model with the following inputs:
| Revaluation
date | |
December 31,
2023 | | |
December 31,
2022 | |
| Exercise Price | |
| $US3,000 | | |
| $US3,000 | |
| Expected life of Put and Call option | |
| 0.85
year | | |
| 1
year | |
| Expected volatility | |
| 75.9% | | |
| 75.9% | |
| Expected dividend yield | |
| nil | | |
| nil | |
| Risk free interest rate | |
| 5.06% | | |
| 4.52% | |
| 7. | Accounts Payable and
Accrued Liabilities |
| | |
December 31,
2023 | | |
December 31,
2022 | |
| | |
| $ | | |
| $ | |
| Trade payables | |
| 1,040 | | |
| 1,466 | |
| Accrued liabilities | |
| 2,584 | | |
| 1,364 | |
| Total trade payables and accrued
liabilities | |
| 3,624 | | |
| 2,830 | |
SATELLOS BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022
(Tabular
amounts expressed in thousands of Canadian Dollars, except for share and per share amounts)
On March 24,
2023, the Company completed a non-brokered private placement offering of 2,385 10% unsecured non- convertible debenture units (the “Debenture
Units”) and raised gross proceeds of $2,385,000 (the “Debenture Offering”). Each Debenture Unit is comprised
of: (i) $1,000 principal amount of unsecured non-convertible debentures of the Company (the “Debentures”); and
(ii) for no additional consideration, such number of common shares in the capital of the Company (each whole common share, a “Bonus
Share”, and collectively, the “Bonus Shares”) as is equal to $100 divided by $0.355, being the closing market
price of the common shares of the Company on the TSX Venture Exchange on March 15, 2023, rounded to the nearest whole share. The
Debentures would have matured on September 24, 2024 (the “Maturity Date”) and bear interest on the principal amount
at a rate of 10% per annum payable quarterly in arrears in cash. Accordingly, 671,825 Bonus Shares were issued in connection with the
Debenture Units at a value of $0.355, resulting in an increase in capital stock of approximately $238 thousand, offset by share issuance
costs of approximately $12 thousand. In addition, the company incurred expenses in the amount of approximately $140 thousand related
to the Debenture Offering of which the Company has allocated $128 thousand to debt issuance cost and $13 thousand to share issuance cost.
Net proceeds of the Debenture Offering were approximately $2.2 million and the effective annual interest rate on the principal of the
Debentures was 21.6%.
The
Company had the option to redeem the Debentures prior to maturity in part or in full subject to an early repayment premium. The repayment
premium was calculated as follows: (i) 6% of the principal amount of the Debentures being redeemed if the redemption occurs prior
to six months from the date of issuance; (ii) 5% of the principal amount of the Debentures being redeemed if the redemption occurs
between the six and twelve month period following the debt issuance; or (iii) 4% of the principal amount of the being redeemed if
the redemption occurred after the first anniversary of the debt issuance but prior to the Maturity Date. Effective August 14, 2023,
the Company redeemed all the outstanding Debentures and paid a 6 % early repayment premium of approximately $143 thousand and recorded
a loss of $426 thousand on the debt extinguishment on the statement of loss and comprehensive loss.
The
following table presents the amounts recorded related to the Debenture offering and its repayment during the year ended December 31,
2023:
| | |
$ | |
| Proceeds from issuance of Debenture Units on March 24,
2023 | |
| 2,385 | |
| Discount due to Bonus Shares | |
| (238 | ) |
| Debt issue costs | |
| (128 | ) |
| Interest expense, from March 24, 2023, to August 14, 2024 | |
| 177 | |
| Loss on debt extinguishment | |
| 426 | |
| Repayment of interest and Principal | |
| (2,622 | ) |
| Debentures balance December 31, 2023 | |
| - | |
| 9. | Share
Capital and Pre-Funded Warrants |
Authorized
The authorized share capital of the Company consists of an unlimited number
of common shares.
Equity Issuances
On May 17, 2023, the Company completed a public
offering (the “Equity Offering”), issuing 70,297,220 Common Shares at $0.50 per common share (the “Common Shares”)
and 39,702,780 pre-funded common share purchase warrants (the “Pre- Funded Warrants”) with no expiry date and an exercise
price of $0.00001 for $0.49999 per pre-funded common share purchase warrant for gross proceeds of $55 million.
The costs associated with the Equity Offering were
$5.8 million, including cash costs for commissions to the agents of approximately $3.7 million, professional fees and regulatory costs
of $510 thousand and 7,383,919 compensation warrants to the agents valued at $1.6 million. Each compensation warrant is exercisable into
one Common Share at an exercise price of $0.50 until expiry on May 17, 2025.
SATELLOS BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022
(Tabular
amounts expressed in thousands of Canadian Dollars, except for share and per share amounts)
The fair value of the compensation warrants was a
non-cash cost charged to share issuance costs and pre-funded warrant costs proportionately to the number of each Security issued.
Bloom Burton Securities Inc., (“BBSI”),
an entity jointly controlled by a director of Satellos, acted as exclusive agent and book running manager for both the Unit Offering
and the Equity Offering. See Related Party disclosures Note 15. BBSI engaged sub-agents in the Offering.
On September 13, 2022, the Company completed
a public offering (the “Unit Offering”) of 8,750,000 units (“Units”) of the Company at a price
of $0.40 per Unit for gross proceeds of $3.5 million. Each Unit consisted of one Common Share of the Company and one-half of one Common
Share purchase warrant of the Company (each whole Common Share purchase warrant, a “Warrant”), with each Warrant being
exercisable into one Common Share, for a total of 4,375,000 Warrants at an exercise price of $0.60 until expiry on September 13,
2025. The Warrants were valued at $779 thousand.
The costs associated with the Unit Offering were $843
thousand, including cash costs for commissions to the agents of approximately $245 thousand, professional fees and regulatory costs of
$496 thousand and 612,500 compensation warrants to the agents valued at $103 thousand. Each Compensation Warrant is exercisable into
one Common Share at an exercise price of $0.40 until expiry on September 13, 2024.
On July 12, 2022, the Company issued 50,000 Common
Shares to the Ottawa Hospital Research Institute (“OHRI”) as part of an amendment to an existing license agreement
between the parties completed on June 29, 2022. The shares were valued at approximately $23 thousand, or $0.455 per share, the closing
price per Common Share on the TSXV on June 29, 2022.
Loss per share
Loss per share is calculated using the weighted average
number of common shares outstanding. For the year ended December 31, 2023 and 2022, the calculation was as follows:
| |
Year ended, | | |
Year ended, | |
| (in thousands) | |
December 31,
2023 | | |
December 31,
2022 | |
| Common shares issued and outstanding, beginning
of year | |
| 41,797,613 | | |
| 32,997,613 | |
| Shares issued in Unit Offering | |
| | | |
| 2,658,654 | |
| Common Shares issued in Debenture Offering (Note 8) | |
| 519,372 | | |
| - | |
| Common Shares issued in Equity Offering (Note 9) | |
| 44,607,149 | | |
| - | |
| Effect of warrant exercises | |
| 16,827 | | |
| 23,846 | |
| Weighted average common shares issued and outstanding, end
of year | |
| 86,404,762 | | |
| 35,680,113 | |
The effect of any potential exercise of the Company’s
stock options, pre-funded warrants and warrants outstanding during the year has been excluded from the calculation of diluted loss per
common share as it would be anti- dilutive.
Warrants have been issued as part of equity financings
and include compensation to agents and brokers of the Company, and also as components of equity units along with common shares as described
in Note 9. “Pre-Funded Warrants” are defined in Note 9 above and are listed separately on the Statement of Financial
Position and on the Statement of Changes to Equity, and are excluded from the tables below.
SATELLOS BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022
(Tabular
amounts expressed in thousands of Canadian Dollars, except for share and per share amounts)
The following is a summary of changes in warrants:
| | |
Year
ended, December 31, 2023 | | |
Year
ended, December 31, 2022 | |
| | |
Number
of options | | |
Weighted
average
exercise price | | |
Number
of options | | |
Weighted
average
exercise price | |
| Outstanding, beginning of year | |
| 5,245,816 | | |
$ | 0.63 | | |
| 2,159,074 | | |
$ | 1.34 | |
| Issued | |
| 7,383,919 | | |
$ | 0.50 | | |
| 4,987,500 | | |
$ | 0.58 | |
| Exercised | |
| (25,000 | ) | |
$ | 0.40 | | |
| - | | |
| - | |
| Expired | |
| (258,316 | ) | |
$ | 1.69 | | |
| (1,900,758 | ) | |
$ | 1.30 | |
| Outstanding, end of year | |
| 12,346,419 | | |
$ | 0.53 | | |
| 5,245,816 | | |
$ | 0.63 | |
The table below presents
the outstanding warrants as at December 31, 2023:
| Exercise
Price | |
Number
of Warrants | | |
Expiry
Date |
| $0.40 | |
| 587,500 | | |
September 13,2024 |
| $0.60 | |
| 4,375,000 | | |
September 13, 2025 |
| $0.50 | |
| 7,383,919 | | |
May 17,2025 |
| Total warrants | |
| 12,346,419 | | |
|
The fair value of warrants
issued in the years ended December 31, 2023 and 2022 were estimated using the Black-Scholes option pricing model with the following
assumptions:
| Date of Issue | |
May 17,
2023 | | |
September 13,
2022 | |
| Number of warrants | |
| 7,383,919 | | |
| 4,962,500 | |
| Expected life of warrants | |
| 2
years | | |
| 2-3
years | |
| Expected volatility | |
| 73.7% | | |
| 73%-81% | |
| Expected dividend yield | |
| nil | | |
| nil | |
| Risk free interest rate | |
| 4.04% | | |
| 3.53%-3.583% | |
| Fair value of warrants | |
| $1,558 | | |
| $882 | |
| 11. | Stock-Based Compensation |
Under
the Amended and Restated Incentive Stock Option Plan of the Company (the “SOP”), equity-settled stock options of the
Company are granted to certain directors, officers, employees, key employees of academic institutions employed by that institution on
Company-sponsored research and development, consultants and advisors providing services to the Company. The exercise price of the stock
options is equal to or greater than the market price of the underlying share on the date of grant. The stock options vest based on the
terms of each award, over a period of 18 months to four years, and only if the individual remains employed (or under contract) by the
Company (or the academic institution) on the vesting date. The contractual term of stock options is 10 years from grant date.
Under
the stock option plan adopted at the most recent annual general meeting, the aggregate number of common shares reserved for issuance
is limited to 18,300,000.
SATELLOS BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022
(Tabular
amounts expressed in thousands of Canadian Dollars, except for share and per share amounts)
The following is a summary
of changes in options:
| |
|
Year
ended,
December 31, 2023 |
|
|
Year
ended,
December 31, 2022 |
|
| |
|
Number
of
options |
|
|
Weighted
average
exercise price |
|
|
Number
of
options |
|
|
Weighted
average
exercise price |
|
| Outstanding, beginning of year |
|
|
3,991,201 |
|
|
$ |
1.18 |
|
|
|
2,987,051 |
|
|
$ |
1.46 |
|
| Granted |
|
|
10,399,531 |
|
|
$ |
0.54 |
|
|
|
1,013,750 |
|
|
$ |
0.33 |
|
| Forfeited and expired |
|
|
(256,369 |
) |
|
$ |
0.97 |
|
|
|
(9,600 |
) |
|
$ |
1.70 |
|
| Outstanding, end of year |
|
|
14,134,363 |
|
|
$ |
0.71 |
|
|
|
3,991,201 |
|
|
$ |
1.18 |
|
As at December 31, 2023,
the Company had the following outstanding options:
| | | |
| | |
Options
Outstanding | | |
Options
Exercisable | |
| Exercise Prices | | |
Number
of
options | | |
Weighted
average
remaining
contractual life | | |
Weighted
average exercise
price | | |
Number
of
options | | |
Weighted
average exercise
price | |
| $0.33-$0.50 | | |
| 4,580,484 | | |
| 9.51 | | |
$ | 0.42 | | |
| 469,015 | | |
$ | 0.34 | |
| $0.51-$0.66 | | |
| 7,246,809 | | |
| 9.17 | | |
$ | 0.60 | | |
| 552,831 | | |
$ | 0.65 | |
| $0.67-$1.70 | | |
| 2,307,070 | | |
| 7.46 | | |
$ | 1.66 | | |
| 1,544,703 | | |
$ | 1.67 | |
| | | |
| 14,134,363 | | |
| 9.00 | | |
$ | 0.71 | | |
| 2,566,549 | | |
$ | 1.20 | |
The
following table presents the assumptions that were used in the Black-Scholes option pricing model to determine the fair value of stock
options granted during the period, and the resultant average fair values:
| | |
Year
ended,
December 31, 2023 | | |
Year
ended
December 31, 2022 | |
| Expected life of options | |
| 10
years | | |
| 10
years | |
| Expected volatility | |
| 94 | % | |
| 94 | % |
| Expected dividend yield | |
| nil | | |
| nil | |
| Weighted average risk free interest rate | |
| 3.34 | % | |
| 3.83 | % |
| Weighted average fair value of options
granted in the year | |
$ | 0.48 | | |
$ | 0.29 | |
Options
granted in the years ending December 31, 2023 had the following vesting terms: on the first anniversary, 25% of the options are
vested, with 2.08% vesting monthly thereafter..
In the
year ended December 31, 2023, $2,169 thousand (2022 - $1,439 thousand) has been recognized as stock-based compensation expense and
credited to contributed surplus.
Research and development
expenses:
| | |
December 31,2023 | | |
December 31,2022 | |
| | |
$ | | |
$ | |
| Salaries and management fees | |
| 2,173 | | |
| 760 | |
| Discovery expenses | |
| 1,141 | | |
| 2,604 | |
| Preclinical expenses | |
| 3,444 | | |
| - | |
| Chemistry, manufacturing controls | |
| 1,193 | | |
| - | |
| Stock-based compensation | |
| 866 | | |
| 370 | |
| Total research and development expenses | |
| 8,817 | | |
| 3,734 | |
SATELLOS
BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022
(Tabular
amounts expressed in thousands of Canadian Dollars, except for share and per share amounts)
General
and administrative:
| | |
December 31,2023 | | |
December 31,2022 | |
| | |
$ | | |
$ | |
| Salaries and management fees | |
| 2,318 | | |
| 1,299 | |
| Professional fees | |
| 2,438 | | |
| 1,592 | |
| Other operating expenses | |
| 580 | | |
| 397 | |
| Stock-based compensation | |
| 1,303 | | |
| 1,069 | |
| Amortization of intangibles | |
| - | | |
| 333 | |
| Depreciation | |
| 7 | | |
| 4 | |
| Total general and administrative
expenses | |
| 6,646 | | |
| 4,694 | |
| 13. | Commitments and Contingencies |
The
Company enters into contracts in the normal course of business, including for research and development activities. As at December 31,
2023, the Company has commitments for research and development activities in the amount of approximately $5.1 million, of which all are
due within a 12 month period, for the following activities:
| · | The
Company has entered into agreements with three suppliers of biotechnology services under
which the suppliers will provide specialized services including tests, assays, manufacturing
of drug substance and manufacturing of drug product. Payments by the Company to these suppliers
are contingent upon the suppliers successfully completing specific milestones and meeting
specified standards. |
| | | |
| · | Under
the current amendment of the OHRI SRA (defined below), effective September 01, 2023,
the Company is providing funding of approximately $939 thousand annually. The contract is
cancellable upon 60 days notice. |
The
Company may be required to make milestone, royalty, and other research and development funding payments under research and development
collaboration and other agreements with third parties. These payments are contingent upon the achievement of specific development, regulatory
and/or commercial milestones. The Company has not accrued for these payments as of December 31, 2023 because the milestones have
not yet been achieved.
The
Company’s significant contingent milestone, royalty and other research and development commitments are as follows:
| a) | Ottawa
Hospital Research Institute Sponsored Research Agreement and License Agreement (“OHRI
SRA” and “License Agreement”) |
Effective
May 1, 2018, Pre-Arrangement Satellos and OHRI entered into a Sponsored Research Agreement, during the term of which OHRI agreed
to carry out specific research and development activities according to a prescribed statement of work and budget (which may and has been
amended from time to time) under the direction of the Company’s co- founder, Dr. Michael A. Rudnicki.
Effective
May 1, 2018, Pre-Arrangement Satellos and OHRI entered into a license agreement under which OHRI granted the exclusive, world-wide,
sublicensable, royalty bearing right and license to a body of technology and patents comprised of certain patent families to develop
make, have made, import, use, offer for sale, sell and have sold or otherwise commercialize licensed products. The License Agreement
provides for contingent payments which the Company may be required to pay upon the achievement of development and commercialization milestones,
and provides for royalty payments on net sales of licensed products, should such sales occur.
SATELLOS BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022
(Tabular
amounts expressed in thousands of Canadian Dollars, except for share and per share amounts)
The Company
may be required to make annual, milestone, royalty, and other research and development funding payments to OHRI under the OHRI SRA and
the License Agreement between the OHRI and Satellos. These payments are contingent upon the achievement of specific development, regulatory
and/or commercial milestones. The Company’s significant contingent milestone, royalty and other research and development commitments
are as follows:
| · | Royalties
on net sales of any products covered by patents licensed from OHRI (“Licensed Products”)
of 1% or 2% (depending on which patents cover a particular product), during the period when
the applicable patents have valid, unexpired claims, subject to certain royalty stacking
provisions; |
| · | The
following payments to OHRI may be triggered by specified events: |
| ▪ | Each
time a Licensed Product is the subject of an approved IND in the US or equivalent in any
other industrialized country (maximum one payment per new drug candidate); |
| ▪ | Each
time a Licensed Product first enters Phase II human clinical trials in the US or equivalent
in any other industrialized country (maximum one payment per new drug candidate); |
| ▪ | Each
time a Licensed Product first enters Phase III human clinical trials in the US or equivalent
in any other industrialized country (maximum one payment per new drug candidate); and |
| ▪ | Each
time a Licensed Product is the subject of a regulatory approval in the US (such as NDA and
BLA) or equivalent in any other industrialized country (maximum one payment per new drug
candidate). |
| · | 2%
of sublicensing income received by Satellos from the grant of sublicenses. |
| b) | University
of British Columbia (UBC) |
On May 6,
2008, iCo signed an agreement with UBC for the exclusive worldwide license to certain patent applications that are incorporated in OralTrans
(see Note 6) (the “UBC License”). In consideration for the UBC License, iCo paid UBC an initial license fee of $20
thousand and is required to pay annual fees to UBC for maintaining the license until such time as a New Drug Application (NDA) for OralTrans
is approved. The Company is required to make additional contingent payments of up to $1,900 thousand in aggregate upon the achievement
of certain development and commercialization milestones and is also required to pay royalties on future revenues.
As at
December 31, 2023 the Company had $62,519 thousand (2022: $48,126 thousand) Canadian non-capital losses available to reduce taxable
income in future years. The losses will expire between 2026 and 2043.
In addition,
the Company has Australian non-capital losses of $838 thousand (2022 - $671 thousand) that do not expire and are available to reduce
taxable income in future years.
Net deferred income tax liabilities
are comprised of the following:
| As
at December 31, 2023 | |
Opening
balance | | |
Recognized
in
earnings (loss) | | |
Closing
balance | |
| Investments in subsidiaries | |
| (524 | ) | |
| - | | |
| (524 | ) |
| Non-capital loss carry forwards | |
| 524 | | |
| - | | |
| 524 | |
| Net deferred income tax liability | |
| - | | |
| - | | |
| - | |
The following temporary differences
have not been recognized:
| As at December 31, | |
2023 | | |
2022 | |
| Non-capital loss carry forward | |
$ | 58,562 | | |
$ | 44,168 | |
| Share issuance costs and other | |
| 5,314 | | |
| 818 | |
| Intangibles | |
| 5,965 | | |
| 5,637 | |
| | |
| 69,841 | | |
| 50,623 | |
SATELLOS BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022
(Tabular
amounts expressed in thousands of Canadian Dollars, except for share and per share amounts)
The
Company’s effective income tax rate differs from the statutory income tax rate of 26.5% (2021 – 26.5%). The differences arise
from the following items:
| For the years ended December 31, | |
2023 | | |
2022 | |
| Loss before income taxes | |
$ | (15,897 | ) | |
$ | (11,317 | ) |
| Income tax recovery at statutory rate | |
| (4,213 | ) | |
| (2,999 | ) |
| Permanent differences | |
| 575 | | |
| 1,229 | |
| Financing costs | |
| (304 | ) | |
| 292 | |
| Change in unrecognized deductible temporary differences | |
| 3,942 | | |
| 1,483 | |
| Changes in tax rate | |
| nil | | |
| nil | |
| Tax expense / (recovery) | |
| - | | |
| 6 | |
| 15. |
Related Party Balances and Transactions |
The
following related parties have engaged in transactions with the Company during the years ended December 31, 2023 and December 31,
2022. All related party transactions have been recorded at the amount of consideration established and agreed upon by the related parties
in the normal course of business.
| a) | BBSI
- an entity that is jointly controlled by Brian Bloom, a director of the Company. |
BBSI
acted as lead agent for two equity offerings (see Note 7 above). Related to the Unit Offering of September 13, 2022, the Company
issued 208,688 compensation warrants, paid approximately $63 thousand in commissions and reimbursed BBSI for $101 thousand in legal and
related fees. Related to the Equity Offering on May 17, 2023, the Company issued 6,560,474 compensation warrants, paid approximately
$3.3 million in commissions and reimbursed BBSI for $176 thousand in legal and related fees related to the prospectus agreement.
The
Company engaged BBSI in a consulting agreement in November of 2022. The Company recorded $40 thousand in expenses during the three
months period ended December 31, 2022 and a further $60 thousand in the three month period ended March 31, 2023 for work completed
under this agreement. This agreement is completed and there are no amounts owing to BBSI as of December 31, 2023.
Mr. Jarosz,
previously the Chief Executive Officer of iCo Therapeutics Inc. (“iCo”), the entity Satellos acquired as part of a
reverse takeover transaction on August 13, 2021, and now a Director of the Company, had provided consulting services to iCo that
were unpaid as of the date of the reverse takeover and this liability was assumed by Satellos. Following the reverse takeover, Mr. Jarosz
provided consulting services to Satellos. On September 13, 2022, Mr. Jarosz participated in the Unit Offering and purchased
325,000 Units in exchange for a reduction in amounts owing to him of US$99 thousand (C$130 thousand). The following table presents the
related party transactions between Mr. Jarosz and the Company:
| | |
$ | |
| Liability assumed by Company from iCo upon closing of reverse take-over,
August 13, 2021 | |
US$ | 289 | |
| Director and consulting services to Satellos, August 21,2021 to December 31,
2023 | |
US$ | 344 | |
| Less, partial settlement of liability with purchase of Units, September 13, 2022
financing | |
US$ | (99 | ) |
| Amount owing as at December 31, 2023 | |
US$ | 534 | |
| Amount owing as at December 31, 2023 | |
C$ | 706 | |
Certain
directors participated in the Debenture Offering described in Note 6. A total of 450 of the 2,385 units were purchased by directors of
the Company.
SATELLOS BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022
(Tabular
amounts expressed in thousands of Canadian Dollars, except for share and per share amounts)
| d) | Key
management personnel: |
Key
management personnel consists of the Company’s Chief Executive Officer, Chief Scientific Officer, former Chief Medical Officer,
Chief Discovery Officer, Chief Business Officer and Chief Financial Officer and the Directors of the Corporation. The remuneration of
key management personnel is as follows:
| | |
Year
ended
December 31, 2023 | | |
Year
ended
December 31, 2022 | |
| | |
$ | | |
$ | |
| Salaries and management fees | |
| 2,554 | | |
| 1,073 | |
| Stock-based compensation | |
| 1,725 | | |
| 1,010 | |
| Total compensation for key management
personnel | |
| 4,279 | | |
| 2,083 | |
Amounts owing to related
parties are included in accounts payable and accrued liabilities:
| As
at: | |
December 31,
2023 | | |
December 31,2022 | |
| | |
$ | | |
$ | |
| Due to BBSI | |
| - | | |
| 40 | |
| Due to directors and officers | |
| 712 | | |
| 553 | |
| Total due to related parties | |
| 712 | | |
| 593 | |
All
amounts due to related parties are non-interest bearing and have no specified terms of repayment. The amounts in the above table include
the $706 thousand owing to Mr. Jarosz and $6 thousand owed to other directors for fees accrued prior to the end of the fiscal quarter.
The
Company operates within a single operating segment, the research and development of drug therapeutics, which is the Company’s only
reportable segment, which is consistent with the internal reporting provided to the chief operating decision- maker. The Company operates
in two geographic areas, Canada and Australia. All of the Company’s assets are located in Canada except for cash held in the bank
account of the Company’s Australian subsidiary.
The
Company manages its capital structure in an endeavour to ensure sufficient resources are available to meet day-to-day operational requirements,
further develop its existing technology, and continue as a going concern.
In order
to maintain or adjust the capital structure, the Company may issue new shares or issue debt (secured, convertible and/or other types
of available debt instruments) or sell assets. Total capital is calculated as the Company’s own equity.
The
Company is not subject to any externally imposed capital requirements.
| 18. | Financial Instruments
and Risk Management |
The
Company is exposed to various risks through its financial instruments including the following at December 31, 2023:
Credit
risk arises from cash and cash equivalents held at banks and financial institutions, as well as outstanding receivables. In the year
ended December 31, 2023 the Company invested its excess cash in interest-bearing operating accounts held at a Schedule 1 Canadian
bank and in US government treasury bills. The Company limits its exposure to credit risk, with respect to cash and cash equivalents,
by placing them with high quality credit financial institutions. The Company’s cash equivalents consist primarily of operating funds,
US government treasury bills, deposit investments and guaranteed investment certificates with commercial banks.
SATELLOS BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022
(Tabular
amounts expressed in thousands of Canadian Dollars, except for share and per share amounts)
Liquidity
risk is the risk that the Company will encounter difficulty in raising funds to meet cash flow requirements associated with financial
instruments. The Company continues to manage its liquidity risk by monitoring its cash flows and investments regularly, comparing actual
results with budgets and future cash requirements. As at December 31, 2023, the Company’s liabilities consist of accounts
payable and accrued liabilities that have contracted maturities of less than one year.
Market
risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.
Market risk comprises three types of risk: currency risk, interest rate risk, and price risk. The Company is mainly exposed to currency
risk as follows:
Currency
risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange
rates. The exposure to this risk changes as the exchange rate fluctuates.
Foreign
currency risk is limited to the portion of the Company’s business transactions denominated in currencies other than the Canadian dollar,
primarily expenses for research and development incurred in US dollars. The Company manages foreign exchange risk by maintaining US$
cash on hand to fund its short-term foreign currency expenditures. Balances in foreign currencies were:
| As
at: | |
December 31,
2023 | | |
December 31,2022 | |
| | |
| US$ | | |
| US$ | |
| Cash and cash equivalents | |
| 16,522 | | |
| 393 | |
| Short-term investments | |
| 13,246 | | |
| - | |
| Deposits | |
| - | | |
| 6 | |
| Accounts payable and accrued liabilities | |
| (1,071 | ) | |
| (1,057 | ) |
| Net monetary assets (liabilities) | |
| 28,697 | | |
| (658 | ) |
Based on
the US$ balance sheet exposure at December 31, 2023, with other variables unchanged, if the Canadian dollar were to weaken against
the US dollar by 10%, relative to the rate at December 31, 2023, the net monetary assets would be approximately $3.8 million greater.
If the Canadian dollar were to strengthen against the US dollar by 10%, relative to the rate at December 31, 2023, the net monetary
assets would be approximately $3.5 million less.
Financial
assets and liabilities are recognized on the statement of financial position at amortized cost in a hierarchy that is based on significance
of the inputs used in making the measurements. The levels in the hierarchy are:
| · | Level
1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities |
| · | Level
2 – Inputs other than quoted prices included within level 1 that are observable for
the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from
prices) |
| · | Level
3 – Inputs for the asset or liability that are not based on observable market data
(i.e., unobservable inputs) |
At December 31,
2023, the Company’s financial instruments included cash and cash equivalents, short-term investments, accounts receivable, the Put Option
(Note 5(c)), the Call Option (Note 5 (c)), and accounts payable and accrued liabilities.
Due to the short-term
maturities of cash and cash equivalents, accounts receivable, and accounts payable and accrued liabilities, the carrying amounts approximate
their fair value at the respective statement of financial position date. Short-term investments are measured using Level 2 inputs.
SATELLOS BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022 (
Tabular
amounts expressed in thousands of Canadian Dollars, except for share and per share amounts)
There were no transfers of
assets or liabilities between levels during the years ended December 31, 2023 and 2022.
Certain comparative figures
have been reclassified to conform to the current year presentation.
Exhibit
4.3
SATELLOS
BIOSCIENCE INC.
Consolidated
Financial Statements
Years
ended December 31, 2024 and 2023
Independent
auditor’s report
To
the Shareholders of Satellos Bioscience Inc.
Our
opinion
In
our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of Satellos
Bioscience Inc. and its subsidiaries (together, the Company) as at December 31, 2024 and its financial performance and its cash
flows for the year then ended in accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board (IFRS Accounting Standards).
What
we have audited
The
Company’s consolidated financial statements comprise:
| · | the
consolidated statement of financial position as at December 31, 2024; |
| · | the
consolidated statement of loss and comprehensive loss for the year then ended; |
| · | the
consolidated statement of changes in shareholders’ equity for the year then ended; |
| · | the
consolidated statement of cash flows for the year then ended; and |
| · | the
notes to the consolidated financial statements, comprising material accounting policy information
and other explanatory information. |
Basis
for opinion
We
conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our
report.
We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We
are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial
statements in Canada. We have fulfilled our other ethical responsibilities in accordance with these requirements.
Key
audit matters
We
have determined that there are no key audit matters to communicate in our report.
Comparative
information
The
consolidated financial statements of the Company for the year ended December 31, 2023 were audited by another auditor who expressed
an unmodified opinion on those consolidated financial statements on March 27, 2024.
Other
information
Management
is responsible for the other information. The other information comprises the Management’s Discussion and Analysis.
Our
opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion
thereon.
In
connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above
and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit, or otherwise appears to be materially misstated.
If,
based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.
Responsibilities
of management and those charged with governance for the consolidated financial statements
Management
is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS Accounting
Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.
In
preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management
either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those
charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s
responsibilities for the audit of the consolidated financial statements
Our
objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level
of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated
financial statements.
As
part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
| · | Identify
and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control. |
| · | Obtain
an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control. |
| · | Evaluate
the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management. |
| · | Conclude
on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related
to events or conditions that may cast significant doubt on the Company’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the consolidated
financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause the Company to cease to continue as a going concern. |
| · | Evaluate
the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation. |
| · | Plan
and perform the group audit to obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business units within the Company as a basis for
forming an opinion on the consolidated financial statements. We are responsible for the direction,
supervision and review of the audit work performed for purposes of the group audit. We remain
solely responsible for our audit opinion. |
We
communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we identify during our audit.
We
also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence,
and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.
From
the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of
the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our
auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances,
we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
The
engagement partner on the audit resulting in this independent auditor’s report is Grant Redpath.
/s/PricewaterhouseCoopers
LLP
Chartered
Professional Accountants, Licensed Public Accountants
Toronto,
Ontario, Canada
March 25,
2025
SATELLOS
BIOSCIENCE INC.
Consolidated
Statements of Financial Position
(Expressed
in thousands of Canadian Dollars)
| As at, | |
Notes | | |
December 31,
2024 | | |
December 31,
2023 | |
| | |
| | | |
$ | | |
$ | |
| ASSETS | |
| | | |
| | | |
| | |
| Current | |
| | | |
| | | |
| | |
| Cash and cash equivalents | |
| 3 | | |
| 57,659 | | |
| 22,067 | |
| Short-term investments | |
| 4 | | |
| 12,195 | | |
| 17,520 | |
| Sales tax and other receivables | |
| | | |
| 626 | | |
| 583 | |
| Prepaid expenses and deposits | |
| 5 | | |
| 2,532 | | |
| 148 | |
| Derivative
financial instruments, net | |
| 6 | | |
| - | | |
| 4 | |
| Total current assets | |
| | | |
| 73,012 | | |
| 40,322 | |
| | |
| | | |
| | | |
| | |
| Property and equipment | |
| | | |
| 5 | | |
| 19 | |
| | |
| | | |
| | | |
| | |
| Assets held for sale | |
| | | |
| | | |
| | |
| Intangible
asset | |
| 6 | | |
| - | | |
| 3,916 | |
| Investment | |
| 6 | | |
| - | | |
| 41 | |
| | |
| | | |
| 5 | | |
| 3,976 | |
| | |
| | | |
| | | |
| | |
| TOTAL
ASSETS | |
| | | |
| 73,017 | | |
| 44,298 | |
| | |
| | | |
| | | |
| | |
| LIABILITIES | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | |
| Accounts
payable and accrued liabilities | |
| 7 | | |
| 5,155 | | |
| 3,624 | |
| Total
current liabilities | |
| | | |
| 5,155 | | |
| 3,624 | |
| | |
| | | |
| | | |
| | |
| Total
Liabilities | |
| | | |
| 5,155 | | |
| 3,624 | |
| | |
| | | |
| | | |
| | |
| SHAREHOLDERS’ EQUITY | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | |
| Common shares | |
| 9 | | |
| 105,729 | | |
| 61,916 | |
| Pre-funded warrants | |
| 9 | | |
| 27,622 | | |
| 17,772 | |
| Contributed surplus | |
| | | |
| 10,329 | | |
| 8,503 | |
| Accumulated deficit | |
| | | |
| (75,601 | ) | |
| (47,502 | ) |
| Accumulated
other comprehensive loss | |
| | | |
| (217 | ) | |
| (15 | ) |
| Total
shareholders’ equity | |
| | | |
| 67,862 | | |
| 40,674 | |
| | |
| | | |
| | | |
| | |
| TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY | |
| | | |
| 73,017 | | |
| 44,298 | |
Commitments
and Contingencies (Note 13)
The
accompanying notes are an integral part of these consolidated financial statements.
Approved
by the Board of Directors:
| (signed) “Geoff
MacKay” |
|
|
| |
|
Director |
| |
|
|
| (signed) “Adam Mostafa” |
|
|
| |
|
Director |
SATELLOS
BIOSCIENCE INC.
Consolidated
Statements of Loss and Comprehensive Loss
(Expressed
in thousands of Canadian Dollars, except for per share amounts)
| |
|
Notes |
|
|
December 31,
2024 | |
December 31,
2023 | |
| | |
|
| | |
$ | | |
$ | |
| Research
and development (“R&D”) | |
| 12 | | |
| 19,603 | | |
| 8,817 | |
| General
and administrative (“G&A”) | |
| 12 | | |
| 8,205 | | |
| 6,646 | |
| | |
| | | |
| | | |
| | |
| TOTAL
R&D AND G&A EXPENSES: | |
| | | |
| (27,808 | ) | |
| (15,463 | ) |
| | |
| | | |
| | | |
| | |
| OTHER INCOME AND EXPENSES | |
| | | |
| | | |
| | |
| Finance income | |
| | | |
| 1,371 | | |
| 1,333 | |
| Interest expense | |
| 8 | | |
| - | | |
| (177 | ) |
| Loss on extinguishment of Debenture
Units | |
| 8 | | |
| - | | |
| (426 | ) |
| (Loss)/gain on derivative financial
instruments | |
| 6 | | |
| (2 | ) | |
| 1 | |
| Impairment of AmpB assets | |
| 6 | | |
| (3,961 | ) | |
| - | |
| Foreign
exchange gain/(loss) | |
| | | |
| 2,301 | | |
| (1,157 | ) |
| | |
| | | |
| | | |
| | |
| NET
LOSS BEFORE INCOME TAXES | |
| | | |
| (28,099 | ) | |
| (15,889 | ) |
| | |
| | | |
| | | |
| | |
| Income
tax expense | |
| | | |
| - | | |
| - | |
| | |
| | | |
| | | |
| | |
| NET
LOSS FOR THE YEAR | |
| | | |
| (28,099 | ) | |
| (15,889 | ) |
| | |
| | | |
| | | |
| | |
| OTHER COMPREHENSIVE LOSS | |
| | | |
| | | |
| | |
| Item that
may be reclassified to net loss Foreign currency translation adjustment | |
| | | |
| (202 | ) | |
| (8 | ) |
| | |
| | | |
| | | |
| | |
| TOTAL
COMPREHENSIVE LOSS | |
| | | |
| (28,301 | ) | |
| (15,897 | ) |
| | |
| | | |
| | | |
| | |
| Basic
and diluted loss per share | |
| | | |
$ | (0.25 | ) | |
$ | (0.18 | ) |
| Weighted average number of common shares | |
| 9 | | |
| 114,778,351 | | |
| 86,404,762 | |
The
accompanying notes are an integral part of these consolidated financial statements.
SATELLOS
BIOSCIENCE INC.
Consolidated
Statements of Changes in Shareholders’ Equity
(Expressed
in thousands of Canadian Dollars)
| For
the years ended December 31, 2024 and 2023 | |
| | |
Common
Shares | | |
Common
Shares | | |
Pre-funded
Warrants | | |
Pre-funded
Warrants | | |
Contributed
Surplus | | |
Accumulated
Deficit | | |
Accumulated
Other
Comprehensive
Loss | | |
Total
Shareholders’
Equity | |
| | |
Number | | |
$ | | |
Number | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | |
| Balance - December 31, 2022 | |
41,797,613 | | |
30,209 | | |
- | | |
- | | |
4,780 | | |
(31,613 | ) | |
(7 | ) | |
3,369 | |
| Bonus Common Shares issued in
Debenture Offering (Note 8) | |
671,825 | | |
238 | | |
- | | |
- | | |
- | | |
- | | |
- | | |
238 | |
| Transaction costs incurred on
issuance of Bonus Common Shares in Debenture Offering (Note 8) | |
- | | |
(12 | ) | |
- | | |
- | | |
- | | |
- | | |
- | | |
(12 | ) |
| Exercise of broker warrants (note 10) | |
25,000 | | |
14 | | |
- | | |
- | | |
(4 | ) | |
- | | |
- | | |
10 | |
| Common Shares issued in equity
offering (Note 9) | |
70,297,220 | | |
35,149 | | |
- | | |
- | | |
- | | |
- | | |
- | | |
35,149 | |
| Transaction costs incurred on
issuance of Common Shares in equity offering: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Cash
transaction costs (Note 9) | |
- | | |
(2,686 | ) | |
- | | |
- | | |
- | | |
- | | |
- | | |
(2,686 | ) |
| Fair value of warrants
(Note 9) | |
- | | |
(996 | ) | |
- | | |
| | |
996 | | |
- | | |
- | | |
- | |
| Pre-Funded Warrants issued in
equity offering (Note 9) | |
- | | |
- | | |
39,702,780 | | |
19,851 | | |
- | | |
- | | |
- | | |
19,851 | |
| Transaction costs incurred on
issuance of Pre-Funded Warrants: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Cash
transaction costs (Note 9) | |
- | | |
- | | |
- | | |
(1,517 | ) | |
- | | |
- | | |
- | | |
(1,517 | ) |
| Fair value of warrants
(Note 9) | |
- | | |
- | | |
- | | |
(562 | ) | |
562 | | |
| | |
| | |
| |
| Stock-based compensation (Note
11) | |
- | | |
- | | |
- | | |
- | | |
2,169 | | |
- | | |
- | | |
2,169 | |
| Net loss for the year | |
- | | |
- | | |
- | | |
- | | |
- | | |
(15,889 | ) | |
- | | |
(15,889 | ) |
| Foreign
currency translation adjustment | |
- | | |
- | | |
- | | |
- | | |
- | | |
- | | |
(8 | ) | |
(8 | ) |
| Balance –December 31,
2023 | |
112,791,658 | | |
61,916 | | |
39,702,780 | | |
17,772 | | |
8,503 | | |
(47,502 | ) | |
(15 | ) | |
40,674 | |
| Exercise of warrants (Note 10) | |
1,608,214 | | |
1,120 | | |
- | | |
- | | |
(287 | ) | |
- | | |
- | | |
833 | |
| Common Shares issued in equity
offering, net of transaction costs (Note 9) | |
51,420,000 | | |
42,693 | | |
- | | |
- | | |
- | | |
- | | |
- | | |
42,693 | |
| Pre-Funded Warrants issued in
equity offering, net of transactions costs (Note 9) | |
- | | |
- | | |
11,865,000 | | |
9,850 | | |
- | | |
- | | |
- | | |
9,850 | |
| Stock-based compensation (Note
11) | |
- | | |
- | | |
- | | |
- | | |
2,113 | | |
- | | |
- | | |
2,113 | |
| Net loss for the year | |
- | | |
- | | |
- | | |
- | | |
- | | |
(28,099 | ) | |
- | | |
(28,099 | ) |
| Foreign
currency translation adjustment | |
- | | |
- | | |
- | | |
- | | |
- | | |
- | | |
(202 | ) | |
(202 | ) |
| Balance – December 31,
2024 | |
165,819,872 | | |
105,729 | | |
51,567,780 | | |
27,622 | | |
10,329 | | |
(75,601 | ) | |
(217 | ) | |
67,862 | |
The
accompanying notes are an integral part of these consolidated financial statements.
SATELLOS
BIOSCIENCE INC.
Consolidated
Statements of Cash Flows
(Expressed
in thousands of Canadian Dollars)
| For
the years ended, | |
Notes | | |
December 31,
2024 | | |
December 31,
2023 | |
| | |
| | | |
$ | | |
$ | |
| CASH AND CASH EQUIVALENTS
PROVIDED BY (USED IN): | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | |
| OPERATING ACTIVITIES | |
| | | |
| | | |
| | |
| Net
loss for the year | |
| | | |
| (28,099 | ) | |
| (15,889 | ) |
| Items
not affecting cash: | |
| | | |
| | | |
| | |
| Impairment
of AmpB assets | |
| | | |
| 3,961 | | |
| - | |
| Accrued
interest on long term debt | |
| 8 | | |
| - | | |
| 177 | |
| Loss on
extinguishment of Debenture Units | |
| 8 | | |
| - | | |
| 426 | |
| Depreciation
of property and equipment | |
| | | |
| 20 | | |
| 7 | |
| Stock-based
compensation | |
| 10 | | |
| 2,113 | | |
| 2,169 | |
| (Gain)/loss
on derivative financial instruments | |
| 6 | | |
| 2 | | |
| (1 | ) |
| Non-cash
finance income | |
| | | |
| (488 | ) | |
| - | |
| Unrealized
foreign exchange (gain)/loss | |
| | | |
| (1,459 | ) | |
| 1,157 | |
| Net change
in non-cash working capital balances: | |
| | | |
| | | |
| | |
| Sales
tax and other receivables | |
| | | |
| (43 | ) | |
| (323 | ) |
| Prepaid
expenses and deposits | |
| | | |
| (2,360 | ) | |
| (102 | ) |
| Accounts
payable and accrued liabilities | |
| | | |
| 1,378 | | |
| 794 | |
| | |
| | | |
| (24,975 | ) | |
| (11,585 | ) |
| | |
| | | |
| | | |
| | |
| FINANCING ACTIVITIES | |
| | | |
| | | |
| | |
| Proceeds
from issuance of Debenture Units, net of costs | |
| 8 | | |
| - | | |
| 2,244 | |
| Repayment
of Debenture Units | |
| 8 | | |
| - | | |
| (2,622 | ) |
| Proceeds
from exercise of warrants, net of costs | |
| | | |
| 833 | | |
| 10 | |
| Proceeds
from Common Share issuance, net of costs | |
| 9 | | |
| 42,802 | | |
| 32,463 | |
| Proceeds
from Pre-Funded Warrant issuance, net of costs | |
| 9 | | |
| 9,850 | | |
| 18,334 | |
| | |
| | | |
| 53,485 | | |
| 50,429 | |
| | |
| | | |
| | | |
| | |
| INVESTING ACTIVITIES | |
| | | |
| | | |
| | |
| Purchases
of short-term investments | |
| | | |
| (37,336 | ) | |
| (17,520 | ) |
| Maturities
of short-term investments | |
| | | |
| 43,680 | | |
| - | |
| Purchase
of property and equipment | |
| | | |
| (6 | ) | |
| (18 | ) |
| | |
| | | |
| 6,338 | | |
| (17,538 | ) |
| | |
| | | |
| | | |
| | |
| Effect
of foreign currency exchange rates on cash and cash equivalents | |
| | | |
| 744 | | |
| (1,163 | ) |
| | |
| | | |
| | | |
| | |
| INCREASE IN CASH AND CASH
EQUIVALENTS | |
| | | |
| 35,592 | | |
| 20,143 | |
| | |
| | | |
| | | |
| | |
| CASH
AND CASH EQUIVALENTS – Beginning of period | |
| | | |
| 22,067 | | |
| 1,924 | |
| | |
| | | |
| | | |
| | |
| CASH
AND CASH EQUIVALENTS – End of period | |
| | | |
| 57,659 | | |
| 22,067 | |
| | |
| | | |
| | | |
| | |
| Non-Cash Transactions | |
| | | |
| | | |
| | |
| Broker
warrants issued | |
| | | |
| - | | |
| 1,558 | |
| | |
| | | |
| | | |
| | |
| Cash interest received | |
| | | |
| 780 | | |
| 752 | |
The accompanying notes
are an integral part of these consolidated financial statements.
SATELLOS
BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2024 and 2023
(Amounts
expressed in thousands of Canadian Dollars, except for share and per share amounts)
| 1. | Description
of Business |
Satellos
Bioscience Inc. (“Satellos” or the “Company”) is a Canadian biotechnology and drug development
company incorporated under the laws of Canada. The head office, principal address, and records of the Company are located at Royal Bank
Plaza, South Tower, 200 Bay Street, Suite 2800, Toronto, Ontario M5J 2J1 Canada and the Company’s common shares (“Common
Shares”) are listed on the Toronto Stock Exchange (“TSX”).
The
Company has wholly owned subsidiaries in Australia, (Satellos Bioscience Australia Pty Ltd) in Canada (Amphotericin B Technologies, Inc.,
hereinafter “AmpB Tech”) and in Delaware, USA (Satellos Bioscience US, Inc.).
| 2. | Material
Accounting Policies |
These
consolidated financial statements as at and for the years ended December 31, 2024 and 2023 have been prepared in accordance with
International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS Accounting Standards”).
The
consolidated financial statements have been prepared using the accrual basis of accounting at historical cost except for derivative financial
instruments and assets held for sale which are measured at fair value.
The
consolidated financial statements are presented in thousands of Canadian dollars, unless otherwise stated.
These
consolidated financial statements were approved and authorized for issue by the Board of Directors on March 25, 2025.
| 2.2 | Basis
of Consolidation |
The
consolidated financial statements comprise the financial statements of the Company and its subsidiaries. Subsidiaries are consolidated
from the date at which control is determined to have occurred and are deconsolidated from the date that the Company no longer controls
the entity. Intercompany transactions, balances, and gains and losses on transactions between subsidiaries are eliminated.
| 2.3 | Summary
of Material Accounting Policies |
Cash
and cash equivalents
Cash
and cash equivalents consist of cash on deposit and highly liquid short-term interest-bearing securities with maturities at the date
of purchase of three months or less. Cash and cash equivalents are held or invested at financial institutions including Canadian chartered
banks and financial service firms. Interest income earned is recognized in the consolidated statements of loss and comprehensive loss
in finance income.
Functional
and presentation currency
The
Company has a functional currency of Canadian dollars and the functional currency of each subsidiary is determined based on facts and
circumstances relevant for each subsidiary. Subsidiaries that have a functional currency different from the Company’s presentation
currency of Canadian dollars, the assets and liabilities are translated at the closing rate at the date of the balance sheets and income
and expenses are translated at the exchange rates at the dates of the transactions. All resulting changes are recognized in the other
comprehensive loss as foreign currency translation adjustments.
Current
and deferred income taxes
The
Company follows the liability method of accounting for income taxes. Under this method, current income taxes are recognized for the estimated
income taxes payable for the current period. Deferred income tax assets and liabilities are recognized in the current period for temporary
differences between the tax and accounting bases of assets and liabilities as well as for the benefit of losses available to be carried
forward to future years for tax purposes. Deferred tax assets are only recognized to the extent that it is considered probable that they
will be realized. Deferred income tax assets and liabilities are measured using substantively enacted tax rates and laws expected to
apply in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates
on deferred income tax assets and liabilities is recognized in operations in the period that includes the substantive enactment.
SATELLOS
BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2024 and 2023
(Amounts
expressed in thousands of Canadian Dollars, except for share and per share amounts)
Financial
instruments
Classification
and Measurement of Financial Instruments
At
initial recognition, financial instruments are recorded at fair value. For financial instruments not measured at fair value through profit
or loss, transaction costs directly attributable to their acquisition are included in the carrying amount. Transaction costs related
to financial instruments measured at fair value through profit or loss are expensed as incurred.
Subsequent
measurement of financial assets depends on the Company’s business model for managing the asset and the cash flow characteristics
of the asset. There are three measurement categories in which the Company could classify its financial instruments:
| · | Amortized
cost: Financial assets held to collect contractual cash flows, where those cash flows solely
represent payments of principal and interest, are measured at amortized cost. Interest income
is recognized using the effective interest rate method in the consolidated statements of
loss and comprehensive loss. |
| · | Fair
value through other comprehensive income (FVOCI): Financial assets held for both collecting
contractual cash flows and for selling, where the cash flows solely represent payments of
principal and interest, are measured at FVOCI. Changes in fair value are recorded in other
comprehensive income, except for impairment gains or losses, interest income, and foreign
exchange gains and losses, which are recognized in the consolidated statements of loss and
comprehensive loss. |
| · | Fair
value through profit or loss (FVTPL): Financial instruments that do not meet the criteria
for measurement at amortized cost or FVOCI are measured at FVTPL. Changes in fair value are
recognized in net loss in the period in which they arise and presented net in the consolidated
statements of loss and comprehensive loss, except when the instrument is designated as part
of a hedging relationship. |
The
Company’s financial assets and liabilities are subsequently measured at amortized cost using the effective interest rate method
except for derivative financial instruments which are measured at FVTPL and investment.
The
Company assesses on a forward looking basis the expected credit losses associated with its financial assets carried at amortized cost.
Impairment
of non-financial assets
The
Company assesses, at each reporting date, whether there is an indication that a non-financial asset may be impaired. If such an indication
exists, or if annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount is estimated
as the higher of its fair value less costs of disposal or its value in use. When the carrying amount of an asset exceeds its recoverable
amount, the asset is considered impaired and is written down to its recoverable amount.
Impairment
losses are recognized in the statements of loss and comprehensive loss.
At
each reporting date, the Company assesses whether previously recognized impairments should be reversed based on updated assumptions.
Any reversal is limited to the asset’s recoverable amount and cannot exceed its historical carrying value net of amortization or
depreciation.
Intangible
assets
Intangible
assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in the Arrangement is
their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less accumulated amortization
and accumulated impairment losses.
The
useful lives of intangible assets are assessed as either finite or indefinite.
SATELLOS
BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2024 and 2023
(Amounts
expressed in thousands of Canadian Dollars, except for share and per share amounts)
Research
and development
Expenditures
on research and development activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding,
are recognized in profit or loss as incurred. Research and development expenses include all direct and indirect operating expenses supporting
the products in development and clinical trials. The Company outsources a significant portion of its research and development activities
to third-party contract service providers. Third-party costs include those related to preclinical research, clinical trial activities
and product manufacturing. Clinical trial activities expenses include investigator fees, clinical site costs, contract research organization
fees and other related costs. The amount of expense recognized in a period for third-party contract service providers is based on the
work performed using the accrual basis of accounting. The Company’s third-party contract service organizations provide information
of services performed to allow the Company to determine the appropriate accrual at period end.
Research
and development tax credits receivable
The
Company is entitled to certain refundable research and development tax credits (“R&D credits”) for qualified scientific
research and experimental development. These R&D credits are recorded as a reduction in the related expenditures when there is reasonable
assurance that such credits will be realized. R&D credits that are related to capitalized expenditures are recognized in the consolidated
statements of financial position as a reduction to the asset that the tax credit relates.
Share
capital
Common
Shares and Pre-Funded Warrants are classified as equity. Incremental costs directly attributable to the issuance of Common Shares and
Pre-Funded Warrants are recognized as a deduction from shareholders’ equity.
Stock-based
compensation
The
Company grants stock options to directors, officers, employees, consultants and advisors as consideration for work or services performed.
The Company used the Black-Scholes option pricing model to estimate the fair value of each stock option on the grant date. Stock option
expense is recognized over the vesting period using the graded vesting method by increasing contributed surplus based on the number of
stock options expected to vest.
Loss
per share
Basic
and diluted loss per share is calculated by dividing net loss for the period attributable to the Company by the weighted average number
of common shares outstanding and the dilutive impact of outstanding warrants and stock options during the period.
| 2.4 | New
and Amended Standards and Interpretations |
| a) | New
standards, amendments and interpretations adopted by the Company |
Amendments
to International Accounting Standard (IAS) 1, Presentation of Financial Statements (IAS 1)
The
amendments affect only the presentation of liabilities in the interim condensed consolidated statements of financial position, not the
amount or timing of recognition of any asset, liability, income or expenses, or the information that entities disclose about those items.
They clarify that the classification of liabilities as current or non-current should be based on rights that are in existence at the
end of the reporting period and align the wording in all affected paragraphs to refer to the “right” to defer settlement
by at least 12 months and make explicit that only rights in place at the end of the reporting period should affect the classification
of a liability; clarify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement
of a liability; and make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or
services. The adoption of these amendments did not have a material impact on the consolidated financial statements.
| b) | New
standards, amendments and interpretations issued but not yet effective |
At
the date of authorization of these consolidated financial statements, the Company had not applied the following new and revised IFRS
Accounting Standards that are not yet effective.
SATELLOS
BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2024 and 2023
(Amounts
expressed in thousands of Canadian Dollars, except for share and per share amounts)
Amendments
to IFRS 9, Financial instruments and IFRS 7, Financial instruments: Disclosures
The
IASB has issued classification and measurement and disclosure amendments to IFRS 9 and IFRS 7 with an effective date for years beginning
on or after January 1, 2026 with earlier application permitted. The amendments clarify the date of recognition and derecognition
of some financial assets and liabilities and introduce a new exception for some financial liabilities settled through an electronic payment
system. Other changes include a clarification of the requirements when assessing whether a financial asset meets the solely payments
of principal and interest criteria and new disclosures for certain instruments with contractual terms that can change cash flows (including
instruments where cash flows changes are linked to environment, social or governance (ESG) targets).
The
Company has not yet commenced the evaluation of the impact of these amendments.
New
accounting standard IFRS 18, Presentation and disclosure in financial statements
IFRS
18, Presentation and Disclosure in Financial Statements (IFRS 18) will provide new presentation and disclosure requirements and replace
IAS 1, Presentation of Financial Statements. IFRS 18 introduces changes to the structure of the income statement; provides required disclosures
in financial statements for certain profit or loss performance measures that are reported outside an entity’s financial statements;
and provides enhanced principles on aggregation and disaggregation in financial statements. Many other existing principles in IAS 1 have
been maintained. IFRS 18 is effective for years beginning on or after January 1, 2027, with earlier application permitted.
The
Company has not yet commenced the evaluation of the impact of the new standard.
| 2.5 | Use
of judgements and estimates |
The
preparation of financial statements in accordance with IFRS Accounting Standards requires management to make judgements, estimates, and
assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, revenues and expenses. Actual
results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimates are revised and in any future periods affected. Management has applied
significant judgements, estimates and assumptions to the following:
| a) | Impairment
of intangible assets |
Impairment
exists when the carrying value of an asset or cash generating units (“CGUs”) exceeds its recoverable amount, which
is the higher of its fair value less costs of disposal and its value in use. During the year ended December 31, 2024, management
determined that it was no longer likely that the sale of AmpB (and its component assets, OralTrans and the investment in NWMT) would
be completed. The Company recognized an impairment of $3,916 to fully write down the remaining carrying value of the intangible asset.
The factor leading this to this impairment was the lack of financing obtained by NWMT to advance the technology. On October 7, 2024,
the Company exercised its Put Option, and NPWT did not fulfil their obligations under the terms of the agreement (note 6).
| b) | Valuation
of derivative financial instruments |
Management
measures the fair value of derivative financial instruments using the Black Scholes option valuation techniques. Assumptions are made
and estimates are used in applying the valuation techniques. These include estimating the future volatility, expected dividend yield,
expected risk-free interest rate and corporate performance. Such estimates and assumptions are inherently uncertain. Changes in these
assumptions affect the fair value estimates of the derivative financial instruments.
| 3. | Cash
and Cash Equivalents |
Cash
and cash equivalents consist of the following:
| | |
December 31,
2024 | | |
December 31,
2023 | |
| | |
$ | | |
$ | |
| Cash balances with
banks | |
| 35,086 | | |
| 609 | |
| Short-term
instruments | |
| 22,573 | | |
| 21,458 | |
| Total
cash and cash equivalents | |
| 57,659 | | |
| 22,067 | |
SATELLOS
BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2024 and 2023
(Amounts
expressed in thousands of Canadian Dollars, except for share and per share amounts)
Short-term
investments with initial maturities greater than three months and less than one year consist of the following:
| | |
December 31,
2024 | | |
December 31,
2023 | |
| | |
$ | | |
$ | |
| Guarantee Investment
Certificates | |
| 12,195 | | |
| - | |
| United
States Treasury Bills | |
| - | | |
| 17,520 | |
| Total | |
| 12,195 | | |
| 17,520 | |
| 5. | Prepaid
expenses and deposits |
Prepaid
expenses and deposits primarily consist of advance payments for contract research services required for ongoing clinical trials, subscriptions
and other general and administrative items.
| | |
December 31,
2024 | | |
December 31,
2023 | |
| | |
$ | | |
$ | |
| Research and development
deposits | |
| 2,273 | | |
| - | |
| Other prepaid
and deposits | |
| 259 | | |
| 148 | |
| Total
prepaid expenses and deposits | |
| 2,532 | | |
| 148 | |
| 6. | Intangible
Asset and Assets Held for Sale |
| a) | The
intangible asset consists of the Oral AmpB Delivery System held by AmpB Tech (“OralTrans”),
which consists of (a) a license to three patents from the University of British Columbia;
(b) title to several patents and patent applications; and (c) clinical and pre-clinical
data. This intangible asset had a finite useful life that was estimated to run until the
latest expected expiry date of the patent that is expected to issue from the latest-filed
patent application either licensed to or filed by the Company. |
On
Oct 6, 2022, the Company licensed the OralTrans technology to NW Micelle Therapeutics (NWMT) in exchange for 15% of NWMT. Further, the
Company entered into an agreement with NW Pharmatech Limited (“NWPT”), the entity that owns 85% of NWMT, in which
NWPT acquired a time-limited option to acquire AmpB Tech from the Company for US$3,000 subject to certain conditions (the “Call
Option”); and the Company acquired a time-limited option (with the same term as the Call Option) to compel NWPT to acquire
AmpB Tech from the Company for US$3,000 subject to certain conditions (the “Put Option”).
Due
to the prospect of sale within one year, AmpB Tech (and its component assets, OralTrans and the investment in NWMT), were considered
assets held for sale. Accordingly, the group of assets was recorded at their respective fair values, determined to be $3,961 in aggregate,
as of December 31, 2023, and the intangible asset was no longer amortized.
During
the year ended December 31, 2024, management determined that it was no longer likely that the sale of AmpB (and its component assets,
OralTrans and the investment in NWMT) would be completed through the exercise of the Call Option or completion of the Put Option. As
such, the AmpB assets no longer qualified as held for sale and accordingly should be measured at the lower of the carrying value and
the recoverable amount. The Company recognized an impairment of $3,916 to fully write down the remaining carrying value of the intangible
asset, $43 pertaining to the investment in NWMT, and $2 related to the call and put options, for a total of $3,961. The factor leading
this to this impairment was the lack of financing obtained by NWMT to advance the technology. On October 7, 2024, the Company exercised
its Put Option, and NPWT did not fulfil their obligations under the terms of the agreement.
SATELLOS
BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2024 and 2023
(Amounts
expressed in thousands of Canadian Dollars, except for share and per share amounts)
| b) | Investments
consisted of the minority equity investment in NWMT, and had the following balances as of
the years ending: |
| | |
December 31,
2024 | | |
December 31,
2023 | |
| | |
$ | | |
$ | |
| Investment
in NWMT | |
| - | | |
| 41 | |
The
Company does not have control nor significant influence over NWMT and therefore had accounted for the investment in NWMT as an asset
held at fair value. As described above, during the year ended December 31, 2024, the Investment in NWMT no longer met the definition
of an asset held for sale and was remeasured to its recoverable amount of $nil as the AmpB technology, the advancement of which was the
purpose of NWMT, have a fair value of $nil. The company recorded an impairment loss of $43 and a change in fair value of $2 related to
this investment.
| c) | The
Company had recognized the net value of the fair values of the Put Option and the Call Option
on the consolidated statements of financial position as derivative financial instruments.
On October 7, 2024, the Company exercised its Put Option, and NWMT did not fulfil their
obligations under the terms of the agreement. |
| d) | The
table below presents the fair value of the derivative asset and derivative liability: |
| | |
December 31,
2024 | | |
December 31,
2023 | |
| | |
$ | | |
$ | |
| Fair value of Put Option | |
| - | | |
| 1,191 | |
| Fair value of Call Option | |
| - | | |
| 1,187 | |
| Derivatives,
net | |
| - | | |
| 4 | |
| 7. | Accounts
Payable and Accrued Liabilities |
| |
|
December 31,
2024 | |
December 31,
2023 | |
| | |
$ | | |
$ | |
| Trade payables | |
| 2,968 | | |
| 1,040 | |
| Accrued
liabilities | |
| 2,187 | | |
| 2,584 | |
| Total
trade payables and accrued liabilities | |
| 5,155 | | |
| 3,624 | |
On
March 24, 2023, the Company completed a non-brokered private placement offering of 2,385 10% unsecured non- convertible debenture
units (the “Debenture Units”) and raised gross proceeds of $2,385 (the “Debenture Offering”). Each
Debenture Unit is comprised of: (i) $1,000 principal amount of unsecured non-convertible debentures of the Company (the “Debentures”);
and (ii) for no additional consideration, such number of common shares in the capital of the Company (each whole common share, a
“Bonus Share”, and collectively, the “Bonus Shares”) as is equal to $100 divided by $0.355, being
the closing market price of the common shares of the Company on the TSX Venture Exchange on March 15, 2023, rounded to the nearest
whole share. The Debentures bear interest on the principal amount at a rate of 10% per annum payable quarterly in arrears in cash and
matured on September 24, 2024 (the “Maturity Date”). Accordingly, 671,825 Bonus Shares were issued in connection
with the Debenture Units at a value of $0.355. In addition, the Company incurred expenses in the amount of approximately $140 related
to the Debenture Offering of which the Company has allocated $128 to debt issuance costs and $12 to share issuance costs. Net proceeds
of the Debenture Offering were approximately $2,244 and the effective annual interest rate on the principal of the Debentures was 21.6%.
Effective
August 14, 2023, the Company redeemed all the outstanding Debentures and paid a 6% early repayment premium of $143 and recorded
a loss of $426 on the extinguishment of debenture units on the consolidated statements of loss and comprehensive loss.
SATELLOS
BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2024 and 2023
(Amounts
expressed in thousands of Canadian Dollars, except for share and per share amounts)
The
following table presents the amounts recorded related to the Debenture Offering and its redemption:
| | |
$ | |
| Proceeds from issuance
of Debenture Units on March 24, 2023 | |
| 2,385 | |
| Discount due to Bonus Shares | |
| (238 | ) |
| Transaction costs | |
| (128 | ) |
| Interest expense from March 24, 2023 to August 14,
2023 | |
| 177 | |
| Loss on extinguishment | |
| 426 | |
| Repayment of interest and
principal, August 14, 2023 | |
| (2,622 | ) |
| Debentures balance,
December 31, 2023 and December 31, 2024 | |
| - | |
| 9. | Share
Capital and Pre-Funded Warrants |
Authorized
The
authorized share capital of the Company consists of an unlimited number of common shares.
On
December 20, 2024, the Company completed a public offering (the “December Equity Offering”), issuing 51,420,000
common shares at $0.90 per common share (the “Common Shares”) and 11,865,000 pre-funded common share purchase warrants
(“Pre-Funded Warrants”) with no expiry date and an exercise price of $0.00001 for $0.89999 per Pre-Funded Warrant
for gross proceeds of $56,956.
The
costs associated with the December Equity Offering were $4,413, including cash costs for commissions to the agents of approximately
$3,959, professional fees and regulatory costs of $345, and accrued professional and regulatory fees of $109.
On
May 17, 2023, the Company completed a public offering (the “Equity Offering”), issuing 70,297,220 Common Shares
at $0.50 per Common Share and 39,702,780 pre-funded common share purchase warrants (Pre-Funded Warrants) with no expiry date and
an exercise price of $0.00001 for $0.49999 per Pre-Funded Warrant for gross proceeds of $55,000.
The
costs associated with the Equity Offering were $5,761, including cash costs for commissions to the agents of approximately $3,693, professional
fees and regulatory costs of $510 and 7,383,919 compensation warrants to the agents valued at $1,558. Each compensation warrant is exercisable
into one Common Share at an exercise price of $0.50 until expiry on May 17, 2025.
The
fair value of the compensation warrants was recorded in share issuance costs and Pre-Funded Warrant costs proportionately to the number
of each security issued.
Loss
per share
Loss
per share is calculated using the weighted average number of Common Shares outstanding. For the year ended December 31, 2024 and
2023, the calculation was as follows:
| | |
Year
ended,
December 31, 2024 | | |
Year
ended,
December 31, 2023 | |
| Net loss | |
$ | 28,099 | | |
$ | 15,889 | |
| Weighted average number of
Common Shares | |
| 114,778,351 | | |
| 86,404,762 | |
| Net loss
per share – basic and diluted | |
$ | (0.25 | ) | |
$ | (0.18 | ) |
The
effect of any potential exercise of the Company’s stock options, pre-funded warrants and warrants outstanding during the year has
been excluded from the calculation of diluted loss per Common Share as it would be anti- dilutive.
SATELLOS
BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2024 and 2023
(Amounts
expressed in thousands of Canadian Dollars, except for share and per share amounts)
Warrants
have been issued as part of equity financings and include compensation to agents and brokers of the Company. “Pre-Funded Warrants”
are defined in Note 9 above and are listed separately on the Statement of Financial Position and on the Statement of Changes to Equity
and are excluded from the tables below.
The
following is a summary of changes in warrants:
| |
|
Year
ended, December 31, 2024 | |
Year
ended, December 31, 2023 | |
| | |
Number
of
warrants | | |
Weighted
average
exercise price | | |
Number
of
warrants | | |
Weighted
average
exercise price | |
| Outstanding, beginning
of year | |
| 12,346,419 | | |
$ | 0.53 | | |
| 5,245,816 | | |
$ | 0.63 | |
| Issued | |
| - | | |
| - | | |
| 7,383,919 | | |
$ | 0.50 | |
| Exercised | |
| (1,608,214 | ) | |
$ | 0.52 | | |
| (25,000 | ) | |
$ | 0.40 | |
| Expired | |
| (12,094 | ) | |
$ | 0.40 | | |
| (258,316 | ) | |
$ | 1.69 | |
| Outstanding,
end of year | |
| 10,726,111 | | |
$ | 0.53 | | |
| 12,346,419 | | |
$ | 0.53 | |
The
table below presents the outstanding warrants as at December 31, 2024:
| Exercise
Price | |
Number
of Warrants | | |
Expiry
Date |
|
| $0.60 | |
| 3,506,500 | | |
September 13,
2025 |
|
| $0.50 | |
| 7,219,611 | | |
May 17,2025 |
|
| Total
warrants | |
| 10,726,111 | | |
|
|
During
the year ended December 31, 2024, 1,608,214 warrants were exercised for cash proceeds of $833. In addition to the cash proceeds
received, the original fair value related to these warrants of $287, was transferred from warrants to contributed surplus.
The
fair value of warrants issued in the years ended December 31, 2023 and 2022, were estimated using the Black-Scholes option pricing
model with the following assumptions:
| Date
of Issue | |
May 17,
2023 | | |
September 13,
2022 | |
| Number of warrants | |
| 7,383,919 | | |
| 4,987,500 | |
| Expected life of warrants | |
| 2
years | | |
| 2-3
years | |
| Expected volatility | |
| 73.7% | | |
| 73%-81% | |
| Expected dividend yield | |
| nil | | |
| nil | |
| Risk free interest rate | |
| 4.04% | | |
| 3.53%-3.583% | |
| Fair value of warrants | |
| $1,558 | | |
| $882 | |
Due
to the absence of volatility rates specific to the Company, the Company selected comparable companies in a similar industry to estimate
an appropriate volatility rate.
| 11. | Stock-Based
Compensation |
Effective
May 14, 2024, the Company adopted a new omnibus equity incentive plan (“Omnibus Plan”) which authorizes the Board
of Directors to administer the Omnibus Plan to provide equity-based compensation in the form of stock options and restricted stock units.
The
Company currently maintains its existing Amended and Restated Incentive Stock Option Plan (“Option Plan”) but effective
May 14, 2024 no further grants will be made under this plan though existing grants under the Option Plan will remain in effect in
accordance with their terms.
The
aggregate number of common shares that may be issued under all awards under the Omnibus Plan and the Option Plan is 15% of our issued
and outstanding common shares on a rolling basis.
SATELLOS
BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2024 and 2023
(Amounts
expressed in thousands of Canadian Dollars, except for share and per share amounts)
Under
both the Omnibus Plan and the Option Plan, the exercise price of each option equals the market price of the underlying share on the date
of the grant. Vesting is provided for at the discretion of the Board of Directors and the expiration of options is to be no greater than
10 years from the date of grant.
The
Company calculates the fair value of each stock option grant using the Black-Scholes option pricing model at the grant date.
The
stock-based compensation expense of the stock options is recognized as stock-based compensation expense over the relevant vesting period
of the stock options using an estimate of the number of options that will eventually vest.
Stock
option transactions for the year ended December 31, 2024, and December 31, 2023, are presented below:
| | |
Year
ended,
December 31, 2024 | | |
Year
ended,
December 31, 2023 | |
| | |
Number
of
options | | |
Weighted
average
exercise price | | |
Number
of
options | | |
Weighted
average
exercise price | |
| Outstanding, beginning
of year | |
| 14,134,363 | | |
$ | 0.71 | | |
| 3,991,201 | | |
$ | 1.18 | |
| Granted | |
| 1,162,500 | | |
$ | 0.73 | | |
| 10,399,531 | | |
$ | 0.54 | |
| Forfeited
and expired | |
| (1,417,274 | ) | |
$ | 0.56 | | |
| (256,369 | ) | |
$ | 0.97 | |
| Outstanding,
end of year | |
| 13,879,589 | | |
$ | 0.73 | | |
| 14,134,363 | | |
$ | 0.71 | |
As
at December 31, 2024, the Company had the following outstanding options:
| | |
Options Outstanding | | |
| Options
Exercisable | |
| Exercise
Prices | |
Number
of
options | | |
Weighted
average
remaining
contractual life | | |
Weighted
average exercise
price | | |
Number
of
options | | |
Weighted
average exercise
price | |
| $0.33-$0.50 | |
| 4,287,810 | | |
| 8.48 | | |
$ | 0.42 | | |
| 1,809,891 | | |
$ | 0.40 | |
| $0.51-$0.66 | |
| 6,576,809 | | |
| 8.19 | | |
$ | 0.60 | | |
| 2,751,277 | | |
$ | 0.61 | |
| $0.67-$1.70 | |
| 3,014,970 | | |
| 7.32 | | |
$ | 1.47 | | |
| 1,979,748 | | |
$ | 1.66 | |
| | |
| 13,879,589 | | |
| 8.09 | | |
$ | 0.73 | | |
| 6,540,916 | | |
$ | 0.87 | |
The
following table presents the assumptions that were used in the Black-Scholes option pricing model to determine the fair value of stock
options granted during the period, and the resultant average fair values:
| | |
Year
ended,
December 31, 2024 | | |
Year
ended,
December 31, 2023 | |
| Expected life of stock options | |
| 10
years | | |
| 10
years | |
| Expected weighted average volatility | |
| 84% | | |
| 94% | |
| Expected dividend yield | |
| nil% | | |
| nil% | |
| Weighted average risk-free interest rate | |
| 3.03% | | |
| 3.34% | |
| Weighted
average fair value of stock options granted in the year | |
$ | 0.66 | | |
$ | 0.48 | |
Due
to the absence of volatility rates specific to the Company, the Company selected comparable companies in a similar industry to estimate
a volatility rate.
During
the year ended December 31, 2024, $2,113 (2023 - $2,169) has been recognized as stock-based compensation expense.
SATELLOS
BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2024 and 2023
(Amounts
expressed in thousands of Canadian Dollars, except for share and per share amounts)
Research
and development expenses:
| | |
December 31,2024 | | |
December 31,2023 | |
| | |
$ | | |
$ | |
| Salaries and management
fees | |
| 3,676 | | |
| 2,173 | |
| Discovery expenses | |
| 955 | | |
| 1,141 | |
| Preclinical expenses | |
| 7,430 | | |
| 3,444 | |
| Chemistry, manufacturing controls | |
| 3,384 | | |
| 1,193 | |
| Clinical expenses | |
| 3,411 | | |
| - | |
| Stock-based
compensation | |
| 747 | | |
| 866 | |
| Total
research and development expenses | |
| 19,603 | | |
| 8,817 | |
General
and administrative:
| | |
December 31,2024 | | |
December 31,2023 | |
| | |
$ | | |
$ | |
| Salaries and management
fees | |
| 3,725 | | |
| 2,318 | |
| Professional fees | |
| 2,318 | | |
| 2,438 | |
| Other operating expenses | |
| 776 | | |
| 580 | |
| Stock-based compensation | |
| 1,366 | | |
| 1,303 | |
| Depreciation | |
| 20 | | |
| 7 | |
| Total
general and administrative expenses | |
| 8,205 | | |
| 6,646 | |
| 13. | Commitments
and Contingencies |
The
Company enters into contracts in the normal course of business, including for research and development activities. As at December 31,
2024, in addition to amounts that have been recognized in accounts payable and accrued liabilities, the Company has commitments for research
and development activities in the amount of $4,947, most cancellable with notice. These commitments include agreements related to the
conduct of long-term toxicology and a clinical study.
| | |
Payments
Due by Period | |
| | |
Total | | |
Less
than 1 year | | |
1
-3 years | | |
4
– 5 years | | |
After
5 years | |
| Purchase
obligations | |
$ | 4,947 | | |
$ | 4,693 | | |
$ | 254 | | |
| nil | | |
| nil | |
The
Company may be required to make annual, milestone, royalty, and other research and development funding payments to Ottawa Hospital Research
Institute (“OHRI”) under the OHRI Sponsored Research Agreement (“OHRI SRA”) and the Ottawa Hospital
Research Institute License (“OHRI License”). These payments are contingent upon the achievement of specific development,
regulatory and/or commercial milestones. The Company’s significant contingent milestone, royalty and other research and development
commitments are as follows:
| · | Royalties
on net sales of any products covered by patents licensed from OHRI (“Licensed Products”)
of 1% or 2% (depending on which patents cover a particular product), during the period when
the applicable patents have valid, unexpired claims, subject to certain royalty stacking
provisions; |
The
following payments to OHRI may be triggered by specified events:
| · | $50
- each time a Licensed Product is the subject of an approved Investigational New Drug (“IND”)
in the US or equivalent in any other industrialized country (maximum one payment per new
drug candidate); |
| · | $150
- each time a Licensed Product first enters Phase II human clinical trials in the US or equivalent
in any other industrialized country (maximum one payment per new drug candidate); |
| · | $300
- each time a Licensed Product first enters Phase III human clinical trials in the US or
equivalent in any other industrialized country (maximum one payment per new drug candidate);
and |
SATELLOS
BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2024 and 2023
(Amounts
expressed in thousands of Canadian Dollars, except for share and per share amounts)
| · | $1,000-
each time a Licensed Product is the subject of a regulatory approval in the US (such as New
Drug Application and Biologics License Application) or equivalent in any other industrialized
country (maximum one payment per new drug candidate). |
| · | 2%
of sublicensing income received by the Company from the grant of sublicenses. |
During
the year ended December 31, 2024, the Company made a milestone payment of $50 upon the approval of an Investigational New Drug (IND)
application for SAT-3247, in accordance with the agreement.
A
reconciliation of income taxes at statutory rates with the reported taxes is as follows:
| As
at | |
December 31,
2024 | | |
December 31,
2023 | |
| Loss before income
taxes | |
$ | (28,099 | ) | |
$ | (15,889 | ) |
| Tax rate | |
| 26.5 | % | |
| 26.5 | % |
| Income tax recovery at statutory
rate | |
| (7,446 | ) | |
| (4,210 | ) |
| Permanent differences | |
| 1,728 | | |
| 574 | |
| Share issuance costs and other
timing differences | |
| (1,065 | ) | |
| (306 | ) |
| Income tax benefit not recognized | |
| 6,859 | | |
| 3,942 | |
| Domestic
vs foreign tax rate differential | |
| (76 | ) | |
| - | |
| Tax expense
/ (recovery) | |
| - | | |
| - | |
The following
temporary differences have not been recognized:
| As
at | |
December 31,
2024 | | |
December 31,
2023 | |
| Non-capital loss
carry forwards | |
$ | 85,913 | | |
$ | 59,400 | |
| Share issuance costs and other | |
| 7,474 | | |
| 5,314 | |
| Intangible assets | |
| 5,985 | | |
| 5,966 | |
| Scientific research and experimental
development costs | |
| 1,217 | | |
| - | |
| Investments
in subsidiaries | |
| - | | |
| 525 | |
| | |
| 100,589 | | |
| 71,205 | |
Net-capital
loss carry forward expiration by county:
| Canada | |
$ | 79,719 | | |
2026-2044 | |
|
|
|
| USA | |
| 3,363 | | |
do
not expire | |
|
|
|
| Australia | |
| 2,831 | | |
do
not expire | |
|
|
|
| | |
| 85,913 | | |
| |
|
|
|
| 15. | Related
Party Balances and Transactions |
The
following related parties have engaged in transactions with the Company during the years ended December 31, 2024 and December 31,
2023.
| a) | Bloom
Burton Securities Inc. (“BBSI”) - an entity that is jointly controlled
by Brian Bloom, a director of the Company. |
BBSI
acted as lead agent the May 2023 and December 2024 equity offerings (Note 9). Related to the May Equity Offering, the
Company issued 6,560,474 compensation warrants, paid $3,300 in commissions and reimbursed BBSI for $176 in legal and related fees. Related
to the December Equity Offering on December 17, 2024, the Company paid $3,960 in commission and reimbursed BBSI for $141 in
legal and related fees.
