As filed with the Securities and Exchange Commission on July 10,
2017
Registration No. 333-218297
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pre-Effective Amendment No. 2
to
FORM F-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933
INTELLIPHARMACEUTICS
INTERNATIONAL INC.
(Exact
name of Registrant as specified in its charter)
Not Applicable
(Translation
of Registrant’s name into English)
|
Canada
(State
or other jurisdiction of
incorporation
or organization)
|
Not Applicable
(I.R.S.
Employer
Identification
Number)
|
Intellipharmaceutics
International Inc.
30 Worcester Road
Toronto, Ontario
Canada, M9W 5X2
(416) 798-3001
(Address
and telephone number of Registrant’s principal executive
offices)
Corporation Service Company
1090 Vermont Avenue N.W.
Washington, D.C. 20005
(800) 927-9800
(Name,
address, and telephone number of agent for service)
___________________
With copies to:
|
Richard DiStefano, Esq.
Blank Rome LLP
405 Lexington Avenue
New York, New York 10174
Telephone: (212) 885-5000
Facsimile: (212) 885-5001
|
Tina M. Woodside, Esq.
Gowling WLG (Canada)
LLP
Suite 1600, 1 First Canadian Place
100 King Street West
Toronto, Ontario M5X 1G5
Telephone: (416) 369-4584
Facsimile: (416) 862-7661
|
Approximate date of commencement of proposed
sale to the public: From time to time after this
registration statement becomes effective.
If the
only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check
the following box. [ ]
If any
of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box.
[X]
If this
Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. [ ]
If this
Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same offering. [
]
If this
Form is a registration statement pursuant to General Instruction
I.C. or a post-effective amendment thereto that shall become
effective upon filing with the Commission pursuant to Rule 462(e)
under the Securities Act, please check the following box. [
]
If this
Form is a post-effective amendment to a registration statement
filed pursuant to General Instruction I.C. filed to register
additional securities or additional classes of securities pursuant
to Rule 413(b) under the Securities Act, please check the following
box. [ ]
Indicate by check mark whether the registrant is an emerging growth company as
defined in Rule 405 of the Securities Act of
1933.
Emerging growth
company [ ]
If an emerging growth company that prepares its
financial statements in accordance with U.S. GAAP, indicate by
check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial
accounting standards† provided pursuant to Section 7(a)(2)(B)
of the Securities Act. [ ]
†
The term “new or revised financial accounting standard”
refers to any update issued by the Financial Accounting Standards
Board to its Accounting Standards Codification after April 5,
2012.
CALCULATION OF REGISTRATION FEE
|
Title
of Each Classof Securitiesto be Registered
|
Amount
to
be Registered
(1)(2)(3)
|
Proposed
MaximumAggregate Price Per Security(1)(3)
|
Proposed
MaximumAggregateOffering Price (3)
|
Amount
ofRegistration Fee
|
|
Common
Shares
|
—
|
—
|
—
|
—
|
|
Preference
Shares
|
—
|
—
|
—
|
—
|
|
Warrants
|
—
|
—
|
—
|
—
|
|
Subscription
Receipts
|
—
|
—
|
—
|
—
|
|
Subscription
Rights
|
—
|
—
|
—
|
—
|
|
Units(4)
|
—
|
—
|
—
|
—
|
|
Total
|
$U.S.100,000,000(5)
|
---
|
$U.S. 100,000,000
|
$U.S.11,590(6)(7)(8)
|
(1) There are being registered under this Registration
Statement such indeterminate number of common shares, preference
shares, warrants, subscription receipts, subscription rights and
units as shall have an aggregate initial offering price not to
exceed U.S.$100,000,000. Any securities registered by this
Registration Statement may be sold separately or in any combination
or as units with other securities registered under this
Registration Statement. 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. The securities
registered also include such indeterminate number of common shares
and preference shares as may be issued upon conversion of
or
exchange for preference shares that provide for conversion or
exchange, upon exercise of warrants or pursuant to the
anti-dilution provisions of any such
securities.
(2)
Pursuant to Rule 416 under the Securities Act of 1933, as amended,
or Securities Act, the securities being registered hereunder also
include such indeterminate number of common shares and preference
shares as may be issuable with respect to the shares being
registered hereunder as a result of stock splits, stock dividends
or similar transactions.
(3) In
United States dollars or the equivalent thereof as converted from
Canadian dollars.
(4) Consisting
of some or all of the securities listed above, in any combination,
including common shares, preference shares, warrants, subscription
receipts and subscription rights.
(5) 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 pursuant to General Instruction II.C of Form F-3 under the
Securities Act.
(6) The
amount of the registration fee has been calculated in accordance
with Rule 457(o) of the Securities Act.
(7)
Determined in accordance with Section 6(b) of the Securities
Act at a rate equal to $115.90 per $1,000,000 of the proposed
maximum aggregate offering price.
(8) The
registrant has previously paid the registration fee with the
initial filing of this registration statement.
Pursuant
to Rule 415(a)(6) under the Securities Act, this Registration
Statement includes $86,920,938 of securities that were previously
registered, but were not sold, pursuant to the registrant’s
registration statement on Form F-3 (File No. 333-196112) (the
“Prior Registration Statement”), including $4,095,270
that may be sold under the registrant’s current at-the-market
equity offering program and common shares that are issuable
upon the exercise of warrants previously issued by the registrant.
The Prior Registration Statement registered securities for a
maximum aggregate offering price of $100,000,000 and of that
amount, the registrant has sold securities for an aggregate
offering price of $13,079,062, leaving a balance of unsold
securities with an aggregate offering price of
$86,920,938.
The
Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states
that this Registration Statement shall thereafter become effective
in accordance with Section 8(a) of the Securities Act or until this
Registration Statement shall become effective on such date as the
Securities and Exchange Commission, acting pursuant to Section 8(a)
of the Securities Act, may determine.
Information
contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed
with the Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy
nor shall there be any sale of these securities in any State in
which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
State.
A copy of this preliminary short form base shelf prospectus has
been filed with the securities regulatory authorities in each of
the provinces and territories of Canada, other than the Province of
Quebec, but has not yet become final for the purpose of the sale of
securities. Information contained in this preliminary
short form base shelf prospectus may not be complete and may have
to be amended. The securities may not be sold until a
receipt for the short form base shelf prospectus is obtained from
the securities regulatory authorities.
This short form base shelf prospectus has been filed under
legislation in each of the provinces and territories of Canada,
other than the Province of Quebec, 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.
No securities regulatory authority has expressed an opinion about
these securities and it is an offence to claim otherwise. This
short form base shelf prospectus constitutes an 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 in those jurisdictions.
Information has
been incorporated by reference in this short form base shelf
prospectus from documents filed with securities commissions or
similar authorities in Canada. Copies of the documents incorporated
herein by reference may be obtained on request without charge from
the Chief Financial Officer of the Company at 30 Worcester Road,
Toronto, Ontario, Canada M9W 5X2, telephone (416) 798-3001, and are
also available electronically at www.sedar.com.
PRELIMINARY SHORT FORM BASE SHELF PROSPECTUS
|
New Issue
|
|
July 10, 2017
|
INTELLIPHARMACEUTICS INTERNATIONAL INC.
U.S.$100,000,000
Common Shares
Preference Shares
Warrants
Subscription Receipts
Subscription Rights
Units
___________
Intellipharmaceutics
International Inc. (the “Company”,
“Intellipharmaceutics”, “we”,
“us” or “our” ) may offer and issue
from time to time common shares of the Company (“common
shares”), preference shares of the Company (“preference
shares”), warrants to purchase common shares or preference
shares (“warrants”), subscription receipts
(“subscription receipts”), subscription rights
(“subscription rights”) and/or units comprised of one
or more of the foregoing (“units” and together with the
common shares, preference shares, warrants, subscription receipts
and subscription rights, the “securities”) or any
combination thereof for up to an aggregate initial offering price
of U.S.$100,000,000 (or the equivalent thereof in other currencies)
during the period that the registration statement of which this
short form base shelf prospectus (the “prospectus”),
including any amendments hereto, forms a part remains
effective. Any offerings of the Company’s
securities in Canada pursuant to this prospectus and any related
filings with the securities commissions or other securities
regulatory bodies in Canada shall be made only during the 25-month
period commencing on the date hereof. Securities may be offered
separately or together, in amounts, at prices and on terms to be
determined based on market conditions at the time of sale and set
forth in an accompanying prospectus supplement (a “prospectus
supplement”).
The
specific terms of the securities with respect to a particular
offering will be set out in the applicable prospectus supplement
and may include, where applicable (i) in the case of common shares,
the number of common shares offered, the offering price, whether
the common shares are being offered for cash, and any other terms
specific to the common shares being offered, (ii) in the case of
preference shares, the number of preference shares offered, the
designation of a particular class or series, if applicable, the
offering price, whether the preference shares are being offered for
cash, the dividend rate, if any, any terms for redemption or
retraction, any conversion rights, and any other terms specific to
the preference shares being offered, (iii) in the case of warrants,
the offering price, whether the warrants are being offered for
cash, the designation, the number and the terms of the common
shares or preference shares purchasable upon exercise of the
warrants, any procedures that will result in the adjustment of
these numbers, the exercise price, the dates and periods of
exercise and any other terms specific to the warrants being
offered, (iv) in the case of subscription receipts, the number of
subscription receipts being offered, the offering price, whether
the subscription receipts are being offered for cash, the
procedures for the exchange of the subscription receipts for common
shares, preference shares or warrants, as the case may be, and any
other terms specific to the subscription receipts being offered,
(v) in the case of subscription rights, the number of subscription
rights being offered, the exercise price, the procedures for the
exercise of the subscription rights and any other terms specific to
the subscription rights being offered, and (vi) in the case of
units, the number of units offered, the offering price, and any
other terms specific to the units being offered. Where
required by statute, regulation or policy, and where securities are
offered in currencies other than Canadian dollars, appropriate
disclosure of foreign exchange rates applicable to the securities
will be included in the prospectus supplement describing the
securities.
All
shelf information permitted under applicable law 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 the securities to which the
prospectus supplement pertains.
This
prospectus constitutes a public offering of the securities only in
those jurisdictions where they may be lawfully offered for sale and
only by persons permitted to sell the securities in those
jurisdictions. The Company may offer and sell securities to, or
through, underwriters or dealers and also may offer and sell
certain securities directly to other purchasers or through agents
pursuant to exemptions from registration or qualification under
applicable securities laws. A prospectus supplement relating to
each issue of securities offered thereby will set forth the names
of any underwriters, dealers, or agents involved in the offering
and sale of the securities and will set forth the terms of the
offering of the securities, the method of distribution of the
securities including, to the extent applicable, the proceeds to the
Company and any fees, discounts or any other compensation payable
to underwriters, dealers or agents and any other material terms of
the plan of distribution.
The
outstanding common shares are listed for trading on the Toronto
Stock Exchange (the “TSX”), and on The NASDAQ Capital
Market (“NASDAQ”), under the symbol “IPCI”.
Unless otherwise specified in the applicable prospectus supplement,
no securities, other than common shares, will be listed on any
securities exchange.
On July
7, 2017, the closing sale price of the common shares as reported by
the TSX and NASDAQ was Cdn$3.07 and $2.41, respectively. On July 7,
2017, the aggregate market value of our outstanding common shares
held by non-affiliates was $75,820,822, based on our 30,572,912
outstanding common shares as of such date, of which 24,450,932
common shares were held by non-affiliates, and a per share price of
$2.48, the closing sale price of our common shares on July 3, 2017
(which is the highest closing sale price of our common shares in
the last 60 days). We have sold or offered securities having an
aggregate market value of approximately $3,427,319 pursuant to
General Instruction I.B.5 of Form F-3 during the prior twelve
calendar month period that ends on and includes the date of this
prospectus.
The
Company’s registered office and head office is located at 30
Worcester Road, Toronto, Ontario, Canada, M9W 5X2.
We
are a foreign private issuer under United States
(“U.S.”) securities laws. The financial
statements incorporated herein by reference have been prepared in
accordance with accounting principles generally accepted in the
United States of America (“U.S. GAAP”). The
offering price of the securities being distributed under this
prospectus will be stated in U.S. dollars.
Purchasers
of any securities should be aware that the acquisition of the
securities may have tax consequences both in the United States and
in Canada. Such consequences for purchasers who are resident in, or
citizens of, the United States or who are resident in Canada may
not be described fully herein or in any applicable prospectus
supplement. Purchasers of the securities should read any applicable
tax discussion contained in the applicable prospectus supplement
with respect to a particular offering of securities.
The
enforcement by investors of civil liabilities under U.S. federal
securities laws may be affected adversely by the fact that the
Company is incorporated under the laws of Canada, that all of its
officers and directors are residents of Canada, that some or all of
the experts named in the registration statement are residents
of a foreign country, and that a substantial portion of the assets
of the Company and said persons are located outside the United
States.
NEITHER
THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SEC”)
NOR ANY STATE SECURITIES COMMISSION OR CANADIAN SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
No
underwriter has been involved in the preparation of this prospectus
nor has any underwriter performed any review of the contents of
this prospectus.
Investing in the
securities involves certain risks. See “Risk
Factors” beginning on page 6 of this
prospectus. Prospective purchasers of the securities
should carefully consider all the information in this prospectus
and in the documents incorporated by reference in this
prospectus.
The
date of this prospectus is July ,
2017
TABLE OF CONTENTS
|
TRADEMARKS
|
1
|
|
CAUTIONARY NOTE
REGARDING FORWARD-LOOKING INFORMATION
|
1
|
|
WHERE YOU CAN FIND
MORE INFORMATION; INCORPORATION BY REFERENCE
|
4
|
|
FINANCIAL
INFORMATION
|
6
|
|
EXCHANGE RATE
INFORMATION
|
6
|
|
RISK
FACTORS
|
6
|
|
THE
COMPANY
|
31
|
|
CONSOLIDATED
CAPITALIZATION
|
35
|
|
USE OF
PROCEEDS
|
35
|
|
EXPENSES OF
ISSUANCE AND DISTRIBUTION
|
36
|
|
PLAN OF
DISTRIBUTION
|
36
|
|
RELATED PARTY
TRANSACTIONS
|
37
|
|
DESCRIPTION OF
SHARE CAPITAL
|
37
|
|
TRADING PRICE AND
VOLUME
|
39
|
|
PRIOR
SALES
|
40
|
|
DIVIDEND
POLICY
|
41
|
|
DESCRIPTION OF
WARRANTS
|
41
|
|
DESCRIPTION OF
SUBSCRIPTION RECEIPTS
|
42
|
|
DESCRIPTION OF
SUBSCRIPTION RIGHTS
|
43
|
|
DESCRIPTION OF
UNITS
|
44
|
|
CERTAIN UNITED
STATES FEDERAL INCOME TAX CONSIDERATIONS
|
44
|
|
CERTAIN CANADIAN
FEDERAL INCOME TAX CONSIDERATIONS
|
54
|
|
EXPERTS
|
56
|
|
LEGAL
PROCEEDINGS
|
56
|
|
LEGAL
MATTERS
|
56
|
|
TRANSFER AGENT AND
REGISTRAR
|
56
|
|
PURCHASERS’
STATUTORY RIGHTS
|
57
|
|
ENFORCEMENT OF
CERTAIN CIVIL LIABILITIES
|
58
|
|
DOCUMENTS FILED AS
PART OF THE REGISTRATION STATEMENT
|
58
|
|
DISCLOSURE OF
COMMISSION POSITION ON INDEMNIFICATION FOR U.S. SECURITIES ACT
LIABILITY
|
58
|
You
should rely only on the information contained in or incorporated by
reference into this prospectus or any prospectus
supplement. References to this “prospectus”
include documents incorporated by reference therein. See
“Where You Can Find More Information; Incorporation by
Reference” at page 4 of this prospectus. The
information in or incorporated by reference into this prospectus is
current only as of its date. We have not authorized
anyone to provide you with information that is
different. This document may only be used where it is
legal to offer these securities.
Any
reference in this prospectus or any prospectus supplement to our
“products” includes a reference to our product
candidates and future products we may develop.
Whenever
we refer to any of our current product candidates (including
additional product strengths of products we are currently
marketing, such as generic Focalin XR® (dexmethylphenidate
hydrochloride extended-release) capsules and generic Seroquel
XR® (quetiapine fumarate extended release) tablets and future
products we may develop, no assurances can be given that we, or any
of our strategic partners, will successfully commercialize or
complete the development of any of such product candidates or
future products under development or proposed for development, that
regulatory approvals will be granted for any such product candidate
or future product, or that any approved product will be produced in
commercial quantities or sold profitably.
In
this prospectus, any prospectus supplement, and/or the documents
incorporated by reference herein or therein, we refer to
information regarding potential markets for our products, product
candidates and other industry data. We believe that all such
information has been obtained from reliable sources that are
customarily relied upon by companies in our industry. However, we
have not independently verified any such information.
Intellipharmaceutics™, Hypermatrix™,
Drug Delivery Engine™, IntelliFoam™,
IntelliGITransporter™, IntelliMatrix™,
IntelliOsmotics™, IntelliPaste™, IntelliPellets™,
IntelliShuttle™, Rexista™, nPODDDS™ ,
PODRAS™ and Regabatin™ are our trademarks. These
trademarks are important to our business. Although we may have
omitted the “TM” trademark designation for such
trademarks in this prospectus or in any prospectus supplement, all
rights to such trademarks are nevertheless reserved. Unless
otherwise noted, other trademarks used in this prospectus are the
property of their respective holders.
Certain
statements included and incorporated by reference in this
prospectus constitute “forward-looking statements”
within the meaning of the United States Private Securities
Litigation Reform Act of 1995 and/or “forward-looking
information” under the Securities Act (Ontario). These
statements include, without limitation, statements expressed or
implied regarding our plans, goals and milestones, status of
developments or expenditures relating to our business, plans to
fund our current activities, statements concerning our partnering
activities, health regulatory submissions, strategy, future
operations, future financial position, future sales, revenues and
profitability, projected costs, and market penetration. In some
cases, you can identify forward-looking statements by terminology
such as “may,” “will,”
“should,” “expects,” “plans,”
“plans to,” “anticipates,”
“believes,” “estimates,”
“predicts,” “confident,”
“prospects,” “potential,”
“continue,” “intends,” "look forward,"
“could,” or the negative of such terms or other
comparable terminology. We made a number of assumptions in the
preparation of our forward-looking statements. You should not place
undue reliance on our forward-looking statements, which are subject
to a multitude of known and unknown risks and uncertainties that
could cause actual results, future circumstances or events to
differ materially from those stated in or implied by the
forward-looking statements.
Risks,
uncertainties and other factors that could affect our actual
results include, but are not limited to, the effects of general
economic conditions, securing and maintaining corporate alliances,
our estimates regarding our capital requirements, and the effect of
capital market conditions and other factors, including the current
status of our product development programs, on capital
availability, the estimated proceeds (and the expected use of any
proceeds) we may receive from any offering of our securities, the
potential dilutive effects of any future financing, our ability to
maintain compliance with the continued listing requirements of the
principal markets on which our securities are traded, our programs
regarding research, development and commercialization of our
product candidates, the timing of such programs, the timing, costs
and uncertainties regarding obtaining regulatory approvals to
market our product candidates and the difficulty in predicting the
timing and results of any product launches, the timing and amount
of profit-share payments from our commercial partners, and the
timing and amount of any available investment tax credits. Other
factors that could cause actual results to differ materially
include but are not limited to:
●
the actual or
perceived benefits to users of our drug delivery technologies,
products and product candidates as compared to others;
●
our ability to
establish and maintain valid and enforceable intellectual property
rights in our drug delivery technologies, products and product
candidates;
●
the scope of
protection provided by intellectual property for our drug delivery
technologies, products and product candidates;
●
the actual size of
the potential markets for any of our products and product
candidates compared to our market estimates;
●
our selection and
licensing of products and product candidates;
●
our ability to
attract distributors and/or commercial partners with the ability to
fund patent litigation and with acceptable product development,
regulatory and commercialization expertise and the benefits to be
derived from such collaborative efforts;
1
●
sources of revenues
and anticipated revenues, including contributions from distributors
and commercial partners, product sales, license agreements and
other collaborative efforts for the development and
commercialization of product candidates;
●
our ability to
create an effective direct sales and marketing infrastructure for
products we elect to market and sell directly;
●
the rate and degree of market acceptance of our
products;
●
delays in product approvals that may be caused by
changing regulatory requirements;
●
the difficulty in predicting the timing of
regulatory approval and launch of competitive
products;
●
the difficulty in predicting the impact of
competitive products on volume, pricing, rebates and other
allowances;
●
the number of
competitive product entries, and the nature and extent of any
aggressive pricing and rebate activities that may
follow;
●
the inability to forecast wholesaler demand
and/or wholesaler buying patterns;
●
the seasonal
fluctuation in the numbers of prescriptions written for our Focalin
XR® (dexmethylphenidate hydrochloride extended-release)
capsules, which may produce substantial fluctuations in
revenues;
●
the timing and
amount of insurance reimbursement regarding our
products;
●
changes in laws and
regulations affecting the conditions required by the United States
Food and Drug Administration, or FDA, for approval, testing and
labeling of drugs including abuse or overdose deterrent properties,
and changes affecting how opioids are regulated and prescribed by
physicians;
●
changes in laws and
regulations, including Medicare and Medicaid, affecting among other
things, pricing and reimbursement of pharmaceutical
products;
●
changes in U.S.
federal income tax laws currently being considered, including, but
not limited to, the U.S. changing the method by which foreign
income is taxed and resulting changes to the passive foreign
investment company laws and regulations which may impact our
shareholders;
●
the success and
pricing of other competing therapies that may become
available;
●
our ability to
retain and hire qualified employees;
●
the availability
and pricing of third-party sourced products and
materials;
●
challenges related
to the development, commercialization, technology transfer,
scale-up, and/or process validation of manufacturing processes for
our products or product candidates;
2
●
the manufacturing
capacity of third-party manufacturers that we may use for our
products;
●
potential product
liability risks;
●
the recoverability
of the cost of any pre-launch inventory should a planned product
launch encounter a denial or delay of approval by regulatory
bodies, a delay in commercialization, or other potential
issues;
●
the successful
compliance with FDA, Health Canada and other governmental
regulations applicable to us and our third-party
manufacturers’ facilities, products and/or
businesses;
●
our reliance on
commercial partners, and any future commercial partners, to market
and commercialize our products and, if approved, our product
candidates;
●
difficulties,
delays or changes in the FDA approval process or test criteria for
abbreviated new drug applications, or ANDAs, and new drug
applications, or NDAs;
●
challenges in
securing final FDA approval for our product candidates, including
Rexista™ in particular, if a patent infringement suit is
filed against us with respect to any particular product
candidates (such as in the case of Rexista™), which could
delay the FDA’s final approval of such product
candidates;
●
healthcare reform
measures that could hinder or prevent the commercial success of our
products and product candidates;
●
the FDA may not
approve requested product labeling for our product candidate(s)
having abuse-deterrent properties targeting common forms of abuse
(oral, intra-nasal and intravenous);
●
risks associated
with cyber-security and the potential for vulnerability of our
digital information or the digital information of a current and/or
future drug development or commercialization partner of ours;
and
●
risks arising from
the ability and willingness of our third-party commercialization
partners to provide documentation that may be required to support
information on revenues earned by us from those commercialization
partners.
Additional risks
and uncertainties relating to us and our business can be found in
the “Risk Factors” section of this prospectus, as well
as in our other public filings incorporated by reference herein.
The forward-looking statements reflect our current views with
respect to future events, and are based on what we believe are
reasonable assumptions as of the date hereof, and we disclaim any
intention and have no obligation or responsibility, except as
required by law, to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise.
Nothing
contained in this document should be construed to imply that the
results discussed herein will necessarily continue into the future
or that any conclusion reached herein will necessarily be
indicative of our actual operating results.
3
Available Information
We file
reports and other information with the securities commissions and
similar regulatory authorities in each of the provinces and
territories of Canada. These reports and information are
available to the public free of charge on SEDAR at www.sedar.com.
We have
filed with the SEC a registration statement on Form F-3 to register
an indeterminable number of common shares, preference shares,
warrants, subscription receipts and subscription rights as may from
time to time be offered for sale by us, either individually or in
units, at indeterminate prices (up to an aggregate maximum offering
price for all such securities of U.S.$100,000,000. The registration
statement of which this prospectus is a part replaces our prior
Shelf Registration Statement (as defined below) on Form F-3
(Registration No. 333-196112) that became effective in June
2014. The information contained in this prospectus is not
complete and may be changed. This prospectus provides you with some
of the general terms that may apply to an offering of our
securities. Each time we sell securities under this shelf
registration, we will provide a prospectus supplement that will
contain specific information about the terms of that specific
offering, including the number and price per security (or exercise
price) of the securities to be offered and sold in that offering
and the specific manner in which such securities may be offered. A
prospectus supplement may also add to, update or change any of the
information contained in this prospectus. If there is an
inconsistency between the information in this prospectus and a
prospectus supplement, you should rely on the information in the
prospectus supplement. This prospectus, which constitutes a part of
the registration statement, does not contain all of the information
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. Statements
included in this prospectus or incorporated herein by reference
about the contents of any contract, agreement or other documents
referred to are not necessarily complete, and in each instance
investors should refer to the exhibits for a more complete
description of the matter involved. Each such statement is
qualified in its entirety by such reference.
We are
subject to the information requirements of the U.S. Securities
Exchange Act of 1934, as amended, or the U.S. Exchange Act,
relating to foreign private issuers and applicable Canadian
securities legislation and, in accordance therewith, file reports
and other information with the SEC and with the securities
regulatory authorities in Canada. As a foreign private issuer, we
are exempt from the rules under the U.S. Exchange Act prescribing
the furnishing and content of proxy statements, and our officers,
directors and principal shareholders are exempt from the reporting
and short-swing profit recovery provisions contained in Section 16
of the U.S. Exchange Act. In addition, we are not required to
publish financial statements as promptly as U.S.
companies.