The
Company engaged BBSI in a consulting agreement in November of 2022. The Company recorded $60 during the year ended December 31,
2023 for work completed under this agreement. This agreement has been completed and there were no amounts owing to BBSI as of December 31,
2023 or December 31, 2024.
SATELLOS
BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2024 and 2023
(Amounts
expressed in thousands of Canadian Dollars, except for share and per share amounts)
Mr. Jarosz,
previously the Chief Executive Officer of iCo Therapeutics Inc. (“iCo”), the entity Satellos completed a reverse takeover
transaction with on August 13, 2021, and now a Director of the Company, had provided consulting services to iCo that were unpaid
as of the date of the reverse takeover and this liability was assumed by Satellos. Following the reverse takeover, Mr. Jarosz provided
consulting services to Satellos until November 2023. During the year ended December 31, 2024, the Company fully settled the
outstanding balance of $706. The following table presents the related party transactions between Mr. Jarosz and the Company:
| | |
$ | |
| Liability assumed
by Company from iCo upon closing of reverse take-over, August 13, 2021 | |
| 382 | |
| Director and consulting services
provided to the Company | |
| 455 | |
| Partial
settlement of liability with purchase of Units in the September 13, 2022 financing | |
| (131 | ) |
| Balance at December 31, 2023 | |
| 706 | |
| Less, full
settlement of liability with cash payment | |
| (706 | ) |
| Balance at December 31,
2024 | |
| - | |
| c) | Key
management personnel: |
Key
management personnel consists of the Company’s Chief Executive Officer, Chief Scientific Officer, former Chief Medical Officer,
Chief Discovery Officer, Chief Business Officer and Chief Financial Officer and the Directors of the Corporation. The remuneration of
key management personnel is as follows:
| | |
December 31,
2024 | | |
December 31,
2023 | |
| | |
$ | | |
$ | |
| Salaries and management
fees | |
| 3,164 | | |
| 2,554 | |
| Stock-based
compensation | |
| 1,489 | | |
| 1,725 | |
| Total | |
| 4,653 | | |
| 4,279 | |
The
Company operates within a single operating segment, the research and development of drug therapeutics, which is the Company’s only
reportable segment, which is consistent with the internal reporting provided to the chief operating decision- maker. The Company operates
in three geographic areas, Canada, United States and Australia. As at December 31, 2024, the Company held total assets of approximately
$201 cash (December 31, 2023 - $nil) in the United States, $1,408 in Australia (December 31, 2023 - $2) and $71,408 in Canada
(December 31, 2023 - $44,296).
The
Company manages its capital structure in an endeavour to ensure sufficient resources are available to meet day-to-day operational requirements,
further develop its existing technology, and continue as a going concern.
In
order to maintain or adjust the capital structure, the Company may issue new shares or issue debt (secured, convertible and/or other
types of available debt instruments) or sell assets. Total capital is calculated as the Company’s own equity.
The
Company is not subject to any externally imposed capital requirements.
| 18. | Financial
Instruments and Risk Management |
The
Company is exposed to various risks through its financial instruments including the following at December 31, 2024:
Credit
risk arises from cash and cash equivalents and short-term investments held at banks and financial institutions, as well as outstanding
receivables. In the year ended December 31, 2024, the Company invested its excess cash in interest- bearing operating accounts held
at a Schedule 1 Canadian bank and in US government treasury bills. The Company limits its exposure to credit risk, with respect to cash
and cash equivalents and short-term investments, by placing them with high quality credit financial institutions. The Company’s
cash equivalents and short-term investments consist primarily of operating funds, US government treasury bills, deposit investments and
guaranteed investment certificates with commercial banks.
SATELLOS
BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2024 and 2023
(Amounts
expressed in thousands of Canadian Dollars, except for share and per share amounts)
Liquidity
risk is the risk that the Company will encounter difficulty in raising funds to meet cash flow requirements associated with financial
instruments. The Company controls liquidity risk through management of working capital, cash flows and the availability and sourcing
of financing. The Company’s ability to accomplish all of its future strategic plans is dependent on obtaining additional financing
or executing other strategic options; however, there is no assurance the Company will achieve these objectives. As at December 31,
2024, the Company’s liabilities consist of accounts payable and accrued liabilities that have contracted maturities of less than
one year.
Market
risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.
Market risk comprises three types of risk: currency risk, interest rate risk, and price risk. The Company is mainly exposed to currency
risk as follows:
Currency
risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange
rates. The exposure to this risk changes as the exchange rate fluctuates.
Foreign
currency risk is limited to the portion of the Company’s business transactions denominated in currencies other than the Canadian
dollar, primarily expenses for research and development incurred in US dollars. The Company manages foreign exchange risk by maintaining
US dollars cash on hand to fund its short- term foreign currency expenditures. Balances held in foreign currencies, presented in Canadian
dollars are as follows:
| | |
As
at December 31, 2024 | |
| | |
US
$ | | |
Australian
$ | | |
Euro
€ | | |
Canadian
$ | | |
Total
$ | |
| Cash and cash equivalents | |
| 35,752 | | |
| 488 | | |
| - | | |
| 21,419 | | |
| 57,659 | |
| Short-term investments | |
| 7,195 | | |
| - | | |
| - | | |
| 5,000 | | |
| 12,195 | |
| Accounts
payable and accrued liabilities | |
| (3,584 | ) | |
| (473 | ) | |
| (348 | ) | |
| (750 | ) | |
| (5,155 | ) |
| Total | |
| 39,363 | | |
| 15 | | |
| (348 | ) | |
| 25,669 | | |
| 64,699 | |
| | |
As
at December 31, 2023 | |
| | |
US
$ | | |
Australian
$ | | |
Euro
€ | | |
Canadian
$ | | |
Total
$ | |
| Cash and cash equivalents | |
| 21,852 | | |
| 2 | | |
| - | | |
| 213 | | |
| 22,067 | |
| Short-term investments | |
| 17,520 | | |
| - | | |
| - | | |
| - | | |
| 17,520 | |
| Accounts
payable and accrued liabilities | |
| (1,417 | ) | |
| (79 | ) | |
| - | | |
| (2,128 | ) | |
| (3,624 | ) |
| Total | |
| 37,955 | | |
| (77 | ) | |
| - | | |
| (1,915 | ) | |
| 35,963 | |
Assuming
all other variables remain constant, a 10% depreciation or appreciation of the Canadian dollar against the U.S. dollar would result in
an increase or decrease in loss and comprehensive loss for the year ended December 31, 2024, of $3,936 (December 31, 2023 -
$3,795).
Assuming
all other variables remain constant, a 10% depreciation or appreciation of the Canadian dollar against the Euro would result in an increase
or decrease in loss and comprehensive loss for the year ended December 31, 2024, of $35 (December 31, 2023 – nil).
SATELLOS
BIOSCIENCE INC.
Notes
to the Consolidated Financial Statements for the Years Ended December 31, 2024 an
(Amounts
expressed in thousands of Canadian Dollars, except for share and per share amounts)
Interest
rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The Company holds its cash and cash equivalents and short-term investments in banks and financial institutions, and manages
its interest rate risk by holding cash in high yield savings accounts or highly liquid short-term investments.
Financial
assets and liabilities are recognized on the statement of financial position at amortized cost in a hierarchy that is based on significance
of the inputs used in making the measurements. The levels in the hierarchy are:
| · | Level
1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities |
| · | Level
2 – Inputs other than quoted prices included within level 1 that are observable for
the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from
prices) |
| · | Level
3 – Inputs for the asset or liability that are not based on observable market data
(i.e., unobservable inputs) |
At
December 31, 2024, the Company’s financial instruments, all subsequently measured at amortized cost included cash and cash
equivalents, short-term investments, and accounts payable and accrued liabilities.
Due
to the short-term maturities of cash and cash equivalents, short-term investments, accounts payable and accrued liabilities, the carrying
amounts approximate their fair value at the respective statement of financial position date.
There
were no transfers of assets or liabilities between levels during the years ended December 31, 2024 and 2023. At December 31,
2023 the derivative financial instruments, net were considered level 3 in the fair value hierarchy.
Exhibit 4.4
SATELLOS BIOSCIENCE
INC.
Management’s
Discussion and Analysis
For the years ended
December 31, 2024, and 2023
DATE OF REPORT:
March 26, 2025
The following discussion
is management’s assessment and analysis of the results of operations and financial conditions of Satellos Bioscience Inc. (the
“Company” or “Satellos”) and should be read in conjunction with the accompanying consolidated financial statements
and related notes thereto for the years ended December 31, 2024, and 2023.
All financial information
in this Management’s Discussion and Analysis (“MD&A”) has been prepared in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards Board (IFRS Accounting Standards) and all dollar amounts are
expressed in thousands of Canadian dollars unless otherwise indicated.
FORWARD-LOOKING
STATEMENTS
Certain statements
and information in this MD&A contain “forward-looking information” and “forward-looking statements”, within
the meaning of applicable Canadian securities laws (collectively herein referred to as “forward-looking statements”). These
statements relate to future events or future performance and reflect the Company’s expectations and assumptions regarding the growth,
results of operations, performance and business prospects and opportunities of the Company. These forward-looking statements are made
as of the date of this MD&A or, in the case of documents incorporated by reference herein, as of the date of such documents. Forward-looking
statements are frequently, but not always, identified by words such as “expects”, “expectation”, “anticipates”,
“believes”, “intends”, “intention”, “estimates”, “predicts”, “continues”,
“potential”, “targeted”, “plans”, “possible”, “goal”, “seek”,
“project”, “future”, “likely” and similar expressions, or statements that events, conditions or results
“will”, “may”, “could”, “would” or “should” occur or be achieved. Any forward-looking
statements or statements of “belief”, including the statements made under “Risks and Uncertainties”, represent
the Company’s estimates only as of the date of this MD&A and the documents incorporated by reference herein, respectively,
and should not be relied upon as representing the Company’s estimates as of any subsequent date. Forward-looking statements are
necessarily based on estimates and assumptions made by Satellos in light of its experience and perception of historical trends, current
conditions and expected future developments, as well as factors that Satellos believes are appropriate. Forward-looking statements in
this MD&A include, but are not limited to, statements relating to:
| · | our
belief that the Company will be successful in raising additional capital to continue as a
going concern; |
| · | the
expected research and development timelines, therapeutic benefits, effectiveness and safety
of our product candidates; |
| · | our
belief that the Company’s products and research and development efforts are targeting
diseases and conditions with significant unmet medical treatment needs; |
| · | our
belief that the Company has made, and will continue to make progress towards the achievement
of certain milestones or objectives; |
| · | our
expectation with respect to meeting milestones and the minimum amount of funds the Company
expects to need to raise in order to achieve such milestones and garner additional funding; |
| · | the
initiation, timing, cost, progress, outcomes, resource needs and success of our research
and development activities, plans and programs; |
| · | our
expectations regarding our ability to design, test and patent novel drug products suitable
for advancement into Investigational New Drug (“IND”) enabling studies
and clinical trials and the anticipated timelines surrounding such enabling studies; |
| · | our
belief that we will not receive substantive comments on our IND applications; |
| · | our
expectations that the Notch pathway and AAK1 drug target (both as further described herein)
represent drug development opportunities similar or superior to modulation of the epidermal
growth factor receptor signaling pathway; |
| · | our
intentions of developing inhibitors to AAK1 (including but not limited to SAT-3247 and SAT-
3153) and in showing that such potential inhibitors have desirable effects in relevant models
of Duchenne muscular dystrophy (“Duchenne”) and in other indications,
such as other degenerative muscle diseases, muscle injury or trauma, or muscle regeneration
generally; |
| · | our
expectations that we will identify predictive biomarkers as discussed herein which will translate
into or be useful in conducting human clinical trials; |
| · | our
belief that the results of Satellos’ research and development activities, preclinical
studies, safety studies or clinical trials have the potential to be commercially competitive
with research and development activities, preclinical studies, safety studies or clinical
trials conducted by other parties; |
| · | discoveries
we have made in muscle stem cell regulation having the potential to represent insights into
a potential root cause of degenerative muscle disorders which has previously not been recognized
and which may be therapeutically relevant in the treatment of degenerative muscle disorders; |
| · | our
belief that the Company’s technology can be commercialized, and that such commercialization
could be done as effectively or more effectively than other technologies to treat degenerative
muscle disorders and conditions or other medical disorders or conditions, or at all; |
| · | our
ability to discover, optimize, select and advance into clinical development our therapeutic
drug development candidates in a timely, cost-efficient and effective manner, or at all; |
| · | our
ability to translate our discoveries in muscle stem cell regulation into safe and therapeutically
effective drug products and the broad applicability of such products; |
| · | our
ability to enter into research and/or commercial development collaborations or partnerships
to successfully and profitably advance our drug development candidates; |
| · | our
ability and that of our partners (if any) to advance identified drug development candidates
into, and successfully complete, clinical trials; |
| · | our
intention to identify and nominate one or more back-up drug candidates and the potential
benefits of having such back-ups; |
| · | our
plans to utilize and deploy MyoRegenXTM in our programs and our continued relationship with
OHRI (as defined below); |
| · | our
ability to develop the Company’s novel discoveries into viable therapeutic treatments
suitable for clinical development, including, but not limited to, our ability to determine
appropriate dosing regimens; |
| · | the
ability of our products to effectively and safely treat Duchenne and other degenerative muscle
disorders and conditions or other medical disorders or conditions and the applicability of
our products to other disorders and conditions; |
| · | our
expectations regarding future enrolment into clinical trials and the timing of future enrolment
into clinical trials for our product candidates; |
| · | our
belief that our approach may reduce the risk, time and cost of developing therapeutics by
avoiding some of the uncertainty associated with certain research and preclinical stages
of drug development; |
| · | our
ability to establish and maintain relationships with collaborators with acceptable preclinical
and/or clinical research and development capability, and regulatory and commercialization
expertise to enable the development and future commercialization of our technology or products,
and the benefits to be derived from such collaborative efforts; |
| · | our
ability to enter into agreements or partnerships with pharmaceutical or biotechnology companies
that have research and clinical development and/or sales and marketing capabilities and the
expected benefits that could be derived therefrom; |
| · | our
ability to generate and protect our potential intellectual property; |
| · | our
ability to operate our business without infringing upon the intellectual property rights
of others; |
| · | our
ability to engage third party services with specialized domain expertise for the drafting
and submitting of regulatory applications to conduct clinical trials in humans; |
| · | our
ability to establish suitable CMC and GMP protocols as further described herein; |
| · | the
manufacturing capacity of third-party manufacturers for our product candidates; |
| · | our
expectations regarding federal, provincial and foreign regulatory requirements; |
| · | the
timing of, and the costs of obtaining and maintaining, regulatory approvals in the United
States, Canada and other jurisdictions; |
| · | our
plans to meet with the United States Food and Drug Administration (the “FDA”),
file an application to obtain drug designations and initiate studies; |
| · | the
rate and degree of market acceptance and clinical utility of our future products, if any; |
| · | existing
and future corporate alliances and licensing transactions with third parties, and the receipt
and timing of any payments to be made by us or to us pursuant to such arrangements; |
| · | the
implementation and execution of our commercial and operational strategy; |
| · | our
ability to engage and retain the consultants or employees required to grow our business; |
| · | the
potential revenue that may be generated from our products, pricing and reimbursement of the
patient cost of our drug products by insurers or national health systems, as the case may
be, in those jurisdictions where the Company intends to sell its drug products and our ability
to achieve profitability; |
| · | developments
relating to our competitors and our industry, including the success of competing therapies
that are or become available; |
| · | the
potential growth of the market and demand for our products as well as the estimated pricing
and subsequent revenue generation of any potential therapeutics we discover; |
| · | our
belief that any discoveries by the Rudnicki Lab (as defined below) have the potential to
have a positive impact on Satellos and our work; |
| · | our
future financial performance, including projected expenditures, future revenue, capital requirements
and our needs for additional financing; and |
| · | general
business and economic conditions and outlook including but not limited to foreign exchange
rates and rates of inflation and the evolving regulatory or geo-political landscape. |
Such forward-looking
statements reflect our current views with respect to future events, are subject to risks and uncertainties and are necessarily based
upon a number of estimates and assumptions that, while considered reasonable by Satellos as of the date of such statements, are inherently
subject to significant medical, scientific, business, economic, competitive, political and social uncertainties and contingencies. Many
factors could cause our actual results, performance, achievements, prospects or opportunities to be materially different from any future
results, performance or achievements that may be expressed or implied by such forward-looking statements. In making the forward-looking
statements included in this MD&A, the Company has made various material assumptions, including, but not limited to:
| · | obtaining
positive results from our research and development activities, including clinical trials; |
| · | our
ability to obtain regulatory approvals; |
| · | assumptions
regarding general business, market and economic conditions; |
| · | assumptions
regarding the cost and timing of each study; |
| · | the
Company’s ability to successfully advance its preclinical and clinical development
programs and execute its plans substantially as currently envisioned; |
| · | the
Company’s ability to identify and advance a suitable drug candidate; |
| · | assumptions
related to the pricing and reimbursement of its drug products in jurisdictions in which the
Company intends to sell its drug products; |
| · | the
Company’s current positive relationships with third parties will be maintained and
the potential to develop new partnerships; |
| · | our
ability to continue to use existing licenses for the development of our product(s); |
| · | the
availability (and sources) of financing on reasonable terms; |
| · | future
expenditures to be incurred by the Company, including research and development and operating
costs; |
| · | the
Company’s ability to attract and retain skilled consultants and employees; |
| · | assumptions
regarding market competition, market capture and pricing; |
| · | the
products and technology offered by the Company’s competitors; and |
| · | the
Company’s ability to protect patents and proprietary rights. |
In evaluating forward-looking
statements, current and prospective shareholders should specifically consider various factors, including the risks outlined under the
headings “Foreign Currency Risk”, “Liquidity Risk”, “Credit Risk” and “Risks
and Uncertainties” in this MD&A and the risks outlined in the Company’s annual information form for the year ended
December 31, 2024 dated March 26, 2025 (the “AIF”). Certain risks and uncertainties that could cause such
actual events or results expressed or implied by such forward-looking statements and information to differ materially from any future
events or results expressed or implied by such statements and information include, but are not limited to:
| · | risks
related to the early stage of our products; |
| · | uncertainties
related to preclinical product development activities and clinical trial outcomes; |
| · | uncertainties
related to current economic conditions; |
| · | risks
related to rapid technological change; |
| · | uncertainties
related to forecasts and timing of clinical trials and regulatory approval; |
| · | competition
in the market for therapeutic products, including those to treat Duchenne and related diseases; |
| · | risks
related to potential product liability claims; |
| · | availability
of financing and access to capital and the risks associated with the Company’s ability
to continue as a going concern; |
| · | market
acceptance and commercialization of products; |
| · | the
availability, costs and supply of materials; |
| · | risks
related to the effective management of our growth; |
| · | risks
related to the reliance on partnerships and licensing agreements; |
| · | risks
related to our reliance on key personnel; |
| · | risks
related to the regulatory approval process for the manufacture and sale of therapeutic products; |
| · | risks
related to the reimbursement process in various jurisdictions where the Company plans to
sell its drug products; and |
| · | our
ability to secure and protect our intellectual property. |
The
Company cautions that the foregoing list of important factors and assumptions is not exhaustive. Although the Company has attempted to
identify on a reasonable basis important factors and assumptions related to forward-looking statements, there can be no assurance that
forward-looking statements will prove to be accurate, as events or circumstances or other factors could cause actual results to differ
materially from those estimated or projected and expressed in, or implied by, these forward-looking statements. Other than as specifically
required by law, the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after
the date on which such statement is made, or to reflect the occurrence of unanticipated events, whether as a result of new information,
future events or results or otherwise. Accordingly, readers should not place undue reliance on forward-looking statements.
NATURE
OF BUSINESS AND OVERVIEW OF OPERATIONS
Overview
of the Business
Satellos
is a publicly traded (TSX: MSCL) biotechnology company dedicated to developing life-improving medicines to treat degenerative
muscle diseases.
Satellos
has incorporated breakthrough research in muscle stem cell polarity into a proprietary discovery platform, called MyoReGenXTM,
to identify degenerative muscle diseases where deficits in this process affect muscle regeneration and are amenable to therapeutic intervention.
With this platform, Satellos is building a pipeline of novel therapeutics to correct muscle stem cell polarity and promote the body’s
innate muscle repair and regeneration process. The Company’s lead drug candidate is an oral, small molecule drug candidate in development
as a potential disease-modifying treatment for Duchenne muscular dystrophy.
Satellos
Bioscience Inc. was incorporated under the Canada Business Corporation Act (the “CBCA”) on July 27, 2012
(“Pre-Arrangement Satellos”). iCo Therapeutics Inc. (“iCo”) was incorporated under the Business
Corporations Act (British Columbia) on April 20, 2006, and completed a reverse take-over transaction by way of statutory arrangement
onto the TSX Venture Exchange (the “TSXV”).
On
August 13, 2021, Pre-Arrangement Satellos and iCo completed a plan of arrangement (the “Arrangement”) under section
192 of the CBCA, pursuant to which, among other things, iCo acquired all of the issued and outstanding shares of Pre-Arrangement Satellos.
Following the Arrangement, the common shares in the capital of the Company (the “Common Shares”) traded on the TSXV
under the trading symbol “MSCL”. The Company commenced trading on the Toronto Stock Exchange (the "TSX")
on February 15, 2024, under the symbol "MSCL", and was delisted from the TSXV effective as of the close of the market
on February 14, 2024.
As
at December 31, 2024, the Company had three wholly owned subsidiaries, Amphotericin B Technologies, Inc. (an entity incorporated
under the Business Corporations Act (British Columbia)) (“Amp B”), Satellos Bioscience Australia Pty Ltd. (an
entity incorporated under the laws of Australia) and Satellos Bioscience US, Inc. (incorporated under the laws of Delaware, USA).
The
Company’s head office is located at Royal Bank Plaza, South Tower, 200 Bay St., Suite 2800, Toronto, Ontario, M5J 2J3, and
the Company’s registered and records office is located at Royal Bank Plaza, South Tower, 200 Bay St., Suite 2800, Toronto,
Ontario, M5J 2J3.
Achievements
and Highlights in the Year Ended December 31, 2024
On
January 23, 2024, the Company announced the departure of Alan Jacobs, M.D., as Chief Medical Officer and the appointment of Jordan
Dubow, M.D. as Chief Medical Advisor.
On
February 13, 2024, the Company announced positive preliminary data showing SAT-3247 can improve skeletal muscle function in a mouse
model of facioscapulohumeral muscular dystrophy (“FSHD”). FSHD, an adult-onset muscular dystrophy that results in
the progressive destruction of muscle tissue, is the third most common muscular dystrophy behind Duchenne (& Beckers) and myotonic
dystrophy. In research conducted under a grant from the FSHD Canada Foundation, Satellos demonstrated that treatment with SAT-3247 successfully
improved the phenotype of FSHD mice.
On
February 14, 2024, the Company announced that it would commence trading on the TSX on February 15, 2024, under the symbol “MSCL”,
and delist from the TSXV effective as of the close of the market on February 14, 2024.
On
March 4, 2024, Satellos announced positive preclinical data presented at the Muscular Dystrophy Association Clinical and Scientific
Conference showing that SAT-3247 can improve skeletal muscle function in multiple mouse models of muscle degeneration. We believe that
the preclinical data presented show the broad potential of SAT-3247 to improve skeletal muscle function as has been demonstrated in three
mouse models of muscle degeneration: the mdx model of Duchenne, the FLExDUX4 model of FSHD, and a muscle injury model in wildtype mice.
In all instances, treatment with SAT-3247 over a three-to-four-week period resulted in a statistically significant improvement in muscle
force versus animals receiving placebo.
During
Q1, 2024, the Company engaged a contract research organization (“CRO”) to design and implement its planned Phase 1a clinical
trial for SAT-3247, initiated requisite GLP toxicology studies in two species with SAT-3247 and carried out GMP manufacturing and tablet
formulation of SAT-3247.
On
May 28, 2024, Satellos announced the formation of a distinguished Clinical Advisory Board to support the advancement of SAT-3247
in clinical trial development for DMD.
On
June 27, 2024, the Company announced that Frank Gleeson, Satellos CEO, would join leading members of the Duchenne medical and scientific
community during a panel discussion at PPMD’s 30th Annual Conference being held from June 27–29, 2024 in Orlando, Florida.
On
July 2, 2024, Satellos announced data in a canine model of DMD showing improved muscle repair and regeneration and improved muscle
force from SAT-3247 treatment. After treatment with SAT-3247 the animals showed an increase in Regenerative Index (RI), a measure of
the number of newly regenerated muscle fibers versus the number of damaged and dying muscle fibers, suggesting that muscle repair and
regeneration is occurring. These results were further updated on August 12, 2024 and October 1, 2024,
On
July 11, 2024, the Company announced submission of a clinical research proposal to a Human Research Ethics Committee (HREC) in Australia
seeking regulatory authorization under their Therapeutic Goods Administration’s (TGA’s) Clinical Trial Notification (CTN)
scheme to conduct a first-in-human Phase 1 clinical trial of SAT-3247. Satellos announced on August 19, 2024 that the HREC submission
had been approved.
On
August 8, 2024, Satellos announced that the FDA had granted Rare Pediatric Disease Designation to SAT- 3247 for the potential treatment
of DMD after receiving Orphan Drug Designation earlier in 2024.
On
September 19, 2024, Satellos announced that the first participant in the first-in-human Phase 1 clinical trial had been dosed.
The
Phase 1 clinical trial is comprised of two components. In the first component, 72 healthy volunteers were enrolled in a blinded, randomized,
placebo-controlled, staggered, parallel design study to assess the safety and pharmacokinetic properties of SAT-3247. Participants were
randomized across five single-ascending dose (“SAD”) cohorts, four multiple-ascending dose (“MAD”)
cohorts, and one food effect dose cohort. In the second component, which began on December 11, 2024, up to 10 adult volunteers with
genetically confirmed DMD are being enrolled in a 28-day, open-label, single dose cohort to assess safety and pharmacokinetic properties
in patients and explore potential pharmacodynamic markers.
On
October 1, 2024, Satellos announced data to be presented at the 29th Annual Congress of the World Muscle Society taking place October 8-12,
2024, in Prague. The presentation provided an overview of key data collected during the open-label pilot study of SAT-3247 in a canine
model of DMD. The data presented from the pilot study demonstrated that treatment of DMD Canines with SAT-3247 improved measures of strength
to near normal levels.
On
November 14, 2024, Satellos announced the appointment of Stephanie Brown to its Board of Directors. Ms. Brown brings over 30
years of biopharma industry experience, having held numerous executive roles contributing to groundbreaking achievements in product commercialization
and organizational transformation.
On
December 11, 2024, the Company announced that the first participant with DMD had been dosed in the Phase 1b safety and pharmacokinetics
trial in DMD patients.
On
December 20, 2024, Satellos announced that it had closed an equity offering, issuing a total of 63,285,000 equity securities for
gross proceeds of $56,956 (US$40,000). Bloom Burton Securities Inc. acted as lead agent for the offering, together with a syndicate of
agents including Canaccord Genuity Corp., Haywood Securities Inc. and Leede Financial Inc. Under the offering, subscribers either purchased
Common Shares at $0.90 per share or pre-funded warrants of the Company (“Pre-Funded Warrants”) for $0.89999 per warrant.
Investors purchased a total of 63,285,000 securities, consisting of 51,420,000 Common Shares and 11,865,000 Pre- Funded Warrants.
Subsequent
to the year ended December 31, 2024, on February 10, 2025, the Company announced that the SAD, MAD and food effect dose cohorts
of the Phase 1 clinical trial have been fully enrolled.
Also
subsequent to the year ended December 31, 2024, on March 19, 2025, the Company announced initial Phase 1 data in an oral presentation
at the 2025 Muscular Dystrophy Association (MDA) Clinical & Scientific Conference.
In
the Phase 1a, designed to assess the safety and tolerability of SAT-3247, 72 healthy volunteers were randomized across five SAD cohorts
(including one food effect cohort) with single oral doses of up to 400 mg, and four MAD cohorts with daily oral doses up to 240 mg/day
for 7 days. As of February 20, 2025, data cut- off:
| · | Phase
1a data showed that SAT-3247 was safe and well tolerated across all healthy volunteer cohorts.
At predicted human efficacious dose levels, SAT-3247 did not display adverse clinical findings
on any parameter measured, including clinical labs, vital signs, ECG’s, and physical
exams. No moderate or greater drug-related adverse events were reported at any dose studied. |
| · | Phase
1a PK data demonstrated consistency with results from the Company’s preclinical studies.
These PK results confirm post-dose plasma concentrations of SAT-3247 are sustained at levels
and time courses, which findings suggest are most likely to yield a therapeutic effect on
muscle regeneration and strength. |
Satellos expects
to report full Phase 1a and Phase 1b data in Q2 2025.
Description of Business Strategy
and Programs
The Company’s
primary goal is the development of disease modifying therapeutic drugs for the treatment of severe muscle conditions of unmet medical
need. Our core technology is based on discoveries by the Company’s scientific founder and Chief Discovery Officer, Dr. Michael
Rudnicki, into understanding and modulating muscle stem cell function and its role in muscle regeneration. Multiple peer reviewed publications
from Dr. Rudnicki’s lab (the “Rudnicki Lab”) at the Ottawa Hospital Research Institute (the “OHRI”)
have advanced the understanding of the identity and behavior of muscle stem cells including their role in health and disease. For instance,
the Rudnicki Lab was the first to define so called muscle stem cells (a.k.a. ‘satellite stem cells’) and characterize a sub-population
as bona fide multipotent stem cells capable of both self-renewal and regeneration (Source: Kuang et al., 2007, Cell). Dr. Rudnicki
was also first to demonstrate that such stem cells exist as a special body of cells capable of regeneration, and subsequently elucidate
their biological mechanism of action and identify means to modulate their activity. He further linked deficiencies in muscle stem cell
function directly to the pathology of Duchenne as a potential causal factor in the progressive muscle destruction that occurs in this
lethal disease (Source: Dumont et al., 2015, Nature Medicine). The basic principle governing how muscle stem cells functionally contribute
to muscle regeneration and homeostasis is depicted below in Figure 1.
Figure 1: Muscle
stem cells undergo symmetric or asymmetric divisions in response to injury stimuli. Muscle progenitor cells are generated to produce
new muscle tissue or repair injured muscle.
Fundamentally,
symmetric divisions result in two identical copies of the stem cell through the process of self- renewal. Asymmetric stem cell divisions,
by contrast, result in one stem cell being produced and one daughter cell, committed to eventual differentiation, called a progenitor
muscle cell. Progenitor muscle cells undergo normal mitosis to generate potentially thousands of cells that ultimately incorporate into
functional muscle tissue. Findings from the research of Dr. Rudnicki have linked deficits in either symmetric or asymmetric division
to multiple muscle wasting and degenerative diseases. Related to this research, the Company has licensed issued patents and pending patent
applications from the OHRI pursuant to a license agreement (the “License Agreement”).
To advance and
expand our therapeutic development programs for degenerative muscle conditions or disorders, Satellos employs a proprietary discovery
platform developed by the Rudnicki laboratory at OHRI called, MyoReGenX™. An automated microscopy system, MyoReGenX™ recapitulates
the muscle stem cell environment ex-vivo (i.e., outside the body) and enables Satellos to identify molecular regulators of stem
cell polarity that are capable of rescuing the defective regeneration process by tracking, classifying and quantitating the divisions
of individual muscle stem cells in response to stimuli such as drug candidates or small interfering ribonucleic acid (“siRNA”).
Lead Development
Program: Duchenne
The Company’s
first application of its technology (the “Lead Program”) is directed towards the discovery and development of a small
molecule drug for the treatment of Duchenne, the most common fatal genetic disorder diagnosed in childhood affecting approximately one
in 4,000 male births per year, worldwide. As depicted in the below graphic, early signs of motor impairment and delays in motor related
milestones emerge in Duchenne between the ages of two to five years. Rapid disease progression and muscle weakening typically ensue,
resulting in patients generally being wheelchair bound by the age of 12. By the third decade of life, these patients often experience
respiratory distress and heart failure, the leading causes of death in Duchenne. There is no known cure for Duchenne.
Duchenne is caused
by a change or mutation in the dystrophin gene that results in impairment to or loss of the dystrophin protein. Dr. Rudnicki demonstrated
that muscle stem cells require the dystrophin protein to properly and efficiently divide in an asymmetric fashion to generate muscle
progenitor cells and enable muscle regeneration. As a direct result of the loss of the dystrophin protein, their innate role in regenerating
muscle is severely impaired (Source: Dumont et al. 2015, Nature Medicine.). These findings suggest that, in addition to its commonly
recognized role in stabilizing muscle, the dystrophin protein has a second, previously unrecognized role as a signal transduction molecule.
Consequently, Satellos’ therapeutic strategy is to restore this signaling role of dystrophin by drug treatment and reset the muscle
regeneration process. We have identified a protein kinase drug target called AAK1 (further discussed in the below paragraph) which we
believe from our scientific work, when inhibited by drug, has the capacity to compensate for the loss of the signaling role of the dystrophin
protein.
Deploying MyoReGenX™
to build on the identification and discovery of this previously unreported signaling role of dystrophin, in collaboration with the Rudnicki
lab, Satellos undertook a systematic assessment of molecular pathways for their potential to rescue asymmetric stem cell divisions. The
Company then evaluated and prioritized these pathways and further evaluated potential drug targets therein based on their capacity to
safely and effectively regulate muscle stem cell driven regeneration. From this exercise conducted over a multi- year period, the Company
identified and selected a particular protein kinase in the molecular signaling pathway known as “Notch”. For reasons
of competitive secrecy and confidentiality this protein kinase was previously codenamed as “K9” but, on November 13,
2023, was disclosed by the Company to be Adaptor Associated Kinase 1 (aka “AAK1”). We have shown in our preclinical
studies in the mdx mouse model of Duchenne that modulating the Notch molecular signaling pathway via inhibition of AAK1 has the potential
to impact muscle regeneration and increase muscle force and thus we believe represents a potential novel therapeutic approach for the
treatment of Duchenne in humans.
Supporting our
assertion that dysregulation of muscle stem cells is relevant to Duchenne pathogenesis, it was reported that amongst a large cohort of
over 400 Duchenne patients – some of whom maintained ambulation for a decade or longer than the majority of their peers –
genetic factors implicating effects on polarity and the regulation of muscle stem cell regeneration were identified within the ambulatory
population (Source: Flanigan et al. European Journal of Human Genetics). In further independent case reports, which we also believe
support our thesis, Drs. L. Kunkel and M. Zatz have postulated that random genetic mutations affecting Notch signaling may be responsible
for the existence of Duchenne humans who exhibit a milder disease course and who have continued to ambulate into their twenties despite
the complete absence of the dystrophin protein (Sources: Zatz et al., Neuromuscular Disorders, 11/2014; Kunkel and Zatz (unpublished).
They also have previously associated Notch signaling with muscle regeneration as published in the journal Cell in 2015 by Vieira
et al in a paper titled “Jagged 1 Rescues the Duchenne Muscular Dystrophy Phenotype”. The authors associated Jagged 1, a
ligand (or binder/activator) of Notch signaling, with the process of regeneration and as explaining how two (2) Golden Retriever
Muscular Dystrophy dogs were able to escape the Duchenne phenotype and live a normal life.
Satellos
has generated Proof of Concept (“POC”) preclinical data in the Mdx mouse, a gold standard research model bearing
the same genetic defect as patients with Duchenne, demonstrating that treatment of these research mice via the Notch pathway through
inhibition of AAK1 with SAT-3247 has potential to restore the process by which stem cells enable ongoing muscle regeneration.
AAK1
Program in Duchenne
From
preliminary experimental work by the Company, in which AAK1 was inhibited using genetic means, we demonstrated that modulation of Notch
signaling in muscle stem cells via AAK1 inhibition could be achieved, leading to restoration of asymmetric divisions, muscle stem cell
polarity and regeneration of skeletal muscle. Of interest to Satellos from a de-risking perspective, small molecule inhibitors of AAK1
have previously been described for non-muscle related disease indications by an independent 3rd party company and have demonstrated
what appear to be acceptable safety profiles thus far in two Phase 1 and two Phase 2 human clinical trials spanning hundreds
of patients (Lexicon Pharmaceuticals Inc. 2022 10K filing pages 5&6
filed March 2, 2023). Not only do we believe this provides some initial indications of the potential safety of AAK1 inhibition,
but the existence of small molecule inhibitors of AAK1 indicated to the Company that (a) it may be possible to develop its own,
proprietary small molecule inhibitors of AAK1 to suit its purpose as well as (b) it may also be able to quickly generate useful
POC data.
The Company, in
collaboration with the OHRI, filed patent applications to provide intellectual property protection for selected pathways, prospective
drug targets and inhibitors related thereto. On June 29, 2022, the Company amended its License Agreement with OHRI to add a specific
patent application related to Notch, AAK1 (previously described as K9) and inhibitors thereof for the purpose of regeneration. Furthermore,
the Company has subsequently filed, in consultation with its IP counsel, for distinct patent protection of its novel small molecule inhibitors
of AAK1, including but not limited to SAT-3247.
In the year ended
December 31, 2024, Satellos advanced its AAKI inhibitor, SAT-3247, through IND enabling studies, GMP manufacturing and completed
the Phase 1a clinical trial. Further details on the development history highlights of SAT-3247 are below.
On March 4,
2024, Satellos announced positive preclinical data presented at the Muscular Dystrophy Association Clinical and Scientific Conference
showing that SAT-3247 can improve skeletal muscle function in multiple mouse models of muscle degeneration. The preclinical data presented
show the broad potential of SAT-3247 to improve skeletal muscle function as has been demonstrated in three mouse models of muscle degeneration:
mdx model of Duchenne, FLExDUX4 model of FSHD, and a muscle injury model in wildtype mice. In all instances, treatment with SAT-3247
over a three-to-four-week period resulted in a statistically significant improvement in muscle force versus animals receiving placebo.
On August 7,
2024, Satellos announced that the FDA had granted Rare Pediatric Disease Designation to SAT- 3247 for the potential treatment of DMD
after receiving Orphan Drug Designation earlier this year. The FDA grants Orphan Drug Designation to support development of medicines
for underserved patient populations, or rare disorders, that affect fewer than 200,000 people in the U.S. Orphan Drug Designation provides
certain benefits, including the potential for a seven-year market exclusivity upon regulatory approval, exemption from FDA application
fees, tax credits for qualified clinical trials, and a priority review voucher. The FDA grants Rare Pediatric Disease Designation for
serious and life-threatening diseases that primarily affect children ages 18 years or younger and fewer than 200,000 people in the United
States. The Rare Pediatric Disease Priority Review Voucher Program is intended to address the challenges that drug companies face when
developing treatments for these unique patient populations. Under this program, a sponsor who receives an approval for a drug or biologic
for a "rare pediatric disease" may be eligible for a voucher that can be redeemed to receive priority review of a subsequent
marketing application for a different product or sold to another sponsor for priority review of their marketing application.
On July 11,
2024, the Company announced submission of a clinical research proposal to a Human Research Ethics Committee (HREC) in Australia seeking
regulatory authorization under their Therapeutic Goods Administration’s (TGA’s) Clinical Trial Notification (CTN) scheme
to conduct a first-in-human Phase 1 clinical trial of SAT-3247. Satellos announced on August 19, 2024 that the HREC submission had
been approved and on September 19, 2024, Satellos announced that the first participant in the first-in-human Phase 1 clinical trial
had been dosed.
The
Phase 1 clinical trial is comprised of two components. In the first component, 72 healthy volunteers were enrolled in a blinded, randomized,
placebo-controlled, staggered, parallel design study to assess the safety and pharmacokinetic properties of SAT-3247. Participants were
randomized across five SAD cohorts, four MAD cohorts, and one food effect dose cohort. In the second component, 10 adult volunteers with
genetically confirmed DMD will be enrolled in a 28-day, open-label, single dose cohort to assess safety and pharmacokinetic properties
in patients and explore potential pharmacodynamic markers.
On October 1,
2024, Satellos announced data to be presented at the 29th Annual Congress of the World Muscle Society taking place October 8-12,
2024, in Prague. The presentation provided an overview of key data collected during the open-label pilot study of SAT-3247 in a canine
model of DMD. The data presented from the pilot study demonstrates that treatment of two DMD Canines with SAT-3247 improved measures
of strength to near normal levels. The data is described in detail above under ‘Achievements and Highlights in the year ended December 31,
2024’
Subsequent to the
year ended December 31, 2024, on February 10, 2025, the Company announced that the SAD, MAD and food effect dose cohorts of
the Phase 1 clinical trial have been fully enrolled.
Also subsequent
to the year ended December 31, 2024, on March 19, 2025, the Company announced initial Phase 1 data in an oral presentation
at the 2025 Muscular Dystrophy Association (MDA) Clinical & Scientific Conference.
In the Phase 1a,
designed to assess the safety and tolerability of SAT-3247, 72 healthy volunteers were randomized across five single ascending dose (SAD)
cohorts (including one food effect cohort) with single oral doses of up to 400 mg, and four MAD cohorts with daily oral doses up to 240
mg/day for 7 days. As of February 20, 2025, data cut-off:
| · | Phase
1a data showed that SAT-3247 was safe and well tolerated across all healthy volunteer cohorts.
At predicted human efficacious dose levels, SAT-3247 did not display adverse clinical findings
on any parameter measured, including clinical labs, vital signs, ECG, and physical exam.
No moderate or greater drug-related adverse events were reported at any dose studied. |
| · | Phase
1a PK data demonstrated consistency with results from the Company’s preclinical studies.
These PK results confirm post-dose plasma concentrations of SAT-3247 are sustained at levels
and time courses, which findings suggest are most likely to yield a therapeutic effect on
muscle regeneration and strength. |
Satellos expects
to report full Phase 1a and Phase 1b data in Q2 2025.
Following the successful
completion of the Phase 1 clinical study, Satellos plans to initiate a Phase 2 clinical trial in pediatric Duchenne patients in 2025
intended to demonstrate the potential for patient benefit from treatment with SAT-3247. Please refer to the section “Regulatory
Process” in the Company’s AIF for further details on the clinical drug development process.
Follow-On
Program
There are more
than 30 types of muscular dystrophy that affect humans. Each of these dystrophies has different causes that manifest into conditions
ranging in severity from benign, small impairments to motor function, to the full loss of ambulation, or even death. Satellos has conducted
proof of concept preclinical studies in relevant animal disease models showing potential for benefit by restoring the muscle regeneration
process in Lama-2 Related Muscular Dystrophy (prevalence estimates between one in 50,000 and one in 400,000 births), Collagen- VI Related
Muscular Dystrophy (prevalence of severe form of the disease estimated to be one in 1,000,000 births) and FSHD (prevalence of 4 per 100,000
individuals). These represent potential follow-on disease indications or programs for Satellos to consider in the future. The Company
also plans to evaluate additional dystrophies as part of its ongoing research and development efforts.
Legacy Asset
Through its business
combination with iCo the Company acquired the iCo Portfolio including the Oral Amp B Delivery System, a patented oral transport technology
licensed exclusively by iCo from the University of British Columbia (“UBC”) in 2008 (such license, the “UBC
License Agreement”). Amp B was established as a wholly owned subsidiary of the Company as part of a renewed strategy to create
value and attract partnerships and/or funding. The UBC License Agreement was assigned to Amp B with the consent of UBC. During the quarter
ended September 30, 2024, the UBC License Agreement was mutually terminated.
On August 18,
2021, Satellos announced that Amp B had entered into a Joint Development Agreement (the “JDA”) with NW PharmaTech
Limited (“NW PharmaTech”). The purpose of the JDA was to collaborate on the development of an oral formulation of
cannabidiol to be targeted at the global market as an over-the-counter sleep aid. Effective February 4, 2022, pursuant to the JDA,
Satellos and the UT entered into a Sponsored Research and Collaboration Agreement to develop Amp B Tech’s formulation technology
for cannabidiol-based sleep aid products (the “UT SRA”). Effective October 3, 2023, pursuant to the JDA, Satellos
and the University of Toronto (“UT”) entered into a second Sponsored Research and Collaboration Agreement to develop
Amp B Tech’s formulation technology for cannabidiol-based products (the “UT SRA 2”).
On October 6,
2022, NW Micelle Therapeutics Inc. (“NWMT”) was established for the purpose of developing an oral formulation of cannabidiol
technology for the treatment of insomnia and other indications relating to mental health (“Oral CBD”). NW PharmaTech
holds 85% of the shares in NWMT and Amp B holds 15%. Amp B is entitled to a seat on the board of NWMT and receives certain anti-dilution
protections. NW PharmaTech Ltd. (“NWPT”) obtained a call option to acquire Amp B from Satellos for US$3 million while
Satellos received a put option to trigger a sale of Amp B to NWPT, also for US$3 million. On October 5, 2024, Satellos exercised
its put option, however, NPWT did not fulfil their obligations under the terms of the agreement.
NWMT has agreed
to reimburse Satellos for all amounts due to UT under the UT SRA and UT SRA 2, and Satellos has granted its rights under UT SRA and UT
SRA 2 to NWMT.
The Company is
no longer incurring development costs associated with the iCo Portfolio nor does it anticipate doing so in the future.
REVIEW OF FINANCIAL
RESULTS
All tabular amounts
below are presented in thousands of Canadian dollars, except for per share amounts.
The financial information
reported herein was derived from the audited annual consolidated financial statements. Satellos’ functional and presentation currency
is the Canadian dollar. Our financial results may be subject to fluctuations between the Canadian dollar and other international currencies,
primarily the US dollar.
Selected Financial
Information
| | |
2024 | | |
2023 | | |
2022 | |
| | |
$ | | |
$ | | |
$ | |
| R&D expenses | |
| 19,603 | | |
| 8,817 | | |
| 3,734 | |
| G&A expenses | |
| 8,205 | | |
| 6,646 | | |
| 4,694 | |
| Other (income)/expense | |
| 291 | | |
| 426 | | |
| 2,889 | |
| Income
tax expense | |
| - | | |
| - | | |
| 5 | |
| Net loss | |
| (28,099 | ) | |
| (15,889 | ) | |
| (11,322 | ) |
| Basic and
diluted net loss per share | |
| (0.25 | ) | |
| (0.18 | ) | |
| (0.32 | ) |
| Total assets | |
| 73,017 | | |
| 44,298 | | |
| 6,199 | |
| Total non-current
financial liabilities | |
| - | | |
| - | | |
| - | |
We have not earned
revenue in any of the previous fiscal years.
For the year ended
December 31, 2024, we reported a net loss of $28,099 ($0.25 loss per share), compared to a net loss $15,889 ($0.18 loss per share)
for the year ended December 31, 2023. The $12,210 increase in net loss for the year ended December 31, 2024, compared with
the year ended December 31, 2023, was primarily a result of increased R&D expenses related to activities associated with SAT-3247,
particularly clinical costs from the ongoing Phase 1 trial, and preclinical costs related to IND enabling and toxicology studies. In
addition, during the year ended December 31, 2024, management determined that it was no longer likely that the sale of AmpB (and
its component assets, OralTrans and the investment in NWMT) would be completed through the exercise of the Call Option or completion
of the Put Option. As such, the Company recognized an impairment of $3,961 to fully write down the remaining carrying value of the intangible
asset, investment in NWMT and the Call and Put Options.
The increase in
R&D expenses of $5,083, for the year ended December 31, 2023 as compared to the year ended December 31, 2022, reflects
the Company’s strategic focus on advancing its drug candidate through key development stages. During the year ended December 31,
2023, the Company advanced its focus on drug development, manufacturing, and preclinical studies, driving higher R&D expenses to
support these activities. In contrast, a significant portion of R&D efforts were directed toward drug discovery in fiscal 2022. Other
expense decreased by $2,463 for the year ended December 31, 2023, as compared to the year ended December 31, 2022 as the Company
recognized an impairment loss of $2,886 for its AmpB technology in the prior year, partially offset by interest income and foreign exchange
losses in the year ended December 31, 2023.
RESULTS OF
OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2024 AND 2023
Research and
development (“R&D”) expenses:
| | |
Year
ended
December 31, 2024 | | |
Year
ended,
December 31, 2023 | |
| | |
$ | | |
$ | |
| Salaries and management
fees | |
| 3,676 | | |
| 2,173 | |
| Discovery expenses | |
| 955 | | |
| 1,141 | |
| Preclinical expenses | |
| 7,430 | | |
| 3,444 | |
| Chemistry,
manufacturing and controls (“CMC”) | |
| 3,384 | | |
| 1,193 | |
| Clinical expenses | |
| 3,411 | | |
| - | |
| Stock-based
compensation | |
| 747 | | |
| 866 | |
| Total research
and development expenses | |
| 19,603 | | |
| 8,817 | |
Research
and development expenses increased by $10,786 to $19,603 for the year ended December 31, 2024, compared to $8,817 for the year ended
December 31, 2023. Factors contributing to the increase in R&D expenses in the current year period are primarily the result
of the following:
| · | Salaries
and management fees increased by $1,503 for the year ended December 31, 2024, compared
with the prior year. The increase is related to higher headcount in 2024 as we expanded our
team to add CMC expertise. |
| · | Preclinical
expenses increased by $3,986. The increase related to preclinical and IND-enabling studies
for SAT 3247 conducted during the year to support the regulatory filing approved in 2024
to conduct the Phase 1 clinical trial with SAT-3247 as well as long-term toxicology work
to support later stage clinical development. |
| · | CMC
expenses increased by $2,191 as compared to the prior year period. CMC activities relate
to the process development and manufacturing of SAT-3247 for clinical use. |
| · | Clinical
expenses increased by $3,411 for the year ended December 31, 2024. Clinical costs incurred
in the year are associated with initiating and conducting the Phase 1 healthy volunteer clinical
study for which the first participant was dosed in Q3 2024, Phase 1b component in adult DMD
patients and initial work on the Phase 2 studies. |
General and
administrative:
| | |
Year
ended
December 31, 2024 | | |
Year
ended
December 31, 2023 | |
| | |
$ | | |
$ | |
| Salaries and management
fees | |
| 3,725 | | |
| 2,318 | |
| Professional fees | |
| 2,318 | | |
| 2,438 | |
| Other expenses | |
| 776 | | |
| 580 | |
| Stock-based compensation | |
| 1,366 | | |
| 1,303 | |
| Depreciation | |
| 20 | | |
| 7 | |
| Total general
and administrative expenses | |
| 8,205 | | |
| 6,646 | |
General
and administrative expenses increased by $1,559 to $8,205 for the year ended December 31, 2024, as compared to $6,646 for the year
ended December 31, 2023. Changes to the components for general and administrative expenses presented in the table above are primarily
the result of the following:
| · | Salaries
and management fees increased by $1,407 primarily related to increased staffing required
to support expanded operations and public company reporting requirements. |
| · | Other
expenses increased by $196 primarily due to higher patient advocacy expenses, licence costs,
and office related expenses associated with increased headcount and operations. |
Other Income and expenses:
| | |
Year
ended
December 31, 2024 | | |
Year
ended
December 31, 2023 | |
| | |
$ | | |
$ | |
| Finance
income | |
| 1,371 | | |
| 1,333 | |
| Interest
expense and loss on extinguishment of Debenture Units | |
| - | | |
| (603 | ) |
| Gain
on derivative financial instruments | |
| (2 | ) | |
| 1 | |
| Impairment
of AmpB assets | |
| (3,961 | ) | |
| - | |
| Foreign
exchange gain (loss) | |
| 2,301 | | |
| (1,157 | ) |
| Total | |
| (291 | ) | |
| (426 | ) |
Other
income and expenses were a net expense of $291 in the period ended December 31, 2024 and a net expense of $426 in the comparative
year. Changes to the components for other income and expenses presented in the table above are primarily the result of the following:
| · | Finance
income increased in the current year by approximately $38 related to interest earned on cash
and cash equivalents and short-term investments from an increased balance as compared to
the prior year. |
| · | Interest
expense and loss on extinguishment of Debenture Units for the year ended December 31,
2023 relates to the Debenture Offering, described further below under Financial Condition,
and repaid in the prior year. |
| · | In
the year ended December 31, 2024, the Company recorded an impairment of $3,961 related
to its AmpB assets. |
| · | The
foreign exchange gain in the current period of $2,301 is primarily the result of unrealized
foreign exchange gains on US denominated cash and cash equivalents and short-term investments.
There were foreign exchange losses in the comparative period due to adverse movement in the
Canadian-US exchange rate. |
Summary of Quarterly Results
The table below is derived from unaudited
quarterly results and was prepared by management for the eight previous quarters to December 31, 2024.
| | |
Q4 2024 | | |
Q3 2024 | | |
Q2 2024 | | |
Q1 2024 | | |
Q4 2023 | | |
Q3 2023 | | |
Q2 2023 | | |
Q1 2023 | |
| | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | |
| R&D
Expense | |
5,529 | | |
3,263 | | |
4,873 | | |
5,938 | | |
3,585 | | |
2,734 | | |
1,565 | | |
933 | |
| G&A
Expense | |
2,283 | | |
1,799 | | |
1,806 | | |
2,317 | | |
2,663 | | |
1,754 | | |
1,497 | | |
732 | |
| Other
(income) and expenses | |
(1,706 | ) | |
3,986 | | |
(643 | ) | |
(1,346 | ) | |
286 | | |
(914 | ) | |
1,054 | | |
- | |
| Net
Loss | |
(6,106 | ) | |
(9,048 | ) | |
(6,036 | ) | |
(6,909 | ) | |
(6,534 | ) | |
(3,574 | ) | |
(4,116 | ) | |
(1,665 | ) |
| Loss
per Share | |
(0.06 | ) | |
(0.08 | ) | |
(0.05 | ) | |
(0.06 | ) | |
(0.06 | ) | |
(0.03 | ) | |
(0.05 | ) | |
(0.04 | ) |
R&D expenses
increased in 2024, due to clinical costs related to Phase 1 clinical studies and IND enabling and toxicology studies. G&A expenses
have also increased in 2024, primarily related to salaries and management fees pertaining to increased staffing required to support expanded
operations and advanced stage of developments.
Net
loss increased in Q3 2024, because the Company recognized an impairment of $3,916 to fully write down the remaining carrying value of
the AmpB intangible asset, $43 pertaining to the investment in NWMT, and $2 related to the call and put options, for a total of $3,961.
Quarter ended
December 31, 2024 compared to Quarter ended December 31, 2023
The net loss for
the three-months ended December 31, 2024, was $6,106 as compared with a net loss of $6,534 for the three-months ended December 31,
2023. The decrease in the net loss reflects lower non-cash stock-based compensation expense in the current period due to the timing of
grants and the related vesting, as well as unrealized foreign exchange gains on US denominated cash and cash equivalents and short-term
investments, partially offset by increased R&D activities related to the ongoing phase 1 clinical trial, initiated in the current
year and long term toxicology studies.
Research and development
expenses increased by $1,944 to $5,529 for the three-months ended December 31, 2024, as compared to $3,585 for the three-months
ended December 31, 2023. The increase relates primarily to the clinical trial initiated in the current year as well as ongoing toxicology
studies.
General and administrative
expenses decreased by $380 to $2,283 for the three-months ended December 31, 2024, as compared with $2,663 for the three-months
ended December 31, 2023. This decrease relates primarily to lower non-cash stock-based compensation expenses in the current period
due to the timing of grants and the related vesting.
Other income increased
by approximately $1,992 to $1,706 for the three-months ended December 31, 2024, as compared with an expense of $286 for the three-months
ended December 31, 2023. This increase is primarily the result of unrealized foreign exchange gains on US denominated cash and cash
equivalents and short-term investments as well as interest earned on investments.
LIQUIDITY AND
CAPITAL RESOURCES
Since inception,
the Company has devoted its resources to funding R&D programs, including securing intellectual property rights and licenses, conducting
discovery research, manufacturing drug supplies, initiating preclinical studies, and providing administrative support to R&D activities,
which has resulted in an accumulated deficit of $75,601 as of December 31, 2024. With no current revenues, losses are expected to
continue while the Company’s R&D programs are advanced.
We currently do
not earn any revenues from our product candidates and are therefore considered to be in the development stage. As required, the Company
will continue to finance its operations through the sale of equity or pursue non-dilutive funding sources available to the Company in
the future. The continuation of our research and development activities for our muscle regeneration platform is dependent upon our ability
to successfully finance and complete our research and development programs through a combination of equity financing and revenues from
strategic partners. We have no current sources of revenues from strategic partners. Management has forecasted that the Company’s
current level of cash will be sufficient to execute its current planned expenditures for more than the next 12 months without further
financing. The Company’s cash and cash equivalents and short-term investments at December 31, 2024 are expected to fund operations
through 2026.
Cash Management
At December 31,
2024, the Company had cash and cash equivalents and short-term investments of $69,854, compared with $39,587 at December 31, 2023.
Cash utilized in operating activities for the year ended December 31, 2024, was $24,975, compared to the year ended December 31,
2023, of $11,585. Cash provided in financing activities for the year ended December 31, 2024, was $53,485, compared to the year
ended December 31, 2023, of $50,429. The Company invests cash in excess of operational requirements in highly rated and liquid investments.
Net working capital
was $67,857 as of December 31, 2024, compared to a net working capital of $36,698 as of December 31, 2023. The improvement
is due to cash inflows from the December Equity Offering.
Satellos’
main objectives in managing capital are to ensure cash resources are preserved and provide sufficient liquidity to finance research and
development activities, ongoing administrative costs and working capital. Since inception, Satellos has financed its operations from
private sales of equity, public sales of equity, convertible debt financing, non-convertible debenture financing, government grants and
investment tax credits. Since Satellos has not generated net earnings from operations, its ongoing liquidity depends on its ability to
access capital markets, which depends on the success of Satellos’ ongoing research and development programs, as well as capital
market conditions.
Satellos
uses cash flow forecasts to estimate cash requirements and have forecasted that our existing working capital is sufficient to operate
the Company and meet our announced goals for the ensuing twelve months. Based on future requirements, Satellos plans to raise capital
as required to provide the necessary financial resources for operations. The timing of financings will depend on market conditions and
Satellos’ cash requirements. Satellos’ cash flow forecasts are continually updated to reflect actual cash inflows and outflows
to monitor the requirements and timing for additional financial resources. Given the volatility of the Canadian and US dollar exchange
rate, the Company estimates its US dollar expenses for the year and sets appropriate levels of US dollar cash and cash equivalent balances.
By holding US dollars, Satellos remains subject to currency fluctuations which affect its loss and comprehensive loss during any given
year.
Satellos will continue
to pursue various funding options and opportunities; however, no assurances can be made that Satellos will be successful in raising additional
investment capital, to continue as a going concern. Our ability to raise additional funds could be affected by adverse market conditions,
the status of our product pipeline, and various other factors and we may be unable to raise capital when needed, or on terms favorable
to us. If the necessary funds are not available, we may have to delay, reduce the scope of, or eliminate some of our development programs,
potentially delaying the time to market for any of our product candidates.
Debenture Offering
in March 2023
On March 24,
2023, the Company completed a non-brokered private placement offering of 2,385 10% unsecured non-convertible debenture units (the “Debenture
Units”) and raised gross proceeds of $2,385 (the “Debenture Offering”). Each Debenture Unit was comprised
of: (i) $1,000 principal amount of unsecured non- convertible debentures of the Company (the “Debentures”); and
(ii) for no additional consideration, such number of Common Shares in the capital of the Company (each whole Common Share, a “Bonus
Share”, and collectively, the “Bonus Shares”) as is equal to $100 divided by $0.355, being the closing market
price of the Common Shares of the Company on the TSXV on March 15, 2023, rounded to the nearest whole share. The Debentures bear
interest on the principal amount at a rate of 10% per annum payable quarterly in arrears in cash and matured on September 24, 2024
(the “Maturity Date”). Accordingly, 671,825 Bonus Shares were issued in connection with the Debenture Units at a value
of $0.355. In addition, the Company incurred expenses in the amount of $140, related to the Debenture Offering of which $128 was allocated
to debt issuance costs and $12 to share issuance costs. Net proceeds of the Debenture Offering were $2,244 and the effective annual interest
rate on the principal of the Debentures was 21.6%.
Effective August 14,
2023, the Company redeemed all the outstanding Debentures and paid a 6% early repayment premium of $143 and recorded a loss of $426 on
the debt extinguishment on the consolidated statement of loss and comprehensive loss.
The following table
presents the amounts recorded related to the Debenture Offering and its redemption:
| | |
$ | |
| Proceeds
from issuance of Debenture Units on March 24, 2023 | |
| 2,385 | |
| Discount
due to Bonus Shares | |
| (238 | ) |
| Transaction
costs | |
| (128 | ) |
| Interest
expense, from March 24, 2023 to August 14, 2024 | |
| 177 | |
| Loss
on extinguishment | |
| 426 | |
| Repayment
of interest and principal | |
| (2,622 | ) |
| Debentures
balance December 31, 2023 and December 31, 2024 | |
| - | |
Equity Offering
December 2024
On December 20,
2024, the Company completed a public offering (the “December Equity Offering”), issuing 51,420,000 Common Shares
at $0.90 per Common Share and 11,865,000 Pre-Funded Warrants with no expiry date and an exercise price of $0.00001 for $0.89999 per Pre-Funded
Warrant for gross proceeds of $56,956.
The costs associated
with the December Equity Offering were $4,413, including cash costs for commissions to the agents of approximately $3,959, professional
fees and regulatory costs of $345, and accrued professional and regulatory fees of $109.
Bloom Burton Securities
Inc., (“BBSI”), an entity jointly controlled by a director of Satellos, acted as exclusive agent and book running
manager for both the December Equity Offering and the May Equity Offering. See Transactions with Related Parties disclosures
below.
Equity Offering
May 2023
On May 17,
2023, the Company completed a public offering (the “May Equity Offering”), issuing 70,297,220 Common Shares at
$0.50 per Common Share and 39,702,780 pre-funded common share purchase warrants (“Pre-Funded Warrants”) with no expiry
date for $0.49999 per Pre-Funded Warrant for gross proceeds of $55,000. Each Pre-Funded Warrant is exercisable for one Common Share at
an exercise price of $0.00001 per share.
The costs associated
with the May Equity Offering were $5,761 including cash costs for commissions to the agents of approximately $3,693 million, professional
fees and regulatory costs of $510 and 7,383,919 compensation warrants to the agents valued at $1,558. Each such compensation warrant
is exercisable into one Common Share at an exercise price of $0.50 until expiry on May 17, 2025.
USE OF PROCEEDS
December 2024
Financing
The following table
provides an update on the milestones for the Duchenne program and the anticipated use of proceeds raised as part of the December Equity
Offering (as previously proposed in the final prospectus dated December 17, 2024, relating to the December Equity Offering
(the “December 2024 Prospectus”), along with the amounts actually expended.
| Development
Milestone | |
Amount
to
Spend
(as proposed in the
Dec 2024
Prospectus) | | |
Adjustments | | |
Costs
Incurred to
Date | | |
Estimated
Remaining
Costs | |
| Phase
2 clinical development of SAT-3247 | |
$ | 40,000 | | |
| - | | |
| - | | |
$ | 40,000 | |
| General
corporate and administrative expenses | |
$ | 12,470 | | |
| - | | |
| - | | |
$ | 12,470 | |
| Total | |
$ | 52,470 | | |
| | | |
| - | | |
$ | 52,470 | |
May 2023
Financing
The following table
provides an update on the milestones for the Duchenne program and the anticipated use of proceeds raised as part of the May Equity
Offering (as previously proposed in the final prospectus dated May 9, 2023 relating to the May Equity Offering), along with
the amounts actually expended.
The Company changed
its lead candidate from SAT-3153 to SAT-3247 following preclinical studies that demonstrated SAT-3247 had similar capacity to affect
stem cell polarity, enhance muscle regeneration, and improve muscle force in the mdx mouse model of Duchenne but also exhibited improved
oral bioavailability, target specificity, and tissue distribution, when compared directly to SAT-3153. SAT-3153 will serve as a back-up
candidate to SAT-3247.
Development
Milestone | |
Estimated
Completion | |
12/31/2024
Status | |
Amount
to
Spend | | |
Adjustments | | |
Estimated
Remaining
Costs | |
| Complete
CMC Activities and GMP Manufacturing | |
September 2024 | |
This
work was initiated during Q3 2023 and is COMPLETE as of September 30, 2024. | |
$ | 3,000 | | |
$ | 2,217 | | |
$ | - | |
| Complete
prescribed IND enabling studies and Preparation of IND/CTA Submissions | |
September 2024 | |
The
work on the Pre-Clinical Package is COMPLETE for SAT-3247 as of September 30, 2024 and was incorporated into the regulatory
submission made July 10, 2024 to initiate a Phase 1 clinical trial for which the first participant was dosed in Q3, 2024. | |
$ | 10,500 | | |
$ | (48 | ) | |
$ | - | |
| Further
Discovery research on new drug targets/indications | |
Discovery
Work ongoing as of Sept 2025 | |
Further
discovery work on new drug targets and disease indications is ongoing and is expected to be completed by September 2025. ON
TRACK | |
$ | 2,500 | | |
$ | (200 | ) | |
$ | 360 | |
| Phase
1 Clinical Studies | |
September 2025 | |
The
Company initiated enrollment in the Phase 1a safety study comprised of SAD and MAD stages
in healthy volunteers in September 2024 and completed enrolment in Q1 2025. COMPLETE
The
Company initiated a Phase 1b PK study in Adult Duchenne patients in Q4 2024 and is expected to be complete in Q2 2025. A Phase 2
study will be initiated in 2025. ON TRACK. | |
$ | 16,500 | | |
$ | (1,969 | ) | |
$ | 9,104 | |
| G&A | |
| |
| |
$ | 17,050 | | |
| - | | |
$ | 6,739 | |
| Total | |
| |
| |
$ | 49,550 | | |
| - | | |
$ | 16,203 | |
These estimated
timelines and costs set out in the table above), reflect management’s best estimates and assume successful completion of manufacturing
activities, preclinical and toxicology studies showing safety and efficacy, regulatory approvals, and timely recruitment of patients
once clinical trials may begin.
Adjustments were
made to the originally proposed allocations as actual CMC costs were higher than planned due to additional work needed on drug formulation
and on development of the manufacturing process. These costs were offset by efficient progress related to the preclinical work required
to prepare and submit the initial regulatory package for SAT-3247. These adjustments will not impact the Company’s ability to achieve
its stated business objectives and milestones.
License Agreements
Ottawa Hospital
Research Institute (“OHRI”)
Effective May 1,
2018, Satellos and OHRI entered into the OHRI License Agreement whereby OHRI granted Pre-Arrangement Satellos an exclusive, world-wide,
sublicensable, royalty bearing right and license to a body of technology and patents comprised of five patent families to develop, make,
have made, import, use, offer for sale, sell and have sold or otherwise commercialize licensed products. At the same time the parties
entered into a sponsored research agreement, during the term of which OHRI has agreed to carry out specific research and development
activities according to a prescribed statement of work, as may be amended from time to time, under the direction of the Company’s
co-founder, Dr. Michael A. Rudnicki (the “OHRI SRA”). Under the OHRI SRA, Dr. Rudnicki leads a dedicated
R&D team who are engaged solely to execute the agreed R&D program of Satellos, under his direction and as defined in the statement
of work.
University of
British Columbia
On July 27,
2007, iCo entered into an option agreement with UBC which granted an option to negotiate a license for the exclusive rights to the Oral
Amp B Delivery System to be used for potential systemic fungal infections. iCo exercised the option on February 26, 2008 and on
May 6, 2008 signed the UBC License Agreement. In consideration for the UBC License Agreement, iCo paid UBC an initial license fee
of $20,000 and was required to pay annual fees to UBC for maintaining the license until such time as an NDA for the Oral Amp B Delivery
System is approved by the FDA or other regulatory body. During the year ended December 31, 2024, the parties mutually agreed to
terminate the UBC license agreement.
Long-Term Obligations
and Other Contractual Commitments
The Company enters
into contracts in the normal course of business, including for research and development activities. As at December 31, 2024, in
addition to amounts that have been recognized in accounts payable and accrued liabilities, the Company has commitments for research and
development activities in the amount of $4,947, most cancellable with notice. These commitments include agreements related to the conduct
of long-term toxicology and a clinical study.
| |
|
Payments
Due by Period |
|
| |
|
Total |
|
|
Less
than 1 year |
|
|
1
-3 years |
|
|
4
– 5 years |
|
|
After
5 years |
|
| Purchase obligations |
|
$ |
4,947 |
|
|
$ |
4,693 |
|
|
$ |
254 |
|
|
|
nil |
|
|
|
nil |
|
The Company may
be required to make annual, milestone, royalty, and other research and development funding payments to OHRI under the OHRI SRA and the
OHRI License. These payments are contingent upon the achievement of specific development, regulatory and/or commercial milestones. The
Company’s significant contingent milestone, royalty and other research and development commitments are as follows:
| ● | Royalties
on net sales of any products covered by patents licensed from OHRI (“Licensed Products”)
of 1% or 2% (depending on which patents cover a particular product), during the period when
the applicable patents have valid, unexpired claims, subject to certain royalty stacking
provisions; |
| ● | The following payments to OHRI
may be triggered by specified events: |
| o | $50 - each
time a Licensed Product is the subject of an approved IND in the US or equivalent in any
other industrialized country (maximum one payment per new drug candidate); |
| o | $150
- each time a Licensed Product first enters Phase II human clinical trials in the US or equivalent
in any other industrialized country (maximum one payment per new drug candidate); |
| o | $300
- each time a Licensed Product first enters Phase III human clinical trials in the US or
equivalent in any other industrialized country (maximum one payment per new drug candidate);
and |
| o | $1,000
- each time a Licensed Product is the subject of a regulatory approval in the US (such as
NDA and BLA) or equivalent in any other industrialized country (maximum one payment per new
drug candidate). |
| ● | 2%
of sublicensing income received by Satellos from the grant of sublicenses. |
During the year
ended December 31, 2024, the Company made a milestone payment of $50 upon the approval of an Investigational New Drug (IND) application
for SAT-3247, in accordance with the agreement.
TRANSACTIONS
WITH RELATED PARTIES
The following related
parties have engaged in transactions with the Company during the years ended December 31, 2024 and December 31, 2023.
| (1) | BBSI - an
entity that is jointly controlled by Brian Bloom, a director of the Company. |
| | | |
| | | BBSI acted as lead agent the May Equity
Offering and December Equity Offering. Related to the May Equity Offering, the Company issued
6,560,474 compensation warrants, paid $3,300 in commissions and reimbursed BBSI for $176 in legal and related
fees. Related to the December Equity Offering on December 17, 2024, the Company paid $3,960 in
commission and reimbursed BBSI for $141 in legal and related fees. |
| | | |
| | | The Company engaged BBSI in a consulting
agreement in November of 2022. The Company recorded $60 during the year ended December 31, 2023
for work completed under this agreement. This agreement has been completed and there were no amounts owing
to BBSI as of December 31, 2023 or December 31, 2024. |
| (2) | William Jarosz |
| | | |
| | | Mr. Jarosz, previously the Chief Executive
Officer of iCo, the entity Satellos completed a reverse takeover with on August 13, 2021, and now
a Director of the Company, provided consulting services to iCo that were unpaid as of the date of the reverse
takeover and this liability was assumed by Satellos. Following the reverse takeover, Mr. Jarosz provided
consulting services to Satellos. During the year ended December 31, 2024, the Company fully settled
the outstanding balance of $706. The following table presents the related party transactions between Mr. Jarosz
and the Company: |
| | |
$ | |
| Liability
assumed by Company from iCo upon closing of reverse take-over, August 13, 2021 | |
| 382 | |
| Director
and consulting services provided to the Company | |
| 455 | |
| Partial
settlement of liability with purchase of Units in the September 13, 2022 financing | |
| (131 | ) |
| Balance
at December 31, 2023 | |
| 706 | |
| Less,
full settlement of liability with cash payment | |
| 706 | |
| Balance
at December 31, 2024 | |
| - | |
| (3) | Key management
personnel |
| | | |
| | | Key management personnel consists of the
Company’s Chief Executive Officer, Chief Scientific Officer, former Chief Medical Officer, Chief
Technology Officer, Chief Financial Officer and the Directors of the Corporation. The remuneration of key
management personnel is as follows: |
| | |
Year
ended
December 31, 2024 | | |
Year
ended
December 31, 2023 | |
| | |
$ | | |
$ | |
| Salaries and management
fees | |
| 3,164 | | |
| 2,554 | |
| Stock-based
compensation | |
| 1,489 | | |
| 1,725 | |
| | |
| 4,653 | | |
| 4,279 | |
OFF-BALANCE
SHEET ARRANGEMENTS
Satellos has not
entered into any material off-balance sheet arrangements.
FINANCIAL INSTRUMENTS
AND RISK MANAGEMENT
Satellos is exposed
to various risks through its financial instruments as at December 31, 2024. The Company’s risk exposures and the impact on
the Company’s financial instruments are summarized below:
Credit Risk
Credit risk arises
from cash and cash equivalents and short-term investments held at banks and financial institutions, as well as outstanding receivables.
In the year ending December 31, 2024, the Company invested its excess cash in interest-bearing operating accounts held at a Schedule
1 Canadian bank and in US government treasury bills. The Company limits its exposure to credit risk, with respect to cash and cash equivalents
and short-term investments, by placing them with high quality credit financial institutions. The Company's cash equivalents and short-term
investments consist primarily of operating funds, US government treasury bills, deposit investments and guaranteed investment certificates
with commercial banks.
Liquidity Risk
Liquidity risk
is the risk that the Company will encounter difficulty in raising funds to meet cash flow requirements associated with financial instruments.
The Company controls liquidity risk through management of working capital, cash flows and the availability and sourcing of financing.
The Company’s ability to accomplish all of its future strategic plans is dependent on obtaining additional financing or executing
other strategic options; however, there is no assurance the Company will achieve these objectives. As at December 31, 2024, the
Company’s liabilities consist of accounts payable and accrued liabilities that have contracted maturities of less than one year.
Market Risk
Market risk is
the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and equity prices. These
fluctuations may be significant.
Currency
risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange
rates. The exposure to this risk changes as the exchange rate fluctuates. Foreign currency risk is limited to the portion of the Company’s
business transactions denominated in currencies other than the Canadian dollar, primarily expenses for research and development incurred
in US dollars. The Company manages foreign exchange risk by maintaining US dollars in cash on hand to fund its short-term foreign currency
expenditures. Balances held in foreign currencies, presented in Canadian dollars are as follows:
| |
|
As
at December 31, 2024 |
|
| |
|
US
$ |
|
|
Australian
$ |
|
|
Euro
€ |
|
|
Canadian
$ |
|
|
Total
$ |
|
| Cash and cash equivalents |
|
|
35,752 |
|
|
|
488 |
|
|
|
- |
|
|
|
21,419 |
|
|
|
57,659 |
|
| Short-term investments |
|
|
7,195 |
|
|
|
- |
|
|
|
- |
|
|
|
5,000 |
|
|
|
12,195 |
|
| Accounts payable and accrued liabilities |
|
|
(3,584 |
) |
|
|
(473 |
) |
|
|
(348 |
) |
|
|
(750 |
) |
|
|
(5,155 |
) |
| Total |
|
|
39,363 |
|
|
|
15 |
|
|
|
(348 |
) |
|
|
25,669 |
|
|
|
64,699 |
|
| |
|
As
at December 31, 2023 |
|
| |
|
US
$ |
|
|
Australian
$ |
|
|
Euro
€ |
|
|
Canadian
$ |
|
|
Total
$ |
|
| Cash and cash equivalents |
|
|
21,852 |
|
|
|
2 |
|
|
|
- |
|
|
|
213 |
|
|
|
22,067 |
|
| Short-term investments |
|
|
17,520 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
17,520 |
|
| Accounts payable and accrued liabilities |
|
|
(1,417 |
) |
|
|
(79 |
) |
|
|
- |
|
|
|
(2,128 |
) |
|
|
(3,624 |
) |
| Total |
|
|
37,955 |
|
|
|
(77 |
) |
|
|
- |
|
|
|
(1,915 |
) |
|
|
35,963 |
|
Assuming
all other variables remain constant, a 10% depreciation or appreciation of the Canadian dollar against the U.S. dollar would result in
an increase or decrease in loss and comprehensive loss for the year ended December 31, 2024, of $3,936 (December 31, 2023 -
$3,795).
Assuming
all other variables remain constant, a 10% depreciation or appreciation of the Canadian dollar against the Euro would result in an increase
or decrease in loss and comprehensive loss for the year ended December 31, 2024, of $35 (December 31, 2023 – nil).
Interest
rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The Company holds its cash and cash equivalents and short-term investments in banks and financial institutions, and manages
its interest rate risk by holding cash in high yield savings accounts or highly liquid short-term investments.
Financial
assets and liabilities are recognized on the statement of financial position at amortized cost in a hierarchy that is based on significance
of the inputs used in making the measurements. The levels in the hierarchy are:
| · | Level
1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities |
| · | Level
2 – Inputs other than quoted prices included within level 1 that are observable for
the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from
prices) |
| · | Level
3 – Inputs for the asset or liability that are not based on observable market data
(i.e., unobservable inputs) |
At
December 31, 2024, the Company's financial instruments included cash and cash equivalents and short-term investments, accounts receivable,
and accounts payable and accrued liabilities.
Due to
the short-term maturities of cash and cash equivalents and short-term investments, accounts receivable, and accounts payable and accrued
liabilities, the carrying amounts approximate fair value at the respective statement of financial position date. There were no transfers
of financial assets or liabilities held at fair value between levels during the years ended December 31, 2024 and 2023. At December 31,
2023 the derivative financial instruments, net were considered level 3 in the fair value hierarchy.
CRITICAL ACCOUNTING
POLICIES AND ESTIMATES
The preparation
of our consolidated financial statements in accordance with IFRS Accounting Standards requires management to make judgements, estimates
and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.
The reported amounts and note disclosures reflect management’s best estimate of the most probable set of economic conditions and
planned course of actions. Actual results may differ from these estimates. In preparing these consolidated financial statements, the
significant judgements made by management in applying our accounting policies and key sources of estimation uncertainty are disclosed
in the consolidated financial statements for the years ended December 31, 2024 and 2023.
Refer to the
consolidated financial statements for the years ended December 31, 2024 and 2023 for discussions on our material accounting policies
and estimates that are most important in assessing, understanding and evaluating our consolidated financial statements.
DISCLOSURE CONTROLS
AND INTERNAL CONTROL OVER FINANCIAL REPORTING
The Company has
implemented a system of internal controls that it believes adequately protects the assets of the Company and is appropriate for the nature
of its business and the size of its operations. The internal control system was designed to provide reasonable assurance that all transactions
are accurately recorded, that transactions are recorded as necessary to permit preparation of financial statements in accordance with
IFRS Accounting Standards and that our assets are safeguarded.
Internal control
over financial reporting means a process designed by or under the supervision of the Chief Executive Officer and the Chief Financial
Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with IFRS Accounting Standards. The internal controls are not expected to prevent and detect all
misstatements due to error or fraud.
These internal
controls include disclosure controls and procedures designed to ensure that information required to be disclosed by the Company is accumulated
and communicated as appropriate to allow timely decisions regarding required disclosure.
There were no changes
in our internal control over financial reporting that occurred during the year ended December 31, 2024 that have materially affected,
or are reasonably likely to materially affect, our internal control over financial reporting.
As of December 31,
2024, the Company’s management assessed the effectiveness of our internal control over financial reporting and disclosure controls
and procedures using the Committee of Sponsoring Organizations of the Treadway Commission’s 2013 framework. Based on their evaluation,
the Chief Executive Officer and the Chief Financial Officer have concluded that these controls and procedures are effective.
OUTSTANDING
SHARE DATA
As of the date
of this MD&A, the Company had the following issued and outstanding securities:
| Security | |
Number | |
| Common shares | |
165,819,872 | |
| Prefunded Warrants | |
51,567,780 | |
| Warrants | |
10,726,111 | |
| Stock options | |
13,879,859 | |
RISKS AND UNCERTAINTIES
We are a development
stage biopharmaceutical company that operates in an industry that is dependent on a number of factors that include the capacity to raise
additional capital on reasonable terms, obtain positive results of clinical trials, obtain positive results of clinical trials without
serious adverse or inappropriate side effects, and obtain market acceptance of its product. An investment in our Common Shares is subject
to a number of risks and uncertainties. An investor should carefully consider the risks described in our AIF, as well as our other public
filings with the securities regulators before investing in our Common Shares. If any of such described risks occur, or if others occur,
our business, operating results and financial condition could be seriously harmed, and investors may lose a significant proportion of
their investment. There are important risks which management believes could impact our business. For information on risks and uncertainties,
please refer to the “Risk Factors” section of our most recent AIF filed on SEDAR+ at www.sedarplus.ca.
ADDITIONAL INFORMATION
Additional information related to Satellos,
including the AIF, is available by accessing the Company’s SEDAR+ profile at www.sedarplus.ca.
Exhibit 4.5
SATELLOS BIOSCIENCE
INC.
Condensed Consolidated
Interim Financial Statements
For the three months ended March 31, 2025
and 2024 (Unaudited)
SATELLOS BIOSCIENCE
INC.
Condensed Consolidated Interim Statements of
Financial Position
(Expressed in thousands of US Dollars)
(Unaudited)
| As at, | |
Notes | | |
March 31,
2025 | | |
December 31,
2024 | | |
January 1,
2024 | |
| | |
| | |
$ | | |
$
(Notes 2 and 16) | | |
$
(Notes 2 and 16) | |
| ASSETS | |
| | |
| | | |
| | | |
| | |
| Current | |
| | |
| | | |
| | | |
| | |
| Cash and cash equivalents | |
3 | | |
| 32,712 | | |
| 40,073 | | |
| 16,681 | |
| Short-term investments | |
4 | | |
| 8,478 | | |
| 8,475 | | |
| 13,246 | |
| Sales tax and other receivables | |
| | |
| 338 | | |
| 435 | | |
| 441 | |
| Prepaid expenses and deposits | |
5 | | |
| 2,837 | | |
| 1,760 | | |
| 112 | |
| Derivative financial instruments, net | |
| | |
| - | | |
| - | | |
| 3 | |
| Total current assets | |
| | |
| 44,365 | | |
| 50,743 | | |
| 30,483 | |
| | |
| | |
| | | |
| | | |
| | |
| Property and equipment | |
| | |
| 3 | | |
| 4 | | |
| 15 | |
| Assets held for sale | |
| | |
| | | |
| | | |
| | |
| Intangible asset | |
| | |
| - | | |
| - | | |
| 2,961 | |
| Investments | |
| | |
| - | | |
| - | | |
| 31 | |
| | |
| | |
| 3 | | |
| 4 | | |
| 3,007 | |
| TOTAL ASSETS | |
| | |
| 44,368 | | |
| 50,747 | | |
| 33,490 | |
| | |
| | |
| | | |
| | | |
| | |
| LIABILITIES | |
| | |
| | | |
| | | |
| | |
| | |
| | |
| | | |
| | | |
| | |
| Accounts payable and accrued liabilities | |
6 | | |
| 2,699 | | |
| 3,583 | | |
| 2,734 | |
| Total current liabilities | |
| | |
| 2,699 | | |
| 3,583 | | |
| 2,734 | |
| Total Liabilities | |
| | |
| 2,699 | | |
| 3,583 | | |
| 2,734 | |
| | |
| | |
| | | |
| | | |
| | |
| SHAREHOLDERS’ EQUITY | |
| | |
| | | |
| | | |
| | |
| | |
| | |
| | | |
| | | |
| | |
| Common shares | |
| | |
| 78,134 | | |
| 78,131 | | |
| 47,335 | |
| Pre-funded warrants | |
| | |
| 19,967 | | |
| 19,967 | | |
| 13,050 | |
| Contributed surplus | |
| | |
| 8,347 | | |
| 7,706 | | |
| 6,472 | |
| Accumulated deficit | |
| | |
| (63,238 | ) | |
| (57,097 | ) | |
| (36,463 | ) |
| Accumulated other comprehensive income/(loss) | |
| | |
| (1,541 | ) | |
| (1,543 | ) | |
| 362 | |
| Total shareholders’ equity | |
| | |
| 41,669 | | |
| 47,164 | | |
| 30,756 | |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | |
| | |
| 44,368 | | |
| 50,747 | | |
| 33,490 | |
Commitments and Contingencies (Note 11)
The accompanying notes are an integral part of these condensed consolidated
interim financial statements.
SATELLOS
BIOSCIENCE INC.
Condensed Consolidated Interim Statements of Loss and Comprehensive
Loss
(Expressed in thousands of US Dollars, except for per share amounts)
(Unaudited)
| |
|
Notes | |
March 31,
2025 | | |
March 31,
2024 | |
| | |
| | |
$ | | |
$
(Notes 2 and 16) | |
| Research
and development (“R&D”) | |
10 | | |
| 4,542 | | |
| 4,406 | |
| General
and administrative (“G&A”) | |
10 | | |
| 1,937 | | |
| 1,722 | |
| TOTAL R&D AND G&A EXPENSES: | |
| | |
| (6,479 | ) | |
| (6,128 | ) |
| | |
| | |
| | | |
| | |
| OTHER INCOME AND EXPENSES | |
| | |
| | | |
| | |
| Finance income | |
| | |
| 393 | | |
| 328 | |
| Loss on derivative financial instruments | |
| | |
| - | | |
| (1 | ) |
| Foreign exchange gain | |
| | |
| 8 | | |
| 671 | |
| NET LOSS BEFORE INCOME TAXES | |
| | |
| (6,078 | ) | |
| (5,130 | ) |
| | |
| | |
| | | |
| | |
| Income taxes | |
| | |
| (63 | ) | |
| - | |
| NET LOSS FOR THE PERIOD | |
| | |
| (6,141 | ) | |
| (5,130 | ) |
| | |
| | |
| | | |
| | |
| OTHER COMPREHENSIVE LOSS | |
| | |
| | | |
| | |
| Item that
may be reclassified to net loss | |
| | |
| | | |
| | |
| Foreign currency translation adjustment | |
| | |
| 2 | | |
| (714 | ) |
| TOTAL COMPREHENSIVE LOSS | |
| | |
| (6,139 | ) | |
| (5,844 | ) |
| | |
| | |
| | | |
| | |
| Basic and diluted loss per share | |
| | |
$ | (0.04 | ) | |
$ | (0.05 | ) |
| Weighted average number of common shares | |
7 | | |
| 165,824,483 | | |
| 112,791,658 | |
The accompanying notes are an integral part of these condensed consolidated
interim financial statements.
SATELLOS BIOSCIENCE INC.
Condensed Consolidated Interim Statements of Changes in Shareholders’
Equity
(Expressed in thousands of US Dollars)
(Unaudited)
For the three months ended March 31,
2025 and 2024
| | |
Common
Shares | | |
Common
Shares | | |
Pre-funded
Warrants | | |
Pre-funded
Warrants | | |
Contributed
Surplus | | |
Accumulated
Deficit | | |
Accumulated
Other
Comprehensive
Loss | | |
Total
Shareholders’
Equity | |
| | |
Number | | |
$ | | |
Number | | |
$ | | |
$ | | |
$ | | |
$ | | |
| |
| Balance
- December 31, 2023 (Notes 2 and 16) | |
112,791,658 | | |
47,335 | | |
39,702,780 | | |
13,050 | | |
6,471 | | |
(36,463 | ) | |
362 | | |
30,755 | |
| Stock-based
compensation (Note 9) | |
- | | |
- | | |
- | | |
- | | |
556 | | |
- | | |
- | | |
556 | |
| Net
loss for the period | |
- | | |
- | | |
- | | |
- | | |
- | | |
(5,130 | ) | |
- | | |
(5,130 | ) |
| Foreign
currency translation adjustment | |
- | | |
- | | |
- | | |
- | | |
- | | |
- | | |
(714 | ) | |
(714 | ) |
| Balance
– March 31, 2024 (Notes 2 and 16) | |
112,791,658 | | |
47,335 | | |
39,702,780 | | |
13,050 | | |
7,027 | | |
(41,593 | ) | |
(352 | ) | |
25,467 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Balance
- December 31, 2024 (Notes 2 and 16) | |
165,819,872 | | |
78,131 | | |
51,567,780 | | |
19,967 | | |
7,706 | | |
(57,097 | ) | |
(1,543 | ) | |
47,164 | |
| Exercise
of warrants (Note 8) | |
5,000 | | |
3 | | |
- | | |
- | | |
(1 | ) | |
- | | |
- | | |
2 | |
| Stock-based
compensation (Note 9) | |
- | | |
- | | |
- | | |
- | | |
642 | | |
- | | |
- | | |
642 | |
| Net
loss for the period | |
- | | |
- | | |
- | | |
- | | |
- | | |
(6,141 | ) | |
- | | |
(6,141 | ) |
| Foreign
currency translation adjustment | |
- | | |
- | | |
- | | |
- | | |
- | | |
- | | |
2 | | |
2 | |
| Balance
– March 31, 2025 | |
165,824,872 | | |
78,134 | | |
51,567,780 | | |
19,967 | | |
8,347 | | |
(63,238 | ) | |
(1,541 | ) | |
41,669 | |
The accompanying notes are an integral part of these condensed consolidated
interim financial statements.
SATELLOS BIOSCIENCE INC.
Condensed Consolidated Interim Statements of Cash Flows
(Expressed in thousands of US Dollars)
(Unaudited)
| For the three months ended, | |
Notes | | |
March 31,
2025 | | |
March 31,
2024 | |
| | |
| | |
$ | | |
$ | |
| | |
| | |
| | |
(Notes 2 and 16) | |
| CASH AND CASH EQUIVALENTS PROVIDED BY (USED IN): | |
| | |
| | | |
| | |
| | |
| | |
| | | |
| | |
| OPERATING ACTIVITIES | |
| | |
| | | |
| | |
| Net loss for the period | |
| | |
| (6,141 | ) | |
| (5,130 | ) |
| Items not affecting cash: | |
| | |
| | | |
| | |
| Depreciation of property and equipment | |
| | |
| 1 | | |
| 2 | |
| Stock-based compensation | |
9 | | |
| 642 | | |
| 556 | |
| Loss on derivative financial instruments | |
| | |
| - | | |
| 1 | |
| Non-cash finance income | |
| | |
| - | | |
| (193 | ) |
| Unrealized foreign exchange gain | |
| | |
| (3 | ) | |
| (525 | ) |
| Net change in non-cash working capital
balances: | |
| | |
| | | |
| | |
| Sales tax and other receivables | |
| | |
| 98 | | |
| (220 | ) |
| Prepaid expenses and deposits | |
| | |
| (1,077 | ) | |
| (42 | ) |
| Accounts payable and accrued liabilities | |
| | |
| (886 | ) | |
| 30 | |
| | |
| | |
| (7,366 | ) | |
| (5,521 | ) |
| FINANCING ACTIVITIES | |
| | |
| | | |
| | |
| Proceeds from exercise of warrants | |
| | |
| 2 | | |
| - | |
| | |
| | |
| | | |
| | |
| INVESTING ACTIVITIES | |
| | |
| | | |
| | |
| Purchases of short-term investments | |
| | |
| - | | |
| (5,500 | ) |
| Maturities of short-term investments | |
| | |
| - | | |
| 4,132 | |
| Purchase of property and equipment | |
| | |
| - | | |
| (1 | ) |
| | |
| | |
| - | | |
| (1,369 | ) |
| Effect of foreign currency exchange rates on cash and
cash equivalents | |
| | |
| 3 | | |
| (116 | ) |
| | |
| | |
| | | |
| | |
| INCREASE IN CASH AND CASH EQUIVALENTS | |
| | |
| (7,361 | ) | |
| (7,006 | ) |
| | |
| | |
| | | |
| | |
| CASH AND CASH EQUIVALENTS – Beginning of period | |
| | |
| 40,073 | | |
| 16,681 | |
| | |
| | |
| | | |
| | |
| CASH AND CASH EQUIVALENTS – End of period | |
| | |
| 32,712 | | |
| 9,675 | |
| | |
| | |
| | | |
| | |
| Cash interest received | |
| | |
| 247 | | |
| 188 | |
The accompanying notes are an integral part of these condensed consolidated
interim financial statements.
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim
Financial Statements (unaudited)
For the three months ended March 31, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
| 1. | Description of Business |
Satellos Bioscience Inc. (“Satellos”
or the “Company”) is a Canadian biotechnology and drug development company incorporated under the laws of Canada.
The head office, principal address, and records of the Company are located at Royal Bank Plaza, South Tower, 200 Bay Street, Suite 2800,
Toronto, Ontario M5J 2J1 Canada and the Company’s common shares (“Common Shares”) are listed on the Toronto
Stock Exchange (“TSX”).
The Company has wholly owned subsidiaries
in Australia, (Satellos Bioscience Australia Pty Ltd) in Canada (Amphotericin B Technologies, Inc.,) and in Delaware, USA (Satellos
Bioscience US, Inc.).
| 2. | Basis of Presentation and Material Accounting Policies |
The Company prepares its condensed
consolidated interim financial statements in accordance with International Financial Reporting Standards as issued by the International
Accounting Standards Board (IFRS Accounting Standards) applicable to the preparation of condensed consolidated interim financial statements,
including International Accounting Standard 34, Interim Financial Reporting. These condensed consolidated interim financial statements
should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2024, which
were prepared in accordance with IFRS Accounting Standards.
Certain comparative figures have been
reclassified to conform to the current period presentation. These reclassifications had no material impact on previously reported net
income, total assets, or equity.
These consolidated financial statements were approved and
authorized for issue by the Board of Directors on May 12, 2025.
Functional and Presentation Currency
Effective January 1, 2025, Satellos
Bioscience Inc. has adopted the United States dollar (“USD”) as its functional currency. Prior to this date, the functional
currency was the Canadian dollar (“CAD”). The change in the functional currency from CAD to USD was made to more closely
reflect the primary economic environment in which the Company currently operates. As a result of the advancement of the Company’s
development programs, the Company has incurred and anticipates incurring the majority of future operating costs including research and
development costs primarily in USD. On January 1, 2025, the change in functional currency resulted in the assets and liabilities
of the Company as of December 31, 2024 being translated into USD using the exchange rate in effect on that date, and equity transactions
were translated at historical rates. The change in functional currency was applied prospectively from January 1, 2025.
During the quarter, the Company has
also changed its presentation currency from CAD to USD. The change in presentation currency was made to better reflect the Company’s
business activities and to improve investor’s ability to compare the Company’s financial results with other publicly traded
business in the industry. In making the change to a USD presentation currency, the Company followed the guidance in IAS 21. The Effects
of Changes in Foreign Exchange Rates (IAS 21) and has applied the change retrospectively as if the new presentation currency had always
been the Company's presentation currency. In accordance with IAS 21, the financial statements for all the periods presented have been
translated to the new USD presentation currency. For comparative balances, assets and liabilities have been translated into the presentation
currency at the rate of exchange prevailing at the reporting date, or at the exchange rate prevailing at the date of the transactions.
Exchange rate differences arising on translation are taken to other comprehensive loss/(income). The Company has presented the effects
of the change in the presentation currency, see note 16.
Significant Accounting Judgements, Estimates and Assumptions
The preparation of these condensed
consolidated interim financial statements in accordance with IFRS Accounting Standards requires management to make judgments, estimates
and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the condensed consolidated interim financial statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim
Financial Statements (unaudited)
For the three months ended March 31, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
The condensed consolidated interim
financial statements include estimates, which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout
the condensed consolidated interim financial statements and may require accounting adjustments based on future occurrences. The estimates
and underlying assumptions are reviewed on a regular basis. Revisions to accounting estimates are accounted for prospectively.
There have been no material changes
to the nature of estimates and judgments reported in the Company’s audited consolidated financial statements for the year ended
December 31, 2024.
Material Accounting Policies
The accounting policies applied in these condensed consolidated
interim financial statements are the same as those applied in our audited consolidated financial statements for the year ended December 31,
2024.
New and Amended Standards and Interpretations
New standards, amendments and interpretations issued
but not yet effective
At the date of authorization of these condensed consolidated
interim financial statements, the Company had not applied the following new and revised IFRS Accounting Standards that are not yet effective.
Amendments to IFRS 9, Financial instruments and IFRS
7, Financial instruments: Disclosures
The IASB has issued classification
and measurement and disclosure amendments to IFRS 9 and IFRS 7 with an effective date for years beginning on or after January 1,
2026 with earlier application permitted. The amendments clarify the date of recognition and derecognition of some financial assets and
liabilities and introduce a new exception for some financial liabilities settled through an electronic payment system. Other changes
include a clarification of the requirements when assessing whether a financial asset meets the solely payments of principal and interest
criteria and new disclosures for certain instruments with contractual terms that can change cash flows (including instruments where cash
flows changes are linked to environment, social or governance (ESG) targets). The Company has not yet commenced the evaluation of the
impact of these amendments.
New accounting standard IFRS 18, Presentation and disclosure
in financial statements
IFRS 18, Presentation and Disclosure
in Financial Statements (IFRS 18) will provide new presentation and disclosure requirements and replace IAS 1, Presentation of Financial
Statements. IFRS 18 introduces changes to the structure of the income statement; provides required disclosures in financial statements
for certain profit or loss performance measures that are reported outside an entity’s financial statements; and provides enhanced
principles on aggregation and disaggregation in financial statements. Many other existing principles in IAS 1 have been maintained. IFRS
18 is effective for years beginning on or after January 1, 2027, with earlier application permitted. The Company has not yet commenced
the evaluation of the impact of the new standard.
| 3. | Cash and Cash Equivalents |
Cash and cash equivalents consist of the following:
| | |
March 31,
2025 | | |
December 31,
2024 | |
| | |
$ | | |
$ | |
| Cash balances with banks | |
| 7,114 | | |
| 24,385 | |
| Short-term instruments | |
| 25,598 | | |
| 15,688 | |
| Total cash and cash equivalents | |
| 32,712 | | |
| 40,073 | |
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim
Financial Statements (unaudited)
For the three months ended March 31, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
Short-term investments with initial maturities greater than
three months and less than one year consist of the following:
| | |
March 31,
2025 | | |
December 31,
2024 | |
| | |
$ | | |
$ | |
| Guaranteed Investment Certificates | |
| 8,478 | | |
| 8,475 | |
| Total | |
| 8,478 | | |
| 8,475 | |
| 5. | Prepaid expenses and deposits |
Prepaid expenses and deposits primarily consist of advance
payments for contract research services required for ongoing clinical trials, subscriptions and other general and administrative items.
| | |
March 31,
2025 | | |
December 31,
2024 | |
| | |
$ | | |
$ | |
| Research and development deposits | |
| 2,639 | | |
| 1,580 | |
| Other prepaids and deposits | |
| 198 | | |
| 180 | |
| Total prepaid expenses and deposits | |
| 2,837 | | |
| 1,760 | |
| 6. | Accounts Payables and Accrued Liabilities |
| | |
March 31,
2025 | | |
December 31,
2024 | |
| | |
$ | | |
$ | |
| Trade payables | |
| 1,885 | | |
| 2,063 | |
| Accrued liabilities | |
| 751 | | |
| 1,520 | |
| Income taxes payables | |
| 63 | | |
| - | |
| Total accounts payables and accrued liabilities | |
| 2,699 | | |
| 3,583 | |
| 7. | Share Capital and Pre-Funded Warrants |
Authorized
The authorized share capital of the Company consists of
an unlimited number of common shares.
Loss per share
Loss per share is calculated using the weighted average
number of Common Shares outstanding. For the three months ended March 31, 2025 and 2024, the calculation was as follows:
| | |
Three months
ended,
March 31, 2025 | | |
Three months
ended,
March 31, 2024 | |
| Net loss | |
$ | 6,141 | | |
$ | 5,130 | |
| Weighted average number of Common Shares | |
| 165,824,483 | | |
| 112,791,658 | |
| Net loss per share – basic and diluted | |
$ | (0.04 | ) | |
$ | (0.05 | ) |
The effect of any potential exercise of the Company’s
stock options, pre-funded warrants and warrants outstanding during the period has been excluded from the calculation of diluted loss
per Common Share as it would be anti-dilutive.
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim
Financial Statements (unaudited)
For the three months ended March 31, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
Warrants have been issued as part of
equity financings and include compensation to agents and brokers of the Company. Pre-Funded Warrants and are listed separately on the
condensed consolidated interim statement of financial position and on the condensed consolidated statement of changes in shareholder’s
equity and are excluded from the tables below. The following is a summary of changes in warrants:
| | | |
Three months
ended,
March 31, 2025 | | |
Three months
ended,
March 31, 2024 | |
| | | |
Number
of
warrants | | |
Weighted
average exercise
price | | |
Number
of
warrants | | |
Weighted
average exercise
price | |
| Outstanding,
beginning of period | | |
| 10,726,111 | | |
| CA$0.53 | | |
| 12,346,419 | | |
| CA$0.53 | |
| Exercised | | |
| (5,000 | ) | |
| CA$0.60 | | |
| - | | |
| - | |
| Outstanding,
end of period | | |
| 10,721,111 | | |
| CA$0.53 | | |
| 12,346,419 | | |
| CA$0.53 | |
The table below presents the outstanding
warrants as at March 31, 2025:
| Exercise Price | |
Number
of Warrants | | |
Expiry Date |
| CA$0.60 | |
| 3,501,500 | | |
September 13, 2025 |
| CA$0.50 | |
| 7,219,611 | | |
May 17,2025 |
| Total warrants | |
| 10,721,111 | | |
|
| 9. | Stock-Based Compensation |
Effective May 14, 2024, the Company
adopted a new omnibus equity incentive plan (“Omnibus Plan”) which authorizes the Board of Directors to administer
the Omnibus Plan to provide equity-based compensation in the form of stock options and restricted stock units.
The Company currently maintains its
existing Amended and Restated Incentive Stock Option Plan (“Option Plan”) but effective May 14, 2024 no further
grants will be made under this plan though existing grants under the Option Plan will remain in effect in accordance with their terms.
The aggregate number of common shares
that may be issued under all awards under the Omnibus Plan and the Option Plan is 15% of our issued and outstanding common shares on
a rolling basis.
Under both the Omnibus Plan and the
Option Plan, the exercise price of each option equals the market price of the underlying share on the date of the grant. Vesting is provided
for at the discretion of the Board of Directors and the expiration of options is to be no greater than 10 years from the date of grant.
The Company calculates the fair value
of each stock option grant using the Black-Scholes option pricing model at the grant date.
The stock-based compensation expense
of the stock options is recognized as stock-based compensation expense over the relevant vesting period of the stock options using an
estimate of the number of options that will eventually vest.
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim
Financial Statements (unaudited)
For the three months ended March 31, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
Stock option transactions for the three
months ended March 31, 2025, and March 31, 2024, are presented below:
| |
|
Three months ended,
March 31, 2025 |
|
|
Three months ended,
March 31, 2024 |
|
| |
|
Number
of
options |
|
|
Weighted
average
exercise price |
|
|
Number
of
options |
|
|
Weighted
average
exercise price |
|
| Outstanding, beginning of period |
|
|
13,879,589 |
|
|
|
CA$0.73 |
|
|
|
14,134,363 |
|
|
|
CA$0.71 |
|
| Granted |
|
|
9,514,523 |
|
|
|
CA$0.80 |
|
|
|
280,000 |
|
|
|
CA$0.52 |
|
| Forfeited and expired |
|
|
(20,000 |
) |
|
|
CA$1.60 |
|
|
|
(9,600 |
) |
|
|
CA$1.70 |
|
| Outstanding, end of period |
|
|
23,374,112 |
|
|
|
CA$0.76 |
|
|
|
14,404,763 |
|
|
|
CA$0.71 |
|
As at March 31, 2025, the Company had the following
outstanding options:
| | |
| | |
Options Outstanding | | |
Options Exercisable | |
| Exercise Prices | |
Number
of
options | | |
Weighted
average
remaining
contractual life | | |
Weighted
average
exercise price | | |
Number
of
options | | |
Weighted
average
exercise price | |
| $0.33-$0.50 | |
| 4,287,810 | | |
| 8.23 | | |
| CA$0.42 | | |
| 2,073,487 | | |
$ | 0.41 | |
| $0.51-$0.66 | |
| 6,576,809 | | |
| 7.93 | | |
| CA$0.60 | | |
| 3,172,472 | | |
$ | 0.61 | |
| $0.67-$1.70 | |
| 12,509,493 | | |
| 9.20 | | |
| CA$0.96 | | |
| 2,113,975 | | |
$ | 1.65 | |
| | |
| 23,374,112 | | |
| 8.67 | | |
$ | 0.76 | | |
| 7,359,934 | | |
$ | 0.85 | |
The following table presents the assumptions that were used
in the Black-Scholes option pricing model to determine the fair value of stock options granted during the period, and the resultant average
fair values:
| | |
Three months
ended,
March 31, 2025 | |
|
Three months
ended,
March 31, 2024 | |
| Expected life of stock options | |
| 10
years | |
|
| 10
years | |
| Expected weighted average volatility | |
| 83.9 | % |
|
| 79.9 | % |
| Expected dividend yield | |
| nil | % |
|
| nil | % |
| Weighted average risk-free interest rate | |
| 2.99 | % |
|
| 3.41 | % |
| Weighted average fair value of stock options granted in the period | |
$ | 0.47 | |
|
$ | 0.32 | |
Due to the absence of volatility rates specific to the Company,
the Company selected comparable companies in a similar industry to estimate a volatility rate.
During the three months ended March 31, 2025, $642
(2024 - $556) has been recognized as stock-based compensation expense.
Research and development expenses:
| | |
March 31,
2025 | | |
March 31,
2024 | |
| | |
$ | | |
$ | |
| Salaries and management fees | |
| 762 | | |
| 892 | |
| Discovery expenses | |
| 144 | | |
| 179 | |
| Preclinical expenses | |
| 712 | | |
| 1,436 | |
| Chemistry, manufacturing controls | |
| 317 | | |
| 1,569 | |
| Clinical expenses | |
| 2,335 | | |
| 53 | |
| Stock-based compensation | |
| 272 | | |
| 277 | |
| Total research and development expenses | |
| 4,542 | | |
| 4,406 | |
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim
Financial Statements (unaudited)
For the three months ended March 31, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
General
and administrative:
| | |
March 31,
2025 | | |
March 31,
2024 | |
| | |
$ | | |
$ | |
| Salaries and management fees | |
| 893 | | |
| 750 | |
| Professional fees | |
| 529 | | |
| 516 | |
| Other operating expenses | |
| 144 | | |
| 175 | |
| Stock-based compensation | |
| 370 | | |
| 279 | |
| Depreciation | |
| 1 | | |
| 2 | |
| Total general and administrative expenses | |
| 1,937 | | |
| 1,722 | |
| 11. | Commitments and Contingencies |
The Company enters into contracts in
the normal course of business, including for research and development activities. As at March 31, 2025, in addition to amounts that
have been recognized in accounts payable and accrued liabilities, the Company has commitments for research and development activities
in the amount of $2,832, most cancellable with notice. These commitments include agreements related to the conduct of long-term toxicology
and clinical development.
| | |
Payments Due by Period |
| | |
Total | | |
Less than
1 year | | |
1 -3 years | | |
4 –
5 years | | |
After 5 years |
| Purchase obligations | |
$ | 2,832 | | |
$ | 2,680 | | |
$ | 152 | | |
| nil | | |
nil |
The Company may be required to make
milestone, royalty, and other research and development funding payments under research and development collaboration and other agreements
with third parties. These payments are contingent upon the achievement of specific development, regulatory and/or commercial milestones.
The Company has not accrued any amounts for these payments as of March 31, 2025, because the milestones have not yet been achieved.
| 12. | Related Party Transactions |
Mr. Jarosz, a director and former
officer of the Company, is a related party to the Company and, as of March 31, 2024, was owed $545 by the Company for work done
in the three months ended March 31, 2024 as a consultant, officer and director. The outstanding balance was fully settled in 2024.
| b) | Key management personnel |
Key management personnel consists of
the Company’s Chief Executive Officer, Chief Scientific Officer, former Chief Medical Officer, Chief Discovery Officer, former
Chief Business Officer and Chief Financial Officer and the Directors of the Corporation. The remuneration of key management personnel
is as follows:
| | |
March 31,
2025 | | |
March 31,
2024 | |
| | |
$ | | |
$ | |
| Salaries and management fees | |
| 662 | | |
| 735 | |
| Stock-based compensation | |
| 387 | | |
| 523 | |
| Total | |
| 1,049 | | |
| 1,258 | |
The Company operates within a single
operating segment, the research and development of drug therapeutics, which is the Company’s only reportable segment, which is
consistent with the internal reporting provided to the chief operating decision-maker. The Company operates in three geographic areas,
Canada, United States and Australia. As at March 31, 2025, the Company held total assets of $365 (December 31, 2024 - $145)
in the United States, $1,569 (December 31, 2024 - $979) in Australia and $42,434 in Canada (December 31, 2024 - $49,623).
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim
Financial Statements (unaudited)
For the three months ended March 31, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
The Company manages its capital structure in an endeavour
to ensure sufficient resources are available to meet day-to- day operational requirements, further develop its existing technology, and
continue as a going concern.
In order to maintain or adjust the capital structure, the
Company may issue new shares or issue debt or sell assets. Total capital is calculated as the Company’s own equity.
The Company is not subject to any externally imposed capital
requirements.
| 15. | Financial Instruments and Risk Management |
The Company is exposed to various risks through its financial
instruments including the following at March 31, 2025:
Credit risk arises from cash and cash
equivalents and short-term investments held at banks and financial institutions, as well as outstanding receivables. In the three months
ended March 31, 2025, the Company invested its excess cash in interest-bearing operating accounts held at a Schedule 1 Canadian
bank and in US government treasury bills and Guaranteed Investment Certificates. The Company limits its exposure to credit risk, with
respect to cash and cash equivalents and short-term investments, by placing them with high quality credit financial institutions. The
Company's cash equivalents and short-term investments consist primarily of operating funds, US government treasury bills, deposit investments
and guaranteed investment certificates with commercial banks.
Liquidity risk is the risk that the
Company will encounter difficulty in raising funds to meet cash flow requirements associated with financial instruments. The Company
controls liquidity risk through management of working capital, cash flows and the availability and sourcing of financing. The Company’s
ability to accomplish all of its future strategic plans is dependent on obtaining additional financing or executing other strategic options;
however, there is no assurance the Company will achieve these objectives. As at March 31, 2025, the Company’s liabilities
consist of accounts payable and accrued liabilities that have contracted maturities of less than one year.
Market risk is the risk that the fair value or future cash
flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency
risk, interest rate risk, and price risk.
The Company is mainly exposed to currency risk as follows:
Currency risk is the risk that the
fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The exposure to
this risk changes as the exchange rate fluctuates.
Foreign currency risk is limited to
the portion of the Company's business transactions denominated in currencies other than the US dollar, primarily expenses for general
and administrative and research and development incurred in Canadian dollars. The Company manages foreign exchange risk by maintaining
Canadian dollars cash on hand to fund its short-term foreign currency expenditures. Balances held in foreign currencies, presented in
US dollars are as follows:
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim
Financial Statements (unaudited)
For the three months ended March 31, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
| | |
As at March 31,
2025 | |
| | |
US
$ | | |
Australian
$ | | |
Euro
€ | | |
Canadian
$ | | |
Total
$ | |
| Cash and cash equivalents | |
| 26,497 | | |
| 1,168 | | |
| - | | |
| 5,047 | | |
| 32,712 | |
| Short-term investments | |
| 5,000 | | |
| - | | |
| - | | |
| 3,478 | | |
| 8,478 | |
| Accounts payable and accrued liabilities | |
| (1,463 | ) | |
| (6 | ) | |
| (580 | ) | |
| (650 | ) | |
| (2,699 | ) |
| Total | |
| 30,034 | | |
| 1,162 | | |
| (580 | ) | |
| 7,875 | | |
| 38,491 | |
| | |
As at December 31,
2024 | |
| | |
US
$ | | |
Australian
$ | | |
Euro
€ | | |
Canadian
$ | | |
Total
$ | |
| Cash and cash equivalents | |
| 24,848 | | |
| 339 | | |
| - | | |
| 14,886 | | |
| 40,073 | |
| Short-term investments | |
| 5,000 | | |
| - | | |
| - | | |
| 3,475 | | |
| 8,475 | |
| Accounts payable and accrued liabilities | |
| (2,491 | ) | |
| (329 | ) | |
| (242 | ) | |
| (521 | ) | |
| (3,583 | ) |
| Total | |
| 27,357 | | |
| 10 | | |
| (242 | ) | |
| 17,840 | | |
| 44,965 | |
Assuming all other variables remain
constant, a 10% depreciation or appreciation of the US dollar against the Canadian dollar, Australian dollar and Euro would result in
an increase or decrease in loss and comprehensive loss for the three months ended March 31, 2025, of $846 (December 31, 2024
- $1,761).
Interest rate risk is the risk that
the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company
holds its cash and cash equivalents and short- term investments in banks and financial institutions, and manages its interest rate risk
by holding cash in high yield savings accounts or highly liquid short-term investments.
Financial assets and liabilities are
recognized on the condensed consolidated interim statement of financial position at amortized cost in a hierarchy that is based on significance
of the inputs used in making the measurements. The levels in the hierarchy are:
| · | Level 1 – Quoted
prices (unadjusted) in active markets for identical assets or liabilities |
| · | Level 2 – Inputs
other than quoted prices included within level 1 that are observable for the asset or liability,
either directly (i.e., as prices) or indirectly (i.e., derived from prices) |
| · | Level 3 – Inputs
for the asset or liability that are not based on observable market data (i.e., unobservable
inputs) |
At March 31, 2025, the Company's
financial instruments, all subsequently measured at amortized cost, included cash and cash equivalents, short-term investments, and accounts
payable and accrued liabilities.
Due to the short-term maturities of
cash and cash equivalents, short-term investments, accounts payable and accrued liabilities, the carrying amounts approximate their fair
value at the respective condensed consolidated interim statement of financial position date.
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim
Financial Statements (unaudited)
For the three months ended March 31, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
| 16. | Change
in presentation currency |
During the current quarter, the Company
has changed its presentation currency from CAD to USD. In accordance with IAS 21, the amounts for all the periods presented have been
translated to the USD presentation currency. For comparative balances, assets and liabilities have been translated into the presentation
currency at the rate of exchange prevailing at the reporting date, or at the exchange rate prevailing at the date of the transactions.
Exchange rate differences arising on translation are taken to other comprehensive loss/(income). The Company has presented the effects
of the change in presentation currency below.
| | |
December 31,
2024
USD$ | | |
December 31,
2024
CAD$ | | |
January 1,
2024
USD$ | | |
January 1,
2024
CAD$ | |
| ASSETS | |
| | | |
| | | |
| | | |
| | |
| Current | |
| | | |
| | | |
| | | |
| | |
| Cash and cash equivalents | |
| 40,073 | | |
| 57,659 | | |
| 16,681 | | |
| 22,067 | |
| Short-term investments | |
| 8,475 | | |
| 12,195 | | |
| 13,246 | | |
| 17,520 | |
| Sales tax and other receivables | |
| 435 | | |
| 626 | | |
| 441 | | |
| 583 | |
| Prepaid expenses and deposits | |
| 1,760 | | |
| 2,532 | | |
| 112 | | |
| 148 | |
| Derivative financial instruments, net | |
| - | | |
| - | | |
| 3 | | |
| 4 | |
| Total current assets | |
| 50,743 | | |
| 73,012 | | |
| 30,483 | | |
| 40,322 | |
| | |
| | | |
| | | |
| | | |
| | |
| Property and equipment | |
| 4 | | |
| 5 | | |
| 15 | | |
| 19 | |
| Assets held for sale | |
| | | |
| | | |
| | | |
| | |
| Intangible asset | |
| - | | |
| - | | |
| 2,961 | | |
| 3,916 | |
| Investments | |
| - | | |
| - | | |
| 31 | | |
| 41 | |
| | |
| 4 | | |
| 5 | | |
| 3,007 | | |
| 3,976 | |
| TOTAL ASSETS | |
| 50,747 | | |
| 73,017 | | |
| 33,490 | | |
| 44,298 | |
| | |
| | | |
| | | |
| | | |
| | |
| LIABILITIES | |
| | | |
| | | |
| | | |
| | |
| Accounts payable and accrued liabilities | |
| 3,583 | | |
| 5,155 | | |
| 2,734 | | |
| 3,624 | |
| Total current liabilities | |
| 3,583 | | |
| 5,155 | | |
| 2,734 | | |
| 3,624 | |
| Total liabilities | |
| 3,583 | | |
| 5,155 | | |
| 2,734 | | |
| 3,624 | |
| | |
| | | |
| | | |
| | | |
| | |
| SHAREHOLDER’S EQUITY | |
| | | |
| | | |
| | | |
| | |
| Common shares | |
| 78,131 | | |
| 105,729 | | |
| 47,335 | | |
| 61,916 | |
| Pre-funded warrants | |
| 19,967 | | |
| 27,622 | | |
| 13,050 | | |
| 17,772 | |
| Contributed surplus | |
| 7,706 | | |
| 10,329 | | |
| 6,472 | | |
| 8,503 | |
| Accumulated deficit | |
| (57,097 | ) | |
| (75,601 | ) | |
| (36,463 | ) | |
| (47,502 | ) |
| Accumulated other comprehensive | |
| | | |
| | | |
| | | |
| | |
| income/(loss) | |
| (1,543 | ) | |
| (217 | ) | |
| 362 | | |
| (15 | ) |
| Total shareholder’s equity | |
| 47,164 | | |
| 67,862 | | |
| 30,756 | | |
| 40,674 | |
| | |
| | | |
| | | |
| | | |
| | |
| TOTAL LIABILITIES AND SHAREHOLDER’S EQUITY | |
| 50,747 | | |
| 73,017 | | |
| 33,490 | | |
| 44,298 | |
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim
Financial Statements (unaudited)
For the three months ended March 31, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
| | |
March 31,
2024
USD$ | | |
March 31,
2024
CAD$ | |
| Research
and Development (“R&D”) | |
| 4,406 | | |
| 5,938 | |
| General
and administrative (“G&A”) | |
| 1,722 | | |
| 2,317 | |
| TOTAL R&D AND G&A EXPENSES | |
| (6,128 | ) | |
| (8,255 | ) |
| | |
| | | |
| | |
| OTHER INCOME AND EXPENSES | |
| | | |
| | |
| Finance income | |
| 328 | | |
| 442 | |
| | |
| | | |
| | |
| Loss on derivative financial instruments | |
| (1 | ) | |
| (1 | ) |
| Foreign exchange gain | |
| 671 | | |
| 905 | |
| | |
| | | |
| | |
| NET LOSS FOR THE PERIOD | |
| (5,130 | ) | |
| (6,909 | ) |
| | |
| | | |
| | |
| OTHER COMPREHENSIVE LOSS | |
| | | |
| | |
| Foreign currency
translation adjustment | |
| (714 | ) | |
| - | |
| TOTAL COMPREHENSIVE LOSS | |
| (5,844 | ) | |
| (6,909 | ) |
| | |
| | | |
| | |
| Basic and diluted loss per share | |
$ | (0.05 | ) | |
$ | (0.06 | ) |
| Weighted average number of common shares | |
| 112,791,658 | | |
| 112,791,658 | |
Exhibit 4.6
SATELLOS BIOSCIENCE
INC.
Management’s
Discussion and Analysis
For the three months
ended March 31, 2025, and 2024
May 12,
2025
The following discussion
is management’s assessment and analysis (this “MD&A”) of the results of operations and financial conditions
of Satellos Bioscience Inc. (“Satellos” or the “Company”) for the three months ended March 31,
2025 and 2024. This MD&A should be read in conjunction with the condensed consolidated interim financial statements for the three
months ended in March 31, 2025 and 2024 and the related notes thereto (together, the “condensed consolidated interim financial
statements”) and the audited annual consolidated financial statements for the years ended December 31, 2024 and December 31,
2023 and the related notes thereto (together, the “audited annual consolidated financial statements”).
Change in Presentation
Currency
Effective January 1,
2025, the Company changed its presentation currency from the Canadian dollar (“CAD”) to the United States dollar (“USD”).
The change in presentation currency was made to better reflect the Company’s business activities and to improve investor’s
ability to compare the Company’s financial results with other publicly traded businesses in the industry. For the year ended December 31,
2024 and for all prior periods, we presented our financial statements in CAD. The comparative figures disclosed in our condensed consolidated
interim financial statements for the period ended March 31, 2025, and in this MD&A, have been retrospectively changed to reflect
the change in presentation currency to the USD, as if the USD had been used as the presentation currency for all prior periods.
All financial information
in this MD&A has been prepared in accordance with IFRS accounting standards and all dollar amounts are expressed in thousands of
USD unless otherwise indicated.
FORWARD-LOOKING
STATEMENTS
Certain statements
and information in this MD&A contain “forward-looking information” and “forward-looking statements”, within
the meaning of applicable Canadian securities laws (collectively herein referred to as “forward-looking statements”). These
statements relate to future events or future performance and reflect the Company’s expectations and assumptions regarding the growth,
results of operations, performance and business prospects and opportunities of the Company. These forward-looking statements are made
as of the date of this MD&A or, in the case of documents incorporated by reference herein, as of the date of such documents. Forward-looking
statements are frequently, but not always, identified by words such as “expects”, “expectation”, “anticipates”,
“believes”, “intends”, “intention”, “estimates”, “predicts”, “continues”,
“potential”, “targeted”, “plans”, “possible”, “goal”, “seek”,
“project”, “future”, “likely” and similar expressions, or statements that events, conditions or results
“will”, “may”, “could”, “would” or “should” occur or be achieved. Any forward-looking
statements or statements of “belief”, including the statements made under “Risks and Uncertainties”, represent
the Company’s estimates only as of the date of this MD&A and the documents incorporated by reference herein, respectively,
and should not be relied upon as representing the Company’s estimates as of any subsequent date. Forward-looking statements are
necessarily based on estimates and assumptions made by Satellos in light of its experience and perception of historical trends, current
conditions and expected future developments, as well as factors that Satellos believes are appropriate. Forward-looking statements in
this MD&A include, but are not limited to, statements relating to:
| · | our
belief that the Company will be successful in raising additional capital to continue as a
going concern; |
| · | the
expected research and development timelines, therapeutic benefits, effectiveness and safety
of our product candidates; |
| · | our
belief that the Company’s products and research and development efforts are targeting
diseases and conditions with significant unmet medical treatment needs; |
| · | our
belief that the Company has made, and will continue to make progress towards the achievement
of certain milestones or objectives; |
| · | our
expectation with respect to meeting milestones and the minimum amount of funds the Company
expects to need to raise in order to achieve such milestones and garner additional funding; |
| · | the
initiation, timing, cost, progress, outcomes, resource needs and success of our research
and development activities, plans and programs; |
| · | our
expectations regarding our ability to design, test and patent novel drug products suitable
for advancement into Investigational New Drug (“IND”) enabling studies
and clinical trials and the anticipated timelines surrounding such enabling studies; |
| · | our
belief that we will not receive substantive comments on our IND applications; |
| · | our
expectations that the Notch pathway and AAK1 drug target (both as further described herein)
represent drug development opportunities similar or superior to modulation of the epidermal
growth factor receptor signaling pathway; |
| · | our
intentions of developing inhibitors to AAK1 (including but not limited to SAT-3247 and SAT-
3153) and in showing that such potential inhibitors have desirable effects in relevant models
of Duchenne muscular dystrophy (“Duchenne”) and in other indications,
such as other degenerative muscle diseases, muscle injury or trauma, or muscle regeneration
generally; |
| · | our
expectations that we will identify predictive biomarkers as discussed herein which will translate
into or be useful in conducting human clinical trials; |
| · | our
belief that the results of Satellos’ research and development activities, preclinical
studies, safety studies or clinical trials have the potential to be commercially competitive
with research and development activities, preclinical studies, safety studies or clinical
trials conducted by other parties; |
| · | discoveries
we have made in muscle stem cell regulation having the potential to represent insights into
a potential root cause of degenerative muscle disorders which has previously not been recognized
and which may be therapeutically relevant in the treatment of degenerative muscle disorders; |
| · | our
belief that the Company’s technology can be commercialized, and that such commercialization
could be done as effectively or more effectively than other technologies to treat degenerative
muscle disorders and conditions or other medical disorders or conditions, or at all; |
| · | our
ability to discover, optimize, select and advance into clinical development our therapeutic
drug development candidates in a timely, cost-efficient and effective manner, or at all; |
| · | our
ability to translate our discoveries in muscle stem cell regulation into safe and therapeutically
effective drug products and the broad applicability of such products; |
| · | our
ability to enter into research and/or commercial development collaborations or partnerships
to successfully and profitably advance our drug development candidates; |
| · | our
ability and that of our partners (if any) to advance identified drug development candidates
into, and successfully complete, clinical trials; |
| · | our
intention to identify and nominate one or more back-up drug candidates and the potential
benefits of having such back-ups; |
| · | our
plans to utilize and deploy MyoRegenXTM in our programs and our continued relationship
with OHRI (as defined below); |
| · | our
ability to develop the Company’s novel discoveries into viable therapeutic treatments
suitable for clinical development, including, but not limited to, our ability to determine
appropriate dosing regimens; |
| · | the
ability of our products to effectively and safely treat Duchenne and other degenerative muscle
disorders and conditions or other medical disorders or conditions and the applicability of
our products to other disorders and conditions; |
| · | our
expectations regarding future enrolment into clinical trials and the timing of future enrolment
into clinical trials for our product candidates; |
| · | our
belief that our approach may reduce the risk, time and cost of developing therapeutics by
avoiding some of the uncertainty associated with certain research and preclinical stages
of drug development; |
| · | our
ability to establish and maintain relationships with collaborators with acceptable preclinical
and/or clinical research and development capability, and regulatory and commercialization
expertise to enable the development and future commercialization of our technology or products,
and the benefits to be derived from such collaborative efforts; |
| · | our
ability to enter into agreements or partnerships with pharmaceutical or biotechnology companies
that have research and clinical development and/or sales and marketing capabilities and the
expected benefits that could be derived therefrom; |
| · | our
ability to generate and protect our potential intellectual property; |
| · | our
ability to operate our business without infringing upon the intellectual property rights
of others; |
| · | our
ability to engage third party services with specialized domain expertise for the drafting
and submitting of regulatory applications to conduct clinical trials in humans; |
| · | our
ability to establish suitable CMC and GMP protocols as further described herein; |
| · | the
manufacturing capacity of third-party manufacturers for our product candidates; |
| · | our
expectations regarding federal, provincial and foreign regulatory requirements; |
| · | the
timing of, and the costs of obtaining and maintaining, regulatory approvals in the United
States, Canada and other jurisdictions; |
| · | our
plans to meet with the United States Food and Drug Administration (the “FDA”),
file an application to obtain drug designations and initiate studies; |
| · | the
rate and degree of market acceptance and clinical utility of our future products, if any; |
| · | existing
and future corporate alliances and licensing transactions with third parties, and the receipt
and timing of any payments to be made by us or to us pursuant to such arrangements; |
| · | the
implementation and execution of our commercial and operational strategy; |
| · | our
ability to engage and retain the consultants or employees required to grow our business; |
| · | the
potential revenue that may be generated from our products, pricing and reimbursement of the
patient cost of our drug products by insurers or national health systems, as the case may
be, in those jurisdictions where the Company intends to sell its drug products and our ability
to achieve profitability; |
| · | developments
relating to our competitors and our industry, including the success of competing therapies
that are or become available; |
| · | the
potential growth of the market and demand for our products as well as the estimated pricing
and subsequent revenue generation of any potential therapeutics we discover; |
| · | our
belief that any discoveries by the Rudnicki Lab (as defined below) have the potential to
have a positive impact on Satellos and our work; |
| · | our
future financial performance, including projected expenditures, future revenue, capital requirements
and our needs for additional financing; and |
| · | general
business and economic conditions and outlook including but not limited to foreign exchange
rates and rates of inflation and the evolving regulatory or geo-political landscape. |
Such
forward-looking statements reflect our current views with respect to future events, are subject to risks and uncertainties and are necessarily
based upon a number of estimates and assumptions that, while considered reasonable by Satellos as of the date of such statements, are
inherently subject to significant medical, scientific, business, economic, competitive, political and social uncertainties and contingencies.
Many factors could cause our actual results, performance, achievements, prospects or opportunities to be materially different from any
future results, performance or achievements that may be expressed or implied by such forward-looking statements. In making the forward-looking
statements included in this MD&A, the Company has made various material assumptions, including, but not limited to:
| · | obtaining
positive results from our research and development activities, including clinical trials; |
| · | our
ability to obtain regulatory approvals; |
| · | assumptions
regarding general business, market and economic conditions; |
| · | assumptions
regarding the cost and timing of each study; |
| · | the
Company’s ability to successfully advance its preclinical and clinical development
programs and execute its plans substantially as currently envisioned; |
| · | the
Company’s ability to identify and advance a suitable drug candidate; |
| · | assumptions
related to the pricing and reimbursement of its drug products in jurisdictions in which the
Company intends to sell its drug products; |
| · | the
Company’s current positive relationships with third parties will be maintained and
the potential to develop new partnerships; |
| · | our
ability to continue to use existing licenses for the development of our product(s); |
| · | the
availability (and sources) of financing on reasonable terms; |
| · | future
expenditures to be incurred by the Company, including research and development and operating
costs; |
| · | the
Company’s ability to attract and retain skilled consultants and employees; |
| · | assumptions
regarding market competition, market capture and pricing; |
| · | the
products and technology offered by the Company’s competitors; and |
| · | the
Company’s ability to protect patents and proprietary rights. |
In evaluating forward-looking
statements, current and prospective shareholders should specifically consider various factors, including the risks outlined under the
headings “Foreign Currency Risk”, “Liquidity Risk”, “Credit Risk” and “Risks
and Uncertainties” in this MD&A and the risks outlined in the Company’s annual information form for the year ended
December 31, 2024 dated March 26, 2025 (the “AIF”). Certain risks and uncertainties that could cause such
actual events or results expressed or implied by such forward-looking statements and information to differ materially from any future
events or results expressed or implied by such statements and information include, but are not limited to:
| · | risks
related to the early stage of our products; |
| · | uncertainties
related to preclinical product development activities and clinical trial outcomes; |
| · | uncertainties
related to current economic conditions; |
| · | risks
related to rapid technological change; |
| · | uncertainties
related to forecasts and timing of clinical trials and regulatory approval; |
| · | competition
in the market for therapeutic products, including those to treat Duchenne and related diseases; |
| · | risks
related to potential product liability claims; |
| · | availability
of financing and access to capital and the risks associated with the Company’s ability
to continue as a going concern; |
| · | market
acceptance and commercialization of products; |
| · | the
availability, costs and supply of materials; |
| · | risks
related to the effective management of our growth; |
| · | risks
related to the reliance on partnerships and licensing agreements; |
| · | risks
related to our reliance on key personnel; |
| · | risks
related to the regulatory approval process for the manufacture and sale of therapeutic products; |
| · | risks
related to the reimbursement process in various jurisdictions where the Company plans to
sell its drug products; and |
| · | our
ability to secure and protect our intellectual property. |
The
Company cautions that the foregoing list of important factors and assumptions is not exhaustive. Although
the Company has attempted to identify on a reasonable basis important factors and assumptions related to forward-looking statements,
there can be no assurance that forward-looking statements will prove to be accurate, as events or circumstances or other factors could
cause actual results to differ materially from those estimated or projected and expressed in, or implied by, these forward-looking statements.
Other than as specifically required by law, the Company undertakes no obligation to update any forward-looking
statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated
events, whether as a result of new information, future events or results or otherwise. Accordingly, readers should not place undue
reliance on forward-looking statements.
NATURE OF BUSINESS
AND OVERVIEW OF OPERATIONS
Overview of
the Business
Satellos is a publicly
traded (TSX: MSCL) biotechnology company dedicated to developing life-improving medicines to treat degenerative muscle diseases.
Satellos has incorporated
breakthrough research in muscle stem cell polarity into a proprietary discovery platform, called MyoReGenXTM, to identify
degenerative muscle diseases where deficits in this process affect muscle regeneration and are amenable to therapeutic intervention.
With this platform, Satellos is building a pipeline of novel therapeutics to correct muscle stem cell polarity and promote the body’s
innate muscle repair and regeneration process. The Company’s lead drug candidate is an oral, small molecule drug candidate in development
as a potential disease-modifying treatment for Duchenne muscular dystrophy.
Achievements
and Highlights in the three months ended March 31, 2025
On February 10,
2025, the Company announced that the single-ascending dose (“SAD”) cohorts, four multiple- ascending dose (“MAD”)
cohorts, and one cross-over food effect single-dose cohort of the Company’s Phase 1a clinical trial had been fully enrolled.
On March 19,
2025, the Company announced initial safety and pharmacokinetic (“PK”) data from the Phase 1a clinical trial in an oral presentation
at the 2025 Muscular Dystrophy Association (MDA) Clinical & Scientific Conference.
In the Phase 1a,
72 healthy volunteers were randomized across five SAD cohorts (including one cross-over food effect cohort) with single oral doses of
up to 400 mg, and four MAD cohorts with daily oral doses up to 240 mg/day for 7 consecutive days. The purpose of the study was to assess
the safety, tolerability and PK of SAT- 3247.
As of the February 20,
2025 data cut-off date:
| · | Phase
1a data showed that SAT-3247 was safe and well tolerated across all healthy volunteer cohorts.
At predicted human efficacious dose levels (i.e., between 50 and 150 mg total daily dose),
SAT-3247 did not display adverse clinical findings on any parameter measured, including clinical
labs, vital signs, ECG’s, and physical exams. No moderate or greater drug-related adverse
events were reported at any dose studied and any mild events reported were reversible. |
| · | Phase
1a PK data demonstrated consistency with results from the Company’s preclinical studies.
These PK results confirmed post-dose plasma concentrations of SAT-3247 were sustained at
levels and time courses which the Company’s research findings suggest are most likely
to yield a therapeutic effect on muscle regeneration and strength. |
During Q1 2025,
the Company also continued to conduct a Phase 1b clinical study in which up to 10 adults over the age of 18 with genetically confirmed
DMD received treatment with SAT-3247 over a period of 28 days. The drug was administered orally in tablet form at a total daily dose
of 60mg for 5 consecutive weekdays followed by 2 days of placebo for 4 weeks (i.e., 20 dosing days on drug over the 28-day period of
the study). Satellos expects to complete the study and report Phase 1b data in Q2 2025.
Satellos had publicly announced a plan
to submit an IND in the USA before the end of Q1 2025. The Company’s intent had been to obtain approval to commence a second open-label
study with SAT-3247, this time in up to 20 adolescent DMD patients. During Q2 2025, the Company announced it had altered its clinical
trial plans. Instead, Satellos now intends to submit an IND in the USA (and equivalent submissions in other regulatory jurisdictions)
during Q3 2025, following consolidation of its pre-IND preclinical toxicology studies to support a clinical trial in younger patients
as well as its Phase 1b safety, PK and pharmacodynamic data in DMD adult, seeking authorization to begin a randomized controlled trial
(“RCT”) with SAT-3247 in a pediatric DMD patients treated with SAT-3247. The Company believes this revised approach
offers a greater likelihood for it to generate proof of concept data in the earliest – yet prudent – manner to demonstrate
the prospect for SAT- 3247 to (a) have a positive effect on muscle generation and (b) represent its potential to be a safe,
tolerable new treatment approach for patients living with DMD.
Description
of Business Strategy and Programs
The Company’s
primary goal is the development of disease modifying therapeutic drugs for the treatment of severe muscle conditions of unmet medical
need. Our core technology is based on discoveries by the Company’s scientific founder and Chief Discovery Officer, Dr. Michael
Rudnicki, into understanding and modulating muscle stem cell function and its role in muscle regeneration. Multiple peer reviewed publications
from Dr. Rudnicki’s lab (the “Rudnicki Lab”) at the Ottawa Hospital Research Institute (the “OHRI”)
have advanced the understanding of the identity and behavior of muscle stem cells including their role in health and disease. For instance,
the Rudnicki Lab was the first to define so called muscle stem cells (a.k.a. ‘satellite stem cells’) and characterize a sub-population
as bona fide multipotent stem cells capable of both self-renewal and regeneration (Source: Kuang et al., 2007, Cell). Dr. Rudnicki
was also first to demonstrate that such stem cells exist as a special body of cells capable of regeneration, and subsequently elucidate
their biological mechanism of action and identify means to modulate their activity. He further linked deficiencies in muscle stem cell
function directly to the pathology of Duchenne as a potential causal factor in the progressive muscle destruction that occurs in this
lethal disease (Source: Dumont et al., 2015, Nature Medicine). The basic principle governing how muscle stem cells functionally contribute
to muscle regeneration and homeostasis is depicted below in Figure 1.
Figure 1: Muscle
stem cells undergo symmetric or asymmetric divisions in response to injury stimuli. Muscle progenitor cells are generated to produce
new muscle tissue or repair injured muscle.
Fundamentally,
symmetric divisions result in two identical copies of the stem cell through the process of self- renewal. Asymmetric stem cell divisions,
by contrast, result in one stem cell being produced and one daughter cell, committed to eventual differentiation, called a progenitor
muscle cell. Progenitor muscle cells undergo normal mitosis to generate potentially thousands of cells that ultimately incorporate into
functional muscle tissue. Findings from the research of Dr. Rudnicki have linked deficits in either symmetric or asymmetric division
to multiple muscle wasting and degenerative diseases. Related to this research, the Company has licensed issued patents and pending patent
applications from the OHRI pursuant to a license agreement (the “License Agreement”).
To advance and
expand our therapeutic development programs for degenerative muscle conditions or disorders, Satellos employs a proprietary discovery
platform developed by the Rudnicki laboratory at OHRI called, MyoReGenX™. An automated microscopy system, MyoReGenX™ recapitulates
the muscle stem cell environment ex-vivo (i.e., outside the body) and enables Satellos to identify molecular regulators of stem
cell polarity that are capable of rescuing the defective regeneration process by tracking, classifying and quantitating the divisions
of individual muscle stem cells in response to stimuli such as drug candidates or small interfering ribonucleic acid (“siRNA”).
Lead
Development Program: Duchenne
The Company’s
first application of its technology (the “Lead Program”) is directed towards the discovery and development of a small
molecule drug for the treatment of Duchenne, the most common fatal genetic disorder diagnosed in childhood affecting approximately one
in 4,000 male births per year, worldwide. As depicted in the below Figure 2, early signs of motor impairment and delays in motor related
milestones emerge in Duchenne between the ages of two to five years. Rapid disease progression and muscle weakening typically ensue,
resulting in patients generally being wheelchair bound by the age of 12. By the third decade of life, these patients often experience
respiratory distress and heart failure, the leading causes of death in Duchenne. There is no known cure for Duchenne.
Figure 2: Progressive
muscle loss a hallmark of Duchenne muscular dystrophy
Duchenne is caused
by a change or mutation in the dystrophin gene that results in impairment to or loss of the dystrophin protein. Dr. Rudnicki demonstrated
that muscle stem cells require the dystrophin protein to properly and efficiently divide in an asymmetric fashion to generate muscle
progenitor cells and enable muscle regeneration. As a direct result of the loss of the dystrophin protein, their innate role in regenerating
muscle is severely impaired (Source: Dumont et al. 2015, Nature Medicine.). These findings suggest that, in addition to its commonly
recognized role in stabilizing muscle, the dystrophin protein has a second, previously unrecognized role as a signal transduction molecule.
Consequently, Satellos’ therapeutic strategy is to restore this signaling role of dystrophin by drug treatment and reset the muscle
regeneration process.
Supporting our
assertion that dysregulation of muscle stem cells is relevant to Duchenne pathogenesis, it was reported that amongst a large cohort of
over 400 Duchenne patients – some of whom maintained ambulation for a decade or longer than the majority of their peers –
genetic factors implicating effects on polarity and the regulation of muscle stem cell regeneration were identified within the ambulatory
population (Source: Flanigan et al. European Journal of Human Genetics). In further independent case reports, which we also believe
support our thesis, Drs. L. Kunkel and M. Zatz have postulated that random genetic mutations affecting Notch signaling may be responsible
for the existence of Duchenne humans who exhibit a milder disease course and who have continued to ambulate into their twenties despite
the complete absence of the dystrophin protein (Sources: Zatz et al., Neuromuscular Disorders, 11/2014; Kunkel and Zatz (unpublished).
They also have previously associated Notch signaling with muscle regeneration as published in the journal Cell in 2015 by Vieira
et al in a paper titled “Jagged 1 Rescues the Duchenne Muscular Dystrophy Phenotype”. The authors associated Jagged 1, a
ligand (or binder/activator) of Notch signaling, with the process of regeneration and as explaining how two (2) Golden Retriever
Muscular Dystrophy dogs were able to escape the Duchenne phenotype and live a normal life.
AAK1 Program
in Duchenne
Deploying
MyoReGenX™ to build on the identification and discovery of this previously unreported signaling role of dystrophin, in collaboration
with the Rudnicki lab, Satellos undertook a systematic assessment of molecular pathways for their potential to rescue asymmetric stem
cell divisions. The Company then evaluated and prioritized these pathways and further evaluated potential drug targets therein based
on their capacity to safely and effectively regulate muscle stem cell driven regeneration. From this exercise conducted over a multi-
year period, the Company identified and selected a particular protein kinase in the molecular signaling pathway known as “Notch”
or Adaptor Associated Kinase 1 (aka “AAK1”). Satellos has generated Proof of Concept (“POC”) preclinical
data in the Mdx mouse, a gold standard research model bearing the same genetic defect as patients with Duchenne, demonstrating
that treatment of these research mice via the Notch pathway through inhibition of AAK1 with SAT-3247 has potential to restore the process
by which stem cells enable ongoing muscle regeneration. Our preclinical studies in the mdx mouse model have further shown that modulating
the Notch molecular signaling pathway via inhibition of AAK1 and enabling regeneration has the potential to increase muscle force. Thus,
we believe represents a potential novel therapeutic approach for the treatment of Duchenne in humans. Figure 3 below depicts our understanding
of the mechanism by which our lead drug candidate, SAT-3247, affects the muscle stem cell mediated regeneration.
Figure 3 Satellos
Approach: Reset regeneration with SAT-3247
Of
particular interest to Satellos from a de-risking perspective, small molecule inhibitors of AAK1 have previously been described for non-muscle
related disease indications by an independent 3rd party company and have demonstrated what appear to be acceptable safety
profiles thus far in multiple human clinical trials spanning hundreds of patients (Lexicon
Pharmaceuticals Inc. 2022 10K filing pages 5&6 filed March 2, 2023). Not only do we believe this provides some initial
indications of the potential safety of AAK1 inhibition, but the existence of small molecule inhibitors of AAK1 indicated to the Company
that (a) it may be possible to develop its own, proprietary small molecule inhibitors of AAK1 to suit its purpose as well as (b) it
may also be able to quickly generate useful POC data.
The Company, in
collaboration with the OHRI, filed patent applications to provide intellectual property protection for selected pathways, prospective
drug targets and inhibitors related thereto. On June 29, 2022, the Company amended its License Agreement with OHRI to add a specific
patent application related to Notch, AAK1 (previously described as K9) and inhibitors thereof for the purpose of regeneration.
Furthermore, the
Company developed and has subsequently filed, in consultation with its IP counsel, for distinct patent protection of its novel small
molecule inhibitors of AAK1, including but not limited to SAT-3247.
The Company has
advanced SAT-3247 through IND enabling studies, GMP manufacturing, completed and publicly reported safety and PK results from a Phase
1a clinical trial in Q1 2025 (as noted earlier in this document), and expects to analyze and report results from a Phase 1b clinical
trial in Q2 2025. Further details on the development history highlights of SAT-3247 are provided below.
The FDA granted
both Orphan Drug Designation and Rare Pediatric Disease Designation to SAT-3247 for the potential treatment of Duchenne Muscular Dystrophy
(“DMD”). Orphan Drug Designation applies to therapies targeting rare diseases affecting fewer than 200,000 people
in the U.S. and provides benefits including seven- year market exclusivity upon approval, exemption from FDA application fees, tax credits
for clinical trials, and eligibility for a priority review voucher.
The Rare Pediatric
Disease Designation specifically supports treatments for serious and life-threatening conditions primarily affecting children under 18
years old. Under this program, drug sponsors may qualify for a priority review voucher upon approval, which can be used to accelerate
the review of a future marketing application for another product or sold to another sponsor. These designations recognize the unmet medical
need in DMD and provide regulatory and financial incentives to support SAT-3247's development.
Satellos announced
positive preclinical data presented at the March 2024 MDA Clinical and Scientific Conference showing that SAT-3247 can improve skeletal
muscle function in multiple mouse models of muscle degeneration. The preclinical data presented show the broad potential of SAT-3247
to improve skeletal muscle function as it has been demonstrated in three mouse models of muscle degeneration: mdx model of Duchenne,
FLExDUX4 model of FSHD, and a muscle injury model in wildtype mice. In all instances, treatment with SAT- 3247 over a three-to-four-week
period resulted in a statistically significant improvement in muscle force versus animals receiving placebo.
In September 2024,
the first participant in the first-in-human Phase 1a clinical trial was dosed in Australia following regulatory approvals. The trial
consisted of two components: a randomized, placebo-controlled study in healthy volunteers evaluating safety and PK across multiple dose
cohorts, and an open-label study in adults with genetically confirmed DMD examining safety, PK, and potential pharmacodynamic markers.
The healthy volunteer portion enrolled 72 participants across single ascending dose, multiple ascending dose, and food effect cohorts,
while the DMD component will include up to 10 participants receiving a single dose daily over 28 days.
In October 2024,
Satellos announced data presented at the 29th Annual Congress of the World Muscle Society in Prague. The presentation provided an overview
of key data collected during the open-label pilot study of SAT-3247 in a canine model of DMD. The data presented from the pilot study
demonstrates that treatment of two DMD Canines with SAT-3247 improved measures of strength to near normal levels.
In February 2025,
the Company announced that the SAD, MAD and food effect dose cohorts of the Phase 1 clinical trial had been fully enrolled and in March 2025,
the Company announced initial Phase 1 data in an oral presentation at the 2025 MDA conference as described above.
Satellos plans
to initiate a Phase 2 clinical trial in Duchenne patients in 2025 intended to demonstrate the potential for patient benefit from treatment
with SAT-3247. Please refer to the section “Regulatory Process” in the Company’s AIF for further details on the clinical
drug development process.
Follow-On
Program
There are more
than 30 types of muscular dystrophy that affect humans. Each of these dystrophies has different causes that manifest into conditions
ranging in severity from benign, small impairments to motor function, to the full loss of ambulation, or even death. Satellos has conducted
proof of concept preclinical studies in relevant animal disease models showing potential for benefit by restoring the muscle regeneration
process in Lama-2 Related Muscular Dystrophy (prevalence estimates between one in 50,000 and one in 400,000 births), Collagen- VI Related
Muscular Dystrophy (prevalence of severe form of the disease estimated to be one in 1,000,000 births) and FSHD (prevalence of 4 per 100,000
individuals). These represent potential follow-on disease indications or programs for Satellos to consider in the future. The Company
also plans to evaluate additional dystrophies as part of its ongoing research and development efforts.
REVIEW OF FINANCIAL RESULTS
The financial information
reported herein was derived from the condensed consolidated interim financial statements for the three months ended March 31 2025
and 2024.
Selected Financial Information
| | |
Three
months ended
March 31, 2025 | | |
Three
months ended
March 31, 2024 | |
| | |
$ | | |
$ | |
| R&D expenses | |
| 4,542 | | |
| 4,406 | |
| G&A expenses | |
| 1,937 | | |
| 1,722 | |
| Other (income)/expense | |
| (401 | ) | |
| (998 | ) |
| Income tax expense | |
| 63 | | |
| - | |
| Net loss | |
| (6,141 | ) | |
| (5,130 | ) |
| Basic and diluted net loss per
share | |
| (0.04 | ) | |
| (0.05 | ) |
| Total assets | |
| 44,368 | | |
| 28,228 | |
| Total non-current financial
liabilities | |
| - | | |
| - | |
We have not earned revenue in the current
quarter or any of the previous fiscal years.
For the three months
ended March 31, 2025, we reported a net loss of $6,141 ($0.04 loss per share), compared to a net loss of $5,130 ($0.05 loss per
share) for the three months ended March 31, 2024. The $1,011 increase in net loss for the three months ended March 31, 2025,
compared with the three months ended March 31, 2024, was a result of increased Research and Development (“R&D”)
expenses related to activities associated with SAT-3247, particularly clinical costs from the ongoing Phase 1 trial as well as preparation
for the planned Phase 2 clinical program, increased General and administrative (“G&A”) expenses due to headcount
changes in the current period as well as a decrease in other income primarily driven by the foreign exchange gains in the prior period
that were lower in the current period. The gain on foreign exchange was $8 for the three months ended 2025, compared to $671 in the comparative
period.
RESULTS
OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024
Research and
development (“R&D”) expenses:
| | |
Three
months ended
March 31, 2025 | | |
Three
months ended,
March 31, 2024 | |
| | |
$ | | |
$ | |
| Salaries and management
fees | |
| 762 | | |
| 892 | |
| Discovery expenses | |
| 144 | | |
| 179 | |
| Preclinical expenses | |
| 712 | | |
| 1,436 | |
| Chemistry,
manufacturing and controls (“CMC”) | |
| 317 | | |
| 1,569 | |
| Clinical expenses | |
| 2,335 | | |
| 53 | |
| Stock-based compensation | |
| 272 | | |
| 277 | |
| Total research and development
expenses | |
| 4,542 | | |
| 4,406 | |
Research and development
expenses increased by $136 to $4,542 for the three months ended March 31, 2025, compared to $4,406 for the three months ended March 31,
2024. Factors contributing to the increase in R&D expenses in the current year period are primarily the result of the following:
| · | Salaries
and management fees decreased by $130 for the three months ended March 31, 2025, compared
with the prior period. The decrease is mainly related to separation payments to an executive
in the comparative period. |
| · | Preclinical
expenses decreased by $724. The preclinical expense in the current period is related to long-
term toxicology work to support clinical development. In the comparative period, preclinical
expenses were related to pre-IND enabling studies conducted to support the regulatory filing,
and IND enabling studies for SAT-3247 as we prepared for clinical development. |
| · | CMC
expenses decreased by $1,252 as compared to the prior period, primarily due to CMC activities
in the prior period related to the process development and manufacturing of SAT-3247 for
clinical use, while current period costs mostly related to process development. |
| · | Clinical
expenses increased by $2,282 for the three months ended March 31, 2025 as compared to
the prior period. Clinical costs incurred in the current period are associated with the completion
of the Phase 1 healthy volunteer clinical study, ongoing work on Phase 1b component in adult
DMD patients and initial work on the planned Phase 2 clinical program. |
General and administrative:
| | |
Three
months ended
March 31, 2025 | | |
Three
months ended
March 31, 2024 | |
| | |
$ | | |
$ | |
| Salaries and management
fees | |
| 893 | | |
| 750 | |
| Professional fees | |
| 529 | | |
| 516 | |
| Other expenses | |
| 144 | | |
| 175 | |
| Stock-based compensation | |
| 370 | | |
| 279 | |
| Depreciation | |
| 1 | | |
| 2 | |
| Total general and administrative
expenses | |
| 1,937 | | |
| 1,722 | |
General and administrative
expenses increased by $215 to $1,937 for the three months ended March 31, 2025, as compared to $1,722 for the three months ended
March 31, 2024. Changes to the components for general and administrative expenses presented in the table above are primarily the
result of the following:
| · | Salaries
and management fees increased by $143 primarily related to increased staffing required to
support expanded operations and public company reporting requirements and a separation payment
in the current period. |
| · | Stock-based
compensation increased by $91 related to new grants issued in the current period. |
Other Income and expenses:
| |
|
Three
months ended
March 31, 2025 |
|
|
Three
months ended
March 31, 2024 |
|
| |
|
$ |
|
|
$ |
|
| Finance income |
|
|
393 |
|
|
|
328 |
|
| Loss on derivative financial instruments |
|
|
- |
|
|
|
(1 |
) |
| Foreign exchange gain |
|
|
8 |
|
|
|
671 |
|
| Total |
|
|
401 |
|
|
|
998 |
|
Other income and
expenses were a net income of $401 in the period ended March 31, 2025 and a net income of $998 in the comparative period.
Changes to the components for other income and expenses presented in the table above are primarily the result of the following:
| · | Finance
income increased in the current year by approximately $65 related to interest earned on cash
and cash equivalents and short-term investments from an increased balance as compared to
the prior year. |
| · | The
decrease in foreign exchange gain primarily reflects the change in the functional and presentation
currency from Canadian dollars to US dollars effective January 1, 2025. |
Summary of Quarterly
Results
The table below
is derived from unaudited quarterly results and was prepared by management for the eight previous quarters to March 31, 2025.
| | |
Q1
2025
$ | | |
Q4
2024
$ | | |
Q3
2024
$ | | |
Q2
2024
$ | | |
Q1
2024
$ | | |
Q4
2023
$ | | |
Q3
2023
$ | | |
Q2
2023
$ | |
| R&D Expense | |
4,542 | | |
3,999 | | |
2,387 | | |
3,567 | | |
4,406 | | |
2,620 | | |
2,044 | | |
1,167 | |
| G&A Expense | |
1,937 | | |
1,678 | | |
1,313 | | |
1,326 | | |
1,722 | | |
1,943 | | |
1,313 | | |
1,117 | |
| Other (income) and expenses | |
(401 | ) | |
(1,221 | ) | |
2,924 | | |
(469 | ) | |
(998 | ) | |
210 | | |
(682 | ) | |
784 | |
| Income taxes | |
63 | | |
- | | |
- | | |
- | | |
- | | |
- | | |
- | | |
- | |
| Net Loss | |
(6,141 | ) | |
(4,456 | ) | |
(6,624 | ) | |
(4,424 | ) | |
(5,130 | ) | |
(4,773 | ) | |
(2,675 | ) | |
(3,068 | ) |
| Loss per Share | |
(0.04 | ) | |
(0.03 | ) | |
(0.06 | ) | |
(0.04 | ) | |
(0.05 | ) | |
(0.04 | ) | |
(0.02 | ) | |
(0.03 | ) |
R&D expenses
increased in Q1 2025 and Q4 2024 as compared to prior quarters, due to clinical costs related to the Phase 1 (initiated at the end of
Q3 2024) and Phase 2 clinical programs. R&D expenses were high in Q1 2024 and Q2 2024 due to IND enabling studies and CMC manufacturing
in preparation of initiating our clinical program. G&A expenses have also increased in Q1 2025, primarily related to headcount changes.
Between Q2 2023 and Q4 2024, excluding Q3 2024, other income and expenses recorded primarily reflect foreign exchange gains and losses
on the Company’s cash and cash equivalents and investments held in USD and interest income earned on investments.
Net loss increased
in Q3 2024, because the Company recognized an impairment of $2,872 to fully write down the remaining carrying value of the AmpB intangible
asset.
LIQUIDITY AND
CAPITAL RESOURCES
Since inception,
the Company has devoted its resources to funding R&D programs, including securing intellectual property rights and licenses, conducting
discovery research, manufacturing drug supplies, initiating preclinical and clinical studies, and providing administrative support to
R&D activities, which has resulted in an accumulated deficit of $63,238 as of March 31, 2025. With no current revenues, losses
are expected to continue while the Company’s R&D programs are advanced.
We currently do
not earn any revenues from our product candidates and are therefore considered to be in the development stage. As required, the Company
will continue to finance its operations through the sale of equity or pursue non-dilutive funding sources available to the Company in
the future. The continuation of our research and development activities for our muscle regeneration platform is dependent upon our ability
to successfully finance and complete our research and development programs through a combination of equity financing and revenues from
strategic partners. We have no current sources of revenues from strategic partners. Management has forecasted that the Company’s
current level of cash will be sufficient to execute its current planned expenditures for more than the next 12 months without further
financing.
Cash Management
At March 31,
2025, the Company had cash and cash equivalents and short-term investments of $41,190, compared with $48,548 at December 31, 2024.
Cash utilized in operating activities for the period ended March 31, 2025, was $7,366, compared to the period ended March 31,
2024, of $5,521. The Company invests cash in excess of operational requirements in highly rated and liquid investments.
Net working capital
was $41,666 as of March 31, 2025, compared to a net working capital of $47,160 as of December 31, 2024.
Satellos’
main objectives in managing capital are to ensure cash resources are preserved and provide sufficient liquidity to finance research and
development activities, ongoing administrative costs and working capital. Since inception, Satellos has financed its operations from
private sales of equity, public sales of equity, convertible debt financing, non-convertible debenture financing, government grants and
investment tax credits. Since Satellos has not generated net earnings from operations, its ongoing liquidity depends on its ability to
access capital markets, which depends on the success of Satellos’ ongoing research and development programs, as well as capital
market conditions.