Investors may read
any document that we have filed with the SEC at the SEC’s
public reference room in Washington, D.C. Investors may also obtain
copies of those documents from the public reference room of the SEC
at 100 F Street, N.E., Washington, D.C., 20549 by paying a fee.
Investors should call the SEC at 1-800-SEC-0330 or access its
website at www.sec.gov for
further information about the public reference rooms. Investors may
read and download some of the documents we have filed with the
SEC’s Electronic Data Gathering and Retrieval system at
www.sec.gov.
Readers
should rely only on information contained or incorporated by
reference in this prospectus and any applicable prospectus
supplement. We have not authorized anyone to provide the reader
with different information. We are not making an offer of any
securities in any jurisdiction where the offer is not permitted.
Readers should not assume that the information contained in this
prospectus is accurate as of any date other than the date on the
front of this prospectus, unless otherwise noted herein or as
required by law. It should be assumed that the information
appearing in this prospectus and the documents incorporated herein
by reference are accurate only as of their respective dates. Our
business, financial condition, results of operations and prospects
may have changed since those dates.
4
Documents Incorporated by Reference
Information has been
incorporated by reference in this prospectus from documents filed
with securities commissions or similar authorities in each of the
provinces and territories of Canada and filed with, or furnished
to, the SEC. Copies of the documents incorporated
herein by reference may be obtained on request without charge from
our Chief Financial Officer at 30 Worcester Road, Toronto, Ontario,
Canada, M9W 5X2, telephone (416) 798-3001 or on our website at
www.intellipharmaceutics.com. The
information on our website is not incorporated by reference into
this prospectus. These documents are also available
through the Internet on SEDAR, which can be accessed online at
www.sedar.com, and on the
SEC’s Electronic Data Gathering and Retrieval System at
www.sec.gov. The following
documents filed or furnished by us with the various securities
commissions or similar authorities in the provinces and territories
of Canada and the SEC, as applicable, 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:
a)
our condensed
unaudited interim consolidated financial statements and notes to
the condensed unaudited interim consolidated financial statements
for the three months ended February 28, 2017, which were included
as Exhibit 99.2 to the Report on Form 6-K furnished to the SEC on
April 12, 2017, together with the Management Discussion and
Analysis of Financial Condition and Results of Operations for the
three months ended February 28, 2017, which was included as Exhibit
99.1 to the Report on Form 6-K furnished to the SEC on April 12,
2017;
b)
our report on Form
6-K furnished to the SEC on March 21, 2017, including our
management proxy circular dated March 8, 2017, for the annual
meeting of shareholders held on April 18, 2017, which was included
as part of Exhibit 99.2, but excluding Exhibits 99.1, 99.3, 99.4
and 99.5 thereto;
c)
our annual report
on Form 20-F for the fiscal year ended November 30, 2016,
which was filed with the SEC on February 28, 2017, including
our audited consolidated balance sheets as at November 30, 2016 and
November 30, 2015, and the consolidated statements of operations
and comprehensive loss, cash flows and shareholders’ equity
(deficiency) for each of the years in the three-year period ended
November 30, 2016; and
d)
our reports on Form
6-K furnished to the SEC on April 19, 2017, May 10, 2017, May 24,
2017, June 6, 2017 and June 30, 2017.
In
addition, this prospectus shall also be deemed to incorporate by
reference all subsequent annual reports filed on Form 20-F, Form
40-F or Form 10-K, and all subsequent filings on Forms 10-Q and 8-K
filed by us pursuant to the U.S. Exchange Act (i) after the date of
the initial registration statement and before effectiveness of the
registration statement and (ii) after the date of this
prospectus and prior to
the termination of the offering made by this prospectus. We
may incorporate by reference into this prospectus any Form 6-K that
is submitted to the SEC after the date of the filing of the
registration statement of which this prospectus forms a part and
before the date of termination of this offering. Any such Form
6-K that we intend to so incorporate shall state in such form that
it is being incorporated by reference into the registration
statement of which this prospectus forms a part. The documents
incorporated or deemed to be incorporated herein by reference
contain meaningful and material information relating to us and the
readers should review all information contained in this prospectus
and the documents incorporated or deemed to be incorporated herein
by reference.
Upon a
new annual report on Form 20-F and related annual consolidated
financial statements being filed by us with the applicable
securities regulatory authorities during the duration that this
prospectus is effective, the previous annual report on Form 20-F,
the previous annual consolidated financial statements and all
interim consolidated financial statements, and in each case the
accompanying management’s discussion and analysis,
information circulars (to the extent the disclosure is
inconsistent) and material change reports filed prior to the
commencement of the financial year of the Company in which the new
annual report on Form 20-F is filed shall be deemed no longer to be
incorporated into this prospectus for purposes of future offers and
sales of securities under this prospectus. Upon (i) interim
consolidated financial statements and the accompanying
management’s discussion and analysis being filed by us with
the applicable securities regulatory authorities during the
duration that this prospectus is effective and (ii) the
incorporation thereof herein by reference, all interim consolidated
financial statements and the accompanying management’s
discussion and analysis filed prior to the new interim consolidated
financial statements shall be deemed no longer to be incorporated
into this prospectus for purposes of future offers and sales of
securities under this prospectus.
5
A
prospectus supplement containing the specific terms of an offering
of securities and other information relating to the securities will
be delivered to prospective purchasers of such securities together
with this prospectus and will be deemed to be incorporated into
this prospectus as of the date of such prospectus supplement only
for the purpose of the offering of the securities covered by that
prospectus supplement.
Any
statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or
superseded for the purposes of this prospectus, to the extent that
a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any statement so
modified or superseded shall not constitute a part of this
prospectus, except as so modified or superseded. The 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 such a modifying or superseding statement shall not be
deemed an admission for any purpose 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.
The
financial statements of the Company incorporated herein by
reference and in any prospectus supplement are reported in United
States dollars and have been prepared in accordance with U.S. GAAP.
References to “$,” “U.S.$” or
“dollars” are to U.S. dollars, and all references to
“Cdn$” or “C$” are to the lawful currency
of Canada. In this prospectus, where applicable, and unless
otherwise indicated, amounts are converted from U.S. dollars to
Canadian dollars and vice versa by applying the noon spot rate of
exchange of the Bank of Canada on July 7, 2017. See “Exchange
Rate Information” below.
The
following table sets out the high and low rates of exchange for one
U.S. dollar expressed in Canadian dollars in effect at the end of
each of the following periods; the average rate of exchange for
those periods; and the rate of exchange in effect at the end of
each of those periods, each based on the closing rate published by
the Bank of Canada.
|
|
|
Fiscal years ended November
30,
|
||
|
|
Seven
months ended June 30, 2017
|
2016
|
2015
|
2014
|
|
High
|
Cdn
$1.3743
|
Cdn
$1.4559
|
Cdn
$1.3418
|
Cdn
$1.1440
|
|
Low
|
Cdn
$1.2977
|
Cdn
$1.2536
|
Cdn
$1.1328
|
Cdn
$1.0587
|
|
Average for the
Period
|
Cdn
$1.3343
|
Cdn
$1.3276
|
Cdn
$1.2603
|
Cdn
$1.0971
|
|
End of
Period
|
Cdn
$1.2887
|
Cdn
$1.3429
|
Cdn
$1.3353
|
Cdn
$1.1440
|
On July
7, 2017, the closing rate for Canadian dollars in terms of the
United States dollar, as reported by the Bank of Canada, was U.S.
$1.00=Cdn $1.2977 or Cdn $1.00=U.S.$0.7706.
Prospective
purchasers of securities should carefully consider the risk factors
contained in and incorporated by reference in this prospectus
(including subsequently filed documents incorporated by reference)
and those described in a prospectus supplement relating to a
specific offering of securities. Each of these risk factors
could adversely affect our business, operating results and
financial condition, as well as adversely affect the value of an
investment in our securities. Additional risks and
uncertainties not presently known to us or that we currently deem
immaterial may also impair our business operations.
6
Prospects for
companies in the pharmaceutical industry generally may be regarded
as uncertain given the research and development nature of the
industry and uncertainty regarding the prospects of successfully
commercializing product candidates and, accordingly, investments in
companies such as ours should be regarded as very
speculative. An investor should carefully consider the risks
and uncertainties described below, as well as other information
contained or incorporated by reference in this prospectus or in any
applicable prospectus supplement. The list of risks and
uncertainties described below is not an exhaustive list. Additional
risks and uncertainties not presently known to us or that we
believe to be immaterial may also adversely affect our business. If
any one or more of the following risks, or those contained in any
document incorporated by reference in this prospectus or in any
applicable prospectus supplement, occur, our business, financial
condition and results of operations could be seriously
harmed. Further, if we fail to meet the expectations of the
public market in any given period, the market price of our common
shares could decline. If any of the following risks actually
occurs, our business, operating results, or financial condition
could be materially adversely affected.
Our
activities entail significant risks. In addition to the usual risks
associated with a business, the following is a general description
of certain significant risk factors which may be applicable to
us.
Risks related to our Company
Our business is capital intensive and requires significant
investment to conduct research and development, clinical and
regulatory activities necessary to bring our products to market,
which capital may not be available in amounts or on terms
acceptable to us, if at all.
Our
business requires substantial capital investment in order to
conduct the research and development, clinical and regulatory
activities necessary to bring our products to market and to
establish commercial manufacturing, marketing and sales
capabilities. As of February 28, 2017, we had a cash balance of
$2.4 million. As of July 7, 2017, our cash balance was $0.6
million. We currently expect to satisfy our operating cash
requirements until September 2017 from cash on hand and quarterly
profit share payments from Par Pharmaceutical, Inc.
(“Par”) and Mallinckrodt LLC
(“Mallinckrodt”). Should our marketing and distribution
partner Mallinckrodt soon be successful in fully commercializing
our generic Seroquel XR® (all strengths of which were launched
in June 2017), then we may be cash flow positive in the second half
of 2017. Failing this, we may need to obtain additional funding
prior to that time as we further the development of our product
candidates and if we accelerate our product commercialization
activities. There can be no assurance as to when or if Par will
launch the remaining two strengths of its generic Focalin XR®
and, if launched, whether they will be successfully commercialized,
or if generic Seroquel XR® will be successfully
commercialized. If necessary, we expect to utilize our
at-the-market equity offering program (see “Prior
Sales” below for a further description of our at-the-market
offering program) to bridge any funding shortfall in the second
half of 2017. Our future operations are highly dependent upon our
ability to source additional capital to support advancing our
product pipeline through continued research and development
activities which are at higher-than-currently projected levels and
to fund any significant expansion of our operations. Although there
can be no assurances, such capital may come from revenues from the
sales of our generic Focalin XR® capsules, from sales of our
generic Seroquel XR® tablets, from proceeds of our
at-the-market offering program, and from potential partnering
opportunities. Other potential sources of capital may include
payments from licensing agreements, cost savings associated with
managing operating expense levels, other equity and/or debt
financings, and/or new strategic partnership agreements which fund
some or all costs of product development. Our ultimate success will
depend on whether our product candidates receive the approval of
the FDA or Health Canada and whether we are able to successfully
market approved products. We cannot be certain that we will be able
to receive FDA or Health Canada approval for any of our current or
future product candidates, that we will reach the level of sales
and revenues necessary to achieve and sustain profitability, or
that we can secure other capital sources on terms or in amounts
sufficient to meet our needs or at all. The availability of
equity or debt financing will be affected by, among other things,
the results of our research and development, our ability to obtain
regulatory approvals, our success in commercializing approved
products with our commercial partners and the market acceptance of
our products, the state of the capital markets generally, strategic
alliance agreements, and other relevant commercial
considerations.
7
In
addition, if we raise additional funds by issuing equity
securities, our then existing security holders will likely
experience dilution, and the incurring of indebtedness would result
in increased debt service obligations and could require us to agree
to operating and financial covenants that would restrict our
operations. In the event that we do not obtain sufficient
additional capital, it will raise substantial doubt about our
ability to continue as a going concern and realize our assets and
pay our liabilities as they become due. Our cash outflows are
expected to consist primarily of internal and external research and
development, legal and consulting expenditures to advance our
product pipeline and selling, general and administrative expenses
to support our commercialization efforts. Depending upon the
results of our research and development programs, the impact of the
Purdue litigation (as defined below) and the availability of
financial resources, we could decide to accelerate, terminate, or
reduce certain projects, or commence new ones. Any failure on
our part to successfully commercialize approved products or raise
additional funds on terms favorable to us or at all, may require us
to significantly change or curtail our current or planned
operations in order to conserve cash until such time, if ever, that
sufficient proceeds from operations are generated, and could result
in our not taking advantage of business opportunities, in the
termination or delay of clinical trials or our not taking any
necessary actions required by the FDA or Health Canada for one or
more of our product candidates, in curtailment of our product
development programs designed to identify new product candidates,
in the sale or assignment of rights to our technologies, products
or product candidates, and/or our inability to file ANDAs,
Abbreviated New Drug Submissions (“ANDSs”), or NDAs, at
all or in time to competitively market our products or product
candidates.
Delays, suspensions and terminations in our preclinical studies and
clinical trials could result in increased costs to us and delay our
ability to generate product revenues.
The
commencement of clinical trials can be delayed for a variety of
reasons, including delays in:
●
demonstrating
sufficient safety and efficacy to obtain regulatory approval to
commence a clinical trial;
●
reaching agreement
on acceptable terms with prospective contract research
organizations and clinical trial sites;
●
manufacturing
sufficient quantities of a drug candidate;
●
obtaining
institutional review board approval to conduct a clinical trial at
a prospective clinical trial site;
●
patient enrollment;
and
●
for controlled
substances, obtaining specific permission to conduct a study, and
obtaining import and export permits to ship study
samples.
Once a
clinical trial has begun, it may be delayed, suspended or
terminated due to a number of factors, including:
●
the number of
patients that participate in the trial;
●
the length of time
required to enroll suitable subjects;
●
the duration of
patient follow-up;
●
the number of
clinical sites included in the trial;
●
changes in
regulatory requirements or regulatory delays or clinical holds
requiring suspension or termination of the trials;
8
●
delays, suspensions
or termination of clinical trials due to the institutional review
board overseeing the study at a particular site;
●
failure to conduct
clinical trials in accordance with regulatory
requirements;
●
unforeseen safety
issues, including serious adverse events or side effects
experienced by participants; and
●
inability to
manufacture, through third party manufacturers, adequate supplies
of the product candidate being tested.
Based
on results at any stage of product development, we may decide to
repeat or redesign preclinical studies or clinical trials, conduct
entirely new studies or discontinue development of products for one
or all indications. In addition, our product candidates may
not demonstrate sufficient safety and efficacy in pending or any
future preclinical testing or clinical trials to obtain the
requisite regulatory approvals. Even if such approvals are
obtained for our products, they may not be accepted in the market
as a viable alternative to other products already approved or
pending approvals.
If we
experience delays, suspensions or terminations in a preclinical
study or clinical trial, the commercial prospects for our products
will be harmed, and our ability to generate product revenues will
be delayed or we may never be able to generate such
revenues.
We have a history of operating losses, which may continue in the
foreseeable future.
We have
incurred net losses from inception through February 28, 2017 and
had an accumulated deficit of $65,006,880 as of such date and have
incurred additional losses since such date. As we engage in
the development of products in our pipeline, we may continue to
incur further losses. While our commercial prospects have
improved and our revenue base is growing, there can be no assurance
that we will ever be able to achieve or sustain profitability or
positive cash flow. Our ultimate success will depend on how
many of our product candidates receive the approval of the FDA or
Health Canada and whether we are able to successfully market
approved products. We cannot be certain that we will be able
to receive FDA or Health Canada approval for any of our current or
future product candidates, or that we will reach the level of sales
and revenues necessary to achieve and sustain
profitability.
Loss of key scientists and failure to attract qualified personnel
could limit our growth and negatively impact our
operations.
We are
dependent upon the scientific expertise of Dr. Isa Odidi, our
Chairman and Chief Executive Officer, and Dr. Amina Odidi, our
President and Chief Operating Officer. Although we employ
other qualified scientists, Drs. Isa and Amina Odidi are our only
employees with the knowledge and experience necessary for us to
continue development of controlled-release products. We do not
maintain key-person life insurance on any of our officers or
employees. Although we have employment agreements with key
members of our management team, each of our employees may terminate
his or her employment at any time. The success of our business
depends, in large part, on our continued ability to attract and
retain highly qualified management, scientific, manufacturing and
sales and marketing personnel, on our ability to successfully
integrate many new employees, and on our ability to develop and
maintain important relationships with leading research and medical
institutions and key distributors. If we lose the services of
our executive officers or other qualified personnel or are unable
to attract and retain qualified individuals to fill these roles or
develop key relationships, our business, financial condition and
results of operations could be materially adversely
affected.
Our intellectual property may not provide meaningful protection for
our products and product candidates.
We hold
certain U.S., Canadian and foreign patents and have pending
applications for additional patents outstanding. We intend to
continue to seek patent protection for, or maintain as trade
secrets, all of our commercially
9
promising drug
delivery platforms and technologies. Our success depends, in
part, on our and our collaborative partners’ ability to
obtain and maintain patent protection for products and product
candidates, maintain trade secret protection and operate without
infringing the proprietary rights of third parties. Without
patent and other similar protection, other companies could offer
substantially identical products without incurring sizeable
development costs, which could diminish our ability to recover
expenses of and realize profits on our developed products. If
our pending patent applications are not approved, or if we are
unable to obtain patents for additional developed technologies, the
future protection for our technologies will remain
uncertain. Furthermore, third parties may independently
develop similar or alternative technologies, duplicate some or all
of our technologies, design around our patented technologies or
challenge our issued patents. Such third parties may have
filed patent applications, or hold issued patents, relating to
products or processes competitive with those we are developing or
otherwise restricting our ability to do business in a particular
area. If we are unable to obtain patents or otherwise protect
our trade secrets or other intellectual property and operate
without infringing on the proprietary rights of others, our
business, financial condition and results of operations could be
materially adversely affected.
We may be subject to intellectual property claims that could be
costly and could disrupt our business.
Third
parties may claim we have infringed their patents, trademarks,
copyrights or other rights. We may be unsuccessful in
defending against such claims, which could result in the inability
to protect our intellectual property rights or liability in the
form of substantial damages, fines or other penalties such as
injunctions precluding our manufacture, importation or sales of
products. The resolution of a claim could also require us to
change how we do business or enter into burdensome royalty or
license agreements. Insurance coverage may be denied or may
not be adequate to cover every claim that third parties could
assert against us. Even unsuccessful claims could result in
significant legal fees and other expenses, diversion of
management’s time and disruptions in our business. Any
of these claims could also harm our reputation.
We rely on maintaining as trade secrets our competitively sensitive
know-how and other information. Intentional or unintentional
disclosure of this information could impair our competitive
position.
As to
many technical aspects of our business, we have concluded that
competitively sensitive information is either not patentable or
that for competitive reasons it is not commercially advantageous to
seek patent protection. In these circumstances, we seek
to protect this know-how and other proprietary information by
maintaining it in confidence as a trade secret. To maintain
the confidentiality of our trade secrets, we generally enter into
agreements that contain confidentiality provisions with our
employees, consultants, collaborators, contract manufacturers and
advisors upon commencement of their relationships with
us. These provisions generally require that all confidential
information developed by the individual or made known to the
individual by us during the course of the individual’s
relationship with us be kept confidential and not disclosed to
third parties. We may not have these arrangements in place in
all circumstances, and the confidentiality provisions in our favor
may be breached. We may not become aware of, or have adequate
remedies in the event of, any such breach. In addition, in
some situations, the confidentiality provisions in our favor may
conflict with, or be subject to, the rights of third parties with
whom our employees, consultants, collaborators, contract
manufacturers or advisors have previous employment or consulting
relationships. To the extent that our employees, consultants,
collaborators, contract manufacturers or advisors use trade secrets
or know-how owned by others in their work for us, disputes may
arise as to the ownership of relative inventions. Also, others
may independently develop substantially equivalent trade secrets,
processes and know-how, and competitors may be able to use this
information to develop products that compete with our products,
which could adversely impact our business. The disclosure of
our trade secrets could impair our competitive
position. Adequate remedies may not exist in the event of
unauthorized use or disclosure of our confidential
information.
Approvals for our product candidates may be delayed or become more
difficult to obtain if the FDA institutes changes to its approval
requirements.
The FDA
may institute changes to its ANDA approval requirements, which may
make it more difficult or expensive for us to obtain approval for
our new generic products. For instance, in July 2012, the Generic
Drug Fee User Amendments of 2012, or GDUFA, were enacted into law.
The GDUFA legislation implemented substantial
10
fees
for new ANDAs, Drug Master Files, product and establishment fees
and a one-time fee for back-logged ANDAs pending approval as of
October 1, 2012. In return, the program is intended to provide
faster and more predictable ANDA reviews by the FDA and more timely
inspections of drug facilities. For the FDA’s fiscal years
2016 and 2017, respectively, the user fee rates are $76,030 and
$70,480 for new ANDAs, $38,020 and $35,240 for “Prior
Approval Supplements,” and $17,434 for each ANDA already on
file at the FDA. For the FDA’s fiscal year 2016 and 2017,
there is also an annual facility user fee of $258,905 and $273,646,
respectively. Under GDUFA, generic product companies face
significant penalties for failure to pay the new user fees,
including rendering an ANDA not “substantially
complete” until the fee is paid. It is currently uncertain
the effect the new fees will have on our ANDA process and business.
However, any failure by us or our suppliers to pay the fees or to
comply with the other provisions of GDUFA may adversely impact or
delay our ability to file ANDAs, obtain approvals for new generic
products, generate revenues and thus may have a material adverse
effect on our business, results of operations and financial
condition.
We operate in a highly litigious environment.
From
time to time, we are subject to legal proceedings. As of the
date of this prospectus, we are not aware of any pending or
threatened material litigation claims against us other than as
described below and under the caption "Legal
Proceedings.” Litigation to which we are, or may
be, subject could relate to, among other things, our patent and
other intellectual property rights, or such rights of others,
business or licensing arrangements with other persons, product
liability or financing activities. Such litigation could
include an injunction against the manufacture or sale of one or
more of our products or potential products or a significant
monetary judgment, including a possible
punitive damages
award, or a judgment that certain of our patent or other
intellectual property rights are invalid or unenforceable or
infringe the intellectual property rights of others. If such
litigation is commenced, our business, results of operations,
financial condition and cash flows could be materially adversely
affected.
There
has been substantial litigation in the pharmaceutical industry
concerning the manufacture, use and sale of new products that are
the subject of conflicting patent rights. When we file an ANDA
or 505(b)(2) NDA for a bioequivalent version of a drug, we may, in
some circumstances, be required to certify to the FDA that any
patent which has been listed with the FDA as covering the branded
product has expired, the date any such patent will expire, or that
any such patent is invalid or will not be infringed by the
manufacture, sale or use of the new drug for which the application
is submitted. Approval of an ANDA is not effective until each
listed patent expires, unless the applicant certifies that the
patents at issue are not infringed or are invalid and so notifies
the patent holder and the holder of the branded product. A
patent holder may challenge a notice of non-infringement or
invalidity by suing for patent infringement within 45 days of
receiving notice. Such a challenge prevents FDA approval for a
period which ends 30 months after the receipt of notice, or sooner
if an appropriate court rules that the patent is invalid or not
infringed. From time to time, in the ordinary course of
business, we face and have faced such challenges and may continue
to do so in the future.
Our NDA
seeking authorization to market our Rexista™ product
candidate (abuse-deterrent oxycodone hydrochloride extended release
tablets) in the 10, 15, 20, 30, 40, 60 and 80 mg strengths was
filed under Paragraph IV of the Hatch-Waxman Act, as amended. In
connection with the NDA for our Rexista™ product candidate,
we relied on the 505(b)(2) regulatory pathway and referenced data
from Purdue Pharma L.P.'s file for its OxyContin® extended
release oxycodone hydrochloride. Our Rexista™ application was
accepted by the FDA for further review in February 2017. We
certified to the FDA that we believed that our Rexista™
product candidate would not infringe any of sixteen (16) patents
associated with the branded product Oxycontin® (the
“Oxycontin® patents”) listed in the FDA’s
Approved Drug Products with Therapeutic Equivalence Evaluations,
commonly known as the Orange Book (the “Orange Book”),
or that such patents are invalid, and so notified Purdue Pharma
L.P. and the other owners of the subject patents listed in the
Orange Book of such certification. On April 7, 2017, we received
notice that Purdue Pharma L.P., Purdue Pharmaceuticals L.P., The
P.F. Laboratories, Inc., or collectively the Purdue parties, Rhodes
Technologies, and Grünenthal GmbH, or collectively the Purdue
litigation plaintiffs or plaintiffs, had commenced patent
infringement proceedings, or the Purdue litigation, against us in
the U.S. District Court for the District of
11
Delaware in respect
of our NDA filing for Rexista™, alleging that Rexista™
infringes six (6) out of the sixteen (16) patents. The complaint
seeks injunctive relief as well as attorneys' fees and costs and
such other and further relief as the Court may deem just and
proper. An answer and counterclaim have been filed.
As a
result of the commencement of these legal proceedings, the FDA is
stayed for 30 months from granting final approval to our
Rexista™ product candidate. That time period commenced on
February 24, 2017, when the Purdue litigation plaintiffs received
notice of our certification concerning the patents, and will expire
on August 24, 2019, unless the stay is earlier terminated by a
final declaration of the courts that the patents are invalid, or
are not infringed, or the matter is otherwise settled among the
parties. We are confident that we do not infringe the subject
patents, and will vigorously defend against these
claims.