Satellos uses cash
flow forecasts to estimate cash requirements and has forecasted that our existing working capital is sufficient to operate the Company
and meet our announced goals for the ensuing twelve months. Based on future requirements, Satellos plans to raise capital as required
to provide the necessary financial resources for operations. The timing of financings will depend on market conditions and Satellos’
cash requirements. Satellos’ cash flow forecasts are continually updated to reflect actual cash inflows and outflows to monitor
the requirements and timing for additional financial resources.
Satellos will continue
to pursue various funding options and opportunities; however, no assurances can be made that Satellos will be successful in raising additional
investment capital, to continue as a going concern. Our ability to raise additional funds could be affected by adverse market conditions,
the status of our product pipeline, and various other factors and we may be unable to raise capital when needed, or on terms favorable
to us. If the necessary funds are not available, we may have to delay, reduce the scope of, or eliminate some of our development programs,
potentially delaying the time to market for any of our product candidates.
Equity Offering
December 2024
On December 20,
2024, the Company completed a public offering (the “December Equity Offering”), issuing 51,420,000 Common Shares
at CA$0.90 per Common Share and 11,865,000 Pre-Funded Warrants with no expiry date and an exercise price of CA$0.00001 for CA$0.89999
per Pre-Funded Warrant for gross proceeds of $41,823 ($CA56,956).
The costs associated
with the December Equity Offering were $3,240, including cash costs for commissions to the agents of approximately $2,907, professional
fees and regulatory costs of $253, and accrued professional and regulatory fees of $80.
Bloom Burton Securities
Inc., (“BBSI”), an entity jointly controlled by a director of Satellos, acted as exclusive agent and book running
manager for both the December Equity Offering and the May Equity Offering.
USE OF PROCEEDS
December 2024
Financing
The following table
provides an update on the milestones for the Duchenne program and the anticipated use of proceeds raised as part of the December Equity
Offering (as previously proposed in the final prospectus dated December 17, 2024, relating to the December Equity Offering
(the “December 2024 Prospectus”), along with the amounts actually expended.
| Development
Milestone |
|
Amount
to Spend
(as proposed in the Dec
2024 Prospectus) |
|
|
Adjustments |
|
|
Costs
Incurred to
Date |
|
|
Estimated
Remaining
Costs |
|
| Phase 2 clinical development
of SAT-3247 |
|
$ |
28,092 |
|
|
|
- |
|
|
$ |
1,454 |
|
|
$ |
26,638 |
|
| General corporate and administrative
expenses |
|
$ |
8,758 |
|
|
|
- |
|
|
|
- |
|
|
$ |
8,758 |
|
| Total |
|
$ |
36,850 |
|
|
|
|
|
|
$ |
1,454 |
|
|
$ |
35,396 |
|
May 2023
Financing
The following table
provides an update on the milestones for the Duchenne program and the anticipated use of proceeds raised as part of the public offering
completed by the Company on May 17, 2023 (the “May Equity Offering”) (as previously proposed in the final
prospectus dated May 9, 2023 relating to the May Equity Offering), along with the amounts actually expended.
The Company changed
its lead candidate from SAT-3153 to SAT-3247 following preclinical studies that demonstrated SAT-3247 had similar capacity to affect
stem cell polarity, enhance muscle regeneration, and improve muscle force in the mdx mouse model of Duchenne but also exhibited improved
oral bioavailability, target specificity, and tissue distribution, when compared directly to SAT-3153. SAT-3153 will serve as a back-
up candidate to SAT-3247.
Development
Milestone | |
Estimated
Completion | |
March 31,
2025
Status | |
Amount
to
Spend | | |
Adjustments | | |
Incurred
to Date | | |
Estimated
Remaining
Costs | |
| Complete
CMC Activities and GMP Manufacturing | |
Sept 2024 | |
Complete Q3 2024 | |
$ | 2,203 | | |
$ | 1,628 | | |
$ | (3,831 | ) | |
$ | - | |
| Complete
prescribed IND enabling studies and Preparation of IND/CTA Submissions | |
Sept 2024 | |
Complete Q3 2024 | |
$ | 7,710 | | |
$ | (35 | ) | |
$ | (7,675 | ) | |
$ | - | |
| Further
Discovery research on new drug targets / indications | |
Discovery
Work ongoing as of Sept 2025 | |
Further
discovery work on new drug targets and disease indications is ongoing and is expected to be completed by September 2025. ON
TRACK | |
$ | 1,836 | | |
$ | (147 | ) | |
$ | (1,625 | ) | |
$ | 64 | |
| Phase 1
Clinical Studies | |
Sept 2025 | |
The
Company initiated enrollment in the Phase 1a safety study comprised of SAD and MAD stages
in healthy volunteers in September 2024 and completed enrolment in Q1 2025. COMPLETE
The
Company initiated a Phase 1b PK study in Adult Duchenne patients in Q4 2024 and is expected to be complete in Q2 2025. A Phase 2
study will be initiated in 2025. ON TRACK. | |
$ | 12,116 | | |
$ | (3,446 | ) | |
$ | (6,556 | ) | |
$ | 2,114 | |
| G&A | |
| |
| |
$ | 12,520 | | |
$ | (2,103 | ) | |
$ | (8,917 | ) | |
$ | 1,500 | |
| Total | |
| |
| |
$ | 36,385 | | |
$ | (4,103 | ) | |
$ | (28,604 | ) | |
$ | 3,678 | |
These estimated
timelines and costs set out in the table above, reflect management’s best estimates and assume successful completion of manufacturing
activities, preclinical and toxicology studies showing safety and efficacy, regulatory approvals, and timely recruitment of patients
once clinical trials may begin.
Adjustments were
made to the originally proposed allocations as actual CMC costs were higher than planned due to additional work needed on drug formulation
and on development of the manufacturing process. These costs were offset by efficient progress related to the preclinical work required
to prepare and submit the initial regulatory package for SAT-3247. In addition, an adjustment was made to both the Phase 1 clinical cost
allocation and G&A cost allocation to reallocate a portion of the proceeds to working capital. These adjustments will not impact
the Company’s ability to achieve its stated business objectives and milestones.
License Agreements
Ottawa Hospital
Research Institute (“OHRI”)
Effective May 1,
2018, Satellos and OHRI entered into the OHRI License Agreement whereby OHRI granted Satellos an exclusive, world-wide, sublicensable,
royalty bearing right and license to a body of technology and patents comprised of five patent families to develop, make, have made,
import, use, offer for sale, sell and have sold or otherwise commercialize licensed products. At the same time the parties entered into
a sponsored research agreement, during the term of which OHRI has agreed to carry out specific research and development activities according
to a prescribed statement of work, as may be amended from time to time, under the direction of the Company’s co-founder, Dr. Michael
A. Rudnicki (the “OHRI SRA”). Under the OHRI SRA, Dr. Rudnicki leads a dedicated R&D team who are engaged
solely to execute the agreed R&D program of Satellos, under his direction and as defined in the statement of work.
Long-Term Obligations
and Other Contractual Commitments
The Company
enters into contracts in the normal course of business, including for research and development activities. As at March 31,
2025, in addition to amounts that have been recognized in accounts payable and accrued liabilities, the Company has commitments for
research and development activities in the amount of $2,832, most cancellable with notice. These commitments include agreements
related to the conduct of long- term toxicology and a clinical study.
| | |
Payments Due by Period |
|
| | |
Total | | |
Less
than 1 year | | |
1
-3 years | | |
4
– 5 years |
|
After
5 years |
|
| Purchase
obligations | |
$ | 2,832 | | |
$ | 2,680 | | |
$ | 152 | | |
nil |
|
nil |
|
The
Company may be required to make annual, milestone, royalty, and other research and development funding payments to OHRI under the OHRI
SRA and the OHRI License. These payments are contingent upon the achievement of specific development, regulatory and/or commercial milestones.
The Company’s significant contingent milestone, royalty and other research and development commitments are as follows:
| ● | Royalties
on net sales of any products covered by patents licensed from OHRI (“Licensed Products”)
of 1% or 2% (depending on which patents cover a particular product), during the period when
the applicable patents have valid, unexpired claims, subject to certain royalty stacking
provisions; |
| ● | The following payments to OHRI
may be triggered by specified events: |
| o | CA$50 -
each time a Licensed Product is the subject of an approved IND in the US or equivalent in
any other industrialized country (maximum one payment per new drug candidate); |
| o | CA$150 -
each time a Licensed Product first enters Phase II human clinical trials in the US or equivalent
in any other industrialized country (maximum one payment per new drug candidate); |
| o | CA$300 -
each time a Licensed Product first enters Phase III human clinical trials in the US or equivalent
in any other industrialized country (maximum one payment per new drug candidate); and |
| o | CA$1,000
- each time a Licensed Product is the subject of a regulatory approval in the US (such as
NDA and BLA) or equivalent in any other industrialized country (maximum one payment per new
drug candidate). |
| ● | 2%
of sublicensing income received by Satellos from the grant of sublicenses. |
TRANSACTIONS WITH RELATED PARTIES
The following related
parties have engaged in transactions with the Company during the three months ended March 31, 2025 and March 31, 2024.
Mr. Jarosz,
a director and former officer of the Company, is a related party to the Company and, as of March 31, 2024, was owed $545 by the
Company for work done in the three months ended March 31, 2024 as a consultant, officer and director. The outstanding balance was
fully settled in 2024.
| 2. | Key management personnel |
Key management
personnel consists of the Company’s Chief Executive Officer, Chief Scientific Officer, former Chief Medical Officer, former Chief
Business Officer, Chief Financial Officer and the Directors of the Corporation. The remuneration of key management personnel is as follows:
| | |
Three
months ended
March 31, 2025 | | |
Three
months ended
March 31, 2024 | |
| | |
| $ | | |
| $ | |
| Salaries and management
fees | |
| 662 | | |
| 735 | |
| Stock-based compensation | |
| 387 | | |
| 523 | |
| Total | |
| 1,049 | | |
| 1,258 | |
OFF-BALANCE SHEET ARRANGEMENTS
Satellos has not
entered into any material off-balance sheet arrangements.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Satellos is exposed
to various risks through its financial instruments as at March 31, 2025. The Company’s risk exposures and the impact on the
Company’s financial instruments are summarized below:
Credit Risk
Credit risk arises
from cash and cash equivalents and short-term investments held at banks and financial institutions, as well as outstanding receivables.
In the three months ended March 31, 2025, the Company invested its excess cash in interest-bearing operating accounts held at a
Schedule 1 Canadian bank and in US government treasury bills and Guaranteed Investment Certificates. The Company limits its exposure
to credit risk, with respect to cash and cash equivalents and short-term investments, by placing them with high quality credit
financial institutions. The Company's cash equivalents and short-term investments consist primarily of operating funds, US government
treasury bills, deposit investments and guaranteed investment certificates with commercial banks.
Liquidity Risk
Liquidity risk
is the risk that the Company will encounter difficulty in raising funds to meet cash flow requirements associated with financial instruments.
The Company controls liquidity risk through management of working capital, cash flows and the availability and sourcing of financing.
The Company’s ability to accomplish all of its future strategic plans is dependent on obtaining additional financing or executing
other strategic options; however, there is no assurance the Company will achieve these objectives. As at March 31, 2025, the Company’s
liabilities consist of accounts payable and accrued liabilities that have contracted maturities of less than one year.
Market Risk
Market risk is
the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and equity prices. These
fluctuations may be significant.
Currency
risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange
rates. The exposure to this risk changes as the exchange rate fluctuates. Foreign currency risk is limited to the portion of the Company’s
business transactions denominated in currencies other than the Canadian dollar, primarily expenses for research and development incurred
in US dollars. The Company manages foreign exchange risk by maintaining Canadian dollars in cash on hand to fund its short-term foreign
currency expenditures. Balances held in foreign currencies, presented in US dollars are as follows:
| |
|
As
at March 31, 2025 |
|
| |
|
US
$ |
|
|
Australian
$ |
|
|
Euro
€ |
|
|
Canadian
$ |
|
|
Total
$ |
|
| Cash and cash equivalents |
|
|
26,497 |
|
|
|
1,168 |
|
|
|
- |
|
|
|
5,047 |
|
|
|
32,712 |
|
| Short-term investments |
|
|
5,000 |
|
|
|
- |
|
|
|
- |
|
|
|
3,478 |
|
|
|
8,478 |
|
| Accounts payable and accrued liabilities |
|
|
(1,400 |
) |
|
|
(6 |
) |
|
|
(580 |
) |
|
|
(650 |
) |
|
|
(2,636 |
) |
| Total |
|
|
30,097 |
|
|
|
1,162 |
|
|
|
(580 |
) |
|
|
7,875 |
|
|
|
38,554 |
|
| |
|
As
at December 31, 2024 |
|
| |
|
US
$ |
|
|
Australian
$ |
|
|
Euro
€ |
|
|
Canadian
$ |
|
|
Total
$ |
|
| Cash and cash equivalents |
|
|
24,848 |
|
|
|
339 |
|
|
|
- |
|
|
|
14,886 |
|
|
|
40,073 |
|
| Short-term investments |
|
|
5,000 |
|
|
|
- |
|
|
|
- |
|
|
|
3,475 |
|
|
|
8,475 |
|
| Accounts payable and accrued liabilities |
|
|
(2,491 |
) |
|
|
(329 |
) |
|
|
(242 |
) |
|
|
(521 |
) |
|
|
(3,583 |
) |
| Total |
|
|
27,357 |
|
|
|
10 |
|
|
|
(242 |
) |
|
|
17,840 |
|
|
|
44,965 |
|
Assuming
all other variables remain constant, a 10% depreciation or appreciation of the US dollar against the Canadian dollar, Australian dollar
and Euro would result in an increase or decrease in loss and comprehensive loss for the three months ended March 31, 2025,
of $846 (March 31, 2024 - $1,761).
Interest
rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The Company holds its cash and cash equivalents and short- term investments in banks and financial institutions, and
manages its interest rate risk by holding cash in high yield savings accounts or highly liquid short-term investments.
Financial
assets and liabilities are recognized on the statement of financial position at amortized cost in a hierarchy that is based on significance
of the inputs used in making the measurements. The levels in the hierarchy are:
| · | Level
1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities |
| · | Level
2 – Inputs other than quoted prices included within level 1 that are observable for
the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from
prices) |
| · | Level
3 – Inputs for the asset or liability that are not based on observable market data
(i.e., unobservable inputs) |
At March 31,
2025, the Company's financial instruments included cash and cash equivalents and short- term investments, accounts receivable, and accounts
payable and accrued liabilities.
Due to
the short-term maturities of cash and cash equivalents and short-term investments and accounts payable and accrued liabilities, the carrying
amounts approximate fair value at the respective statement of financial position date.
CRITICAL ACCOUNTING
POLICIES AND ESTIMATES
The preparation
of our consolidated financial statements in accordance with IFRS Accounting Standards requires management to make judgements, estimates
and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.
The reported amounts and note disclosures reflect management’s best estimate of the most probable set of economic conditions and
planned course of actions. Actual results may differ from these estimates. In preparing these unaudited condensed consolidated interim
financial statements, the significant judgements made by management in applying our accounting policies and key sources of estimation
uncertainty are disclosed in the consolidated financial statements for the years ended December 31, 2024 and 2023.
DISCLOSURE CONTROLS
AND INTERNAL CONTROL OVER FINANCIAL REPORTING
The Company has
implemented a system of internal controls that it believes adequately protects the assets of the Company and is appropriate for the nature
of its business and the size of its operations. The internal control system was designed to provide reasonable assurance that all transactions
are accurately recorded, that transactions are recorded as necessary to permit preparation of financial statements in accordance with
IFRS Accounting Standards and that our assets are safeguarded.
Internal control
over financial reporting means a process designed by or under the supervision of the Chief Executive Officer and the Chief Financial
Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with IFRS Accounting Standards. The internal controls are not expected to prevent and detect
all misstatements due to error or fraud.
These internal
controls include disclosure controls and procedures designed to ensure that information required to be disclosed by the Company is accumulated
and communicated as appropriate to allow timely decisions regarding required disclosure.
There were no changes
in our internal control over financial reporting that occurred during the three months ended March 31, 2025 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
OUTSTANDING
SHARE DATA
As of the date
of this MD&A, the Company had the following issued and outstanding securities:
| Security | |
Number | |
| Common shares | |
| 165,885,462 | |
| Prefunded Warrants | |
| 51,567,780 | |
| Warrants | |
| 10,660,521 | |
| Stock options | |
| 23,374,112 | |
RISKS AND UNCERTAINTIES
We are a development
stage biopharmaceutical company that operates in an industry that is dependent on a number of factors that include the capacity to raise
additional capital on reasonable terms, obtain positive results of clinical trials, obtain positive results of clinical trials without
serious adverse or inappropriate side effects, and obtain market acceptance of its product. An investment in our Common Shares is subject
to a number of risks and uncertainties. An investor should carefully consider the risks described in our AIF, as well as our other public
filings with the securities regulators before investing in our Common Shares. If any of such described risks occur, or if others occur,
our business, operating results and financial condition could be seriously harmed, and investors may lose a significant proportion of
their investment. There are important risks which management believes could impact our business. For information on risks and uncertainties,
please refer to the “Risk Factors” section of our most recent AIF filed on SEDAR+ at www.sedarplus.ca.
ADDITIONAL INFORMATION
Additional information related to Satellos,
including the AIF, is available by accessing the Company’s SEDAR+ profile at www.sedarplus.ca.
Exhibit 4.7
SATELLOS
BIOSCIENCE INC.
Condensed
Consolidated Interim Financial Statements
For the three and six months ended June 30,
2025 and 2024 (Unaudited)
SATELLOS BIOSCIENCE INC.
Condensed Consolidated Interim Statements of Financial Position
(Expressed in thousands of US Dollars)
(Unaudited)
| As at, | |
Notes | | |
June 30,
2025 | | |
December 31,
2024 | | |
January 1,
2024 | |
| | |
| | |
$ | | |
$
(Notes 2 and 16) | | |
$
(Notes 2 and 16) | |
| ASSETS | |
| | |
| | | |
| | | |
| | |
| Current | |
| | |
| | | |
| | | |
| | |
| Cash and cash equivalents | |
3 | | |
| 38,217 | | |
| 40,073 | | |
| 16,681 | |
| Short-term investments | |
4 | | |
| - | | |
| 8,475 | | |
| 13,246 | |
| Sales tax and other receivables | |
| | |
| 186 | | |
| 435 | | |
| 441 | |
| Prepaid expenses and deposits | |
5 | | |
| 2,709 | | |
| 1,760 | | |
| 112 | |
| Derivative financial instruments, net | |
| | |
| - | | |
| - | | |
| 3 | |
| Total current assets | |
| | |
| 41,112 | | |
| 50,743 | | |
| 30,483 | |
| | |
| | |
| | | |
| | | |
| | |
| Property and equipment | |
| | |
| 5 | | |
| 4 | | |
| 15 | |
| Assets held for sale | |
| | |
| | | |
| | | |
| | |
| Intangible asset | |
| | |
| - | | |
| - | | |
| 2,961 | |
| Investments | |
| | |
| - | | |
| - | | |
| 31 | |
| | |
| | |
| 5 | | |
| 4 | | |
| 3,007 | |
| TOTAL ASSETS | |
| | |
| 41,117 | | |
| 50,747 | | |
| 33,490 | |
| | |
| | |
| | | |
| | | |
| | |
| LIABILITIES | |
| | |
| | | |
| | | |
| | |
| | |
| | |
| | | |
| | | |
| | |
| Accounts payable and accrued liabilities | |
6 | | |
| 2,770 | | |
| 3,583 | | |
| 2,734 | |
| Total current liabilities | |
| | |
| 2,770 | | |
| 3,583 | | |
| 2,734 | |
| Total Liabilities | |
| | |
| 2,770 | | |
| 3,583 | | |
| 2,734 | |
| | |
| | |
| | | |
| | | |
| | |
| SHAREHOLDERS’ EQUITY | |
| | |
| | | |
| | | |
| | |
| | |
| | |
| | | |
| | | |
| | |
| Common shares | |
| | |
| 82,512 | | |
| 78,131 | | |
| 47,335 | |
| Pre-funded warrants | |
| | |
| 17,581 | | |
| 19,967 | | |
| 13,050 | |
| Contributed surplus | |
| | |
| 8,775 | | |
| 7,900 | | |
| 6,472 | |
| Accumulated deficit | |
| | |
| (68,846 | ) | |
| (57,097 | ) | |
| (36,463 | ) |
| Accumulated other comprehensive income/(loss) | |
| | |
| (1,675 | ) | |
| (1,737 | ) | |
| 362 | |
| Total shareholders’ equity | |
| | |
| 38,347 | | |
| 47,164 | | |
| 30,756 | |
| | |
| | |
| | | |
| | | |
| | |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | |
| | |
| 41,117 | | |
| 50,747 | | |
| 33,490 | |
Commitments and Contingencies (Note 11)
The accompanying notes are an integral part of these condensed consolidated
interim financial statements.
SATELLOS BIOSCIENCE INC.
Condensed Consolidated Interim Statements of Loss and Comprehensive
Loss
(Expressed in thousands of US Dollars, except for per share amounts)
(Unaudited)
| | |
| | |
Three months ended
June 30, | | |
Six months ended
June 30, | |
| | |
Notes | | |
2025 | | |
2024 | | |
2025 | | |
2024 | |
| | |
| | |
$ | | |
$ | | |
$ | | |
$ | |
| | |
| | |
| | |
(Notes 2, 16) | | |
| | |
(Notes 2, 16) | |
| EXPENSES | |
| | |
| | | |
| | | |
| | | |
| | |
| Research and development expenses | |
10 | | |
| 4,435 | | |
| 3,567 | | |
| 8,977 | | |
| 7,973 | |
| General and administrative expenses | |
10 | | |
| 1,932 | | |
| 1,326 | | |
| 3,869 | | |
| 3,048 | |
| LOSS FROM OPERATING
ACTIVITIES: | |
| | |
| (6,367 | ) | |
| (4,893 | ) | |
| (12,846 | ) | |
| (11,021 | ) |
| | |
| | |
| | | |
| | | |
| | | |
| | |
| OTHER INCOME AND EXPENSES | |
| | |
| | | |
| | | |
| | | |
| | |
| Finance income | |
| | |
| 362 | | |
| 261 | | |
| 755 | | |
| 589 | |
| Loss on derivatives | |
| | |
| - | | |
| (1 | ) | |
| - | | |
| (2 | ) |
| Foreign exchange gain | |
| | |
| 429 | | |
| 209 | | |
| 437 | | |
| 880 | |
| NET LOSS BEFORE INCOME TAXES | |
| | |
| (5,576 | ) | |
| (4,424 | ) | |
| (11,654 | ) | |
| (9,554 | ) |
| | |
| | |
| | | |
| | | |
| | | |
| | |
| Income taxes | |
| | |
| (32 | ) | |
| - | | |
| (95 | ) | |
| - | |
| | |
| | |
| | | |
| | | |
| | | |
| | |
| NET LOSS FOR THE
PERIOD | |
| | |
| (5,608 | ) | |
| (4,424 | ) | |
| (11,749 | ) | |
| (9,554 | ) |
| | |
| | |
| | | |
| | | |
| | | |
| | |
| OTHER COMPREHENSIVE LOSS | |
| | |
| | | |
| | | |
| | | |
| | |
| Items that may be reclassified to net loss Foreign currency translation adjustments | |
| | |
| 60 | | |
| (287 | ) | |
| 62 | | |
| (1,001 | ) |
| TOTAL COMPREHENSIVE
LOSS | |
| | |
| (5,548 | ) | |
| (4,711 | ) | |
| (11,687 | ) | |
| (10,555 | ) |
| | |
| | |
| | | |
| | | |
| | | |
| | |
| Basic and diluted
loss per share | |
| | |
$ | (0.03 | ) | |
$ | (0.04 | ) | |
$ | (0.07 | ) | |
$ | (0.08 | ) |
| | |
| | |
| | | |
| | | |
| | | |
| | |
Weighted average number of common shares
(basic & diluted) | |
7 | | |
| 171,226,830 | | |
| 112,796,646 | | |
| 168,540,580 | | |
| 112,794,152 | |
The accompanying notes are an integral part of these condensed consolidated
interim financial statements.
SATELLOS BIOSCIENCE INC.
Condensed Consolidated Interim Statements of Changes in Shareholders’
Equity
(Expressed in thousands of US Dollars)
(Unaudited)
For the six months ended June 30,
2025 and 2024
| | |
Common
Shares | | |
Common
Shares | | |
Pre-funded
Warrants | | |
Pre-funded
Warrants | | |
Contributed
Surplus | | |
Accumulated
Deficit | | |
Accumulated
Other
Comprehensive
Loss | | |
Total
Shareholders’
Equity | |
| | |
Number | | |
$ | | |
Number | | |
$ | | |
$ | | |
$ | | |
$ | | |
| |
| Balance - December 31, 2023
(Notes 2 and 16) | |
112,791,658 | | |
47,335 | | |
39,702,780 | | |
13,050 | | |
6,472 | | |
(36,463 | ) | |
362 | | |
30,756 | |
| Exercise of warrants (Note 8) | |
40,531 | | |
17 | | |
- | | |
- | | |
(5 | ) | |
- | | |
- | | |
12 | |
| Stock-based compensation (Note
9) | |
- | | |
- | | |
- | | |
- | | |
1,074 | | |
- | | |
- | | |
1,074 | |
| Net loss for the period | |
- | | |
- | | |
- | | |
- | | |
- | | |
(9,554 | ) | |
- | | |
(9,554 | ) |
| Foreign currency translation
adjustment | |
- | | |
- | | |
- | | |
- | | |
- | | |
- | | |
(1,001 | ) | |
(1,001 | ) |
| Balance – June 30, 2024 (Notes
2 and 16) | |
112,832,189 | | |
47,352 | | |
39,702,780 | | |
13,050 | | |
7,541 | | |
(46,017 | ) | |
(639 | ) | |
21,287 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Balance - December 31, 2024 (Notes
2 and 16) | |
165,819,872 | | |
78,131 | | |
51,567,780 | | |
19,967 | | |
7,900 | | |
(57,097 | ) | |
(1,737 | ) | |
47,164 | |
| Exercise of warrants (Note 8) | |
3,885,587 | | |
1,995 | | |
- | | |
- | | |
(601 | ) | |
- | | |
- | | |
1,394 | |
| Common shares issued in connection
with the exercise of pre-funded warrants (Note 7) | |
6,599,900 | | |
2,386 | | |
(6,600,000 | ) | |
(2,386 | ) | |
- | | |
- | | |
- | | |
- | |
| Stock-based compensation (Note
9) | |
- | | |
- | | |
- | | |
- | | |
1,476 | | |
- | | |
- | | |
1,476 | |
| Net loss for the period | |
- | | |
- | | |
- | | |
- | | |
- | | |
(11,749 | ) | |
- | | |
(11,749 | ) |
| Foreign currency translation
adjustment | |
- | | |
- | | |
- | | |
- | | |
- | | |
- | | |
62 | | |
62 | |
| Balance – June 30, 2025 | |
176,305,359 | | |
82,512 | | |
44,967,780 | | |
17,581 | | |
8,775 | | |
(68,846 | ) | |
(1,675 | ) | |
38,347 | |
The accompanying notes are an integral part of these condensed consolidated
interim financial statements.
SATELLOS BIOSCIENCE INC.
Condensed Consolidated Interim Statements of Cash Flows
(Expressed in thousands of US Dollars)
(Unaudited)
| For the six months ended, | |
Notes | | |
June 30, 2025 | | |
June 30, 2024 | |
| | |
| | |
$ | | |
$ | |
| | |
| | |
| | |
(Notes 2 and 16) | |
| CASH AND CASH EQUIVALENTS PROVIDED BY (USED IN): | |
| | |
| | | |
| | |
| | |
| | |
| | | |
| | |
| OPERATING ACTIVITIES | |
| | |
| | | |
| | |
| Net loss for the period | |
| | |
| (11,749 | ) | |
| (9,554 | ) |
| Items not affecting cash: | |
| | |
| | | |
| | |
| Depreciation of property and equipment | |
| | |
| 1 | | |
| 4 | |
| Stock-based compensation | |
9 | | |
| 1,476 | | |
| 1,076 | |
| Loss on derivative financial instruments | |
| | |
| - | | |
| 2 | |
| Non-cash finance income | |
| | |
| - | | |
| (314 | ) |
| Unrealized
foreign exchange gain | |
| | |
| (391 | ) | |
| (663 | ) |
| Net change in non-cash working capital balances: | |
| | |
| | | |
| | |
| Sales tax and other receivables | |
| | |
| 249 | | |
| (292 | ) |
| Prepaid expenses and deposits | |
| | |
| (949 | ) | |
| (240 | ) |
| Accounts payable and accrued liabilities | |
| | |
| (846 | ) | |
| 182 | |
| | |
| | |
| (12,209 | ) | |
| (9,799 | ) |
| | |
| | |
| | | |
| | |
| FINANCING ACTIVITIES | |
| | |
| | | |
| | |
| Proceeds from exercise of warrants | |
| | |
| 1,394 | | |
| 12 | |
| | |
| | |
| | | |
| | |
| INVESTING ACTIVITIES | |
| | |
| | | |
| | |
| Purchases of short-term investments | |
| | |
| - | | |
| (18,398 | ) |
| Maturities of short-term investments | |
| | |
| 8,475 | | |
| 19,022 | |
| Purchase of property and equipment | |
| | |
| (3 | ) | |
| (4 | ) |
| | |
| | |
| 8,472 | | |
| 620 | |
| | |
| | |
| | | |
| | |
| Effect of foreign currency exchange rates on cash and cash equivalents | |
| | |
| 487 | | |
| (362 | ) |
| | |
| | |
| | | |
| | |
| INCREASE IN CASH AND CASH EQUIVALENTS | |
| | |
| (1,856 | ) | |
| (9,529 | ) |
| | |
| | |
| | | |
| | |
| CASH AND CASH EQUIVALENTS – Beginning of period | |
| | |
| 40,073 | | |
| 16,681 | |
| | |
| | |
| | | |
| | |
| CASH AND CASH EQUIVALENTS – End of period | |
| | |
| 38,217 | | |
| 7,152 | |
| | |
| | |
| | | |
| | |
| Cash interest received | |
| | |
| 671 | | |
| 268 | |
The accompanying notes are an integral part of these condensed consolidated
interim financial statements.
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim Financial Statements (unaudited)
For the three and six months ended June 30, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
| 1. | Description of Business |
Satellos Bioscience Inc. (“Satellos”
or the “Company”) is a Canadian biotechnology and drug development company incorporated under the laws of Canada.
The head office, principal address, and records of the Company are located at Royal Bank Plaza, South Tower, 200 Bay Street, Suite 2800,
Toronto, Ontario M5J 2J1 Canada and the Company’s common shares (“Common Shares”) are listed on the Toronto
Stock Exchange (“TSX”).
The Company has wholly owned subsidiaries
in Australia, (Satellos Bioscience Australia Pty Ltd) in Canada Amphotericin B Technologies, Inc., (AmpB) and in Delaware, USA (Satellos
Bioscience US, Inc.).
Subsequent to the quarter ended June 30,
2025, the Company completed the sale of its wholly owned subdiary, AmpB, as part of a strategic portfolio review. This divestiture does
not impact the Company’s core operations or ongoing business activities.
| 2. | Basis of Presentation and Material Accounting Policies |
The Company prepares its condensed
consolidated interim financial statements in accordance with International Financial Reporting Standards as issued by the International
Accounting Standards Board (IFRS Accounting Standards) applicable to the preparation of condensed consolidated interim financial statements,
including International Accounting Standard 34, Interim Financial Reporting. These condensed consolidated interim financial statements
should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2024, which
were prepared in accordance with IFRS Accounting Standards.
Certain comparative figures have been
reclassified to conform to the current period presentation. These reclassifications had no material impact on previously reported net
income, total assets, or equity.
These consolidated
financial statements were approved and authorized for issue by the Board of Directors on August 12, 2025.
Functional and Presentation Currency
Effective January 1, 2025, Satellos
Bioscience Inc. adopted the United States dollar (“USD”) as its functional currency. Prior to this date, the functional currency
was the Canadian dollar (“CAD”). The change in the functional currency from CAD to USD was made to more closely reflect the
primary economic environment in which the Company currently operates. As a result of the advancement of the Company’s development
programs, the Company incurred and anticipated incurring the majority of future operating costs including research and development costs
primarily in USD. On January 1, 2025, the change in functional currency resulted in the assets and liabilities of the Company as
of December 31, 2024 being translated into USD using the exchange rate in effect on that date, and equity transactions were translated
at historical rates. The change in functional currency was applied prospectively from January 1, 2025.
During the period ended March 31,
2025, the Company also changed its presentation currency from CAD to USD. The change in presentation currency was made to better reflect
the Company’s business activities and to improve investor’s ability to compare the Company’s financial results with
other publicly traded business in the industry. In making the change to a USD presentation currency, the Company followed the guidance
in IAS 21. The Effects of Changes in Foreign Exchange Rates (IAS 21) and has applied the change retrospectively as if the new presentation
currency had always been the Company's presentation currency. In accordance with IAS 21, the financial statements for all the periods
presented have been translated to the new USD presentation currency. For comparative balances, assets and liabilities have been translated
into the presentation currency at the rate of exchange prevailing at the reporting date, or at the exchange rate prevailing at the date
of the transactions. Exchange rate differences arising on translation are taken to other comprehensive loss/(income). The Company has
presented the effects of the change in the presentation currency, see note 16.
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim Financial Statements (unaudited)
For the three and six months ended June 30, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
Significant Accounting Judgements,
Estimates and Assumptions
The preparation
of these condensed consolidated interim financial statements in accordance with IFRS Accounting Standards requires management to make
judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the condensed consolidated interim financial statements and reported
amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
The condensed consolidated interim
financial statements include estimates, which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout
the condensed consolidated interim financial statements and may require accounting adjustments based on future occurrences. The estimates
and underlying assumptions are reviewed on a regular basis. Revisions to accounting estimates are accounted for prospectively.
There have been no material changes
to the nature of estimates and judgments reported in the Company’s audited consolidated financial statements for the year ended
December 31, 2024.
Material Accounting Policies
The accounting policies applied in
these condensed consolidated interim financial statements are the same as those applied in our audited consolidated financial statements
for the year ended December 31, 2024.
New and Amended Standards and Interpretations
New standards, amendments and interpretations issued
but not yet effective
At the date of authorization of these
condensed consolidated interim financial statements, the Company had not applied the following new and revised IFRS Accounting Standards
that are not yet effective.
Amendments to IFRS 9, Financial instruments and IFRS
7, Financial instruments: Disclosures
The IASB has issued classification
and measurement and disclosure amendments to IFRS 9 and IFRS 7 with an effective date for years beginning on or after January 1,
2026 with earlier application permitted. The amendments clarify the date of recognition and derecognition of some financial assets and
liabilities and introduce a new exception for some financial liabilities settled through an electronic payment system. Other changes
include a clarification of the requirements when assessing whether a financial asset meets the solely payments of principal and interest
criteria and new disclosures for certain instruments with contractual terms that can change cash flows (including instruments where cash
flows changes are linked to environment, social or governance (ESG) targets). The Company has not yet commenced the evaluation of the
impact of these amendments.
New accounting standard IFRS 18, Presentation and disclosure
in financial statements
IFRS 18, Presentation and Disclosure
in Financial Statements (IFRS 18) will provide new presentation and disclosure requirements and replace IAS 1, Presentation of Financial
Statements. IFRS 18 introduces changes to the structure of the income statement; provides required disclosures in financial statements
for certain profit or loss performance measures that are reported outside an entity’s financial statements; and provides enhanced
principles on aggregation and disaggregation in financial statements. Many other existing principles in IAS 1 have been maintained. IFRS
18 is effective for years beginning on or after January 1, 2027, with earlier application permitted. The Company has not yet commenced
the evaluation of the impact of the new standard.
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim Financial Statements (unaudited)
For the three and six months ended June 30, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
| 3. | Cash and Cash Equivalents |
Cash and cash equivalents consist of the following:
| | |
June 30, 2025 | | |
December 31, 2024 | |
| | |
$ | | |
$ | |
| Cash balances with banks | |
| 10,215 | | |
| 24,385 | |
| Short-term instruments | |
| 28,002 | | |
| 15,688 | |
| Total cash and cash equivalents | |
| 38,217 | | |
| 40,073 | |
Short-term investments with initial maturities greater than
three months and less than one year consist of the following:
| | |
June 30, 2025 | | |
December 31, 2024 | |
| | |
$ | | |
$ | |
| Guaranteed Investment Certificates | |
| - | | |
| 8,475 | |
| Total | |
| - | | |
| 8,475 | |
| 5. | Prepaid expenses and deposits |
Prepaid expenses and deposits primarily consist of advance
payments for contract research services required for ongoing clinical trials, subscriptions and other general and administrative items.
| | |
June 30, 2025 | | |
December 31, 2024 | |
| | |
$ | | |
$ | |
| Research and development deposits | |
| 2,429 | | |
| 1,580 | |
| Other prepaids and deposits | |
| 280 | | |
| 180 | |
| Total prepaid expenses and deposits | |
| 2,709 | | |
| 1,760 | |
| 6. | Accounts Payables and Accrued Liabilities |
| | |
June 30, 2025 | | |
December 31, 2024 | |
| | |
| $ | | |
| $ | |
| Trade payables | |
| 1,060 | | |
| 2,063 | |
| Accrued liabilities | |
| 1,615 | | |
| 1,520 | |
| Income taxes payables | |
| 95 | | |
| - | |
| Total accounts payables and accrued liabilities | |
| 2,770 | | |
| 3,583 | |
| 7. | Share Capital and Pre-Funded Warrants Authorized |
The authorized share capital of the Company consists of
an unlimited number of common shares.
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim Financial Statements (unaudited)
For the three and six months ended June 30, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
Loss per share
Loss per share is calculated using the weighted average
number of Common Shares outstanding. For the three and six months ended June 30, 2025 and 2024, the calculation was as follows:
| | |
Three months ended
June 30, | | |
Six months ended
June 30, | |
| | |
2025 | | |
2024 | | |
2025 | | |
2024 | |
| Net loss | |
$ | 5,608 | | |
$ | 4,424 | | |
$ | 11,749 | | |
$ | 9,554 | |
| Weighted average number of Common Shares | |
| 171,226,830 | | |
| 112,796,646 | | |
| 168,540,580 | | |
| 112,794,152 | |
| Net loss per share – basic and diluted | |
$ | (0.03 | ) | |
$ | (0.04 | ) | |
$ | (0.07 | ) | |
$ | (0.08 | ) |
The effect of any potential exercise of the Company’s
stock options, pre-funded warrants and warrants outstanding during the period has been excluded from the calculation of diluted loss
per Common Share as it would be anti-dilutive.
May 2023 Equity Offering
On May 17, 2023, the Company completed
an equity offering (the “Equity Offering”), issuing either common shares at CA $0.50 per common share (the “Common
Shares”) or pre-funded common share purchase warrants with no expiry date for CA $0.49999 per pre-funded common share purchase
warrant (“Pre-Funded Warrants“, and, collectively with the Common Shares, the “Securities”). Investors purchased
70,297,220 Common Shares and 39,702,780 Pre-Funded Warrants for gross proceeds of $40,397. On May 13, 2025, 6,599,900 common shares
were issued upon the exercise of 6,600,000 pre-funded warrants at an exercise price of CA $0.00001 per Pre-Funded Warrant. During the
six months ended June 30, 2025, the fair value of $0.36155 per Pre-Funded Warrant, was reclassified from Pre-funded Warrants to
Common Shares within shareholder’s equity for a total amount of $2,386.
Warrants have been issued as part of
equity financings and include compensation to agents and brokers of the Company. Pre-Funded Warrants and are listed separately on the
condensed consolidated interim statement of financial position and on the condensed consolidated statement of changes in shareholder’s
equity and are excluded from the tables below. The following is a summary of changes in warrants:
| |
|
Six months ended,
June 30, 2025 |
|
|
Six months ended,
June 30, 2024 |
|
| |
|
Number of
warrants |
|
|
Weighted
average exercise
price |
|
|
Number of
warrants |
|
|
Weighted
average exercise
price |
|
| Outstanding, beginning of period |
|
|
10,726,111 |
|
|
|
CA$0.53 |
|
|
|
12,346,419 |
|
|
|
CA$0.53 |
|
| Exercised |
|
|
(3,885,587 |
) |
|
|
CA$0.50 |
|
|
|
(40,531 |
) |
|
|
CA$0.40 |
|
| Expired |
|
|
(3,376,524 |
) |
|
|
CA$0.50 |
|
|
|
- |
|
|
|
- |
|
| Outstanding, end of period |
|
|
3,464,000 |
|
|
|
CA$0.60 |
|
|
|
12,305,888 |
|
|
|
CA$0.53 |
|
The table below presents the outstanding warrants as at
June 30, 2025:
| Exercise Price | |
Number of Warrants | | |
Expiry Date | |
| CA$0.60 | |
| 3,464,000 | | |
| September 13, 2025 | |
| Total warrants | |
| 3,464,000 | | |
| | |
| 9. | Stock-Based Compensation |
Effective May 14, 2024, the Company
adopted a new omnibus equity incentive plan (“Omnibus Plan”) which authorizes the Board of Directors to administer
the Omnibus Plan to provide equity-based compensation in the form of stock options and restricted stock units.
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim Financial Statements (unaudited)
For the three and six months ended June 30, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
The Company currently maintains its
existing Amended and Restated Incentive Stock Option Plan (“Option Plan”) but effective May 14, 2024 no further
grants will be made under this plan though existing grants under the Option Plan will remain in effect in accordance with their terms.
The aggregate number of common shares that may be issued
under all awards under the Omnibus Plan and the Option Plan is 15% of our issued and outstanding common shares on a rolling basis.
Under both the Omnibus Plan and the
Option Plan, the exercise price of each option equals the market price of the underlying share on the date of the grant. Vesting is provided
for at the discretion of the Board of Directors and the expiration of options is to be no greater than 10 years from the date of grant.
The Company calculates the fair value
of each stock option grant using the Black-Scholes option pricing model at the grant date.
The stock-based compensation expense of the stock options
is recognized as stock-based compensation expense over the relevant vesting period of the stock options using an estimate of the number
of options that will eventually vest.
Stock option transactions for the six months ended June 30,
2025, and June 30, 2024, are presented below:
| |
Six months ended,
June 30, 2025 | |
Six months ended,
June 30, 2024 | |
| | |
Number of
options | | |
Weighted average
exercise price | | |
Number of
options | | |
Weighted average
exercise price | |
| Outstanding, beginning of period | |
| 13,879,589 | | |
| CA$0.73 | | |
| 14,134,363 | | |
| CA$0.71 | |
| Granted | |
| 10,399,617 | | |
| CA$0.77 | | |
| 430,000 | | |
| CA$0.53 | |
| Forfeited and expired | |
| (175,620 | ) | |
| CA$1.51 | | |
| (24,600 | ) | |
| CA$1.64 | |
| Outstanding, end of period | |
| 24,103,586 | | |
| CA$0.74 | | |
| 14,539,763 | | |
| CA$0.71 | |
As at June 30, 2025, the Company had the following
outstanding options:
| | | |
| | |
Options Outstanding | | |
Options Exercisable |
| Exercise Prices | | |
Number of
options | | |
Weighted
average
remaining
contractual life | | |
Weighted
average
exercise price | | |
Number of
options | | |
Weighted
average
exercise price |
| $0.33-$0.50 | | |
| 4,287,810 | | |
| 7.98 | | |
| CA$0.42 | | |
| 2,312,086 | | |
$ | 0.41 |
| $0.51-$0.66 | | |
| 7,455,235 | | |
| 8.23 | | |
| CA$0.59 | | |
| 3,566,792 | | |
$ | 0.60 |
| $0.67-$1.70 | | |
| 12,360,541 | | |
| 8.98 | | |
| CA$0.95 | | |
| 2,131,202 | | |
$ | 1.63 |
| | | |
| 24,103,586 | | |
| 8.49 | | |
| CA$0.74 | | |
| 8,010,080 | | |
$ | 0.82 |
The following table presents the assumptions that were used
in the Black-Scholes option pricing model to determine the fair value of stock options granted during the period, and the resultant average
fair values:
| | |
Six months ended,
June 30, 2025 | | |
Six months ended,
June 30, 2024 | |
| Expected life of stock options | |
| 10 years | | |
| 10 years | |
| Expected weighted average volatility | |
| 83.9 | % | |
| 79.9 | % |
| Expected dividend yield | |
| nil | % | |
| nil | % |
| Weighted average risk-free interest rate | |
| 3.02 | % | |
| 3.38 | % |
| Weighted average fair value of stock options granted in the period | |
$ | 0.46 | | |
$ | 0.32 | |
Due to the absence of volatility rates specific to the Company,
the Company selected comparable companies in a similar industry to estimate a volatility rate.
During the three and six months ended
June 30, 2025, $834 (2024 - $518) and $1,476 (2024 - $1,074), respectively, were recognized as stock-based compensation expense.
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim Financial Statements (unaudited)
For the three and six months ended June 30, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
Research and development expenses:
| | |
Three months ended
June 30, | | |
Six months ended
June 30, | |
| | |
2025 | | |
2024 | | |
2025 | | |
2024 | |
| | |
$ | | |
$ | | |
$ | | |
$ | |
| Salaries and fees | |
| 759 | | |
| 609 | | |
| 1,521 | | |
| 1,501 | |
| Discovery expenses | |
| 186 | | |
| 172 | | |
| 330 | | |
| 351 | |
| Preclinical expenses | |
| 569 | | |
| 1,686 | | |
| 1,281 | | |
| 3,122 | |
| Chemistry, manufacturing controls | |
| 207 | | |
| 409 | | |
| 524 | | |
| 1,978 | |
| Clinical | |
| 2,348 | | |
| 485 | | |
| 4,683 | | |
| 538 | |
| Stock-based compensation | |
| 366 | | |
| 206 | | |
| 638 | | |
| 483 | |
| Total research and development expenses | |
| 4,435 | | |
| 3,567 | | |
| 8,977 | | |
| 7,973 | |
General and administrative:
| | |
Three months ended
June 30, | | |
Six months ended
June 30, | |
| | |
2025 | | |
2024 | | |
2025 | | |
2024 | |
| | |
$ | | |
$ | | |
$ | | |
$ | |
| Salaries and board fees | |
| 849 | | |
| 541 | | |
| 1,742 | | |
| 1,291 | |
| Professional fees | |
| 427 | | |
| 332 | | |
| 956 | | |
| 848 | |
| Other operating expenses | |
| 187 | | |
| 137 | | |
| 331 | | |
| 312 | |
| Stock-based compensation | |
| 468 | | |
| 314 | | |
| 838 | | |
| 593 | |
| Depreciation | |
| 1 | | |
| 2 | | |
| 2 | | |
| 4 | |
| Total general and administrative expenses | |
| 1,932 | | |
| 1,326 | | |
| 3,869 | | |
| 3,048 | |
| 11. | Commitments and Contingencies |
The Company enters into contracts in
the normal course of business, including for research and development activities. As at June 30, 2025, in addition to amounts that
have been recognized in accounts payable and accrued liabilities, the Company has commitments for research and development activities
in the amount of $17,728, most cancellable with notice. These commitments include agreements related to the conduct of long-term toxicology
and clinical development.
| | |
Payments Due by Period | |
| | |
Total | | |
Less than 1 year | | |
1 -3 years | | |
4 – 5 years | | |
After 5 years | |
| Purchase obligations | |
$ | 17,728 | | |
$ | 10,468 | | |
$ | 7,260 | | |
| nil | | |
| nil | |
The Company may be required to make
milestone, royalty, and other research and development funding payments under research and development collaboration and other agreements
with third parties. These payments are contingent upon the achievement of specific development, regulatory and/or commercial milestones.
The Company has not accrued any amounts for these payments as of June 30, 2025, because the milestones have not yet been achieved.
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim Financial Statements (unaudited)
For the three and six months ended June 30, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
| 12. | Related Party Transactions |
Key management personnel consists of
the Company’s Chief Executive Officer, Chief Scientific Officer, former Chief Medical Officer, Chief Discovery Officer, former
Chief Business Officer and Chief Financial Officer and the Directors of the Corporation. The remuneration of key management personnel
is as follows:
| | |
Three months ended
June 30, | | |
Six months ended
June 30, | |
| | |
2025 | | |
2024 | | |
2025 | | |
2024 | |
| | |
$ | | |
$ | | |
$ | | |
$ | |
| Salaries and management fees | |
| 626 | | |
| 755 | | |
| 1,288 | | |
| 1,490 | |
| Stock-based compensation | |
| 554 | | |
| 354 | | |
| 941 | | |
| 877 | |
| | |
| 1,180 | | |
| 1,109 | | |
| 2,229 | | |
| 2,367 | |
The Company operates within a single
operating segment, the research and development of drug therapeutics, which is the Company’s only reportable segment, which is
consistent with the internal reporting provided to the chief operating decision-maker. The Company operates in three geographic areas,
Canada, United States and Australia. As at June 30, 2025, the Company held total assets of $124 (December 31, 2024 - $145)
in the United States, $1,682 (December 31, 2024 - $979) in Australia and $39,311 in Canada (December 31, 2024 - $49,623).
The Company manages its capital structure
in an endeavour to ensure sufficient resources are available to meet day-to- day operational requirements, further develop its existing
technology, and continue as a going concern.
In order to maintain or adjust the
capital structure, the Company may issue new shares, issue debt or sell assets. Total capital is calculated as the Company’s own
equity.
The Company is not subject to any externally
imposed capital requirements.
| 15. | Financial Instruments and Risk Management |
The Company is exposed to various risks
through its financial instruments including the following at June 30, 2025:
Credit risk arises
from cash and cash equivalents and short-term investments held at banks and financial institutions, as well as outstanding receivables.
In the six months ended June 30, 2025, the Company invested its excess cash in interest-bearing operating accounts held at a Schedule
1 Canadian bank and in US government treasury bills and Guaranteed Investment Certificates. The Company limits its exposure to credit
risk, with respect to cash and cash equivalents and short-term investments, by placing them with high quality credit financial institutions.
The Company's cash equivalents and short-term investments consist primarily of operating funds, US government treasury bills, deposit
investments and Guaranteed Investment Certificates with commercial banks.
Liquidity risk is the risk that the
Company will encounter difficulty in raising funds to meet cash flow requirements associated with financial instruments. The Company
controls liquidity risk through management of working capital, cash flows and the availability and sourcing of financing. The Company’s
ability to accomplish all of its future strategic plans is dependent on obtaining additional financing or executing other strategic options;
however, there is no assurance the Company will achieve these objectives. As at June 30, 2025, the Company’s liabilities consist
of accounts payable and accrued liabilities that have contracted maturities of less than one year.
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim Financial Statements (unaudited)
For the three and six months ended June 30, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
Market risk is the risk that the fair value or future cash
flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency
risk, interest rate risk, and price risk.
The Company is mainly exposed to currency risk as
follows:
Currency risk is the risk that the
fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The exposure to
this risk changes as the exchange rate fluctuates.
Foreign currency risk is limited to
the portion of the Company's business transactions denominated in currencies other than the US dollar, primarily expenses for general
and administrative and research and development incurred in Canadian dollars. The Company manages foreign exchange risk by maintaining
Canadian dollars cash on hand to fund its short-term foreign currency expenditures. Balances held in foreign currencies, presented in
US dollars are as follows:
| |
|
As at June 30, 2025 |
| | |
US
$ | | |
Australian
$ | | |
Euro
€ | | |
GBP
£ | | |
Canadian
$ | | |
Total
$ | |
| Cash and cash equivalents | |
| 28,080 | | |
| 1,302 | | |
| - | | |
| - | | |
| 8,835 | | |
| 38,217 | |
| Accounts payable and accrued liabilities | |
| (1,396 | ) | |
| (213 | ) | |
| (286 | ) | |
| (6 | ) | |
| (869 | ) | |
| (2,770 | ) |
| Total | |
| 26,684 | | |
| 1,089 | | |
| (286 | ) | |
| (6 | ) | |
| 7,966 | | |
| 35,447 | |
| |
|
As at December 31, 2024 |
| | |
US
$ | | |
Australian
$ | | |
Euro
€ | | |
Canadian
$ | | |
Total
$ | |
| Cash and cash equivalents | |
| 24,848 | | |
| 339 | | |
| - | | |
| 14,886 | | |
| 40,073 | |
| Short-term investments | |
| 5,000 | | |
| - | | |
| - | | |
| 3,475 | | |
| 8,475 | |
| Accounts payable and accrued liabilities | |
| (2,491 | ) | |
| (329 | ) | |
| (242 | ) | |
| (521 | ) | |
| (3,583 | ) |
| Total | |
| 27,357 | | |
| 10 | | |
| (242 | ) | |
| 17,840 | | |
| 44,965 | |
Assuming all other variables remain
constant, a 10% depreciation or appreciation of the US dollar against the Canadian dollar, Australian dollar, Euro, and GBP would result
in an increase or decrease in loss and comprehensive loss for the six months ended June 30, 2025, of $876 (December 31, 2024
- $1,761).
Interest rate risk is the risk that
the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company
holds its cash and cash equivalents and short- term investments in banks and financial institutions, and manages its interest rate risk
by holding cash in high yield savings accounts or highly liquid short-term investments.
Financial assets and liabilities are
recognized on the condensed consolidated interim statement of financial position at amortized cost in a hierarchy that is based on significance
of the inputs used in making the measurements. The levels in the hierarchy are:
| · | Level 1 – Quoted prices (unadjusted) in active markets for
identical assets or liabilities |
| · | Level 2 – Inputs other than quoted prices included within
level 1 that are observable for the asset or liability, either directly (i.e., as prices)
or indirectly (i.e., derived from prices) |
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim Financial Statements (unaudited)
For the three and six months ended June 30, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
| · | Level 3 – Inputs for the asset or liability that are not
based on observable market data (i.e., unobservable inputs) |
At June 30, 2025, the Company's
financial instruments, all subsequently measured at amortized cost, included cash and cash equivalents, short-term investments, and accounts
payable and accrued liabilities.
Due to the short-term maturities of
cash and cash equivalents, short-term investments, accounts payable and accrued liabilities, the carrying amounts approximate their fair
value at the respective condensed consolidated interim statement of financial position date.
| 16. | Change in presentation currency |
During the period
ended March 31, 2025, the Company changed its presentation currency from CAD to USD. In accordance with IAS 21, the amounts for
all the periods presented have been translated to the USD presentation currency. For comparative balances, assets and liabilities have
been translated into the presentation currency at the rate of exchange prevailing at the reporting date, or at the exchange rate prevailing
at the date of the transactions. Exchange rate differences arising on translation are taken to other comprehensive loss/(income). The
Company has presented the effects of the change in presentation currency below.
| |
|
December 31, 2024 | |
December 31, 2024 | | |
January 1, 2024 | | |
January 1, 2024 | |
| | |
USD$ | | |
CAD$ | | |
USD$ | | |
CAD$ | |
| ASSETS | |
| | |
| | |
| | |
| |
| Current | |
| | |
| | |
| | |
| |
| Cash and cash equivalents | |
| 40,073 | | |
| 57,659 | | |
| 16,681 | | |
| 22,067 | |
| Short-term investments | |
| 8,475 | | |
| 12,195 | | |
| 13,246 | | |
| 17,520 | |
| Sales tax and other receivables | |
| 435 | | |
| 626 | | |
| 441 | | |
| 583 | |
| Prepaid expenses and deposits | |
| 1,760 | | |
| 2,532 | | |
| 112 | | |
| 148 | |
| Derivative financial instruments, net | |
| - | | |
| - | | |
| 3 | | |
| 4 | |
| Total current assets | |
| 50,743 | | |
| 73,012 | | |
| 30,483 | | |
| 40,322 | |
| Property and equipment | |
| 4 | | |
| 5 | | |
| 15 | | |
| 19 | |
| Assets held for sale | |
| | | |
| | | |
| | | |
| | |
| Intangible asset | |
| - | | |
| - | | |
| 2,961 | | |
| 3,916 | |
| Investments | |
| - | | |
| - | | |
| 31 | | |
| 41 | |
| | |
| 4 | | |
| 5 | | |
| 3,007 | | |
| 3,976 | |
| TOTAL ASSETS | |
| 50,747 | | |
| 73,017 | | |
| 33,490 | | |
| 44,298 | |
| | |
| | | |
| | | |
| | | |
| | |
| LIABILITIES | |
| | |
| | |
| | |
| |
| Accounts payable and accrued liabilities | |
| 3,583 | | |
| 5,155 | | |
| 2,734 | | |
| 3,624 | |
| Total current liabilities | |
| 3,583 | | |
| 5,155 | | |
| 2,734 | | |
| 3,624 | |
| Total liabilities | |
| 3,583 | | |
| 5,155 | | |
| 2,734 | | |
| 3,624 | |
| | |
| | | |
| | | |
| | | |
| | |
| SHAREHOLDER’S EQUITY | |
| | | |
| | | |
| | | |
| | |
| Common shares | |
| 78,131 | | |
| 105,729 | | |
| 47,335 | | |
| 61,916 | |
| Pre-funded warrants | |
| 19,967 | | |
| 27,622 | | |
| 13,050 | | |
| 17,772 | |
| Contributed surplus | |
| 7,900 | | |
| 10,329 | | |
| 6,472 | | |
| 8,503 | |
| Accumulated deficit | |
| (57,097 | ) | |
| (75,601 | ) | |
| (36,463 | ) | |
| (47,502 | ) |
| Accumulated other comprehensive | |
| | | |
| | | |
| | | |
| | |
| income/(loss) | |
| (1,737 | ) | |
| (217 | ) | |
| 362 | | |
| (15 | ) |
| Total shareholder’s equity | |
| 47,164 | | |
| 67,862 | | |
| 30,756 | | |
| 40,674 | |
| | |
| | | |
| | | |
| | | |
| | |
| TOTAL LIABILITIES AND | |
| | | |
| | | |
| | | |
| | |
| SHAREHOLDER’S EQUITY | |
| 50,747 | | |
| 73,017 | | |
| 33,490 | | |
| 44,298 | |
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim Financial Statements (unaudited)
For the three and six months ended June 30, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
| |
|
Three months ended | |
Six months ended | |
| | |
June 30, 2024 | | |
June 30, 2024 | | |
June 30, 2024 | | |
June 30, 2024 | |
| | |
USD$ | | |
CAD$ | | |
USD$ | | |
CAD$ | |
| Research and development expenses | |
| 3,567 | | |
| 4,873 | | |
| 7,973 | | |
| 10,809 | |
| General and administrative expenses | |
| 1,326 | | |
| 1,806 | | |
| 3,048 | | |
| 4,124 | |
| LOSS FROM OPERATING ACTIVITIES | |
| (4,893 | ) | |
| (6,679 | ) | |
| (11,021 | ) | |
| (14,933 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| OTHER INCOME AND EXPENSES | |
| | | |
| | | |
| | | |
| | |
| Finance income | |
| 261 | | |
| 358 | | |
| 589 | | |
| 800 | |
| Loss on derivative financial instruments | |
| (1 | ) | |
| (1 | ) | |
| (2 | ) | |
| (3 | ) |
| Foreign exchange gain | |
| 209 | | |
| 286 | | |
| 880 | | |
| 1,191 | |
| | |
| | | |
| | | |
| | | |
| | |
| NET LOSS FOR THE PERIOD | |
| (4,424 | ) | |
| (6,036 | ) | |
| (9,554 | ) | |
| (12,945 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| OTHER COMPREHENSIVE LOSS | |
| | | |
| | | |
| | | |
| | |
| Foreign currency translation adjustments | |
| (287 | ) | |
| (8 | ) | |
| (1,001 | ) | |
| (8 | ) |
| TOTAL COMPREHENSIVE LOSS | |
| (4,711 | ) | |
| (6,044 | ) | |
| (10,555 | ) | |
| (12,953 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Basic and diluted loss per share | |
$ | (0.04 | ) | |
$ | (0.05 | ) | |
$ | (0.08 | ) | |
$ | (0.11 | ) |
| Weighted average number of common shares (basic and diluted) | |
| 112,796,646 | | |
| 112,796,646 | | |
| 112,794,152 | | |
| 112,794,152 | |
Exhibit 4.8
SATELLOS BIOSCIENCE INC.
Management’s Discussion and Analysis
For the three and six months ended June 30,
2025, and 2024
August 12, 2025
The following
discussion is management’s assessment and analysis (this “MD&A”) of the results of operations and financial
conditions of Satellos Bioscience Inc. (“Satellos” or the “Company”) for the three and six months
ended June 30, 2025, and 2024. This MD&A should be read in conjunction with the condensed consolidated interim financial statements
for the three and six months ended June 30, 2025 and 2024 and the related notes thereto (together, the “condensed consolidated
interim financial statements”) and the audited annual consolidated financial statements for the years ended December 31,
2024 and December 31, 2023 and the related notes thereto (together, the “audited annual consolidated financial statements”).
Change in Presentation Currency
Effective January 1, 2025, the Company changed
its presentation currency from the Canadian dollar (“CAD”) to the United States dollar (“USD”).
The change in presentation currency was made to better reflect the Company’s business activities and to improve investor’s
ability to compare the Company’s financial results with other publicly traded businesses in the industry. For the year ended December 31,
2024, and for all prior periods, we presented our financial statements in CAD. The comparative figures disclosed in our condensed consolidated
interim financial statements for the period ended June 30, 2025, and in this MD&A, have been retrospectively changed to reflect
the change in presentation currency to the USD, as if the USD had been used as the presentation currency for all prior periods.
All financial information in this MD&A has
been prepared in accordance with IFRS accounting standards and all dollar amounts are expressed in thousands of USD unless otherwise
indicated.
FORWARD-LOOKING STATEMENTS
Certain statements and information in this MD&A
contain “forward-looking information” and “forward-looking statements”, within the meaning of applicable Canadian
securities laws (collectively herein referred to as “forward-looking statements”). These statements relate to future events
or future performance and reflect the Company’s expectations and assumptions regarding the growth, results of operations, performance
and business prospects and opportunities of the Company. These forward-looking statements are made as of the date of this MD&A or,
in the case of documents incorporated by reference herein, as of the date of such documents. Forward-looking statements are frequently,
but not always, identified by words such as “expects”, “expectation”, “anticipates”, “believes”,
“intends”, “intention”, “estimates”, “predicts”, “continues”, “potential”,
“targeted”, “plans”, “possible”, “goal”, “seek”, “project”, “future”,
“likely” and similar expressions, or statements that events, conditions or results “will”, “may”,
“could”, “would” or “should” occur or be achieved. Any forward-looking statements or statements of
“belief”, including the statements made under “Risks and Uncertainties”, represent the Company’s
estimates only as of the date of this MD&A and the documents incorporated by reference herein, respectively, and should not be relied
upon as representing the Company’s estimates as of any subsequent date. Forward-looking statements are necessarily based on estimates
and assumptions made by Satellos in light of its experience and perception of historical trends, current conditions and expected future
developments, as well as factors that Satellos believes are appropriate. Forward-looking statements in this MD&A include, but are
not limited to, statements relating to:
| · | our
belief that the Company will be successful in raising additional capital to continue as a
going concern; |
| · | the
expected research and development timelines, therapeutic benefits, effectiveness and safety
of our product candidates; |
| · | our
belief that the Company’s products and research and development efforts are targeting
diseases and conditions with significant unmet medical treatment needs; |
| · | our
belief that the Company has made, and will continue to make progress towards the achievement
of certain milestones or objectives; |
| · | our
expectation with respect to meeting milestones and the minimum amount of funds the Company
expects to need to raise in order to achieve such milestones and garner additional funding; |
| · | the
initiation, timing, cost, progress, outcomes, resource needs and success of our research
and development activities, plans and programs; |
| · | our
expectations regarding our ability to design, test and patent novel drug products suitable
for advancement into Investigational New Drug (“IND”) enabling studies
and clinical trials and the anticipated timelines surrounding such enabling studies; |
| · | our
belief that we will not receive substantive comments from the United States Food and Drug
Administration (“FDA”) on our IND applications which unduly delay our
plans for and/or timing of a Phase 2 clinical trial in pediatric patients; |
| · | our
expectations that the Notch pathway and AAK1 drug target (both as further described herein)
represent drug development opportunities similar or superior to modulation of the epidermal
growth factor receptor signaling pathway; |
| · | our
intentions of developing inhibitors to AAK1 (including but not limited to SAT-3247 and SAT-
3153) and in showing that such potential inhibitors have desirable effects in relevant models
of Duchenne muscular dystrophy (“DMD”) and in other indications, such
as other degenerative muscle diseases, muscle injury or trauma, or muscle regeneration generally; |
| · | our
belief that the results of Satellos’ research and development activities, preclinical
studies, safety studies or clinical trials have the potential to be commercially competitive
with research and development activities, preclinical studies, safety studies or clinical
trials conducted by other parties; |
| · | discoveries
we have made in muscle stem cell regulation having the potential to represent insights into
a potential root cause of degenerative muscle disorders which has previously not been recognized
and which may be therapeutically relevant in the treatment of degenerative muscle disorders; |
| · | our
belief that the Company’s technology can be commercialized, and that such commercialization
could be done as effectively or more effectively than other technologies to treat degenerative
muscle disorders and conditions or other medical disorders or conditions, or at all; |
| · | our
ability to discover, optimize, select and advance into clinical development therapeutic drug
development candidates in a timely, cost-efficient and effective manner, or at all; |
| · | our
ability to translate our discoveries in muscle stem cell regulation into safe and therapeutically
effective drug products and the broad applicability of such products; |
| · | our
ability to enter into research and/or commercial development collaborations or partnerships
to successfully and profitably advance our drug development candidates; |
| · | our
ability and that of our partners (if any) to advance identified drug development candidates
into, and successfully complete, clinical trials; |
| · | our
intention to identify and nominate one or more back-up drug candidates and the potential
benefits of having such back-ups; |
| · | our
plans to utilize and deploy MyoRegenXTM in our programs and our continued relationship
with OHRI (as defined below); |
| · | our
ability to develop the Company’s novel discoveries into viable therapeutic treatments
suitable for clinical development in patients diagnosed with DMD, including, but not limited
to, our ability to determine appropriate dosing regimens; |
| · | the
ability of our products to effectively and safely treat Duchenne and other degenerative muscle
disorders and conditions or other medical disorders or conditions and the applicability of
our products to other disorders and conditions; |
| · | our
expectations regarding future initiation of and enrolment into clinical trials and the timing
of future enrolment into clinical trials for our product candidates; |
| · | our
belief that our approach may reduce the risk, time and cost of developing therapeutics by
avoiding some of the uncertainty associated with certain research and preclinical stages
of drug development; |
| · | our
ability to establish and maintain relationships with collaborators with acceptable preclinical
and/or clinical research and development capability, and regulatory and commercialization
expertise to enable the development and future commercialization of our technology or products,
and the benefits to be derived from such collaborative efforts; |
| · | our
ability to enter into agreements or partnerships with pharmaceutical or biotechnology companies
that have research and clinical development and/or sales and marketing capabilities and the
expected benefits that could be derived therefrom; |
| · | our
ability to generate and protect our potential intellectual property; |
| · | our
ability to operate our business without infringing upon the intellectual property rights
of others; |
| · | our
ability to engage third party services with specialized domain expertise for the drafting
and submitting of regulatory applications to conduct clinical trials in humans; |
| · | our
ability to establish suitable CMC and GMP protocols as further described herein; |
| · | the
manufacturing capacity of third-party manufacturers for our product candidates; |
| · | our
expectations regarding federal, provincial and foreign regulatory requirements; |
| · | the
timing of, and the costs of obtaining and maintaining, regulatory approvals in the United
States, Canada and other jurisdictions; |
| · | our
plans to submit one or more IND applications to and engage in communications with the FDA
with the objective of obtaining approvals to initiate clinical trials in patients diagnosed
with DMD; |
| · | the
rate and degree of market acceptance and clinical utility of our future products, if any; |
| · | existing
and future corporate alliances and licensing transactions with third parties, and the receipt
and timing of any payments to be made by us or to us pursuant to such arrangements; |
| · | the
implementation and execution of our commercial and operational strategy; |
| · | our
ability to engage and retain the consultants or employees required to grow our business; |
| · | the
potential revenue that may be generated from our products, pricing and reimbursement of the
patient cost of our drug products by insurers or national health systems, as the case may
be, in those jurisdictions where the Company intends to sell its drug products and our ability
to achieve profitability; |
| · | developments
relating to our competitors and our industry, including the success of competing therapies
that are or become available; |
| · | the
potential growth of the market and demand for our products as well as the estimated pricing
and subsequent revenue generation of any potential therapeutics we discover; |
| · | our
belief that any discoveries by the Rudnicki Lab (as defined below) have the potential to
have a positive impact on Satellos and our work; |
| · | our
future financial performance, including projected expenditures, future revenue, capital requirements
and our needs for additional financing; and |
| · | general
business and economic conditions and outlook including but not limited to foreign exchange
rates and rates of inflation and the evolving regulatory or geo-political landscape. |
Such forward-looking statements reflect our current
views with respect to future events, are subject to risks and uncertainties and are necessarily based upon a number of estimates and
assumptions that, while considered reasonable by Satellos as of the date of such statements, are inherently subject to significant medical,
scientific, business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause our actual
results, performance, achievements, prospects or opportunities to be materially different from any future results, performance or achievements
that may be expressed or implied by such forward-looking statements. In making the forward-looking statements included in this MD&A,
the Company has made various material assumptions, including, but not limited to:
| · | obtaining
positive results from our research and development activities, including clinical trials; |
| · | our
ability to obtain regulatory approvals; |
| · | assumptions
regarding general business, market and economic conditions; |
| · | assumptions
regarding the cost and timing of each study; |
| · | the
Company’s ability to successfully advance its preclinical and clinical development
programs and execute its plans substantially as currently envisioned; |
| · | assumptions
related to the pricing and reimbursement of its drug products in jurisdictions in which the
Company intends to sell its drug products; |
| · | the
Company’s current positive relationships with third parties will be maintained and
the potential to develop new partnerships; |
| · | our
ability to continue to use existing licenses for the development of our product(s); |
| · | the
availability (and sources) of financing on reasonable terms; |
| · | future
expenditures to be incurred by the Company, including research and development and operating
costs; |
| · | the
Company’s ability to attract and retain skilled consultants and employees; |
| · | assumptions
regarding market competition, market capture and pricing; |
| · | the
products and technology offered by the Company’s competitors; and |
| · | the
Company’s ability to protect patents and proprietary rights. |
In evaluating forward-looking statements, current
and prospective shareholders should specifically consider various factors, including the risks outlined under the headings “Foreign
Currency Risk”, “Liquidity Risk”, “Credit Risk” and “Risks and Uncertainties”
in this MD&A and the risks outlined in the Company’s annual information form for the year ended December 31, 2024 dated
March 26, 2025 (the “AIF”). Certain risks and uncertainties that could cause such actual events or results expressed
or implied by such forward-looking statements and information to differ materially from any future events or results expressed or implied
by such statements and information include, but are not limited to:
| · | risks
related to the early stage of our products; |
| · | uncertainties
related to preclinical product development activities and clinical trial outcomes; |
| · | uncertainties
related to current economic conditions; |
| · | risks
related to rapid technological change; |
| · | uncertainties
related to forecasts and timing of clinical trials and regulatory approval; |
| · | competition
in the market for therapeutic products, including those to treat Duchenne and related diseases; |
| · | risks
related to potential product liability claims; |
| · | availability
of financing and access to capital and the risks associated with the Company’s ability
to continue as a going concern; |
| · | market
acceptance and commercialization of products; |
| · | the
availability, costs and supply of materials; |
| · | risks
related to the effective management of our growth; |
| · | risks
related to the reliance on partnerships and licensing agreements; |
| · | risks
related to our reliance on key personnel; |
| · | risks
related to the regulatory approval process for the manufacture and sale of therapeutic products; |
| · | risks
related to the reimbursement process in various jurisdictions where the Company plans to
sell its drug products; and |
| · | our
ability to secure and protect our intellectual property. |
The Company cautions
that the foregoing list of important factors and assumptions is not exhaustive. Although the Company has attempted to identify
on a reasonable basis important factors and assumptions related to forward-looking statements, there can be no assurance that forward-looking
statements will prove to be accurate, as events or circumstances or other factors could cause actual results to differ materially from
those estimated or projected and expressed in, or implied by, these forward-looking statements. Other than
as specifically required by law, the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances
after the date on which such statement is made, or to reflect the occurrence of unanticipated events, whether as a result of new information,
future events or results or otherwise. Accordingly, readers should not place undue reliance on forward-looking statements.
NATURE OF BUSINESS AND OVERVIEW OF OPERATIONS
Overview of the Business
Satellos is a publicly traded (TSX: MSCL)
biotechnology company dedicated to developing life-improving medicines to treat degenerative muscle diseases.
Satellos has incorporated breakthrough research
in muscle stem cell polarity into a proprietary discovery platform, called MyoReGenXTM, to identify degenerative muscle diseases
where deficits in this process affect muscle regeneration and are amenable to therapeutic intervention. With this platform, Satellos
is building a pipeline of novel therapeutics to correct muscle stem cell polarity and promote the body’s innate muscle repair and
regeneration process. The Company’s lead drug candidate is an oral, small molecule drug candidate in clinical development as a
potential disease-modifying treatment for Duchenne muscular dystrophy.
Achievements and Highlights in the three
and six months ended June 30, 2025
On February 10,
2025, the Company announced that the single-ascending dose (“SAD”) cohorts, four multiple- ascending dose (“MAD”)
cohorts, and one cross-over food effect single-dose cohort of the Company’s Phase 1a clinical trial had been fully enrolled.
On March 19, 2025, the Company announced
initial safety and pharmacokinetic (“PK”) data from the Phase 1a clinical trial in an oral presentation at the 2025
Muscular Dystrophy Association (MDA) Clinical & Scientific Conference.
In the Phase 1a, 72 healthy volunteers were randomized
across five SAD cohorts (including one cross-over food effect cohort) with single oral doses of up to 400 mg, and four MAD cohorts with
daily oral doses up to 240 mg/day for 7 consecutive days. The purpose of the study was to assess the safety, tolerability and PK of SAT-
3247.
On May 22, 2025, the Company announced promising
Phase 1b data, in an open-label study treating five adult male DMD patients, ages 20 – 27, demonstrating early signs that SAT-3247
may have the potential to affect grip strength, which could represent a clinically meaningful measure for patients with DMD. Over a period
of 28 days, the drug was administered orally in tablet form at a total daily dose of 60mg for 5 consecutive weekdays followed by 2 days
of placebo for 4 weeks (i.e., 20 dosing days on drug over the 28-day period of the study).
| · | Phase
1a data showed that SAT-3247 was safe and well tolerated across all healthy volunteer cohorts.
At predicted human efficacious dose levels (i.e., between 50 and 150 mg total daily dose),
SAT-3247 did not display adverse clinical findings on any parameter measured, including clinical
labs, vital signs, ECG’s, and physical exams. No moderate or greater drug-related adverse
events were reported at any dose studied and any mild events reported were reversible. |
| · | Phase
1a PK data demonstrated consistency with results from the Company’s preclinical studies.
These PK results confirmed post-dose plasma concentrations of SAT-3247 were sustained at
levels and time courses which the Company’s research findings suggest are most likely
to yield a therapeutic effect on muscle regeneration and strength, with average strength
across the study participants doubling from ~2kg to ~4kg. |
| · | Study
participants have been offered the option to enroll into an 11-month, long-term follow-up
study with SAT-3247 which is expected to begin in the second half of 2025 in Australia following
regulatory approval. |
On June 18, 2025, the Company announced
the election of Iris Loew-Friedrich, M.D., Ph.D., and Selwyn Ho, MBBS, to its Board of Directors. As part of the Annual General Meeting,
Rima Al-awar, Ph.D., William Jarosz, J.D., and William McVicar, Ph.D., did not stand for re-election.
Subsequent to the quarter ended June 30,
2025, on July 16, 2025, the Company announced the appointment of Wildon Farwell, M.D., MPH, as Chief Medical Officer. Dr. Farwell
joined Satellos from Dyne Therapeutics (Nasdaq: DYN), where he most recently served as CMO and medical advisor. At Dyne, Dr. Farwell
built the development organization, led the protocol development and regulatory submissions for their DMD and myotonic dystrophy type
1 (DM1) programs, oversaw the conduct of multiple potentially registrational clinical studies, and contributed to several successful
capital raises. Before joining Dyne, he spent a decade at Biogen in increasing leadership roles. Prior to moving into industry, Dr. Farwell
served as an assistant professor of medicine at Harvard Medical School and was a physician at Brigham and Women’s Hospital and
the VA Boston Healthcare System. He earned his medical degree from the University of Missouri School of Medicine and holds a Master of
Public Health in clinical effectiveness from the Harvard T.H. Chan School of Public Health.
Subsequent to the quarter ended June 30,
2025, the Company completed the sale of its wholly owned subsidiary, AmpB, as part of a strategic portfolio review. This divestiture
does not impact the Company’s core operations or ongoing business activities.
Satellos had publicly announced a plan to submit
an IND in the USA before the end of Q1 2025. The Company’s intent had been to obtain approval to commence a second open-label study
with SAT-3247, this time in up to 20 adolescent DMD patients. During Q2 2025, the Company announced it had altered its clinical trial
plans. Instead, Satellos now intends to submit an IND in the USA (and equivalent submissions in other regulatory jurisdictions) during
Q3 2025, following consolidation of its pre-IND preclinical toxicology studies to support a clinical trial in younger patients as well
as its Phase 1b safety, PK and pharmacodynamic data in DMD adult, seeking authorization to begin a randomized controlled trial (“RCT”)
with SAT-3247 in a pediatric DMD patients treated with SAT-3247. The Company believes this revised approach offers a greater likelihood
for it to generate proof of concept data in the earliest – yet prudent – manner to demonstrate the prospect for SAT- 3247
to (a) have a positive effect on muscle generation and (b) represent its potential to be a safe, tolerable new treatment approach
for patients living with DMD.
Description of Business Strategy and Programs
The Company’s primary goal is the development
of disease modifying therapeutic drugs for the treatment of severe muscle conditions of unmet medical need. Our core technology is based
on discoveries by the Company’s scientific founder and Chief Discovery Officer, Dr. Michael Rudnicki, into understanding and
modulating muscle stem cell function and its role in muscle regeneration. Multiple peer reviewed publications from Dr. Rudnicki’s
lab (the “Rudnicki Lab”) at the Ottawa Hospital Research Institute (the “OHRI”) have advanced the
understanding of the identity and behavior of muscle stem cells including their role in health and disease. For instance, the Rudnicki
Lab was the first to define so called muscle stem cells (a.k.a. ‘satellite stem cells’) and characterize a sub-population
as bona fide multipotent stem cells capable of both self-renewal and regeneration (Source: Kuang et al., 2007, Cell). Dr. Rudnicki
was also first to demonstrate that such stem cells exist as a special body of cells capable of regeneration, and subsequently elucidate
their biological mechanism of action and identify means to modulate their activity. He further linked deficiencies in muscle stem cell
function directly to the pathology of Duchenne as a potential causal factor in the progressive muscle destruction that occurs in this
lethal disease (Source: Dumont et al., 2015, Nature Medicine).
The basic principle governing how muscle stem cells contribute to
the creation of new muscle cells and hence muscle regeneration, through a process known as asymmetric division, is depicted below in
Figure 1.
Figure 1: Muscle stem cells undergo asymmetric
divisions in response to injury stimuli. Muscle progenitor cells are generated to produce new muscle tissue or repair injured muscle.
Asymmetric
muscle stem cell divisions result in one stem cell being produced and one progenitor muscle cell. The former maintains the pool of stem
cells to be called on to respond to future injury. Progenitor muscle cells by contrast, continue to replicate through normal cell mitosis
to generate potentially thousands of cells that ultimately incorporate into and become functional muscle tissue. Findings from the research
of Dr. Rudnicki have linked deficits asymmetric division to the progressive muscle loss which is a principal pathology of DMD and
other degenerative diseases.
To apply our understanding of muscle regeneration
to therapeutic development in degenerative muscle conditions or disorders, Satellos employs a proprietary discovery platform developed
by the Rudnicki laboratory at OHRI called, MyoReGenX™. An automated microscopy system, MyoReGenX™ recapitulates the muscle
stem cell environment ex-vivo (i.e., outside the body) and enables Satellos to identify and assess opportunities for developing
novel therapeutic treatments.
Lead Development Program: Duchenne
The Company’s first application of its
technology (the “Lead Program”) is directed towards the discovery and development of a small molecule drug for the
treatment of Duchenne, the most common fatal genetic disorder diagnosed in childhood affecting approximately one in 4,000 male births
per year, worldwide. As depicted in the below Figure 2, individuals living with Duchenne experience severe and progressive loss of muscle
function during their lives, often exhibited by loss of ambulation before their teenage years and generally culminating in death before
the end of their third decade of life. There is no known cure.
Despite this dire scenario, Satellos takes hope
for its novel approach from the fact that individuals living with Duchenne do make functional muscle as young children, albeit not as
effectively as their healthy peers. Our interpretation of the progressive nature of Duchenne, also depicted in Figure 2, is that the
unmistakable signs of motor impairment and ambulatory challenges that become apparent during childhood represent a ‘tipping point’
in the balance between muscle damage and repair where regeneration fails to keep up with damage.
Satellos has designed SAT-3247 with the goal
of resetting the balance of regeneration over degeneration by enhancing the process of asymmetric division and the ensuing creation of
new muscle cells.
Figure 2: Progressive muscle loss a hallmark
of Duchenne muscular dystrophy
Duchenne is caused by a mutation in the dystrophin
gene that results in impairment to or loss of the dystrophin protein. Dr. Rudnicki demonstrated that muscle stem cells require a
signal from the dystrophin protein to properly and efficiently divide in an asymmetric fashion (Source: Dumont et al. 2015, Nature Medicine.).
As described in Figure 3 below, without the dystrophin signal, muscle stem cells fail to divide efficiently, often creating copies of
themselves rather than making the progenitor cells needed to create new muscle.
Figure 3: Imbalanced Stell Cell Division
To address this problem, Satellos’ therapeutic
strategy is to restore the missing signaling role of dystrophin by drug treatment - thereby resetting the muscle regeneration process.
Restoring the Missing Dystrophin Signal via AAK1 Inhibition
Deploying MyoReGenX™ to build on the identification
and discovery of this previously unreported signaling role of dystrophin, in collaboration with the Rudnicki lab, Satellos undertook
a systematic assessment, evaluation and prioritization of molecular pathways for their potential to safely rescue asymmetric stem cell
divisions in the absence of dystrophin. From this exercise conducted over a multi-year period, the Company identified and selected Adaptor
Associated Kinase 1 (aka “AAK1”), a protein kinase in the molecular signaling pathway known as “Notch”.
Satellos has generated extensive preclinical data in the Mdx mouse, a gold standard research model bearing the same genetic defect
as patients with Duchenne, demonstrating that treatment of these research mice through inhibition of AAK1 with SAT-3247 has potential
to restore the process of asymmetric division in muscle stems cells. Our preclinical studies have further shown that inhibition of AAK1
with SAT- 3247 enables muscle regeneration with the potential to increase muscle strength. Thus, we believe, SAT-3247 represents a potential
novel therapeutic drug for the treatment of Duchenne in humans. Figure 4 below depicts our understanding of the mechanism by which our
lead drug candidate, SAT-3247, affects asymmetric division and the muscle stem cell mediated regeneration via inhibition of AAK1.
Figure 4: Satellos Approach: Reset regeneration with SAT-3247
Of
particular interest to Satellos from a de-risking perspective, small molecule inhibitors of AAK1 have previously been described for non-muscle
related disease indications by an independent 3rd party company and have demonstrated what appear to be acceptable safety
profiles thus far in multiple human clinical trials spanning hundreds of patients (Lexicon
Pharmaceuticals Inc. 2022 10K filing pages 5&6 filed March 2, 2023). We believe this provides some initial indications
of the potential safety of AAK1 inhibition.
Satellos announced positive preclinical data
presented at the March 2024 MDA Clinical and Scientific Conference showing that SAT-3247 can improve skeletal muscle function in
multiple mouse models of muscle degeneration. The preclinical data presented show the broad potential of SAT-3247 to improve skeletal
muscle function as it has been demonstrated in three mouse models of muscle degeneration: mdx model of Duchenne, FLExDUX4 model of FSHD,
and a muscle injury model in wildtype mice. In all instances, treatment with SAT- 3247 over a three-to-four-week period resulted in a
statistically significant improvement in muscle force versus animals receiving placebo.
In October 2024, Satellos announced data
presented at the 29th Annual Congress of the World Muscle Society in Prague. The presentation provided an overview of key data collected
during the open-label pilot study of SAT-3247 in a canine model of DMD. The data presented from the pilot study demonstrated that treatment
of two DMD Canines with SAT-3247 improved measures of strength to near normal levels.
The Company has filed for patent protection on
SAT-3247 and other inhibitors of AAK1. Please refer to the Intellectual Property section in the Company’s AIF for further details
on its intellectual property strategy and filings and its licensing agreement with the OHRI.
Regulatory Designations for SAT-3247
The FDA granted both Orphan Drug Designation
and Rare Pediatric Disease Designation to SAT-3247 for the potential treatment of DMD. Orphan Drug Designation applies to therapies targeting
rare diseases affecting fewer than 200,000 people in the U.S. and provides benefits including seven-year market exclusivity upon approval,
exemption from FDA application fees, tax credits for clinical trials, and eligibility for a priority review voucher.
The Rare Pediatric Disease Designation specifically
supports treatments for serious and life-threatening conditions primarily affecting children under 18 years old. Under this program,
drug sponsors may qualify for a priority review voucher upon approval, which can be used to accelerate the review of a future marketing
application for another product or sold to another sponsor. These designations recognize the unmet medical need in DMD and provide regulatory
and financial incentives to support SAT-3247's development.
Clinical Development of SAT-3247
The Company has advanced SAT-3247 through IND
enabling studies, GMP manufacturing, a Phase 1a clinical study in 72 healthy adult volunteers and a Phase 1b clinical study in 5 adult
DMD patients.
In September 2024,
the first participant in the first-in-human Phase 1a clinical trial was dosed in Australia following regulatory approvals. The trial
consisted of two components: a randomized, placebo-controlled study in healthy volunteers evaluating safety and PK across multiple dose
cohorts, and an open-label study in adults with genetically confirmed DMD examining safety, PK, and potential pharmacodynamic markers.
The healthy volunteer portion enrolled 72 participants across single ascending dose, multiple ascending dose, and food effect cohorts,
while the DMD component included 5 participants receiving a single dose daily of SAT-3247 over 28 days.
In February 2025, the Company announced
that the SAD, MAD and food effect dose cohorts of the Phase 1 clinical trial had been fully enrolled and in March 2025, the Company
announced initial Phase 1 data in an oral presentation at the 2025 MDA conference as described above.
In May 2025,
Satellos announced what it considers to be promising Phase 1b data, from its open-label study, demonstrating early signs that SAT-3247
may have the potential to positively affect grip strength in a statistically significant manner; such an outcome could represent a clinically
meaningful measure for patients with DMD. A long-term follow-up study for these patients is expected to initiate in Q3 2025 whereby patients
will be eligible to receive SAT-3247 for an additional eleven months.
The Company is preparing the requisite documentation
and is on track to submit IND and equivalent applications to the relevant regulatory authorities in multiple countries, including the
USA and Canada, before the end of Q3, 2025 seeking approvals to conduct a randomized, placebo-controlled Phase 2 clinical trial in pediatric
patients with DMD. Depending on responses from the regulators, Satellos plans to initiate this Phase 2 clinical trial in Q4, 2025. If
approved, the Company has designed its proposed Phase 2 trial with the goal of demonstrating the potential for safety and functional
benefit from treatment with SAT-3247. Please refer to the section “Regulatory Process” in the Company’s AIF for further
details on the clinical drug development process.
Follow-On Program
There are more than 30 types of muscular dystrophy
that affect humans. Each of these dystrophies has different causes that manifest into conditions ranging in severity from benign, small
impairments to motor function, to the full loss of ambulation, or even death. Satellos has conducted proof of concept preclinical studies
in relevant animal disease models showing potential for benefit by restoring the muscle regeneration process in Lama-2 Related Muscular
Dystrophy (prevalence estimates between one in 50,000 and one in 400,000 births), Collagen- VI Related Muscular Dystrophy (prevalence
of severe form of the disease estimated to be one in 1,000,000 births) and FSHD (prevalence of 4 per 100,000 individuals). These represent
potential follow-on disease indications or programs for Satellos to consider in the future. The Company also plans to evaluate additional
dystrophies as part of its ongoing research and development efforts.
REVIEW OF FINANCIAL RESULTS
The financial information reported herein was
derived from the condensed consolidated interim financial statements for the three and six months ended June 30, 2025 and 2024.
Selected Financial Information
| | |
Three months
ended
June 30, 2025 | | |
Three Months
ended
June 30, 2024 | | |
Six months
ended
June 30, 2025 | | |
Six months
ended
June 30, 2024 | |
| | |
$ | | |
$ | | |
$ | | |
$ | |
| R&D expenses | |
| 4,435 | | |
| 3,567 | | |
| 8,977 | | |
| 7,973 | |
| G&A expenses | |
| 1,932 | | |
| 1,326 | | |
| 3,869 | | |
| 3,048 | |
| Other income | |
| (791 | ) | |
| (469 | ) | |
| (1,192 | ) | |
| (1,467 | ) |
| Income tax expense | |
| 32 | | |
| - | | |
| 95 | | |
| - | |
| Net loss | |
| (5,608 | ) | |
| (4,424 | ) | |
| (11,749 | ) | |
| (9,554 | ) |
| Basic and diluted loss per share | |
| (0.03 | ) | |
| (0.04 | ) | |
| (0.07 | ) | |
| (0.08 | ) |
| Total assets | |
| 41,117 | | |
| 24,202 | | |
| 41,117 | | |
| 24,202 | |
We have not earned revenue in the current quarter
or any of the previous fiscal years.
For the three months ended June 30, 2025,
we reported a net loss of $5,608 ($0.03 loss per share), compared to a net loss of $4,424 ($0.04 loss per share) for the three months
ended June 30, 2024. For the six months ended June 30, 2025, we reported a net loss of $11,749 ($0.07 loss per share), compared
to a net loss of $9,554 for the six months ended June 20, 2024. The increase in net loss for the three and six-month periods ended
June 30, 2025, compared with the same periods in 2024 was primarily a result of increased Research and Development (“R&D”)
expenses related to clinical activities associated with SAT-3247 and increased General and administrative (“G&A”)
expenses due to headcount changes in the current period. The increase in net loss was partially offset by higher other income, driven
by increased interest income and unrealized foreign exchange gains on cash balances held in Canadian dollars, resulting from favorable
foreign exchange movements compared to the prior-year periods.
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE
30, 2025 AND 2024
Research and development expenses:
| | |
Three months
ended
June 30, 2025 | | |
Three Months
ended
June 30, 2024 | | |
Six months
ended
June 30, 2025 | | |
Six months
ended
June 30, 2024 | |
| | |
$ | | |
$ | | |
$ | | |
$ | |
| Salaries and fees | |
| 759 | | |
| 609 | | |
| 1,521 | | |
| 1,501 | |
| Discovery expenses | |
| 186 | | |
| 172 | | |
| 330 | | |
| 351 | |
| Preclinical expenses | |
| 569 | | |
| 1,686 | | |
| 1,281 | | |
| 3,122 | |
| Chemistry, manufacturing controls | |
| 207 | | |
| 409 | | |
| 524 | | |
| 1,978 | |
| Clinical | |
| 2,348 | | |
| 485 | | |
| 4,683 | | |
| 538 | |
| Stock-based compensation | |
| 366 | | |
| 206 | | |
| 638 | | |
| 483 | |
| Total research and development expenses | |
| 4,435 | | |
| 3,567 | | |
| 8,977 | | |
| 7,973 | |
R&D expenses increased by $868 to $4,435
for the three months ended June 30, 2025, compared to $3,567 for the three months ended June 30, 2024, and by $1,004 to $8,977
for the six months ended June 30, 2025, compared to $7,973 for the six months ended June 30, 2024. Factors contributing to
the increase in R&D expenses in the current year periods are primarily the result of the following:
| · | Salaries
and management fees increased by $150 for the three months ended June 30, 2025, and
by $20 for the six-month period ended June 30, 2025, compared with the respective periods
in the prior year. The increase is mainly related to higher headcount in the current year
to support expanded clinical activities, and partially offset by separation payments to an
executive in the first half of the comparative period. |
| · | Preclinical
expenses decreased by $1,117 for the three months ended June 30, 2025, and by $1,841
for the six-month period ended June 30, 2025, compared with the respective periods in
the prior year. The preclinical expense in the current periods is related to long-term toxicology
work to support clinical development. In the comparative periods, preclinical expenses were
related to IND enabling studies conducted to support necessary regulatory filing, as we prepared
for clinical development of SAT-3247. |
| · | Chemistry,
and manufacturing controls (“CMC”) expenses decreased by $202 for the
three months ended June 30, 2025, and by $1,454 for the six-month period ended June 30,
2025, primarily due to CMC activities in the prior period related to the process development
and manufacturing of SAT-3247 for clinical use, while current period costs decreased due
to a more focused scope of process development activities. |
| · | Clinical
expenses increased by $1,863 for the three months ended June 30, 2025, and by $4,145
for the six-month period ended June 30, 2025. Clinical costs incurred in the current
period are associated with the completion of the Phase 1 healthy volunteer clinical study
and the Phase 1b clinical study in adult DMD patients, and initial work on the planned Phase
2 clinical program. Clinical costs incurred in the comparative period were related to preparatory
costs associated with conducting the Phase 1 healthy volunteer clinical study. |
| · | Stock-based
compensation increased by approximately $160 for the three months ended June 30, 2025
and by $155 for the six months ended June 30, 2025 compared with the respective periods
in the prior year due to new grants issued in the first half of 2025. |
General and administrative:
| | |
Three months
ended
June 30, 2025 | | |
Three Months
ended
June 30, 2024 | | |
Six months
ended
June 30, 2025 | | |
Six months
ended
June 30, 2024 | |
| | |
$ | | |
$ | | |
$ | | |
$ | |
| Salaries and board fees | |
| 849 | | |
| 538 | | |
| 1,742 | | |
| 1,291 | |
| Professional fees | |
| 427 | | |
| 332 | | |
| 956 | | |
| 848 | |
| Other operating expenses | |
| 187 | | |
| 138 | | |
| 331 | | |
| 312 | |
| Stock-based compensation | |
| 468 | | |
| 314 | | |
| 838 | | |
| 593 | |
| Depreciation | |
| 1 | | |
| 4 | | |
| 2 | | |
| 4 | |
| Total general and administrative
expenses | |
| 1,932 | | |
| 1,326 | | |
| 3,869 | | |
| 3,048 | |
General
and administrative expenses increased by $606 to $1,932 for the three months ended June 30, 2025, as compared to $1,326 for the
three months ended June 30, 2024, and by $821 for the six months ended June 30, 2025, to $3,869, as compared to $3,048 for
the six months ended June 30, 2024. Changes to the components for general and administrative expenses presented in the table above
are primarily the result of the following:
| · | Salaries
and board fees increased by $311 for the three months ended June 30, 2025, and by $451
for the six months ended June 30, 2025, compared with the respective periods in the
prior year. The increases are primarily related to staffing required to support expanded
operations and public company reporting requirements and a separation payment in the current
six-month period. |
| · | Professional
fees increased by $95 for the three months ended June 30, 2025, and by $108 for the
six months ended June 30, 2025, compared with the respective periods in the prior year.
The increases are primarily related to recruitment fees partially offset by a reduction in
investor relations expenses and agency services fees relative to the comparative period. |
| · | Stock-based
compensation increased by $154 for the three months ended June 30, 2025, and by $245
for the six months ended June 30, 2025. The increases are primarily related to new grants
issued in the year and the timing of the vesting of options granted in prior years. |
Other income and expenses:
| | |
Three months
ended
June 30, 2025 | | |
Three Months
ended
June 30, 2024 | | |
Six months
ended
June 30, 2025 | | |
Six months
ended
June 30, 2024 | |
| | |
$ | | |
$ | | |
$ | | |
$ | |
| Finance income | |
| 362 | | |
| 261 | | |
| 755 | | |
| 589 | |
| Loss on derivative financial instruments | |
| - | | |
| (1 | ) | |
| - | | |
| (2 | ) |
| Foreign exchange gain | |
| 429 | | |
| 209 | | |
| 437 | | |
| 880 | |
| Total | |
| 791 | | |
| 469 | | |
| 1,192 | | |
| 1,467 | |
Other income and expenses were a net income of
$791 in the three months ended June 30, 2025 and a net income of $1,192 in the six months ended June 30, 2025, compared to
net income of $469 and $1,467 in the respective comparative periods. Changes to the components for other income and expenses presented
in the table above are primarily the result of the following:
| · | Finance
income increased in the current quarter by $101 and by $166 in the current year as compared
to the respective prior year periods, related to interest earned on cash and cash equivalents
and short- term investments from an increased average balance. |
| · | The
increase in foreign exchange gain in the current quarter of $429 as compared to a foreign
exchange gain of $209 in the prior period, was primarily driven by unrealized foreign exchange
gains on a higher balance of Canadian dollars denominated cash and cash equivalents and foreign
currency conversions resulting from the appreciation of the Canadian dollar relative to the
US dollar. The decrease in foreign exchange gain in the current year of $437 as compared
to a foreign exchange gain of $880 in the prior period, primarily reflects the change in
the functional and presentation currency from Canadian dollars to US dollars effective January 1,
2025. |
Summary of Quarterly Results
The table below is derived from unaudited quarterly
results and was prepared by management for the eight previous quarters to June 30, 2025.
| | |
Q2 2025 | | |
Q1 2025 | | |
Q4 2024 | | |
Q3 2024 | | |
Q2 2024 | | |
Q1 2024 | | |
Q4 2023 | | |
Q3 2023 | |
| | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | |
| R&D Expense | |
| 4,435 | | |
| 4,542 | | |
| 3,999 | | |
| 2,387 | | |
| 3,567 | | |
| 4,406 | | |
| 2,620 | | |
| 2,044 | |
| G&A Expense | |
| 1,932 | | |
| 1,937 | | |
| 1,678 | | |
| 1,313 | | |
| 1,326 | | |
| 1,722 | | |
| 1,943 | | |
| 1,313 | |
| Other (income) and expenses | |
| (791 | ) | |
| (401 | ) | |
| (1,221 | ) | |
| 2,924 | | |
| (469 | ) | |
| (998 | ) | |
| 210 | | |
| (682 | ) |
| Income taxes | |
| 32 | | |
| 63 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| Net Loss | |
| (5,608 | ) | |
| (6,141 | ) | |
| (4,456 | ) | |
| (6,624 | ) | |
| (4,424 | ) | |
| (5,130 | ) | |
| (4,773 | ) | |
| (2,675 | ) |
| Loss per Share | |
| (0.03 | ) | |
| (0.04 | ) | |
| (0.03 | ) | |
| (0.06 | ) | |
| (0.04 | ) | |
| (0.05 | ) | |
| (0.04 | ) | |
| (0.02 | ) |
R&D expenses were high in Q2 2025 and Q1
2025 as compared to prior quarters, due to clinical costs related to the Phase 1 clinical programs and the preparatory work on Phase
2 clinical programs. R&D expenses were high in Q1 2024 and Q4 2023 due to IND enabling studies and CMC manufacturing in preparation
of initiating our clinical program.
G&A expenses have increased in Q2 2025 and
Q1 2025 as compared to prior quarters primarily related to headcount changes. In Q2 2025 and Q1 2025, other income and expenses primarily
reflect foreign exchange gains and losses on the Company’s cash and cash equivalents held in CAD and interest income earned on
investments. Between Q3 2023 and Q4 2024, excluding Q3 2024, other income and expenses recorded primarily reflect foreign exchange gains
and losses on the Company’s cash and cash equivalents and investments held in USD and interest income earned on investments.
Net loss increased in Q3 2024, because the Company
recognized an impairment of $2,872 to fully write down the remaining carrying value of the AmpB intangible asset.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has devoted its
resources to funding R&D programs, including securing intellectual property rights and licenses, conducting discovery research, manufacturing
drug supplies, conducting preclinical and clinical studies, and providing administrative support to R&D activities, which has resulted
in an accumulated deficit of $68,846 as of June 30, 2025. With no current revenues, losses are expected to continue while the Company’s
R&D programs are advanced.
We currently do not earn any revenues from our
product candidates and are therefore considered to be in the development stage. As required, the Company will continue to finance its
operations through the sale of equity or pursue non-dilutive funding sources available to the Company in the future. The continuation
of our research and development activities for our muscle regeneration platform is dependent upon our ability to successfully finance
and complete our research and development programs through a combination of equity financing and revenues from strategic partners. We
have no current sources of revenues from strategic partners. Management has forecasted that the Company’s current level of cash
will be sufficient to execute its current planned expenditures for more than the next 12 months without further financing.
Cash Management
At June 30, 2025, the Company had cash and
cash equivalents of $38,217, compared with $48,548 of cash and cash equivalents and short-term investments at December 31, 2024.
Cash utilized in operating activities for the period ended June 30, 2025, was $12,209, compared to the period ended June 30,
2024, of $9,799. The Company invests cash in excess of operational requirements in highly rated and liquid investments.
Net working
capital was $38,342 as of June 30, 2025, compared to a net working capital of $47,160 as of December 31, 2024.
Satellos’ main objectives in managing capital
are to ensure cash resources are preserved and provide sufficient liquidity to finance research and development activities, ongoing administrative
costs and working capital. Since inception, Satellos has financed its operations from private sales of equity, public sales of equity,
convertible debt financing, non-convertible debenture financing, government grants and investment tax credits. Since Satellos has not
generated net earnings from operations, its ongoing liquidity depends on its ability to access capital markets, which depends on the
success of Satellos’ ongoing research and development programs, as well as capital market conditions.
Satellos uses cash flow forecasts to estimate
cash requirements and has forecasted that our existing working capital is sufficient to operate the Company and meet our announced goals
for the ensuing twelve months. Based on future requirements, Satellos plans to raise capital as required to provide the necessary financial
resources for operations. The timing of financings will depend on market conditions and Satellos’ cash requirements. Satellos’
cash flow forecasts are continually updated to reflect actual cash inflows and outflows to monitor the requirements and timing for additional
financial resources.
Satellos will continue to pursue various funding
options and opportunities; however, no assurances can be made that Satellos will be successful in raising additional investment capital,
to continue as a going concern. Our ability to raise additional funds could be affected by adverse market conditions, the status of our
product pipeline, and various other factors and we may be unable to raise capital when needed, or on terms favorable to us. If the necessary
funds are not available, we may have to delay, reduce the scope of, or eliminate some of our development programs, potentially delaying
the time to market for any of our product candidates.
Equity Offering December 2024
On December 20, 2024, the Company completed
a public offering (the “December Equity Offering”), issuing 51,420,000 Common Shares at CA$0.90 per Common Share
and 11,865,000 Pre-Funded Warrants with no expiry date and an exercise price of CA$0.00001 for CA$0.89999 per Pre-Funded Warrant for
gross proceeds of $41,823 ($CA56,956).
The costs associated with the December Equity
Offering were $3,240, including cash costs for commissions to the agents of approximately $2,907, professional fees and regulatory costs
of $253, and accrued professional and regulatory fees of $80.
Bloom Burton Securities Inc., (“BBSI”),
an entity jointly controlled by a director of Satellos, acted as exclusive agent and book running manager for both the December Equity
Offering and the May Equity Offering.
USE OF PROCEEDS
December 2024 Financing
The following table provides an update on the
milestones for the Duchenne program and the anticipated use of proceeds raised as part of the December Equity Offering (as previously
proposed in the final prospectus dated December 17, 2024, relating to the December Equity Offering (the “December 2024
Prospectus”), along with the amounts actually expended.
| Development Milestone | |
Amount to Spend
(as proposed in the Dec
2024 Prospectus) | | |
Adjustments | | |
Costs
Incurred to
Date | | |
Estimated
Remaining
Costs | |
| Phase 2 clinical development of SAT-3247 Including Phase 1 long-term follow up study and supporting CMC and pre-clinical activities | |
$ | 28,092 | | |
| - | | |
$ | 3,156 | | |
$ | 24,936 | |
| General corporate and administrative expenses | |
$ | 8,758 | | |
| - | | |
| 36 | | |
$ | 8,722 | |
| Total | |
$ | 36,850 | | |
| | | |
$ | 3,192 | | |
$ | 33,658 | |
May 2023 Financing
The following table provides an update on the
milestones for the Duchenne program and the anticipated use of proceeds raised as part of the public offering completed by the Company
on May 17, 2023 (the “May Equity Offering”) (as previously proposed in the final prospectus dated May 9,
2023 relating to the May Equity Offering), along with the amounts actually expended.
The Company changed its lead candidate from SAT-3153
to SAT-3247 following preclinical studies that demonstrated SAT-3247 had similar capacity to affect stem cell polarity, enhance muscle
regeneration, and improve muscle force in the mdx mouse model of Duchenne but also exhibited improved oral bioavailability, target specificity,
and tissue distribution, when compared directly to SAT-3153. SAT-3153 will serve as a back- up candidate to SAT-3247.
Development
Milestone | |
Estimated
Completion | |
June 30, 2025
Status | |
Amount
to
Spend | | |
Adjustments | | |
Incurred
to Date | | |
Estimated
Remaining
Costs | |
| CMC Activities and GMP Manufacturing | |
Sept 2024 | |
Complete Q3 2024 | |
$ | 2,203 | | |
$ | 1,628 | | |
$ | (3,831 | ) | |
$ | - | |
| IND enabling studies submissions | |
Sept 2024 | |
Complete Q3 2024 | |
$ | 7,710 | | |
$ | (35 | ) | |
$ | (7,675 | ) | |
$ | - | |
| Further Discovery research on new drug targets / indications | |
Discovery work ongoing as of Sept 2025 | |
Further discovery work on new drug targets and disease indications is complete at this time. ON TRACK | |
$ | 1,836 | | |
$ | 42 | | |
$ | (1,878 | ) | |
$ | - | |
| Phase 1 Clinical Studies | |
Sept 2025 | |
The Company completed a Phase 1a safety study comprised of SAD and MAD stages in healthy volunteers in Q1 2025. COMPLETE | |
$ | 12,116 | | |
$ | (3,446 | ) | |
$ | (8,670 | ) | |
$ | - | |
| | |
| |
The Company completed a Phase 1b PK study in Adult Duchenne patients in Q2 2025. COMPLETE. | |
| | | |
| | | |
| | | |
| | |
| G&A | |
| |
| |
$ | 12,520 | | |
$ | (2,139 | ) | |
$ | (10,381 | ) | |
$ | - | |
| Total | |
| |
| |
$ | 36,385 | | |
$ | (3,950 | ) | |
$ | (32,435 | ) | |
$ | - | |
These estimated timelines and costs set out in
the table above, reflect management’s best estimates and assume successful completion of manufacturing activities, preclinical
and toxicology studies showing safety and efficacy, regulatory approvals, and timely recruitment of patients once clinical trials may
begin.
Adjustments were made to the originally proposed
allocations as actual CMC costs were higher than planned due to additional work needed on drug formulation and on development of the
manufacturing process. These costs were offset by efficient progress related to the preclinical work required to prepare and submit the
initial regulatory package for SAT-3247. In addition, an adjustment was made to both the Phase 1 clinical cost allocation and G&A
cost allocation to reallocate a portion of the proceeds to working capital. These adjustments will not impact the Company’s ability
to achieve its stated business objectives and milestones.
License Agreements
Ottawa Hospital Research Institute (“OHRI”)
Effective May 1, 2018, Satellos and OHRI
entered into the OHRI License Agreement whereby OHRI granted Satellos an exclusive, world-wide, sublicensable, royalty bearing right
and license to a body of technology and patents comprised of five patent families to develop, make, have made, import, use, offer for
sale, sell and have sold or otherwise commercialize licensed products. At the same time the parties entered into a sponsored research
agreement, during the term of which OHRI has agreed to carry out specific research and development activities according to a prescribed
statement of work, as may be amended from time to time, under the direction of the Company’s co-founder, Dr. Michael A. Rudnicki
(the “OHRI SRA”). Under the OHRI SRA, Dr. Rudnicki leads a dedicated R&D team who are engaged solely to execute
the agreed R&D program of Satellos, under his direction and as defined in the statement of work.
Long-Term Obligations and Other Contractual
Commitments
The Company enters into contracts in the normal
course of business, including for research and development activities. As at June 30, 2025, in addition to amounts that have been
recognized in accounts payable and accrued liabilities, the Company has commitments for research and development activities in the amount
of $17,728, most cancellable with notice. These commitments include agreements related to the conduct of long- term toxicology and a
clinical study.
| | |
Payments
Due by Period |
| | |
Total | | |
Less than
1 year | | |
1 -3 years | | |
4 –
5 years | | |
After 5 years |
| Purchase
obligations | |
$ | 17,728 | | |
$ | 10,468 | | |
$ | 7,260 | | |
| nil | | |
nil |
The Company may be required to make annual, milestone,
royalty, and other research and development funding payments to OHRI under the OHRI SRA and the OHRI License. These payments are contingent
upon the achievement of specific development, regulatory and/or commercial milestones. The Company’s significant contingent milestone,
royalty and other research and development commitments are as follows:
| ● | Royalties on net sales of any products
covered by patents licensed from OHRI (“Licensed Products”) of 1% or 2%
(depending on which patents cover a particular product), during the period when the applicable
patents have valid, unexpired claims, subject to certain royalty stacking provisions; |
| ● | The following payments to OHRI may be triggered by specified
events: |
| o | CA$50
- each time a Licensed Product is the subject of an approved IND in the US or equivalent
in any other industrialized country (maximum one payment per new drug candidate); |
| o | CA$150
- each time a Licensed Product first enters Phase II human clinical trials in the US or equivalent
in any other industrialized country (maximum one payment per new drug candidate); |
| o | CA$300
- each time a Licensed Product first enters Phase III human clinical trials in the US or
equivalent in any other industrialized country (maximum one payment per new drug candidate);
and |
| o | CA$1,000
- each time a Licensed Product is the subject of a regulatory approval in the US (such as
NDA and BLA) or equivalent in any other industrialized country (maximum one payment per new
drug candidate). |
| ● | 2% of sublicensing income received by Satellos from the grant
of sublicenses. |
TRANSACTIONS WITH RELATED PARTIES
The following related parties have engaged in
transactions with the Company during the three and six months ended June 30, 2025 and June 30, 2024.
Key management personnel consists of the Company’s
Chief Executive Officer, Chief Scientific Officer, former Chief Medical Officer, former Chief Business Officer, Chief Financial Officer
and the Directors of the Corporation. The remuneration of key management personnel is as follows:
| | |
Three months
ended
June 30, 2025 | | |
Three months
ended
June 30,
2025 | | |
Three months
ended
June 30, 2024 | | |
Three months
ended
June 30,
2024 | |
| | |
$ | | |
$ | | |
$ | | |
$ | |
| Salaries and management
fees | |
| 626 | | |
| 755 | | |
| 1,288 | | |
| 1,490 | |
| Stock-based compensation | |
| 554 | | |
| 354 | | |
| 941 | | |
| 877 | |
| Total | |
| 1,180 | | |
| 1,109 | | |
| 2,229 | | |
| 2,367 | |
OFF-BALANCE SHEET ARRANGEMENTS
Satellos has not entered into any material off-balance
sheet arrangements.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Satellos is exposed to various risks through
its financial instruments as at June 30, 2025. The Company’s risk exposures and the impact on the Company’s financial
instruments are summarized below:
Credit Risk
Credit risk arises from cash and cash equivalents
and short-term investments held at banks and financial institutions, as well as outstanding receivables. In the three and six months
ended June 30, 2025, the Company invested its excess cash in interest-bearing operating accounts held at a Schedule 1 Canadian bank
and in US government treasury bills and Guaranteed Investment Certificates. The Company limits its exposure to credit risk, with respect
to cash and cash equivalents and short-term investments, by placing them with high quality credit financial institutions. The Company's
cash and cash equivalents consist primarily of operating funds, US government treasury bills, deposit investments and Guaranteed Investment
Certificates with commercial banks.
Liquidity Risk
Liquidity risk is the risk that the Company will
encounter difficulty in raising funds to meet cash flow requirements associated with financial instruments. The Company controls liquidity
risk through management of working capital, cash flows and the availability and sourcing of financing. The Company’s ability to
accomplish all of its future strategic plans is dependent on obtaining additional financing or executing other strategic options; however,
there is no assurance the Company will achieve these objectives. As at June 30, 2025, the Company’s liabilities consist of
accounts payable and accrued liabilities that have contracted maturities of less than one year.
Market Risk
Market risk is the risk of loss that may arise
from changes in market factors such as interest rates, foreign exchange rates, and equity prices. These fluctuations may be significant.
Currency risk is the risk that the
fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The exposure to
this risk changes as the exchange rate fluctuates. Foreign currency risk is limited to the portion of the Company’s business transactions
denominated in currencies other than the Canadian dollar, primarily expenses for research and development incurred in US dollars. The
Company manages foreign exchange risk by maintaining Canadian dollars in cash on hand to fund its short-term foreign currency expenditures.
Balances held in foreign currencies, presented in US dollars are as follows:
| | |
As at June 30,
2025 | |
| | |
US | | |
Australian | | |
Euro | | |
GBP | | |
Canadian | | |
Total | |
| | |
$ | | |
$ | | |
€ | | |
£ | | |
$ | | |
$ | |
| Cash and cash equivalents | |
| 28,080 | | |
| 1,302 | | |
| - | | |
| - | | |
| 8,835 | | |
| 38,217 | |
| Accounts payable and accrued liabilities | |
| (1,396 | ) | |
| (213 | ) | |
| (286 | ) | |
| (6 | ) | |
| (869 | ) | |
| (2,770 | ) |
| Total | |
| 26,684 | | |
| 1,089 | | |
| (286 | ) | |
| (6 | ) | |
| 7,966 | | |
| 35,447 | |
| | |
As at December 31,
2024 | |
| | |
US | | |
Australian | | |
Euro | | |
Canadian | | |
Total | |
| | |
$ | | |
$ | | |
€ | | |
$ | | |
$ | |
| Cash and cash equivalents | |
| 24,848 | | |
| 339 | | |
| - | | |
| 14,886 | | |
| 40,073 | |
| Short-term investments | |
| 5,000 | | |
| - | | |
| - | | |
| 3,475 | | |
| 8,475 | |
| Accounts payable and accrued liabilities | |
| (2,491 | ) | |
| (329 | ) | |
| (242 | ) | |
| (521 | ) | |
| (3,583 | ) |
| Total | |
| 27,357 | | |
| 10 | | |
| (242 | ) | |
| 17,840 | | |
| 44,965 | |
Assuming all other variables remain
constant, a 10% depreciation or appreciation of the US dollar against the Canadian dollar, Australian dollar, Euro, and GBP would result
in an increase or decrease in loss and comprehensive loss for the six months ended June 30, 2025, of $876 (December 31, 2024
- $1,761).
Interest rate risk is the risk that
the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company
holds its cash and cash equivalents and short- term investments in banks and financial institutions, and manages its interest rate risk
by holding cash in high yield savings accounts or highly liquid short-term investments.
Financial assets and liabilities are
recognized on the statement of financial position at amortized cost in a hierarchy that is based on significance of the inputs used in
making the measurements. The levels in the hierarchy are:
| · | Level
1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities |
| · | Level
2 – Inputs other than quoted prices included within level 1 that are observable for
the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from
prices) |
| · | Level
3 – Inputs for the asset or liability that are not based on observable market data
(i.e., unobservable inputs) |
At June 30, 2025, the Company's
financial instruments included cash and cash equivalents, accounts receivable, and accounts payable and accrued liabilities.
Due to the short-term maturities of
cash and cash equivalents and accounts payable and accrued liabilities, the carrying amounts approximate fair value at the respective
statement of financial position date.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of our consolidated financial
statements in accordance with IFRS Accounting Standards requires management to make judgements, estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The reported amounts and
note disclosures reflect management’s best estimate of the most probable set of economic conditions and planned course of actions.
Actual results may differ from these estimates. In preparing these unaudited condensed consolidated interim financial statements, the
significant judgements made by management in applying our accounting policies and key sources of estimation uncertainty are disclosed
in the consolidated financial statements for the years ended December 31, 2024 and 2023.
DISCLOSURE CONTROLS AND INTERNAL CONTROL OVER
FINANCIAL REPORTING
The Company has implemented a system of internal
controls that it believes adequately protects the assets of the Company and is appropriate for the nature of its business and the size
of its operations. The internal control system was designed to provide reasonable assurance that all transactions are accurately recorded,
that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS Accounting Standards
and that our assets are safeguarded.
Internal control over financial reporting means
a process designed by or under the supervision of the Chief Executive Officer and the Chief Financial Officer to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
IFRS Accounting Standards. The internal controls are not expected to prevent and detect all misstatements due to error or fraud.
These internal controls include disclosure controls
and procedures designed to ensure that information required to be disclosed by the Company is accumulated and communicated as appropriate
to allow timely decisions regarding required disclosure.
There were no changes in our internal control
over financial reporting that occurred during the six months ended June 30, 2025 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
OUTSTANDING SHARE DATA
As of the date of this MD&A, the Company
had the following issued and outstanding securities:
| Security | |
Number | |
| Common shares | |
| 176,305,359 | |
| Prefunded Warrants | |
| 44,967,780 | |
| Warrants | |
| 3,464,000 | |
| Stock options | |
| 23,434,816 | |
RISKS AND UNCERTAINTIES
We are a development stage biopharmaceutical
company that operates in an industry that is dependent on a number of factors that include the capacity to raise additional capital on
reasonable terms, obtain positive results of clinical trials, obtain positive results of clinical trials without serious adverse or inappropriate
side effects, and obtain market acceptance of its product. An investment in our Common Shares is subject to a number of risks and uncertainties.
An investor should carefully consider the risks described in our AIF, as well as our other public filings with the securities regulators
before investing in our Common Shares. If any of such described risks occur, or if others occur, our business, operating results and
financial condition could be seriously harmed, and investors may lose a significant proportion of their investment. There are important
risks which management believes could impact our business. For information on risks and uncertainties, please refer to the “Risk
Factors” section of our most recent AIF filed on SEDAR+ at www.sedarplus.ca.
ADDITIONAL INFORMATION
Additional information related to Satellos, including the AIF, is
available by accessing the Company’s SEDAR+ profile at www.sedarplus.ca.
Exhibit 4.9
SATELLOS BIOSCIENCE INC.
Condensed Consolidated Interim Financial Statements
For the three and nine months ended September 30,
2025 and 2024 (Unaudited)
SATELLOS BIOSCIENCE INC.
Condensed Consolidated Interim Statements of Financial Position
(Expressed in thousands of US Dollars)
(Unaudited)
| As at, | |
Notes | |
September 30,
2025 | | |
December 31,
2024 | | |
January 1,
2024 | |
| | |
| |
$ | | |
$
(Notes 2 and 16) | | |
$
(Notes 2 and 16) | |
| ASSETS | |
| |
| | | |
| | | |
| | |
| Current | |
| |
| | | |
| | | |
| | |
| Cash and cash equivalents | |
3 | |
| 19,304 | | |
| 40,073 | | |
| 16,681 | |
| Short-term investments | |
4 | |
| 15,310 | | |
| 8,475 | | |
| 13,246 | |
| Sales tax and other receivables | |
| |
| 205 | | |
| 435 | | |
| 441 | |
| Prepaid expenses and deposits | |
5 | |
| 2,678 | | |
| 1,760 | | |
| 112 | |
| Derivative financial instruments, net | |
| |
| - | | |
| - | | |
| 3 | |
| Total current assets | |
| |
| 37,497 | | |
| 50,743 | | |
| 30,483 | |
| | |
| |
| | | |
| | | |
| | |
| Property and equipment | |
| |
| 6 | | |
| 4 | | |
| 15 | |
| Assets held for sale | |
| |
| | | |
| | | |
| | |
| Intangible asset | |
| |
| - | | |
| - | | |
| 2,961 | |
| Investments | |
| |
| - | | |
| - | | |
| 31 | |
| | |
| |
| 6 | | |
| 4 | | |
| 3,007 | |
| | |
| |
| | | |
| | | |
| | |
| TOTAL ASSETS | |
| |
| 37,503 | | |
| 50,747 | | |
| 33,490 | |
| | |
| |
| | | |
| | | |
| | |
| LIABILITIES | |
| |
| | | |
| | | |
| | |
| | |
| |
| | | |
| | | |
| | |
| Accounts payable and accrued liabilities | |
6 | |
| 3,503 | | |
| 3,583 | | |
| 2,734 | |
| Total current liabilities | |
| |
| 3,503 | | |
| 3,583 | | |
| 2,734 | |
| | |
| |
| | | |
| | | |
| | |
| Total Liabilities | |
| |
| 3,503 | | |
| 3,583 | | |
| 2,734 | |
| | |
| |
| | | |
| | | |
| | |
| SHAREHOLDERS’ EQUITY | |
| |
| | | |
| | | |
| | |
| | |
| |
| | | |
| | | |
| | |
| Common shares | |
| |
| 85,546 | | |
| 78,131 | | |
| 47,335 | |
| Pre-funded warrants | |
| |
| 15,480 | | |
| 19,967 | | |
| 13,050 | |
| Contributed surplus | |
| |
| 9,316 | | |
| 7,900 | | |
| 6,472 | |
| Accumulated deficit | |
| |
| (74,667 | ) | |
| (57,097 | ) | |
| (36,463 | ) |
| Accumulated other comprehensive income/(loss) | |
| |
| (1,675 | ) | |
| (1,737 | ) | |
| 362 | |
| Total shareholders’ equity | |
| |
| 34,000 | | |
| 47,164 | | |
| 30,756 | |
| | |
| |
| | | |
| | | |
| | |
| TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY | |
| |
| 37,503 | | |
| 50,747 | | |
| 33,490 | |
Commitments and Contingencies (Note 11)
The accompanying notes are an integral part of these condensed consolidated
interim financial statements.
SATELLOS BIOSCIENCE INC.
Condensed Consolidated Interim Statements of Loss and Comprehensive
Loss
(Expressed in thousands of US Dollars, except for per share amounts)
(Unaudited)
| | |
| |
Three months ended
September 30, | | |
Nine months ended
September 30, | |
| | |
Notes | |
2025 | | |
2024 | | |
2025 | | |
2024 | |
| | |
| |
$ | | |
$ | | |
$ | | |
$ | |
| | |
| |
(Notes 2, 16) | | |
(Notes 2, 16) | |
| EXPENSES | |
| |
| | | |
| | | |
| | | |
| | |
| Research and development expenses | |
10 | |
| 3,994 | | |
| 2,387 | | |
| 12,971 | | |
| 10,360 | |
| General and administrative expenses | |
10 | |
| 1,972 | | |
| 1,313 | | |
| 5,841 | | |
| 4,361 | |
| LOSS FROM OPERATING ACTIVITIES: | |
| |
| (5,966 | ) | |
| (3,700 | ) | |
| (18,812 | ) | |
| (14,721 | ) |
| | |
| |
| | | |
| | | |
| | | |
| | |
| OTHER INCOME AND EXPENSES | |
| |
| | | |
| | | |
| | | |
| | |
| Finance income | |
| |
| 349 | | |
| 230 | | |
| 1,104 | | |
| 819 | |
| Impairment of intangible asset | |
| |
| - | | |
| (2,905 | ) | |
| - | | |
| (2,905 | ) |
| Loss on derivatives | |
| |
| - | | |
| - | | |
| - | | |
| (2 | ) |
| Foreign exchange gain/(loss) | |
| |
| (185 | ) | |
| (249 | ) | |
| 252 | | |
| 631 | |
| NET LOSS BEFORE INCOME TAXES | |
| |
| (5,802 | ) | |
| (6,624 | ) | |
| (17,456 | ) | |
| (16,178 | ) |
| | |
| |
| | | |
| | | |
| | | |
| | |
| Income taxes | |
| |
| (19 | ) | |
| - | | |
| (114 | ) | |
| - | |
| | |
| |
| | | |
| | | |
| | | |
| | |
| NET LOSS FOR THE PERIOD | |
| |
| (5,821 | ) | |
| (6,624 | ) | |
| (17,570 | ) | |
| (16,178 | ) |
| | |
| |
| | | |
| | | |
| | | |
| | |
| OTHER COMPREHENSIVE INCOME/(LOSS) | |
| |
| | | |
| | | |
| | | |
| | |
| Items that may be reclassified to net loss Foreign currency translation adjustments | |
| |
| - | | |
| 257 | | |
| 62 | | |
| (744 | ) |
| TOTAL COMPREHENSIVE LOSS | |
| |
| (5,821 | ) | |
| (6,367 | ) | |
| (17,508 | ) | |
| (16,922 | ) |
| | |
| |
| | | |
| | | |
| | | |
| | |
| Basic and diluted loss per share | |
| |
$ | (0.03 | ) | |
$ | (0.06 | ) | |
$ | (0.10 | ) | |
$ | (0.14 | ) |
| | |
| |
| | | |
| | | |
| | | |
| | |
| Weighted average number of common shares (basic & diluted) | |
7 | |
| 167,339,189 | | |
| 113,027,202 | | |
| 171,669,287 | | |
| 112,872,225 | |
The accompanying notes are an integral part of these condensed consolidated
interim financial statements.
SATELLOS BIOSCIENCE INC.
Condensed Consolidated Interim Statements of Changes in Shareholders’
Equity
(Expressed in thousands of US Dollars)
(Unaudited)
For the nine months ended September 30, 2025
and 2024
| | |
Common
Shares | | |
Common
Shares | | |
Pre-funded
Warrants | | |
Pre-funded
Warrants | | |
Contributed
Surplus | | |
Accumulated
Deficit | | |
Accumulated
Other
Comprehensive
Loss | | |
Total
Shareholders’
Equity | |
| | |
Number | | |
$ | | |
Number | | |
$ | | |
$ | | |
$ | | |
$ | | |
| |
| Balance - December 31,
2023 (Notes 2 and 16) | |
| 112,791,658 | | |
| 47,335 | | |
| 39,702,780 | | |
| 13,050 | | |
| 6,472 | | |
| (36,463 | ) | |
| 362 | | |
| 30,756 | |
| Exercise of warrants (Note 8) | |
| 589,156 | | |
| 264 | | |
| - | | |
| - | | |
| (82 | ) | |
| - | | |
| - | | |
| 182 | |
| Stock-based compensation (Note
9) | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,238 | | |
| - | | |
| - | | |
| 1,238 | |
| Net loss for the period | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (16,178 | ) | |
| - | | |
| (16,178 | ) |
| Foreign
currency translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (744 | ) | |
| (744 | ) |
| Balance – September 30,
2024 (Notes 2 and 16) | |
| 113,380,814 | | |
| 47,559 | | |
| 39,702,780 | | |
| 13,050 | | |
| 7,628 | | |
| (52,641 | ) | |
| (382 | ) | |
| 15,254 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance - December 31,
2024 (Notes 2 and 16) | |
| 165,819,872 | | |
| 78,131 | | |
| 51,567,780 | | |
| 19,967 | | |
| 7,900 | | |
| (57,097 | ) | |
| (1,737 | ) | |
| 47,164 | |
| Exercise of warrants (Note 8) | |
| 5,623,087 | | |
| 2,928 | | |
| - | | |
| - | | |
| (834 | ) | |
| - | | |
| - | | |
| 2,094 | |
| Common shares issued in connection
with the exercise of pre-funded warrants (Note 7) | |
| 13,650,631 | | |
| 4,487 | | |
| (13,650,840 | ) | |
| (4,487 | ) | |
| - | | |
| - | | |
| - | | |
| - | |
| Stock-based compensation (Note
9) | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,250 | | |
| - | | |
| - | | |
| 2,250 | |
| Net loss for the period | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (17,570 | ) | |
| - | | |
| (17,570 | ) |
| Foreign
currency translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 62 | | |
| 62 | |
| Balance – September 30,
2025 | |
| 185,093,590 | | |
| 85,546 | | |
| 37,916,940 | | |
| 15,480 | | |
| 9,316 | | |
| (74,667 | ) | |
| (1,675 | ) | |
| 34,000 | |
The accompanying notes are an integral part of these condensed consolidated
interim financial statements.
SATELLOS BIOSCIENCE INC.
Condensed Consolidated Interim Statements of Cash Flows
(Expressed in thousands of US Dollars)
(Unaudited)
| For the nine months ended, | |
Notes | |
September 30, 2025 | | |
September 30, 2024 | |
| | |
| |
$ | | |
$ | |
| | |
| |
| | |
(Notes 2 and 16) | |
| CASH AND CASH EQUIVALENTS PROVIDED BY (USED IN): | |
| |
| | | |
| | |
| | |
| |
| | | |
| | |
| OPERATING ACTIVITIES | |
| |
| | | |
| | |
| Net loss for the period | |
| |
| (17,570 | ) | |
| (16,178 | ) |
| Items not affecting cash: | |
| |
| | | |
| | |
| Depreciation of property and equipment | |
| |
| 4 | | |
| 6 | |
| Stock-based compensation | |
9 | |
| 2,250 | | |
| 1,238 | |
| Impairment of intangible assets | |
| |
| - | | |
| 2,905 | |
| Loss on derivative financial instruments | |
| |
| - | | |
| 2 | |
| Non-cash finance income | |
| |
| - | | |
| (353 | ) |
| Unrealized foreign exchange gain | |
| |
| (276 | ) | |
| (629 | ) |
| Net change in non-cash working capital balances: | |
| |
| | | |
| | |
| Sales tax and other receivables | |
| |
| 231 | | |
| 288 | |
| Prepaid expenses and deposits | |
| |
| (918 | ) | |
| (317 | ) |
| Accounts payable and accrued liabilities | |
| |
| (56 | ) | |
| 1 | |
| | |
| |
| (16,335 | ) | |
| (13,037 | ) |
| | |
| |
| | | |
| | |
| FINANCING ACTIVITIES | |
| |
| | | |
| | |
| Proceeds from exercise of warrants | |
| |
| 2,094 | | |
| 182 | |
| | |
| |
| | | |
| | |
| INVESTING ACTIVITIES | |
| |
| | | |
| | |
| Purchases of short-term investments | |
| |
| (15,329 | ) | |
| (18,499 | ) |
| Maturities of short-term investments | |
| |
| 8,475 | | |
| 32,097 | |
| Purchase of property and equipment | |
| |
| (6 | ) | |
| (4 | ) |
| | |
| |
| (6,860 | ) | |
| 13,594 | |
| | |
| |
| | | |
| | |
| Effect of foreign currency exchange rates on cash and cash equivalents | |
| |
| 332 | | |
| (57 | ) |
| | |
| |
| | | |
| | |
| INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS | |
| |
| (20,769 | ) | |
| 682 | |
| | |
| |
| | | |
| | |
| CASH AND CASH EQUIVALENTS – Beginning of period | |
| |
| 40,073 | | |
| 16,681 | |
| | |
| |
| | | |
| | |
| CASH AND CASH EQUIVALENTS – End of period | |
| |
| 19,304 | | |
| 17,363 | |
| | |
| |
| | | |
| | |
Cash
interest received | |
| |
| 981 | | |
| 396 | |
The accompanying notes are an integral part of these condensed consolidated
interim financial statements.
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim Financial Statements (unaudited)
For the three and nine months ended September 30, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
| 1. | Description of Business |
Satellos Bioscience Inc. (“Satellos”
or the “Company”) is a Canadian biotechnology and drug development company incorporated under the laws of Canada. The
head office, principal address, and records of the Company are located at Royal Bank Plaza, South Tower, 200 Bay Street, Suite 2800,
Toronto, Ontario M5J 2J1 Canada and the Company’s common shares (“Common Shares”) are listed on the Toronto Stock
Exchange (“TSX”).
The Company has wholly owned subsidiaries
in Australia (Satellos Bioscience Australia Pty Ltd) and in Delaware, USA (Satellos Bioscience US, Inc.).
On July 29, 2025, the Company completed
the sale of its wholly owned subsidiary in Canada, Amphotericin B Technologies, Inc., (AmpB), to Natural Works Trading Limited, as
part of a strategic portfolio review, for consideration of $10. This divestiture did not impact the Company’s core operations or
ongoing business activities.
| 2. | Basis of Presentation and Material Accounting Policies |
The Company prepares its condensed consolidated
interim financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board (IFRS Accounting Standards) applicable to the preparation of condensed consolidated interim financial statements, including
International Accounting Standard 34, Interim Financial Reporting. These condensed consolidated interim financial statements should
be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2024, which were
prepared in accordance with IFRS Accounting Standards.
Certain comparative figures have been
reclassified to conform to the current period presentation. These reclassifications had no material impact on previously reported net
income, total assets, or equity.
These consolidated financial statements
were approved and authorized for issue by the Board of Directors on November 13, 2025.
Functional and Presentation Currency
Effective January 1, 2025, Satellos
Bioscience Inc. adopted the United States dollar (“USD”) as its functional currency. Prior to this date, the functional currency
was the Canadian dollar (“CAD”). The change in the functional currency from CAD to USD was made to more closely reflect the
primary economic environment in which the Company currently operates. As a result of the advancement of the Company’s development
programs, the Company incurred and anticipated incurring the majority of future operating costs including research and development costs
primarily in USD. On January 1, 2025, the change in functional currency resulted in the assets and liabilities of the Company as
of December 31, 2024 being translated into USD using the exchange rate in effect on that date, and equity transactions were translated
at historical rates. The change in functional currency was applied prospectively from January 1, 2025.
During the period ended March 31,
2025, the Company also changed its presentation currency from CAD to USD. The change in presentation currency was made to better reflect
the Company’s business activities and to improve investor’s ability to compare the Company’s financial results with
other publicly traded business in the industry. In making the change to a USD presentation currency, the Company followed the guidance
in IAS 21. The Effects of Changes in Foreign Exchange Rates (IAS 21) and has applied the change retrospectively as if the new presentation
currency had always been the Company’s presentation currency. In accordance with IAS 21, the financial statements for all the periods
presented have been translated to the new USD presentation currency. For comparative balances, assets and liabilities have been translated
into the presentation currency at the rate of exchange prevailing at the reporting date, or at the exchange rate prevailing at the date
of the transactions. Exchange rate differences arising on translation are taken to other comprehensive loss/(income). The Company has
presented the effects of the change in the presentation currency, see note 16.
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim Financial Statements (unaudited)
For the three and nine months ended September 30, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
Significant Accounting Judgements, Estimates and Assumptions
The preparation
of these condensed consolidated interim financial statements in accordance with IFRS Accounting Standards requires management to make
judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the condensed consolidated interim financial statements and reported
amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
The condensed consolidated interim financial
statements include estimates, which, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the condensed
consolidated interim financial statements and may require accounting adjustments based on future occurrences. The estimates and underlying
assumptions are reviewed on a regular basis. Revisions to accounting estimates are accounted for prospectively.
There have been no material changes
to the nature of estimates and judgments reported in the Company’s audited consolidated financial statements for the year ended
December 31, 2024.
Material Accounting Policies
The accounting policies applied in these
condensed consolidated interim financial statements are the same as those applied in our audited consolidated financial statements for
the year ended December 31, 2024.
New and Amended Standards and Interpretations
New standards, amendments and interpretations issued
but not yet effective
At the date of authorization of these
condensed consolidated interim financial statements, the Company had not applied the following new and revised IFRS Accounting Standards
that are not yet effective.
Amendments to IFRS 9, Financial instruments and IFRS
7, Financial instruments: Disclosures
The IASB has issued classification
and measurement and disclosure amendments to IFRS 9 and IFRS 7 with an effective date for years beginning on or after January 1,
2026 with earlier application permitted. The amendments clarify the date of recognition and derecognition of some financial assets and
liabilities and introduce a new exception for some financial liabilities settled through an electronic payment system. Other changes include
a clarification of the requirements when assessing whether a financial asset meets the solely payments of principal and interest criteria
and new disclosures for certain instruments with contractual terms that can change cash flows (including instruments where cash flows
changes are linked to environment, social or governance (ESG) targets). The Company has not yet commenced the evaluation of the impact
of these amendments.
New accounting standard IFRS 18, Presentation and disclosure
in financial statements
IFRS 18, Presentation and Disclosure
in Financial Statements (IFRS 18) will provide new presentation and disclosure requirements and replace IAS 1, Presentation of Financial
Statements. IFRS 18 introduces changes to the structure of the income statement; provides required disclosures in financial statements
for certain profit or loss performance measures that are reported outside an entity’s financial statements; and provides enhanced
principles on aggregation and disaggregation in financial statements. Many other existing principles in IAS 1 have been maintained. IFRS
18 is effective for years beginning on or after January 1, 2027, with earlier application permitted. The Company has not yet commenced
the evaluation of the impact of the new standard.
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim Financial Statements (unaudited)
For the three and nine months ended September 30, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
| 3. | Cash and Cash Equivalents |
Cash and cash equivalents consist of the following:
| | |
September 30, 2025 | | |
December 31, 2024 | |
| | |
$ | | |
$ | |
| Cash balances with banks | |
| 6,232 | | |
| 24,385 | |
| Short-term instruments | |
| 13,072 | | |
| 15,688 | |
| Total cash and cash equivalents | |
| 19,304 | | |
| 40,073 | |
Short-term investments with initial maturities greater than
three months and less than one year consist of the following:
| | |
September 30, 2025 | | |
December 31, 2024 | |
| | |
$ | | |
$ | |
| Guaranteed Investment Certificates | |
| 15,310 | | |
| 8,475 | |
| Total | |
| 15,310 | | |
| 8,475 | |
| 5. | Prepaid expenses and deposits |
Prepaid expenses and deposits primarily consist of advance
payments for contract research services required for ongoing clinical trials, subscriptions and other general and administrative items.
| | |
September 30, 2025 | | |
December 31, 2024 | |
| | |
$ | | |
$ | |
| Research and development deposits | |
| 2,277 | | |
| 1,580 | |
| Other prepaids and deposits | |
| 401 | | |
| 180 | |
| Total prepaid expenses and deposits | |
| 2,678 | | |
| 1,760 | |
| 6. | Accounts Payables and Accrued Liabilities |
| | |
September 30, 2025 | | |
December 31, 2024 | |
| | |
$ | | |
$ | |
| Trade payables | |
| 1,385 | | |
| 2,063 | |
| Accrued liabilities | |
| 2,004 | | |
| 1,520 | |
| Income taxes payables | |
| 114 | | |
| - | |
| Total accounts payables and accrued liabilities | |
| 3,503 | | |
| 3,583 | |
| 7. | Share Capital and Pre-Funded Warrants |
Authorized
The authorized share capital of the Company consists of an
unlimited number of common shares.
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim Financial Statements (unaudited)
For the three and nine months ended September 30, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
Loss per share
Loss per share is calculated using the weighted average number
of Common Shares outstanding. For the three and nine months ended September 30, 2025 and 2024, the calculation was as follows:
| | |
Three months ended
September 30, | | |
Nine months ended
September 30, | |
| | |
2025 | | |
2024 | | |
2025 | | |
2024 | |
| Net loss | |
$ | 5,821 | | |
$ | 6,624 | | |
$ | 17,570 | | |
$ | 16,178 | |
| Weighted average number of Common Shares | |
| 167,339,189 | | |
| 113,027,202 | | |
| 171,669,287 | | |
| 112,872,225 | |
| Net loss per share – basic and diluted | |
$ | (0.03 | ) | |
$ | (0.06 | ) | |
$ | (0.10 | ) | |
$ | (0.14 | ) |
The effect of any potential exercise of the Company’s
stock options, pre-funded warrants and warrants outstanding during the period has been excluded from the calculation of diluted loss per
Common Share as it would be anti-dilutive.
December 2024 Equity Offering
On December 20, 2024, the Company
completed a public offering (the “December Equity Offering”), issuing 51,420,000 common shares at CA $0.90 per common
share (the “Common Shares”) and 11,865,000 pre-funded common share purchase warrants (“Pre-Funded Warrants”) with
no expiry date and an exercise price of CA $0.00001 for CA $0.89999 per Pre-Funded Warrant for gross proceeds of $40,000 (CA$56,956).
May 2023 Equity Offering
On May 17, 2023, the Company completed
an equity offering (the “Equity Offering”), issuing either common shares at CA $0.50 per common share (the “Common Shares”)
or pre-funded common share purchase warrants with no expiry date for CA $0.49999 per pre-funded common share purchase warrant (“Pre-Funded
Warrants”, and, collectively with the Common Shares, the “Securities”). Investors purchased 70,297,220 Common Shares
and 39,702,780 Pre-Funded Warrants for gross proceeds of $40,397. During the nine months ended September 30, 2025, 13,650,631 common
shares were issued upon the exercise of 13,650,840 pre-funded warrants at an exercise price of CA $0.00001 per Pre-Funded Warrant. In
addition, during the nine months ended September 30, 2025, the original fair value of $0.36714 per Pre- Funded Warrant, was reclassified
from Pre-funded Warrants to Common Shares within shareholder’s equity for a total amount of $5,012. Share issuance costs of $525,
which were initially recognized against Pre-Funded Warrants at the time of issuance, reduced the amount reclassified to Share Capital
within shareholder’s equity, resulting in a reclassification amount net of share issuance costs of $4,487.
Warrants have been issued as part of
equity financings and include compensation to agents and brokers of the Company. Pre-Funded Warrants are listed separately on the condensed
consolidated interim statement of financial position and on the condensed consolidated statement of changes in shareholder’s equity
and are excluded from the tables below. The following is a summary of changes in warrants:
| |
|
Nine months ended,
September 30, 2025 |
|
|
Nine months ended,
September 30, 2024 |
|
| |
|
Number of
warrants |
|
|
Weighted
average exercise
price |
|
|
Number of
warrants |
|
|
Weighted
average exercise
price |
|
| Outstanding, beginning of period |
|
|
10,726,111 |
|
|
CA$ |
0.53 |
|
|
|
12,346,419 |
|
|
CA$ |
0.53 |
|
| Exercised |
|
|
(5,623,087 |
) |
|
CA$ |
0.53 |
|
|
|
(589,156 |
) |
|
CA$ |
0.40 |
|
| Expired |
|
|
(5,103,024 |
) |
|
CA$ |
0.53 |
|
|
|
(12,094 |
) |
|
CA$ |
0.40 |
|
| Outstanding, end of period |
|
|
- |
|
|
|
- |
|
|
|
11,745,169 |
|
|
CA$ |
0.54 |
|
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim Financial Statements (unaudited)
For the three and nine months ended September 30, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
| 9. | Stock-Based Compensation |
Effective May 14, 2024, the Company adopted a new
omnibus equity incentive plan (“Omnibus Plan”) which authorizes the Board of Directors to administer the Omnibus
Plan to provide equity-based compensation in the form of stock options and restricted stock units.
The Company currently maintains its
existing Amended and Restated Incentive Stock Option Plan (“Option Plan”) but effective May 14, 2024 no further
grants will be made under this plan though existing grants under the Option Plan will remain in effect in accordance with their terms.
The aggregate number of common shares
that may be issued under all awards under the Omnibus Plan and the Option Plan is 15% of our issued and outstanding common shares on a
rolling basis.
Under both the Omnibus Plan and the
Option Plan, the exercise price of each option equals the market price of the underlying share on the date of the grant. Vesting is provided
for at the discretion of the Board of Directors and the expiration of options is to be no greater than 10 years from the date of grant.
The Company calculates the fair value
of each stock option grant using the Black-Scholes option pricing model at the grant date.
The stock-based compensation expense
of the stock options is recognized as stock-based compensation expense over the relevant vesting period of the stock options using an
estimate of the number of options that will eventually vest.
Stock option transactions for the nine
months ended September 30, 2025, and September 30, 2024, are presented below:
| | |
Nine months ended,
September 30, 2025 | | |
Nine months ended,
September 30, 2024 | |
| | |
Number of options | | |
Weighted average
exercise price |
| |
Number of options | | |
Weighted average
exercise price |
|
| Outstanding, beginning of period | |
| 13,879,589 | | |
CA$ |
0.73 | | |
| 14,134,363 | | |
CA$ |
0.71 | |
| Granted | |
| 13,238,709 | | |
CA$ |
0.73 | | |
| 430,000 | | |
CA$ |
0.53 | |
| Forfeited and expired | |
| (847,722 | ) | |
CA$ |
0.78 | | |
| (1,417,274 | ) | |
CA$ |
0.56 | |
| Outstanding, end of period | |
| 26,270,576 | | |
CA$ |
0.73 | | |
| 13,147,089 | | |
CA$ |
0.72 | |
As at September 30, 2025, the Company
had the following outstanding options:
| | |
Options Outstanding | | |
Options Exercisable | |
| Exercise Prices | |
Number of
options | | |
Weighted
average
remaining
contractual life | | |
Weighted
average
exercise price | | |
Number of
options | | |
Weighted
average
exercise price | |
| CA$0.33-$0.50 | |
| 3,799,040 | | |
| 7.70 | | |
CA$ |
0.41 | | |
| 2,513,097 | | |
CA$ |
0.41 | |
| CA$0.51-$0.66 | |
| 10,290,995 | | |
| 8.31 | | |
CA$ |
0.59 | | |
| 3,941,749 | | |
CA$ |
0.60 | |
| CA$0.67-$1.70 | |
| 12,180,541 | | |
| 8.72 | | |
CA$ |
0.95 | | |
| 2,217,770 | | |
CA$ |
1.63 | |
| | |
| 26,270,576 | | |
| 8.41 | | |
CA$ |
0.73 | | |
| 8,672,616 | | |
CA$ |
0.81 | |
The following table presents the assumptions
that were used in the Black-Scholes option pricing model to determine the fair value of stock options granted during the period, and the
resultant average fair values:
| | |
Nine months ended,
September 30, 2025 | | |
Nine months ended,
September 30, 2024 | |
| Expected life of stock options | |
| 10 years | | |
| 10 years | |
| Expected weighted average volatility | |
| 83.9% | | |
| 79.9% | |
| Expected dividend yield | |
| nil% | | |
| nil% | |
| Weighted average risk-free interest rate | |
| 3.10% | | |
| 3.38% | |
| Weighted average fair value of stock options granted in the period | |
| $0.44 | | |
| $0.32 | |
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim Financial Statements (unaudited)
For the three and nine months ended September 30, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
Due to the absence of volatility rates specific to the Company,
the Company selected comparable companies in a similar industry to estimate a volatility rate.
During the three and nine months ended September 30,
2025, $774 (2024 - $164) and $2,250 (2024 - $1,238), respectively, were recognized as stock-based compensation expense.
Research and development expenses:
| | |
Three months ended
September 30, | | |
Nine months ended
September 30, | |
| | |
2025 | | |
2024 | | |
2025 | | |
2024 | |
| | |
$ | | |
$ | | |
$ | | |
$ | |
| Salaries and fees | |
| 909 | | |
| 568 | | |
| 2,430 | | |
| 2,069 | |
| Discovery expenses | |
| 168 | | |
| 219 | | |
| 498 | | |
| 570 | |
| Preclinical expenses | |
| 409 | | |
| 893 | | |
| 1,690 | | |
| 4,015 | |
| Chemistry, manufacturing controls | |
| 334 | | |
| 433 | | |
| 858 | | |
| 2,411 | |
| Clinical | |
| 1,759 | | |
| 323 | | |
| 6,442 | | |
| 861 | |
| Stock-based compensation | |
| 415 | | |
| (49 | ) | |
| 1,053 | | |
| 434 | |
| Total research and development expenses | |
| 3,994 | | |
| 2,387 | | |
| 12,971 | | |
| 10,360 | |
General and administrative:
| | |
Three months ended
September 30, | | |
Nine months ended
September 30, | |
| | |
2025 | | |
2024 | | |
2025 | | |
2024 | |
| | |
$ | | |
$ | | |
$ | | |
$ | |
| Salaries and board fees | |
| 819 | | |
| 767 | | |
| 2,561 | | |
| 2,058 | |
| Professional fees | |
| 686 | | |
| 252 | | |
| 1,642 | | |
| 1,100 | |
| Other operating expenses | |
| 106 | | |
| 81 | | |
| 437 | | |
| 393 | |
| Stock-based compensation | |
| 359 | | |
| 211 | | |
| 1,197 | | |
| 804 | |
| Depreciation | |
| 2 | | |
| 2 | | |
| 4 | | |
| 6 | |
| Total general and administrative expenses | |
| 1,972 | | |
| 1,313 | | |
| 5,841 | | |
| 4,361 | |
| 11. | Commitments and Contingencies |
The Company enters into contracts in
the normal course of business, including for research and development activities. As at September 30, 2025, in addition to amounts
that have been recognized in accounts payable and accrued liabilities, the Company has commitments for research and development activities
in the amount of $21,870, most cancellable with notice. These commitments include agreements related to the conduct of long-term toxicology
and clinical development.
| | |
Payments Due by Period | |
| | |
Total | | |
Less than 1 year | | |
1 -3 years | | |
4 – 5 years | | |
After 5 years | |
| Purchase obligations | |
$ | 21,870 | | |
$ | 12,803 | | |
$ | 9,067 | | |
nil | | |
nil | |
The Company may be required to
make milestone, royalty, and other research and development funding payments under research and development collaboration and other
agreements with third parties. These payments are contingent upon the achievement of specific development, regulatory and/or
commercial milestones. The Company has not accrued any amounts for these payments as of September 30, 2025, because the
milestones have not yet been achieved.
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim Financial Statements (unaudited)
For the three and nine months ended September 30, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
| 12. | Related Party Transactions |
Key management personnel consists of
the Company’s Chief Executive Officer, Chief Scientific Officer, Chief Medical Officer, Chief Discovery Officer, former Chief Business
Officer and Chief Financial Officer and the Directors of the Corporation. The remuneration of key management personnel is as follows:
| | |
Three months ended
September 30, | | |
Nine months ended
September 30, | |
| | |
2025 | | |
2024 | | |
2025 | | |
2024 | |
| | |
$ | | |
$ | | |
$ | | |
$ | |
| Salaries and management fees | |
| 663 | | |
| 294 | | |
| 1,951 | | |
| 1,784 | |
| Stock-based compensation | |
| 499 | | |
| 102 | | |
| 1,440 | | |
| 979 | |
| | |
| 1,162 | | |
| 396 | | |
| 3,391 | | |
| 2,763 | |
The Company operates within a single
operating segment, the research and development of small molecule drug candidates to treat degenerative muscle diseases, which is the
Company’s only reportable segment and is consistent with the internal reporting provided to the chief operating decision-maker.
The Company operates in three geographic areas, Canada, United States and Australia. As at September 30, 2025, the Company held total
assets of $302 (December 31, 2024 - $145) in the United States, $1,097 (December 31, 2024 - $979) in Australia and $36,104 in
Canada (December 31, 2024 - $49,623).
The Company manages its capital structure in an endeavour
to ensure sufficient resources are available to meet day-to- day operational requirements, further develop its existing technology, and
continue as a going concern.
In order to maintain or adjust the capital
structure, the Company may issue new shares, issue debt or sell assets. Total capital is calculated as the Company’s own equity.
The Company is not subject to any externally imposed capital
requirements.
| 15. | Financial Instruments and Risk Management |
The Company is exposed to various risks
through its financial instruments including the following at September 30, 2025:
Credit risk arises from cash and cash
equivalents and short-term investments held at banks and financial institutions, as well as outstanding receivables. In the nine months
ended September 30, 2025, the Company invested its excess cash in interest-bearing operating accounts held at a Schedule 1 Canadian
bank and in US government treasury bills and Guaranteed Investment Certificates. The Company limits its exposure to credit risk, with
respect to cash and cash equivalents and short-term investments, by placing them with high quality credit financial institutions. The
Company’s cash equivalents and short-term investments consist primarily of operating funds, US government treasury bills, deposit investments
and Guaranteed Investment Certificates with commercial banks.
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim Financial Statements (unaudited)
For the three and nine months ended September 30, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
Liquidity risk is the risk that the
Company will encounter difficulty in raising funds to meet cash flow requirements associated with financial instruments. The Company controls
liquidity risk through management of working capital, cash flows and the availability and sourcing of financing. The Company’s ability
to accomplish all of its future strategic plans is dependent on obtaining additional financing or executing other strategic options; however,
there is no assurance the Company will achieve these objectives. As at September 30, 2025, the Company’s liabilities consist
of accounts payable and accrued liabilities that have contracted maturities of less than one year.
Market risk is the risk that the fair value or future cash
flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency
risk, interest rate risk, and price risk.
The Company is mainly exposed to currency risk as
follows:
Currency risk is the risk that the
fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The exposure to
this risk changes as the exchange rate fluctuates.
Foreign currency risk is limited to
the portion of the Company’s business transactions denominated in currencies other than the US dollar, primarily expenses for general
and administrative and research and development incurred in Canadian dollars. The Company manages foreign exchange risk by maintaining
Canadian dollars cash on hand to fund its short-term foreign currency expenditures. Balances held in foreign currencies, presented in
US dollars are as follows:
| | |
As at September 30, 2025 | |
| | |
US $ | | |
Australian $ | | |
Euro € | | |
GBP £ | | |
Canadian $ | | |
Total $ | |
| Cash and cash equivalents | |
| 13,975 | | |
| 756 | | |
| - | | |
| - | | |
| 4,573 | | |
| 19,304 | |
| Short-term investments | |
| 11,000 | | |
| - | | |
| - | | |
| - | | |
| 4,310 | | |
| 15,310 | |
| Accounts payable and accrued liabilities | |
| (1,853 | ) | |
| (207 | ) | |
| (269 | ) | |
| - | | |
| (1,174 | ) | |
| (3,503 | ) |
| Total | |
| 23,122 | | |
| 549 | | |
| (269 | ) | |
| - | | |
| 7,709 | | |
| 31,111 | |
| | |
As at December 31, 2024 | |
| | |
US $ | | |
Australian $ | | |
Euro € | | |
Canadian $ | | |
Total $ | |
| Cash and cash equivalents | |
| 24,848 | | |
| 339 | | |
| - | | |
| 14,886 | | |
| 40,073 | |
| Short-term investments | |
| 5,000 | | |
| - | | |
| - | | |
| 3,475 | | |
| 8,475 | |
| Accounts payable and accrued liabilities | |
| (2,491 | ) | |
| (329 | ) | |
| (242 | ) | |
| (521 | ) | |
| (3,583 | ) |
| Total | |
| 27,357 | | |
| 10 | | |
| (242 | ) | |
| 17,840 | | |
| 44,965 | |
Assuming all other variables remain
constant, a 10% depreciation or appreciation of the US dollar against the Canadian dollar, Australian dollar, Euro, and GBP would result
in an increase or decrease in loss and comprehensive loss for the nine months ended September 30, 2025, of $799 (December 31,
2024 - $1,761).
Interest rate risk is the risk that
the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company
holds its cash and cash equivalents and short- term investments in banks and financial institutions, and manages its interest rate risk
by holding cash in high yield savings accounts or highly liquid short-term investments.
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim Financial Statements (unaudited)
For the three and nine months ended September 30, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
Financial assets and liabilities are
recognized on the condensed consolidated interim statement of financial position at amortized cost in a hierarchy that is based on significance
of the inputs used in making the measurements. The levels in the hierarchy are:
| ● | Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities |
| ● | Level 2 – Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly
(i.e., as prices) or indirectly (i.e., derived from prices) |
| ● | Level 3 – Inputs for the asset or liability that are not based on observable market data (i.e., unobservable inputs) |
At September 30,
2025, the Company’s financial instruments, all subsequently measured at amortized cost, included cash and cash equivalents, short-term
investments, and accounts payable and accrued liabilities.