Brand-name
pharmaceutical manufacturers routinely bring patent infringement
litigation against ANDA applicants seeking FDA approval to
manufacture and market generic forms of their branded products. We
are routinely subject to patent litigation that can delay or
prevent our commercialization of products, force us to incur
substantial expense to defend, and expose us to substantial
liability.
We cannot ensure the availability of raw materials.
Certain
raw materials necessary for the development and subsequent
commercial manufacture of our product candidates may be proprietary
products of other companies. While we attempt to manage the
risk associated with such proprietary raw materials, if our efforts
fail, or if there is a material shortage, contamination, and/or
recall of such materials, the resulting scarcity could adversely
affect our ability to develop or manufacture our product
candidates. In addition, many third party suppliers are
subject to governmental regulation and, accordingly, we are
dependent on the regulatory compliance of, as well as on the
strength, enforceability and terms of our various contracts with,
these third party suppliers.
Further, the FDA
requires identification of raw material suppliers in applications
for approval of drug products. If raw materials are
unavailable from a specified supplier, the supplier does not give
us access to its technical information for our application or the
supplier is not in compliance with FDA or other applicable
requirements, FDA approval of the supplier could delay the
manufacture of the drug involved. Any inability to
obtain raw materials on a timely basis, or any significant price
increases which cannot be passed on to customers, could have a
material adverse effect on our business, results of operations,
financial condition and cash flows.
Our product candidates may not be successfully developed or
commercialized.
Successful
development of our product candidates is highly uncertain and is
dependent on numerous factors, many of which are beyond our
control. Products that appear promising in research or
early phases of development may fail to reach later stages of
development or the market for several reasons
including:
●
for ANDA
candidates, bioequivalence studies results may not meet regulatory
requirements or guidelines for the demonstration of
bioequivalence;
●
for NDA candidates,
a product may not demonstrate acceptable large-scale clinical trial
results, even though it demonstrated positive preclinical or
initial clinical trial results;
●
for NDA candidates,
a product may not be effective in treating a specified condition or
illness;
●
a product may have
harmful side effects on humans;
●
products may fail
to receive the necessary regulatory approvals from the FDA or other
regulatory bodies, or there may be delays in receiving such
approvals;
12
●
changes in the
approval process of the FDA or other regulatory bodies during the
development period or changes in regulatory review for each
submitted product application may also cause delays in the approval
or result in rejection of an application;
●
difficulties may be
encountered in formulating products, scaling up manufacturing
processes or in getting approval for manufacturing;
●
difficulties may be
encountered in the manufacture and/or packaging of our
products;
●
once manufactured,
our products may not meet prescribed quality assurance and
stability tests;
●
manufacturing
costs, pricing or reimbursement issues, other competitive
therapeutics, or other commercial factors may make the product
uneconomical; and
●
the proprietary
rights of others, and their competing products and technologies,
may prevent the product from being developed or
commercialized.
Further, success in
preclinical and early clinical trials does not ensure that
large-scale clinical trials will be successful nor does success in
preliminary studies for ANDA candidates ensure that bioequivalence
studies will be successful. Results are frequently susceptible
to varying interpretations that may delay, limit or prevent
regulatory approvals. The length of time necessary to complete
bioequivalence studies or clinical trials and to submit an
application for marketing approval for a final decision by a
regulatory authority varies significantly and may be difficult to
predict. As a result, there can be no assurance that any of
our product candidates currently in development will ever be
successfully commercialized.
Near-term revenue depends significantly on the success of our first
filed ANDA (“lead”) product, our once daily generic
Focalin XR® (dexmethylphenidate hydrochloride
extended-release).
We have
invested significant time and effort in the development of our lead
ANDA product, our once daily generic Focalin XR®
(dexmethylphenidate hydrochloride extended-release) capsules, for
which we received final approval from the FDA in November 2013
under the Company ANDA (as defined below) to launch the 15 and 30
mg strengths. Commercial sales of these strengths were launched
immediately by our commercialization partner in the U.S.,
Par. Our 5, 10, 20 and 40 mg strengths were also then
tentatively FDA approved, subject to the right of Teva
Pharmaceuticals USA, Inc. (“Teva”) to 180 days of
generic exclusivity from the date of first launch of such products.
Teva launched its own 5, 10, 20 and 40 mg strengths of generic
Focalin XR® capsules on November 11, 2014, February 2, 2015,
June 22, 2015 and November 19, 2013, respectively. In January 2017,
Par launched the 25 and 35 mg strengths of its generic Focalin
XR® capsules in the U.S., and in May 2017, Par launched the 10
and 20 mg strengths, complementing the 15 and 30 mg strengths of
our generic Focalin XR® marketed by Par. The FDA recently had
granted final approval under the Par ANDA (as defined below) for
its generic Focalin XR® capsules in the 5, 10, 15, 20, 25, 30,
35 and 40 mg strengths. We believe Par is preparing to launch the
remaining 5 and 40 mg strengths in the near future. As the first
filer of an ANDA for generic Focalin XR® in the 25 and 35 mg
strengths, Par had 180 days of U.S. generic marketing exclusivity
for those strengths. Under a license and commercialization
agreement between us and Par (as amended, the “Par
agreement”), we receive quarterly profit-share payments on
Par’s U.S. sales of generic Focalin XR®. We expect sales
of the 10, 20, 25 and 35 mg strengths to improve our revenues
significantly in 2017. There can be no assurance as to when or if
any further launches will occur for the remaining strengths, or if
they will be successfully commercialized. We depend
significantly on the actions of our marketing partner Par in the
prosecution, regulatory approval and commercialization of our
generic Focalin XR® capsules and on their timely payment to us
of the contracted quarterly payments as they come due. Our
near term ability to generate significant revenue will depend upon
successful commercialization of our products in the U.S., where the
branded Focalin XR® product is in the market. Although we have
several other products in our pipeline, and received final approval
from the FDA for our generic Keppra XR® (levetiracetam
extended-release tablets) for the 500 and 750 mg strengths, final
approval from the FDA for our metformin hydrochloride extended
release tablets in the 500 and 750 mg strengths and of our generic
Seroquel XR® which is partnered with Mallinckrodt,
the
13
majority of the
products in our pipeline are at earlier stages of development. We
will be exploring licensing and commercial alternatives for our
generic Keppra XR® product strengths that have been approved
by the FDA. We are also actively evaluating options to realize
commercial returns from the new approval of our generic
Glucophage® XR.
Our significant expenditures on research and development may not
lead to successful product introductions.
We
conduct research and development primarily to enable us to
manufacture and market pharmaceuticals in accordance with FDA
regulations. Typically, research expenses related to the
development of innovative compounds and the filing of NDAs are
significantly greater than those expenses associated with
ANDAs. As we continue to develop new products, our research
expenses will likely increase. We are required to obtain FDA
approval before marketing our drug products and the approval
process is costly and time consuming. Because of the inherent
risk associated with research and development efforts in our
industry, particularly with respect to new drugs, our research and
development expenditures may not result in the successful
introduction of FDA approved new pharmaceuticals.
We may not have the ability to develop or license, or otherwise
acquire, and introduce new products on a timely basis.
Product
development is inherently risky, especially for new drugs for which
safety and efficacy have not been established and the market is not
yet proven. Likewise, product licensing involves inherent
risks including uncertainties due to matters that may affect the
achievement of milestones, as well as the possibility of
contractual disagreements with regard to terms such as license
scope or termination rights. The development and
commercialization process, particularly with regard to new drugs,
also requires substantial time, effort and financial resources. The
process of obtaining FDA or other regulatory approval to
manufacture and market new and generic pharmaceutical products is
rigorous, time consuming, costly and largely
unpredictable. We, or a partner, may not be successful in
obtaining FDA or other required regulatory approval or in
commercializing any of the product candidates that we are
developing or licensing.
Our
business and operations are increasingly dependent on information
technology and accordingly we would suffer in the event of computer
system failures, cyber-attacks or a deficiency in
cyber-security.
Our
internal computer systems, and those of a current and/or future
drug development or commercialization partner of ours, may be
vulnerable to damage from cyber-attacks, computer viruses, malware,
natural disasters, terrorism, war, telecommunication and electrical
failures. The risk of a security breach or disruption, particularly
through cyber-attacks, including by computer hackers, foreign
governments, and cyber terrorists, has generally increased as the
number, intensity and sophistication of attempted attacks and
intrusions have increased. If such an event were to occur and cause
interruptions in our operations or those of a drug development or
commercialization partner, it could result in a material disruption
of our product development programs. For example, the loss of
clinical trial data from completed or ongoing or planned clinical
trials could result in delays in our regulatory approval efforts
and significantly increase our costs to recover or reproduce the
data. To the extent that any disruption or security breach was to
result in a loss of or damage to our data or applications, or
inappropriate disclosure of confidential or proprietary
information, we could incur material legal claims and liability,
damage to our reputation, and the further development of our drug
candidates could be adversely affected.
Our
business can be impacted by wholesaler buying patterns, increased
generic competition and, to a lesser extent, seasonal fluctuations,
which may cause our operating results to fluctuate.
We
believe that the revenues derived from our generic Focalin XR®
capsules and generic Seroquel XR® tablets are subject to
wholesaler buying patterns, increased generic competition
negatively impacting price, margins and market share consistent
with industry post-exclusivity experience and, to a lesser extent,
seasonal fluctuations in relation to generic Focalin XR®
capsules (as these products are indicated for conditions including
attention deficit hyperactivity disorder which we expect may see
increases in prescription rates during the school term and declines
in prescription rates during the summer months). Accordingly, these
factors may cause our operating results to fluctuate.
14
We may not achieve our projected development goals in the time
frames we announce and expect.
We set
goals regarding the expected timing of meeting certain corporate
objectives, such as the commencement and completion of clinical
trials, anticipated regulatory approval and product launch
dates. From time to time, we may make certain public
statements regarding these goals. The actual timing of these
events can vary dramatically due to, among other things,
insufficient funding, delays or failures in our clinical trials or
bioequivalence studies, the uncertainties inherent in the
regulatory approval process, such as failure to secure appropriate
product labeling approvals, requests for additional information,
delays in achieving manufacturing or marketing arrangements
necessary to commercialize our product candidates and failure by
our collaborators, marketing and distribution partners, suppliers
and other third parties to fulfill contractual obligations. In
addition, the possibility of a patent infringement suit regarding
one or more of our product candidates could delay final FDA
approval of such candidates. If we fail to achieve one or more of
these planned goals, the price of our common shares could
decline.
If our manufacturing facility is unable to manufacture our
product(s) or the manufacturing process is interrupted due to
failure to comply with regulations or for other reasons, it could
have a material adverse impact on our business.
If our
manufacturing facility fails to comply with regulatory requirements
or encounter other manufacturing difficulties, it could adversely
affect our ability to supply products. All facilities and
manufacturing processes used for the manufacture of pharmaceutical
products are subject to inspection by regulatory agencies at any
time and must be operated in conformity with cGMP regulations.
Compliance with FDA and Health Canada cGMP requirements applies to
both drug products seeking regulatory approval and to approved drug
products. In complying with cGMP requirements, pharmaceutical
manufacturing facilities must continually expend significant time,
money and effort in production, record-keeping and quality
assurance and control so that their products meet applicable
specifications and other requirements for product safety, efficacy
and quality. Failure to comply with applicable legal requirements
subjects our manufacturing facility to possible legal or regulatory
action, including shutdown, which may adversely affect our ability
to manufacture product. Were we not able to manufacture products at
our manufacturing facility because of regulatory, business or any
other reasons, the manufacture and marketing of these products
would be interrupted. This could have a material adverse impact on
our business, results of operations, financial condition, cash
flows and competitive position.
The use of legal and regulatory strategies by competitors with
innovator products, including the filing of citizen petitions, may
delay or prevent the introduction or approval of our product
candidates, increase our costs associated with the introduction or
marketing of our products, or significantly reduce the profit
potential of our product candidates.
Companies with
innovator drugs often pursue strategies that may serve to prevent
or delay competition from alternatives to their innovator products.
These strategies include, but are not limited to:
●
filing
“citizen petitions” with the FDA that may delay
competition by causing delays of our product
approvals;
●
seeking to
establish regulatory and legal obstacles that would make it more
difficult to demonstrate a product’s bioequivalence or
“sameness” to the related innovator
product;
●
filing suits for
patent infringement that automatically delay FDA approval of
products seeking approval based on the Section 505(b)(2)
pathway;
●
obtaining
extensions of market exclusivity by conducting clinical trials of
innovator drugs in pediatric populations or by other
methods;
15
●
persuading the FDA
to withdraw the approval of innovator drugs for which the patents
are about to expire, thus allowing the innovator company to develop
and launch new patented products serving as substitutes for the
withdrawn products;
●
seeking to obtain
new patents on drugs for which patent protection is about to
expire; and
●
initiating
legislative and administrative efforts in various states to limit
the substitution of innovator products by pharmacies.
These
strategies could delay, reduce or eliminate our entry into the
market and our ability to generate revenues from our products and
product candidates.
Our products may not achieve expected levels of market acceptance,
thereby limiting our potential to generate revenue.
Even if
we are able to obtain regulatory approvals for our product
candidates, the success of any of our products will be dependent
upon market acceptance. Levels of market acceptance for any
products marketed by us could be affected by several factors,
including:
●
the availability of
alternative products from competitors;
●
the prices of our
products relative to those of our competitors;
●
the number of
competitive product entries, and the nature and extent of any
aggressive pricing and rebate activities that may
follow;
●
the timing of our
market entry;
●
the ability to
market our products effectively at the retail level;
and
●
the acceptance of
our products by government and private formularies.
Some of
these factors are not within our control, and our proposed products
may not achieve levels of market acceptance anticipated by
us. Additionally, continuing and increasingly sophisticated
studies of the proper utilization, safety and efficacy of
pharmaceutical products are being conducted by the industry,
government agencies and others which can call into question the
utilization, safety and efficacy of our products and any product
candidates we are currently developing or may develop in the
future. These studies could also impact a future product after
it has been marketed. In some cases, studies have resulted,
and may in the future result, in the discontinuance of product
marketing or requirement of other risk management programs such as
the need for a patient registry. The failure of our products
and any of our product candidates, once approved, to achieve market
acceptance would limit our ability to generate revenue and would
adversely affect our results of operations.
The risks
and uncertainties inherent in conducting clinical trials
could delay or prevent the development and commercialization of our
own branded products, which could have a material adverse effect on
our results of operations, liquidity, financial condition, and
growth prospects.
There
are a number of risks and uncertainties associated with clinical
trials, which may be exacerbated by our relatively limited
experience in conducting and supervising clinical trials and
preparing NDAs. The results of initial clinical trials may not
be indicative of results that would be obtained from large scale
testing. Clinical trials are often conducted with patients
having advanced stages of disease and, as a result, during the
course of treatment these patients can die or suffer adverse
medical effects for reasons that may not be related to the
pharmaceutical agents being tested, but which nevertheless affect
the clinical trial results. In addition, side effects experienced
by the patients may cause delay of approval of our product
candidates or a limited application of an approved product.
Moreover, our clinical trials may not demonstrate sufficient safety
and efficacy to obtain FDA approval.
16
Failure
can occur at any time during the clinical trial process and, in
addition, the results from early clinical trials may not be
predictive of results obtained in later and larger clinical trials,
and product candidates in later clinical trials may fail to show
the desired safety or efficacy despite having progressed
successfully through earlier clinical testing. A number of
companies in the pharmaceutical industry have suffered significant
setbacks in clinical trials, even in advanced clinical trials after
showing positive results in earlier clinical trials. In the
future, the completion of clinical trials for our product
candidates may be delayed or halted for many reasons, including
those relating to the following:
●
delays in patient
enrollment, and variability in the number and types of patients
available for clinical trials;
●
regulators or
institutional review boards may not allow us to commence or
continue a clinical trial;
●
our inability, or
the inability of our partners, to manufacture or obtain from third
parties materials sufficient to complete our clinical
trials;
●
delays or failures
in reaching agreement on acceptable clinical trial contracts or
clinical trial protocols with prospective clinical trial
sites;
●
risks associated
with trial design, which may result in a failure of the trial to
show statistically significant results even if the product
candidate is effective;
●
difficulty in
maintaining contact with patients after treatment commences,
resulting in incomplete data;
●
poor effectiveness
of product candidates during clinical trials;
●
safety issues,
including adverse events associated with product
candidates;
●
the failure of
patients to complete clinical trials due to adverse side effects,
dissatisfaction with the product candidate, or other
reasons;
●
governmental or
regulatory delays or changes in regulatory requirements, policy and
guidelines; and
●
varying
interpretation of data by the FDA or other applicable foreign
regulatory agencies.
In
addition, our product candidates could be subject to competition
for clinical study sites and patients from other therapies under
development by other companies which may delay the enrollment in or
initiation of our clinical trials. Many of these companies
have significantly more resources than we do.
The FDA
or other foreign regulatory authorities may require us to conduct
unanticipated additional clinical trials, which could result in
additional expense and delays in bringing our product candidates to
market. Any failure or delay in completing clinical trials for
our product candidates would prevent or delay the commercialization
of our product candidates. There can be no assurance our
expenses related to clinical trials will lead to the development of
brand-name drugs which will generate revenues in the near
future. Delays or failure in the development and
commercialization of our own branded products could have a material
adverse effect on our results of operations, liquidity, financial
condition, and our growth prospects.
17
We rely on third parties to conduct clinical trials for our product
candidates, and if they do not properly and successfully perform
their legal and regulatory obligations, as well as their
contractual obligations to us, we may not be able to obtain
regulatory approvals for our product candidates.
We
design the clinical trials for our product candidates, but rely on
contract research organizations and other third parties to assist
us in managing, monitoring and otherwise carrying out these trials,
including with respect to site selection, contract negotiation and
data management. We do not control these third parties and, as a
result, they may not treat our clinical studies as their highest
priority, or in the manner in which we would prefer, which could
result in delays.
Although we rely on
third parties to conduct our clinical trials, we are responsible
for confirming that each of our clinical trials is conducted in
accordance with our general investigational plan and
protocol. Moreover, the FDA and foreign regulatory agencies
require us to comply with regulations and standards, commonly
referred to as good clinical practices, for conducting, recording
and reporting the results of clinical trials to ensure that the
data and results are credible and accurate and that the trial
participants are adequately protected. Our reliance on third
parties does not relieve us of these responsibilities and
requirements. The FDA enforces good clinical practices through
periodic inspections of trial sponsors, principal investigators and
trial sites. If we, our contract research organizations or our
study sites fail to comply with applicable good clinical practices,
the clinical data generated in our clinical trials may be deemed
unreliable and the FDA may require us to perform additional
clinical trials before approving our marketing
applications. There can be no assurance that, upon inspection,
the FDA will determine that any of our clinical trials comply with
good clinical practices. In addition, our clinical trials must
be conducted with product manufactured under the FDA’s
current Good Manufacturing Practices, or cGMP,
regulations. Our failure, or the failure of our contract
manufacturers, if any are involved in the process, to comply with
these regulations may require us to repeat clinical trials, which
would delay the regulatory approval process.
If
third parties do not successfully carry out their duties under
their agreements with us; if the quality or accuracy of the data
they obtain is compromised due to failure to adhere to our clinical
protocols or regulatory requirements; or if they otherwise fail to
comply with clinical trial protocols or meet expected deadlines,
our clinical trials may not meet regulatory requirements. If
our clinical trials do not meet regulatory requirements or if these
third parties need to be replaced, such clinical trials may be
extended, delayed, suspended or terminated. If any of these events
occur, we may not be able to obtain regulatory approval of our
product candidates, which could have a material adverse effect on
our results of operations, financial condition and growth
prospects.
Competition in our industry is intense, and developments by other
companies could render our products and product candidates
obsolete.
Many of
our competitors, including medical technology, pharmaceutical or
biotechnology and other companies, universities, government
agencies, or research organizations, have substantially greater
financial and technical resources and production and marketing
capabilities than we have. They also may have greater
experience in conducting bioequivalence studies, preclinical
testing and clinical trials of pharmaceutical products, obtaining
FDA and other regulatory approvals, and ultimately commercializing
any approved products. Therefore, our competitors may succeed
in developing and commercializing technologies and products that
are more effective than the drug delivery technologies we have
developed or we are developing or that will cause our technologies
or products to become obsolete or non-competitive, and in obtaining
FDA approval for products faster than we could. These
developments could render our products obsolete and uncompetitive,
which would have a material adverse effect on our business,
financial condition and results of operations. Even if we
commence further commercial sales of our products, we will be
competing against the greater manufacturing efficiency and
marketing capabilities of our competitors, areas in which we have
limited or no experience.
We rely
on collaborative arrangements with third parties that provide
manufacturing and/or marketing support for some or all of our
products and product candidates. Even if we find a potential
partner, we may not be able to negotiate an arrangement on
favorable terms or achieve results that we consider
satisfactory. In addition, such arrangements can be terminated
under certain conditions and do not assure a product’s
success. We also face intense competition for collaboration
arrangements with other pharmaceutical and biotechnology
companies.
Although we believe
that our ownership of patents for some of our drug delivery
products will limit direct competition with these products, we must
also compete with established existing products and other promising
technologies and other products and delivery alternatives that may
be more effective than our products and proposed products. In
addition, we may not be able to compete effectively with other
commercially available products or drug delivery
technologies.
18
We require regulatory approvals for any products that use our drug
delivery technologies.
Our
drug delivery technologies can be quite complex, with many
different components. The development required to take a
technology from its earliest stages to its incorporation in a
product that is sold commercially can take many years and cost a
substantial amount of money. Significant technical challenges
are common as additional products incorporating our technologies
progress through development.
Any
particular technology such as our abuse-deterrent technology may
not perform in the same manner when used with different therapeutic
agents, and therefore this technology may not prove to be as useful
or valuable as originally thought, resulting in additional
development work.
If our
efforts do not repeatedly lead to successful development of product
candidates, we may not be able to grow our pipeline or to enter
into agreements with marketing and distribution partners or
collaborators that are willing to distribute or develop our product
candidates. Delays or unanticipated increases in costs of
development at any stage, or failure to solve a technical
challenge, could adversely affect our operating
results.
If
contract manufacturers fail to devote sufficient time and resources
to our concerns, or if their performance is substandard, the
commercialization of our products could be delayed or prevented,
and this may result in higher costs or deprive us of potential
product revenues.
We rely
on contract manufacturers for certain components and ingredients of
our clinical trial materials, such as active pharmaceutical
ingredients, or APIs, and we may rely on such manufacturers for
commercial sales purposes as well. Our reliance on contract
manufacturers in these respects will expose us to several risks
which could delay or prevent the commercialization of our products,
result in higher costs, or deprive us of potential product
revenues, including:
●
Difficulties in
achieving volume production, quality control and quality assurance,
or technology transfer, as well as with shortages of qualified
personnel;
●
The failure to
establish and follow cGMP and to document adherence to such
practices;
●
The need to
revalidate manufacturing processes and procedures in accordance
with FDA and other nationally mandated cGMPs and potential prior
regulatory approval upon a change in contract
manufacturers;
●
Failure to perform
as agreed or to remain in the contract manufacturing business for
the time required to produce, store and distribute our products
successfully;
●
The potential for
an untimely termination or non-renewal of contracts;
and
●
The potential for
us to be in breach of our collaboration and marketing and
distribution arrangements with third parties for the failure of our
contract manufacturers to perform their obligations to
us.
In
addition, drug manufacturers are subject to ongoing periodic
unannounced inspection by the FDA and corresponding state and
foreign agencies to ensure strict compliance with cGMP and other
government regulations. While we may audit the
performance of third-party contractors, we will not have complete
control over their compliance with these regulations and
standards. Failure by either our third-party
manufacturers or by us to comply with applicable regulations could
result in sanctions being imposed on us, including fines,
injunctions, civil penalties, failure of applicable regulatory
authorities to grant review of submissions or market approval of
drugs, delays, suspension or withdrawal of approvals, product
seizures or recalls, operating restrictions, facility closures and
criminal prosecutions, any of which could harm our
business.
19
We are subject to currency rate fluctuations that may impact
our financial results.
Our
financial results are reported in U.S. dollars and our revenues are
payable in U.S. dollars, but the majority of our expenses are
payable in Canadian dollars. There may be instances where we
have net foreign currency exposure. Any fluctuations in
exchange rates will impact our financial results.
We are exposed to risks arising from the ability and willingness of
our third-party commercialization partners to provide documentation
that may be required to support information on revenues earned by
us from those commercialization partners.
If our
third-party commercialization partners, from whom we receive
revenues, are unable or unwilling to supply necessary or sufficient
documentation to support the revenue numbers in our financial
statements in a timely manner to the satisfaction of our auditors,
this may lead to delays in the timely publication of our financial
results, our ability to obtain an auditor’s report on our
financial statements and our possible inability to access the
financial markets during the time our results remain
unpublished.
We rely on commercial partners, and may rely on future commercial
partners, to market and commercialize our products and, if
approved, our product candidates, and one or more of those
commercial partners may fail to develop and effectively
commercialize our current, and any future, products.
Our
core competency and strategic focus is on drug development and we
now, and may in the future, utilize strategic commercial partners
to assist in the commercialization of our products and our product
candidates, if approved by the FDA. If we enter into strategic
partnerships or similar arrangements, we will rely on third parties
for financial resources and for commercialization, sales and
marketing. Our commercial partners may fail to develop or
effectively commercialize our current, and any future products, for
a variety of reasons, including, among others, because they may
face intense competition, they lack adequate financial or other
resources or they decide to focus on other initiatives or
priorities. Any failure of our third-party commercial partners to
successfully market and commercialize our products and product
candidates would diminish our revenues.
We have limited sales, marketing and distribution
experience.
We have
limited experience in the sales, marketing, and distribution of
pharmaceutical products. There can be no assurance that, if
required, we would be able to establish sales, marketing, and
distribution capabilities or make arrangements with our
collaborators, licensees, or others to perform such activities or
that such efforts would be successful. If we fail to establish
successful marketing and sales capabilities or to make arrangements
with third parties, our business, financial condition and results
of operations will be materially adversely affected.
Our significant shareholders have the ability to exercise
significant influence over certain corporate actions.
Our
principal shareholders, Drs. Amina and Isa Odidi, our President and
Chief Operating Officer and our Chairman and Chief Executive
Officer, respectively, and Odidi Holdings Inc., a privately-held
company controlled by Drs. Amina and Isa Odidi, owned in the
aggregate approximately 18.91% of our issued and outstanding common
shares as of July 7, 2017 (and collectively beneficially owned in
the aggregate approximately 31.6% of our common shares, including
common shares issuable upon the exercise of outstanding options and
the conversion of the convertible debenture in respect of the loan
to us in the original principal amount of $1,500,000 by Drs. Isa
and Amina Odidi, or the Debenture, of which $1,350,000 remains
outstanding, that are exercisable or convertible within 60 days of
the date hereof). As a result, the principal shareholders have
the ability to exercise significant influence over all matters
submitted to our shareholders for approval whether subject to
approval by a majority of holders of our common shares or subject
to a class vote or special resolution requiring the approval of
66⅔% of the votes cast by holders of our common shares, in
person or by proxy.
20
Our effective tax rate may vary.
Various
internal and external factors may have favorable or unfavorable
effects on our future effective tax rate. These factors
include, but are not limited to, changes in tax laws, regulations
and/or rates, changing interpretations of existing tax laws or
regulations, future levels of research and development spending,
the availability of tax credit programs for the reimbursement of
all or a significant proportion of research and development
spending, and changes in overall levels of pre-tax
earnings. At present, we qualify in Canada for certain
research tax credits for qualified scientific research and
experimental development pertaining to our drug delivery
technologies and drug products in research stages. If Canadian
tax laws relating to research tax credits were substantially
negatively altered or eliminated, or if a substantial portion of
our claims for tax credits were denied by the relevant taxing
authorities, pursuant to an audit or otherwise, it would have a
material adverse effect upon our financial results.
“Comprehensive
tax reform” remains a topic of discussion in the United
States Congress. Such legislation could significantly alter the
existing Internal Revenue Code of 1986, as amended, or the Code. We
cannot predict whether, when, or to what extent U.S. federal tax
laws, regulations, interpretations, or rulings will be issued, nor
is the long-term impact of proposed comprehensive tax reforms known
at this time. We could be adversely affected by changes as a result
of comprehensive tax reform. In particular, under a recently
released draft outline of comprehensive tax reform, the U.S. is
considering changing the method by which foreign income is taxed as
well as changing the rates of U.S. federal income tax. If passed,
these changes to the Code may impact current law and regulations
regarding passive foreign investment companies and the impact on
our shareholders may be substantial.
Risks related to our Industry
Generic drug manufacturers will increase competition for certain
products and may reduce our expected royalties.
Part of
our product development strategy includes making NDA filings
relating to product candidates involving the novel reformulation of
existing drugs with active ingredients that are off-patent. Such
NDA product candidates, if approved, are likely to face competition
from generic versions of such drugs in the future. Regulatory
approval for generic drugs may be obtained without investing in
costly and time consuming clinical trials. Because of
substantially reduced development costs, manufacturers of generic
drugs are often able to charge much lower prices for their products
than the original developer of a new product. If we face
competition from manufacturers of generic drugs on products we may
commercialize, such as our once-daily Rexista™ product
candidate (abuse-deterrent oxycodone hydrochloride extended release
tablets), the prices at which such of our products are sold and the
revenues we may receive could be reduced.
Revenues from
generic pharmaceutical products typically decline as a result of
competition, both from other pharmaceutical companies and as a
result of increased governmental pricing pressure.
Our
generic drugs face intense competition. Prices of generic drugs
typically decline, often dramatically, especially as additional
generic pharmaceutical companies (including low-cost generic
producers based in China and India) receive approvals and enter the
market for a given product and competition intensifies.
Consequently, our ability to sustain our sales and profitability on
any given product over time is affected by the number of new
companies selling such product and the timing of their
approvals.
In
addition, intense pressure from government healthcare authorities
to reduce their expenditures on prescription drugs could result in
lower pharmaceutical pricing, causing decreases in our
revenues.
Furthermore, brand
pharmaceutical companies continue to defend their products
vigorously. For example, brand companies often sell or license
their own generic versions of their products, either directly or
through other generic pharmaceutical companies (so-called
“authorized generics”). No significant regulatory
approvals are required for authorized generics, and brand companies
do not face any other significant barriers to entry into such
market. Brand companies may seek to delay introductions of generic
equivalents through a variety of commercial and regulatory tactics.
These actions may increase the costs and risks of our efforts to
introduce generic products and may delay or prevent such
introduction altogether.
21
Market acceptance of our products will be limited if users of our
products are unable to obtain adequate reimbursement from
third-party payers.
Government health
administration authorities, private health insurers and other
organizations generally provide reimbursement for products like
ours, and our commercial success will depend in part on whether
appropriate reimbursement levels for the cost of our products and
related treatments are obtained from government authorities,
private health insurers and other organizations, such as health
maintenance organizations and managed care
organizations. Even if we succeed in bringing any of our
products to market, third party payers may not provide
reimbursement in whole or in part for their use.
Significant
uncertainty exists as to the reimbursement status of newly approved
health care products. Some of our product candidates, such as
our once-daily Rexista™ (abuse-deterrent oxycodone
hydrochloride extended release tablets), are intended to replace or
alter existing therapies or procedures. These third-party
payers may conclude that our products are less safe, less effective
or less economical than those existing therapies or
procedures. Therefore, third-party payers may not approve our
products for reimbursement. We may be required to make
substantial pricing concessions in order to gain access to the
formularies of large managed-care organizations. If
third-party payers do not approve our products for reimbursement or
fail to reimburse them adequately, sales will suffer as some
physicians or their patients may opt for a competing product that
is approved for reimbursement or is adequately
reimbursed. Even if third-party payers make reimbursement
available, these payers’ reimbursement policies may adversely
affect our ability and our potential marketing and distribution
partners’ ability to sell our products on a profitable
basis.
We are subject to significant costs and uncertainties related to
compliance with the extensive regulations that govern the
manufacturing, labeling, distribution, cross-border imports and
promotion of pharmaceutical products as well as environmental,
safety and health regulations.
Governmental
authorities in the United States and Canada regulate the research
and development, testing and safety of pharmaceutical
products. The regulations applicable to our existing and
future products may change. Regulations require extensive
clinical trials and other testing and government review and final
approval before we can market our products. The cost of
complying with government regulation can be substantial and may
exceed our available resources causing delay or cancellation of our
product introductions.
Some
abbreviated application procedures for controlled-release drugs and
other products, including those related to our ANDA filings, or to
the ANDA filings of unrelated third parties in respect of drugs
similar to or chemically related to those of our ANDA filings, are
or may become the subject of petitions filed by brand-name drug
manufacturers or other ANDA filers seeking changes from the FDA in
the interpretation of the statutory approval requirements for
particular drugs as part of their strategy to thwart or advance
generic competition. We cannot predict whether the FDA will
make any changes to its interpretation of the requirements
applicable to our ANDA applications as a result of these petitions,
or whether unforeseen delays will occur in our ANDA filings while
the FDA considers such petitions or changes or otherwise, or the
effect that any changes may have on us. Any such changes in
FDA interpretation of the statutes or regulations, or any
legislated changes in the statutes or regulations, may make it more
difficult for us to file ANDAs or obtain further approval of our
ANDAs and generate revenues and thus may materially harm our
business and financial results.
Any
failure or delay in obtaining regulatory approvals could make it so
that we are unable to market any products we develop and therefore
adversely affect our business, results of operations, financial
condition and cash flows. Even if product candidates are
approved in the United States or Canada, regulatory authorities in
other countries must approve a product prior to the commencement of
marketing the product in those countries. The time required to
obtain any such approval may be longer than in the United States or
Canada, which could cause the introduction of our products in other
countries to be cancelled or materially delayed.
22
The
manufacturing, distribution, processing, formulation, packaging,
labeling, cross-border importation and advertising of our products
are subject to extensive regulation by federal agencies, including
in the United States, the FDA, Drug Enforcement Administration,
Federal Trade Commission, Consumer Product Safety Commission and
Environmental Protection Agency in the U.S., and Health Canada and
Canada Border Services Agency in Canada, among others. We are
also subject to state and local laws, regulations and
agencies. Compliance with these regulations requires
substantial expenditures of time, money and effort in such areas as
production and quality control to ensure full technical
compliance. Failure to comply with FDA and Health Canada and
other governmental regulations can result in fines, disgorgement,
unanticipated compliance expenditures, recall or seizure of
products, total or partial suspension of production or
distribution, suspension of the FDA’s or Health
Canada’s review of NDAs, ANDAs or ANDSs, as the case may be,
enforcement actions, injunctions and civil or criminal
prosecution.
Environmental laws
have changed in recent years and we may become subject to stricter
environmental standards in the future and face larger capital
expenditures in order to comply with environmental laws. We
are subject to extensive federal, state, provincial and local
environmental laws and regulations which govern the discharge,
emission, storage, handling and disposal of a variety of substances
that may be used in, or result from, our operations. We are
also subject periodically to environmental compliance reviews by
environmental, safety, and health regulatory agencies and to
potential liability for the remediation of contamination associated
with both present and past hazardous waste generation, handling,
and disposal activities. We cannot accurately predict the
outcome or timing of future expenditures that we may be required to
make in order to comply with the federal, state, local and
provincial environmental, safety, and health laws and regulations
that are applicable to our operations and facilities.
Healthcare reform measures could hinder or prevent the commercial
success of our products and product candidates.
In the
United States, there have been, and we expect there will continue
to be, a number of legislative and regulatory changes to the
healthcare system that could affect our future revenues and
potential profitability. Federal and state lawmakers regularly
propose and, at times, enact legislation that results in
significant changes to the healthcare system, some of which are
intended to contain or reduce the costs of medical products and
services. An example of this is the Patient Protection and
Affordable Care Act, as amended by the Health Care and Education
Reconciliation Act, or, collectively, the Affordable Care Act. In
addition, other legislative changes have been proposed and adopted
in the U.S. since the Affordable Care Act was enacted.
There
is also increasing legislative attention to opioid abuse in the
U.S., including passage of the 2016 Comprehensive Addiction and
Recovery Act and the 21st Century Cures Act, which, among other
things, strengthens state prescription drug monitoring programs and
expands educational efforts for certain populations. These laws
could result in fewer prescriptions being written for opioid drugs,
which could impact future sales of our Rexista and related opioid
product candidates.
We
expect that the new presidential administration and U.S. Congress
will seek to modify, repeal, or otherwise invalidate all, or
certain provisions of, the Affordable Care Act. Since taking
office, President Trump has continued to support the repeal of all
or portions of the Affordable Care Act and the House and Senate
have recently taken certain action in furtherance of this
goal.
We also
expect that additional state and federal healthcare reform measures
will be adopted in the future, any of which could limit the amounts
that federal and state governments will pay for healthcare products
and services, and which could result in reduced demand for our
products once approved or additional pricing pressures, and may
adversely affect our operating results.
Our
ability to market and promote our Rexista™ product candidate
(abuse-deterrent oxycodone hydrochloride extended release tablets)
and its abuse-deterrent features will be determined by FDA-approved
labeling requirements.
23
The
commercial success of our Rexista™ product candidate
(abuse-deterrent oxycodone hydrochloride extended release tablets)
will depend upon our ability to obtain requested FDA-approved
labeling describing its abuse-deterrent features. Our failure to
achieve FDA approval of requested product labeling containing such
information will prevent us from advertising and promoting the
abuse-deterrent features of our product candidate in a way to
differentiate it from competitive products. This would make our
product candidate less competitive in the market. Moreover, FDA
approval is required in order to make claims that a product has an
abuse-deterrent effect.
In
April 2015, the FDA published final guidance with respect to the
evaluation and labeling of abuse-deterrent opioids. The guidance
provides direction as to the studies and data required for
obtaining abuse-deterrent claims in a product label. If a product
is approved by the FDA to include such claims in its label, the
applicant may use the approved labeling information about the
abuse-deterrent features of the product in its marketing efforts to
physicians.
Although we intend
to provide data to the FDA to support approval of abuse-deterrence
label claims for Rexista™, there can be no assurance that
Rexista™ or any of our other product candidates will receive
FDA-approved labeling that describes the abuse-deterrent features
of such products. The FDA may find that our studies and data do not
support our requested abuse-deterrent labeling or that our product
candidate does not provide substantial abuse-deterrence benefits
because, for example, its deterrence mechanisms do not address the
way it is most likely to be abused. Furthermore, the FDA could
change its guidance, which could require us to conduct additional
studies or generate additional data. If the FDA does not approve
our requested abuse-deterrent labeling, we will be limited in our
ability to promote Rexista™ based on its abuse-deterrent
features and, as a result, our business may suffer.
We are subject to product liability costs for which we may not have
or be able to obtain adequate insurance coverage.
The
testing and marketing of pharmaceutical products entails an
inherent risk of product liability. Liability exposures for
pharmaceutical products can be extremely large and pose a material
risk. In some instances, we may be or may become contractually
obligated to indemnify third parties for such liability. Our
business may be materially and adversely affected by a successful
product liability claim or claims in excess of any insurance
coverage that we may have. Further, even if claims are not
successful, the costs of defending such claims and potential
adverse publicity could be harmful to our business.
While
we currently have, and in some cases are contractually obligated to
maintain, insurance for our business, property and our products as
they are administered in bioavailability/bioequivalence studies,
first and third party insurance is increasingly costly and narrow
in scope. Therefore, we may be unable to meet such contractual
obligations or we may be required to assume more risk in the
future. If we are subject to third party claims or suffer a loss or
damage in excess of our insurance coverage, we may be required to
bear that risk in excess of our insurance limits. Furthermore, any
first or third party claims made on our insurance policy may impact
our ability to obtain or maintain insurance coverage at reasonable
costs or at all in the future.
Our products involve the use of hazardous materials and waste, and
as a result we are exposed to potential liability claims and to
costs associated with complying with laws regulating hazardous
waste.
Our
research and development activities involve the use of hazardous
materials, including chemicals, and are subject to Canadian
federal, provincial and local laws and regulations governing the
use, manufacture, storage, handling and disposal of hazardous
materials and waste products. It is possible that accidental
injury or contamination from these materials may occur. In the
event of an accident, we could be held liable for any damages,
which could exceed our available financial resources. Further,
we may not be able to maintain insurance to cover these costs on
acceptable terms, or at all. In addition, we may be required
to incur significant costs to comply with environmental laws and
regulations in the future.
24
Our operations may be adversely affected by risks associated with
international business.
We may
be subject to certain risks that are inherent in an international
business, including:
●
varying regulatory
restrictions on sales of our products to certain markets and
unexpected changes in regulatory requirements;
●
tariffs, customs,
duties, and other trade barriers;
●
difficulties in
managing foreign operations and foreign distribution
partners;
●
longer payment
cycles and problems in collecting accounts receivable;
●
political
risks;
●
foreign exchange
controls that may restrict or prohibit repatriation of
funds;
●
export and import
restrictions or prohibitions, and delays from customs brokers or
government agencies;
●
seasonal reductions
in business activity in certain parts of the world;
and
●
potentially adverse
tax consequences.
Depending on the
countries involved, any or all of the foregoing factors could
materially harm our business, financial condition and results of
operations.
Risks related to our common shares
Our share price has been highly volatile and our shares could
suffer a further decline in value.
The
trading price of our common shares has been highly volatile and
could continue to be subject to wide fluctuations in price in
response to various factors, many of which are beyond our control,
including:
●
sales of our common
shares, including any sales made in connection with future
financings;
●
announcements
regarding new or existing corporate relationships or
arrangements;
●
announcements by us
of significant acquisitions, joint ventures, or capital
commitments;
●
actual or
anticipated period-to-period fluctuations in financial
results;
●
clinical and
regulatory development regarding our product
candidates;
●
litigation or
threat of litigation;
●
failure to achieve,
or changes in, financial estimates by securities
analysts;
●
comments or
opinions by securities analysts or members of the medical
community;
●
announcements
regarding new or existing products or services or technological
innovations by us or our competitors;
●
conditions or
trends in the pharmaceutical and biotechnology
industries;
25
●
additions or
departures of key personnel or directors;
●
economic and other
external factors or disasters or crises;
●
limited daily
trading volume; and
●
developments
regarding our patents or other intellectual property or that of our
competitors.
In
addition, the stock market in general and the market for drug
development companies in particular have experienced significant
price and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of those
companies. Further, there has been significant volatility in
the market prices of securities of life science companies. In
the past, following periods of volatility in the market price of a
company’s securities, securities class action litigation has
often been instituted. A securities class action suit against
us could result in substantial costs, potential liabilities, and
the diversion of management’s attention and
resources.
A large number of our common shares could be sold in the market in
the near future, which could depress our stock price.
As of
July 7, 2017, we had approximately 30,572,912 common shares
outstanding. In addition, a substantial portion of our shares
are currently freely trading without restriction under the
Securities Act of 1933, as amended, or U.S. Securities Act, having
been registered for resale or held by their holders for over one
year and are eligible for sale under Rule 144. In addition, in
November 2013, we established our at-the-market equity program
pursuant to which we originally could, from time to time, sell up
to 5,305,484 of our common shares for up to an aggregate of $16.8
million (or such lesser amount as may then be permitted under
applicable exchange rules and securities laws and
regulations). As of July 7, 2017 we have issued and sold
4,255,111 common shares with an aggregate offering price of
$12,837,173 under the at-the-market program. As a result of prior
sales of our common shares under the equity distribution agreement,
we may in the future offer and sell our common shares with an
aggregate purchase price of up to $3,962,827 pursuant to the
at-the-market program (or such lesser amount as may then be
permitted under applicable exchange rules and securities laws and
regulations, such amount we currently can offer and sell being
limited to approximately $2.5 million). The registration
statement of which this prospectus forms a part, or this
Replacement Shelf Registration Statement, was filed to replace the
Shelf Registration Statement (as defined below). This Replacement
Shelf Registration Statement is intended, upon it being declared
effective by the SEC, to provide us with additional flexibility to
continue to access the capital markets, including through the sale
of additional common shares under our at-the-market equity program,
if we seek to do so.
On
October 22, 2009, IntelliPharmaCeutics Ltd., or IPC Ltd., and
Vasogen Inc., or Vasogen, completed a plan of arrangement and
merger, or the IPC Arrangement Agreement, resulting in the
formation of the Company. Our shareholders who received shares
under the IPC Arrangement Agreement who were not deemed
“affiliates” of either Vasogen, IPC Ltd. or us prior to
the IPC Arrangement Agreement were able to resell the common shares
that they received without restriction under the U.S. Securities
Act. The common shares received by an “affiliate”
after the IPC Arrangement Agreement or who were
“affiliates” of either Vasogen, IPC Ltd. or us prior to
the IPC Arrangement Agreement are subject to certain restrictions
on resale under Rule 144.
As of
July 7, 2017, there are currently common shares issuable upon the
exercise of outstanding options and warrants and the conversion of
an outstanding convertible debenture for an aggregate of
approximately 7,828,102 common shares. To the extent any of
our options and warrants are exercised and the convertible
debenture is converted, a shareholder’s percentage ownership
will be diluted and our stock price could be further adversely
affected. Moreover, as the underlying shares are sold, the
market price could drop significantly if the holders of these
restricted shares sell them or if the market perceives that the
holders intend to sell these shares.
26
We have no history or foreseeable prospect of paying cash
dividends.
We have
not paid any cash dividends on our common shares and do not intend
to pay cash dividends in the foreseeable future. We intend to
retain future earnings, if any, for reinvestment in the development
and expansion of our business. Dividend payments in the future
may also be limited by loan agreements or covenants contained in
other securities we may issue. Any future determination to pay
cash dividends will be at the discretion of our board of directors
and depend on our financial condition, results of operations,
capital and legal requirements and such other factors as our board
of directors deems relevant.
There may not be an active, liquid market for our common
shares.
There
is no guarantee that an active trading market for our common shares
will be maintained on the NASDAQ Capital Market, or NASDAQ, or the
Toronto Stock Exchange, or TSX. Investors may not be able to
sell their shares quickly or at the latest market price if trading
in our common shares is not active.
Future issuances of our shares could adversely affect the trading
price of our common shares and could result in substantial dilution
to shareholders.
We may
need to issue substantial amounts of common shares in the
future. In this regard, in November 2013, we entered into an
at-the-market program pursuant to which we originally could, from
time to time, sell up to 5,305,484 of our common shares for up to
an aggregate of $16.8 million (or such lesser amount as may then be
permitted under applicable exchange rules and securities laws and
regulations) of our common shares on NASDAQ or otherwise. As
of July 7, 2017, we have issued and sold 4,255,111 common shares
with an aggregate offering price of $12,837,173 under the
at-the-market program. There can be no assurance that any
additional shares will be sold under our at-the-market
program. To the extent that the market price of our common
shares declines, we will need to issue an increasing number of
common shares per dollar of equity investment. In addition to
our common shares issuable in connection with the exercise of our
outstanding warrants, our employees, and directors will hold rights
to acquire substantial amounts of our common shares. In order
to obtain future financing if required, it is likely that we will
issue additional common shares or financial instruments that are
exchangeable for or convertible into common shares. Also, in
order to provide incentives to employees and induce prospective
employees and consultants to work for us, we may offer and issue
options to purchase common shares and/or rights exchangeable for or
convertible into common shares. Future issuances of shares
could result in substantial dilution to shareholders. Capital
raising activities, if available, and dilution associated with such
activities could cause our share price to decline. In
addition, the existence of common share purchase warrants may
encourage short selling by market participants. Also, in order
to provide incentives to current employees and directors and induce
prospective employees and consultants to work for us, we have
historically granted options and deferred share units, or DSUs, and
intend to continue to do so or offer and issue other rights
exchangeable for or convertible into common shares. Future
issuances of shares could result in substantial dilution to all our
shareholders. In addition, future public sales by holders of
our common shares could impair our ability to raise capital through
any future equity offerings.
On June
4, 2014, our most recent prior registration statement on Form F-3
was declared effective by the SEC (the “Shelf Registration
Statement”), and on June 5, 2014, we filed a final short form
base shelf prospectus with securities regulatory authorities in
each of the provinces and territories of Canada, except Quebec.
These documents allow for, subject to securities regulatory
requirements and limitations, the potential offering of up to an
aggregate of US$100 million of our common shares, preference
shares, warrants, subscription receipts, and units, or any
combination thereof, from time to time in one or more offerings,
and are intended to give us the flexibility to take advantage of
financing opportunities when, and if, market conditions are
favorable to us. This Replacement Shelf Registration Statement was
filed to replace the existing Shelf Registration Statement and is
intended, upon it being declared effective by the SEC, to provide
us with additional flexibility to continue to access the capital
markets, including through the sale of additional common shares
under our at-the-market equity program, if we seek to do so. The
specific terms of future offerings, if any, would be established,
subject to the approval of our board of directors, at the time of
such offering and will be described in detail in a prospectus
supplement filed at the time of any such offering. As of July 7,
2017, we have not sold any securities under the Shelf Registration
Statement or the shelf prospectus, other than (i) the sale since
June 4, 2014 of 2,565,611 common shares under our at-the-market
program referred to above, (ii) the sale of units, common shares
and warrants under the Underwriting Agreement between us and Dawson
James Securities, Inc., dated May 27, 2016, and (iii) the issuance
of 1,030,590 common shares pursuant to warrants previously issued,
and there can be no assurance that any additional securities will
be sold under the Shelf Registration Statement, the shelf
prospectus or this Replacement Shelf Registration
Statement.
27
We may in the future issue preference shares which could adversely
affect the rights of holders of our common shares and the value of
such shares.
Our
board of directors has the ability to authorize the issue of an
unlimited number of preference shares in series, and to determine
the price, rights, preferences and privileges of those shares
without any further vote or action by the holders of our common
shares. Although we have no preference shares issued and
outstanding, preference shares issued in the future, including by
this prospectus or any applicable prospectus supplement, could
adversely affect the rights and interests of holders of our common
shares.
Our common shares may not continue to be listed on the
TSX.
Failure
to maintain the applicable continued listing requirements of
the TSX could result in our common shares being delisted from the
TSX. The TSX will normally consider the delisting of
securities if, in the opinion of the exchange, it appears that the
public distribution, price, or trading activity of the securities
has been so reduced as to make further dealings in the securities
on TSX unwarranted. Specifically, participating securities may
be delisted from the TSX if, among other things, the market value
of an issuer’s securities is less than C$3,000,000 over any
period of 30 consecutive trading days. In such circumstances,
the TSX may place an issuer under a delisting review pursuant to
which the issuer would be reviewed under the TSX’s remedial
review process and typically be granted 120 days to comply with all
requirements for continued listing. If the market price of our
common shares declines further or we are unable to maintain other
listing requirements, the TSX could commence a remedial review
process that could lead to the delisting of our common shares from
the TSX. Further, if we complete a sale, merger, acquisition, or
alternative strategic transaction, we will have to consider if the
continued listing of our common shares on the TSX is appropriate,
or possible.
If our
common shares are no longer listed on the TSX, they may be eligible
for listing on the TSX Venture Exchange. In the event that we
are not able to maintain a listing for our common shares on the TSX
or the TSX Venture Exchange, it may be extremely difficult or
impossible for shareholders to sell their common shares in
Canada. Moreover, if we are delisted from the TSX, but obtain
a substitute listing for our common shares on the TSX Venture
Exchange, our common shares will likely have less liquidity and
more price volatility than experienced on the
TSX. Shareholders may not be able to sell their common shares
on any such substitute exchange in the quantities, at the times, or
at the prices that could potentially be available on a more liquid
trading market. As a result of these factors, if our common
shares are delisted from the TSX, the price of our common shares is
likely to decline.