Due to the short-term maturities of
cash and cash equivalents, short-term investments, accounts payable and accrued liabilities, the carrying amounts approximate their fair
value at the respective condensed consolidated interim statement of financial position date.
| 16. | Change in presentation currency |
During the period
ended March 31, 2025, the Company changed its presentation currency from CAD to USD. In accordance with IAS 21, the amounts for all
the periods presented have been translated to the USD presentation currency. For comparative balances, assets and liabilities have been
translated into the presentation currency at the rate of exchange prevailing at the reporting date, or at the exchange rate prevailing
at the date of the transactions. Exchange rate differences arising on translation are taken to other comprehensive income/(loss). The
Company has presented the effects of the change in presentation currency below. The Statement of Cash Flow has been adjusted to reflect
the currency change, and no other adjustments were required.
| | |
December 31, 2024 | | |
December 31, 2024 | | |
January 1, 2024 | | |
January 1, 2024 | |
| | |
USD$ | | |
CAD$ | | |
USD$ | | |
CAD$ | |
| ASSETS | |
| | |
| | |
| | |
| |
| Current | |
| | | |
| | | |
| | | |
| | |
| Cash and cash equivalents | |
| 40,073 | | |
| 57,659 | | |
| 16,681 | | |
| 22,067 | |
| Short-term investments | |
| 8,475 | | |
| 12,195 | | |
| 13,246 | | |
| 17,520 | |
| Sales tax and other receivables | |
| 435 | | |
| 626 | | |
| 441 | | |
| 583 | |
| Prepaid expenses and deposits | |
| 1,760 | | |
| 2,532 | | |
| 112 | | |
| 148 | |
| Derivative financial instruments, net | |
| - | | |
| - | | |
| 3 | | |
| 4 | |
| Total current assets | |
| 50,743 | | |
| 73,012 | | |
| 30,483 | | |
| 40,322 | |
| | |
| | | |
| | | |
| | | |
| | |
| Property and equipment | |
| 4 | | |
| 5 | | |
| 15 | | |
| 19 | |
| Assets held for sale | |
| | | |
| | | |
| | | |
| | |
| Intangible asset | |
| - | | |
| - | | |
| 2,961 | | |
| 3,916 | |
| Investments | |
| - | | |
| - | | |
| 31 | | |
| 41 | |
| | |
| 4 | | |
| 5 | | |
| 3,007 | | |
| 3,976 | |
| TOTAL ASSETS | |
| 50,747 | | |
| 73,017 | | |
| 33,490 | | |
| 44,298 | |
| | |
| | | |
| | | |
| | | |
| | |
| LIABILITIES | |
| | | |
| | | |
| | | |
| | |
| Accounts payable and accrued liabilities | |
| 3,583 | | |
| 5,155 | | |
| 2,734 | | |
| 3,624 | |
| Total current liabilities | |
| 3,583 | | |
| 5,155 | | |
| 2,734 | | |
| 3,624 | |
| Total liabilities | |
| 3,583 | | |
| 5,155 | | |
| 2,734 | | |
| 3,624 | |
| | |
| | | |
| | | |
| | | |
| | |
| SHAREHOLDER’S EQUITY | |
| | | |
| | | |
| | | |
| | |
| Common shares | |
| 78,131 | | |
| 105,729 | | |
| 47,335 | | |
| 61,916 | |
| Pre-funded warrants | |
| 19,967 | | |
| 27,622 | | |
| 13,050 | | |
| 17,772 | |
| Contributed surplus | |
| 7,900 | | |
| 10,329 | | |
| 6,472 | | |
| 8,503 | |
| Accumulated deficit | |
| (57,097 | ) | |
| (75,601 | ) | |
| (36,463 | ) | |
| (47,502 | ) |
| Accumulated other comprehensive income/(loss) | |
| (1,737 | ) | |
| (217 | ) | |
| 362 | | |
| (15 | ) |
| Total shareholder’s equity | |
| 47,164 | | |
| 67,862 | | |
| 30,756 | | |
| 40,674 | |
| | |
| | | |
| | | |
| | | |
| | |
| TOTAL LIABILITIES AND SHAREHOLDER’S EQUITY | |
| 50,747 | | |
| 73,017 | | |
| 33,490 | | |
| 44,298 | |
SATELLOS BIOSCIENCE INC.
Notes to the Condensed Consolidated Interim Financial Statements (unaudited)
For the three and nine months ended September 30, 2025 and 2024
(Amounts expressed in thousands of US Dollars, except for share and
per share amounts)
| | |
Three months ended | | |
Nine months ended | |
| | |
September 30, 2024 | | |
September 30, 2024 | | |
September 30, 2024 | | |
September 30, 2024 | |
| | |
USD$ | | |
CAD$ | | |
USD$ | | |
CAD$ | |
| Research and development expenses | |
| 2,387 | | |
| 3,263 | | |
| 10,360 | | |
| 14,072 | |
| General and administrative expenses | |
| 1,313 | | |
| 1,799 | | |
| 4,361 | | |
| 5,923 | |
| LOSS FROM OPERATING ACTIVITIES | |
| (3,700 | ) | |
| (5,062 | ) | |
| (14,721 | ) | |
| (19,995 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| OTHER INCOME | |
| | | |
| | | |
| | | |
| | |
| Finance income | |
| 230 | | |
| 314 | | |
| 819 | | |
| 1,114 | |
| Impairment of intangible asset | |
| (2,905 | ) | |
| (3,961 | ) | |
| (2,905 | ) | |
| (3,961 | ) |
| Loss on derivative | |
| - | | |
| - | | |
| (2 | ) | |
| (3 | ) |
| Foreign exchange gain/(loss) | |
| (249 | ) | |
| (339 | ) | |
| 631 | | |
| 852 | |
| | |
| | | |
| | | |
| | | |
| | |
| NET LOSS FOR THE PERIOD | |
| (6,624 | ) | |
| (9,048 | ) | |
| (16,178 | ) | |
| (21,993 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| OTHER | |
| | | |
| | | |
| | | |
| | |
| Foreign currency translation | |
| 257 | | |
| 12 | | |
| (744 | ) | |
| 3 | |
| TOTAL | |
| (6,367 | ) | |
| (9,036 | ) | |
| (16,922 | ) | |
| (21,990 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Basic and diluted loss per share | |
$ | (0.06 | ) | |
$ | (0.08 | ) | |
$ | (0.14 | ) | |
$ | (0.19 | ) |
| Weighted average number of common | |
| 113,027,202 | | |
| 113,027,202 | | |
| 112,872,225 | | |
| 112,872,225 | |
Exhibit 4.10
SATELLOS BIOSCIENCE
INC.
Management’s
Discussion and Analysis
For the three and
nine months ended September 30, 2025, and 2024
November 13,
2025
The
following discussion is management’s assessment and analysis (this “MD&A”) of the results of operations
and financial conditions of Satellos Bioscience Inc. (“Satellos” or the “Company”) for the three
and nine months ended September 30, 2025, and 2024. This MD&A should be read in conjunction with the condensed consolidated
interim financial statements for the three and nine months ended September 30, 2025 and 2024 and the related notes thereto (together,
the “condensed consolidated interim financial statements”) and the audited annual consolidated financial statements
for the years ended December 31, 2024 and December 31, 2023 and the related notes thereto (together, the “audited
annual consolidated financial statements”).
Change in Presentation
Currency
Effective January 1,
2025, the Company changed its presentation currency from the Canadian dollar (“CAD”) to the United States dollar (“USD”).
The change in presentation currency was made to better reflect the Company’s business activities and to improve investor’s
ability to compare the Company’s financial results with other publicly traded businesses in the industry. For the year ended December 31,
2024, and for all prior periods, we presented our financial statements in CAD. The comparative figures disclosed in our condensed consolidated
interim financial statements for the period ended September 30, 2025, and in this MD&A, have been retrospectively changed to
reflect the change in presentation currency to the USD, as if the USD had been used as the presentation currency for all prior periods.
All financial information
in this MD&A has been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board (IFRS Accounting Standards) and all dollar amounts are expressed in thousands of USD unless otherwise indicated.
FORWARD-LOOKING
STATEMENTS
Certain statements
and information in this MD&A contain “forward-looking information” and “forward- looking statements”, within
the meaning of applicable Canadian securities laws (collectively herein referred to as “forward-looking statements”). These
statements relate to future events or future performance and reflect the Company’s expectations and assumptions regarding the growth,
results of operations, performance and business prospects and opportunities of the Company. These forward-looking statements are made
as of the date of this MD&A or, in the case of documents incorporated by reference herein, as of the date of such documents. Forward-looking
statements are frequently, but not always, identified by words such as “expects”, “expectation”, “anticipates”,
“believes”, “intends”, “intention”, “estimates”, “predicts”, “continues”,
“potential”, “targeted”, “plans”, “possible”, “goal”, “seek”,
“project”, “future”, “likely” and similar expressions, or statements that events, conditions or results
“will”, “may”, “could”, “would” or “should” occur or be achieved. Any forward-looking
statements or statements of “belief”, including the statements made under “Risks and Uncertainties”, represent
the Company’s estimates only as of the date of this MD&A and the documents incorporated by reference herein, respectively,
and should not be relied upon as representing the Company’s estimates as of any subsequent date. Forward-looking statements are
necessarily based on estimates and assumptions made by Satellos in light of its experience and perception of historical trends, current
conditions and expected future developments, as well as factors that Satellos believes are appropriate. Forward- looking statements in
this MD&A include, but are not limited to, statements relating to:
| · | our
belief that the Company will be successful in raising additional capital to continue as a
going concern; |
| · | the
expected research and development timelines, therapeutic benefits, effectiveness and safety
of our product candidates; |
| · | our
belief that the Company’s products and research and development efforts are targeting
diseases and conditions with significant unmet medical treatment needs; |
| · | our
belief that the Company has made, and will continue to make progress towards the achievement
of certain milestones or objectives; |
| · | our
expectation with respect to meeting milestones and the minimum amount of funds the Company
expects to need to raise in order to achieve such milestones and garner additional funding; |
| · | the
initiation, timing, cost, progress, outcomes, resource needs and success of our research
and development activities, plans and programs; |
| · | our
expectations regarding our ability to design, test and patent novel drug products suitable
for advancement into Investigational New Drug (“IND”) enabling studies
and clinical trials and the anticipated timelines surrounding such enabling studies; |
| · | our
belief that we will not receive substantive comments from the United States Food and Drug
Administration (“FDA”) on our IND applications which unduly delay our
plans for and/or timing of a Phase 2 clinical trial in pediatric patients; |
| · | our
expectations that the Notch pathway and AAK1 drug target (both as further described herein)
represent drug development opportunities similar or superior to modulation of the epidermal
growth factor receptor signaling pathway; |
| · | our
intentions of developing inhibitors to AAK1 (including but not limited to SAT-3247 and SAT-
3153) and in showing that such potential inhibitors have desirable effects in relevant models
of Duchenne muscular dystrophy (“DMD”) and in other indications, such
as other degenerative muscle diseases, muscle injury or trauma, or muscle regeneration generally; |
| · | our
belief that the results of Satellos’ research and development activities, preclinical
studies, safety studies or clinical trials have the potential to be commercially competitive
with research and development activities, preclinical studies, safety studies or clinical
trials conducted by other parties; |
| · | discoveries
we have made in muscle stem cell regulation having the potential to represent insights into
a potential root cause of degenerative muscle disorders which has previously not been recognized
and which may be therapeutically relevant in the treatment of degenerative muscle disorders; |
| · | our
belief that the Company’s technology can be commercialized, and that such commercialization
could be done as effectively or more effectively than other technologies to treat degenerative
muscle disorders and conditions or other medical disorders or conditions, or at all; |
| · | our
ability to discover, optimize, select and advance into clinical development therapeutic drug
development candidates in a timely, cost-efficient and effective manner, or at all; |
| · | our
ability to translate our discoveries in muscle stem cell regulation into safe and therapeutically
effective drug products and the broad applicability of such products; |
| · | our
ability to enter into research and/or commercial development collaborations or partnerships
to successfully and profitably advance our drug development candidates; |
| · | our
ability and that of our partners (if any) to advance identified drug development candidates
into, and successfully complete, clinical trials; |
| · | our
intention to identify and nominate one or more back-up drug candidates and the potential
benefits of having such back-ups; |
| · | our
plans to utilize and deploy MyoRegenXTM in our programs and our continued relationship
with OHRI (as defined below); |
| · | our
ability to develop the Company’s novel discoveries into viable therapeutic treatments
suitable for clinical development in patients diagnosed with DMD, including, but not limited
to, our ability to determine appropriate dosing regimens; |
| · | the
ability of our products to effectively and safely treat Duchenne and other degenerative muscle
disorders and conditions or other medical disorders or conditions and the applicability of
our products to other disorders and conditions; |
| · | our
expectations regarding future initiation of and enrolment into clinical trials and the timing
of future enrolment into clinical trials for our product candidates; |
| · | our
belief that our approach may reduce the risk, time and cost of developing therapeutics by
avoiding some of the uncertainty associated with certain research and preclinical stages
of drug development; |
| · | our
ability to establish and maintain relationships with collaborators with acceptable preclinical
and/or clinical research and development capability, and regulatory and commercialization
expertise to enable the development and future commercialization of our technology or products,
and the benefits to be derived from such collaborative efforts; |
| · | our
ability to enter into agreements or partnerships with pharmaceutical or biotechnology companies
that have research and clinical development and/or sales and marketing capabilities and the
expected benefits that could be derived therefrom; |
| · | our
ability to generate and protect our potential intellectual property; |
| · | our
ability to operate our business without infringing upon the intellectual property rights
of others; |
| · | our
ability to engage third party services with specialized domain expertise for the drafting
and submitting of regulatory applications to conduct clinical trials in humans; |
| · | our
ability to establish suitable CMC and GMP protocols as further described herein; |
| · | the
manufacturing capacity of third-party manufacturers for our product candidates; |
| · | our
expectations regarding federal, provincial and foreign regulatory requirements; |
| · | the
timing of, and the costs of obtaining and maintaining, regulatory approvals in the United
States, Canada and other jurisdictions; |
| · | our
plans to submit one or more IND applications to and engage in communications with the FDA
with the objective of obtaining approvals to initiate clinical trials in patients diagnosed
with DMD; |
| · | the
rate and degree of market acceptance and clinical utility of our future products, if any; |
| · | existing
and future corporate alliances and licensing transactions with third parties, and the receipt
and timing of any payments to be made by us or to us pursuant to such arrangements; |
| · | the
implementation and execution of our commercial and operational strategy; |
| · | our
ability to engage and retain the consultants or employees required to grow our business; |
| · | the
potential revenue that may be generated from our products, pricing and reimbursement of the
patient cost of our drug products by insurers or national health systems, as the case may
be, in those jurisdictions where the Company intends to sell its drug products and our ability
to achieve profitability; |
| · | developments
relating to our competitors and our industry, including the success of competing therapies
that are or become available; |
| · | the
potential growth of the market and demand for our products as well as the estimated pricing
and subsequent revenue generation of any potential therapeutics we discover; |
| · | our
belief that any discoveries by the Rudnicki Lab (as defined below) have the potential to
have a positive impact on Satellos and our work; |
| · | our
future financial performance, including projected expenditures, future revenue, capital requirements
and our needs for additional financing; and |
| · | general
business and economic conditions and outlook including but not limited to foreign exchange
rates and rates of inflation and the evolving regulatory or geo-political landscape. |
Such forward-looking
statements reflect our current views with respect to future events, are subject to risks and uncertainties and are necessarily based
upon a number of estimates and assumptions that, while considered reasonable by Satellos as of the date of such statements, are inherently
subject to significant medical, scientific, business, economic, competitive, political and social uncertainties and contingencies. Many
factors could cause our actual results, performance, achievements, prospects or opportunities to be materially different from any future
results, performance or achievements that may be expressed or implied by such forward-looking statements. In making the forward-looking
statements included in this MD&A, the Company has made various material assumptions, including, but not limited to:
| · | obtaining
positive results from our research and development activities, including clinical trials; |
| · | our
ability to obtain regulatory approvals; |
| · | assumptions
regarding general business, market and economic conditions; |
| · | assumptions
regarding the cost and timing of each study; |
| · | the
Company’s ability to successfully advance its preclinical and clinical development
programs and execute its plans substantially as currently envisioned; |
| · | assumptions
related to the pricing and reimbursement of its drug products in jurisdictions in which the
Company intends to sell its drug products; |
| · | the
Company’s current positive relationships with third parties will be maintained and
the potential to develop new partnerships; |
| · | our
ability to continue to use existing licenses for the development of our product(s); |
| · | the
availability (and sources) of financing on reasonable terms; |
| · | future
expenditures to be incurred by the Company, including research and development and operating
costs; |
| · | the
Company’s ability to attract and retain skilled consultants and employees; |
| · | assumptions
regarding market competition, market capture and pricing; |
| · | the
products and technology offered by the Company’s competitors; and |
| · | the
Company’s ability to protect patents and proprietary rights. |
In evaluating forward-looking
statements, current and prospective shareholders should specifically consider various factors, including the risks outlined under the
headings “Foreign Currency Risk”, “Liquidity Risk”, “Credit Risk” and “Risks
and Uncertainties” in this MD&A and the risks outlined in the Company’s annual information form for the year ended
December 31, 2024 dated March 26, 2025 (the “AIF”). Certain risks and uncertainties that could cause such
actual events or results expressed or implied by such forward-looking statements and information to differ materially from any future
events or results expressed or implied by such statements and information include, but are not limited to:
| · | risks
related to the early stage of our products; |
| · | uncertainties
related to preclinical product development activities and clinical trial outcomes; |
| · | uncertainties
related to current economic conditions; |
| · | risks
related to rapid technological change; |
| · | uncertainties
related to forecasts and timing of clinical trials and regulatory approval; |
| · | competition
in the market for therapeutic products, including those to treat Duchenne and related diseases; |
| · | risks
related to potential product liability claims; |
| · | availability
of financing and access to capital and the risks associated with the Company’s ability
to continue as a going concern; |
| · | market
acceptance and commercialization of products; |
| · | the
availability, costs and supply of materials; |
| · | risks
related to the effective management of our growth; |
| · | risks
related to the reliance on partnerships and licensing agreements; |
| · | risks
related to our reliance on key personnel; |
| · | risks
related to the regulatory approval process for the manufacture and sale of therapeutic products; |
| · | risks
related to the reimbursement process in various jurisdictions where the Company plans to
sell its drug products; and |
| · | our
ability to secure and protect our intellectual property. |
The
Company cautions that the foregoing list of important factors and assumptions is not exhaustive. Although
the Company has attempted to identify on a reasonable basis important factors and assumptions related to forward-looking statements,
there can be no assurance that forward-looking statements will prove to be accurate, as events or circumstances or other factors could
cause actual results to differ materially from those estimated or projected and expressed in, or implied by, these forward-looking statements.
Other than as specifically required by law, the Company undertakes no obligation to update any forward-looking
statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated
events, whether as a result of new information, future events or results or otherwise. Accordingly, readers should not place undue
reliance on forward-looking statements.
NATURE OF BUSINESS
AND OVERVIEW OF OPERATIONS
Overview of
the Business
Satellos is a publicly
traded (TSX: MSCL) biotechnology company dedicated to developing life-improving medicines to treat degenerative muscle diseases.
Satellos has incorporated
breakthrough research in muscle stem cell polarity into a proprietary discovery platform, called MyoReGenXTM, to identify
degenerative muscle diseases where deficits in this process affect muscle regeneration and are amenable to therapeutic intervention.
With this platform, Satellos is building a pipeline of novel therapeutics to correct muscle stem cell polarity and promote the body’s
innate muscle repair and regeneration process. The Company’s lead drug candidate is SAT-3247, an oral administered, small molecule
drug in pill form. SAT-3247 is in clinical development as a potentially disease-modifying treatment for Duchenne muscular dystrophy.
Achievements
and Highlights in the three and nine months ended September 30, 2025
On February 10,
2025, the Company announced that the single-ascending dose (“SAD”) cohorts, four multiple- ascending dose (“MAD”)
cohorts, and one cross-over food effect single-dose cohort of the Company’s Phase 1a clinical trial with SAT-3247 had been fully
enrolled.
On March 19,
2025, the Company announced initial safety and pharmacokinetic (“PK”) data of SAT-3247 from the Phase 1a clinical
trial in an oral presentation at the 2025 Muscular Dystrophy Association (MDA) Clinical & Scientific Conference.
The purpose of
the Phase 1a clinical study was to assess the safety, tolerability and PK of SAT-3247. In Phase 1a, 72 healthy volunteers were randomized
across five SAD cohorts (including one cross-over food effect cohort) with single oral doses of up to 400 mg, and four MAD cohorts with
daily oral doses up to 240 mg/day for 7 consecutive days. Phase 1a data showed that:
| · | SAT-3247
was safe and well tolerated across all healthy volunteer cohorts. At predicted human efficacious
dose levels (i.e., between 50 and 150 mg total daily dose), SAT-3247 did not display adverse
clinical findings on any parameter measured, including clinical labs, vital signs, ECG’s,
and physical exams. No moderate or greater drug-related adverse events were reported at any
dose studied and any mild events reported were reversible. |
| · | Phase
1a PK data demonstrated consistency with results from the Company’s preclinical studies.
These PK results confirmed post-dose plasma concentrations of SAT-3247 were sustained at
levels and time courses which the Company’s research findings suggest are most likely
to yield a therapeutic effect on muscle regeneration and strength. |
On May 22,
2025, the Company announced promising data from a Phase 1b clinical study with SAT-3247. The Phase 1b was designed as an open-label study
in which five adult male DMD patients, ages 20 – 27, were enrolled and treated with SAT-3247 over a period of 28 days. Results
from Phase 1b demonstrated early signs that SAT-3247 may have the potential to affect grip strength, which could represent a clinically
meaningful measure for patients with DMD. During the Phase 1b study, SAT-3247 was administered orally in tablet form at a total daily
dose of 60mg for 5 consecutive weekdays followed by 2 days of placebo for 4 weeks (i.e., 20 dosing days on drug over the 28-day period
of the study). Phase 1b data showed that:
| · | SAT-3247
treatment appeared to have an effect on muscle regeneration and strength, with average strength
across the study participants increasing 118.6% from ~2kg to ~4kg. |
| · | SAT-3247
treatment also may have had an effect on respiratory capacity using a common spirometry test
to measure forced vital capacity (FVC). For the 4 patients who were physically able to conduct
the test at the beginning and end of the 28-day period on drug, FVC increased 5.8% on average
which is potentially meaningful. By contrast, FVC typically shows a decline of about 5% per
year in DMD patients in the tested age group. |
| · | Study
participants have been offered the option to enroll into an 11-month, long-term follow-up
study with SAT-3247 and the first patient in this study was dosed in October 2025. |
On June 18,
2025, the Company announced the election of Iris Loew-Friedrich, M.D., Ph.D., and Selwyn Ho, MBBS, to its Board of Directors. As part
of the Annual General Meeting, Rima Al-awar, Ph.D., William Jarosz, J.D., and William McVicar, Ph.D., did not stand for re-election.
On July 16,
2025, the Company announced the appointment of Wildon Farwell, M.D., MPH, as Chief Medical Officer. Dr. Farwell joined Satellos
from Dyne Therapeutics (Nasdaq: DYN), where he most recently served as CMO and medical advisor. At Dyne, Dr. Farwell built the development
organization, led the protocol development and regulatory submissions for their DMD and myotonic dystrophy type 1 (DM1) programs, oversaw
the conduct of multiple potentially registrational clinical studies, and contributed to several successful capital raises. Before joining
Dyne, he spent a decade at Biogen in increasing leadership roles, including on clinical programs resulting in the approval of Spinraza
and Qalsody as then-novel medicines for the treatment of the neuromuscular diseases SMA and ALS, respectively. Prior to moving into industry,
Dr. Farwell served as an assistant professor of medicine at Harvard Medical School and was a physician at Brigham and Women’s
Hospital and the VA Boston Healthcare System. He earned his medical degree from the University of Missouri School of Medicine and holds
a Master of Public Health in clinical effectiveness from the Harvard T.H. Chan School of Public Health.
The Company announced
on September 22, 2025, that 1.7 million warrants with an exercise price of CAD$0.60 had been exercised for gross proceeds of CAD$1.0
million.
On September 22,
2025, the Company announced the submission of an IND application to the U.S. FDA, along with parallel regulatory filings in the United
Kingdom, Europe, Serbia and Australia, to initiate a Phase 2 clinical trial of SAT-3247 in ambulatory children with DMD. The planned
Phase 2 trial will enroll children with Duchenne in the U.S., following FDA approval, and globally, following country health authority
approvals. The three-month randomized, placebo-controlled study will assess safety and tolerability as well as key measures of strength,
function, biomarkers, and muscle health. A nine-month open-label extension for this study is also being planned.
Subsequent to the
quarter end, on October 10, 2025, Satellos announced presentation of data from the Phase 1b study noted above in a late-breaking
poster session at the 30th Annual Congress of the World Muscle Society further demonstrating safety, tolerability, and functional
impact of SAT-3247 in the first-in-human trial of adults with DMD.
Subsequent to the
quarter end, on October 21, 2025, Satellos announced that the first adult patient had been dosed in LT-001, an open-label, long-term
follow-up study of SAT-3247 in DMD.
Description
of Business Strategy and Programs
The
Company’s primary goal is the development of disease modifying therapeutic drugs for the treatment of severe muscle conditions
of unmet medical need. Our core technology is based on discoveries by the Company’s scientific founder and Chief Discovery
Officer, Dr. Michael Rudnicki, into understanding and modulating muscle stem cell function and its role in muscle regeneration.
Multiple peer reviewed publications from Dr. Rudnicki’s lab (the “Rudnicki Lab”) at the Ottawa
Hospital Research Institute (the “OHRI”) have advanced the understanding of the identity and behavior of muscle
stem cells including their role in health and disease. For instance, the Rudnicki Lab was the first to define so called muscle stem
cells (a.k.a. ‘satellite stem cells’) and characterize a sub-population as bona fide multipotent stem cells capable of
both self-renewal and regeneration (Source: Kuang et al., 2007, Cell). Dr. Rudnicki was also first to demonstrate that such
stem cells exist as a special body of cells capable of regeneration, and subsequently elucidate their biological mechanism of
action and identify means to modulate their activity. He further linked deficiencies in muscle stem cell function directly to the
pathology of Duchenne as a potential causal factor in the progressive muscle destruction that occurs in this lethal disease (Source:
Dumont et al., 2015, Nature Medicine).
The
basic principle governing how muscle stem cells contribute to the creation of new muscle cells and hence muscle regeneration, through
a process known as asymmetric division, is depicted below in Figure 1.
Figure
1: Muscle stem cells undergo asymmetric divisions in response to injury stimuli. Muscle
progenitor cells are generated to produce new
muscle tissue or repair injured muscle.
Asymmetric muscle
stem cell divisions result in one stem cell being produced and one progenitor muscle cell. The former maintains the pool of stem cells
to be called on to respond to future injury. Progenitor muscle cells by contrast, continue to replicate through normal cell mitosis to
generate potentially thousands of cells that ultimately incorporate into and become functional muscle tissue. Findings from the research
of Dr. Rudnicki have linked deficits asymmetric division to the progressive muscle loss which is a principal pathology of DMD and
other degenerative diseases.
To apply our understanding
of muscle regeneration to therapeutic development in degenerative muscle conditions or disorders, Satellos employs a proprietary discovery
platform developed by the Rudnicki laboratory at OHRI called, MyoReGenX™. An automated microscopy system, MyoReGenX™ recapitulates
the muscle stem cell environment ex-vivo (i.e., outside the body) and enables Satellos to identify and assess opportunities for
developing novel therapeutic treatments.
Lead Development
Program: Duchenne
The
Company’s first application of its technology (the “Lead Program”) is directed towards the discovery and development
of a small molecule drug for the treatment of Duchenne, the most common fatal genetic disorder diagnosed in childhood affecting approximately
one in 4,000 male births per year, worldwide. As depicted in the below Figure 2, individuals living with Duchenne experience severe and
progressive loss of muscle function during their lives, often exhibited by loss of ambulation before their teenage years and generally
culminating in death before the end of their third decade of life. There is no known cure.
Despite this dire
scenario, Satellos takes hope for its novel approach from the fact that individuals living with Duchenne do make functional muscle as
young children, albeit not as effective as their healthy peers. Our interpretation of the progressive nature of Duchenne, also depicted
in Figure 2, is that the unmistakable signs of motor impairment and ambulatory challenges that become apparent during childhood represent
a ‘tipping point’ in the balance between muscle damage and repair where regeneration fails to keep up with damage.
Satellos has designed
SAT-3247 with the goal of resetting the balance of regeneration over degeneration by enhancing the process of asymmetric division and
the ensuing creation of new muscle cells.
Figure 2: Progressive
muscle loss a hallmark of Duchenne muscular dystrophy
Duchenne is caused
by a mutation in the dystrophin gene that results in impairment to or loss of the dystrophin protein. Dr. Rudnicki demonstrated
that muscle stem cells require a signal from the dystrophin protein to properly and efficiently divide in an asymmetric fashion (Source:
Dumont et al. 2015, Nature Medicine.). As described in Figure 3 below, without the dystrophin signal, muscle stem cells fail to divide
efficiently, often creating copies of themselves rather than making the progenitor cells needed to create new muscle.
Figure 3: Imbalanced
Stell Cell Division
To address this
problem, Satellos’ therapeutic strategy is to restore the missing signaling role of dystrophin by drug treatment - thereby resetting
the muscle regeneration process.
Restoring
the Missing Dystrophin Signal via AAK1 Inhibition
Deploying MyoReGenX™
to build on the identification and discovery of this previously unreported signaling role of dystrophin, in collaboration with the Rudnicki
lab, Satellos undertook a systematic assessment, evaluation and prioritization of molecular pathways for their potential to safely rescue
asymmetric stem cell divisions in the absence of dystrophin. From this exercise conducted over a multi-year period, the Company identified
and selected Adaptor Associated Kinase 1 (aka “AAK1”), a protein kinase in the molecular signaling pathway known as
“Notch”. Satellos has generated extensive preclinical data in the Mdx mouse, a gold standard research model
bearing the same genetic defect as patients with Duchenne, demonstrating that treatment of these research mice through inhibition of
AAK1 with SAT-3247 has potential to restore the process of asymmetric division in muscle stems cells. Our preclinical studies have further
shown that inhibition of AAK1 with SAT-3247 enables muscle regeneration with the potential to increase muscle strength. Thus, we believe,
SAT-3247 represents a potential novel therapeutic drug for the treatment of Duchenne in humans. Figure 4 below depicts our understanding
of the mechanism by which our lead drug candidate, SAT-3247, affects asymmetric division and the muscle stem cell mediated regeneration
via inhibition of AAK1.
Figure 4: Satellos
Approach: Reset regeneration with SAT-3247
Of
particular interest to Satellos from a de-risking perspective, small molecule inhibitors of AAK1 have previously been described for non-muscle
related disease indications by an independent 3rd party company and have demonstrated what appear to be acceptable safety
profiles thus far in multiple human clinical trials spanning hundreds of patients (Lexicon
Pharmaceuticals Inc. 2022 10K filing pages 5&6 filed March 2, 2023). We believe this provides some initial indications
of the potential safety of AAK1 inhibition.
Satellos announced
positive preclinical data presented at the March 2024 MDA Clinical and Scientific Conference showing that SAT-3247 can improve skeletal
muscle function in multiple mouse models of muscle degeneration. The preclinical data presented show the broad potential of SAT-3247
to improve skeletal muscle function as it has been demonstrated in three mouse models of muscle degeneration: mdx model of Duchenne,
FLExDUX4 model of FSHD, and a muscle injury model in wildtype mice. In all instances, treatment with SAT-3247 over a three-to-four-week
period resulted in a statistically significant improvement in muscle force versus animals receiving placebo.
In October 2024,
Satellos announced data presented at the 29th Annual Congress of the World Muscle Society in Prague. The presentation provided an overview
of key data collected during the open-label pilot study of SAT-3247 in a canine model of DMD. The data presented from the pilot study
demonstrated that treatment of two DMD Canines with SAT-3247 improved measures of strength to near normal levels.
The Company has
filed for patent protection on SAT-3247 and other inhibitors of AAK1. Please refer to the Intellectual Property section in the Company’s
AIF for further details on its intellectual property strategy and filings and its licensing agreement with the OHRI.
Regulatory
Designations for SAT-3247
The FDA granted
both Orphan Drug Designation and Rare Pediatric Disease Designation to SAT-3247 for the potential treatment of DMD. Orphan Drug Designation
applies to therapies targeting rare diseases affecting fewer than 200,000 people in the U.S. and provides benefits including seven-year
market exclusivity upon approval, exemption from FDA application fees, tax credits for clinical trials, and eligibility for a priority
review voucher.
The Rare Pediatric
Disease Designation specifically supports treatments for serious and life-threatening conditions primarily affecting children under 18
years old. Under this program, drug sponsors may qualify for a priority review voucher upon approval, which can be used to accelerate
the review of a future marketing application for another product or sold to another sponsor. These designations recognize the unmet medical
need in DMD and provide regulatory and financial incentives to support SAT-3247's development.
Clinical
Development of SAT-3247
The Company has
advanced SAT-3247 through IND enabling studies, GMP manufacturing, a Phase 1a clinical study in 72 healthy adult volunteers and a Phase
1b clinical study in 5 adult DMD patients.
In
September 2024, the first participant in the first-in-human Phase 1a clinical trial was dosed in Australia following regulatory
approvals. The trial consisted of two components: a randomized, placebo-controlled study in healthy volunteers evaluating safety and
PK across multiple dose cohorts, and an open-label study in adults with genetically confirmed DMD examining safety, PK, and potential
pharmacodynamic markers. The healthy volunteer portion enrolled 72 participants across single ascending dose, multiple ascending dose,
and food effect cohorts, while the DMD component included 5 participants receiving a single dose daily of SAT-3247 over 28 days.
In February 2025,
the Company announced that the SAD, MAD and food effect dose cohorts of the Phase 1 clinical trial had been fully enrolled and in March 2025,
the Company announced initial Phase 1 data in an oral presentation at the 2025 MDA conference as described above.
In May 2025,
Satellos announced what it considers to be promising Phase 1b data, from its open-label study, demonstrating early signs that SAT-3247
may have the potential to positively affect grip strength in a statistically significant manner; such an outcome could represent a clinically
meaningful measure for patients with DMD. This data was further updated at the World Muscle Society Conference in October 2025 as
described above.
A long-term follow-up
study (LT-001) for the patients who completed the Phase 1b study was initiated in Q3 2025 with the first patient dosed in October 2025.
This study
will evaluate, over an eleven-month period, longer-term safety, changes in muscle composition by MRI, and functional outcomes
including grip strength and FVC. The design allows patient assessments and reporting every three months during treatment. The
company is working to expand the LT-001 protocol to include additional participants in Australia and plans to open the study in the
U.S. — both subject to regulatory and clinical site approvals.
The Company filed
IND and equivalent applications to the relevant regulatory authorities in the USA, the UK, the EU, Australia, and Serbia in September 2025
seeking approvals to conduct a global, randomized, placebo- controlled Phase 2 clinical trial in ambulatory pediatric DMD patients. Depending
on responses from the regulators, Satellos plans to initiate this Phase 2 clinical trial in Q4, 2025. If approved, the Company has designed
its proposed Phase 2 trial with the goal of demonstrating the potential for safety and functional benefit from treatment with SAT-3247.
Please refer to the section “Regulatory Process” in the Company’s AIF for further details on the clinical drug development
process.
Follow-On Program
There are more
than 30 types of muscular dystrophy that affect humans. Each of these dystrophies has different causes that manifest into conditions
ranging in severity from benign, small impairments to motor function, to the full loss of ambulation, or even death. Satellos has conducted
proof of concept preclinical studies in relevant animal disease models showing potential for benefit by restoring the muscle regeneration
process in Lama-2 Related Muscular Dystrophy (prevalence estimates between one in 50,000 and one in 400,000 births), Collagen- VI Related
Muscular Dystrophy (prevalence of severe form of the disease estimated to be one in 1,000,000 births) and FSHD (prevalence of 4 per 100,000
individuals). These represent potential follow-on disease indications or programs for Satellos to consider in the future. The Company
also plans to evaluate additional dystrophies as part of its ongoing research and development efforts.
REVIEW OF FINANCIAL RESULTS
The financial information reported herein
was derived from the condensed consolidated interim financial statements for the three and nine months ended September 30, 2025
and 2024.
Selected Financial Information
| | |
Three months ended
September 30,
2025 | | |
Three Months
ended
September 30,
2024 | | |
Nine months ended
September 30, 2025 | | |
Nine months
ended
September 30,
2024 | |
| | |
$ | | |
$ | | |
$ | | |
$ | |
| Research & Development expenses | |
| 3,994 | | |
| 2,387 | | |
| 12,971 | | |
| 10,360 | |
| General & Administrative expenses | |
| 1,972 | | |
| 1,313 | | |
| 5,841 | | |
| 4,361 | |
| Other (income)/expense | |
| (164 | ) | |
| 2,924 | | |
| (1,356 | ) | |
| 1,457 | |
| Income tax expense | |
| 19 | | |
| - | | |
| 114 | | |
| - | |
| Net loss | |
| (5,821 | ) | |
| (6,624 | ) | |
| (17,570 | ) | |
| (16,178 | ) |
| Basic and diluted loss per share | |
| (0.03 | ) | |
| (0.06 | ) | |
| (0.10 | ) | |
| (0.14 | ) |
| Total assets | |
| 37,503 | | |
| 17,964 | | |
| 37,503 | | |
| 17,964 | |
We have not earned revenue in the current
quarter or any of the previous fiscal years.
For the three
months ended September 30, 2025, we reported a net loss of $5,821 ($0.03 loss per share), compared to a net loss of $6,624
($0.06 loss per share) for the three months ended September 30, 2024. For the nine months ended September 30, 2025, we
reported a net loss of $17,570 ($0.10 loss per share), compared to a net loss of $16,178 ($0.14 loss per share) for the nine months
ended September 30, 2024. The decrease in net loss for the three-month period ended September 30, 2025, compared with the
same periods in 2024 was primarily a result of an impairment of $2,905 to fully write down the remaining carrying value of the AmpB intangible
asset recognized in the three months ended September 30, 2024. This decrease was partially offset by increased Research and
Development (“R&D”) expenses related to clinical activities associated with SAT- 3247 and increased General
and administrative (“G&A”) expenses due to additional personnel fees and professional fees in the current
period. The increase in net loss for the nine-month period ended September 30, 2025, compared with the same period in 2024 was
primarily a result of increased R&D expenses related to clinical activities associated with SAT-3247. General and administrative
expenses also increased in the nine- month period ended September 30, 2025 as compared to the prior period due to additional
personnel fees and professional fees to support advancing operations, partially offset by an impairment loss recognized in the three
months ended September 30, 2024 as mentioned above.
RESULTS OF OPERATIONS FOR THE
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
Research and
development expenses:
| | |
Three months ended
September 30,
2025 | | |
Three Months
ended
September 30,
2024 | | |
Nine months ended
September 30, 2025 | | |
Nine months
ended
September 30,
2024 | |
| | |
$ | | |
$ | | |
$ | | |
$ | |
| Salaries and fees | |
| 909 | | |
| 568 | | |
| 2,430 | | |
| 2,069 | |
| Discovery expenses | |
| 168 | | |
| 219 | | |
| 498 | | |
| 570 | |
| Preclinical expenses | |
| 409 | | |
| 893 | | |
| 1,690 | | |
| 4,015 | |
| Chemistry, manufacturing controls | |
| 334 | | |
| 433 | | |
| 858 | | |
| 2,411 | |
| Clinical | |
| 1,759 | | |
| 323 | | |
| 6,442 | | |
| 861 | |
| Stock-based compensation | |
| 415 | | |
| (49 | ) | |
| 1,053 | | |
| 434 | |
| Total research and development expenses | |
| 3,994 | | |
| 2,387 | | |
| 12,971 | | |
| 10,360 | |
R&D
expenses increased by $1,607 to $3,994 for the three months ended September 30, 2025, compared to $2,387 for the three months
ended September 30, 2024, and by $2,611 to $12,971 for the nine months ended September 30, 2025, compared to $10,360 for
the nine months ended September 30, 2024. Factors contributing to the increase in R&D expenses in the current year periods
are primarily the result of the following:
| · | Salaries
and management fees increased by $341 for the three months ended September 30, 2025,
and by $361 for the nine-month period ended September 30, 2025, compared with the respective
periods in the prior year. The increase is mainly related to higher headcount in the current
year to support expanded clinical activities, partially offset by separation payments to
an executive in the first half of the comparative period. |
| · | Preclinical
expenses decreased by $484 for the three months ended September 30, 2025, and by $2,325
for the nine-month period ended September 30, 2025, compared with the respective periods
in the prior year. The preclinical expense in the current periods is related to long-term
toxicology work to support clinical development. In the comparative periods, preclinical
expenses were related to IND enabling studies conducted to support the necessary regulatory
filing, to initiate a Phase 1 clinical trial with SAT- 3247. |
| · | Chemistry,
and manufacturing controls (“CMC”) expenses decreased by $99 for the three
months ended September 30, 2025, and by $1,553 for the nine-month period ended September 30,
2025. CMC activities in the comparative period related to the process development and manufacturing
of SAT-3247 for clinical use, while current period costs decreased due to a more focused
scope of process development activities. |
| · | Clinical
expenses increased by $1,436 for the three months ended September 30, 2025, and by $5,581
for the nine-month period ended September 30, 2025. Clinical costs incurred in the current
period are associated with the completion of the Phase 1 healthy volunteer clinical study
and the Phase 1b clinical study in adult DMD patients, and initiation and set up costs for
the Phase 1b long term follow up study and Phase 2 pediatric clinical study. Clinical costs
incurred in the comparative period were related to costs associated with initiating and conducting
the Phase 1 healthy volunteer clinical study. |
| · | Non-cash
stock-based compensation increased by approximately $464 for the three months ended September 30,
2025 and by $619 for the nine months ended September 30, 2025 compared with the respective
periods in the prior year due to new grants issued in the first half of 2025 and the timing
of the related vesting. |
General and
administrative:
| | |
Three months ended
September 30,
2025 | | |
Three Months
ended
September 30,
2024 | | |
Nine months ended
September 30, 2025 | | |
Nine months
ended
September 30,
2024 | |
| | |
$ | | |
$ | | |
$ | | |
$ | |
| Salaries and board fees | |
| 819 | | |
| 767 | | |
| 2,561 | | |
| 2,058 | |
| Professional fees | |
| 686 | | |
| 252 | | |
| 1,642 | | |
| 1,100 | |
| Other operating expenses | |
| 106 | | |
| 81 | | |
| 437 | | |
| 393 | |
| Stock-based compensation | |
| 359 | | |
| 211 | | |
| 1,197 | | |
| 804 | |
| Depreciation | |
| 2 | | |
| 2 | | |
| 4 | | |
| 6 | |
| Total general and administrative expenses | |
| 1,972 | | |
| 1,313 | | |
| 5,841 | | |
| 4,361 | |
General and administrative
expenses increased by $659 to $1,972 for the three months ended September 30, 2025, as compared to $1,313 for the three months ended
September 30, 2024, and by $1,480 for the nine months ended September 30, 2025, to $5,841, as compared to $4,361 for the nine
months ended September 30, 2024. Changes to the components for general and administrative expenses presented in the table above
are primarily the result of the following:
| · | Salaries
and board fees increased by $52 for the three months ended September 30, 2025, and by
$503 for the nine months ended September 30, 2025, compared with the respective periods
in the prior year. The increases are primarily related to salary and board fee adjustments,
new hires to support expanded operations and a separation payment in the current nine-month
period. |
| · | Professional
fees increased by $434 for the three months ended September 30, 2025, and by $542 for
the nine months ended September 30, 2025, compared with the respective periods in the
prior year. The increases are primarily related to recruitment fees, legal fees, and fees
associated with public company reporting obligations. |
| · | Non-cash
stock-based compensation increased by $148 for the three months ended September 30,
2025, and by $393 for the nine months ended September 30, 2025 compared with the respective
periods in the prior year due to new grants issued in 2025 and the timing of the related
vesting. |
Other income and expenses:
| | |
Three months ended
September 30,
2025 | | |
Three Months
ended
September 30,
2024 | | |
Nine months ended
September 30, 2025 | | |
Nine months
ended
September 30,
2024 | |
| | |
$ | | |
$ | | |
$ | | |
$ | |
| Finance income | |
| 349 | | |
| 230 | | |
| 1,104 | | |
| 819 | |
| Impairment of intangible asset | |
| - | | |
| (2,905 | ) | |
| - | | |
| (2,905 | ) |
| Loss on derivative | |
| - | | |
| - | | |
| - | | |
| (2 | ) |
| Foreign exchange gain/(loss) | |
| (185 | ) | |
| (249 | ) | |
| 252 | | |
| 631 | |
| Total other income/(expenses) | |
| 164 | | |
| (2,924 | ) | |
| 1,356 | | |
| (1,457 | ) |
Other income and
expenses were a net income of $164 in the three months ended September 30, 2025 and a net income of $1,356 in the nine months ended
September 30, 2025, compared to net loss of $2,924 and $1,457 in the respective comparative periods. Changes to the components for
other income and expenses presented in the table above are primarily the result of the following:
| · | Finance
income increased in the current quarter by $119 and by $285 in the current year as compared
to the respective prior year periods, related to interest earned on cash and cash equivalents
and short- term investments from an increased average balance. |
| · | In
the comparative period we recorded an impairment loss of $2,905, to fully write down the
remaining carrying value of the AmpB intangible asset. |
| · | The
decrease in foreign exchange gain in the nine-months ended September 30, 2025, of $252
as compared to a foreign exchange gain of $631 in the prior period, primarily reflects the
change in the functional currency from Canadian dollars to US dollars effective January 1,
2025. |
Summary of Quarterly Results
The table below is derived from unaudited
quarterly results and was prepared by management for the eight previous quarters to September 30, 2025.
| | |
Q3 2025 | | |
Q2 2025 | | |
Q1 2025 | | |
Q4 2024 | | |
Q3 2024 | | |
Q2 2024 | | |
Q1 2024 | | |
Q4 2023 | |
| | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | |
| R&D Expense | |
3,994 | | |
4,435 | | |
4,542 | | |
3,999 | | |
2,387 | | |
3,567 | | |
4,406 | | |
2,620 | |
| G&A Expense | |
1,972 | | |
1,932 | | |
1,937 | | |
1,678 | | |
1,313 | | |
1,326 | | |
1,722 | | |
1,943 | |
| Other (income) and expenses | |
(164 | ) | |
(791 | ) | |
(401 | ) | |
(1,221 | ) | |
2,924 | | |
(469 | ) | |
(998 | ) | |
210 | |
| Income taxes | |
19 | | |
32 | | |
63 | | |
- | | |
- | | |
- | | |
- | | |
- | |
| Net Loss | |
(5,821 | ) | |
(5,608 | ) | |
(6,141 | ) | |
(4,456 | ) | |
(6,624 | ) | |
(4,424 | ) | |
(5,130 | ) | |
(4,773 | ) |
| Loss per Share | |
(0.03 | ) | |
(0.03 | ) | |
(0.04 | ) | |
(0.03 | ) | |
(0.06 | ) | |
(0.04 | ) | |
(0.05 | ) | |
(0.04 | ) |
R&D expenses
in Q3 2025 were lower than Q2 2025 and Q1 2025, primarily as a result of the recognition of a R&D tax incentive credit that was applied
against R&D expenditures in Q3 2025. R&D expenses were higher in Q2 2025 and Q1 2025 as compared to prior quarters, due to clinical
costs related to the Phase 1 clinical programs and the preparatory work on Phase 2 clinical programs. R&D expenses were higher in
Q1 2024 due to IND enabling studies and CMC manufacturing in preparation of initiating our clinical program. R&D expenses in Q3 2024
were lower than in the prior quarters of 2024 and Q4 2023, reflecting the completion of the IND enabling studies necessary for the IND
submission in Q2 2024 and reduced manufacturing activities in the quarter.
G&A expenses
have increased in the current year quarters as compared to prior quarters primarily related to increased personnel expenses and non-cash
stock-based compensation expenses. G&A expenses was lower in Q3 2024 and Q2 2024 compared to the other quarters, primarily due to
lower professional fees related to investor relations expenses.
Beginning in Q1
2025, other income and expenses primarily reflect foreign exchange gains and losses on the Company’s cash and cash equivalents
held in CAD and interest income earned on investments. Between Q4 2023 and Q4 2024, excluding Q3 2024, other income and expenses recorded
primarily reflect foreign exchange gains and losses on the Company’s cash and cash equivalents and investments held in USD and
interest income earned on short-term investments.
Net loss increased
in Q3 2024, because the Company recognized an impairment of $2,905 to fully write down the remaining carrying value of the AmpB intangible
asset.
LIQUIDITY AND
CAPITAL RESOURCES
Since inception,
the Company has devoted its resources to funding R&D programs, including securing intellectual property rights and licenses, conducting
discovery research, manufacturing drug supplies, conducting preclinical and clinical studies, and providing administrative support to
R&D activities, which has resulted in an accumulated deficit of $74,667 as of September 30, 2025. With no current revenues,
losses are expected to continue while the Company’s R&D programs are advanced.
We currently do
not earn any revenues from our product candidates and are therefore considered to be in the development stage. As required, the Company
will continue to finance its operations through the sale of equity or pursue non-dilutive funding sources available to the Company in
the future. The continuation of our research and development activities for our muscle regeneration platform is dependent upon our ability
to successfully finance and complete our research and development programs through a combination of equity financing and revenues from
strategic partners. We have no current sources of revenues from strategic partners. Management has forecasted that the Company’s
current level of cash will be sufficient to execute its current planned expenditures for more than the next 12 months without further
financing.
Cash Management
At September 30,
2025, the Company had cash and cash equivalents and short-term investments of $34,614, compared with $48,548 of cash and cash equivalents
and short-term investments at December 31, 2024. The decrease primarily reflects cash used to fund ongoing operations, particularly
clinical trial costs and supporting operating activities. The Company invests cash in excess of operational requirements in highly rated
and liquid investments.
Cash Flows:
The following table
presents a summary of our cash flows for the nine months ended September 30, 2025, and 2024:
| | |
Nine months ended
September 30, 2025 | | |
Nine months ended
September 30, 2024 | |
| | |
$ | | |
$ | |
| Net Cash provided by (used in): | |
| | | |
| | |
| Operating activities | |
| (16,335 | ) | |
| (13,037 | ) |
| Financing activities | |
| 2,094 | | |
| 182 | |
| Investing activities | |
| (6,860 | ) | |
| 13,594 | |
| Effect of foreign exchange on cash and cash equivalents | |
| 332 | | |
| (57 | ) |
| Net (decrease)/increase in cash and cash equivalents | |
| (20,769 | ) | |
| 682 | |
Cash used in
operating activities
Our cash used in
operating activities for the nine months ended September 30, 2025, and 2024 was $16,335 and $13,037, respectively. Our uses of cash
for operating activities consisted of costs related to the completion of the Phase 1, initial costs on Phase 1b long term follow up study
and Phase 2 clinical study, salaries and wages for our employees, fees paid in connection with preclinical studies, drug manufacturing
costs, and professional fees.
Cash used in
financing activities
Our cash flow from
financing activities for the nine months ended September 30, 2025, consisted of proceeds from the exercise of 5,623,087 warrants
for cash proceeds, net of share issuance costs of $2,094. Our cash flow from financing activities for the nine months ended September 30,
2024, consisted of proceeds from the exercise of 589,156 warrants for cash proceeds of $182.
Cash used in
investing activities
Our cash flow used
in investing activities for the nine months ended September 30, 2025, was $6,860, and consisted of net purchases of investments
of $6,854 and purchase of equipment of $6. Our cash flow from investing activities in the nine months ended September 30, 2024,
was $13,594, and consisted of net maturity of investments of $13,598 and purchases of equipment of $4.
Net working capital
was $33,994 as of September 30, 2025, compared to a net working capital of $47,160 as of December 31, 2024. Working capital
is a non-GAAP measure and represents cash and cash equivalents, short-term investments, prepaid expenses, and other current assets less
current liabilities. This financial measure provides insight into the Company’s short-term liquidity and the capital available
to fund future operations.
Satellos’
main objectives in managing capital are to ensure cash resources are preserved and provide sufficient liquidity to finance research and
development activities, ongoing administrative costs and working capital. Since inception, Satellos has financed its operations from
private sales of equity, public sales of equity, convertible debt financing, non-convertible debenture financing, government grants and
investment tax credits. Since Satellos has not generated net earnings from operations, its ongoing liquidity depends on its ability to
access capital markets, which depends on the success of Satellos’ ongoing research and development programs, as well as capital
market conditions.
Satellos uses cash
flow forecasts to estimate cash requirements and has forecasted that our existing working capital is sufficient to operate the Company
and meet our announced goals for the ensuing twelve months.
Based on future
requirements, Satellos plans to raise capital as required to provide the necessary financial resources for operations. The timing of
financings will depend on market conditions and Satellos’ cash requirements. Satellos’ cash flow forecasts are continually
updated to reflect actual cash inflows and outflows to monitor the requirements and timing for additional financial resources.
Satellos will continue
to pursue various funding options and opportunities; however, no assurances can be made that Satellos will be successful in raising additional
investment capital, to continue as a going concern. Our ability to raise additional funds could be affected by adverse market conditions,
the status of our product pipeline, and various other factors and we may be unable to raise capital when needed, or on terms favorable
to us. If the necessary funds are not available, we may have to delay, reduce the scope of, or eliminate some of our development programs,
potentially delaying the time to market for any of our product candidates.
Equity Offering
December 2024
On December 20,
2024, the Company completed a public offering (the “December Equity Offering”), issuing 51,420,000 Common Shares
at CA$0.90 per Common Share and 11,865,000 Pre-Funded Warrants with no expiry date and an exercise price of CA$0.00001 for CA$0.89999
per Pre-Funded Warrant for gross proceeds of $40,000 (CAD $56,956).
The costs associated
with the December Equity Offering were $3,240, including cash costs for commissions to the agents of approximately $2,907, professional
fees and regulatory costs of $253, and accrued professional and regulatory fees of $80.
Bloom Burton Securities
Inc., (“BBSI”), an entity jointly controlled by a director of Satellos, acted as exclusive agent and book running
manager for both the December Equity Offering and the May Equity Offering.
USE OF PROCEEDS
December 2024
Financing
The following table
provides an update on the milestones for the Duchenne program and the anticipated use of proceeds raised as part of the December Equity
Offering (as previously proposed in the final prospectus dated December 17, 2024, relating to the December Equity Offering
(the “December 2024 Prospectus”), along with the amounts actually expended.
| Development Milestone | |
Amount to Spend (as proposed in the Dec 2024
Prospectus) | | |
Costs Incurred
to Date | | |
Estimated
Remaining
Costs | |
| Phase 2 clinical development of SAT-3247, including Phase 1 long-term follow up study and supporting CMC and pre-clinical activities | |
$ | 28,092 | | |
$ | 6,272 | | |
$ | 21,820 | |
| General corporate and administrative expenses | |
$ | 8,758 | | |
$ | 526 | | |
$ | 8,232 | |
| Total | |
$ | 36,850 | | |
$ | 6,798 | | |
$ | 30,052 | |
Please refer to
the ‘Achievements and Highlights in the three and nine months ended September 30, 2025’ section above for progress made
during the period on the development milestone.
License Agreements
Ottawa Hospital
Research Institute (“OHRI”)
Effective
May 1, 2018, Satellos and OHRI entered into the OHRI License Agreement whereby OHRI granted Satellos an exclusive, world-wide,
sublicensable, royalty bearing right and license to a body of technology and patents comprised of five patent families to develop,
make, have made, import, use, offer for sale, sell and have sold or otherwise commercialize licensed products. At the same time the
parties entered into a sponsored research agreement, during the term of which OHRI has agreed to carry out specific research and
development activities according to a prescribed statement of work, as may be amended from time to time, under the direction of
the Company’s co-founder, Dr. Michael A. Rudnicki (the “OHRI SRA”). Under the OHRI SRA,
Dr. Rudnicki leads a dedicated R&D team who are engaged solely to execute the agreed R&D program of Satellos, under his
direction and as defined in the statement of work.
Long-Term Obligations
and Other Contractual Commitments
The
Company enters into contracts in the normal course of business, including for research and development activities. As at
September 30, 2025, in addition to amounts that have been recognized in accounts payable and accrued liabilities, the Company
has commitments for research and development activities in the amount of $21,870, most cancellable with notice. These
commitments include agreements related to the conduct of long- term toxicology and clinical studies.
| | |
Payments Due by Period |
| | |
Total | | |
Less than 1 year | | |
1 -3 years | | |
4 – 5 years | |
After 5 years |
| Purchase obligations | |
$ | 21,870 | | |
$ | 12,803 | | |
$ | 9,067 | | |
nil | |
nil |
The Company may
be required to make annual, milestone, royalty, and other research and development funding payments to OHRI under the OHRI SRA and the
OHRI License. These payments are contingent upon the achievement of specific development, regulatory and/or commercial milestones. The
Company’s significant contingent milestone, royalty and other research and development commitments are as follows:
| ● | Royalties
on net sales of any products covered by patents licensed from OHRI (“Licensed Products”)
of 1% or 2% (depending on which patents cover a particular product), during the period when
the applicable patents have valid, unexpired claims, subject to certain royalty stacking
provisions; |
| ● | The
following payments to OHRI may be triggered by specified events: |
| o | CA$50
- each time a Licensed Product is the subject of an approved IND in the US or equivalent
in any other industrialized country (maximum one payment per new drug candidate); |
| o | CA$150
- each time a Licensed Product first enters Phase II human clinical trials in the US or equivalent
in any other industrialized country (maximum one payment per new drug candidate); |
| o | CA$300
- each time a Licensed Product first enters Phase III human clinical trials in the US or
equivalent in any other industrialized country (maximum one payment per new drug candidate);
and |
| o | CA$1,000
- each time a Licensed Product is the subject of a regulatory approval in the US (such as
NDA and BLA) or equivalent in any other industrialized country (maximum one payment per new
drug candidate). |
| ● | 2%
of sublicensing income received by Satellos from the grant of sublicenses. |
TRANSACTIONS
WITH RELATED PARTIES
The following related
parties have engaged in transactions with the Company during the three and nine months ended September 30, 2025 and September 30,
2024.
Key management
personnel consists of the Company’s Chief Executive Officer, Chief Scientific Officer, Chief Medical Officer, former Chief Business
Officer, Chief Financial Officer and the Directors of the Corporation. The remuneration of key management personnel is as follows:
| | |
Three months ended September 30,
2025 | | |
Three months
ended
September 30,
2025 | | |
Three months ended September 30,
2024 | | |
Three months
ended
September 30,
2024 | |
| | |
$ | | |
$ | | |
$ | | |
$ | |
| Salaries and management fees | |
| 663 | | |
| 294 | | |
| 1,951 | | |
| 1,784 | |
| Stock-based compensation | |
| 499 | | |
| 102 | | |
| 1,440 | | |
| 979 | |
| Total | |
| 1,162 | | |
| 396 | | |
| 3,391 | | |
| 2,763 | |
OFF-BALANCE
SHEET ARRANGEMENTS
Satellos has not
entered into any material off-balance sheet arrangements.
FINANCIAL INSTRUMENTS
AND RISK MANAGEMENT
Satellos is exposed
to various risks through its financial instruments as at September 30, 2025. The Company’s risk exposures and the impact on
the Company’s financial instruments are summarized below:
Credit Risk
Credit risk arises
from cash and cash equivalents and short-term investments held at banks and financial institutions, as well as outstanding receivables.
In the three and nine months ended September 30, 2025, the Company invested its excess cash in interest-bearing operating accounts
held at a Schedule 1 Canadian bank and in US government treasury bills and Guaranteed Investment Certificates. The Company limits its
exposure to credit risk, with respect to cash and cash equivalents and short-term investments, by placing them with high quality credit
financial institutions. The Company's cash and cash equivalents and short-term investments consist primarily of operating funds, US government
treasury bills, deposit investments and Guaranteed Investment Certificates with commercial banks.
Liquidity Risk
Liquidity risk
is the risk that the Company will encounter difficulty in raising funds to meet cash flow requirements associated with financial instruments.
The Company controls liquidity risk through management of working capital, cash flows and the availability and sourcing of financing.
The Company’s ability to accomplish all of its future strategic plans is dependent on obtaining additional financing or executing
other strategic options; however, there is no assurance the Company will achieve these objectives. As at September 30, 2025, the
Company’s liabilities consist of accounts payable and accrued liabilities that have contracted maturities of less than one year.
Market Risk
Market risk is
the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and equity prices. These
fluctuations may be significant.
Currency
risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign
exchange rates. The exposure to this risk changes as the exchange rate fluctuates. Foreign currency risk is limited to the portion
of the Company’s business transactions denominated in currencies other than the Canadian dollar, primarily expenses for
research and development incurred in US dollars. The Company manages foreign exchange risk by maintaining Canadian dollars in
cash on hand to fund its short-term foreign currency expenditures. Balances held in foreign currencies, presented in US dollars are
as follows:
| | |
As at September 30, 2025 | |
| | |
US $ | | |
Australian $ | | |
Euro € | | |
GBP £ | | |
Canadian $ | | |
Total $ | |
| Cash and cash equivalents | |
13,975 | | |
756 | | |
- | | |
- | | |
4,573 | | |
19,304 | |
| Short-term investments | |
11,000 | | |
- | | |
- | | |
- | | |
4,310 | | |
15,310 | |
| Accounts payable and accrued liabilities | |
(1,853 | ) | |
(207 | ) | |
(269 | ) | |
- | | |
(1,174 | ) | |
(3,503 | ) |
| Total | |
23,122 | | |
549 | | |
(269 | ) | |
- | | |
7,709 | | |
31,111 | |
| | |
As at December 31, 2024 | |
| | |
US $ | | |
Australian $ | | |
Euro € | | |
Canadian $ | | |
Total $ | |
| Cash and cash equivalents | |
| 24,848 | | |
| 339 | | |
| - | | |
| 14,886 | | |
| 40,073 | |
| Short-term investments | |
| 5,000 | | |
| - | | |
| - | | |
| 3,475 | | |
| 8,475 | |
| Accounts payable and accrued liabilities | |
| (2,491 | ) | |
| (329 | ) | |
| (242 | ) | |
| (521 | ) | |
| (3,583 | ) |
| Total | |
| 27,357 | | |
| 10 | | |
| (242 | ) | |
| 17,840 | | |
| 44,965 | |
Assuming
all other variables remain constant, a 10% depreciation or appreciation of the US dollar against the Canadian dollar, Australian dollar,
Euro, and GBP would result in an increase or decrease in loss and comprehensive loss for the nine months ended September 30, 2025,
of $799 (December 31, 2024 - $1,761).
Interest
rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The Company holds its cash and cash equivalents and short- term investments in banks and financial institutions, and
manages its interest rate risk by holding cash in high yield savings accounts or highly liquid short-term investments.
Financial
assets and liabilities are recognized on the statement of financial position at amortized cost in a hierarchy that is based on significance
of the inputs used in making the measurements. The levels in the hierarchy are:
| · | Level
1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities |
| · | Level
2 – Inputs other than quoted prices included within level 1 that are observable for
the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from
prices) |
| · | Level
3 – Inputs for the asset or liability that are not based on observable market data
(i.e., unobservable inputs) |
At September 30,
2025, the Company's financial instruments included cash and cash equivalents, short- term investments, accounts receivable, and accounts
payable and accrued liabilities.
Due to
the short-term maturities of cash and cash equivalents, short-term investments and accounts payable and accrued liabilities, the carrying
amounts approximate fair value at the respective statement of financial position date.
CRITICAL ACCOUNTING POLICIES AND
ESTIMATES
The preparation
of our consolidated financial statements in accordance with IFRS Accounting Standards requires management to make judgements, estimates
and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.
The reported amounts and note disclosures reflect management’s best estimate of the most probable set of economic conditions and
planned course of actions. Actual results may differ from these estimates. In preparing these unaudited condensed consolidated interim
financial statements, the significant judgements made by management in applying our accounting policies and key sources of estimation
uncertainty are disclosed in the consolidated financial statements for the years ended December 31, 2024 and 2023.
DISCLOSURE CONTROLS AND INTERNAL
CONTROL OVER FINANCIAL REPORTING
The Company has
implemented a system of internal controls that it believes adequately protects the assets of the Company and is appropriate for the nature
of its business and the size of its operations. The internal control system was designed to provide reasonable assurance that all transactions
are accurately recorded, that transactions are recorded as necessary to permit preparation of financial statements in accordance with
IFRS Accounting Standards and that our assets are safeguarded.
Internal control
over financial reporting means a process designed by or under the supervision of the Chief Executive Officer and the Chief Financial
Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with IFRS Accounting Standards. The internal controls are not expected to prevent and detect all
misstatements due to error or fraud.
These internal
controls include disclosure controls and procedures designed to ensure that information required to be disclosed by the Company is accumulated
and communicated as appropriate to allow timely decisions regarding required disclosure.
There were no changes
in our internal control over financial reporting that occurred during the nine months ended September 30, 2025 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
OUTSTANDING SHARE DATA
As of the date
of this MD&A, the Company had the following issued and outstanding securities:
| Security | |
Number | |
| Common shares | |
| 185,507,153 | |
| Prefunded Warrants | |
| 37,916,940 | |
| Stock options | |
| 25,766,763 | |
RISKS AND UNCERTAINTIES
We are a development
stage biopharmaceutical company that operates in an industry that is dependent on a number of factors that include the capacity to raise
additional capital on reasonable terms, obtain positive results of clinical trials, obtain positive results of clinical trials without
serious adverse or inappropriate side effects, and obtain market acceptance of its product. An investment in our Common Shares is subject
to a number of risks and uncertainties. An investor should carefully consider the risks described in our AIF, as well as our other public
filings with the securities regulators before investing in our Common Shares. If any of such described risks occur, or if others occur,
our business, operating results and financial condition could be seriously harmed, and investors may lose a significant proportion of
their investment. There are important risks which management believes could impact our business. For information on risks and uncertainties,
please refer to the “Risk Factors” section of our most recent AIF filed on SEDAR+ at www.sedarplus.ca.
ADDITIONAL INFORMATION
Additional information related to Satellos,
including the AIF, is available by accessing the Company’s SEDAR+ profile at www.sedarplus.ca.
Exhibit 4.11
NOTICE OF MEETING AND MANAGEMENT INFORMATION
CIRCULAR
RELATING TO THE
ANNUAL GENERAL AND SPECIAL MEETING OF SHAREHOLDERS
OF
SATELLOS BIOSCIENCE INC.
to be held on Wednesday, June 18, 2025
DATED MAY 12, 2025
This management information circular and the accompanying materials
require your immediate attention. If you are in doubt as to how to deal with these documents or the matters to which they refer, please
consult your financial, legal, tax or other professional advisor.
May 12, 2025
Dear Shareholders:
You are invited to attend the annual general
and special meeting (the “Meeting”) of the holders (the “Shareholders”) of common shares of Satellos
Bioscience Inc. (“Satellos” or the “Company”) to be held virtually on Wednesday June 18, 2025,
at 10:00 a.m. (Toronto time) via live audio webcast.
Registered Shareholders and duly appointed proxyholders
will be able to attend, ask questions, and vote at the Meeting online. Guests, including Non-registered Shareholders who have not duly
appointed themselves as proxyholder, will be able to listen to the live stream of the Meeting, but will not be able to vote or ask questions
at the Meeting. For Shareholders who will not be attending, appointment of a proxyholder and voting may be completed at www.investorvote.com.
The Meeting is being held to receive the audited
consolidated financial statements of Satellos for the year ended December 31, 2024, to: elect the board of directors of Satellos
(the “Board”); appoint the auditors of the Company for the ensuing year; and, approve a consolidation of the Company's
common shares. The Management Information Circular provides additional information relating to the proxies and the matters to be dealt
with at the Meeting. Shareholders should access and review all of the information in the Management Information Circular before voting.
Recommendation:
The Board believes that passing the resolutions
contained in the Notice of Meeting is in the best interests of the Company and the Shareholders and therefore recommends that you vote
in favour of each resolution in advance of the Meeting, as each of the Company’s directors intend to do in respect of their
shareholdings.
| |
Yours truly, |
| |
|
| |
(signed)
“Frank Gleeson” |
| |
|
| |
Frank Gleeson |
| |
President and Chief Executive Officer |
| |
Satellos Bioscience Inc. |
SATELLOS BIOSCIENCE INC.
NOTICE OF AN ANNUAL AND SPECIAL MEETING OF
SHAREHOLDERS
TO BE HELD ON JUNE 18, 2025
TO: The Shareholders of Satellos
Bioscience Inc.
TAKE NOTICE that the annual
general and special meeting (the “Meeting”) of the holders (the “Shareholders”) of common shares
(“Shares”) of Satellos Bioscience Inc. (“Satellos” or the “Company”) will be
held electronically on June 18, 2025 at 10:00 a.m. (Toronto time) for the following purposes:
| 1. | to receive the consolidated financial statements of Satellos for the
year ended December 31, 2024, together with the notes thereto and the auditors’
report thereon; |
| 2. | to elect the board of directors of Satellos (the “Board”)
to hold office until the next annual meeting of the Shareholders or until their successors
are elected or appointed; |
| 3. | to appoint PricewaterhouseCoopers, LLP, Chartered Professional Accountants,
of Toronto, Ontario as auditors of Satellos for the ensuing year, at a remuneration to be
fixed by the Board; |
| 4. | to consider and, if deemed advisable, to pass a special resolution,
the full text of which is set out in the accompanying management information circular (the
"Information Circular"), approving an amendment to the articles of the Company
for a future consolidation of the Company's issued and outstanding Shares on the basis of
a consolidation ratio to be selected by the Board within a range between five (5) pre-consolidation
Shares for one (1) post-consolidation Share and fifteen (15) pre- consolidation Shares
for one (1) post-consolidation Share, provided that, such consolidation occurs prior
to the earlier of the 12 month anniversary of the Meeting and the next annual meeting of
Shareholders; if, and at such time following the date of the Meeting, as may be determined
by the Board in its sole discretion, as more particularly described in the Information Circular; |
| 5. | to transact such other business as may properly come before the Meeting
or any adjournment(s) or postponement thereof. |
The details of all matters proposed
to be put before the Shareholders at the Meeting are set forth in the Information Circular accompanying this Notice of the Annual General
and Special Meeting of Shareholders. Only Shareholders of record at the close of business on May 12, 2025 are entitled to notice
of and to vote at the Meeting or any adjournment or postponement thereof.
If you are a non-registered shareholder
of the Company and received these materials through your broker or through another intermediary, please complete and return the materials
in accordance with the instructions provided to you by your broker or by the other intermediary. Failure to do so may result in your
shares not being eligible to be voted by proxy at the Meeting.
IMPORTANT
The Meeting will be held in a virtual
only format.
Registered Shareholders and duly appointed
proxyholders (as defined in the Information Circular) can attend the Meeting via webcast online at //meetnow.global/M6F2GXU
to participate, vote, or submit questions during the Meeting’s live webcast. Non-registered Shareholders (being those who
beneficially own Shares that are registered in the name of an intermediary such as a bank, trust company, securities broker or other
nominee, or in the name of a depository of which the intermediary is a participant) who have not duly appointed themselves as
proxyholder will be able to attend the Meeting online as guests, but will not be able to vote or ask questions at the Meeting.
Please read the enclosed Information
Circular and the Instrument of Proxy which accompanies this Notice, and then complete, sign, date and deliver the Instrument of
Proxy, together with the power of attorney or other authority, if any, under which it was signed (or a notarially certified copy
thereof) with Satellos’ transfer agent, Computershare Investor Services Inc. (“Computershare”), either in
person, by mail or courier, to 100 University Avenue, 8th Floor, Toronto, ON M5J 2Y1, or via the internet at www.investorvote.com,
by 10:00 a.m. (Toronto time), on June 16, 2025, or at least forty-eight (48) hours (excluding Saturdays, Sundays and
statutory holidays) before the time of the Meeting or any adjournment thereof. Late proxies may be accepted or rejected by the chair
of the Meeting in his or her discretion, and the chair is under no obligation to accept or reject any particular late proxy.
Non-registered Shareholders who received
the proxy through an intermediary must deliver the proxy in accordance with the instructions given by such intermediary.
A Shareholder who wishes to appoint a person
other than the proxyholder nominees identified on the Instrument of Proxy or voting instruction form (including a non-registered Shareholder
who wishes to appoint themselves as proxyholder in order to attend and vote at the Meeting online) must carefully follow the instructions
in the Information Circular and on their Instrument of Proxy or voting instruction form accompanying this Notice. These instructions
include the additional step of registering such proxyholder with Computershare after submitting an Instrument of Proxy or voting instruction
form. Failure to register will result in the proxyholder not receiving an invite code, which is used as their online sign-in credentials
and is required for them to vote at the Meeting. Without an invite code, such proxyholder will only be able to attend the Meeting
online as a guest. Non-registered Shareholders located in the United States must also provide Computershare with a duly completed
legal proxy by email to uslegalproxy@computershare.com, or by courier to Computershare Investor Services Inc., 100 University
Avenue, 8th Floor, Toronto, ON M5J 2Y1, if they wish to vote at the Meeting or appoint a third-party as their proxyholder.
Satellos has provided an electronic
link and dial-in number to the Meeting so that shareholders or proxyholders can participate in the live Meeting. Although Shareholders
may attend to the live Meeting by electronic means, they are strongly encouraged to vote by proxy, in the manner described
above.
DATED at Toronto, Ontario this 12th day of May,
2025.
SATELLOS BIOSCIENCE INC.
| (signed)
“Frank Gleeson” |
|
| Frank Gleeson |
|
| President and Chief Executive Officer |
|
SATELLOS BIOSCIENCE INC.
ANNUAL GENERAL AND SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY JUNE 18, 2025
MANAGEMENT INFORMATION CIRCULAR
GENERAL
This management
information circular (the “Information Circular”) is furnished to holders (“Shareholders”) of common
shares (“Shares”) of Satellos Bioscience Inc. (the “Company” or “Satellos”)
in connection with the solicitation of proxies and voting instructions forms by the management of the Company for use at the annual general
and special meeting (the “Meeting”) of Shareholders to be held electronically on Wednesday June 18, 2025, at
10:00 a.m. (Toronto time), and at any adjournment or postponement thereof, for the purposes set forth in the accompanying notice
of annual and special meeting (the “Notice of Meeting”). Shareholders will not be able to attend the Meeting in person.
The information contained herein is
given as of May 12, 2025, except where otherwise indicated. Enclosed herewith is an Instrument of Proxy for use at the Meeting.
Each Shareholder who is entitled to attend at meetings of Shareholders is encouraged to participate in the Meeting and Shareholders are
urged to vote on matters to be considered in person or by proxy.
Shareholders should not construe the
contents of this Information Circular as legal, tax or financial advice and should consult with their own professional advisors in considering
the relevant legal, tax, financial or other matters contained in this Information Circular.
If you hold Shares through a broker,
investment dealer, bank, trust company, clearing agency, trustee, agent, nominee or other intermediary (collectively, an “Intermediary”),
you should contact your Intermediary for instructions and assistance in voting the Shares that you beneficially own.
INFORMATION CONCERNING FORWARD–LOOKING
STATEMENTS
Certain statements contained in this
Information Circular, the Appendices attached hereto and in the documents incorporated by reference herein constitute forward-looking
statements. These statements relate to future events or future performance. All statements other than statements of historical fact may
be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as “seek”,
“anticipate”, “plan”, “continue”, “expect”, “may”, “will”, “potential”,
“target”, “intend”, “could”, “can”, “goals”, “should”, “believe”,
“likely”, “is designed to” and similar expressions.
By their very nature, forward-looking
statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially
from those anticipated in such forward-looking statements. Satellos believes the expectations reflected in those forward-looking statements
are reasonable but, no assurance can be given that these expectations will prove to be correct. Thus, forward-looking statements included
in this Information Circular and in the documents incorporated by reference herein should not be unduly relied upon. These statements
speak only as of the date of this Information Circular.
Some of the risks that could cause
results to differ materially from those expressed in the forward-looking statements include:
| · | general
business, economic, competitive, political and social uncertainties; and |
| · | competition
for, among other things, capital and skilled personnel. |
The forward-looking statements contained
in this Information Circular speak only as of the date of this Information Circular. The forward-looking statements contained herein
are expressly qualified in their entirety by this cautionary statement. Satellos assumes no obligation to update these forward-looking
statements except as may otherwise be required pursuant to applicable laws.
CURRENCY
In this Information Circular, except
where otherwise indicated, all dollar amounts are expressed in Canadian dollars, and all references to “$” and “dollars”
are to Canadian dollars.
PERSONS MAKING THE SOLICITATION
This Information Circular is
furnished in connection with the solicitation of proxies by or on behalf of the management of the Company for use at the Meeting and
any adjournment or postponement thereof. The Meeting will be held in virtual only format, which will be conducted via live audio
webcast at //meetnow.global/M6F2GXU. Shareholders will not be able to physically attend the Meeting. For a summary of how
Shareholders may attend the Meeting online, see “Attending and Voting at the Virtual Meeting” below.
This solicitation is made on behalf
of the management of the Company. The costs incurred in the preparation of both the Instrument of Proxy and this Information Circular
will be borne by the Company. In addition to the use of mail, proxies may be solicited by personal interviews, personal delivery, telephone
or any form of electronic communication by directors, officers, employees or agents of the Company who will not be directly compensated
therefor. Any third-party costs thereof will be borne by the Company.
In accordance with National Instrument
54-101 – Communication with Beneficial Owners of Securities of a Reporting Issuer (“NI 54-101”), this
Information Circular and the Instrument of Proxy have been sent by the Company to its registered Shareholders of record registered as
of the close of business on May 12, 2025 (Shareholders holding a paper share certificate or Direct Registration Statement registered
in their name) and the Company has also sent such proxy-related materials directly to those unregistered (beneficial) Shareholders that
have consented to the release of their addresses to the Company (“NOBOs”).
The Company also intends to pay for
intermediaries such as stockbrokers, securities dealers, banks, trust companies, clearing agencies, trustees and their agents and nominees
(“Intermediaries”) to deliver proxy- related materials or Form 54-101F7 –Request for Voting Instructions
Made by Intermediary to the Beneficial shareholders that have refused to release their addresses to the Company (“OBOs”).
The OBOs and NOBOs are herein collectively
referred to as the “Non-Registered Shareholders”. See also “Proxy Related Information – Advice for
Non-Registered Shareholders” in this Information Circular.
The Company
will not be providing the Notice of Meeting, the Information Circular or the form of proxy to registered Shareholders or Non-Registered
Shareholders through the use of notice-and-access, as such term is defined in NI 54-101.
PROXY RELATED INFORMATION
Appointment and Revocation of Proxies
The persons named in the accompanying
Instrument of Proxy, Elizabeth Williams, or failing her, Frank Gleeson, or failing him, Geoff MacKay (the “Management
Nominees”), have been selected by the Board, and have indicated their willingness, to represent Shareholders who appoint them
as their proxy for the Meeting.
The Management Nominees
named in the accompanying Instrument of Proxy are directors and/or officers of the Company. A Shareholder has the right to designate
a person (who need not be a Shareholder) other than the Management Nominees to represent him, her, they or it at the Meeting. Such
right may be exercised by striking out the names of the specified persons and inserting in the space provided for that purpose on
the enclosed Instrument of Proxy the name of the person to be designated or by completing another proper Instrument of Proxy. Such
Shareholder should notify the nominee of the appointment, obtain his or her or their consent to act as proxy and should provide
instructions on how the Shares held by the Shareholder are to be voted. In any case, an Instrument of Proxy should be dated and
executed by the Shareholder or an attorney authorized in writing, with proof of such authorization attached where an attorney has
executed the Instrument of Proxy.