Our common shares may not continue to be listed on
NASDAQ.
Failure
to meet the applicable quantitative and/or qualitative maintenance
requirements of NASDAQ could result in our common shares being
delisted from NASDAQ. For continued listing, NASDAQ
requires, among other things, that listed securities maintain a
minimum bid price of not less than $1.00 per share. If
the bid price falls below the $1.00 minimum for more than 30
consecutive trading days, an issuer will typically have 180 days to
satisfy the $1.00 minimum bid price, which must be maintained for a
period of at least ten trading days in order to regain
compliance.
If we
are delisted from NASDAQ, our common shares may be eligible for
trading on an over-the-counter market in the United
States. In the event that we are not able to obtain a
listing on another U.S. stock exchange or quotation service for our
common shares, it may be extremely difficult or impossible for
shareholders to sell their common shares in the United
States. Moreover, if we are delisted from NASDAQ, but
obtain a substitute listing for our common shares in the United
States, it will likely be on a market with less liquidity, and
therefore experience potentially more price volatility than
experienced on NASDAQ. Shareholders may not be able to
sell their common shares on any such substitute U.S. market in the
quantities, at the times, or at the prices that could potentially
be available on a more liquid trading market. As a result of
these factors, if our common shares are delisted from NASDAQ, the
price of our common shares is likely to decline. In addition,
a decline in the price of our common shares will impair our ability
to obtain financing in the future.
28
Our common shares are listed for trading in the United States and
may become subject to the SEC’s penny stock
rules.
Transactions in
securities that are traded in the United States by companies with
net tangible assets of $5,000,000 or less and a market price per
share of less than $5.00 that are not traded on NASDAQ or on other
securities exchanges may be subject to the “penny
stock” rules promulgated under the U.S. Exchange
Act. Under these rules, broker-dealers who recommend such
securities to persons other than institutional investors
must:
●
make a special
written suitability determination for the purchaser;
●
receive the
purchaser’s written agreement to a transaction prior to
sale;
●
provide the
purchaser with risk disclosure documents which identify risks
associated with investing in “penny stocks” and which
describe the market for these “penny stocks” as well as
a purchaser’s legal remedies; and
●
obtain a signed and
dated acknowledgment from the purchaser demonstrating that the
purchaser has actually received the required risk disclosure
document before a transaction in a “penny stock” can be
completed.
As a
result of these requirements, if our common shares are at such time
subject to the “penny stock” rules, broker-dealers may
find it difficult to effectuate customer transactions and trading
activity in these shares in the United States may be significantly
limited. Accordingly, the market price of the shares may be
depressed, and investors may find it more difficult to sell the
shares.
As a foreign private issuer in the United States, we are subject to
different U.S. securities laws and rules than a domestic U.S.
issuer.
As a
foreign private issuer under U.S. securities laws, we are not
required to comply with all the periodic disclosure requirements of
the U.S. Exchange Act applicable to domestic United States
companies and therefore the publicly available information about us
may be different or more limited than if we were a United States
domestic issuer. In addition, our officers, directors, and
principal shareholders are exempt from the “real time”
reporting and “short swing” profit recovery provisions
of Section 16 of the U.S. Exchange Act and the rules
thereunder. Although under Canadian rules, our officers,
directors and principal shareholders are generally required to file
on SEDI (www.sedi.ca)
reports of transactions involving our common shares within five
calendar days of such transaction, our shareholders may not know
when our officers, directors and principal shareholders purchase or
sell our common shares as timely as they would if we were a United
States domestic issuer.
We are exposed to risks if we are unable to comply with laws and
future changes to laws affecting public companies, including the
Sarbanes-Oxley Act of 2002, and also to increased costs associated
with complying with such laws.
Any
future changes to the laws and regulations affecting public
companies, as well as compliance with existing provisions of the
Sarbanes-Oxley Act of 2002, or SOX, in the United States and
applicable Canadian securities laws, regulations, rules and
policies, may cause us to incur increased costs to comply with such
laws and requirements, including, among others, hiring additional
personnel and increased legal, accounting and advisory
fees. Delays, or a failure to comply with, applicable laws,
rules and regulations could result in enforcement actions, the
assessment of other penalties and civil suits. The new laws
and regulations may increase potential costs to be borne under
indemnities provided by us to our officers and directors and may
make it more difficult to obtain certain types of insurance,
including liability insurance for directors and officers; as such,
we may be forced to accept reduced policy limits and coverage or
incur substantially higher costs to obtain the same or similar
coverage. The impact of these events could also make it more
difficult to attract and retain qualified persons to serve on our
board of directors, or as executive officers.
29
We are
required annually to review and report on the effectiveness of our
internal control over financial reporting in accordance with SOX
Section 404 and Multilateral Instrument 52-109 –
Certification of Disclosure in Issuer’s Annual and Interim
Filings of the Canadian Securities Administrators. The results
of this review are reported in our Annual Report on Form 20-F and
in our Management Discussion and Analysis. Management’s
review is designed to provide reasonable, not absolute, assurance
that all material weaknesses in our internal controls are
identified. Material weaknesses represent deficiencies in our
internal controls that may not prevent or detect a misstatement
occurring which could have a material adverse effect on our
quarterly or annual financial statements. In addition, there
can be no assurance that any remedial actions we take to address
any material weaknesses identified will be successful, nor can
there be any assurance that further material weaknesses will not be
identified in future years. Material errors, omissions or
misrepresentations in our disclosures that occur as a result of our
failure to maintain effective internal control over financial
reporting could have a material adverse effect on our business,
financial condition, results of operations, and the value of our
common shares.
We may be classified as a “passive foreign investment
company” or PFIC for U.S. income tax purposes, which could
have significant and adverse tax consequences to U.S.
investors.
The
possible classification of our company as a passive foreign
investment company, or PFIC, for U.S. federal income tax purposes
could have significant and adverse tax consequences for U.S.
Holders (as defined below) of our common shares and preference
shares (collectively, “shares”). It may be possible for
U.S. holders of shares to mitigate certain of these consequences by
making an election to treat us as a “qualified electing
fund” or “QEF” under Section 1295 of the Code, or
a QEF Election, or a mark-to-market election under Section 1296 of
the Code. A non-U.S. corporation generally will be a PFIC if, for a
taxable year (a) 75% or more of the gross income of such
corporation for such taxable year consists of specified types of
passive income or (b) on average, 50% or more of the assets held by
such corporation either produce passive income or are held for the
production of passive income, based on the fair market value of
such assets (or on the adjusted tax basis of such assets, if such
non-U.S. corporation is not publicly traded and either is a
“controlled foreign corporation” under Section 957(a)
of the Code, or makes an election to determine whether it is a PFIC
based on the adjusted basis of the assets).
The
determination of whether we are, or will be, a PFIC for a taxable
year depends, in part, on the application of complex U.S. federal
income tax rules, which are subject to various interpretations.
Although the matter is not free from doubt, we believe that we were
not a PFIC during our 2016 taxable year and will not likely be a
PFIC during our 2017 taxable year. Because PFIC status is based on
our income, assets and activities for the entire taxable year, and
our market capitalization, it is not possible to determine whether
we will be characterized as a PFIC for the 2017 taxable year until
after the close of the taxable year. The tests for determining PFIC
status are subject to a number of uncertainties. These tests are
applied annually, and it is difficult to accurately predict future
income, assets and activities relevant to this determination. In
addition, because the market price of our common shares is likely
to fluctuate, the market price may affect the determination of
whether we will be considered a PFIC. There can be no assurance
that we will not be considered a PFIC for any taxable year
(including our 2017 taxable year). Absent one of the elections
described above, if we are a PFIC for any taxable year during which
a U.S. holder holds our shares, we generally will continue to be
treated as a PFIC regardless of whether we cease to meet the PFIC
tests in one or more subsequent years. Accordingly, no assurance
can be given that we will not constitute a PFIC in the current (or
any future) tax year or that the Internal Revenue Service (the
“IRS”) will not challenge any determination made by us
concerning our PFIC status.
If we
are a PFIC, the U.S. federal income tax consequences to a U.S.
Holder of the ownership and disposition of our shares will depend
on whether such U.S. Holder makes a QEF or mark-to-market
election. Unless otherwise provided by the IRS, a U.S. holder
of our shares is generally required to file an informational return
annually to report its ownership interest in the Company during any
year in which we are a PFIC.
It is
unclear how corporate tax reform currently being considered in the
United States, specifically the recent proposal to change the
method by which income derived from outside of the U.S. is taxed,
will affect the PFIC rules or QEF elections. The foregoing only
speaks to the United States federal income tax considerations as to
the Code in effect on January 1, 2017.
30
The
foregoing does not purport to be a complete enumeration or
explanation of the tax risks involved in an investment in our
company. Prospective investors should read this entire
prospectus and any applicable prospectus supplement and consult
with their own legal, tax and financial advisors before deciding to
invest in our company.
It may be difficult to obtain and enforce judgments against us
because of our Canadian residency.
We are
governed by the laws of Canada. All of our directors and
officers are residents of Canada and all or a substantial portion
of our assets and the assets of such persons may be located outside
of the United States. As a result, it may be difficult for
shareholders to effect service of process upon us or such persons
within the United States or to realize in the United States on
judgments of courts of the United States predicated upon the civil
liability provisions of the U.S. federal securities laws or other
laws of the United States. In addition, there is doubt as to
the enforceability in Canada of liabilities predicated solely upon
U.S. federal securities law against us, our directors, controlling
persons and officers who are not residents of the United States, in
original actions or in actions for enforcements of judgments of
U.S. courts.
History and Development of the Company
The
Company was incorporated under the Canada Business Corporations Act by
certificate and articles of arrangement dated October 22,
2009.
Our
registered principal office is located at 30 Worcester Road,
Toronto, Ontario, Canada M9W 5X2. Our telephone number is (416)
798-3001 and our facsimile number is (416) 798-3007.
Our
agent for service in the United States is Corporation Service
Company at 1090 Vermont Avenue N.W., Washington, D.C.
20005.
On
October 19, 2009, the shareholders of IPC Ltd. and Vasogen approved
the IPC Arrangement Agreement that resulted in the October 22, 2009
court-approved merger of IPC Ltd. and another U.S. subsidiary of
Intellipharmaceutics, Inc. coincident with an arrangement pursuant
to which a predecessor of the Company combined with 7231971 Canada
Inc., a new Vasogen company that acquired substantially all of the
assets and certain liabilities of Vasogen, including the proceeds
from its non-dilutive financing transaction with Cervus LP (the
“IPC Arrangement Transaction”). The
completion of the IPC Arrangement Transaction on October 22, 2009
resulted in the formation of the Company, which is incorporated
under the laws of Canada. The common shares of the Company are
traded on the TSX and NASDAQ.
In this
prospectus, any prospectus supplement, and/or the documents
incorporated by reference herein or therein, unless the context
otherwise requires, the terms “we”, “us”,
“our”, “Intellipharmaceutics,” and the
“Company” refer to Intellipharmaceutics International
Inc. and its subsidiaries.
Business Overview
We are
a pharmaceutical company specializing in the research, development
and manufacture of novel and generic controlled-release and
targeted-release oral solid dosage drugs. Our patented
Hypermatrix™ technology is a multidimensional
controlled-release drug delivery platform that can be applied to
the efficient development of a wide range of existing and new
pharmaceuticals. Based on this technology platform, we have
developed several drug delivery systems and a pipeline of products
(some of which have received FDA approval) and product candidates
in various stages of development, including ANDAs filed with the
FDA (and one ANDS filed with Health Canada) and one NDA filing, in
therapeutic areas that include neurology, cardiovascular,
gastrointestinal tract, or GIT, diabetes and
pain.
31
In
November 2005, we entered into the Par agreement, pursuant to which
we granted Par an exclusive, royalty-free license to make and
distribute in the U.S. all strengths of our generic Focalin
XR® (dexmethylphenidate hydrochloride extended-release)
capsules for a period of 10 years from the date of commercial
launch (which was November 19, 2013). Under the Par agreement, we
made a filing with the FDA for approval to market generic Focalin
XR® capsules in various strengths in the U.S. (the
“Company ANDA”), and are the owner of that Company
ANDA, as approved in part by the FDA. We retain the right to make
and distribute all strengths of the generic product outside of the
U.S. Calendar quarterly profit-sharing payments for its U.S. sales
under the Company ANDA are payable by Par to us as calculated
pursuant to the Par agreement. Within the purview of the Par
agreement, Par also applied for and owns an ANDA pertaining to all
marketed strengths of generic Focalin XR® (the “Par
ANDA”), and is now approved by the FDA, to market generic
Focalin XR® capsules in all marketed strengths in the U.S. As
with the Company ANDA, calendar quarterly profit-sharing payments
are payable by Par to us for its U.S. sales of generic Focalin
XR® under the Par ANDA as calculated pursuant to the Par
agreement.
We
received final approval from the FDA in November 2013 under the
Company ANDA to launch the 15 and 30 mg strengths of our generic
Focalin XR® (dexmethylphenidate hydrochloride
extended-release) capsules. Commercial sales of these
strengths were launched immediately by our commercialization
partner in the U.S., Par.
Our 5,
10, 20 and 40 mg strengths were also then tentatively FDA approved,
subject to the right of Teva to 180 days of generic exclusivity
from the date of first launch of such products. In January 2017,
Par launched the 25 and 35 mg strengths of its generic Focalin
XR® capsules in the U.S., and in May 2017, Par launched the 10
and 20 mg strengths, complementing the 15 and 30 mg strengths of
our generic Focalin XR® currently marketed by Par. The FDA
recently had granted final approval under the Par ANDA for its
generic Focalin XR® capsules in the 5, 10, 15, 20, 25, 30, 35
and 40 mg strengths. We believe Par is preparing to launch the
remaining 5 and 40 mg strengths in the near future. As the first
filer of an ANDA for generic Focalin XR® in the 25 and 35 mg
strengths, Par had 180 days of U.S. generic marketing exclusivity
for those strengths. Under the Par agreement, we receive quarterly
profit share payments on Par’s U.S. sales of generic Focalin
XR®. We expect sales of the 10, 20, 25 and 35 mg strengths to
improve our revenues significantly in 2017. There can be no
assurance as to when or if any further launches will occur for the
remaining strengths, or if they will be successfully
commercialized.
In
February 2017, we received final approval from the FDA for our ANDA
for metformin hydrochloride extended release tablets in the 500 and
750 mg strengths. Our newly-approved product is a generic
equivalent for the corresponding strengths of the branded product
Glucophage® XR sold in the U.S. by Bristol-Myers Squibb. The
Company is aware that several other generic versions of this
product are currently available and serve to limit the overall
market opportunity. We are actively evaluating options to realize
commercial returns from this new approval. There can be no
assurance that our metformin hydrochloride extended release tablets
for the 500 and 750 mg strengths will be successfully
commercialized.
In
February 2016, we received final approval from the FDA of our ANDA
for generic Keppra XR® (levetiracetam extended-release
tablets) for the 500 and 750 mg strengths. Our generic Keppra
XR® is a generic equivalent for the corresponding strengths of
the branded product Keppra XR® sold in the U.S. by UCB, Inc.,
and is indicated for use in the treatment of partial onset seizures
associated with epilepsy. We are aware that several other generic
versions of this product are currently available and serve to limit
the overall market opportunity. We are actively exploring the best
approach to maximize our commercial returns from this approval.
There can be no assurance that our generic Keppra XR® for the
500 and 750 mg strengths will be successfully
commercialized.
32
In
October 2016, we received tentative approval from the FDA for our
ANDA for quetiapine fumarate extended-release tablets in the 50,
150, 200, 300 and 400 mg strengths, and in May 2017, our ANDA
received final FDA approval for all of these strengths. Our
approved product is a generic equivalent for the corresponding
strengths of the branded product Seroquel XR® sold in the U.S.
by AstraZeneca Pharmaceuticals LP, or AstraZeneca. Pursuant to a
settlement agreement between us and AstraZeneca dated July 30,
2012, we were permitted to launch our generic versions of the 50,
150, 200, 300 and 400 mg strengths of generic Seroquel XR®, on
November 1, 2016, subject to FDA final approval of our ANDA for
those strengths. Our final FDA approval followed the expiry of
180-day exclusivity periods granted to the first filers of generic
equivalents to the branded product, which were shared by Par and
Accord Healthcare (“Accord”). The Company has
manufactured and shipped commercial quantities of all strengths of
generic Seroquel XR® to our marketing and distribution partner
Mallinckrodt, and Mallinckrodt launched all strengths in June 2017.
There can be no assurance that our generic Seroquel XR® in any
of the 50, 150, 200, 300 and 400 mg strengths will be successfully
commercialized.
In
October 2016, we announced a license and commercial supply
agreement with Mallinckrodt, or the Mallinckrodt agreement,
granting Mallinckrodt an exclusive license to market, sell and
distribute in the U.S. the following extended release drug product
candidates (“licensed products”) for which we have
ANDAs filed with the FDA:
●
Quetiapine fumarate
extended-release tablets (generic Seroquel XR®) – ANDA
Approved by FDA
●
Desvenlafaxine
extended-release tablets (generic Pristiq®) – ANDA Under
FDA Review
●
Lamotrigine
extended-release tablets (generic Lamictal® XR™) –
ANDA Under FDA Review
Under
the terms of the 10-year agreement, we received a non-refundable
upfront payment of $3 million in October 2016. In addition, the
agreement also provides for a long-term profit sharing arrangement
with respect to these licensed products (which includes up to $11
million in cost recovery payments to us). We have agreed to
manufacture and supply the licensed products exclusively for
Mallinckrodt on a cost plus basis. The Mallinckrodt agreement
contains customary terms and conditions for an agreement of this
kind, and is subject to early termination in the event we do not
obtain FDA approvals of the Mallinckrodt licensed products by
specified dates, or pursuant to any one of several termination
rights of each party.
Our
goal is to leverage our proprietary technologies and know-how in
order to build a diversified portfolio of commercialized products
that generate revenue. We intend to do this by advancing our
products from the formulation stage through product development,
regulatory approval and manufacturing. We believe that
full integration of development and manufacturing will help
maximize the value of our drug delivery technologies, products and
product candidates. We also believe that out-licensing sales
and marketing to established organizations, when it makes economic
sense to do so, will improve our return from our products while
allowing us to focus on our core competencies. We expect
expenditures in investing activities for the purchase of
production, laboratory and computer equipment and the expansion of
manufacturing and warehousing capability to be higher as we prepare
for the commercialization of ANDAs, one NDA and one ANDS that are
pending FDA and Health Canada approval, respectively.
Our Strategy
Our
Hypermatrix™ technologies are central to the development and
manufacture of novel and generic controlled-release and
targeted-release oral solid dosage drugs. The Hypermatrix™
technologies are a multidimensional controlled-release drug
delivery platform that we believe can be applied to the efficient
development of a wide range of existing and new
pharmaceuticals. We believe that the flexibility of these
technologies allows us to develop complex drug delivery solutions
within an industry-competitive timeframe. Based on this technology
platform, we have developed several drug delivery systems and a
pipeline of products (some of which have received FDA approval) and
product candidates in various stages of development, including
ANDAs filed with the FDA (and one ANDS filed with Health Canada)
and one NDA filing, in therapeutic areas that include neurology,
cardiovascular, GIT, diabetes and pain. Certain, but not all, of
the products in our pipeline may be developed from time to time for
third parties pursuant to drug development agreements with those
third parties, under which our commercialization partner generally
pays certain of the expenses of development, sometimes makes
certain milestone payments to us and receives a share of revenues
or profits if the drug is developed successfully to completion, the
control of which is generally in the discretion of our drug
development partner.
33
The
principal focus of our development activities previously targeted
difficult-to-develop controlled-release generic drugs which follow
an ANDA regulatory path. Our current development effort is
increasingly directed towards improved difficult-to-develop
controlled-release drugs which follow an NDA 505(b)(2) regulatory
pathway. We have increased our research and development
(“R&D”) emphasis towards specialty new product
development, facilitated by the 505(b)(2) regulatory pathway, by
advancing the product development program for both Rexista™
and Regabatin™. The technology that is central to our abuse
deterrent formulation of our Rexista™ is the novel Point of
Divergence Drug Delivery System (“nPODDDS™”).
nPODDDS™ is designed to provide for certain unique drug
delivery features in a product. These include the release of the
active substance to show a divergence in a dissolution and/or
bioavailability profile. The divergence represents a point or a
segment in a release timeline where the release rate, represented
by the slope of the curve, changes from an initial rate or set of
rates to another rate or set of rates, the former representing the
usually higher rate of release shortly after ingesting a dose of
the drug, and the latter representing the rate of release over a
later and longer period of time, being more in the nature of a
controlled-release or sustained action. It is applicable for the
delivery of opioid analgesics in which it is desired to discourage
common methods of tampering associated with misuse and abuse of a
drug, and also dose dumping in the presence of alcohol. It can
potentially retard tampering without interfering with the
bioavailability of the product.
In
addition, our Paradoxical OverDose Resistance Activating System, or
PODRAS™, delivery technology was initially introduced to
enhance our Rexista™ (abuse deterrent oxycodone hydrochloride
extended release tablets) product candidate. The PODRAS™
delivery technology platform was designed to prevent overdose when
more pills than prescribed are swallowed intact. Preclinical
studies of prototypes of oxycodone with PODRAS technology suggest
that, unlike other third-party abuse-deterrent oxycodone products
in the marketplace, if more tablets than prescribed are
deliberately or inadvertently swallowed, the amount of drug active
released over 24 hours may be substantially less than expected.
However, if the prescribed number of pills is swallowed, the drug
release should be as expected. Certain aspects of our PODRAS
technology are covered by U.S. Patent No. 9,522,119 and Canadian
Patent No. 2,910,865 issued by the U.S. Patent and Trademark Office
and the Canadian Intellectual Property Office in respect of
“Compositions and Methods for Reducing Overdose” in
December 2016. The issuance of these patents provides us with the
opportunity to accelerate our PODRAS™ development plan in
2017 by pursuing proof of concept studies in humans. We intend to
incorporate this technology in an alternate Rexista™ product
candidate.
The NDA
505(b)(2) pathway (which relies in part upon the FDA’s
findings for a previously approved drug) both accelerates
development timelines and reduces costs in comparison to NDAs for
new chemical entities.
An
advantage of our strategy for development of NDA 505(b)(2) drugs is
that our product candidates can, if approved for sale by the FDA,
potentially enjoy an exclusivity period which may provide for
greater commercial opportunity relative to the generic ANDA
route.
The
market we operate in is created by the expiration of drug product
patents, challengeable patents and drug product exclusivity
periods. There are three ways that we employ our controlled-release
technologies, which we believe represent substantial opportunities
for us to commercialize on our own or develop products or
out-license our technologies and products:
●
For existing
controlled-release (once-a-day) products whose active
pharmaceutical ingredients, or APIs, are covered by drug molecule
patents about to expire or already expired, or whose formulations
are covered by patents about to expire, already expired or which we
believe we do not infringe, we can seek to formulate generic
products which are bioequivalent to the branded products. Our
scientists have demonstrated a successful track record with such
products, having previously developed several drug products which
have been commercialized in the U.S. by their former
employer/clients. The regulatory pathway for this approach
requires ANDAs for the U.S. and ANDSs for Canada.
34
●
For branded
immediate-release (multiple-times-per-day) drugs, we can formulate
improved replacement products, typically by developing new,
potentially patentable, controlled-release once-a-day
drugs. Among other out-licensing opportunities, these drugs
can be licensed to and sold by the pharmaceutical company that made
the original immediate-release product. These can potentially
protect against revenue erosion in the brand by providing a
clinically attractive patented product that competes favorably with
the generic immediate-release competition that arises on expiry of
the original patent(s). The regulatory pathway for this
approach requires NDAs via a 505(b)(2) application for the U.S. or
corresponding pathways for other jurisdictions where
applicable.
●
Some of our
technologies are also focused on the development of abuse-deterrent
and overdose preventive pain medications. The growing abuse
and diversion of prescription “painkillers”,
specifically opioid analgesics, is well documented and is a major
health and social concern. We believe that our technologies
and know-how are aptly suited to developing abuse-deterrent pain
medications. The regulatory pathway for this approach requires
NDAs via a 505(b)(2) application for the U.S. or corresponding
pathways for other jurisdictions where applicable.
We
intend to collaborate in the development and/or marketing of one or
more products with partners, when we believe that such
collaboration may enhance the outcome of the project. We also
plan to seek additional collaborations as a means of developing
additional products. We believe that our business strategy
enables us to reduce our risk by (a) having a diverse product
portfolio that includes both branded and generic products in
various therapeutic categories, and (b) building collaborations and
establishing licensing agreements with companies with greater
resources thereby allowing us to share costs of development and to
improve cash-flow. There can be no assurance that we will be
able to enter into additional collaborations or, if we do, that
such arrangements will be beneficial.
Incidental services
which we may provide from time to time include consulting advice
provided to other organizations regarding FDA
standards.
Except
as set forth below, there have been no material changes in our
share and loan capital, on a consolidated basis, since the date of
our condensed unaudited interim consolidated financial statements
as at and for the three month period ended February 28, 2017, which
are incorporated by reference in this prospectus.
In
November 2013, we established an at-the-market equity program
pursuant to which we originally could, from time to time, sell up
to 5,305,484 of our common shares for up to an aggregate of $16.8
million (or such lesser amount as may then be permitted under
applicable exchange rules and securities laws and regulations). As
a result of prior sales of our common shares under the equity
distribution agreement, we may in the future offer and sell our
common shares with an aggregate purchase price of up to $3,962,827
pursuant to the at-the-market program (or such lesser amount as may
then be permitted under applicable exchange rules and securities
laws and regulations, such amount we currently can offer and sell
being limited to approximately $2.5 million). During the period
commencing March 1, 2017 through July 7, 2017, 401,554 of our
common shares were sold under the at-the-market offering for net
proceeds to us of $901,407. There can be no assurance that any
additional shares will be sold under the at-the-market
program.
Unless
otherwise specified in a prospectus supplement, we may use the net
proceeds from the sale of shelf securities under this prospectus
for general corporate purposes, including funding research,
acceleration of one or more product development initiatives, and
other corporate development opportunities and to possibly fund costs and other
expenses relating to our current leased facilities to accommodate
our anticipated growth requirements, and, although we have no
present understandings, commitments or agreements to do so,
potential acquisitions of, or investments in, companies and
technologies that complement our businesses. Each prospectus
supplement will contain specific information, if any, concerning
the use of proceeds from that sale of securities. Pending the
application of such proceeds, we expect to invest the proceeds in
short-term, interest bearing, investment-grade marketable
securities or money market obligations.
35
All
expenses relating to an offering of securities and any compensation
paid to underwriters, dealers or agents, as the case may be, will
be paid out of the Company’s general funds, unless otherwise
stated in the applicable prospectus supplement.
The
following is a statement of the expenses (all of which are
estimated), other than any underwriting discounts and commission
and expenses reimbursed by us, to be incurred in connection with a
distribution of the securities registered under this registration
statement.
|
SEC registration
and Canadian securities regulatory fees
|
$29,290
|
|
Nasdaq and TSX
listing expenses
|
*
|
|
Printing
expenses
|
*
|
|
Legal fees and
expenses
|
*
|
|
Accountants’
fees and expenses
|
*
|
|
Miscellaneous
|
*
|
|
Total
|
$*
|
____________________________
* to be
provided by a prospectus supplement, or as an exhibit to a Report
on Form 6-K that is incorporated by reference into this
prospectus.
The
Company may sell the securities, separately or together, to or
through underwriters or dealers purchasing as principals for public
offering and sale by them, and also may sell securities to one or
more other purchasers directly or through agents. Each prospectus
supplement will set forth the terms of the offering, including the
name or names of any underwriters or agents, the purchase price or
prices of the securities and the proceeds to the Company from the
sale of the securities.
The
securities may be sold from time to time in one or more
transactions at a fixed price or prices which may be changed or at
market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. The prices
at which the securities may be offered may vary as between
purchasers and during the period of distribution. If, in connection
with the offering of securities at a fixed price or prices, the
underwriters have made a bona fide effort to sell all of the
securities at the initial offering price fixed in the applicable
prospectus supplement, the public offering price may be decreased
and thereafter further changed, from time to time, to an amount not
greater than the initial public offering price fixed in such
prospectus supplement, in which case the compensation realized by
the underwriters will be decreased by the amount that the aggregate
price paid by purchasers for the securities is less than the gross
proceeds paid by the underwriters to the Company.
Underwriters,
dealers and 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 the U.S. Securities Act
and 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.
In
connection with any offering of securities, except as otherwise set
out in a prospectus supplement relating to a particular offering of
securities, the underwriters may over-allot or effect transactions
intended to maintain or stabilize the market price of the
securities offered at a level above that which might otherwise
prevail in the open market. Such transactions, if commenced,
may be discontinued at any time. Any underwriters, dealers or
agents to or through whom securities are sold by us for public
offering and sale may make a market in the securities, but such
underwriters, dealers or agents will not be obligated to do so and
may discontinue any market making at any time without
notice. No assurance can be given that a trading market in the
securities of any series or issue will develop or as to the
liquidity of any such trading market for the
securities.
36
We may
sell the securities covered by this prospectus from time to time.
Registration of our securities covered by this prospectus does not
mean, however, that those securities will necessarily be offered or
sold.
During
the year ended November 30, 2014, we had repaid an outstanding
related party loan payable to Dr. Isa Odidi and Dr. Amina Odidi,
our principal stockholders, directors and executive officers.
Repayments of the related party loan were restricted under the
terms of the loan such that the principal amount thereof was
payable when payment was required solely out of (i) revenues earned
by Intellipharmaceutics Corp., a wholly-owned subsidiary of the
Company (“IPC Corp”) following the effective date of
October 22, 2009 (“effective date”), and/or proceeds
received by IPC Corp or its affiliates from the offering of its
securities after the effective date (other than the proceeds from
the transactions completed in February 2011, March 2012, March 2013
and July 2013), and/or amounts received by IPC Corp for scientific
research tax credits of IPC Corp and (ii) up to C$800,000 of the
Net Cash from the Vasogen transaction (as defined in the IPC
Arrangement Agreement). In March 2014, we repaid the entire
outstanding related party loan principal, in the amount of $690,049
(C$764,851) out of licensing revenues earned by IPC Corp and made
interest payments of $48,504 (C$53,762) in respect of the
promissory note in accordance with the IPC Arrangement
Agreement.
In
January 2013, we completed a private placement financing of an
unsecured Debenture in the original principal amount of $1.5
million. The Debenture bears interest at a rate of 12% per annum,
payable monthly, is pre-payable at any time at the option of the
Company, and is convertible at any time into common shares at a
conversion price of $3.00 per common share at the option of the
holder. Drs. Isa and Amina Odidi, our principal stockholders,
directors and executive officers provided us with the original $1.5
million of the proceeds for the Debenture. In December 2016, a
principal repayment of $150,000 was made on the Debenture.
Effective March 28, 2017, the maturity date for the Debenture was
extended to October 1, 2017. The Company currently expects to repay
the current outstanding principal amount of $1,350,000 on or about
October 1, 2017, if the Company then has cash
available
Since
the beginning of the Company’s preceding three financial
years to the date hereof, other than discussed above, there have
been no transactions or proposed transactions which are material to
the Company or to any associate, holder of 10% of the
Company’s outstanding shares, director or officer or any
transactions that are unusual in their nature or conditions to
which the Company or any of its subsidiaries was a
party.
The
Company’s authorized share capital consists of an unlimited
number of common shares, all without nominal or par value and an
unlimited number of preference shares issuable in series. As of
July 7, 2017, there were 30,572,912 common shares and no preference
shares issued and outstanding.
Common Shares
Each of
our common shares entitles the holder thereof to one vote at any
meeting of shareholders of the Company, except meetings at which
only holders of a specified class of shares are entitled to vote.
Common shares are entitled to receive, as and when declared by the
board of directors, dividends in such amounts as shall be
determined by the board of directors. The holders of common shares
have the right to receive the remaining property of the Company in
the event of liquidation, dissolution, or winding-up of the
Company, whether voluntary or involuntary.
37
Preference Shares
The
preference shares may at any time and from time to time be issued
in one or more series. The board of directors will, by resolution,
from time to time, before the issue thereof, fix the rights,
privileges, restrictions and conditions attaching to the preference
shares of each series. Except as required by law, the holders of
any series of preference shares will not as such be entitled to
receive notice of, attend or vote at any meeting of the
shareholders of the Company. Holders of preference shares will be
entitled to preference with respect to payment of dividends and the
distribution of assets in the event of liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary, or any
other distribution of the assets of the Company among its
shareholders for the purpose of winding up its affairs, on such
shares over the common shares and over any other shares ranking
junior to the preference shares.
Warrants
At July
7, 2017, an aggregate of 1,994,797 common shares were issuable upon
the exercise of outstanding common share purchase warrants, with a
weighted average exercise price of $2.03 per common
share.
Options
As of
July 7, 2017, there were 5,383,305 common shares issuable upon the
exercise of outstanding options. The weighted average exercise
price of these options is $3.45 per common share. As at July 7,
2017, up to 434,951 additional common shares were reserved for
issuance under our option plan.
Convertible Debenture
On
January 10, 2013, we completed a private placement financing of an
unsecured Debenture in the original principal amount of $1.5
million. The Debenture was originally due to mature on January 1,
2015, but effective October 1, 2014, the maturity date was extended
to July 1, 2015; effective June 29, 2015, the July 1, 2015 maturity
date was extended to January 1, 2016; and effective as of December
8, 2015, the maturity date was extended to July 1, 2016. Effective
May 26, 2016, the maturity date of the Debenture was further
extended to December 1, 2016. The Debenture bears interest at a
rate of 12% per annum, payable monthly, is pre-payable at any time
at the option of the Company, and was convertible at any time into
500,000 common shares at a conversion price of $3.00 per common
share at the option of the holder. Drs. Isa and Amina Odidi, our
principal stockholders, directors and executive officers provided
us with the $1.5 million of the proceeds for the Debenture.
Effective December 1, 2016, the maturity date for the Debenture was
extended to April 1, 2017 and a principal repayment of $150,000 was
made at the time of the extension. After giving effect to such
partial repayment, the Debenture is convertible at any time into
450,000 common shares at a conversion price of $3.00 per common
share at the option of the holder. Effective March 28, 2017, the
maturity date of the Debenture was further extended to October 1,
2017. The Company currently expects to repay the current net amount
of $1,350,000 on or about October 1, 2017, if the Company then has
cash available.
Deferred Share Units
At
November 30, 2016, there were 76,743 DSUs issued and outstanding.
From November 30, 2016 to July 7, 2017, an additional 9,207 DSUs
have been issued. At July 7, 2017, 24,050 additional DSUs are
reserved for issuance under our DSU plan.
Restricted Share Units
At
November 30, 2016, there were no restricted share units
(“RSUs”) issued and outstanding. From November 30, 2016
to the date of this prospectus, no RSUs have been issued. At the
date of this prospectus, 330,000 RSUs are reserved for issuance
under our RSU Plan.
38
Registration Rights
We
conducted a private placement issuance of units comprised of common
shares and warrants in February, 2011, which was exempt from
registration under the U.S. Securities Act pursuant to Regulation D
and Section 4(2) and/or Regulation S thereof and such other
available exemptions. As such, the common shares, the warrants, and
the common shares underlying the warrants may not be offered or
sold in the United States unless they are registered under the U.S.
Securities Act, or an exemption from the registration requirements
of the U.S. Securities Act is available.
In
connection with the private placement, we agreed to file a
registration statement on Form F-3, or the Registration Statement,
within 40 days after the closing and use our best efforts to have
it declared effective within 150 days after the closing to register
(i) 100% of the common shares issued in the private placement; and
(ii) 100% of the common shares underlying the investor warrants
issued in the private placement, or the Registrable
Securities.
The
Registration Statement was declared effective as of March 30,
2011. If (i) the Registration Statement ceases to
be continuously effective for more than twenty consecutive calendar
days or more than an aggregate of thirty calendar days during any
consecutive 12-month period, or (ii) at a time in which the
Registrable Securities cannot be sold under the Registration
Statement, we shall fail for any reason to satisfy the current
public information requirement under Rule 144 as to the applicable
Registrable Securities, we shall pay to the investors, on a
pro rata basis, partial liquidated damages of one percent (1%) of
the aggregate purchase price paid by each investor on the
occurrence of an event listed above and for each calendar month
(pro rata for any period less than a calendar month) from an event,
until cured.
The
securities shall cease to be Registrable Securities when (i)
they have been sold (A) pursuant to a registration statement; or
(B) in accordance with Rule 144 or any other rule of similar
effect; or (ii) such securities become eligible for resale without
volume or manner-of-sale restrictions, and when either we are
compliant with any current public information requirements pursuant
to Rule 144 or the current public information requirements no
longer apply.
Our
common shares began trading on October 22, 2009 and are currently
listed on the TSX and listed on NASDAQ under the symbol
“IPCI”. Prior to March 20, 2017, our common shares
traded on the TSX under the symbol “I”; effective that
date, our TSX trading symbol was harmonized with our NASDAQ
symbol.
39
The
following table sets forth the monthly trading history for the
preceding 12 month period, the reported high, low and closing
prices (in Canadian dollars) and total volume traded of our common
shares on the TSX and reported high, low and closing prices (in
U.S. dollars) and total volume of our common shares traded on
NASDAQ.
|
|
TSX
|
NASDAQ
|
||||||
|
|
(Cdn$ per share)
|
(U.S.$ per share)
|
||||||
|
Date
|
High
|
Low
|
Close
|
Volume
Traded
|
High
|
Low
|
Close
|
Volume
Traded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jul-16
|
$2.40
|
$1.97
|
$2.36
|
240,500
|
$1.85
|
$1.53
|
$1.84
|
2,499,500
|
|
Aug-16
|
$2.61
|
$2.23
|
$2.30
|
255,300
|
$2.06
|
$1.71
|
$1.76
|
3,313,300
|
|
Sep-16
|
$2.95
|
$2.21
|
$2.75
|
393,300
|
$2.34
|
$1.69
|
$2.10
|
5,764,800
|
|
Oct-16
|
$4.40
|
$2.75
|
$3.74
|
1,058,000
|
$3.33
|
$2.08
|
$2.77
|
19,519,200
|
|
Nov-16
|
$4.50
|
$3.28
|
$3.70
|
571,000
|
$3.35
|
$2.44
|
$2.79
|
6,246,000
|
|
Dec-16
|
$4.09
|
$3.50
|
$3.79
|
205,600
|
$3.05
|
$2.63
|
$2.88
|
4,127,700
|
|
Jan-17
|
$3.91
|
$3.24
|
$3.65
|
220,800
|
$2.96
|
$2.46
|
$2.75
|
3,614,500
|
|
Feb-17
|
$4.05
|
$2.78
|
$3.35
|
497,100
|
$3.12
|
$2.11
|
$2.53
|
11,874,700
|
|
Mar
-17
|
$3.57
|
$2.87
|
$3.32
|
243,100
|
$2.69
|
$2.19
|
$2.50
|
4,292,200
|
|
Apr
-17
|
$3.33
|
$2.48
|
$2.89
|
176,100
|
$2.50
|
$1.81
|
$2.11
|
3.499,200
|
|
May
-17
|
$3.05
|
$2.57
|
$2.75
|
105,200
|
$2.57
|
$1.88
|
$1.89
|
5,596,200
|
|
June
-17
|
$3.50
|
$2.56
|
$2.57
|
261,600
|
$2.27
|
$1.85
|
$2.09
|
2,669,900
|
|
July 1
to
July 7
-17
|
$3.25
|
$3.00
|
$3.07
|
38,600
|
$2.50
|
$2.17
|
$2.39
|
1,211,800
|
During
the 12 month period prior to the date of this prospectus, the
Company has issued common shares, or securities convertible into
common shares, as follows:
In
November 2013, we entered into an equity distribution agreement
with Roth Capital Partners, LLC, or Roth, pursuant to which we
originally could, from time to time, sell up to 5,305,484 of our
common shares for up to an aggregate of $16.8 million (or such
lesser amount as may then be permitted under applicable exchange
rules and securities laws and regulations) through at-the-market
issuances on the NASDAQ or otherwise. Under the equity
distribution agreement, we may at our discretion, from time to
time, offer and sell common shares through Roth or directly to Roth
for resale. Sales of common shares through Roth, if any, will
be made at such time and at such price as are acceptable to us,
from time to time, by means of ordinary brokers' transactions on
the NASDAQ or otherwise at market prices prevailing at the time of
sale or as determined by us. We are not required to sell
shares under the equity distribution agreement. We will pay
Roth a commission, or allow a discount, of 2.75% of the gross
proceeds we receive from any sales of our common shares under the
equity distribution agreement. Any sales of shares under our at-the
market offering program will be made pursuant to an effective shelf
registration statement on Form F-3 filed with the SEC. We have also
agreed to reimburse Roth for certain expenses relating to the
offering. As of July 7, 2017, we have issued and sold an aggregate
of 4,255,111 common shares with an aggregate offering price of
$12,837,173 under the at-the-market program, including 1,338,568
common shares with an aggregate offering price of $3,427,319 during
the 12-month period prior to the date of this prospectus. Roth
received aggregate compensation of $94,585 in connection with such
sales. We currently may offer and sell our common shares with an
aggregate purchase price of up to $3,962,827 pursuant to the
at-the-market program (or such lesser amount as may then be
permitted under applicable exchange rules and securities laws and
regulations, such amount we currently can offer and sell being
limited to approximately $2.5 million). There can be no assurance
that any additional shares will be sold under our at-the-market
program.
During
the 12-month period prior to the date of this prospectus, warrants
to purchase an aggregate of 445,532 common shares were
exercised.
During
the 12-month period prior to the date of this prospectus, 460,000
options were granted and 34,500 options were
exercised.
During
the 12 month period prior to the date of this prospectus, a total
of 13,290 deferred share units were granted.
During
the 12-month period prior to the date of this prospectus, nil
restricted share units were granted.
40
We have
not paid any cash dividends on our common shares and do not intend
to pay cash dividends in the foreseeable future. We intend to
retain future earnings, if any, for reinvestment in the development
and expansion of our business. Dividend payments in the future may
also be limited by loan agreements or covenants contained in other
securities we may issue. Any future determination to pay cash
dividends will be at the discretion of our board of directors and
depend on our financial condition, results of operations, capital
and legal requirements and such other factors as our board of
directors deems relevant.
The
Company may issue warrants to purchase common shares or preference
shares. This section describes the general terms that will apply to
any warrants issued pursuant to this prospectus. Warrants may be
offered separately or together with other securities and may be
attached to or separate from any other securities.
Unless
the applicable prospectus supplement otherwise indicates, each
series of warrants will be issued under a separate warrant
indenture to be entered into between the Company and one or more
banks or trust companies acting as warrant agent. The warrant agent
will 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
applicable prospectus supplement will include details of the
warrant indentures, if any, governing the warrants being offered.
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 out in the applicable prospectus supplement. The
prospectus supplement relating to any warrants the Company offers
will describe the warrants and the specific terms relating to the
offering. The description will include, where
applicable:
●
the designation and
aggregate number of warrants;
●
the price at which
the warrants will be offered;
●
the currency or
currencies in which the warrants will be offered;
●
the date on which
the right to exercise the warrants will commence and the date on
which the right will expire;
●
the designation,
number and terms of the common shares or preference shares, as
applicable, that may be purchased upon exercise of the warrants,
and the procedures that will result in the adjustment of those
numbers;
●
the exercise price
of the warrants;
●
the designation and
terms of the securities, if any, with which the warrants will be
offered, and the number of warrants that will be offered with each
Security;
●
if the warrants are
issued as a unit with another Security, the date, if any, 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;
●
any terms,
procedures and limitations relating to the transferability,
exchange or exercise of the warrants;
●
whether the
warrants will be subject to redemption or call and, if so, the
terms of such redemption or call provisions;
●
material United
States and Canadian federal income tax consequences of owning the
warrants; and
●
any other material
terms or conditions of the warrants.
41
Warrant
certificates will be exchangeable for new warrant certificates of
different denominations at the office indicated in the prospectus
supplement. Prior to the exercise of their warrants, holders of
warrants will not have any of the rights of holders of the
securities subject to the warrants. The Company may amend the
warrant indenture(s) and the warrants, without the consent of the
holders of the warrants, to cure any ambiguity, to cure, correct or
supplement any defective or inconsistent provision, or in any other
manner that will not prejudice the rights of the holders of
outstanding warrants, as a group.
The
Company will provide an initial Canadian purchaser of warrants with
a contractual right of rescission against the Company following the
issuance of common shares or preference shares, as the case may be,
to such purchaser, entitling the purchaser to receive the amount
paid for the warrants upon surrender of the common shares or
preference shares, as the case may be, if this prospectus, the
applicable prospectus supplement, and any amendment thereto,
contains a misrepresentation, provided such remedy for rescission
is exercised within 180 days of the date the warrants are issued.
This right of rescission does not extend to holders of warrants who
acquire such warrants from an initial purchaser, on the open market
or otherwise, or to initial purchasers who acquire warrants in the
United States.
The
Company may issue subscription receipts, separately or together,
with common shares, preference shares or warrants, as the case may
be. The subscription receipts will be issued under a subscription
receipt agreement. This section describes the general terms that
will apply to any subscription receipts that may be offered by the
Company pursuant to this prospectus.
The
applicable prospectus supplement will include details of the
subscription receipt agreement covering the subscription receipts
being offered. A copy of the subscription receipt agreement
relating to an offering of subscription receipts will be filed by
the Company with securities regulatory authorities in Canada and
the United States after it has been entered into by the Company.
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 will include, where
applicable:
●
the number of
subscription receipts;
●
the price at which the subscription
receipts will be offered and whether the price is payable in
installments;
●
conditions to the exchange of
subscription receipts into common shares, preference shares or
warrants, as the case may be, and the consequences of such
conditions not being satisfied;
●
the procedures for the exchange of
the subscription receipts into common shares, preference shares or
warrants;
●
the number of common shares,
preference shares or warrants that may be exchanged upon exercise
of each subscription receipt;
●
the designation 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;
●
the dates or periods during which
the subscription receipts may be exchanged into common shares,
preference shares or warrants;
●
terms applicable to the gross or net
proceeds from the sale of the subscription receipts plus any
interest earned thereon;
●
material United States and Canadian
federal income tax consequences of owning the subscription
receipts;
42
●
any other rights, privileges,
restrictions and conditions attaching to the subscription receipts;
and
●
any other material terms and
conditions of the subscription receipts.
Subscription
receipt certificates will be exchangeable for new subscription
receipt certificates of different denominations at the office
indicated in the prospectus supplement. Prior to the exchange of
their subscription receipts, holders of subscription receipts will
not have any of the rights of holders of the securities subject to
the subscription receipts.
Under
the subscription receipt agreement, a Canadian purchaser of
subscription receipts will have a contractual right of rescission
following the issuance of common shares, preference shares or
warrants, as the case may be, to such purchaser, entitling the
purchaser to receive the amount paid for the subscription receipts
upon surrender of the common shares, preference shares or warrants,
as the case may be, if this prospectus, the applicable prospectus
supplement, and any amendment thereto, contains a
misrepresentation, provided such remedy for rescission is exercised
within 180 days of the date the subscription receipts are issued.
This right of rescission does not extend to holders of subscription
receipts who acquire such subscription receipts from an initial
purchaser, on the open market or otherwise, or to initial
purchasers who acquire subscription receipts in the United
States.
We
may issue rights to purchase our common shares, preference shares,
warrants, units and/or other securities described in this
prospectus or any combination thereof, as the case may be. The
rights may or may not be transferable by the persons purchasing or
receiving the rights. In connection with any rights offering, we
may enter into a standby underwriting or other arrangement with one
or more underwriters or other persons pursuant to which such
underwriters or other persons would purchase any offered securities
remaining unsubscribed for after such rights offering. In
connection with a rights offering to holders of our capital stock a
prospectus supplement will be distributed to such holders on the
record date for receiving rights in the rights offering set by
us.
We
will file as exhibits to the registration statement of which this
prospectus is a part, or will incorporate by reference from a
report on Form 6-K that we file with the SEC, forms of the
subscription rights, standby underwriting agreement or other
agreements, if any. The prospectus supplement relating to any
rights that we offer will include specific terms relating to the
offering, including, among other matters:
|
●
the
date of determining the security holders entitled to the rights
distribution;
|
|||
|
●
the
aggregate number of rights issued and the aggregate amount of
securities purchasable upon exercise of the rights;
|
|||
|
●
the
exercise price;
|
|||
|
●
the
conditions to completion of the rights offering;
|
|||
|
●
the
date on which the right to exercise the rights will commence and
the date on which the rights will expire; and
|
|||
|
●
any
applicable federal income tax considerations.
|
Each
right would entitle the holder of the rights to purchase the
principal amount of securities at the exercise price set forth in
the applicable prospectus supplement. Rights may be exercised at
any time up to the close of business on the expiration date for the
rights provided in the applicable prospectus supplement. After the
close of business on the expiration date, all unexercised rights
will become void.
Holders
may exercise rights as described in the applicable prospectus
supplement. Upon receipt of payment and the rights certificate
properly completed and duly executed at the corporate trust office
of the rights agent, if any, or any other office indicated in the
prospectus supplement, we will, as soon as practicable, forward the
securities purchasable upon exercise of the rights. If less
than all of the rights issued in any rights offering are exercised,
we may offer any unsubscribed securities directly to persons other
than stockholders, to or through agents, underwriters or dealers or
through a combination of such methods, including pursuant to
standby underwriting arrangements, as described in the applicable
prospectus supplement.
43
The
following description of the terms of the units sets forth certain
general terms and provisions of the units to which any prospectus
supplement many relate. We may issue units comprised of one or
more of the other securities described in this prospectus in any
combination. Each unit will 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 will have the rights and
obligations of a holder of each included Security. The unit
agreement under which a unit is 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.
The
applicable prospectus supplement may describe:
●
the designation 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;
●
any provisions for the issuance,
payment, settlement, transfer or exchange of the units or of the
securities comprising the units; and
●
whether the units will be issued in
fully registered or global form.
The
applicable prospectus supplement will describe the terms of any
units. The preceding description and any description of units
in the applicable prospectus supplement does not purport to be
complete and is subject to and is qualified in its entirety by
reference to the unit agreement and, if applicable, collateral
arrangements and depositary arrangements relating to such
units.
The
applicable prospectus supplement may describe certain U.S. federal
income tax considerations generally applicable to the purchase,
holding and disposition of the securities by an investor who is a
U.S. Holder (as defined below), including, to the extent
applicable, certain U.S. federal income tax rules pertaining to
capital gains and ordinary income treatment, original issue
discount, whether or not we will be considered a passive foreign
investment company (and if so, the tax consequences to a United
States shareholder), backup withholding and the foreign tax credit,
and certain U.S. federal income tax consequences relating to
securities payable in a currency other than U.S. dollars or
containing early redemption provisions or other special
terms.
The
following discussion is a general summary of certain material U.S.
federal income tax considerations applicable to a U.S. Holder (as
defined below) arising from and relating to the acquisition,
ownership, and disposition of common shares and preference shares
(the common shares and preference shares being collectively
referred to as the “shares”), warrants and units
acquired pursuant to this document.