Shareholders who wish to appoint a
third-party proxyholder, someone other than the Management Nominees, to attend the Meeting as their proxy and vote their Shares MUST
submit their Instrument of Proxy or voting instruction form, as applicable, appointing that person as proxyholder, AND register
that proxyholder, as described below. Registering the proxyholder is an additional step that must be completed AFTER the Instrument
of Proxy or voting instruction form has been submitted. Failure to register the proxyholder will result in the proxyholder not receiving
an Invite Code, which is used as their online sign-in credentials and is required for them to vote at the Meeting.
| · | Step
1 – Submit Instrument of Proxy or voting instruction form. Registered Shareholders
unable to attend the Meeting are requested to complete, sign and date the accompanying Instrument
of Proxy, and to return it, together with the power of attorney or other authority, if any,
under which it was signed or a notarially certified copy thereof, to the Company’s
transfer agent, Computershare, either in person, by mail or courier, to 100 University Avenue,
8th Floor, Toronto, Ontario, M5J 2Y1, or via the internet at www.investorvote.com.
This must be completed before registering the proxyholder to attend the Meeting online, which
is an additional step completed once the Instrument of Proxy or voting instruction form is
submitted. |
Non-Registered Shareholders who receive
the proxy through an Intermediary must deliver the proxy in accordance with the instructions given by such Intermediary.
To be effective, proxies must be received
by Computershare not later than by 10:00 a.m. (Toronto time) on June 16, 2025, or at least forty-eight (48) hours (excluding
Saturdays, Sundays and statutory holidays) prior to the Meeting or any adjournment or postponement thereof.
| · | Step
2 - Register your proxyholder: To register a third-party proxyholder, Shareholders MUST visit
http://www.computershare.com/Satellos by 10:00 a.m. (Toronto time) on June 16,
2025, or at least forty-eight (48) hours (excluding Saturdays, Sundays and statutory holidays)
prior to the Meeting or any adjournment or postponement thereof, and provide Computershare
with their proxyholder’s contact information, including email address, so that Computershare
may provide the proxyholder with an Invite Code by email. |
Without an Invite Code, proxyholders
will not be able to vote or ask questions at the Meeting.
They will only be able to attend the
Meeting online as a guest.
The Company may refuse to recognize
any Instrument of Proxy deposited in writing or by the internet received later than forty-eight (48) hours (excluding Saturdays, Sundays
and statutory holidays in Ontario) prior to the Meeting or any adjournment or postponement thereof.
A Shareholder who has submitted an
Instrument of Proxy may revoke it as to any matter on which a vote has not already been cast pursuant to its authority by an
instrument in writing executed by such securityholder or by his attorney duly authorized in writing or, if the Shareholder is a
corporation, by a director, officer or attorney thereof duly authorized, and deposited at the above mentioned office of
Computershare, no later than 48 hours (excluding Saturdays, Sundays and statutory holidays in the Province of Ontario) prior to the
time set for the applicable Meeting, or any adjournment thereof, or with the Chairman of the Meeting, as applicable, on the day of
the Meeting or any adjournment thereof.
A Shareholder who has submitted an
Instrument of Proxy attends the live Meeting via webcast, and who has accepted the terms and conditions when entering the Meeting online,
will be provided the opportunity to vote online by ballot and the votes previously submitted via proxy will be disregarded. See “Attending
and Voting at the Virtual Meeting” below.
Signature of Proxy
The applicable form of proxy must be
executed by the registered Shareholder, as applicable, or his or her attorney authorized in writing, or if the Shareholder is a corporation,
the applicable Instrument of Proxy should be signed in its corporate name under its corporate seal (if required) by an authorized officer
whose title should be indicated. An Instrument of Proxy signed by a Person acting as attorney or in some other representative capacity
should reflect such Person’s capacity following his or her signature and should be accompanied by the appropriate instrument evidencing
qualification and authority to act (unless such instrument has been previously filed with Satellos).
Exercise of Discretion by Proxy Holders
All Shares represented at the Meeting
by properly executed Instruments of Proxy will be voted. Where a choice with respect to any matter to be acted upon has been specified
in the Instrument of Proxy, the securities represented by the proxy will be voted in accordance with such specification. In the absence
of such specification, such securities will be voted in favour of each applicable resolution as set forth in the Notice of Meeting and
in this Information Circular.
The enclosed Instruments of Proxy confer
discretionary authority upon the persons named therein, including the Management Nominees, with respect to amendments or variations to
matters identified in the Notices of Meeting and with respect to other matters which may properly come before the Meeting or any adjournment
of postponement thereof. If any such amendment, variation or other matter should come before the Meeting, it is the intention of the
persons named in the enclosed Instrument of Proxy to vote such proxies in accordance with their best judgment, unless the Shareholder
has specified to the contrary or that Shares are to be withheld from voting. At the time of printing of this Information Circular, management
of Satellos knows of no such amendment, variation or other matter.
Advice for Non-Registered Shareholders
The information set forth in this
section is of importance to many Shareholders, as a substantial number of Shareholders do not hold Shares in their own name. Non-Registered
Shareholders are advised that only proxies from Shareholders of record can be recognized and voted upon at the Meeting. If Shares are
listed in an account statement provided to Shareholders by a broker, then in almost all cases those Shares will not be registered in
the Shareholder’s name on the records of Satellos. Such Shares will more likely be registered under the name of the Shareholder’s
broker or an agent of that broker. Although a Non-Registered Shareholder may not be recognized directly at the Meeting for the purposes
of voting Shares registered in the name of his broker, a Non-Registered Shareholder may attend the Meeting as proxyholder for the registered
Shareholder and vote the Shares in that capacity. Non-Registered Shareholders who have not duly appointed themselves as proxyholders
may attending the Meeting as guests. Guests will be able to listen to the Meeting online, but will not be able to vote or ask questions
at the Meeting.
Voting by Non-Registered Shareholders
Shares held by brokers or their nominees can
only be voted (for or against resolutions) upon the instructions of the Non-Registered Shareholder. Without specific instructions,
brokers and their nominees are prohibited from voting Shares for their clients. The directors and officers of the Company do not
know for whose benefit the Shares registered in the name of CDS & Co. are held, and directors and officers of the Company
do not necessarily know for whose benefit the Shares registered in the name of any Intermediary are held.
Applicable regulatory policy requires
brokers and other Intermediaries to seek voting instructions from Non- Registered Shareholders in advance of Shareholders’ meetings.
Every broker and other Intermediary has its own mailing procedure, and provides its own return instructions, which should be carefully
followed. The form of proxy supplied by brokers and other Intermediaries to Non-Registered Shareholders may be very similar and in some
cases identical to that provided to registered Shareholders. However, its purpose is limited to instructing the registered Shareholder
how to vote on behalf of the Non-Registered Shareholder.
In Canada, the vast majority of brokers
now delegate responsibility for obtaining instructions from clients to Broadridge Financial Solutions, Inc. (“Broadridge”).
Broadridge typically prepares a machine-readable voting instruction form, mails those forms to Non-Registered Shareholders and asks Non-Registered
Shareholders to return the forms to Broadridge, or otherwise communicate voting instructions to Broadridge (by way of the Internet or
telephone, for example). Broadridge then tabulates the results of all instructions received and provides appropriate instructions respecting
the voting of shares to be represented at the Meeting. A Non-Registered Shareholder who receives a Broadridge voting instruction form
cannot use that form to vote Shares directly at the Meeting. The voting instruction forms must be returned to Broadridge (or instructions
respecting the voting of Shares must otherwise be communicated to Broadridge) well in advance of the Meeting in order to have the Shares
voted. If you have any questions respecting the voting of Shares held through a broker or other Intermediary, please contact that
broker or other Intermediary for assistance.
Although a Non-Registered Shareholder
may not be recognized directly at the Meeting for the purposes of voting Shares registered in the name of his or her broker, a Non-Registered
Shareholder may attend the Meeting as proxyholder for the registered Shareholder and vote the Shares in that capacity. Non-Registered
Shareholders who wish to attend the Meeting and indirectly vote their Shares as proxyholder for the registered Shareholder, should enter
their own names in the blank space on the form of proxy provided to them and return the same to their broker (or the broker’s agent)
in accordance with the instructions provided by such broker. In addition, Non-Registered Shareholders are reminded that registering
a Non-Registered Shareholder or third-party proxyholder online, as applicable, is an additional step to be completed after submitting
the proxy authorization form if such persons are to receive an Invite Code and participate and vote at the Meeting.
If you have any questions respecting
the voting of Shares held through a broker or other intermediary, please contact that broker or other intermediary for assistance.
All references to Shareholders in this Information Circular and the accompanying Instrument of Proxy and Notice of Meeting are to Shareholders
of record, unless specifically stated otherwise.
ATTENDING AND VOTING AT THE VIRTUAL MEETING
The Meeting will be held in a virtual
only format, which will be conducted via live audio webcast. Registered Shareholders and duly appointed proxyholders will have an opportunity
to attend, ask questions and vote at the Meeting online. Shareholders and proxyholders will not be able to physically attend the Meeting.
Registered Shareholders and duly appointed
proxyholders will be able to attend, participate and vote at the Meeting online by ballot at the appropriate times. The 15-digit control
number (“Control Number”) located on the Instrument of Proxy received by registered Shareholders is the Control Number
for purposes of logging in to the Meeting online. Duly appointed proxyholders will receive, via email notification from Computershare,
an Invite Code for purposes of logging in to the Meeting online. In order to participate in the Meeting online, registered Shareholders
must have a valid Control Number and duly appointed proxyholders must have received an Invite Code. See “How to Attend the Meeting”
below for additional information on how to log in to the Meeting online.
Non-Registered Shareholders who have
not duly appointed themselves as proxyholders may attend the Meeting as guests. Guests will be able to listen to the Meeting online,
but will not be able to vote or ask questions at the Meeting. This is because our transfer agent, Computershare, does not have a record
of the Non-Registered Shareholders and, as a result, will have no knowledge of their shareholdings or entitlement to vote, unless Non-
Registered Shareholders appoint themselves as proxyholder. Non-Registered Shareholders who wish to vote at the Meeting must (i) appoint
themselves as proxyholder by inserting their name in the space provided for appointing a proxyholder on the voting instruction form and
(ii) follow all of the applicable instructions, including the deadline, provided by their Intermediary. See “How to Attend
the Meeting” below for additional information on how to log in to the Meeting online.
How to Attend the Meeting
Registered Holders and duly appointed
proxyholders, including Non-Registered Shareholders who have duly appointed themselves as proxyholder, will be able to attend, ask
questions and vote at the Meeting online at //meetnow.global/M6F2GXU. It is recommended that Shareholders and duly appointed
proxyholders log in one hour before the Meeting starts. To do so, please go to //meetnow.global/M6F2GXU prior to the start of
the meeting to login. Click on “Shareholder” and enter your 15-digit Control Number or click on “Invitation”
and enter your Invite Code, as applicable.
| · | Registered
Shareholders: Each registered Shareholder’s Control Number is located on the Instrument
of Proxy sent to that registered Shareholder. |
| · | Duly
appointed proxyholders: Computershare will provide the proxyholder with an Invite Code after
the proxy voting deadline has passed and the proxyholder has been duly appointed AND registered
as described in “Appointment and Revocation of Proxies” above. |
Guests, including Non-Registered
Shareholders who have not duly appointed themselves as proxyholder, can listen to the live Meeting. However, Guests are not able to
vote or ask questions at the Meeting. Log in online at //meetnow.global/M6F2GXU, select “Guest”, and then
complete the online registration form.
It is important that attendees at the
Meeting remain connected to the internet for the duration of the Meeting in order to vote when balloting commences. It is the responsibility
of Shareholders and duly appointed proxyholders attending the Meeting to ensure that they remain connected. The virtual meeting platform
is fully supported across most commonly used web browsers (note: Internet Explorer is not a supported browser).
Please allow ample time to check-in
to the Meeting online. Online check-in will begin a half hour prior to the Meeting and the Meeting will begin promptly at 10:00 a.m. (Toronto
time) on June 18, 2025, unless otherwise adjourned or postponed.
United States beneficial Shareholders: To attend
and vote at the Meeting, you must first obtain a valid Legal Form of Proxy from your broker, bank or other agent and then register
in advance to attend the meeting. Follow the instructions from your broker or bank included with the proxy materials or contact your
broker or bank to request a Legal Form of Proxy. After first obtaining a valid Legal Form of Proxy your broker, bank or other
agent, you must submit a copy of your Legal Form of Proxy to Computershare in order to register to attend the meeting. Requests
for registration should be sent to Computershare, either in person, by mail or courier, to 100 University Avenue, 8th Floor, Toronto,
Ontario, M5J 2Y1 or by email to USLegalProxy@computershare.com.
Requests for registration must be labeled as
“Legal Proxy” and be received no later than 10:00 a.m. (Toronto time) on June 16, 2025. You will receive a confirmation
of your registration by email after we receive your registration materials. Following such confirmation, you may attend the Meeting at
//meetnow.global/M6F2GXU and vote your Shares during the Meeting. Please note that you are MUST to register your appointment at
http://www.computershare.com/Satellos prior to the Meeting.
Voting in Advance of the Meeting
Registered Shareholders may also cast
their vote by telephone (1-866-732-8683) or internet (www.investorvote.com) by following the instructions on the form provided. If you
choose to vote by telephone or internet, your vote must also be cast no later than 48 hours (excluding Saturdays, Sundays and statutory
holidays in the Province of Ontario) prior to the time of the Meeting or any adjournment or postponement thereof.
INTEREST OF CERTAIN PERSONS OR COMPANIES IN
MATTERS TO BE ACTED UPON
No person who has been a director or
executive officer of the Company at any time since the beginning of the last financial year, nor any proposed nominee for election as
a director of the Company, nor any associate or affiliate of any of the foregoing, has any material interest, directly or indirectly,
by way of beneficial ownership of securities or otherwise, in any matter to be acted upon except as disclosed in this Information Circular
under the heading “Matters to be Acted Upon at the Meeting – Election of Directors”.
VOTING SECURITIES AND PRINCIPAL HOLDERS OF
VOTING SECURITIES
Voting Rights
The authorized share capital of the
Company consists of an unlimited number of Shares without nominal or par value. As at the date of this Information Circular, 165,885,462
Shares are issued and outstanding. The holders of the Shares are entitled to receive notice of and to attend and vote at all meetings
of the shareholders of Satellos and each Share confers the right to one vote in person or by proxy at all meetings of the shareholders
of Satellos. The holders of the Shares are entitled to receive such dividends as the Board may by resolution determine. The holders of
Shares are entitled to receive the remaining property of Satellos in the event of any liquidation, dissolution or winding up, whether
voluntary or involuntary, or other distribution of assets of Satellos among its shareholders for the purpose of winding-up Satellos’
affairs. There are no pre-emptive or conversion rights.
Shareholders of the Record Date are entitled to receive
notice of and attend and vote at the Meeting.
Each Share carries the right to
one vote on any matter properly coming before the Meeting or any adjournment or postponement thereof.
Record Date
The record date for the determination
of Shareholders entitled to receive notice of and to vote at the Meeting or any adjournment or postponement thereof is May 12, 2025
(the “Record Date”).
The Company will prepare or cause to
be prepared a list of the Shareholders recorded as holders of Shares on its register of Shareholders as of the close of business on the
Record Date, each of whom shall be entitled to vote the Shares shown opposite their name on the list at the Meeting or any adjournment
or postponement thereof.
In addition, persons who are Non-Registered
Shareholders as of the Record Date will be entitled to exercise their voting rights in accordance with the procedures established under
NI 54-101. See “Advice for Non-Registered Shareholders”.
Quorum
As set forth in the by-laws of the
Company, quorum is present at a meeting of Shareholders if at least two persons are present holding, or representing by proxy, not less
than ten percent (10%) of the outstanding shares of the Corporation entitled to vote at that meeting.
Unless otherwise required by law or
the constating documents of the Company, any matter coming before the Meeting or any adjournment or postponement thereof shall be decided
by the majority of the votes duly cast in respect of the matter by Shareholders entitled to vote thereon.
Principal Holders of Shares
To the knowledge of the directors and
executive officers of the Company, no person or company beneficially owns, or controls or directs, directly or indirectly, 10% or more
of the issued and outstanding Shares as at the date of this Information Circular.
MATTERS TO BE ACTED UPON AT THE MEETING
To the knowledge
of the board of directors of the Company (the “Board”), the only matters to be brought before the Meeting are those
matters set forth in the Notice of Meeting.
At the Meeting, the audited consolidated
financial statements of the Company for the financial year ended December 31, 2024 and year ended December 31, 2023, together
with the notes and auditors’ report thereon (the “Financial Statements”), will be presented. Shareholder approval
of the Financial Statements is not required and no formal action will be taken at the Meeting to approve the Financial Statements.
In accordance with applicable
laws, the Financial Statements have been delivered to Non-Registered Shareholders who have requested copies of the Financial Statements
and to registered Shareholders who have not informed the Company in writing that they do not wish to receive copies of Financial Statements.
The Financial Statements are available on the System for Electronic Document Analysis and Retrieval + (“SEDAR+”) at
www.sedarplus.ca under the Company’s profile.
The directors of the Company
are elected annually. At the Meeting, Shareholders will be asked to elect the eight (8) nominees set forth in the table below
as directors of the Company. Each of the nominees elected as a director of the Company will hold office until the next annual
general meeting of Shareholders or until a successor is duly elected or appointed or their office is vacated earlier in accordance
with the articles of amalgamation of the Company and the provisions of the Canada Business Corporations Act (the
“CBCA”).
Each director nominee will be elected
on an individual basis and not as a member of a slate. Management does not contemplate that any of such nominees will be unable to serve
as directors.
In order for each director nominee
to be elected, as required by the CBCA, a majority of the votes cast by Shareholders must be in favour of such director nominee.
The following is a brief
description of the nominees, including the name and province or state and country of residence of each of the nominees, the date
each first became a director of Satellos, their principal occupation and the number of Shares beneficially owned, or controlled or
directed, directly or indirectly, by each of the foregoing as of the date of this Information Circular. The information as to the
Shares, stock options (“Options”) and Warrants beneficially owned or controlled or directed, directly or
indirectly, is based upon information furnished to Satellos by the nominees.
The Board believes the election
of the below named nominees as directors of the Company is in the best interests of the Company and recommends that the Shareholders
vote IN FAVOUR of electing the nominees. Unless otherwise directed to the contrary, it is the intention of the persons named in the enclosed
form of proxy to vote proxies in favour of the election of the nominees set forth in the table below as directors of the Company.
Name, Province and
Country of Residence | |
Offices Held and
Time as Director
or Officer | |
Principal Occupation
(for last 5 years) | |
Number of Common
Shares Beneficially
Owned, Controlled or
Directed | |
Frank Gleeson
(Ontario,
Canada) | |
Director since July 2012, Chief Executive Officer since March 2018, and President since April 2018 | |
President and CEO, Satellos Bioscience Inc. | |
| 3,976,389 | (1) |
| | |
| |
| |
| | |
Franklin M. Berger(5) (New
York, USA) | |
Director since June 29, 2023 | |
Consultant | |
| 7,879,000 | |
| | |
| |
| |
| | |
Brian Bloom
(Ontario, Canada) | |
Director since
March 2018 | |
Co-founder, Chairman and Chief Executive Officer, Bloom Burton & Co., Inc.; Chairman and CEO, Bloom Burton Securities Inc. | |
| 10,400,818 | (2) |
| | |
| |
| |
| | |
Stephanie Brown(3)(4) (Boston,
MA) | |
Director since
November 2024 | |
Former President of North America, Santhera Pharmaceutical (until March 2024) | |
| Nil | |
| | |
| |
| |
| | |
Selwyn Ho
(Windsor,
UK) | |
Director Nominee | |
CEO, Medigene AG (July 2022 to present) | |
| Nil | |
| | |
| |
| |
| | |
| | |
| |
EVP and Chief Business Officer, (Jan 2021 – June 2022) Corporate Advisor, (Jan 2020 – Jan 2021) Connect Biopharma | |
| | |
| | |
| |
| |
| | |
Iris Loew-Friedrich
(Ratingen,
Germany) | |
Director Nominee | |
Former Executive Vice-President, Chief Medical Officer, Head of Development, member of the Executive Committee, UCB S.A. / Schwarz Pharma
AG (until June 2024) | |
| Nil | |
| | |
| |
| |
| | |
Geoff MacKay(4) (Maine,
United States) | |
Board Chair and Director since July 2018 | |
CEO of Biotech Startup, Former Co- founder, Director, President & Chief Executive Officer, AVROBIO, Inc. (until April 2023) | |
| 254,422 | |
| | |
| |
| |
| | |
Adam Mostafa(3)(4)
(Massachusetts, USA) |
|
Director since
December 5, 2021 |
|
Chief Financial Officer of X4 Pharmaceuticals |
|
|
Nil |
|
Notes:
| (1) | Frank Gleeson holds 738,169 Shares through 6857990 Canada Inc., a
company controlled by him. |
| (2) | 6,022,000 of these Shares are held through Bloom Burton Development
Corp, an affiliated company of Bloom Burton and Co. Inc., of which Brian Bloom is co-founder,
Chair and CEO, 2,900,008 of these Shares are held through Bloom Burton & Co. Inc.,
of which Brian Bloom is co-founder, Chair and CEO, 672,005 of these Shares are held through
2194655 Ontario Inc., a company controlled by Brian Bloom and 806,805 of these Shares are
held personally by Brian Bloom. |
| (3) | Current member of Audit Committee (as defined herein). |
| (4) | Current member of Compensation Committee (as defined herein). |
| (5) | Current member of Corporate Governance Committee (as defined herein). |
Frank Gleeson, Director, President and Chief Executive
Officer
During his biotechnology career since
1994, Mr. Gleeson has been a key party to building more than 20 biomedical companies from breakthrough research and technologies
and has negotiated numerous financing and M&A transactions valued in excess of $600 million. In 2018, he co-founded Satellos with
Dr. Rudnicki where, as CEO, he has raised over $125 million, taken the company public on the TSX (MSCL), built a team of 25 professionals,
and directed the company into clinical development with a novel lead drug, SAT-3247. Prior to Satellos, he and Dr. Rudnicki co-founded
Verio Therapeutics, where Mr. Gleeson was CEO and managed its acquisition by Fate Therapeutics (Nasdaq: FATE). Mr. Gleeson
has also served as Chief of Commercial Operations at Centre for Probe Development and Commercialization (CPDC), where he played a principal
role in building a global radiopharmaceutical manufacturing business and supporting the creation of two spin-out companies. Prior to
CPDC, he served as an Executive-in-Residence with the Fight Against Cancer Innovation Trust (FACIT), an innovative nucleator, where he
supported or led the creation, financing and exits of three new entities. Earlier in his career, Mr. Gleeson was founding CEO of
MDS Proteomics Inc., where he made and integrated three acquisitions, built leading-edge sequencing infrastructure, a 200-person team,
and raised in excess of $100 million. He was also Senior Vice President and Venture Partner with MDS Capital Corp. (now Lumira), where
he was lead partner on a fund with more than $250 million under management focused on creating drug discovery companies based on novel
Canadian science. Prior to his tenure with MDS from 1994-2002, he enjoyed a 17-year operational career with ICI plc (now AstraZeneca),
a global chemicals, pharmaceuticals, and advanced materials company, during which he was involved in technology commercialization in
several fields both in Canada and internationally. Mr. Gleeson has served on numerous boards of private and public companies and
not-for-profit entities.
Geoff MacKay, Board Chair
Mr. MacKay has served as CEO of
several innovative biotech companies over the last 20 years. He is currently CEO of a Versant backed stealth start-up. Previously, he
was founding CEO of AVROBIO Inc., which sold its lead asset to Novartis. Mr. MacKay was also the founding CEO of eGenesis Inc.,
a biotech dedicated to applying gene editing to xenotransplantation. During his tenure as CEO of Organogenesis Inc., the company received
the first approval of an allogeneic cell therapy from the FDA’s Center for Biologics Evaluation and Research and treated one million
patients with living cell therapies. Earlier in his career, Mr. MacKay spent 11 years at Novartis in senior leadership positions,
culminating as Vice-President Transplantation & Immunology. Past activities include Chairman of the Board of MassBio, Chairman
of the Board of the Alliance of Regenerative Medicine, and a member of the advisory council to the Health Policy Commission for Massachusetts.
Franklin Berger, Director
Mr. Berger has more than 25 years
of experience in capital markets and financial analysis. He serves on the Board of Directors of BELLUS Health sold to GSK, ESSA Pharma,
Kezar Life Sciences, Atreca, Rain Therapeutics and Atea Pharmaceuticals. Mr. Berger served as a senior portfolio manager at Sectoral
Asset Management; additionally, he was co-founder, co-PM on the small-cap focused NEMO Fund at Sectoral, from 2007 through June 2008.
Previously, he was Managing Director, Equity Research and Senior Biotechnology Analyst for J. P. Morgan Securities from 1998 to 2003.
During his time at J.P. Morgan, he was involved with the issuance of more than $12 billion in biotechnology company equity or equity-linked
securities, including the Genentech initial public offering, the largest biotechnology financing to date. From 1997 to 1998, he served
as a Director, Equity Research and Senior Biotechnology Analyst for Salomon Smith Barney and from 1991 to 1997, he served as a sell-side
analyst for Josephthal & Co. The Wall Street Journal selected Mr. Berger as the No. 1 ranked biotechnology analyst
in its All- Star Analyst Survey in 1997 and was ranked No. 2 in the WSJ’s 2000 Survey. In 2002, Institutional Investor
Magazine ranked him on J. P. Morgan’s 3rd-placed All-Star Research Team. Mr. Berger received a B.A. in International Relations,
an M.A. in International Economics from Johns Hopkins University and an MBA from Harvard University. He serves on the Council of Rockefeller
University and was a Founding Fellow of the Biotechnology Study Center at New York University School of Medicine.
Brian Bloom, Director
Mr. Bloom is a co-founder of Bloom
Burton & Co. and serves as the firm’s Chairman and Chief Executive Officer. He serves on the Board of Directors of Satellos
Bioscience and Appili Therapeutics. Mr. Bloom was formerly the Chairman of the Board of Grey Wolf Animal Health and Triumvira Immunologics,
a member of the Life Sciences Advisory Board at the National Research Council Canada, the Dean’s Advisory Board at McMaster University
and on the Board of Directors of BIOTECanada, the Baycrest Foundation and Qing Bile Therapeutics. Before co- founding Bloom Burton in
2008, he spent six years at an independent investment dealer in the healthcare and biotechnology institutional sales and equity research
groups. Mr. Bloom started his career at New York-based investment banking firms SCO Financial Group and Molecular Securities. He
is the proud recipient of the McMaster University 2017 Distinguished Alumni Award in Science and the co-recipient of the 2023 Life Sciences
Ontario Community Service Award. Mr. Bloom received an Honours Bachelor of Science in Biochemistry from McMaster University and
subsequently studied at the Mount Sinai Graduate School for Biological Sciences of New York University, with a focus in molecular endocrinology
and biophysics
Stephanie Brown, Director
Ms. Brown is a seasoned executive
leader with over 30 years of experience in the bio-pharma industry, holding key leadership roles in North America, Europe, and Asia.
Known for her strategic agility and deep operational expertise, Ms. Brown has driven successful business transformations and product
launches across diverse therapeutic areas, from breakthrough biologics to small molecules. She has served in executive roles at top pharmaceutical
companies, including Merck, Genentech, Biogen, Takeda, and Novartis, where she managed high- value product portfolios and led launches
for multiple specialty and rare disease treatments. Ms. Brown is Past- President of North America for Santhera Pharmaceuticals,
where she oversaw strategic operations and corporate restructuring. Prior to Santhera, she led the Rare Diseases business at Ipsen Biopharmaceutical
North America, managing commercialization strategies and profit growth for in-line and launch brands. Currently, she serves on the Board
of Directors for Resilia, Inc., and has previously held board roles with ObsEva and the Biotechnology Innovation Organization (BIO).
Ms. Brown holds a B.S. in chemistry with biology from Mount Allison University and an MBA from Edinburgh Business School, Heriot-Watt
University.
Selwyn Ho, Director Nominee
Dr. Selwyn Ho is a seasoned
Pharma and Biotech leader with extensive experience in commercial strategy, corporate leadership, financing, and board governance.
As a trained medical doctor with a track record spanning multiple commercial and leadership roles, he now serves as CEO of Medigene
AG, a publicly traded immuno- oncology company. In this role, he has led a strategic transformation, streamlining R&D, expanding
and securing key partnerships with BioNTech, 2seventyBio (Regeneron), WuXi Biologics and EpiMab Biotherapeutics, and successfully
driving financing rounds. Previously, as EVP & Chief Business Officer at Connect Biopharma, Selwyn played a key role in
raising $220 million through an IPO (closed March 2021) and securing $135 million in private financing (throughout 2020). His
leadership experience includes senior roles at Dermira (Eli Lilly), UCB, Allergan (AbbVie), Novartis, and AstraZeneca, providing him
with deep expertise in pre-launch, launch and commercialization, market access, business development & licensing and global
product strategy across ophthalmology, immunology, dermatology and oncology. Selwyn also brings strong board experience, currently
serving as a Non-Executive Director at Antennova Inc. and Peptomyc S.L., and as an Executive-in-Residence at New Rhein Healthcare
Investors. Dr. Ho received his medical degree (MB, BS) and Bachelor of Science (BSc) in Pharmacology from Imperial College,
University of London, UK, and post-graduate qualifications (Dip Pharm Med) in Pharmaceutical Medicine from the Faculty of
Pharmaceutical Physicians, Royal College of Physicians, UK.
Iris Loew-Friedrich, Director Nominee
Dr. Iris Loew-Friedrich is a seasoned
biotech and pharmaceutical executive with extensive experience in global drug development, regulatory affairs, corporate strategy, and
board governance. In June 2024, Iris concluded her 20+ year tenure at UCB S.A, where she was most recently Executive Vice President,
Chief Medical Officer, and Head of Development, leading global clinical development, regulatory affairs, medical affairs, safety/pharmacovigilance,
and data strategy. Under her leadership, UCB successfully developed and secured approvals for multiple therapies, including Cimzia, Briviact,
Evenity, Rystiggo, Zilbrysq, and Bimzelx across the US, EU, and international markets. She also played a pivotal role in lifecycle management,
new formulations, and expanded indications across UCB’s portfolio. Previously, Iris held executive roles at Schwarz Pharma,
BASF Pharma, and Hoechst/Aventis, where she oversaw global R&D organizations, led successful regulatory approvals, and managed key
industry partnerships. Notably, she contributed to the development and commercialization of Humira, Arava, Actonel, Vimpat, and Neupro.
Dr. Loew-Friedrich received her medical license from Johann Wolfgang Goethe University, Frankfurt, Germany, and her PhD following
a research assignment at the Max-Planck-Institute for Biophysics. Iris served as the staff physician at the Department for Internal Medicine
at the Frankfurt University Medical School, with sub-specialties in immunology, nephrology, and transplantation medicine. She is board-certified
in Internal Medicine and holds a professorship at Frankfurt University Medical School. Iris has extensive board experience, currently
serving as Chair of the Supervisory Board at Evotec SE, Chair of the Board at Celosia Therapeutics, and a Non-Executive Director at Fresenius
SE & Co. KGaA. Additionally, she has played key roles in scientific advisory boards and nonprofit organizations, including Helmholtz
Health, Pierre Fabre S.A., and Fondazione Telethon, with a focus on oncology, immunology, and rare diseases.
Adam Mostafa, Director
Mr. Mostafa is an accomplished
financial leader in strategic and financial planning in the pharmaceutical industry. Currently, Mr. Mostafa is the Chief Financial
Officer (CFO) of X4 Pharmaceuticals, working closely with the Chief Executive Officer and Board of Directors on all strategic and financial
matters. Notably this includes the close of its 2019 reverse merger with Arsanis and subsequent Nasdaq public listing and follow-on financings.
Mr. Mostafa has served as CFO of Abpro Corporation, a biotechnology company focused on antibody therapeutics. Previously, Mr. Mostafa
was a Managing Director in the healthcare investment banking group at Cantor Fitzgerald, and a senior banker in the healthcare investment
banking group at Needham & Company. Mr. Mostafa has also held positions of vice president in the investment banking group
at CRT Capital Group, portfolio management associate in the global stock selection group at AQR Capital, and analyst in the healthcare
investment banking group at Salomon Smith Barney. Mr. Mostafa holds an A.B. in economics from Brown University.
Cease Trade Orders, Bankruptcies, Penalties or Sanctions
For the purposes of the following disclosure,
“Order” means (a) a cease trade order; (b) an order similar to a cease trade order; or (c) an order
that denied the relevant company access to any exemption under securities legislation, any of which was in effect for a period of more
than thirty consecutive days.
Other than as described below, to the
knowledge of the Company, none of the persons nominated for election as directors at the Meeting: (a) is, as at the date of this
Information Circular, or has been, within the 10 years before the date of this Circular, a director, chief executive officer or chief
financial officer of any company (including the Company) that: (i) was subject to an Order that was issued while the person was
acting in the capacity as director, chief executive officer or chief financial officer; or (ii) was subject to an Order that was
issued after the person ceased to be a director, chief executive officer or chief financial officer and which resulted from an event
that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer; (b) is,
as at the date of this Information Circular, or has been within 10 years before the date of this Information Circular, a director or
executive officer of any company that, while that person was acting in that capacity, or within a year of that person ceasing to act
in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted
any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets;
or (c) has, within the 10 years before the date of this Information Circular, become bankrupt, made a proposal under any legislation
relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or
had a receiver, receiver manager or trustee appointed to hold the assets of the proposed director.
Stephanie Brown was previously a director
of ObsEva SA (“ObsEva”). She resigned as a director in June 2023 and has had no further involvement with ObsEva
since that date. On January 29, 2024, the Tribunal de première instance of Geneva granted a temporary moratorium (sursis
provisoire) to ObsEva for a period of four months ending May 29, 2024 and appointed a commissioner (commissaire) to supervise the
company's activities during the process. On February 28, 2024 ObsEva announced that it would wind-down its operations with the termination
of all of its employees and notified the SIX Swiss Exchange's listing authority that there was a substantial risk that it would be unable
to have audited financial statements for 2023 prepared and that it is as a result likely not going to be able to satisfy the requirements
for maintaining its listing on SIX.
Selwyn Ho is a director and officer
of Medigene AG which filed for insolvency on April 25, 2025. On April 7, 2025, Medigene announced it had filed an application
for the opening of insolvency proceedings with the competent local court in Munich on April 16, 2025. On April 25, 2025, attorney
Axel W. Bierbach from the law firm Müller-Heydenreich Bierbach & Kollegen was appointed preliminary insolvency administrator.
Medigene AG’s research operations are currently being continued in full.
To the knowledge of the Company, none
of the persons nominated for election as directors at the Meeting, nor any personal holding company thereof owned or controlled by them
has been subject to: (i) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory
authority or has entered into a settlement agreement with a securities regulatory authority; or (ii) any other penalties or sanctions
imposed by a court or regulatory body that would likely be considered important to a reasonable securityholder in deciding whether to
vote for a proposed director.
| 3. | Appointment of Auditors |
Management of the Company intends to
nominate PricewaterhouseCoopers LLP (“PwC”), Chartered Accountants, of Toronto, Ontario, for appointment as the auditors
of the Company, to hold office for the ensuing year until the close of the next annual general meeting of Shareholders or until PwC is
removed from office or resigns, at a remuneration to be fixed by the Board.
At the Meeting, shareholders will be
asked to pass an ordinary resolution appointing PwC to serve as auditors of the Company to hold office until the close of the next annual
meeting of shareholders or until such firm is removed from office or resigns as provided by law, at a remuneration to be fixed by the
Board.
In order to be effective, the ordinary
resolution appointing the auditors of Satellos and authorizing the directors to fix their remuneration must be passed by a majority of
the votes cast by Shareholders in respect of such resolution. PwC have been the Company’s auditors since November 18, 2024.
The Board believes the appointment
of PwC as auditors of the Company is in the best interests of the Company and recommends that the Shareholders vote IN FAVOUR of appointing
PwC as the auditors of the Company. Unless otherwise directed to the contrary, it is the intention of the persons named in the enclosed
form of proxy to vote proxies in favour of the appointment of PwC as auditors of the Company and to authorize the directors to fix their
remuneration.
| 4. | Approval of Share Consolidation |
At the Meeting, Shareholders will be
asked to consider and, if thought advisable, pass a special resolution (the "Share Consolidation Resolution") authorizing
the Board to elect, in its discretion, to direct the Company to file articles of amendment (the "Articles of Amendment")
to amend the Company's articles in order to effect a consolidation (or reverse split) of the Company's issued Shares into a lesser number
of issued Shares (the "Share Consolidation"). The Share Consolidation Resolution will authorize the Board to:
| · | select
a Share Consolidation ratio of between five (5) pre-consolidation Shares for one (1) post-
consolidation Share and fifteen (15) pre-consolidation Shares for one (1) post-consolidation
Share, provided that, such Share Consolidation occurs prior to the earlier of the 12-month
anniversary of the Meeting and the next annual meeting of Shareholders; and |
| · | file
the Articles of Amendment to give effect to the Share Consolidation at the selected consolidation
ratio. |
Background to and Reasons for
the Share Consolidation
The Board believes that it is in the
best interests of the Company to provide the Board with the flexibility to elect to reduce the number of outstanding Shares by way of
the Share Consolidation. Some of the potential benefits of the Share Consolidation include:
| · | Potential
U.S. Listing. The Company may consider the possibility of a future listing on a major
U.S. stock exchange. The higher anticipated price of the post-consolidation Shares may help
make the Company eligible for such a listing. |
| · | Increased
Investor Interest. The current share structure of the Company may make it more difficult
for the Company to attract additional equity financing that may be required or desirable
to maintain the Company or to further develop its products. The Share Consolidation may have
the effect of raising, on a proportionate basis, the price of the Shares, which could appeal
to certain investors that find shares valued above certain prices to be more attractive from
an investment perspective. |
| · | Reduced
Volatility. The higher anticipated price of the post-consolidation Shares may result
in less volatility as a result of small changes in the share price of the Shares. For example,
a nominal price movement will result in a less significant change (in percentage terms) in
the market capitalization of the Company. |
The Company believes that providing
the Board with the authority to select within a range of Share Consolidation ratios provides the flexibility to implement the Share Consolidation
in a manner intended to maximize the anticipated benefits of the Share Consolidation for the Company and the Shareholders.
The Share Consolidation is
subject to certain conditions, including the approval of the Shareholders and acceptance by the Toronto Stock Exchange (the
"TSX"). If the requisite approvals are obtained and the Board elects to proceed with the Share Consolidation, the
Share Consolidation will take place at a time to be determined by the Board, subject to the CBCA. No further action on the part of
Shareholders would be required in order for the Board to implement the Share Consolidation. Shareholders will be notified and
registered shareholders will receive a letter of transmittal containing instructions for exchange of their share certificates in
connection with the Share Consolidation. The special resolution also authorizes the Board to elect not to proceed with, and abandon,
the Share Consolidation at any time if it determines, in its sole discretion, to do so.
Following a vote by the Board to implement
the Share Consolidation, the Company will file articles of amendment with the director under the CBCA to amend the Company's articles.
The Share Consolidation will become effective on the date shown in the certificate of amendment issued by the director under the CBCA
in connection with the Share Consolidation or such other date indicated in the articles of amendment.
Share Consolidation Resolution
At the Meeting, the Shareholders will
be asked to approve the following special resolution:
"BE
IT HEREBY RESOLVED, as a special resolution of the shareholders of Satellos Bioscience Inc. (the “Company”) that:
| 1. | the Articles of the Company be amended to change the number of issued
and outstanding common shares of the Company by consolidating the issued and outstanding
common shares of the Company on the basis of a ratio to be selected by the board of directors
of the Company (the "Board"), in its sole discretion, within a range between
five (5) pre-consolidation common shares of the Company for one (1) post-consolidation common share
of the Company and fifteen (15) pre-consolidation common shares of the Company for one (1) post-consolidation common share of the
Company (the "Share Consolidation"), in the sole discretion of the Board, provided that such Share Consolidation occurs
prior to the earlier of the 12 month anniversary of the date of this resolution and the next annual meeting of shareholders of the Company,
with such amendment to become effective at a date in the future to be determined by the Board in its sole discretion if and when the
Board considers it to be in the best interests of the Company to implement such a Share Consolidation, all as more fully described in
the management information circular of the Company dated May 12, 2025 (the "Circular"), and subject to all necessary
stock exchange approvals; |
| 2. | the amendment to the Articles of the Company giving effect to the Share
Consolidation will provide that no fractional common share will be issued but the number
of common shares to be received by a Shareholder shall be rounded down to the nearest whole
common share in the event that such Shareholder would otherwise be entitled to a receive
fractional common share; |
| 3. | any director or officer of the Company be, and each of them is, hereby
authorized and directed for and in the name of and on behalf of the Company to execute and
deliver or cause to be executed and delivered one or more articles of amendment of the Company
to the director under the Canada Business Corporations Act and to execute and deliver
or cause to be executed and delivered all documents and to take any action which, in the
opinion of that person, is necessary or desirable to give effect to this special resolution; |
| 4. | notwithstanding that this special resolution has been duly passed by
the holders of the common shares of the Company, the Board may, in its sole discretion (including
in the circumstances described in the Circular), revoke this special resolution in whole
or in part at any time prior to its being given effect without further notice to, or approval
of, the holders of the common shares of the Company; and |
| 5. | any one director or officer of the Company be, and each of them is,
hereby authorized and directed for and in the name of and on behalf of the Company, to execute
or cause to be executed, whether under corporate seal of the Company or otherwise, and to
deliver or cause to be delivered all such documents, and to do or cause to be done all such
acts and things, as in the opinion of such director or officer may be necessary or desirable
in order to carry out the terms of this resolution, such determination to be conclusively
evidenced by the execution and delivery of such documents or the doing of any such act or
thing." |
In order to be effective, the Share
Consolidation Resolution must be passed by special resolution, being the affirmative vote of at least two-thirds (66 2/3%) of the votes
cast by Shareholders in respect of such resolution. The Board believes the passing of the above resolution is in the best interests
of the Company and recommends that the Shareholders vote IN FAVOUR of the resolution. Unless otherwise directed to the contrary, it is
the intention of the persons named in the enclosed form of proxy to vote proxies in favour of the Share Consolidation Resolution. See
“Proxy Related Information – Exercise of Discretion by Proxy Holders”.
Effects of the Share Consolidation
General
If the Share Consolidation is implemented,
its principal effect will be to proportionately decrease the number of issued and outstanding Shares by a factor equal to the consolidation
ratio selected by the Board. At the close of business on the Record Date, there were 165,885,462 Shares issued and outstanding. For illustrative
purposes only, the following table sets forth, based on the number of Shares issued and outstanding as of the Record Date, the number
of Shares that would be issued and outstanding (disregarding any resulting fractional Shares and subject to any issuances occurring after
the Record Date) following the implementation of the Share Consolidation, at various consolidation ratios:
| Share Consolidation Ratio | |
Shares Outstanding | |
| Five (5) pre-consolidation Shares for one (1) post-consolidation Share | |
| 33,177,924 | |
| Ten (10) pre-consolidation Shares for one (1) post-consolidation Share | |
| 16,588,546 | |
| Fifteen (15) pre-consolidation Shares for one (1) post-consolidation Share | |
| 11,059,030 | |
The Company does not expect the Share
Consolidation itself to have any economic effect on holders of Shares or securities convertible into or exercisable to acquire Shares,
except to the extent the Share Consolidation will result in fractional Shares. See "No Fractional Shares" below.
The Share Consolidation will not affect
the listing of the Shares on the TSX. Following the Share Consolidation, it is expected that the Shares will continue to be listed on
the TSX under the symbol "MSCL". Following each consolidation the Shares will be assigned new CUSIP and ISIN numbers.
Voting rights and other rights of the
holders of Shares prior to the implementation of the Share Consolidation will not be affected by the Share Consolidation, other than
as a result of the creation and disposition of fractional Shares as described below. For example, a holder of 2% of the voting power
attached to the outstanding Shares immediately prior to the implementation of any consolidation will generally continue to hold 2% of
the voting power attached to the Shares immediately after the implementation of such consolidation. The number of registered Shareholders
is not expected to be affected by any consolidation (except to the extent resulting from the elimination of post-consolidation fractional
shares). For example, if the selected consolidation ratio for a particular consolidation is fifteen (15) pre-consolidation Shares per
one (1) post-consolidation Share a Shareholder that holds less than fifteen (15) pre-consolidation Shares may cease to hold any
Shares following such consolidation.
The exercise or conversion price and
the number of Shares issuable under any outstanding convertible securities of the Company, including outstanding Options, will be adjusted
in accordance with their respective terms on the same basis as any consolidation.
Effect on Beneficial Shareholders
Beneficial Shareholders
(i.e. non-registered Shareholders) holding Shares through an intermediary (a securities broker, dealer, bank or financial institution)
should be aware that the intermediary may have different procedures for processing a consolidation than those that will be put in place
by the Company for registered Shareholders. If Shareholders hold their Shares through an intermediary and they have questions in this
regard, they are encouraged to contact their intermediaries.
Effect of the Share Consolidation on Convertible Securities
The exercise or conversion price and/or
the number of Shares issuable under any of the Company's outstanding convertible securities, including under outstanding Options, warrants,
rights and any other similar securities will be proportionately adjusted upon the implementation of any consolidation, in accordance
with the terms of such securities, based on the Share Consolidation ratio.
Effect on Share Certificates
If the Share
Consolidation is approved by Shareholders and subsequently implemented through one or more consolidations, in connection with each consolidation,
those registered Shareholders who will hold at least one post-consolidation Share will be required to exchange their share certificates
representing pre-consolidation Shares for share certificates representing post-consolidation Shares following each consolidation or,
alternatively, a Direct Registration System ("DRS") Advice/Statement representing the number of post- consolidation
Shares they hold following each consolidation. The DRS is an electronic registration system which allows Shareholders to hold Shares
in their name in book-based form, as evidenced by a DRS Advice/Statement, rather than a physical share certificate.
If the Share Consolidation is implemented
through one or more consolidations, the Company (or its transfer agent) will mail to each registered Shareholder a letter of transmittal
in connection with each consolidation. Each registered Shareholder must complete and sign a letter of transmittal after the applicable
consolidation takes effect. The letter of transmittal will contain instructions on how to surrender to the transfer agent the certificate(s) representing
the registered Shareholder's pre-consolidation Shares. The transfer agent will send to each registered Shareholder who follows the instructions
provided in the letter of transmittal a share certificate representing the number of post-consolidation Shares to which the registered
Shareholder is entitled rounded down to the nearest whole number or, alternatively, a DRS Advice/Statement representing the number of
post- consolidation Shares the registered Shareholder holds following the applicable consolidation. Beneficial Shareholders (i.e. non-registered
Shareholders) who hold their Shares through intermediaries (securities brokers, dealers, banks, financial institutions, etc.) and
who have questions regarding how the Share Consolidation will be processed should contact their intermediaries with respect to the Share
Consolidation. See "Effect on Beneficial Shareholders" above.
Until surrendered to the transfer agent,
each share certificate representing pre-consolidation Shares will be deemed for all purposes to represent the number of post-consolidation
Shares to which the registered Shareholder is entitled as a result of the applicable consolidation. Until registered Shareholders have
returned their properly completed and duly executed letter of transmittal and surrendered their share certificate(s) for exchange,
registered Shareholders will not be entitled to receive any distributions, if any, that may be declared and payable to holders of record
following the applicable consolidation.
Any registered Shareholder whose old
certificate(s) have been lost, destroyed or stolen will be entitled to a replacement share certificate only after complying with
the requirements that the Company and the transfer agent customarily apply in connection with lost, stolen or destroyed certificates.
The method chosen for delivery
of share certificates and letters of transmittal to the Company's transfer agent is the responsibility of the registered Shareholder
and neither the transfer agent nor the Company will have any liability in respect of share certificates and/or letters of
transmittal which are not actually received by the transfer agent.
REGISTERED SHAREHOLDERS SHOULD NEITHER
DESTROY NOR SUBMIT ANY SHARE CERTIFICATE UNTIL HAVING RECEIVED A LETTER OF TRANSMITTAL.
No Fractional Shares
No fractional Shares will be issued
in connection with any consolidation and no cash will be paid in lieu of fractional post-consolidation Shares. In the event that a Shareholder
would otherwise be entitled to receive a fractional Share upon the occurrence of a consolidation, such fraction will be rounded down
to the nearest whole number. In calculating such fractional interest, all post-Consolidation Shares held by a beneficial holder(s) shall
be aggregated.
No Dissent Rights
Shareholders are not entitled to exercise any statutory
dissent rights with respect to any proposed consolidation.
Accounting Consequences
If the Share Consolidation is implemented,
net income or loss per Share, and other per Share amounts, will be increased because there will be fewer Shares issued and outstanding.
In future financial statements, net income or loss per Share and other per Share amounts for periods ending before the applicable consolidation
took effect would be recast to give retroactive effect to the Share Consolidation.
TSX Approval
Assuming shareholder approval is received
at the Meeting, and assuming that the Board determines to proceed with the Share Consolidation, the Share Consolidation will be subject
to acceptance by the TSX, and confirmation that, on a post-Share Consolidation basis, the Company would meet all of the TSX’s applicable
continuous listing requirements. If the TSX does not accept the Share Consolidation, the Company will not proceed with the Share Consolidation.
Risks Associated with the Share Consolidation
Reducing the number of issued and outstanding
Shares through the Share Consolidation is intended, absent other factors, to increase the per share market price of the Shares. However,
the market price of the Shares will also be affected by the Company's financial and operational results, its financial position, including
its liquidity and capital resources, the development of its operations, industry conditions, the market's perception of the Company's
business and other factors, which are unrelated to the number of Shares outstanding.
The market price of the Shares immediately
following the implementation of the Share Consolidation is expected to be approximately equal to the market price of the Shares prior
to the implementation of the Share Consolidation multiplied by the applicable consolidation ratio but there is no assurance that the
anticipated market price immediately following the implementation of any consolidation will be realized or, if realized, will be sustained
or will increase. There is a risk that the total market capitalization of the Shares (the market price of the Shares multiplied by the
number of Shares outstanding) after the implementation of any consolidation may be lower than the total market capitalization of the
Shares prior to the implementation of the Share Consolidation.
Although the Company believes
that establishing a higher market price for the Shares could increase investment interest for the Shares in equity capital markets
by potentially broadening the pool of investors that may consider investing in the Company, including investors whose internal
investment policies prohibit or discourage them from purchasing stocks trading below a certain minimum price, there is no assurance
that implementing the Share Consolidation will achieve this result.
If the Share Consolidation is implemented
and the market price of the Shares (adjusted to reflect the applicable consolidation ratio) declines, the percentage decline as an absolute
number and as a percentage of the Company's overall market capitalization may be greater than would have occurred if the Share Consolidation
had not been implemented. Both the total market capitalization of a company and the adjusted market price of such company's shares following
a consolidation may be lower than they were before the consolidation took effect. The reduced number of Shares that would be outstanding
after the Share Consolidation is implemented could adversely affect the liquidity of the Shares.
Any Share Consolidation
may result in some Shareholders owning "odd lots" of fewer than 100 Shares on a post-consolidation basis. Odd lot Shares may
be more difficult to sell, or may attract greater transaction costs per Share to sell, and brokerage commissions and other costs of transactions
in odd lots may be higher than the costs of transactions in "round lots" of even multiples of 100 Shares.
Tax Considerations
SHAREHOLDERS SHOULD CONSULT THEIR TAX
ADVISORS REGARDING THE TAX CONSEQUENCES OF THE SHARE CONSOLIDATION TO THEM, INCLUDING THE EFFECTS OF ANY CANADIAN OR U.S. FEDERAL,
PROVINCIAL, STATE, LOCAL, FOREIGN AND/OR OTHER TAX LAWS.
8. Other
Business
Management is not aware of any other
matters to come before the Meeting, other than those set out in the Notice of Meeting. If other matters come before the Meeting, it
is the intention of the management designees named in the Instrument of Proxy to vote the same in accordance with their best judgment
in such matters.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Satellos’ executive compensation
program is administered by the Board with the input and support of the Compensation Committee and is designed to attract and retain key
executive employees and consultants in both the short and long term, incentivize both individual and corporate performance and align
interests of executives and consultants with other corporate stakeholders such as shareholders and corporate partners. Given Satellos’
size, resources and business model, Satellos primarily uses three elements of compensation for its executive officers and consultants:
base salary or consulting fees, annual incentive pay (bonus) and long-term equity compensation in accordance with the omnibus equity
incentive plan of the Company (the “Equity Incentive Plan”) and the policies of the TSX. In establishing the framework
for Satellos’ compensation practices, Satellos takes into account the inherent uncertainties of its business and the fact that
the success of Satellos is influenced by a number of risk factors, many of the most important of which will be beyond Satellos’
control. The Compensation Committee’s mandate with respect to compensation includes evaluating senior management and making recommendations
to the Board concerning the development of appropriate compensation policies and the remuneration for key executives.
Satellos encourages its executive officers
and consultants to maintain equity ownership in Satellos, both through direct shareholdings and convertible holdings such as Options.
It is not anticipated that Satellos will provide any financial assistance to Named Executive Officers (“NEO”) to purchase
equity in Satellos.
Compensation Framework
The Board and the Compensation Committee
consider all elements of compensation as a whole rather than any one element in isolation. In evaluating executive compensation, the
Board and Compensation Committee consider a broad range of factors, including individual performance and corporate results. Other factors
that will be taken into account in establishing compensation include market competitiveness and internal equity. The relative balance
of those factors will likely differ from year to year. The Board and Compensation Committee will also examine the competitive positioning
of total compensation, the ratio of current to long-term compensation and the amount of fixed and variable compensation. The Board is
also tasked with ensuring that Satellos’ compensation practices are affordable as an element of Satellos’ overall cost of
doing business, while rewarding performance and creating incentives to achieve long-term success.
Decision Making Process
The Board and the Compensation Committee
oversee and provide strategic direction to management regarding Satellos’ compensation policies and general human resources policies.
In addition to that mandate of broad oversight and direction, the Board and the Compensation Committee are tasked with implementing programs
to attract, retain and develop management of the highest caliber. The Board determines the annual salary, bonus and other benefits of
the Chief Executive Officer (taking into consideration the recommendations of the Compensation Committee) and the Compensation Committee
determines the compensation for all other Named Executive Officers taking into consideration the recommendations of the Chief Executive
Officer.
Risks of Compensation Policies and Practices
The Board and Compensation Committee
assess Satellos’ compensation plans and programs for its executive officers to ensure alignment with Satellos’ business plan
and to evaluate the potential risks associated with those plans and programs. The Board and Compensation Committee consider the risks
associated with executive compensation and corporate incentive plans when designing and reviewing such plans and programs. In addition,
the Board and the Compensation Committee review annually the total compensation package of each of the Satellos’ executives on
an individual basis and are responsible for determining compensation to be paid to Satellos’ Named Executive Officers.
Satellos does not presently have a
long-term incentive plan for its Named Executive Officers other than the Satellos Bioscience Inc. Second Amended and Restated Stock Option
Plan (2023) (the “Option Plan”) (a legacy plan) and the Equity Incentive Plan. There is no policy or target regarding
allocation between cash and non-cash elements of Satellos’ compensation program.
Financial Instruments
It is not anticipated that Satellos
will adopt a policy restricting its Named Executive Officers or directors from purchasing financial instruments that are designated to
hedge or offset a decrease in market value of equity securities granted as compensation or held, directly or indirectly, by its Named
Executive Officers or directors. However, the Company’s Corporate Disclosure and Insider Trading Policy does restrict its Named
Executive Officers and directors from engaging in such transactions without the approval of the Board.
Base Salary
Salaries for Named Executive
Officers are determined by evaluating the responsibilities of each executive’s position, as well as the experience and
knowledge of the individual, with a view to internal equity and the competitive marketplace. The Board aims to balance the desire to
set the salary at a level competitive enough to attract highly qualified executive officers against the desire to ensure that
performance remains a key factor in determining total compensation of Satellos’ management team. In determining the base
salaries of the Named Executive Officers, the Board and Compensation Committee review and consider compensation information from a
number of publicly available sources relevant to the biotechnology and life sciences sector as well as external market surveys when
available. In setting the salary of the Named Executive Officers (other than the Chief Executive Officer), the Compensation
Committee also relies to a large extent on the Chief Executive Officer’s recommendation and evaluation of each Named Executive
Officer’s performance.
For all employees, including Named
Executive Officers (other than the Chief Executive Officer), salary adjustments are generally considered by the Compensation Committee
in the first quarter of Satellos’ fiscal year and implemented at the time of approval by the Compensation Committee. Annual adjustments
to salary and/or fees are not guaranteed and any adjustments will include consideration for individual performance, internal equity and
market conditions.
Annual Bonus
Satellos has an annual bonus program
to drive performance and the achievement of corporate goals. The bonus program is intended to reward annual results and performance that
are most important to meeting Satellos’ long- term objectives. All Named Executive Officers, as well as other employees of Satellos,
are eligible to receive a bonus with bonus rates for Named Executive Officers ranging from 30-50%.
The award and
amount of any bonus is not pre-determined under any policy and is at the sole discretion of the Board. A decision to award a bonus will
be based on the responsibility and accountability of the individual and the role within the organization, performance of the individual,
performance of Satellos in reaching certain corporate objectives for any given year (established by the Board and reviewed periodically)
and a number of other factors, both internal and external.
Incentive Programs
The Equity Incentive Plan is available
to all employees and consultants of Satellos, including the Named Executive Officers and directors. As Options and restricted share units
("RSUs") have increased value to the holder if the market value of the underlying stock appreciates over time, the objective
of the program is to tie the interests of employees directly to the interests of Shareholders. In that regard, the Equity Incentive Plan
is intended to serve as a long-term retention and incentive tool. The exercise price, terms, vesting and conditions of any Options, RSUs
or other awards granted are established by the Compensation Committee and the Board and subject to the rules of the regulatory authorities
having jurisdiction over the securities of Satellos. The Options granted may be exercised during a period not exceeding ten years and
are non-transferable.
Awards of Options and RSUs for all
employees and consultants, including Named Executive Officers other than the Chief Executive Officer, are approved by the Compensation
Committee. The determination of an award, as well as the amount of any award, is at the sole discretion of the Compensation Committee
(or in the case of the Chief Executive Officer or members of the Board, at the sole discretion of the Board). In deciding to grant Options
and/or RSUs, the Board and the Compensation Committee take previous Option and RSU grants into consideration. While there are typically
no performance or other conditions related to the vesting of the Options or RSUs, other than continuing as an employee or consultant
of Satellos, the Board or the Compensation Committee may establish performance criteria.
Performance Graph
The Shares of the Company began trading
on August 18, 2021 on the TSXV under the symbol “MSCL”, trading data prior to that date reflects the predecessor company
with which Satellos completed a Reverse Takeover Transaction. The following graph compares, as at the end of each year up to December 31,
2024, the cumulative total shareholder return on $100 invested in Shares on December 31, 2020, with the cumulative total shareholder
return on the SPDR S&P Biotech ETF (XBI).
The trend shown by the above performance
graph does not directly correlate to the compensation paid to the Named Executives Officers. The factors considered by the Company’s
Compensation Committee and by the Board in determining compensation matters, such as individual and company performance and market demand
for skilled professionals, may not be significantly affected by the market price of the Shares. Shareholder return realized on the Shares
is affected by a number of factors, including the Company’s performance and general market and economic conditions, many of which
are beyond the control of the Company and the Named Executive Officers. Some of these risks are discussed under the “Risk Factors”
section of the Company’s Annual Information Form dated March 26, 2025, accessible through SEDAR+ at www.sedarplus.ca.
Summary Compensation Table
The following table sets forth information
about compensation during the three fiscal years ended December 31, 2024 paid to, or earned by, Satellos’ Named Executive
Officers (each an “NEO” and collectively the “Named Executive Officers”).
Name and
Position | |
Year
Ended | | |
Salary
($) | | |
Share-
based
awards ($) | |
Option-
based
awards ($) | | |
Non-equity incentive
plan compensation | |
Pension
value
($) | |
All
other
compensation
($) | |
Total
Compensation
($) | |
| | |
| | |
| | |
| |
| | |
Annual
incentive plan
($) | | |
Long-term
incentive plans
($) | |
| |
| |
| |
| Frank Gleeson, | |
| 2024 | | |
| 500,000 | | |
Nil | |
| Nil | | |
| 250,000 | | |
Nil | |
Nil | |
Nil | |
| 750,000 | |
| President and | |
| 2023 | | |
| 398,333 | | |
Nil | |
| 1,117,514 | (6) | |
| 410,700 | (4) | |
Nil | |
Nil | |
Nil | |
| 1,926,547 | |
| CEO | |
| 2022 | | |
| 260,000 | | |
Nil | |
| 77,760 | (6) | |
| Nil | | |
Nil | |
Nil | |
Nil | |
| 337,760 | |
| Elizabeth | |
| 2024 | | |
| 375,000 | | |
Nil | |
| Nil | | |
| 150,000 | | |
Nil | |
Nil | |
Nil | |
| 525,000 | |
| Williams | |
| 2023 | | |
| 100,000 | | |
Nil | |
| 399,300 | (6) | |
| 42,115 | | |
Nil | |
Nil | |
Nil | |
| 541,415 | |
| Chief Financial | |
| 2022 | | |
| Nil | | |
Nil | |
| Nil | | |
| Nil | | |
Nil | |
Nil | |
Nil | |
| Nil | |
| Officer(1) | |
| | | |
| | | |
| |
| | | |
| | | |
| |
| |
| |
| | |
| Phil Lambert | |
| 2024 | | |
| 561,171 | | |
Nil | |
| Nil | | |
| 196,410 | | |
Nil | |
Nil | |
Nil | |
| 757,581 | |
| Chief Scientific | |
| 2023 | | |
| 433,254 | | |
Nil | |
| 583,000 | (6) | |
| 431,665 | (4) | |
Nil | |
Nil | |
Nil | |
| 1,447,919 | |
| Officer(2,5) | |
| 2022 | | |
| 54,655 | | |
Nil | |
| 58,400 | (6) | |
| Nil | | |
Nil | |
Nil | |
Nil | |
| 113,055 | |
| Michael Cross | |
| 2024 | | |
| 300,000 | | |
Nil | |
| Nil | | |
| 120,000 | | |
Nil | |
Nil | |
Nil | |
| 420,000 | |
| Former Chief | |
| 2023 | | |
| 93,750 | | |
Nil | |
| 399,734 | (6) | |
| 38,663 | | |
Nil | |
Nil | |
Nil | |
| 532,147 | |
| Business
Officer(3) | |
| 2022 | | |
| Nil | | |
Nil | |
| Nil | | |
| Nil | | |
Nil | |
Nil | |
Nil | |
| Nil | |
Notes
| (1) | Ms. Williams was appointed as Chief Financial Officer on September 1,
2023 |
| (2) | Dr. Lambert was hired as Chief Technology Officer on September 27,
2022 and as Chief Scientific Officer in 2024. |
| (3) | Dr. Cross was appointed Chief Business Officer on September 11,
2023 and terminated effective January 7, 2025. |
| (4) | Annual incentive plan for Mr. Gleeson and Dr. Lambert includes
compensation for performance completed in years ended December 2023 as well as a historical
component related to prior year periods which became payable upon successful completion of
the May 2023 financing. |
| (5) | Dr. Lambert is paid in $US. Amounts reported in the table above
are converted to Canadian dollars at the rate of 1.4389CDN for each US$1.00 in fiscal 2024,
1.3479CDN for each US$1.00 for fiscal 2023 and of 1.3013CDN for each US$1.00 for fiscal 2022. |
| (6) | In determining the fair value of these option-based awards, the Black-Scholes
valuation methodology was used with the following assumptions: (i) expected life of
10 years, (ii) volatility of 93.8%, risk-free interest rate of between 3.16%-3.96%;
and (iv) no dividend yield. |
Incentive Plan Awards – Named Executive Officers
Outstanding Share-Based Awards and Option-Based Awards
The following tables show all awards outstanding to each
NEO as at December 31, 2024:
| Option-based Awards |
|
Share-based Awards |
Name and
Position | |
Number of
securities
underlying
unexercised
options (#) | | |
Option
exercise
price ($) | | |
Option
expiration
date | |
Value of
unexercised
in-the-
money
options(1)
($) | |
Number of
shares or
units of
shares that
have not
vested (#) | |
Market
or
payout
value of
share-
based
awards
that have
not
vested ($) | |
Market or
payout value
of vested
share-based
awards not
paid out or
distributed ($) |
| Frank Gleeson, | |
| 984,400 | | |
$ | 1.700 | | |
13-Aug-2031 | |
| Nil | |
Nil | |
Nil | |
Nil | |
Nil |
| President and | |
| 270,000 | | |
$ | 0.325 | | |
6-Oct-2032 | |
$ | 136,350 | |
| |
| |
| |
|
| CEO | |
| 2,108,517 | | |
$ | 0.600 | | |
1-Jun-2033 | |
$ | 484,959 | |
| |
| |
| |
|
| Elizabeth Williams | |
| 1,100,000 | | |
$ | 0.410 | | |
7-Sep-2033 | |
$ | 462,000 | |
Nil | |
Nil | |
Nil | |
Nil |
| Chief Financial | |
| | | |
| | | |
| |
| | |
| |
| |
| |
|
| Officer | |
| | | |
| | | |
| |
| | |
| |
| |
| |
|
| Phil Lambert | |
| 200,000 | | |
$ | 0.330 | | |
27-Sep-2032 | |
$ | 100,000 | |
Nil | |
Nil | |
Nil | |
Nil |
| Chief Scientific Officer | |
| 1,100,000 | | |
$ | 0.600 | | |
1-Jun-2033 | |
$ | 253,000 | |
| |
| |
| |
|
| Michael Cross | |
| 902,333 | | |
$ | 0.500 | | |
11-Sep-2032 | |
$ | 297,770 | |
Nil | |
Nil | |
Nil | |
Nil |
| Former Chief Business Officer | |
| | | |
| | | |
| |
| | |
| |
| |
| |
|
| (1) | These amounts are calculated based on the difference between the market
value of the securities underlying the Options on December 31, 2024 at the end of the
fiscal year ($0.83), and the exercise price of the Options. |
Value Vested or Earned During the Year
The following table sets forth for each NEO the value vested
or earned on all option-based awards, share- based awards, and non-equity incentive plan compensation during the year ended December 31,
2024:
| Name and Position | |
Option-based
awards – value
vested during the
year ($) | | |
Share-based
awards – value
vested during the
year ($) | |
Non-equity incentive
plan compensation –
value earned during
the year ($) | |
Frank Gleeson, President and CEO | |
| 31,360 | | |
Nil | |
| 250,000 | |
Elizabeth Williams Chief Financial Officer | |
| 51,103 | | |
Nil | |
| 150,000 | |
Phil Lambert Chief Scientific Officer | |
| 12,792 | | |
Nil | |
| 196,410 | |
Michael Cross Former Chief Business Officer | |
| 24,437 | | |
Nil | |
| 120,000 | |
Termination and Change of Control
The table below reflects amounts that would have been payable
to each Named Executive Officer if the Named Executive Officer’s employment had been terminated on December 31, 2024.
| Name | |
Termination Provisions | |
Anticipated Amount of
Payment if Terminated as of
December 31, 2024(3) | |
| Frank Gleeson | |
12 months’ notice | |
$ | 750,000 | |
| Dr. Philip Lambert | |
6 months’ notice | |
$ | 476,995 | (1) |
| Elizabeth Williams | |
6 months’ notice | |
$ | 337,500 | |
| Dr. Michael Cross | |
6 months’ notice | |
$ | 270,000 | (2) |
Note:
| (1) | Based on the December 31,
2024 exchange rate of CDN$1.4389 for each US$1.00. |
| (2) | Dr. Cross was terminated
effective January 7, 2025. |
| (3) | Includes termination provisions
plus 100% of 2024 annual bonus accrued and unpaid |
All unvested Options held by such NEOs
will immediately vest upon the effective date of a change of control of the Company.
Mr. Gleeson
In the event that Mr. Gleeson’s
employment is terminated by Satellos other than for cause, he shall be entitled to receive pay in lieu of notice (comprising of Base
salary plus earned but unpaid cash bonus) equal to twelve months as well as the continuation of Option vesting and benefits during this
paid notice period.
Ms. Williams, Dr. Lambert
and Dr. Cross
In the event that each of these executives’
employment is terminated by Satellos other than for cause, each shall be entitled to receive pay in lieu of notice (comprising of Base
salary plus earned but unpaid cash bonus) equal to six months as well as the continuation of Option vesting and benefits during this
paid notice period.
Compensation of Directors
The members
of the Board are remunerated for services rendered in their capacity as directors of the Company through a combination of cash compensation
and Options.
During the year ended
December 31, 2024, the directors were entitled to an annual fee of US$40,000 and the Chair of the Board was entitled to an
additional annual fee of US$29,000. The chair of the Audit Committee was entitled to an annual fee of US$15,000, with each committee
member receiving an annual fee of US$7,500. The chair of the Corporate Governance Committee was entitled to an annual fee of
US$8,000 and each committee member, an annual fee of US$4,000. The chair of the Compensation Committee received an annual fee of
US$10,500 and each committee member, a fee of US$5,250 per year.
Directors are reimbursed for any out-of-pocket
travel expenses incurred in order to attend meetings. Executive directors are not entitled to directors’ compensation.
Summary Compensation Table for Non-Executive Members
of the Board
The following table provides details relating to the compensation
of the nonexecutive members of the Board during the financial year ended December 31, 2024.
| Name | |
Annual
Fees1
($) | | |
Share-
based
awards ($) | |
Option-
Based
Awards ($) | |
Non-equity
incentive plan
compensation ($) | |
Pension
Value
($) | |
All Other
Compensation
($) | |
Total
($) | |
| Rima Al-awar | |
| 69,607 | | |
Nil | |
Nil | |
Nil | |
Nil | |
Nil | |
| 69,607 | |
| Franklin Berger | |
| 69,607 | | |
Nil | |
Nil | |
Nil | |
Nil | |
Nil | |
| 69,607 | |
| Brian Bloom | |
| Nil | 2 | |
Nil | |
Nil | |
Nil | |
Nil | |
Nil | |
| Nil | |
| Adam Mostafa | |
| 86,694 | | |
Nil | |
Nil | |
Nil | |
Nil | |
Nil | |
| 86,694 | |
| Geoff MacKay | |
| 114,393 | | |
Nil | |
Nil | |
Nil | |
Nil | |
Nil | |
| 114,393 | |
| William McVicar | |
| 68,348 | | |
Nil | |
Nil | |
Nil | |
Nil | |
Nil | |
| 68,348 | |
| William Jarosz | |
| 63,312 | | |
Nil | |
Nil | |
Nil | |
Nil | |
Nil | |
| 63,312 | |
| Stephanie Brown | |
| 12,650 | | |
Nil | |
Nil | |
Nil | |
Nil | |
Nil | |
| 12,650 | |
| (1) | Fees are paid in US dollars. Amounts reported in the table above have
been converted into Canadian dollars at the average rate exchange rate of CDN$1.4389 for
each US$1.00. |
| (2) | Mr. Bloom does not receive director fees in his capacity as Director
due to his affiliation with BBSI |
Outstanding Share-Based Awards and Option-Based Awards
The following tables show all awards outstanding to each
Director as at December 31, 2024:
| Option-based Awards | |
Share-based Awards |
Name | |
Number of securities underlying unexercised options (#) | | |
Option exercise price ($) | | |
Option expiration date | |
Value of unexercised in-the- money options(1) ($) | |
Number of shares or units of shares that have not vested (#) | |
Market or payout value of share- based awards that have not vested ($) | |
Market or payout value of vested share-based awards not paid out or distributed ($) |
| Rima Al-awar | |
| 31,200 | | |
$ | 1.13 | | |
5-Dec-2031 | |
| Nil | |
Nil | |
Nil | |
Nil | |
Nil |
| | |
| 12,500 | | |
$ | 0.325 | | |
6-Oct-2032 | |
| 6,313 | |
| |
| |
| |
|
| | |
| 56,238 | | |
$ | 0.60 | | |
1-June-2033 | |
| 12,935 | |
| |
| |
| |
|
| Option-based Awards | |
Share-based Awards |
Name | |
Number of securities underlying unexercised options (#) | | |
Option exercise price ($) | | |
Option expiration date | |
Value of unexercised in-the- money options(1) ($) | |
Number of shares or units of shares that have not vested (#) | |
Market or payout value of share- based awards that have not vested ($) | |
Market or payout value of vested share-based awards not paid out or distributed ($) |
| Franklin Berger | |
| 56,238 | | |
$ | 0.41 | | |
7-Sep-2033 | |
| 23,620 | |
Nil | |
Nil | |
Nil | |
Nil |
| Brian Bloom | |
| 31,200 | | |
$ | 1.70 | | |
13-Aug-2031 | |
| Nil | |
Nil | |
Nil | |
Nil | |
Nil |
| | |
| 12,500 | | |
$ | 0.325 | | |
6-Oct-2032 | |
| 6,313 | |
| |
| |
| |
|
| Adam Mostafa | |
| 31,200 | | |
$ | 1.13 | | |
5-Dec-2031 | |
| Nil | |
Nil | |
Nil | |
Nil | |
Nil |
| | |
| 18,750 | | |
$ | 0.325 | | |
6-Oct-2032 | |
| 9,469 | |
| |
| |
| |
|
| | |
| 56,238 | | |
$ | 0.60 | | |
1-Jun-2033 | |
| 12,935 | |
| |
| |
| |
|
| Geoff MacKay | |
| 301,100 | | |
$ | 0.6642 | | |
1-Nov-2028 | |
| 49,922 | |
Nil | |
Nil | |
Nil | |
Nil |
| | |
| 25,000 | | |
$ | 0.325 | | |
6-Oct-2032 | |
| 12,625 | |
| |
| |
| |
|
| | |
| 56,238 | | |
$ | 0.60 | | |
1-Jun-2033 | |
| 12,935 | |
| |
| |
| |
|
| William McVicar | |
| 79,200 | | |
$ | 1.70 | | |
13-Aug-2031 | |
| Nil | |
Nil | |
Nil | |
Nil | |
Nil |
| | |
| 12,500 | | |
$ | 0.325 | | |
6-Oct-2032 | |
| 6,313 | |
| |
| |
| |
|
| | |
| 56,238 | | |
$ | 0.60 | | |
1-Jun-2033 | |
| 12,935 | |
| |
| |
| |
|
| William Jarosz | |
| 30,250 | | |
$ | 1.00 | | |
28-Oct-2025 | |
| Nil | |
Nil | |
Nil | |
Nil | |
Nil |
| | |
| 110,400 | | |
$ | 1.70 | | |
13-Aug-2031 | |
| Nil | |
| |
| |
| |
|
| | |
| 20,000 | | |
$ | 1.60 | | |
10-Jan-2025 | |
| Nil | |
| |
| |
| |
|
| | |
| 12,500 | | |
$ | 0.325 | | |
6-Oct-2032 | |
| 6,313 | |
| |
| |
| |
|
| | |
| 56,238 | | |
$ | 0.60 | | |
1-Jun-2033 | |
| 12,935 | |
| |
| |
| |
|
| (1) | These amounts are calculated based on the difference between the market
value of the securities underlying the Options on December 31, 2024 at the end of the
fiscal year ($0.83), and the exercise price of the Options. |
Value Vested or Earned During
the Year
The following table sets forth for
each non-executive Director the value vested or earned on all option- based awards, share-based awards, and non-equity incentive plan
compensation during the year ended December 31, 2024:
| Name | |
Option-based
awards – value
vested during the
year ($) | | |
Share-based
awards – value
vested during the
year ($) | |
Non-equity incentive
plan compensation –
value earned during
the year ($) |
| Rima Al-awar | |
| 1,157 | | |
Nil | |
Nil |
| Franklin Berger | |
| 2,612 | | |
Nil | |
Nil |
| Brian Bloom | |
| 759 | | |
Nil | |
Nil |
| Adam Mostafa | |
| 1,537 | | |
Nil | |
Nil |
| Geoff MacKay | |
| 1,919 | | |
Nil | |
Nil |
| William McVicar | |
| 1,157 | | |
Nil | |
Nil |
| William Jarosz | |
| 1,157 | | |
Nil | |
Nil |
| Stephanie Brown | |
| Nil | | |
Nil | |
Nil |
External Management Contracts
No individuals acting as Named Executive
Officers of the Company are not employees of the Company. The Company does not employ any external management company to provide the
Company’s executive management services.
Oversight and Description of Director and Named Executive
Officer Compensation
The Compensation Committee (or in the
case of the Chief Executive Officer, the Board with the assistance of the Compensation Committee) reviews the compensation payable to
the Named Executive Officers periodically as needed. The objective of the Company’s executive compensation program is to motivate,
reward and retain management talent that is needed to achieve the Company’s business objectives. The compensation program is designed
to ensure that compensation is competitive with other companies of similar size and is commensurate with the experience, performance
and contribution of the individuals involved and the overall performance of the Company. In evaluating performance, the Board and the
Compensation Committee give consideration to the Company’s long-term interests and quantitative financial objectives, as well as
to the qualitative aspects of the individual’s performance and achievements.
Compensation
for each member of the Board, if any, is also determined by the Board, with the assistance of the Compensation Committee, on an annual
basis.
Pension Disclosure
The Company does not have a pension
plan or any other plan that provides for payments or benefits at, following or in connection with retirement and is not currently providing
a pension to any directors of the Company or Named Executive Officers. The Company does not have a deferred compensation plan.
Equity Incentive Plan
At the Company’s May 14,
2024 annual and special meeting of Shareholders, disinterested Shareholders approved by way of ordinary resolution, the Equity Incentive
Plan. As of the Record Date, a maximum of 24,882,819 Shares are issuable under the Equity Incentive Plan, representing approximately
11.4% of the sum of the number of Shares issuable pursuant to the exercise of pre-funded warrants and the number of issued and outstanding
Shares of the Company, and approximately 15% of the issued and outstanding Shares of the Company (excluding the pre-funded warrants).