For
purposes of this summary, the term “U.S. Holder” means
a beneficial owner of shares or warrants acquired pursuant to this
offering that is any of the following for U.S. federal income tax
purposes:
●
an individual who
is a citizen or resident of the U.S. or someone treated as a U.S.
citizen or resident for U.S. federal income tax
purposes;
●
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 or otherwise
considered a U.S. domestic corporation for U.S. federal income tax
purposes;
●
an estate whose income is subject to U.S.
federal income taxation regardless of its source; or
44
●
a trust that (1) 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 (2) was
in existence on August 20, 1996 and has a valid election in effect
under applicable Treasury Regulations to be treated as a U.S.
person.
For
purposes of this summary, a “non-U.S. Holder” is a
beneficial owner of shares or warrants that is not a U.S.
Holder. This summary does not address the U.S. federal
income tax consequences relevant to non-U.S. Holders arising from
and relating to the acquisition, ownership, and disposition of
shares or warrants.
This
summary is for general information purposes only and does not
purport to be a complete discussion of all of the potential U.S.
federal income tax considerations that may be relevant to a U.S.
Holder arising from and relating to the acquisition, ownership, and
disposition of shares or 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 U.S. Holder. This summary does not address
the U.S. federal alternative minimum tax, U.S. federal estate and
gift tax, U.S. state and local tax, and foreign tax consequences
relating to U.S. Holders regarding the acquisition, ownership and
disposition of shares or warrants. Each prospective U.S. Holder
should consult its own tax advisor regarding the U.S. federal tax,
U.S. federal alternative minimum tax, U.S. federal estate and gift
tax, U.S. state and local tax, and foreign tax consequences to U.S.
Holders relating to the acquisition, ownership, and disposition of
shares or warrants.
No
legal opinion from U.S. legal counsel or ruling from the Internal
Revenue Service (the “IRS”) or any other federal, state
or local agency has been requested, or will be obtained, regarding
any of the tax issues affecting the Company or its U.S.
Holders. 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, the positions taken in this summary. In addition,
because the authorities on 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 conclusions described in this
summary.
This
summary is based on current provisions of the Internal Revenue Code
of 1986, as amended (the “Code”), Treasury Regulations
promulgated under the Code by the U.S. Treasury Department (whether
final, temporary, or proposed, the “Treasury
Regulations”), published rulings of the IRS, published
administrative interpretations and official pronouncements by the
IRS, and U.S. court decisions that are applicable and, in each
case, as in effect and available, as of the date of this
document. 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 also
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. Specifically, the
below does not address the impact current U.S. federal income tax
reform proposals may have on the taxation of the Company, its
shareholders, and the rules and laws applicable to passive foreign
investment companies as discussed herein. No assurance can be given
that the IRS would not assert, or that a court would not sustain, a
position contrary to any of the tax consequences described
below.
This
summary does not address the U.S. federal income tax considerations
applicable to U.S. Holders that are subject to special provisions
under the Code, including, but not limited to, the
following: (a) U.S. Holders that are qualified
retirement plans, individual retirement accounts, or other
tax-deferred accounts; (b) U.S. Holders that are financial
institutions, underwriters, insurance companies, real estate
investment trusts, or regulated investment companies;
45
(c)
U.S. Holders that are broker-dealers, dealers, or traders in
securities; (d) U.S. Holders that have a “functional
currency” other than the U.S. dollar; (e) U.S. Holders that
own shares or warrants as part of a straddle, hedging transaction,
conversion transaction, constructive sale, or other arrangement
involving more than one position; (f) U.S. Holders that acquired
shares or warrants in connection with the exercise of employee
stock options or otherwise as compensation for services; (g) U.S.
Holders that hold shares or warrants other than as a capital asset
within the meaning of Section 1221 of the Code (generally, property
held for investment purposes); or (h) U.S. Holders that own or have
owned (directly, indirectly, or by attribution) 10% or more of the
total combined voting power of the outstanding shares 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 residents or deemed to be
residents in Canada for purposes of the Income Tax Act (Canada)
(the “Tax Act”); (c) persons that use or hold, will use
or hold, or that are or will be deemed to use or hold shares or
warrants in connection with carrying on a business in Canada; (d)
persons whose shares or warrants constitute “taxable Canadian
property” under the Tax Act; or (e) persons that have a
permanent establishment in Canada for the purposes of the
Canada-U.S. Tax Convention. U.S. Holders that are subject to
special provisions under the Code, including, but not limited to,
U.S. Holders described immediately above, should consult their own
tax advisor regarding the U.S. federal income tax, U.S. federal
alternative minimum tax, U.S. federal estate and gift, U.S. state
and local, and foreign tax consequences relating to the
acquisition, ownership and disposition of shares or
warrants.
If an
entity or arrangement that is treated as a partnership (or other
“pass-through” entity) for U.S. federal income tax
purposes holds shares or warrants, the U.S. federal income tax
consequences to such beneficial owner generally will depend on the
activities of the partnership and the status of such
partner. This summary does not address the tax consequences to
any such beneficial owner. A U.S. Holder of shares or warrants that
is a partnership and partners in such partnership should consult
their own tax advisors regarding the U.S. federal income tax
consequences arising from and relating to the acquisition,
ownership, and disposition of shares or warrants.
THIS SUMMARY OF MATERIAL UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX
ADVICE. EACH HOLDER IS URGED TO CONSULT ITS TAX ADVISOR REGARDING
THE APPLICATION OF UNITED STATES FEDERAL INCOME TAX LAWS WITH
RESPECT TO ITS PARTICULAR SITUATION AS WELL AS ANY TAX CONSEQUENCES
ARISING UNDER THE UNITED STATES FEDERAL ESTATE OR GIFT TAX RULES OR
UNDER THE LAWS OF ANY FOREIGN, STATE OR LOCAL JURISDICTION OR UNDER
ANY APPLICABLE TAX TREATY.
Allocation of Purchase Price and Characterization of a
Unit
The
applicable prospectus supplement will describe the terms of any
units. For purposes of this summary, it is assumed a unit will
be comprised of a common share and a warrant to purchase common
shares. If the components of a unit are immediately separable,
the purchaser of a unit generally will be treated, for U.S. federal
income tax purposes, as the owner of the underlying share and
warrant components of the unit. However, there is no authority
addressing the treatment, for U.S. federal income tax purposes, of
securities with terms substantially the same as the units, and,
therefore, that treatment is not entirely clear. Each such unit
should be treated for U.S. federal income tax purposes as an
investment unit consisting of one share and one warrant to purchase
one share. For U.S. federal income tax purposes, each purchaser of
such a unit generally must allocate the purchase price of a unit
between the share and the warrant that comprise the unit based on
the relative fair market value of each at the time of issuance. The
price allocated to each share and the warrant generally will be the
holder’s tax basis in such share or warrant, as the case may
be.
The
foregoing description of a holder’s purchase price allocation
is not binding on the IRS or the courts. Because there are no
authorities that directly address instruments that are similar to
the units, no assurance can be given that the IRS or the courts
will agree with the characterization described above or the
discussion below. Accordingly, each holder is advised to consult
its own tax advisor regarding the risks associated with an
investment in a unit (including alternative characterizations of a
unit) and regarding an allocation of the purchase price between the
share and the warrant that comprise a unit. The balance of this
discussion assumes that the characterization of the units described
above is respected for U.S. federal income tax
purposes.
Passive Foreign Investment Company Considerations
Special,
generally unfavorable, U.S. federal income tax rules apply to the
ownership and disposition of the stock or warrants of a passive
foreign investment company, or PFIC. As discussed below, however, a
U.S. Holder of our shares (but not our warrants) may be able to
mitigate these consequences by making a timely and effective
election to treat the Company as a QEF or by making a timely and
effective mark-to-market election with respect to its common
shares.
46
For
U.S. federal income tax purposes, a foreign corporation is
classified as a PFIC for each taxable year in which, applying the
relevant look-through rules, either:
●
at least 75% of its
gross income for the taxable year consists of specified types of
“passive” income (referred to as the “income
test”); or
●
at least 50% of the average value of
its assets during the taxable year is attributable to certain types
of assets that produce passive income or are held for the
production of passive income (referred to as the “asset
test”).
For
purposes of the income and asset tests, if a foreign corporation
owns directly or indirectly at least 25% (by value) of the stock of
another corporation, that foreign corporation will be treated as if
it held its proportionate share of the assets of the other
corporation and received its proportionate share of the income of
that other corporation. Also, for purposes of the income and asset
tests, passive income does not include any income that is an
interest, dividend, rent or royalty payment if it is received or
accrued from a related person to the extent that amount is properly
allocable to the active income of the related person. Under
applicable attribution rules, if the Company is a PFIC, U.S.
Holders of shares will be treated as holding stock of the
Company’s subsidiaries that are PFICs in certain
circumstances. In these circumstances, certain dispositions
of, and distributions on, stock of such subsidiaries may have
consequences for U.S. Holders under the PFIC rules.
Although the matter
is not free from doubt, we believe that we were not a PFIC during
our 2016 taxable year and may not be a PFIC during our 2017 taxable
year. Because PFIC status is based on our income, assets and
activities for the entire taxable year, and our market
capitalization, it is not possible to determine whether we will be
characterized as a PFIC for the 2017 taxable year until after the
close of the taxable year. The tests for determining PFIC status
are subject to a number of uncertainties. These tests are applied
annually, and it is difficult to accurately predict future income,
assets and activities relevant to this determination. In addition,
because the market price of our common shares is likely to
fluctuate, the market price may affect the determination of whether
we will be considered a PFIC. There can be no assurance that we
will not be considered a PFIC for any taxable year (including our
2016 taxable year). Absent one of the elections described below, if
we are a PFIC for any taxable year during which a U.S. Holder holds
our shares, we generally will continue to be treated as a PFIC
subject to the regime described below with respect to such U.S.
Holder, regardless of whether we cease to meet the PFIC tests in
one or more subsequent years. Accordingly, no assurance can be
given that we will not constitute a PFIC in the current (or any
future) tax year or that the IRS will not challenge any
determination made by us concerning our PFIC status.
If we
are a PFIC, the U.S. federal income tax consequences to a U.S.
Holder of the ownership and disposition of our shares will depend
on whether such U.S. Holder makes a QEF or mark-to-market
election. Unless otherwise provided by the IRS, a U.S. Holder
of our shares is generally required to file an informational return
annually to report its ownership interest in the PFIC during any
year in which we are a PFIC.
U.S.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS ABOUT THE PFIC RULES,
THE POTENTIAL APPLICABILITY OF THESE RULES TO THE COMPANY CURRENTLY
AND IN THE FUTURE, AND THEIR FILING OBLIGATIONS IF THE COMPANY IS A
PFIC.
The “No Election” Alternative – Taxation of
Excess Distributions
If we
are classified as a PFIC for any year during which a U.S. Holder
has held shares or warrants and, in the case of our shares, that
U.S. Holder has not made a QEF Election or a mark-to-market
election, special rules may subject that U.S. Holder to increased
tax liability, including loss of favorable capital gains rates and
the imposition of an interest charge upon the sale or other
disposition of the shares or warrants or upon the receipt of any
excess distribution (as defined below). Under these
rules:
●
the gain, if any,
realized on such disposition will be allocated ratably over the
U.S. Holder’s holding period;
47
●
the amount of gain allocated to the
current taxable year and any year prior to the first year in which
we are a PFIC will be taxed as ordinary income in the current
year;
●
the amount of gain allocated to each
of the other taxable years will be subject to tax at the highest
ordinary income tax rate in effect for that year; and
●
an interest charge for the deemed
deferral benefit will be imposed with respect to the resulting tax
attributable to each of the other taxable years.
These
rules will continue to apply to the U.S. Holder even after we cease
to meet the definition of a PFIC, unless the U.S. Holder elects to
be treated as having sold our shares on the last day of the last
taxable year in which we qualified as a PFIC.
An
“excess distribution,” in general, is any distribution
on shares received in a taxable year by a U.S. Holder that is
greater than 125% of the average annual distributions received by
that U.S. Holder in the three preceding taxable years or, if
shorter, that U.S. Holder’s holding period for
shares.
Any
portion of a distribution paid to a U.S. Holder that does not
constitute an excess distribution will be treated as ordinary
dividend income to the extent of our current and accumulated
earnings and profits (as computed for U.S. federal income tax
purposes). Such dividends generally will not qualify for the
dividends-received deduction otherwise available to U.S.
corporations. Any amounts treated as dividends paid by a PFIC
generally will not constitute “qualified dividend
income” within the meaning of Section 1(h)(11) of the Code
and will, therefore, not be eligible for the preferential 20% rate
for such income generally in effect under current law. Any such
amounts in excess of our current and accumulated earnings and
profits will be applied against the U.S. Holder’s tax basis
in the shares and, to the extent in excess of such tax basis, will
be treated as gain from a sale or exchange of such shares. It is
possible that any such gain may be treated as an excess
distribution.
The QEF Election Alternative
A U.S.
Holder of shares (but not warrants) who elects (an “Electing
U.S. Holder”) under Section 1295 of the Code, in a timely
manner to treat us as a QEF would generally include in gross income
(and be subject to current U.S. federal income tax on) its pro rata
share of (a) the Company’s ordinary earnings, as ordinary
income, and (b) our net capital gains, as long-term capital gain.
An Electing U.S. Holder will generally be subject to U.S. federal
income tax on such amounts for each taxable year in which we are
classified as a PFIC, regardless of whether such amounts are
actually distributed to the Electing U.S. Holder. An Electing U.S.
Holder may further elect, in any given taxable year, to defer
payment of U.S. federal income tax on such amounts, subject to
certain limitations. However, if deferred, the taxes will be
subject to an interest charge.
A U.S.
Holder may not make a QEF election with respect to its warrants to
acquire our shares. As a result, if a U.S. Holder sells or
otherwise disposes of such warrants (other than upon exercise of
such warrants), any gain recognized generally will be subject to
the special tax and interest charge rules treating the gain as an
excess distribution, as described above, if we were a PFIC at any
time during the period the U.S. Holder held the warrants. If a U.S.
Holder that exercises such warrants properly makes a QEF election
with respect to the newly acquired shares (or has previously made a
QEF election with respect to our shares), the QEF election will
apply to the newly acquired shares, but the adverse tax
consequences relating to PFIC shares, adjusted to take into account
the current income inclusions resulting from the QEF election, will
continue to apply with respect to such newly acquired shares (which
generally will be deemed to have a holding period for purposes of
the PFIC rules that includes the period the U.S. Holder held the
warrants), unless the U.S. Holder makes a purging election under
the PFIC rules. The purging election creates a deemed sale of such
shares at their fair market value. The gain recognized by the
purging election will be subject to the special tax and interest
charge rules treating the gain as an excess distribution, as
described above. As a result of the purging election, the U.S.
Holder will have a new basis and holding period in the shares
acquired upon the exercise of the warrants for purposes of the PFIC
rules.
A U.S.
Holder may make a QEF Election only if the Company furnishes the
U.S. Holder with certain tax information. If the Company
should determine that it is a PFIC, it is anticipated that it will
attempt to timely and accurately disclose such information to its
U.S. Holders and provide U.S. Holders with information reasonably
required to make such election.
48
A U.S.
Holder that makes a QEF Election with respect to the Company
generally (a) may receive a tax-free distribution from the Company
to the extent that such distribution represents “earnings and
profits” of the Company that were previously included in
income by the U.S. Holder because of such QEF Election and (b) will
adjust such U.S. Holder’s tax basis in his, her or its shares
to reflect the amount included in income (resulting in an increase
in basis) or allowed as a tax-free distribution (resulting in a
decrease in basis) because of the QEF Election.
Similarly, if any
of our non-U.S. subsidiaries were classified as PFICs, a U.S.
Holder that makes a timely QEF Election with respect to any of our
subsidiaries would be subject to the QEF rules as described above
with respect to the Holder’s pro rata share of the ordinary
earnings and net capital gains of any of our subsidiaries. Our
earnings (or earnings of any of our subsidiaries) attributable to
distributions from any of our subsidiaries that had previously been
included in the income of an Electing U.S. Holder under the QEF
rules would generally not be taxed to the Electing U.S. Holder
again.
Upon
the sale or other disposition of shares, an Electing U.S. Holder
who makes a QEF Election for the first taxable year in which he
owns shares will recognize capital gain or loss for U.S. federal
income tax purposes in an amount equal to the difference between
the net amount realized on the disposition and the U.S.
Holder’s adjusted tax basis in the shares. Such gain or loss
will be long-term capital gain or loss if the U.S. Holder’s
holding period in the shares is more than one year, otherwise it
will be short-term capital gain or loss. The deductibility of
capital losses is subject to certain limitations. A U.S.
Holder’s gain realized upon the disposition of shares
generally will be treated as U.S. source income, and losses from
the disposition generally will be allocated to reduce U.S. source
income.
A QEF
Election must be made in a timely manner as specified in applicable
Treasury Regulations. Generally, the QEF Election must be made by
filing the appropriate QEF election documents at the time such U.S.
Holder timely files its U.S. federal income tax return for the
first taxable year of the Company during which it was, at any time,
a PFIC.
Each
U.S. Holder should consult its own tax advisor regarding the
availability of, procedure for making, and consequences of a QEF
Election with respect to the Company.
Mark-to-Market Election Alternative
Assuming that our
common shares are treated as marketable stock (as defined for these
purposes), a U.S. Holder that does not make a QEF Election may
avoid the application of the excess distribution rules, at least in
part, by electing, under Section 1296 of the Code, to mark the
common shares to market annually. Consequently, the U.S. Holder
will generally recognize as ordinary income or loss each year an
amount equal to the difference as of the close of the taxable year
between the fair market value of its common shares and the U.S.
Holder’s adjusted tax basis in the common shares. Any
mark-to-market loss is treated as an ordinary deduction, but only
to the extent of the net mark-to-market gain that the Holder has
included pursuant to the election in prior tax years. Any gain on a
disposition of our common shares by an electing U.S. Holder would
be treated as ordinary income. The electing U.S. Holder’s
basis in its common shares would be adjusted to reflect any of
these income or loss amounts. Currently, a mark-to-market
election may not be made with respect to warrants. We do not
anticipate that the preference shares will be treated as marketable
stock for these purposes.
For
purposes of making this election, stock of a foreign corporation is
“marketable” if it is “regularly traded” on
certain “qualified exchanges”. Under applicable
Treasury Regulations, a “qualified exchange” includes a
national securities exchange that is registered with the SEC or the
national market system established pursuant to Section 11A of the
U.S. Exchange Act, and certain foreign securities exchanges.
Currently, our common shares are traded on a “qualified
exchange.” Under applicable Treasury Regulations, PFIC stock
traded on a qualified exchange is “regularly traded” on
such exchange for any calendar year during which such stock is
traded, other than in de
minimis quantities, on at least 15 days during
each calendar quarter. Special rules apply if an election is made
after the beginning of the taxpayer’s holding period in PFIC
stock.
49
To the
extent available, a mark-to-market election applies to the taxable
year in which such mark-to-market election is made and to each
subsequent taxable year, unless the Company’s common shares
cease to be “marketable stock” or the IRS consents to
revocation of such election. In addition, a U.S. Holder that
has made a mark-to-market election does not include mark-to-market
gains, or deduct mark-to-market losses, for years when the Company
ceases to be treated as a PFIC.
The
mark-to-market rules generally do not appear to prevent the
application of the excess distribution rules in respect of stock of
any of our subsidiaries in the event that any of our subsidiaries
were considered PFICs. Accordingly, if Intellipharmaceutics and any
of our subsidiaries were both considered PFICs and a U.S. Holder
made a mark-to-market election with respect to its common shares,
the U.S. Holder may remain subject to the excess distribution rules
described above with respect to its indirectly owned shares of
subsidiary stock.
U.S. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE
POSSIBLE APPLICABILITY OF THE PFIC RULES AND THE AVAILABILITY OF,
PROCEDURES FOR MAKING, AND CONSEQUENCES OF A QEF ELECTION OR
MARK-TO-MARKET ELECTION WITH RESPECT TO THE COMPANY’S
SHARES.
Ownership and Disposition of Shares and Warrants to the Extent that
the PFIC Rules do not Apply
Distributions on Shares
A U.S.
Holder that receives a distribution, including a constructive
distribution, with respect to a share 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 shares and thereafter as gain
from the sale or exchange of such shares. (See “Sale or
Other Taxable Disposition of Shares” below). However,
the Company may not maintain the calculations of earnings and
profits in accordance with U.S. federal income tax principles, and
each U.S. Holder should (unless advised to the contrary) therefore
assume that any distribution by the Company with respect to the
shares will constitute ordinary dividend income. Dividends
received on shares generally will not be eligible for the
“dividends received deduction”. The dividend rules
are complex, and each U.S. Holder should consult its own tax
advisor regarding the application of such rules.
The
terms of a warrant may provide for an adjustment to the number of
shares for which the warrant may be exercised or to the exercise
price of the warrant in certain events. An adjustment which has the
effect of preventing dilution generally is not taxable. However,
the U.S. Holders of the warrants would be treated as receiving a
constructive distribution from us if, for example, the adjustment
increases the warrant holders’ proportionate interest in our
assets or earnings and profits (e.g., through an increase in the
number of shares that would be obtained upon exercise) as a result
of a distribution of cash to the holders of our shares which is
taxable to the U.S. Holders of such shares as described under
“Distributions on Shares” above. Such constructive
distribution would be subject to tax as described under that
section in the same manner as if the U.S. Holders of the warrants
received a cash distribution from us equal to the fair market value
of such increased interest.
Sale or Other Taxable Disposition of Shares
Upon
the sale or other taxable disposition of common shares, a U.S.
Holder generally will recognize capital gain or loss in an amount
equal to the difference between the U.S. dollar value of cash
received plus the fair market value of any property received and
such U.S. Holder’s tax basis in such shares sold or otherwise
disposed of. A U.S. Holder’s tax basis in shares
generally will be such Holder’s U.S. dollar cost for such
shares.
Gain or
loss recognized on such sale or other disposition generally will be
long-term capital gain or loss if, at the time of the sale or other
disposition, the shares have been held for more than one year. The
long-term capital gains realized by non-corporate U.S. Holders are
generally subject to a lower marginal U.S. federal income tax rate
than ordinary income other than qualified dividend income, as
defined above. Currently, the maximum rate on long-term capital
gains is 20%, although the actual rates may be higher due to the
phase out of certain tax deductions, exemptions and credits.
However, given the uncertain economic conditions in the United
States and the size of the federal deficit, tax rates are subject
to change and prospective U.S. Holders should consult their tax
advisors. The deductibility of losses may be subject to
limitations.
50
Warrants
Generally, no U.S.
federal income tax will be imposed upon the U.S. Holder of a
warrant upon exercise of such warrant to acquire our shares. A
U.S. Holder’s tax basis in a warrant will generally be the
amount of the purchase price that is allocated to the
warrant. Upon exercise of a warrant, the tax basis of the new
shares would be equal to the sum of the tax basis of the warrants
in the hands of the U.S. Holder plus the exercise price paid, and
the holding period of the new shares would begin on the date that
the warrants are exercised. If a warrant lapses without exercise,
the U.S. Holder will generally realize a capital loss equal to its
tax basis in the warrant. Prospective U.S. Holders should consult
their tax advisors regarding the tax consequences of acquiring,
holding and disposing of warrants.
The tax
consequences of a cashless exercise of a warrant are not clear
under current tax law. A cashless exercise may be tax-free, either
because the exercise is not a gain realization event or because the
exercise is treated as a recapitalization for U.S. federal income
tax purposes. In either tax-free situation, a U.S. Holder’s
basis in the shares received would equal the U.S. holder’s
basis in the warrant. If the cashless exercise were treated as not
being a gain realization event, a U.S. Holder’s holding
period in the shares would be treated as commencing on the date
following the date of exercise of the warrant. If the cashless
exercise were treated as a recapitalization, the holding period of
the shares would include the holding period of the warrant. It is
also possible that a cashless exercise could be treated as a
taxable exchange in which gain or loss would be recognized. In such
event, a U.S. Holder could be deemed to have surrendered warrants
equal to the number of shares having a value equal to the exercise
price for the total number of warrants to be exercised. The U.S.
Holder would recognize capital gain or loss in an amount equal to
the difference between the fair market value of the shares
represented by the warrants deemed surrendered and the U.S.
Holder’s tax basis in the warrants deemed surrendered. In
this case, a U.S. Holder’s tax basis in the shares received
would equal the sum of the fair market value of the shares
represented by the warrants deemed surrendered and the U.S.
Holder’s tax basis in the warrants exercised. A U.S.
Holder’s holding period for the shares would commence on the
date following the date of exercise of the warrant. Due to the
absence of authority on the U.S. federal income tax treatment of a
cashless exercise, there can be no assurance which, if any, of the
alternative tax consequences and holding periods described above
would be adopted by the IRS or a court of law. Accordingly, U.S.
Holders should consult their tax advisors regarding the tax
consequences of a cashless exercise.
Subscription Rights
Receipt, Exercise, and Expiration of Rights
A U.S.
Holder generally should not recognize any gain or loss for U.S.
federal income tax purposes as a result of the receipt, exercise,
or expiration of subscription rights.
If the
fair market value of subscription rights when received by a U.S.
Holder is less than 15% of the fair market value of the common
shares with respect to which such subscription rights are received,
the subscription rights will have no basis unless the U.S. Holder
affirmatively elects to allocate its adjusted tax basis in its
common shares between its common shares and the subscription rights
received in proportion to their relative fair market values (as
determined on the date the subscription rights are received). A
U.S. Holder must make this election in its timely filed U.S.
federal income tax return for the taxable year in which the
subscription rights are received and once made, the election is
irrevocable. If, at the time of receipt, the fair market value of
the subscription rights is 15% or more of the fair market value of
the common shares with respect to which the subscription rights are
received, a U.S. Holder's adjusted tax basis in its common shares
must be allocated between its common shares and the subscription
rights received in proportion to their relative fair market values
(as determined on the date subscription rights are received). Any
tax basis allocated to subscription rights under these rules will
be allocated back to the common shares if the subscription rights
expire unexercised.