As of the Record Date, 23,374,112 Equity Incentive Plan Awards (representing approximately 10.7% of the sum of the number of Shares issuable
pursuant to the exercise of pre- funded warrants and the number of issued and outstanding Shares of the Company, and approximately 14.1%
of the issued and outstanding Shares of the Company (excluding the pre-funded warrants)) are outstanding. As of the Record Date, there
are an aggregate of 1,508,707 Shares (representing approximately 4.3% of the sum of the number of Shares issuable pursuant to the exercise
of pre-funded warrants and the number of issued and outstanding Shares of the Company, and approximately 0.9% of the issued and outstanding
Shares of the Company (excluding the pre-funded warrants)) that are currently available for future grants under the Equity Incentive
Plan.
The Company's annual "burn rate"
for Equity Incentive Plan Awards granted under the Equity Incentive Plan, calculated as described in Section 613(p) of the
TSX Company Manual with respect to the number of issued and outstanding Shares (total number of Equity Incentive Plan Awards issued in
a fiscal year, divided by the weighted average number of outstanding Common Shares for that year) was 1.01% in fiscal 2024.
The Equity Incentive Plan will be administered
by the Board, unless the administration of the Equity Incentive Plan has been delegated by the Board to a committee or sub-delegated
in accordance with the terms of the Equity Incentive Plan (the “Plan Administrator”) and the Plan Administrator will
have sole and complete authority, in its discretion, to: (a) determine the individuals to whom grants under the Equity Incentive
Plan may be made; (b) make
grants of Options or RSUs (collectively, the “Equity Incentive Plan Awards”) under the Equity Incentive Plan relating
to the issuance of Shares (including any combination of Options or RSUs); (c) establish the form or forms of Equity Incentive Plan
Award agreements (an “Award Agreement”); (d) cancel, amend, adjust or otherwise change any Equity Incentive Plan
Award under such circumstances as the Plan Administrator may consider appropriate in accordance with the provisions of the Equity Incentive
Plan; (e) construe and interpret the Equity Incentive Plan and all Award Agreements; (f) adopt, amend, prescribe and rescind
administrative guidelines and other rules and regulations relating to the Equity Incentive Plan; and (g) make all other determinations
and take all other actions necessary or advisable for the implementation and administration of the Equity Incentive Plan.
Shares Subject to the Equity Incentive Plan
The Equity Incentive Plan, which is
a “rolling” plan, provides that the aggregate number of Shares reserved for issuance from treasury pursuant to Equity Incentive
Plan Awards granted under the Equity Incentive Plan (together with Shares reserved for issuance in respect of 12,977,089 Awards outstanding
under the Option Plan and in respect of any other Security Based Compensation Arrangement (as defined in the Equity Incentive Plan))
may not exceed 15% of the Company’s total issued and outstanding Shares from time to time, such number being 24,882,819 as of the
date hereof. The Equity Incentive Plan is considered an “evergreen” plan, since the Shares covered by Equity Incentive Plan
Awards which have been settled, exercised, surrendered or terminated will be available for subsequent grants under the Equity Incentive
Plan and the number of Equity Incentive Plan Awards available to grant increases as the number of issued and outstanding Shares increases.
Any Shares issued by the Company through
the assumption or substitution of outstanding stock options or other equity-based awards from an acquired company will not reduce the
number of Shares available for issuance pursuant to the exercise or settlement of Awards granted under the Equity Incentive Plan.
Any awards granted or Shares issued
pursuant to an employment inducement provided by the Company in accordance with Subsection 613(c) of the TSX Company Manual will
not reduce the number of Shares available for issuance pursuant to the exercise or settlement of Awards granted under the Equity Incentive
Plan.
Subject to the number of Shares reserved
for issuance under the Equity Incentive Plan, there is no maximum number of Awards that an individual or entity may be granted under
the plan, except as provided below under “Insider Participation Limit” and “Director Participation Limit”.
Insider Participation Limit
The Equity Incentive Plan provides
that the aggregate number of Shares: (a) issuable to Insiders (as defined in the Equity Incentive Plan) at any time, under all of
the Company’s Security Based Compensation Arrangements, may not exceed 10% of the Company’s issued and outstanding Shares;
and (b) issued to Insiders within any one- year period, under all of the Company’s Security Based Compensation Arrangements,
may not exceed 10% of the Company’s issued and outstanding Shares.
Director Participation Limit
The Equity Incentive Plan provides
that Awards granted thereunder or under any other Security Based Compensation Arrangement during a single calendar year to any director
in connection with such director’s service as a director, taken together with any cash fees paid by the Company to such director
during such calendar year for service on the Board, will not exceed $750,000 USD in total value (calculating the value of any such Awards
based on the grant date fair value of such Awards for financial reporting purposes), or, with respect to the calendar year in which a
director is first appointed or elected to the Board, $1,000,000 USD.
Administration of the Equity Incentive Plan
The Equity Incentive Plan provides
that the initial Plan Administrator will be the Board. To the extent permitted by applicable law, the Board may, from time to time, delegate
the administration of the Equity Incentive Plan to a committee of the Board (the “Committee”) all or any of the powers
conferred on the Plan Administrator pursuant to the Equity Incentive Plan, including the power to sub-delegate to any member(s) of
the Committee or any specified officer(s) of the Company all or any of the powers delegated to the Board.
To the extent permitted by applicable
law and the rules of the TSX, the Board may, from time to time, delegate to one or more officers of the Company the authority to
designate employees and consultants, in each case, who are not officers of the Company or any subsidiary to be recipients of an Award
and to determine the number of Awards to be granted to such employee or consultant and the terms of such Award and to grant them such
Award; provided, however, that the Board resolutions regarding such delegation will specify the total number of Shares that may be granted
by such officer and that such officer may not grant any Awards to themselves.
Eligibility
All directors of the Company and employees
and consultants of the Company and its subsidiaries will be eligible to participate in the Equity Incentive Plan, subject to certain
limitations. Participation in the Equity Incentive Plan will be voluntary and eligibility to participate will not confer upon any director,
employee or consultant any right to receive any grant of a Equity Incentive Plan Award pursuant to the Equity Incentive Plan. The extent
to which any director, employee or consultant is entitled to receive a grant of a Equity Incentive Plan Award pursuant to the Equity
Incentive Plan will be determined in the sole and absolute discretion of the Plan Administrator.
Types of Equity Incentive Plan Awards; Non-Transferability
Only Options
and RSUs may be granted pursuant to the Equity Incentive Plan, as further summarized below. All of the Equity Incentive Plan Awards described
below are subject to the conditions, limitations, restrictions, exercise price, vesting, settlement, and forfeiture provisions determined
by the Plan Administrator, in its sole discretion, subject to such limitations provided in the Equity Incentive Plan and will generally
be evidenced by an Award Agreement. In addition, subject to the limitations provided in the Equity Incentive Plan and in accordance with
applicable law, the Plan Administrator may accelerate or defer the vesting or payment of Equity Incentive Plan Awards, cancel, or modify
outstanding Equity Incentive Plan Awards, and waive any condition imposed with respect to Equity Incentive Plan Awards or Shares issued
pursuant to Equity Incentive Plan Awards.
Except as permitted by the Plan Administrator
and to the extent that certain rights may pass to a beneficiary or legal representative upon death of a Participant, by will or as required
by law, no assignment or transfer of Equity Incentive Plan Awards, whether voluntary, involuntary, by operation of law or otherwise,
will vest any interest or right in such Equity Incentive Plan Awards whatsoever in the assignee or transferee and immediately upon assignment
or transfer, or any attempt to make the same, such Equity Incentive Plan Awards will terminate and be of no further force or effect.
Options
The Equity Incentive Plan
provides that the Plan Administrator may, from time to time, subject to the provisions of the Equity Incentive Plan and such other
terms and conditions as the Plan Administrator may prescribe, grant Options to any Participant. The terms and conditions of each
Option grant will be evidenced by an Award Agreement. The Plan Administrator will establish the exercise price at the time each
Option is granted, which Exercise Price must in all cases be not less than (a) if the Shares are trading on a Canadian stock
exchange, the closing price of Shares on the Canadian stock exchange on the applicable date, and if such applicable date is not a
trading day, the last market trading day prior to such date; (b) if the Shares are not trading on a Canadian stock exchange,
but are listed on a U.S. stock exchange, the closing price of the Shares on the U.S. stock exchange on the applicable date, and if
such applicable date is not a trading day, the last market trading day prior to such date; (c) if the Shares are only listed on
an over-the-counter market and sales prices are regularly reported for the Shares, the closing or, if not applicable, the last price
of the Shares on the applicable date and if such applicable date is not a trading day, the last market trading day prior to such
date; provided that if sales prices are not regularly reported on such over-the-counter market, the mean between the bid and the
asked price for the Shares on the close of trading in the over-the-counter market for the most recent trading day on which the
Shares were traded on the applicable date and if such applicable date is not a trading day, the last market trading day prior to
such date; (d) if the Shares are neither listed on a U.S. stock exchange nor a Canadian stock exchange nor traded in the
over-the-counter market, such value as the Plan Administrator, in good faith, shall determine in compliance with applicable laws
(for the purposes of this section, the “Fair Market Value”). Subject to any accelerated termination as set forth
in the Equity Incentive Plan, each Option will expire on the expiry date specified in the Award Agreement (which may not be later
than the tenth anniversary of the date of grant) or, if not so specified, the tenth anniversary of the date of grant. The Plan
Administrator will have the authority to determine the vesting terms applicable to grants of Options. Once an Option becomes vested,
it will remain vested and will be exercisable until expiration or termination of the Option, unless otherwise specified by the Plan
Administrator, or as may be otherwise set forth in any written employment agreement, Award Agreement or other written agreement
between the Company or a subsidiary and the Participant. Each Option may be exercised at any time or from time to time, in whole or
in part, for up to the total number of Shares with respect to which it is then exercisable. The Plan Administrator has the right to
accelerate the date upon which any Option becomes exercisable. The Plan Administrator may provide at the time of granting an Option
that the exercise of that Option is subject to restrictions, in addition to those specified in the Equity Incentive Plan, such as
vesting conditions relating to the attainment of specified Performance Goals (as defined in the Equity Incentive Plan).
Unless otherwise specified by the Plan
Administrator at the time of granting an Option and set forth in the particular Award Agreement, the exercise notice must be accompanied
by payment of the exercise price. Unless otherwise specified by the Plan Administrator and set forth in the particular Award Agreement,
a Participant may, but only if permitted by the Plan Administrator, in lieu of exercising an Option pursuant to an exercise notice, elect
to surrender such Option to the Company (a “Cashless Exercise”) in consideration for an amount from the Company equal
to: (i) the Fair Market Value of the Shares issuable on the exercise of such Option (or portion thereof) as of the date such Option
(or portion thereof) is exercised, less (ii) the aggregate exercise price of the Option (or portion thereof) surrendered relating
to such Shares (the “In-the-Money Amount”), by written notice to the Company indicating the number of Options such
participant wishes to exercise using the Cashless Exercise, and such other information that the Company may require. Subject to the provisions
of the Equity Incentive Plan, the Company will satisfy payment of the In-the-Money Amount by delivering to the Participant such number
of Shares (rounded down to the nearest whole number) having a fair market value equal to the In- the-Money Amount.
Restricted Share Units (RSUs)
The Equity Incentive Plan provides
that the Plan Administrator may, from time to time, subject to the provisions of the Equity Incentive Plan and such other terms and conditions
as the Plan Administrator may prescribe, grant RSUs to any Participant. The terms and conditions of each RSU grant will be evidenced
by an Award Agreement. Each RSU will consist of a right to receive a Share upon the settlement of such RSU.
Subject to the conditions in the Equity
Incentive Plan, the Plan Administrator will have the authority to determine any vesting terms applicable to the grant of RSUs, including
vesting conditions relating to the attainment of specified Performance Goals.
Subject to the terms of the Equity
Incentive Plan and except as otherwise provided in an Award Agreement, on the settlement date for any RSU, each vested RSU will be redeemed
for one fully paid and non-assessable Share issued from treasury to the Participant. The Plan Administrator will have the sole authority
to determine any other settlement terms applicable to the grant of RSUs.
Dividend Equivalents
The Equity Incentive Plan provides
that unless otherwise determined by the Plan Administrator or as set forth in the particular Award Agreement, an award of RSUs will include
the right for such RSUs to be credited with dividend equivalents in the form of additional RSUs as of each dividend payment date in respect
of which normal cash dividends are paid on Shares. Such dividend equivalents will be computed by dividing: (i) the amount obtained
by multiplying the amount of the dividend declared and paid per Share by the number of RSUs held by the Participant on the record date
for the payment of such dividend, by (ii) the Fair Market Value at the close of the first business day immediately following the
dividend record date, with fractions computed to three decimal places. Dividend equivalents credited to a Participant’s account
will vest in proportion to the RSUs to which they relate, and will be settled in accordance with the terms of the Equity Incentive Plan.
Blackout Periods
Pursuant to the terms of the Equity
Incentive Plan, each Option that would expire during or within 10 business days immediately following a Blackout Period (as defined in
the Equity Incentive Plan) shall expire on the date that is 10 business days immediately following the expiration of the Blackout Period
(provided that this change in expiration date shall not apply to any Options held by a U.S. Taxpayer (as defined in the Equity Incentive
Plan) if it would result in any adverse consequences under Section 409A of the Code or prevent any ISO from qualifying as an ISO
pursuant to Section 422 of the Code).
Termination of Employment or Services
Subject to the terms of the Equity
Incentive Plan, unless otherwise determined by the Plan Administrator or as set forth in a written employment agreement, Award Agreement
or other written agreement:
| (a) | where a Participant’s employment, services or engagement
is terminated by the Company or a subsidiary, then any Option or RSU held by the Participant
that has not been exercised, surrendered or settled as of the Termination Date (as defined
in the Equity Incentive Plan) shall be immediately forfeited and cancelled as of the Termination
Date; |
| (b) | where a Participant’s employment, services or engagement
is terminated by the Company or a subsidiary without Cause (as defined in the Equity Incentive
Plan), whether such termination occurs with or without any or adequate reasonable notice,
or with or without any or adequate compensation in lieu of such reasonable notice, or by
reason of resignation by the Participant, or on account of the Participant incurring a Disability
(as defined in the Equity Incentive Plan), or by reason of the death of the Participant,
there will be no further vesting of any unvested Options or RSUs after the Termination Date
and any unvested Options and RSUs held by the Participant on the Termination Date shall be
immediately forfeited and cancelled. Any vested Options may be exercised by the Participant
(or in the event of the Participant’s death, the Participant’s personal legal
representative) at any time during the period that terminates on the earlier of: (i) the
expiry date of such Option; and (ii)(A) in the event of a Participant’s termination
without Cause or resignation, the date that is three months after the Termination Date, (B) in
the event of the Participant’s incurrence of a Disability, the date that is twelve
months after the Termination Date, or (C) in the event of the Participant’s death,
the date that is twelve months after the Termination Date. If an Option remains unexercised
upon the earlier of (i) or (ii), the Option shall be immediately forfeited and cancelled
upon the termination of such period. In the case of a vested RSU that is held by a Participant
on the Termination Date who is not a U.S. taxpayer, such RSU will be settled within ninety
days after the Termination Date. In the case of a vested RSU that is held by a Participant
on the Termination Date who is a U.S. taxpayer, vested RSUs will be settled within ninety
days after the Termination Date, provided that in all cases such RSUs will be settled by
March 15th of the year following the year of the applicable vesting event; |
| (c) | a Participant’s eligibility to receive further grants of
Options or other Equity Incentive Plan Awards ceases as of the Participant’s Termination
Date; and |
| (d) | except as otherwise provided in an applicable Award Agreement,
and notwithstanding any other provision of the Equity Incentive Plan, in the case of an RSU
that is granted to a U.S. taxpayer and that becomes vested (in whole or in part) pursuant
to the terms of the Equity Incentive Plan upon the Participant’s Termination Date,
such RSU will, subject to the terms of the Equity Incentive Plan, be settled as soon as administratively
practicable following the Participant’s Termination Date but in no event later than
90 days following the Participant’s Termination Date, provided that if such Equity
Incentive Plan Award is an RSU, settlement will occur no later than March 15th
of the year following the year of the applicable vesting event. |
Change in Control
The Equity Incentive Plan provides that except as may be
set forth in an employment agreement, Award Agreement or other written agreement between the Company or a subsidiary and a Participant:
| (a) | Subject to the terms and conditions
in the Equity Incentive Plan, the Plan Administrator may, without the consent of any Participant,
take such steps as it deems necessary or desirable, including to cause: (i) the conversion
or exchange of any outstanding Equity Incentive Plan Awards into or for, rights or other
securities of substantially equivalent value, as determined by the Plan Administrator in
its discretion, in any entity participating in or resulting from a Change in Control (as
defined below), (ii) outstanding Equity Incentive Plan Awards to vest and become exercisable,
realizable, or payable, or restrictions applicable to an Equity Incentive Plan Award to lapse,
in whole or in part prior to or upon consummation of such merger or Change in Control, and,
to the extent the Plan Administrator determines, terminate upon or immediately prior to the
effectiveness of such merger or Change in Control, (iii) the termination of a Equity
Incentive Plan Award in exchange for an amount of cash and/or property, if any, equal to
the amount that would have been attained upon the exercise or settlement of such Equity Incentive
Plan Award or realization of the Participant’s rights as of the date of the occurrence
of the transaction (and, for the avoidance of doubt, if as of the date of the occurrence
of the transaction the Plan Administrator determines in good faith that no amount would have
been attained upon the exercise or settlement of such Equity Incentive Plan Award or realization
of the Participant’s rights, then such Equity Incentive Plan Award may be terminated
by the Company without payment), (iv) the replacement of such Equity Incentive Plan
Award with other rights or property selected by the Board in its sole discretion where such
replacement would not adversely affect the holder, or (v) any combination of the foregoing.
Notwithstanding the foregoing, prior consent of a Participant who is a Canadian taxpayer
is required in respect of subsection (iii). The Plan Administrator will not be required to
treat all Equity Incentive Plan Awards similarly in the transaction. |
| (b) | If the Participant is an employee or director of the Company or
a subsidiary, within 18 months following the completion of a transaction resulting in a Change
in Control, a Participant’s employment or directorship is terminated by the Company
or a subsidiary without Cause: |
| (i) | any unvested Equity Incentive Plan Awards held by such Participant
at the Termination Date shall immediately vest, with any Equity Incentive Plan Awards that
vest based on Performance Goals vesting at their specified target level of attainment; |
| (ii) | any vested Options may be exercised by the Participant at any time
during the period that terminates on the earlier of: (A) the expiry date of such Options;
and (B) the date that is three months after the Termination Date. If an Option remains
unexercised upon the earlier of (A) or (B), the Option shall be immediately
forfeited and cancelled upon the termination of such period; and |
| (iii) | any vested RSUs held by the Participant will be settled within
ninety days after the Termination Date, provided that any RSUs held by a U.S. taxpayer will
be settled by March 15th of the year following the year of the applicable vesting event. |
| (c) | Unless otherwise determined by the Plan Administrator, if, as a
result of a Change in Control, the Shares will cease trading on the U.S. stock exchange,
the Canadian stock exchange or any other exchange upon which the Shares may then be listed,
then the Company may terminate all of the Equity Incentive Plan Awards, other than an Option
held by a Canadian taxpayer, granted under the Equity Incentive Plan at the time of and subject
to the completion of the Change in Control transaction by paying to each holder at or within
a reasonable period of time following completion of such Change in Control transaction an
amount for each Equity Incentive Plan Award equal to the fair market value of the Equity
Incentive Plan Award held by such Participant as determined by the Plan Administrator, acting
reasonably, provided that any vested Equity Incentive Plan Awards granted to U.S. taxpayers
will be settled within ninety days of the Change in Control. |
For purposes of the Equity Incentive
Plan, “Change in Control” means the occurrence of: (i) any individual, entity or group of individuals or entities
acting jointly or in concert (other than the Company, its affiliates or an employee benefit plan or trust maintained by the Company or
its affiliates, or any company owned, directly or indirectly, by the Shareholders in substantially the same proportions as their ownership
of Shares) acquiring beneficial ownership, directly or indirectly, of more than 50% of the combined voting power of the Company’s
then outstanding securities (excluding any person who becomes such a beneficial owner in connection with a transaction described in clause
(ii) of this definition; (ii) the consummation of a merger or consolidation of the Company with any other corporation, other
than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger
or consolidation continuing to represent (either by remaining outstanding or being converted into voting securities of the surviving
entity or any parent thereof) more than 50% of the combined voting power or the total fair market value of the securities of the Company
or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, provided, however, that a
merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person (other than
those covered by the exceptions in clause (i) of this definition) acquires more than 50% of the combined voting power of the Company’s
then outstanding securities will not constitute a Change in Control; (iii) a complete liquidation or dissolution of the Company
or the consummation of any sale, lease, exchange or other transfer (in one transaction or a series of transactions) of all or substantially
all of the assets of the Company, other than such liquidation, sale or disposition to a person or persons who beneficially own, directly
or indirectly, more than 50% of the combined voting power of the outstanding voting securities of the Company at the time of the sale;
(iv) a change in the composition of the Board, as a result of which fewer than a majority of the directors are Incumbent Directors
(as defined in the Equity Incentive Plan); or (v) any other transaction or series of transactions that is determined by the Board
to be substantially similar to any of the events noted above. Notwithstanding the foregoing, with respect to any Equity Incentive Plan
Award that is characterized as “nonqualified deferred compensation” within the meaning of Section 409A of the Revenue
Code, an event will not be considered to be a Change in Control under the Equity Incentive Plan for purposes of payment of such Equity
Incentive Plan Award unless such event constitutes a change in ownership or control of the Company, or a change in ownership of the Company’s
within the meaning of Section 409A of the Revenue Code.
Reorganization of Capital &
Other Events Affecting the Company
Should the Company effect a
subdivision or consolidation of Shares or any similar capital reorganization or a payment of a stock dividend (other than a stock
dividend that is in lieu of a cash dividend), or should any other change be made in the capitalization of the Company that does not
constitute a Change in Control and that would warrant the amendment or replacement of any existing Awards in order to adjust the
number of Shares that may be acquired on the vesting of outstanding Awards and/or the terms of any Award in order to preserve
proportionately the rights and obligations of the Participants holding such Awards, the Plan Administrator will, subject to the
prior approval of the U.S. exchange or the Canadian exchange, as required, authorize such steps to be taken as it may consider to be
equitable and appropriate to that end.
In the event of an amalgamation, combination,
arrangement, merger or other transaction or reorganization involving the Company and occurring by exchange of Shares, by sale or lease
of assets or otherwise, that does not constitute a Change in Control and that warrants the amendment or replacement of any existing Awards
in order to adjust the number and/or type of Shares that may be acquired, or by reference to which such Awards may be settled, on the
vesting of outstanding Awards and/or the terms of any Award in order to preserve proportionately the rights and obligations of the Participants
holding such Awards, the Plan Administrator will, subject to the prior approval of the U.S. exchange and the Canadian exchange, authorize
such steps to be taken as it may consider to be equitable and appropriate to that end.
Amendments, Suspension or Termination
of the Equity Incentive Plan
The Equity Incentive Plan will terminate
on April 10, 2034, the date which is ten years from the date of its adoption by the Board. The Equity Incentive Plan may be terminated
at an earlier date by vote of the Shareholders or the Board; provided, however, that any such earlier termination will not materially
adversely affect any Award Agreements executed prior to the effective date of such termination. Termination of the Equity Incentive Plan
will not affect any Equity Incentive Plan Awards theretofore granted. The Plan Administrator may from time to time, without notice, or
upon notice in accordance with and limited to any applicable Employment Standards (as defined in the Equity Incentive Plan), and without
approval of the Shareholders of the Company, amend, modify, change, suspend or terminate the Equity Incentive Plan or any Equity Incentive
Plan Awards granted pursuant to the Equity Incentive Plan as it, in its discretion determines appropriate, provided, however, that:
| (a) | no such amendment, modification, change, suspension or termination
of the Equity Incentive Plan or any Equity Incentive Plan Awards granted thereunder may materially
impair any rights of a Participant or materially increase any obligations of a Participant
under the Equity Incentive Plan without the consent of the Participant, unless the Plan Administrator
determines such adjustment is required or desirable in order to comply with any requirements
under applicable securities laws or any requirements of the U.S. stock exchange or the Canadian
stock exchange; and |
| (b) | any amendment that would cause a Equity Incentive Plan Award held
by a U.S. taxpayer to be subject to income inclusion under Section 409A of the Revenue
Code will be null and void ab initio with respect to the U.S. taxpayer unless the
consent of the U.S. taxpayer is obtained. |
Amendments Requiring Shareholder
Approval
The Equity Incentive Plan provides
that Shareholder approval will be required for any amendment, modification or change that:
| (a) | reduces the exercise price or purchase price of a Equity Incentive
Plan Award benefiting an Insider of the Company; |
| (b) | extends the term of a Equity Incentive Plan Award benefiting an
Insider of the Company; |
| (c) | increases the percentage or number of Shares reserved for issuance
under the Equity Incentive Plan, except pursuant to the provisions under Article 8 of
the Equity Incentive Plan, which permit the Plan Administrator to make equitable adjustments
in the event of transactions affecting the Company or its capital; |
| (d) | increases or removes the 10% limits on Shares issuable or issued
to Insiders; |
| (e) | reduces the exercise price of an Option (for this purpose, a cancellation
or termination of an Option of a Participant prior to its expiry date for the purpose of
reissuing an Option to the same Participant with a lower exercise price or any other action
that is treated as a repricing under generally accepted accounting principles will be treated
as an amendment to reduce the exercise price of an Option), except pursuant to the provisions
of the Equity Incentive Plan, which permit the Plan Administrator to make equitable adjustments
in the event of transactions affecting the Company or its capital; |
| (f) | extends the term of an Option beyond the original expiry date (except
pursuant to Section 4.3 of the Equity Incentive Plan); |
| (g) | permits an Option to be exercisable beyond 10 years from its date
of grant (except pursuant to Section 4.3 of the Equity Incentive Plan); |
| (h) | permits Equity Incentive Plan Awards to be transferred to a person
in circumstances other than those specified under Section 3.9 of the Equity Incentive
Plan; |
| (i) | permits the introduction or reintroduction of non-employee directors
on a discretionary basis or that increases limits previously imposed on non-employee director
participants; or |
| (j) | deletes or reduces the range of amendments which require approval
of Shareholders under Section 10.2 of the Equity Incentive Plan. |
Permitted Amendments
The Equity Incentive Plan provides
that the Plan Administrator may, without Shareholder approval, at any time or from time to time, amend the Equity Incentive Plan for
the purposes of:
| (a) | making any amendments to the vesting provisions of each Equity
Incentive Plan Award; |
| (b) | making any amendments to the provisions set out in Article 7
of the Equity Incentive Plan; |
| (c) | making any amendments to add covenants of the Company for the protection
of Participants, as the case may be, provided that the Plan Administrator shall be of the
good faith opinion that such additions will not be prejudicial to the rights or interests
of the Participants, as the case may be; |
| (d) | making any amendments to comply with the provisions of the applicable
law or the rules, regulations and policies of the Canadian stock exchanges or the U.S. stock
exchanges; |
| (e) | making any amendments necessary for Awards to qualify for favorable
treatment under applicable tax laws; |
| (f) | making any amendments to include or modify a cashless exercise feature,
payable in cash or Shares, which provides for a full deduction of the number of underlying
Shares from the plan maximum; |
| (g) | making any amendments necessary to suspend or terminate the Plan; |
| (h) | making any amendments not inconsistent with the Equity Incentive
Plan as may be necessary or desirable with respect to matters or questions which, in the
good faith opinion of the Plan Administrator, having in mind the best interests of the Participants,
it may be expedient to make, including amendments that are desirable as a result of changes
in law in any jurisdiction where a Participant resides, provided that the Plan Administrator
shall be of the opinion that such amendments and modifications will not be prejudicial to
the interests of the Participants; |
| (i) | making amendments of a “housekeeping” or administrative
nature or such changes or corrections which, on the advice of counsel to the Company, are
required for the purpose of curing or correcting any ambiguity or defect or inconsistent
provision or clerical omission or mistake or manifest error, provided that the Plan Administrator
shall be of the opinion that such changes or corrections will not be prejudicial to the rights
and interests of the Participants; or |
| (j) | making any other amendment, whether fundamental or otherwise, not
requiring Shareholders’ approval under applicable tax laws, Canadian stock exchange
rules, U.S. stock exchange rules, or any other securities exchange that are applicable to
the Company. |
U.S. Federal Income Tax Considerations
The material U.S. federal income tax
consequences of the issuance and exercise of Options and other Awards under the Equity Incentive Plan to U.S. taxpayers, based on the
current provisions of the Revenue Code and regulations, are as follows. Changes to these laws could alter the tax consequences described
below. This summary assumes that all Awards granted under the Equity Incentive Plan to U.S. taxpayers are exempt from or comply with,
the rules under Section 409A of the Revenue Code related to nonqualified deferred compensation.
Incentive Stock Options (ISOs)
Incentive stock
options (“ISOs”) are intended to qualify for treatment under Section 422 of the Revenue Code. An ISO does not
result in taxable income to the Participant or deduction to us at the time it is granted or exercised, provided that no disposition is
made by the Participant of the Shares acquired pursuant to the ISO within two years after the date of grant of the ISO, nor within one
year after the date of issuance of Shares to the Participant (referred to as the “ISO holding period”). However, the
difference between the fair market value of the Shares on the date of exercise and the ISO price will be an item of tax preference includible
in “alternative minimum taxable income” of the Participant. Upon disposition of the Shares after the expiration of the ISO
holding period, the Participant will generally recognize long term capital gain or loss based on the difference between the disposition
proceeds and the ISO price paid for the Shares. If the Shares are disposed of prior to the expiration of the ISO holding period, the
Participant generally will recognize taxable compensation, and we will have a corresponding deduction, in the year of the disposition,
equal to the excess of the fair market value of the Shares on the date of exercise of the ISO over the ISO price. Any additional gain
realized on the disposition will normally constitute capital gain. If the amount realized upon such a disqualifying disposition is less
than fair market value of the Shares on the date of exercise, the amount of compensation income will be limited to the excess of the
amount realized over the Participant’s adjusted basis in the Shares.
Non-Qualified Options
Options otherwise qualifying as ISOs,
to the extent the aggregate fair market value of Shares with respect to which such ISOs are first exercisable by an individual in any
calendar year exceeds $100,000, and Options designated as non-qualified options (“Non-Qualified Options”) will be
treated as Options that are not ISOs.
A Non-Qualified Option ordinarily will
not result in income to the Participant or deduction to us at the time of grant. The Participant will recognize compensation income at
the time of exercise of such Non-Qualified Option in an amount equal to the excess of the then value of the Shares over the Non-Qualified
Option price per Share.
Such compensation income of Participants
may be subject to withholding taxes, and a deduction may then be allowable to us in an amount equal to the Participant’s compensation
income.
A Participant’s initial basis
in Shares so acquired will be the amount paid on exercise of the Non-Qualified Option plus the amount of any corresponding compensation
income. Any gain or loss as a result of a subsequent disposition of the Shares so acquired will be capital gain or loss.
Stock Units
The Participant recognizes no income
until the issuance of the Shares. At that time, the Participant must generally recognize ordinary income equal to the fair market value
of the Shares received. We generally will be entitled to a deduction in an amount equal to the ordinary income recognized by the Participant.
Option Plan
Other than the Equity Incentive Plan,
the Company’s only equity incentive plan is the Option Plan. The Option Plan is a legacy plan whereby no additional Options may
be granted thereunder. Any outstanding Options granted under the Option Plan will continue to be governed by the terms and conditions
of the plan and the applicable option certificate.
The Option Plan is administered by
the Board and the Compensation Committee and all decisions and implementations of the Board and/or the Compensation Committee respecting
the Option Plan shall be conclusive and binding on Satellos and on the grantee.
The Options under the Option Plan are
exercisable by the holders of the Options (each, an “Optionholder”) giving Satellos notice and payment of the exercise
price for the number of Shares to be acquired. Additionally, the Option Plan was amended by the Board on [Insert Date], 2025 to
permit a cashless exercise feature whereby an Optionholder may, but only if permitted by the Board or the Compensation Committee, elect
to surrender his or her Option to Satellos in consideration for an amount equal to: (i) the fair market value of the Shares issuable
on the exercise of such Option as of the date such Option is exercised, less (ii) the aggregate exercise price of the Option surrendered
relating to such Shares (the “In-the-Money Amount”). Subject to the provisions of the Option Plan, Satellos will satisfy
payment of the In-the-Money Amount by delivering to the Optionholder such number of Shares (rounded down to the nearest whole number)
having a fair market value equal to the In-the- Money Amount.
The exercise price of the Options was determined by the
Board and could not be less than:
| · | at
any time during which the Shares were listed and posted for trading on the TSXV, the allowable
discounted market price; and |
| · | at
any other time, the fair market value of the Shares as determined by the Board or the Compensation
Committee in its sole discretion, subject to the rules and regulations of any regulatory
authority. |
The Options may be exercisable for
up to 10 years from the award date and vest in stages over a period of at least 18 months, with no more than one-quarter of any such
Options vesting in any three-month period. The Options can only be exercised by the Optionholder or personal representative of such Optionholder,
in whole or in part, at any time or from time to time up to 5:00 p.m. (Vancouver time) on its expiry date.
The Options are not transferable or
assignable and the Board has the authority at any time and from time to time, to amend any of the provisions of the Option Plan, or any
Option granted thereunder. However, no such amendment may be made that will materially prejudice the rights of any Optionholder without
the prior written consent of such Optionholder.
As of December 31, 2024, the Company
had 13,879,589 Options outstanding, representing approximately 6.4% of the sum of the number of Shares issuable pursuant to the exercise
of pre-funded warrants and the number of issued and outstanding Shares of the Company as of the date of this Information Circular, and
approximately 8.4% of the issued and outstanding Shares of the Company (excluding the pre-funded warrants) as of the date of this Information
Circular.
The Company's annual "burn rate"
for Options granted under the Option Plan, calculated as described in Section 613(p) of the TSX Company Manual with respect
to the number of issued and outstanding Shares (total number of Options issued in a fiscal year, divided by the weighted average number
of outstanding Common Shares for that year) was 1.01%, 12.04% and 2.84% in fiscal 2024, 2023 and 2022, respectively.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY
COMPENSATION PLANS
The following table sets forth the
Company’s equity compensation plans under which equity securities are authorized for issuance as at December 31, 2024, the
end of the most recently completed financial year.
| Plan Category | |
Number of securities to
be issued upon exercise
of outstanding options | | |
Weighted-average
exercise price of
outstanding options | | |
Number of securities
remaining available for
future issuance under
equity compensation
plans | |
| Equity compensation plans approved by securityholders | |
| 13,879,589 | | |
$ | 0.73 | | |
| 10,993,392 | |
| Equity compensation plans not approved by securityholders | |
| Nil | | |
| N/A | | |
| N/A | |
| Total | |
| 13,879,589 | | |
$ | 0.73 | | |
| 10,993,392 | |
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
Satellos is not aware of any individuals
who are, or who at any time during the most recently completed financial year were, a director or executive officer of Satellos, a proposed
nominee for election or appointment as a director of Satellos, or an associate of any of those directors, executive officers or proposed
nominees, who are, or have been at any time since the beginning of the most recently completed financial year of Satellos, indebted to
Satellos or any of its subsidiaries or whose indebtedness to another entity is, or at any time since the beginning of the most recently
completed financial year of Satellos has been, the subject of a guarantee, support agreement, letter of credit or other similar arrangement
or understanding provided by Satellos or any of its subsidiaries.
AUDIT COMMITTEE INFORMATION
Reference is made to the Annual Information
Form, under the Section “Audit Committee Information”, as well as under the ‘External Auditor Service Fees’,
for a disclosure of information related to the Audit Committee required under Form 52-110F1 to National Instrument 52-110 –
Audit Committees (“NI 52-110”). A copy of this document can be found on SEDAR+ at www.sedarplus.ca, however we will promptly
provide a copy of this document to any securityholder of Satellos free of charge upon request.
INTERESTS OF INFORMED PERSONS IN MATERIAL TRANSACTIONS
Except as disclosed below,
Satellos is not aware of any material interest, direct or indirect, of any informed person of Satellos, any nominee director of
Satellos, or any associate or affiliate of any informed person or nominee director, in any transaction since the last annual general
and special meeting of the shareholders of Satellos, or in any proposed transaction, that has materially affected or would
materially affect Satellos or its subsidiaries.
For the purposes of this Information
Circular an “informed person” of Satellos means a director or executive officer of a person or company that is itself
an “informed person” or subsidiary of Satellos and any person or company who beneficially owns, directly or indirectly,
voting securities of Satellos or who exercises control or direction over voting securities of Satellos or a combination of both carrying
more than 10% of the voting rights attached to all outstanding voting securities of Satellos.
On December 20, 2024, the
Company completed a public offering (the “2024 Offering”), pursuant to a prospectus supplement dated
December 17, 2024, under which subscribers purchased Shares of the Company at $0.90 per Share or pre-funded common share
purchase warrants for $0.89999 per pre-funded common share purchase warrant, raising gross proceeds of approximately $57 million.
Bloom Burton Securities Inc. (“BBSI”), acted as exclusive agent and book running manager for the 2024 Offering.
BBSI and its sub-agents were paid a cash fee equal to 7% of the gross proceeds raised under the 2024 Offering (less gross proceeds
raised from president’s list purchasers that carried no fees).
Franklin Berger, a member of the Board
of Directors of the Company, purchased 320,000 Shares under the 2024 Offering, Frank Gleeson, a director and the Chief Executive Officer
of the Company, purchased 160,000 Shares under the 2024 Offering and, Bloom Burton & Co Inc., an insider of the Company, purchased
1,692,250 Shares under the 2024 Offering.
There are potential conflicts of interest
to which all of the directors and officers of the Company may be subject in connection with the operations of the Company. All of the
directors and officers are engaged in and will continue to be engaged in corporations or businesses, including publicly traded corporations,
which may be in competition with the business of the Company. Accordingly, situations may arise where all of the directors and officers
will be in direct competition with the Company. Conflicts, if any, will be subject to the procedures and remedies as provided under the
CBCA.
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
Corporate governance relates to the
activities of the Board, the members of which are elected by and are accountable to the Shareholders and takes into account the role
of the individual members of management who are appointed by the Board and who are charged with the day-to-day management of Satellos.
The Board believes that sound corporate governance practices are essential to contributing to the effective and efficient decision- making
of management and the Board and to the enhancement of Shareholder value. The Board and management believe that Satellos has a sound governance
structure in place for both management and the Board through establishing the following:
| · | Disclosure and Insider Trading Policy; |
| · | Code of Business Conduct and Ethics; |
| · | Audit Committee Charter; |
| · | Compensation Committee Charter and |
| · | Corporate Governance Committee Charter. |
National Instrument 58-101 —
Disclosure of Corporate Governance Practices (“NI 58-101”) and National Policy 58-201 — Corporate
Governance Guidelines (“NP 58-201”) requires issuers to disclose the corporate governance practices that they
have adopted. NP 58-201 provides guidance on governance practices. Satellos is also subject to NI 52-110, which has been adopted in
various Canadian provinces and territories and which prescribes certain requirements in relation to audit committees. In addition,
Satellos is subject to the disclosure requirements of the Canada Business Corporations Act with respect to diversity. The
required disclosure is attached hereto as Appendix “A”.
Committees of the Board
The following is a description of the current committees
of the Board:
Audit Committee
The mandate of the Audit Committee
is to assist the Board in fulfilling its oversight responsibilities with respect to the financial affairs of the Company, including responsibility
to:
| · | oversee
the integrity of the Company’s financial statements and financial reporting process,
audit process, internal accounting controls and procedures and compliance with related legal
and accounting principles; |
| · | oversee
the qualifications and independence of the external auditor; |
| · | oversee
the work of the Company’s financial management, internal audit function (if any) and
external auditor in these areas; and |
| · | provide
an open avenue of communication between the external auditor, the internal auditors (if any),
the Board and the Company’s management. |
In addition, the Committee shall prepare,
if required, an audit committee report for inclusion in the information circular prepared in connection with the Company’s annual
meeting of shareholders, in accordance with applicable rules and regulations. The current members of the Audit Committee are Mr. Adam
Mostafa, (Chair), Ms. Stephanie Brown, and Dr. Bill McVicar. Mr. Bill Jarosz stepped down from the Audit Committee on
January 30, 2024 and was replaced by Mr. Geoff MacKay. Mr. MacKay stepped down from the Audit Committee on November 12,
2024 and was replaced by Ms. Stephanie Brown.
All of the current members of the Audit
Committee are “independent directors” as defined under applicable law and the listing standards and applicable policies of
the TSX and such members meet the independence, experience and expertise requirements under such laws, listing standards and applicable
policies and under the applicable policies of the Board.
Compensation Committee
The mandate of the Compensation Committee
includes assisting the Board in discharging its responsibilities relating to compensation of the Company’s directors and executives,
oversight of the Company’s overall compensation structure, policies and programs, review of the Company’s processes and procedures
for the consideration and determination of director and executive compensation; and producing a report on executive compensation for
inclusion in the Company’s information circular as required by applicable rules and regulations. The primary objective of
the Committee is to develop and implement compensation policies and plans that ensure the attraction and retention of key management
personnel, the motivation of management to achieve the Company’s corporate goals and strategies, and the alignment of the interests
of management with the long-term interests of the Company’s shareholders. The current members of the Compensation Committee are
Mr. Geoff MacKay (Chair), Mr. Adam Mostafa and Ms. Stephanie Brown. Ms. Al-awar stepped down from the Compensation
Committee on November 12, 2024 and was replaced by Ms. Stephanie Brown.
Corporate Governance Committee
The mandate of the Nominating
and Corporate Governance Committee is to support the Board of Directors in exercising its corporate governance functions, including
identifying individuals qualified to become Board members, and recommend that the Board select the director nominees for the next
annual meeting of shareholders; and to develop and recommend to the Board the corporate governance guidelines and processes
applicable to the Company, review these guidelines and processes at least annually and recommend changes to the Board. The current
members of the Corporate Governance Committee are Mr. Franklin Berger (Chair), Dr. Rima Al-awar and Mr. Bill
Jarosz.
RECEIPT OF SHAREHOLDER PROPOSALS FOR 2026 ANNUAL
MEETING
Under the Canada Business Corporations
Act, a registered holder or beneficial owner of Shares that will be entitled to vote at the 2026 annual meeting of shareholders and
is otherwise eligible under the Canada Business Corporations Act, may submit to the Corporation, by March 20, 2026, a proposal
in respect of any matter to be raised at such meeting.
ADDITIONAL INFORMATION
Financial information is provided in
the Company’s audited financial statements and management's discussion and analysis for its most recently completed financial year.
Copies of these documents and additional information relating to the Company are available on SEDAR+ at www.sedarplus.ca.
APPROVAL BY DIRECTORS
The contents of the Circular and the
sending thereof have been approved by resolution of the Board.
| DATED
at Toronto, Ontario, Canada, May 12, 2025. |
|
| (signed)
Elizabeth Williams |
|
| Corporate
Secretary |
|
| |
|
APPENDIX A
CORPORATE GOVERNANCE DISCLOSURE
General
National Instrument 58-101 –
Disclosure of Corporate Governance Practices (“NI 58-101”) requires Satellos to disclose information about
its corporate governance practices that they have adopted. This disclosure must be made in accordance with the corporate governance guidelines
contained in National Policy 58-201 – Corporate Governance Guidelines (“NP 58-201”). NP 58-201 provides
guidance on corporate governance practices. Corporate governance relates to the activities of the Board, the members of which are elected
by and are accountable to the Shareholders and takes into account the role of the individual members of management who are appointed
by the Board and who are charged with the day-to-day management of the Company. The Board is committed to sound corporate governance
practices, which are both in the interest of its Shareholders and contribute to effective and efficient decision making.
Board of Directors
The Board, which is responsible for
supervising the management of the business and affairs of Satellos, consists of eight directors, of whom the majority are independent,
as such term is defined in NI 58-101 and National Instrument 52-110 – Audit Committees (“NI 52-110”).
The independent directors of the Company include Dr. Rima Al-awar, Franklin Berger, Geoff MacKay (Chair), William McVicar, Stephanie
Brown and Adam Mostafa. It is anticipated that the Director Nominees, Selwyn Ho and Iris Loew-Friedrich are both independent directors.
None of the independent directors will have any direct or indirect material relationship with Satellos (other than securities holdings)
which could, in the view of the Board, reasonably interfere with the exercise of a director’s independent judgment. The remainder
of the directors of Satellos are not independent as Mr. Gleeson is the President and Chief Executive Officer of Satellos, Mr. Jarosz
is the former President of Amp B, Satellos’ wholly- owned subsidiary, and Mr. Bloom is co-founder, Chair and CEO of Bloom
Burton and Co. Inc., whose affiliate Bloom Burton Securities Inc. received a substantial amount of fees from the Company in connection
with its role as agent in the 2024 Offering.
The independent directors do not hold
regularly scheduled meetings at which non-independent directors and members of management are not in attendance. However, as part of
each regularly scheduled Board meeting, the independent directors have an in-camera session, exclusive of non-independent directors and
management. The independent directors may meet in the absence of the non-independent directors and management should they so determine
in their sole discretion. At the present time, the Board believes that the knowledge, experience and qualifications of its independent
directors are sufficient to ensure that the Board can function independently of management and discharge its responsibilities.
The following table illustrates the
attendance record of each director for all Board meetings held for the year ended December 31, 2024.
| Director |
Attendance |
| Rima
Al-awar |
4
of 5 |
| Franklin
Berger |
5
of 5 |
| Brian
Bloom |
4
of 5 |
| Adam
Mostafa |
5
of 5 |
| Geoff
MacKay |
5
of 5 |
| William
McVicar |
5
of 5 |
| William
Jarosz |
5
of 5 |
| Stephanie
Brown(1) |
1
of 1 |
| Frank
Gleeson |
5
of 5 |
(1) Stephanie Brown joined the Board of Directors effective
November 12, 2024.
Board Mandate
The Board has adopted a mandate in
which it explicitly assumes responsibility for stewardship of the business and affairs of Satellos. The Board seeks to discharge such
responsibility by reviewing, discussing and approving the Company’s strategic planning and organizational structure and supervising
management to oversee that the foregoing enhance and preserve the underlying value of Satellos. A copy of the Board Mandate is attached
hereto as Appendix “B”.
Position Descriptions
The Board has developed written position
descriptions, which are reviewed annually, for the Chair of the Board, which requires that the Chair must be an Independent Directors,
and for the Chief Executive Officer. In addition to fulfilling his duties as an individual director, the duties of the Chair of the Board
include, among other things, the duty to foster responsible, ethical and effective decision-making, providing overall leadership to the
Board, managing the affairs of the Board to ensure the Board functions effectively and operates independently from management, coordinating
with management to ensure that appropriate processes are in place to involve the Board in the development and review of the Company’s
strategic and business plans, taking reasonable steps to ensure other Board members understand their responsibilities and duties and
execute them effectively, calling and scheduling of meetings of the Board, presiding at meetings of the Board and coordinating with management.
The Board expects and requires that the primary role of the chair of each committee of the Board is to manage his or her respective committee
and ensure that the committee carries out its mandate, as defined under its Charter, effectively. Each committee chair is expected to
provide leadership to the committee members and ensure that the committee meets its obligations and responsibilities.
Directorships
As of the date
of this Information Circular, the directors (or proposed directors) of Satellos listed in the table that follows are currently directors
and/or officers of other reporting issuers (or equivalent) in a jurisdiction or a foreign jurisdiction.
Name
of Director,
Officer or Promoter |
|
Name
of Reporting
Issuer |
|
Exchange |
|
Position |
|
| Brian
Bloom |
|
Appili
Therapeutics, Inc. |
|
TSX |
|
Director |
|
| Franklin M. Berger |
|
Atea Pharmaceuticals Inc. |
|
NASDAQ |
|
Director |
|
| |
|
Kezar Life Sciences Inc. |
|
NASDAQ |
|
Director |
|
| |
|
Essa
Pharma Inc. |
|
NASDAQ |
|
Director |
|
| Selwyn
Ho |
|
Medigene
AG |
|
XETRA |
|
CEO |
|
| Iris Loew-Friedrich |
|
Evotec SE |
|
NASDAQ/XETRA |
|
Director and Chair Director |
|
| |
|
Fresenius SE &
Co. KGaA |
|
Frankfurt/XETRA |
|
Director |
|
| |
|
Swedish
Orphan Biovitrum AB (Sobi®) |
|
NASDAQ
Stockholm |
|
Director |
|
Orientation and Continuing Education
It is the mandate of the Corporate
Governance Committee to ensure that a process is established for the orientation and education of new directors that addresses the nature
and operation of Satellos’s business and their responsibilities and duties as directors.
The orientation and education of new
members of the Board is conducted by the Board and by management of Satellos. The orientation provides background information on Satellos’
history, performance and strategic plans. All new directors are provided with copies of Satellos’ Board and committee mandates
and policies, Satellos’ by-laws and other reference materials. Prior to joining the Board, each new director is required to meet
with the CEO of Satellos. Such officer is then responsible for outlining the business and prospects of Satellos, both positive and negative,
with a view to ensuring that the new director is properly informed to commence his or her duties as a director. Each new director is
also given the opportunity to meet with the auditors and counsel to Satellos.
In addition,
the Board as a whole is also responsible for ensuring that directors receive adequate information and continuing education opportunities
on an ongoing basis to enable directors to maintain their skills and abilities as directors and to ensure their knowledge and understanding
of Satellos’ business remains current.
Ethical Business Conduct
The Company has adopted a written Code
of Ethics (“Code”) which is available through SEDAR+ at www.sedarplus.ca. All directors, officers and employees of
Satellos are provided with a copy of the code of ethics.
In December 2023, Satellos created
a Corporate Governance Committee that is responsible for monitoring compliance with Satellos’ code of ethics. Satellos has also
developed a Whistleblower Policy which provides an anonymous means for employees and officers to report violations of the Code or any
other corporate policies.
The Board has not granted any waiver
from the code of ethics in favour of any director or executive officer of the Company in the financial year ended December 31, 2024.
Conflicts of Interest
The Governance Committee monitors the
disclosure of conflicts of interest by directors and ensures that no director will vote or participate in a discussion on a matter in
respect of which such director has a material interest.
Nomination of Directors
The Corporate Governance Committee
is responsible for identifying nominees to the Board for election as directors. In fulfilling its responsibilities to identify nominees
to the Board, the Corporate Governance Committee comes up with the names of individuals it believes represent potentially suitable candidates
and also solicits names of other potentially suitable candidates from the other members of the Board of Directors and also from management
of Satellos. It then looks at the qualifications and qualities of each in light of the needs of the Board of Directors and Satellos and
bases its recommendation to the Board on this basis. In addition, the Corporate Governance Committee assesses the participation, contribution
and effectiveness of the individual members of the Board on an annual basis.
The Board has adopted a charter of
the Corporate Governance Committee that clearly establishes it’s purpose, responsibilities, member qualifications, member appointment
and removal, structure, operations and manner of reporting to the Board. The charter also provides authority to the Corporate Governance
Committee to engage outside advisors, if necessary.
Compensation
The Board has established a Compensation
Committee comprised of independent directors within the meaning of Section 1.4 of NI 52-110. The Board has adopted a charter of
the Compensation Committee which clearly establishes the Committee’s purpose, responsibilities, member qualifications, member appointment
and removal, structure, operations and manner of reporting to the Board. The charter also gives the Compensation Committee the authority
to engage outside advisors, if necessary.
The Compensation Committee is responsible
for reviewing and recommending to the Board the levels of compensation of the President and Chief Executive Officer and the officers
reporting to the President and Chief Executive Officer, as well as reviewing the objectives of the President and Chief Executive Officer
and assessing his performance in respect of such assessment. The Compensation Committee is also responsible for reviewing the adequacy
and forms of compensation generally and of director compensation as well as the review of the executive compensation disclosure of the
issuer.
Term Limits
Satellos has not adopted term limits
for the directors of the Board or other mechanisms of Board renewal because the term limits and other mechanisms reduce continuity and
experience on the Board, and force valuable, experienced and knowledgeable directors to leave. The Company regularly assesses Board members’
effectiveness and annual elections are considered sufficient.
Other Board Committee
Satellos has no standing committees
other than the Audit Committee, Corporate Governance Committee, and the Compensation Committee, each of which is described under “Statement
of Corporate Governance Practices” in this Circular.
Assessment of Directors, the Board and Board Committees
The Board as a whole will be responsible
for assessing, on a regular basis, the structure, composition, effectiveness and contribution of the Board, each committee of the Board
and each of the directors.
Diversity Disclosure
The following information is given
pursuant to the Disclosure Relating to Diversity requirements under the CBCA.
The Governance Committee takes diversity,
including diversity of experience, perspective, education, race and gender, into consideration as part of its overall recruitment and
selection process in respect of its Board and senior management.
As of the date of this Information
Circular, the Company has not adopted a written policy relating to the identification and nomination of directors who are from designated
groups (meaning women, Aboriginal peoples, persons with disabilities and members of visible minorities (as each of those are defined
in the Employment Equity Act (Canada), collectively, the “Designated Groups”. As of the date of this Information
Circular, there are three individuals who have self-identified as belonging to a Designated Group, representing 33% of the Board of Directors.
Two women sit on the Board (22%). Currently, one person from the Designated Groups holds an NEO position within the Company. The directors
who self-identified as being a member of the Designated Groups have been furnished this information on a voluntary basis and such responses
have not been independently verified by the Company.
The Company has not yet adopted a target
for each Designated Group, including women, for directors or senior management but is acutely mindful of the importance and desire to
have a diverse workforce. The Company considers candidates based on their qualifications, personal qualities, business background and
experience, and status in Designated Groups but does not feel that a written policy or targets would necessarily result in different
outcomes at this time in the Company’s evolution. However, as the business of the Company continues to progress, the Board will
take into consideration the level of representation of Designated Groups and diversity when nominating potential director nominees. The
Board and management will take into account similar considerations in respect of senior management roles.
APPENDIX B
BOARD MANDATE
SATELLOS BIOSCIENCE INC.
BOARD MANDATE
INTRODUCTION
The term “Company” herein
shall refer to Satellos Bioscience Inc. and the term “Board” shall refer to the Board of Directors of the Company.
The Board is elected by the shareholders
and is responsible for the stewardship of the business and affairs of the Company. The Board seeks to discharge such responsibility by
reviewing, discussing and approving the Company’s strategic planning and organizational structure and supervising management to
oversee that the foregoing enhance and preserve the underlying value of the Company.
Although directors may be elected by
the shareholders to bring special expertise or a point of view to Board deliberations, they are not chosen to represent a particular
constituency. The best interests of the Company as a whole must be paramount at all times.
QUALIFICATIONS OF DIRECTORS
A majority of the directors will be
“independent.” No director will be deemed independent unless the Board affirmatively determines the director has no material
relationship with the Company, directly or as an officer, shareholder or partner of an organization that has a material relationship
with the Company. The Board will observe all additional criteria for determining director independence pursuant to the rules of
any and all securities exchange(s) on which the securities of the Company are listed and posted for trading, and other governing
laws and regulations. The Board shall consider and affirmatively determine whether each individual director is independent on an annual
basis.
DUTIES OF DIRECTORS
The Board discharges its responsibility
for overseeing the management of the Company’s business by delegating to the Company’s senior officers the responsibility
for day-to-day management of the Company. The Board discharges its responsibilities both directly and through its committees, the Audit
Committee, the Compensation Committee and the Corporate Governance Committee. The membership of the foregoing committees shall satisfy
the independence requirements of applicable securities and exchange legislation and listing requirements (including the independence
requirements of any securities exchange(s) on which the securities of the Company are listed and posted for trading and any other
applicable law). In addition to these regular committees, the Board may appoint ad hoc committees periodically to address certain issues
of a more short-term nature. Each of the standing committees of the Board will have its own charter. The charter will set forth the responsibilities
of each committee, procedures of the committee and how the committee will report to the Board.
Directors must fulfill their
responsibilities consistent with their fiduciary duty to the Company in compliance with all applicable laws and regulations.
Directors will take into consideration the interests of shareholders, employees, the members of communities in which the Company
operates, and all other stakeholders in the Company.
In addition to the Board’s primary
roles of overseeing corporate performance and providing quality, depth and continuity of management to meet the Company’s strategic
objectives, principal duties include, but are not limited to the following categories:
Appointment of Management
| 1. | The Board has the responsibility for approving the appointment of the
Chief Executive Officer and all other officers of the Company and approving the compensation
of the executive officers for whom compensation is required to be individually reported under
applicable securities laws (or “named executive officers”), following
a review of the recommendations of the Compensation Committee. To the extent feasible, the
Board shall satisfy itself as to the integrity of the named executive officers and other
executive officers and ensure the named executive officers and other executive officers create
a culture of integrity throughout the Company. |
| 2. | The Board has the responsibility for establishing annual performance
expectations and corporate goals and objectives for the Chief Executive Officer and other
named executive officers and monitoring progress against those expectations. |
| 3. | The Board from time to time delegates to senior management the authority
to enter into certain types of transactions, including financial transactions, subject to
specified limits. Investments and other expenditures above the specified limits and material
transactions outside the ordinary course of business are reviewed by and subject to the prior
approval of the Board. |
| 4. | The Board oversees that succession planning programs are in place,
including programs to appoint, train, develop and monitor management. |
Board Organization
| 5. | The Board will respond to recommendations received from the Corporate
Governance Committee and Compensation Committee, but retains the responsibility for managing
its own affairs by giving its approval for its composition and size, the selection of the
Chair of the Board, candidates nominated for election to the Board, committee and committee
chair appointments, committee charters and director compensation. |
| 6. | The Board supports the separation of the role of the Chair of the Board
from the role of Chief Executive Officer. In the event the Chair of the Board is not independent,
the independent directors shall appoint an independent lead director. |
| 7. | The Board may delegate to Board committees matters it is responsible
for, including the approval of compensation of the Board and management, the conduct of performance
evaluations and oversight of internal controls systems, but the Board retains its oversight
function and ultimate responsibility for these matters and all other delegated responsibilities. |
| 8. | Independent directors will meet in camera as needed. Normally, such
meetings will occur at the end of regularly scheduled board meetings. |
| 9. | The Board has the authority to hire independent legal, financial or
other advisors as it deems necessary. |
Strategic Planning
| 10. | The Board has oversight responsibility to participate directly, and
through its committees, in reviewing, questioning and approving the mission of the business
and its objectives and goals. |
| 11. | The Board is responsible for adopting a strategic planning process
and approving and reviewing, on at least an annual basis, the business, financial and strategic
plans by which it is proposed the Company may reach those goals, and such strategic plans
will take into account, among other things, the opportunities and risks of the business. |
| 12. | The Board has the responsibility to provide input to management on
emerging trends and issues and on strategic plans, objectives and goals that management develops. |
Monitoring of Financial Performance and Other Financial
Reporting Matters
| 13. | The Board is responsible for enhancing congruence between shareholder
expectations, Company plans and management performance. |
| 14. | The Board is responsible for: |
| (a) | adopting processes for monitoring the Company’s progress
toward its strategic and operational goals, and to revise and alter its direction to management
in light of changing circumstances affecting the Company; and |
| (b) | taking action when Company performance falls short of its goals
or as other special circumstances warrant. |
| 15. | The Board shall be responsible for approving the audited consolidated
financial statements; interim consolidated financial statements and the notes and Management’s
Discussion and Analysis accompanying such consolidated financial statements. |
| 16. | The Board is responsible for reviewing and approving material transactions
outside the ordinary course of business and those matters the Board is required to approve
under the Company’s governing statute, including the payment of dividends, issuance,
purchase and redemption of securities, acquisitions and dispositions of material property,
plant and equipment and material capital expenditures. |
Risk Management
| 17. | The Board has responsibility for the identification of the principal
risks of the Company’s business and ensuring the implementation of appropriate systems
to effectively monitor and manage such risks with a view to
the long-term viability of the Company and achieving a proper balance between the risks incurred and the potential return to the Company’s
shareholders. |
| 18. | The Board is responsible for the Company’s internal control
and management information systems. |
Policies and Procedures
| 19. | The Board is responsible for: |
| (a) | developing the Company’s approach to corporate governance
and approving and monitoring compliance with all significant policies and procedures related
to corporate governance; and |
| (b) | approving policies and procedures designed to ensure the Company
operates at all times within applicable laws and regulations and to the highest ethical and
moral standards and, in particular, adopting a written code of business conduct and ethics
which is applicable to directors, officers and employees of the Company and which constitutes
written standards that are reasonably designed to promote integrity and to deter wrongdoing. |
| 20. | The Board enforces its policy respecting confidential treatment of
the Company’s proprietary information and Board deliberations. |
| 21. | The Board is responsible for monitoring compliance with the Company’s
Code of Ethics. Any waivers from the code that may be granted for the benefit of the Company’s
directors or executive officers must be granted by the Board (or a Board committee) only. |
Communications and Reporting
| 22. | The Board has approved and will revise from time to time as circumstances
warrant a Disclosure Policy to address communications with shareholders, employees, financial
analysts, the media and such other outside parties as may be appropriate. |
| 23. | The Board is responsible for: |
| (a) | overseeing the accurate reporting of the financial performance
of the Company to shareholders, other security holders and regulators on a timely and regular
basis; |
| (b) | overseeing that the financial results are reported fairly and in
accordance with Canadian generally accepted accounting standards and related legal disclosure
requirements; |
| (c) | taking steps to enhance the timely disclosure of any other developments
that have a significant and material impact on the Company; |
| (d) | reporting annually to shareholders on its stewardship for the preceding
year; and |
| (e) | overseeing the Company’s implementation of systems that accommodate
feedback from stakeholders. |
Orientation and Continuing Education
| 24. | The Board is responsible for: |
| (a) | ensuring all new directors receive a comprehensive orientation,
that they fully understand the role of the Board and its committees, as well as the contribution
individual directors are expected to make (including the commitment of time and resources
that the Company expects from its directors) and that they understand the nature and operation
of the Company’s business; and |
| (b) | providing continuing education opportunities for all directors,
so that individuals may maintain or enhance their skills and abilities as directors, as well
as to ensure their knowledge and understanding of the Company’s business remains current. |
Human Resources of Directors
| 25. | In connection with the nomination or appointment of individuals as
directors, the Board is responsible for: |
| (a) | considering what competencies and skills the Board, as a whole,
should possess; |
| (b) | assessing what competencies and skills each existing director possesses; |
| (c) | assessing what competencies and skills each new nominee will bring
to the Board; |
| (d) | considering the appropriate size of the Board with a view to facilitating
effective decision making; and |
| (e) | considering whether or not each new nominee can devote sufficient
time and resource to his or her duties as a board member. |
in carrying out each of these responsibilities, the Board
will consider the advice and input of the Corporate Governance Committee.
| 26. | While the Board does not restrict the number of public company boards
on which a director may serve, each director should ensure that he or she is able to devote
sufficient time and resources to carrying out their duties as a board member effectively.
As a general rule, directors are not permitted to join a board of another public company
on which two or more other directors of the Company serve. |
The Board supports the principle that its membership should
represent a diversity of backgrounds, experience and skills.
Board Evaluation
| 27. | The Board is responsible for ensuring that the Board, its committees
and each individual director are regularly assessed regarding his, her or its effectiveness
and contribution. An assessment will consider, in the case of the Board or a Board committee,
its mandate or charter and in the case of an individual director, any applicable position
description, as well as the competencies and skills each individual director is expected
to bring to the Board. |
Annual Review
| 28. | The Corporate Governance Committee shall review and reassess the adequacy
of this mandate at least annually and otherwise as it deems appropriate and recommend changes
to the Board, as necessary. The Corporate Governance Committee will ensure this mandate or
a summary that has been approved by the Corporate Governance Committee is disclosed in accordance
with all applicable securities laws or regulatory requirements in the Company’s annual
management information circular or such other annual filing as may be permitted or required
by applicable securities regulatory authorities. |
Adopted on January 30, 2024.
THIS PAGE INTENTIONALLY LEFT BLANK
Exhibit 4.12
FORM 51-102F3
MATERIAL CHANGE REPORT
| 1. | Name and Address of Company |
Satellos Bioscience Inc. (the "Company")
Royal Bank Plaza, South Tower
200 Bay Street, Suite 2800
Toronto, ON M5J 2J1
| 2. | Date of Material Change |
November 13, 2025.
A news release dated November 14,
2025, was disseminated through the facilities of Business Wire and subsequently filed on the System for Electronic Document Analysis and
Retrieval (SEDAR+) at www.sedarplus.ca.
| 4. | Summary of Material Change |
On November 14, 2025, the Company
announced the appointment of Mark Nawacki to the board of directors of the Company (the "Board").
Full Description of Material Change
5.1 Full Description of Material Change
On November 14, 2025, the Company
announced the appointment of Mark Nawacki to the Board. Mr. Nawacki is co-founder, president and former CEO of Searchlight Pharma.
Mr. Nawacki brings more than two decades of experience across pharmaceuticals, corporate development, and mergers and acquisitions.
Mr. Nawacki co-founded Searchlight Pharma in 2015 and served as President and CEO from its inception untill May 2024, guiding
the organization’s expansion through acquisitions, in-licensing, and commercial growth into one of the three largest specialty pharmaceutical
businesses in Canada. Searchlight was acquired by Apotex in June 2024, and Mark continues to lead Searchlight, now the innovative,
branded division of Apotex, as President. Mr. Nawacki's earlier career includes senior corporate development roles at Paladin Labs
and board positions with healthcare companies.
| 5. | Disclosure for Restructuring Transaction |
Not applicable.
| 6. | Reliance on subsection 7.1(2) or (3) of National Instrument 51-102 |
Not applicable.
Not applicable.
For additional information please contact Liz Williams,
Chief Financial Officer of the Company at ir@satellos.com.
November 18, 2025.
Exhibit 4.13
FORM 51-102F3
MATERIAL CHANGE REPORT
| 1. | Name and Address of Company |
Satellos Bioscience Inc. (the "Company"
or "Satellos")
Royal Bank Plaza, South Tower
200 Bay Street, Suite 2800
Toronto, ON M5J 2J1
| 2. | Date of Material Change |
January 27, 2026 and January 29, 2026.
News releases dated January 28,
2026 and January 29, 2026 were disseminated through the facilities of Business Wire, and subsequently filed on SEDAR+ at www.sedarplus.ca.
| 4. | Summary of Material Change |
On January 27, 2026, pursuant
to the filing of articles of amendment, the Company completed a consolidation (the "Consolidation") of its common shares
(the "Common Shares") on the basis of twelve (12) pre-Consolidation Common Shares for every one (1) post-Consolidation
Common Share. The Common Shares began trading on the Toronto Stock Exchange (the "TSX") on a post- Consolidation basis
on January 30, 2026. The Company also announced that it had applied to list the Common Shares on The Nasdaq Stock Market LLC ("Nasdaq")
under the symbol "MSLE".
On January 29, 2026, the Company
announced the appointment of Antoinette Paone as Chief Development Officer ("CDO") and Head of Regulatory Affairs.
| 5. | Full Description of Material Change |
| 5.1 | Full Description of Material Change |
Share Consolidation
On January 27, 2026, the Company
completed the Consolidation. The Common Shares began trading on the TSX on a post-Consolidation basis on January 30, 2026.
The Consolidation ratio approved by
the Board of Directors is within the previously disclosed range of ratios for a share consolidation authorized by the shareholders of
the Company at the Annual and Special Meeting of Shareholders held on June 18, 2025. The number of Common Shares outstanding immediately
prior to the Consolidation was 185,507,153. The number of Common Shares outstanding immediately following the Consolidation is 15,458,903.
The Consolidation is intended to increase
the quoted market per share price of the Company's Common Shares to meet Nasdaq's requirement that the Common Shares trade at US$3.00
or higher as of the listing date. The Company has applied to list the Common Shares on Nasdaq under the symbol "MSLE". Final
approval of the listing of the Company’s Common Shares on Nasdaq remains subject to the satisfaction of all applicable listing
requirements and the approval of Nasdaq.
Each shareholder's percentage ownership
interest in the Company and proportional voting power remains substantially unchanged following the Consolidation, subject to minor adjustments
resulting from the treatment of fractional shares. Outstanding stock options and pre-funded warrants will be adjusted in accordance with
their respective terms to reflect the Consolidation, including proportionate adjustments to the number of securities issuable upon exercise
thereunder and the applicable exercise prices.
No fractional Common Shares will be
issued as a result of the Consolidation. All fractions of shares will be rounded down to the nearest whole number. No cash consideration
will be paid in respect of fractional shares.
The Company’s new CUSIP number
is 80401L803 and the new ISIN number is CA80401L8033. The Company’s name and trading symbol on the TSX remains unchanged.
A letter of transmittal was mailed
to registered shareholders providing instructions to surrender the certificates evidencing their Common Shares to Satellos’ transfer
agent, Computershare Investor Services Inc., for replacement certificates representing the number of Common Shares to which they are
entitled as a result of the Consolidation. A copy of the letter of transmittal is available on the SEDAR+ profile of Satellos at www.sedarplus.ca.
Non-registered shareholders who hold
Common Shares through a bank, broker or other nominee should note that these intermediaries may have their own procedures for processing
the Consolidation which may differ from those described above for registered shareholders. Nonregistered shareholders who have questions
should contact their bank, broker or other nominee for more information.
Appointment of Chief Development Officer
On January 29, 2026, the Company
announced the appointment of Antoinette Paone as CDO and Head of Regulatory Affairs. Ms. Paone brings extensive experience leading
regulatory strategy from clinical development through approval, including her work on Kalydeco and Orkambi at Vertex Pharmaceuticals (Nasdaq:
VRTX). She joins Satellos from Generation Bio (Nasdaq: GBIO), where she most recently served as Chief Operating Officer.
At Generation Bio, Ms. Paone led
the company’s growth from start-up to a development-ready organization, shaping key business functions, including regulatory strategy,
quality, CMC, technical operations, and program management. She was also part of the executive team responsible for a series of equity
financings over four years, including a successful IPO and a strategic partnership with Moderna. Prior to Generation Bio, she spent more
than a decade at Vertex, most recently as Vice President, Head of North American Regulatory Affairs Strategy, where she led regulatory
efforts for multiple novel small molecule cystic fibrosis therapies, including Kalydeco and Orkambi. Earlier in her career, she held roles
at Merck & Co. and Millenium Pharmaceuticals, Inc. Ms. Paone holds an MBA from Bentley College, an MS in Organic Chemistry
from Yale University, and a BS in Chemistry from Fordham University.
| 6. | Disclosure for Restructuring Transaction |
Not applicable.
| 7. | Reliance on subsection 7.1(2) or (3) of National
Instrument 51-102 |
Not applicable.
Not applicable.
For additional information please contact
Liz Williams, Chief Financial Officer of the Company at ir@satellos.com.
January 30, 2026.
Forward Looking Statements
This material change report contains
forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, "forward-looking
statements") that relate to the Company's current expectations and views of future events, including, without limitation, statements
with respect to the potential listing of the Common Shares on Nasdaq. Any statements that express, or involve discussions as to, expectations,
beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such
as "will likely result", "are expected to", "expects", "will continue", "is anticipated",
"anticipates", "believes", "estimated", "intends", "plans", "forecast", "projection",
"strategy", "objective" and "outlook") are not historical facts and may be forward-looking statements and
may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed
in such forward-looking statements. No assurance can be given that these expectations will prove to be correct and such forward-looking
statements included in this material change report should not be unduly relied upon. These statements speak only as of the date of this
material change report. Forward-looking statements are based on a number of assumptions and are subject to a number of risks and uncertainties,
many of which are beyond the Company's control, which could cause actual results and events to differ materially from those that are disclosed
in or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, those listed in the "Risk
Factors" section of the Company's Annual Information Form dated March 26, 2025. The Company undertakes no obligation to
update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be
required by law. New factors emerge from time to time, and it is not possible for the Company to predict all of them or assess the impact
of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained
in any forward-looking statement. Any forward-looking statements contained in this material change report are expressly qualified in their
entirety by this cautionary statement.
Exhibit 5.1
Consent of Independent Auditor
We hereby consent to the incorporation by reference in this Registration
Statement on Form F-10 of Satellos Bioscience Inc. (the Company) of our Independent Auditor’s Report dated March 25, 2025 relating
to the consolidated financial statements of the Company, which appears in Exhibit 4.3 to this Form F-10.
We also consent to the reference to us under the heading, “Auditors”
in such Registration Statement on Form F-10.
/s/ PricewaterhouseCoopers LLP
Chartered Professional Accountants, Licensed Public Accountants
Toronto,
Ontario, Canada
February 5, 2026
Exhibit 5.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in
the Registration Statement on Form F-10, of our auditor’s report dated March 27, 2024 with respect to the consolidated
financial statements of Satellos Bioscience Inc. and its subsidiaries as at December 31, 2023 and December 31, 2022 and for
each of the years in the two year period ended December 31, 2023.
We also consent the reference to our firm under
the heading “Interests of Experts” in the Annual Information Form filed as Exhibit 4.2 to the registration statement
and under the heading “Auditors” in the prospectus supplement and short form base shelf prospectus, each of which forms part
of this Registration Statement on Form F-10.
/s/ MNP LLP
Chartered Professional Accountants
Licensed Public Accountants
February 5, 2026
Mississauga, Canada
Exhibit 5.3
| |
 |
200 Bay Street, South Tower
Suite 2800
Toronto, ON
647 499 2828
mintz.com |
February 5, 2026
Satellos Bioscience Inc.
Royal Bank Plaza, South Tower
200 Bay Street, Suite 2800
Toronto, ON M5J 2J1
Ladies and Gentlemen:
| Re: | Registration Statement on Form F-10 |
We hereby consent to the references to our firm
name in the prospectus filed as part of this registration statement on Form F-10 of Satellos Bioscience Inc. In giving this consent,
we do not thereby admit that we come within the category of persons whose consent is required by the Securities Act of 1933, as amended,
or the rules and regulations promulgated thereunder.
Yours truly,
(signed) "Mintz LLP"
BOSTON LOS ANGELES MIAMI NEW YORK SAN DIEGO SAN FRANCISCO TORONTO
WASHINGTON
MINTZ LLP
F-10
F-10
EX-FILING FEES
0001421642
Satellos Bioscience Inc.
N/A
N/A
0.0001381
0.0001381
0.0001381
0.0001381
0.0001381
0.0001381
0001421642
2026-02-02
2026-02-02
0001421642
1
2026-02-02
2026-02-02
0001421642
2
2026-02-02
2026-02-02
0001421642
3
2026-02-02
2026-02-02
0001421642
4
2026-02-02
2026-02-02
0001421642
5
2026-02-02
2026-02-02
0001421642
6
2026-02-02
2026-02-02
0001421642
7
2026-02-02
2026-02-02
iso4217:USD
xbrli:pure
xbrli:shares
|
Calculation of Filing Fee Tables
|
|
F-10
|
|
Satellos Bioscience Inc.
|
|
Table 1: Newly Registered Securities
|
☐Not Applicable
|
|
|
|
Security Type
|
Security Class Title
|
Fee Calculation Rule or Instruction
|
Amount Registered
|
Proposed Maximum Offering Price Per Unit
|
Maximum Aggregate Offering Price
|
Fee Rate
|
Amount of Registration Fee
|
|
|
|
Equity
|
Common Shares, no par value
|
457(o)
|
|
|
|
|
|
|
|
|
Equity
|
Preferred Shares
|
457(o)
|
|
|
|
|
|
|
|
|
Debt
|
Debt Securities
|
457(o)
|
|
|
|
|
|
|
|
|
Other
|
Subscription Receipts
|
457(o)
|
|
|
|
|
|
|
|
|
Other
|
Warrants
|
457(o)
|
|
|
|
|
|
|
|
|
Other
|
Units
|
457(o)
|
|
|
|
|
|
|
Fees to be Paid
|
1
|
Unallocated (Universal) Shelf
|
|
457(o)
|
|
|
$
150,000,000.00
|
0.0001381
|
$
20,715.00
|
|
Fees Previously Paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Offering Amounts:
|
|
$
150,000,000.00
|
|
$
20,715.00
|
|
|
|
|
Total Fees Previously Paid:
|
|
|
|
$
0.00
|
|
|
|
|
Total Fee Offsets:
|
|
|
|
$
0.00
|
|
|
|
|
Net Fee Due:
|
|
|
|
$
20,715.00
|
|
1
|
Note.1a. There are being registered under this Registration Statement such indeterminate number of common shares (the "Common Shares"), preferred shares, debt securities, subscription receipts, warrants and units of Satellos Bioscience Inc. (the "Registrant") as shall have an aggregate initial offering price not to exceed US$150,000,000. The proposed maximum initial offering price per security will be determined, from time to time, by the Registrant in connection with the sale of the securities under this Registration Statement. If, as a result of stock splits, stock dividends or similar transactions, the number of Common Shares purported to be registered on this Registration Statement changes, the provisions of Rule 416 under the Securities Act of 1933, as amended, shall apply to this Registration Statement.
Note.1b. The proposed maximum aggregate offering price per unit of security will be determined from time to time by the registrant in connection with the issuance by the registrant of the securities registered hereunder and is not specified as to each class of security.
Note.1c. The proposed maximum aggregate offering price per class of security will be determined from time to time by the registrant in connection with the issuance by the registrant of the securities registered hereunder and is not specified as to each class of security.
|
|
|
Table 2: Fee Offset Claims and Sources
|
☑Not Applicable
|
|
|
|
Registrant or Filer Name
|
Form or Filing Type
|
File Number
|
Initial Filing Date
|
Filing Date
|
Fee Offset Claimed
|
Security Type Associated with Fee Offset Claimed
|
Security Title Associated with Fee Offset Claimed
|
Unsold Securities Associated with Fee Offset Claimed
|
Unsold Aggregate Offering Amount Associated with Fee Offset Claimed
|
Fee Paid with Fee Offset Source
|
|
Rules 457(b) and 0-11(a)(2)
|
|
Fee Offset Claims
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
|
Fee Offset Sources
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
|
Rule 457(p)
|
|
Fee Offset Claims
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
|
Fee Offset Sources
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
|
Table 3: Combined Prospectuses
|
☑Not Applicable
|
|
|
Security Type
|
Security Class Title
|
Amount of Securities Previously Registered
|
Maximum Aggregate Offering Price of Securities Previously Registered
|
Form Type
|
File Number
|
Initial Effective Date
|
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
![[MISSING IMAGE: lg_satellos-4c.jpg]](https://content.edgar-online.com/edgar_conv_img/2026/02/05/0001104659-26-010890_lg_satellos-4c.jpg)