51
A U.S.
Holder generally will not realize gain or loss on the exercise of a
subscription right. A U.S. Holder's tax basis in a common share
acquired upon the exercise of a subscription right will be equal to
its adjusted tax basis in the subscription right plus the U.S.
dollar value exercise price determined at the spot rate on the date
of exercise. The holding period of a common share acquired upon the
exercise of a subscription right will begin with and include the
date of exercise. If a U.S. Holder receives the subscription rights
pursuant to the offering and such subscription rights expire, the
U.S. Holder generally will not recognize gain or loss. In addition,
any tax basis allocated to subscription rights under the rules
described in the preceding paragraph would be allocated back to the
common shares such that the tax bases of such common shares would
be the same as they were prior to the distribution of the
subscription rights.
Sale, Exchange, or Other Disposition of Subscription
Rights
Subject
to the PFIC rules discussed above, a U.S. Holder will recognize
capital gain or loss on the sale or other taxable disposition of
subscription rights in an amount equal to the difference between
the U.S. Holder's tax basis in the subscription rights, if any, and
the U.S. dollar value of the amount realized from the sale or other
disposition. A U.S. Holder's holding period in the subscription
rights will include its holding period in the common shares with
respect to which the subscription rights were distributed. If the
U.S. Holder's holding period for the subscription rights exceeds
one year, any gain or loss generally will be long-term capital gain
or loss. The deductibility of capital losses may be subject to
limitations.
The
amount realized on a sale or other disposition of a subscription
right for an amount in a currency other than the U.S. dollar (a
"foreign currency") will generally be the U.S. dollar value of this
amount on the date of sale or disposition (or in the case of cash
basis and electing accrual basis taxpayers, the settlement date,
provided that the subscription rights are traded on an established
securities market). On the settlement date, the U.S. Holder will
recognize U.S. source foreign currency gain or loss (taxable as
ordinary income or loss) equal to the difference, if any, between
the U.S. dollar value of the amount received based on the exchange
rate in effect on the date of sale or other disposition and the
settlement date. However, in the case of subscription rights traded
on an established securities market that are sold by a cash basis
U.S. Holder (or an accrual basis U.S. Holder that so elects), the
amount realized will be based on the exchange rate in effect on the
settlement date for the sale, and no exchange gain or loss will be
recognized at that time. If an accrual basis U.S. Holder makes the
election described above, it must be applied consistently from year
to year and cannot be revoked without the consent of the
IRS.
If any
Canadian taxes are imposed upon a gain from the sale or other
disposition of a right by a U.S. Holder, foreign tax credits may
not be available with respect to such Canadian taxes. U.S. Holders
should consult their own tax advisors regarding the potential
imposition of any Canadian taxes on any gain and the related U.S.
federal income tax consequences.
Additional Considerations
Tax-Exempt Investors
Special
considerations apply to U.S. persons that are pension plans and
other investors that are subject to tax only on their unrelated
business taxable income. Such a tax-exempt investor’s income
from an investment in our shares or warrants generally will not be
treated as resulting in unrelated business taxable income under
current law, so long as such investor’s acquisition of shares
or warrants is not debt-financed. Tax-exempt investors should
consult their own tax advisors regarding an investment in our
shares or warrants.
Additional Tax on Passive Income
Certain
individuals, estates and trusts whose income exceeds certain
thresholds will generally be required to pay a 3.8% Medicare surtax
on the lesser of (1) the U.S. Holder’s “net investment
income” for the relevant taxable year and (2) the excess of
the U.S. Holder’s modified gross income for the taxable year
over a certain threshold (which, in the case of individuals, will
generally be between U.S.$125,000 and U.S. $250,000 depending on
the individual’s circumstances). A U.S. Holder’s
“net investment income” may generally include, among
other items, certain interest, dividends, gain, and other types of
income from investments, minus the allowable deductions that are
properly allocable to that gross income or net gain. U.S.
Holders are urged to consult with their own tax advisors regarding
the effect, if any, of this tax on their ownership and disposition
of shares or warrants. Under current proposed U.S. comprehensive
tax reform, the 3.8% Medicare surtax would be repealed. It is
unclear when, if at all, this proposal will be passed but such
passage would generally reduce the U.S. federal income taxation of
our shareholders.
52
Receipt of Foreign Currency
The
amount of any distribution paid to a U.S. Holder in foreign
currency, or on the sale, exchange or other taxable disposition of
shares or warrants, generally will be equal to the U.S. dollar
value of such foreign currency based on the exchange rate
applicable on the date of receipt (regardless of whether such
foreign currency is converted into U.S. dollars at that
time). A U.S. Holder will have a basis in the foreign currency
equal to its U.S. dollar value on the date of receipt. Any
U.S. Holder who converts or otherwise disposes of the foreign
currency after the date of receipt may have a foreign currency
exchange gain or loss that would be treated as ordinary income or
loss, and generally will be U.S. source income or loss for foreign
tax credit purposes. 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 foreign
currency.
Foreign Tax Credit
Subject
to the PFIC rules discussed above, a U.S. Holder that pays (whether
directly or through withholding) Canadian income tax with respect
to dividends paid on the shares generally will 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 generally applies to
all foreign taxes paid (whether directly or through withholding) or
accrued by a U.S. Holder during a year.
Complex
limitations apply to the foreign tax credit, including the general
limitation that the credit cannot exceed the proportionate share of
a U.S. Holder’s U.S. federal income tax liability that such
U.S. Holder’s “foreign source” taxable income
bears to such U.S. Holder’s worldwide taxable income. In
applying this limitation, a U.S. Holder’s various items of
income and deduction must be classified, under complex rules, as
either “foreign source” or “U.S.
source”. Generally, dividends paid by a foreign
corporation should be treated as foreign source for this purpose,
and gains recognized on the sale of stock of a foreign corporation
by a U.S. Holder should generally be treated as U.S. source for
this purpose, except as otherwise provided in an applicable income
tax treaty or if an election is properly made under the
Code. However, the amount of a distribution with respect to
the shares that is treated as a “dividend” may be lower
for U.S. federal income tax purposes than it is for Canadian
federal income tax purposes, resulting in a reduced foreign tax
credit allowance to a U.S. Holder. In addition, this
limitation is calculated separately with respect to specific
categories of income. The foreign tax credit rules are
complex, and each U.S. Holder should consult its own U.S. tax
advisor regarding the foreign tax credit rules. It is unclear how
the proposed changes to the taxation of foreign entities under the
Code currently being deliberated in the U.S. will affect the
availability or calculation of foreign tax credits and any change
may have an adverse impact to the Company or our
shareholders.
Payments to Foreign Financial Institutions
The
Hiring Incentives to Restore Employment Act of March 2010, or the
HIRE Act, including the Foreign Account Tax Compliance Act, or
FATCA, provisions promulgated thereunder, generally provides that a
30% withholding tax may be imposed on payments of U.S. source
income and proceeds from the sale of property that could give rise
to U.S. source interest or dividends to certain non-U.S. entities
unless such entities enter into an agreement with the IRS to
disclose the name, address and taxpayer identification number of
certain U.S. persons that own, directly or indirectly, interests in
such entities, as well as certain other information relating to
such interests. U.S. Holders are encouraged to consult with
their own tax advisors regarding the possible implications and
obligations of FATCA and the HIRE Act.
State and Local Tax
In
addition to the U.S. federal income tax discussed above, U.S.
Holders may also be subject to state and local income taxation for
amounts received on the disposition of common shares and on
dividends received. Amounts paid to U.S. Holders will not have
state and local tax amounts withheld from payments and U.S. Holders
should consult with a tax advisor regarding the state and local
taxation implications of such amounts received.
53
Information Reporting
In
general, U.S. Holders of shares are subject to certain information
reporting under the Code relating to their purchase and/or
ownership of stock of a foreign corporation such as the
Company. Failure to comply with these information reporting
requirements may result in substantial penalties.
For
example, recently enacted legislation generally requires certain
individuals who are U.S. Holders to file Form 8938 to report the
ownership of specified foreign financial assets if the total value
of those assets exceeds an applicable threshold amount (subject to
certain exceptions). For these purposes, a specified foreign
financial asset includes not only a financial account (as defined
for these purposes) maintained by a foreign financial institution,
but also any stock or security issued by a non-U.S. person, any
financial instrument or contract held for investment that has an
issuer or counterparty other than a U.S. person and any interest in
a foreign entity, provided that the asset is not held in an account
maintained by a financial institution. The minimum applicable
threshold amount is generally U.S.$50,000 in the aggregate, but
this threshold amount varies depending on whether the individual
lives in the U.S., is married, files a joint income tax return with
his or her spouse, etc. Certain domestic entities that are
U.S. Holders may also be required to file Form 8938 in the near
future. U.S. Holders are urged to consult with their tax
advisors regarding their reporting obligations, including the
requirement to file IRS Form 8938.
In
addition, in certain circumstances, a U.S. Holder of shares who
disposes of such shares in a transaction resulting in the
recognition by such Holder of losses in excess of certain
significant threshold amounts may be obligated to disclose its
participation in such transaction in accordance with the Treasury
Regulations governing tax shelters and other potentially
tax-motivated transactions or tax shelter regulations. Potential
purchasers of shares should consult their tax advisors concerning
any possible disclosure obligation under the tax shelter rules with
respect to the disposition of their shares.
Backup Withholding
Generally,
information reporting requirements will apply to distributions on
our shares or proceeds on the disposition of our shares or warrants
paid within the U.S. (and, in certain cases, outside the U.S.) to
U.S. Holders. Such payments will generally be subject to
backup withholding tax at the rate of 28% if: (a) a U.S. Holder
fails to furnish such U.S. Holder’s correct U.S.
taxpayer identification number to the payor (generally on Form
W-9), as required by the Code and Treasury Regulations, (b) the IRS
notifies the payor that the U.S. Holder’s taxpayer
identification number is incorrect, (c) a U.S. Holder is notified
by the IRS that it has previously failed to properly report
interest and dividend income, or (d) a U.S. Holder fails to
certify, under penalty of perjury, that such U.S. Holder has
furnished its correct U.S. taxpayer identification number. However,
certain exempt persons generally are excluded from these
information reporting and backup withholding rules.
Backup
withholding is not an additional tax. Any amounts withheld
under the U.S. backup withholding tax rules will be allowed as a
credit against a U.S. 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. Each U.S. Holder should consult its own tax advisor
regarding the backup withholding rules.
Taxation
The
following summary describes the principal Canadian federal income
tax considerations generally applicable to a purchaser of the
Company’s common shares pursuant to this offering who, for
purposes of the Income Tax
Act (Canada) (the “Canadian Tax Act”) and the
Canada – United States Tax
Convention (the “Treaty”) and at all relevant
times, is resident in the United States and was not and is not
resident in Canada nor deemed to be resident in Canada, deals at
arm’s length and is not affiliated with the Company, holds
the Company’s common shares as capital property, does not use
or hold and is not deemed to use or hold the Company’s common
shares in or in the course of carrying on business in Canada and
who otherwise qualifies for the full benefit of the Treaty (a
“United States Holder”). Special rules which
are not discussed in this summary may apply to a United States
Holder that is a financial institution, as defined in the Canadian
Tax Act, or an insurer carrying on business in Canada and
elsewhere.
54
The
2017 Canadian Federal Budget released on March 22, 2017 contained
an indication that the Canadian Federal Government intended to
pursue signature of the multilateral tax treaty that has been
proposed by the Organisation for Economic Co-operation and
Development addressing perceived tax treaty abuse (the
“MLI”). Further to this intention, on June 7, 2017,
Canada signed the MLI, and intends to take steps to complete the
ratification and implementation of the MLI in Canada. The
provisions of the multilateral tax treaty are not discussed herein.
United States Holders should consult their own tax advisors with
respect to the potential application of the multilateral tax treaty
provisions to their particular circumstances.
This
following summary is based on the current provisions of the Treaty,
the Canadian Tax Act and the regulations thereunder, all specific
proposals to amend the Canadian Tax Act and the regulations
announced by the Minister of Finance (Canada) prior to the date
hereof and the Company’s understanding of the administrative
practices published in writing by the Canada Revenue Agency prior
to the date hereof. This summary does not take into account or
anticipate any other changes in the governing law, whether by
judicial, governmental or legislative decision or action, nor does
it take into account the tax legislation or considerations of any
province, territory or non-Canadian (including U.S.) jurisdiction,
which legislation or considerations may differ significantly from
those described herein.
All
amounts relevant in computing a United States Holder’s
liability under the Canadian Tax Act are to be computed in Canadian
currency based on the relevant exchange rate applicable
thereto.
This
summary is of a general nature only and is not intended to be, and
should not be interpreted as legal or tax advice to any prospective
purchaser or holder of the Company’s common shares and no
representation with respect to the Canadian federal income tax
consequences to any such prospective purchaser is
made. Accordingly, prospective purchasers and holders of the
Company’s shares should consult their own tax advisors with
respect to their particular circumstances.
Dividends on the Company’s Common Shares
Generally,
dividends paid or credited by Canadian corporations to non-resident
shareholders are subject to a withholding tax of 25% of the gross
amount of such dividends. Pursuant to the Treaty, the
withholding tax rate on the gross amount of dividends paid or
credited to United States Holders is reduced to 15% or, in the case
of a United States Holder that is a U.S. company that beneficially
owns at least 10% of the voting stock of the Canadian corporation
paying the dividends, to 5% of the gross amount of such
dividends.
Pursuant to the
Treaty, certain tax-exempt entities that are United States Holders
may be exempt from Canadian withholding taxes, including any
withholding tax levied in respect of dividends received on the
Company’s common shares.
Disposition of the Company’s Common Shares
In
general, a United States Holder will not be subject to Canadian
income tax on capital gains arising on the disposition of the
Company’s common shares, unless such shares are
“taxable Canadian property” within the meaning of the
Canadian Tax Act. Generally, the shares of a corporation
resident in Canada will not be taxable Canadian property of a
United States Holder at the time of disposition unless at any time
during the 60-month period immediately preceding the disposition,
more than 50% of the value of the Company’s common shares was
derived directly or indirectly from properties that are “real
or immovable properties”, “Canadian resource
properties”, or “timber resource properties”,
within the meaning of the Canadian Tax Act. The value of the
Company’s common shares is not now, and is not expected to be
in the future, derived more than 50% from any of these
properties. Consequently, any gain realized by a United States
Holder upon the disposition of the Company’s common shares
should be exempt from tax under the Canadian Tax Act.
55
The
consolidated financial statements for the year ended November 30,
2016 incorporated by reference in this prospectus from our Annual
Report on Form 20-F for the year ended November 30, 2016, have been
audited by MNP LLP, an independent registered public accounting
firm, 111 Richmond Street West, Suite 300, Toronto, ON M5H 2G4, as
stated in their report incorporated herein by reference (which
report expresses an unqualified opinion and includes an explanatory
paragraph relating to the conditions and events that raise
substantial doubt on the Company’s ability to continue as a
going concern). Such consolidated financial statements have been so
incorporated in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
The consolidated financial statements for the
years ended November 30, 2015 and 2014 incorporated in this
prospectus by reference from our Annual Report on Form 20-F for the
year ended November 30, 2016, have been audited by Deloitte LLP, an
independent registered public accounting firm, as stated in their
report (which report expresses an unqualified opinion and includes
an explanatory paragraph relating to the conditions and events that
raise substantial doubt about the Company’s ability to
continue as a going concern), which is incorporated herein
by reference. Such
consolidated financial statements have been so incorporated in
reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
From
time to time, the Company may be exposed to claims and legal
actions in the normal course of business. As at February 28, 2017,
and continuing as at July 10, 2017, the Company is not aware of any
pending or threatened material litigation claims against the
Company, other than as described below.
In
November 2016, the Company filed an NDA for its
Rexista™ product candidate (abuse-deterrent oxycodone
hydrochloride extended release tablets), relying on the 505(b)(2)
regulatory pathway, which allowed the Company to reference data
from Purdue Pharma L.P.'s file for its OxyContin® extended
release oxycodone hydrochloride. The Rexista™ application was
accepted by the FDA for further review in February 2017. The
Company certified to the FDA that it believed that its
Rexista™ product candidate would not infringe any of sixteen
(16) patents owned by one or more of the Purdue litigation
plaintiffs, or that such patents are invalid, and so notified
Purdue Pharma L.P. and the other owners of the subject patents
listed in the Orange Book of such certification. On April 7, 2017,
the Company received notice that the Purdue litigation plaintiffs
had commenced patent infringement proceedings against the Company
in the U.S. District Court for the District of Delaware in respect
of the Company's NDA filing for Rexista™, alleging that
Rexista™ infringes six (6) out of the sixteen (16) patents.
The complaint seeks injunctive relief as well as attorneys' fees
and costs and such other and further relief as the Court may deem
just and proper. An
answer and counterclaim have been filed.
As a
result of the commencement of these legal proceedings, the FDA is
stayed for 30 months from granting final approval to the Company's
Rexista™ product candidate. That time period commenced on
February 24, 2017, when the plaintiffs received notice of the
Company certification concerning the patents, and will expire on
August 24, 2019, unless the stay is earlier terminated by a final
declaration of the courts that the patents are invalid, or are not
infringed, or the matter is otherwise settled among the parties.
The Company is confident that it does not infringe the subject
patents, and will vigorously defend against these
claims.
Certain
legal matters relating to the offering of securities hereunder will
be passed upon on behalf of the Company by Gowling WLG (Canada)
LLP. At the date hereof, the partners and associates of Gowling WLG
(Canada) LLP, as a group, beneficially own, directly or indirectly,
less than one per cent of any outstanding securities of the Company
or any associate or affiliate of the Company.
Our
Canadian transfer agent and registrar is CST Trust Company, 320 Bay
Street, 3rd Floor, Toronto, Ontario, Canada M5H 4A6. As of July 14,
2017, the Toronto office of CST Trust Company will be: 1 Toronto
Street, Suite 1200, Toronto, ON M5C 2V6. Our United States
co-transfer agent and registrar is American Stock Transfer &
Trust Company LLC, 6201 15th Avenue, Brooklyn, NY
11219.
56
Unless
provided otherwise in a prospectus supplement, the following is a
description of a purchaser’s statutory
rights. 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 province or territory in which the purchaser resides. The
purchaser should refer to any applicable provisions of the
securities legislation of the province or territory in which the
purchaser resides for the particulars of these rights or consult
with a legal advisor.
Original Canadian
purchasers of subscription receipts or warrants which are
convertible into other securities of the Company will have a
contractual right of rescission against the Company in respect of
the conversion, exchange or exercise of such subscription receipts
or warrants. The contractual right of rescission will entitle
such original purchasers to receive the amount paid upon
conversion, exchange or exercise, upon surrender of the underlying
securities gained thereby, in the event that this prospectus (as
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. This contractual right of rescission will be
consistent with the statutory right of rescission described under
section 130 of the Securities Act (Ontario), and is in addition to
any other right or remedy available to original purchasers under
section 130 the Securities Act (Ontario) or otherwise at
law. Original purchasers are further advised that in certain
provinces and territories the statutory right of action for damages
in connection with a prospectus misrepresentation is limited to the
amount paid for the convertible, exchangeable or exercisable
security that was purchased under a prospectus, and therefore a
further payment at the time of conversion, exchange or exercise may
not be recoverable in a statutory action for
damages. The purchaser should refer to any applicable
provisions of the securities legislation of the province or
territory in which the purchaser resides for the particulars of
these rights, or consult with a legal advisor.
57
The
Company is incorporated under the laws of Ontario, Canada and its
principal place of business is in Canada. Most of the
Company’s directors and officers, and some of the experts
named in this prospectus, are residents of Canada, and all or a
substantial portion of their assets, and a substantial portion of
the Company’s assets, are located outside the United
States. The Company has appointed an agent for service
of process in the United States but it may be difficult for holders
of securities who reside in the United States to effect service
within the United States upon the Company or those directors,
officers and experts who are not residents of the United
States. Investors should not assume that a Canadian court
would enforce a judgment of a U.S. court obtained in an action
against the Company or such other persons predicated on the civil
liability provisions of the U.S. federal securities laws or the
securities or “blue sky” laws of any state within the
United States or would enforce, in original actions, liabilities against the
Company or such persons predicated on the U.S. federal securities
laws or any such state securities or “blue sky”
laws. The Company’s Canadian counsel has advised
the Company that a monetary judgment of a U.S. court predicated
solely upon the civil liability provisions of U.S. federal
securities laws would likely be enforceable in Canada if the U.S.
court in which the judgment was obtained had a basis for
jurisdiction in the matter that was recognized by a Canadian court
for such purposes. The Company cannot provide assurance that
this will be the case. It is less certain that an action could
be brought in Canada in the first instance on the basis of
liability predicated solely upon such laws.
The
following documents have been or will be filed with the SEC as part
of the registration statement of which this prospectus forms a
part: the documents set out under the heading “Where You Can
Find More Information; Incorporation by Reference”; the
consents of the auditor and legal counsel and the powers of
attorney from the directors and certain officers of the
Company.
INDEMNIFICATION
FOR U.S. SECURITIES ACT LIABILITY
Insofar
as indemnification for liabilities arising under the U.S.
Securities Act may be permitted to directors, officers or persons
controlling us pursuant to the foregoing provisions, we have been
informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the U.S. Securities Act and is therefore
unenforceable.
58
INTELLIPHARMACEUTICS INTERNATIONAL INC.
U.S. $100,000,000
Common Shares
Preference Shares
Warrants
Subscription Receipts
Subscription Rights
Units
PROSPECTUS
July ,
2017
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 8. Indemnification of Directors and
Officers
Under
Section 124 of the Canada Business
Corporations Act, the registrant may indemnify a present or
former director or officer of the registrant or another individual
who acts or acted at the registrant'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
registrant or other entity. The registrant may not indemnify an
individual unless the individual (i) acted honestly and in good
faith with a view to the best interests of the registrant 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 registrant's request, and (ii) in the case of a
criminal or administrative action or proceeding that is enforced by
a monetary penalty, had reasonable grounds for believing that his
or her conduct was lawful. Such indemnification may be made in
connection with an action by or on behalf of the registrant or
other entity to procure a judgment in its favor only with court
approval. A director or officer is entitled to indemnification from
the registrant as a matter of right if he or she was not judged by
the Court or other competent authority to have committed any fault
or omitted to do anything that he or she ought to have done and
fulfilled the conditions set forth in subclauses (i) and (ii)
above. The registrant may advance moneys to a director, officer or
other individual for the costs, charges and expenses of a
proceeding referred to above. The individual shall repay the moneys
if he or she does not fulfill the conditions set forth in
subclauses (i) and (ii) above to qualify for
indemnification.
Our
By-Law No. 1 (a by-law relating generally to the transaction of the
business and affairs of the Company) provides for the
indemnification of the directors and officers of the Company, and
former directors and officers of the Company, 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 Company, subject to certain limitations
in By-Law No. 1 and the limitations in the Canada Business Corporations
Act .
The
Company may also indemnify other individuals who act or acted at
the Company’s request as a director or officer, or an
individual acting in a similar capacity, of another
entity.
Insofar
as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the “Securities Act”) may be
permitted to directors, officers and controlling persons of the
registrant pursuant to any charter provision, by-law, contract,
arrangement, statute or otherwise, the Company has been advised
that in the opinion of the U.S. Securities and Exchange Commission
(the “Commission”) such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
Item 9. Exhibits
|
Exhibit Number
|
|
Description
|
|
|
|
|
|
1.1*
|
|
Form of
Underwriting Agreement for common shares, preference shares,
warrants, subscription receipts, subscription rights and/or
units.
|
|
|
|
|
|
4.1
|
|
Articles
of Incorporation of the Company and Amendments thereto
(incorporated herein by reference to the Company’s Annual
Report on Form 20-F for the fiscal year ended November 30, 2009 as
filed on June 1, 2010).
|
|
|
|
|
|
4.2
|
|
By-laws
of the Company (incorporated by reference to the Company’s
Annual Report on Form 20-F for the fiscal year ended November 30,
2009 as filed on June 1, 2010).
|
|
|
|
|
|
4.3*
4.4*
|
|
Form of
Subscription Receipt Agreement.
Form of
Subscription Rights Agreement and Form Subscription Rights
Certificate.
|
II-1
|
|
|
|
|
4.5*
|
|
Form of
Warrant Agreement (including form of Warrant
Certificate).
|
|
|
|
|
|
4.6*
|
|
Form of
Unit Agreement.
|
|
|
|
|
|
5.1
|
|
Opinion
of Gowling WLG (Canada) LLP as to the legality of the securities
being registered.
|
|
|
|
|
|
8.1
|
|
Tax
opinion of Blank Rome LLP.
|
|
|
|
|
|
8.2
|
|
Tax
opinion of Gowling WLG (Canada) LLP.
|
|
|
|
|
|
23.1
|
|
Consent
of Independent Registered Public Accounting Firm (MNP
LLP)
|
|
|
|
|
|
23.2
|
|
Consent
of Deloitte LLP
|
|
23.3
|
|
Consent
included in opinion of Gowling WLG (Canada) LLP filed as Exhibit
5.1.
|
|
|
|
|
|
23.4
|
|
Consent
included in opinion of Blank Rome LLP filed as Exhibit
8.1.
|
|
|
|
|
|
23.5
|
|
Consent
included in opinion of Gowling WLG (Canada) LLP filed as Exhibit
8.2.
|
|
|
|
|
|
24.1
|
|
Power
of Attorney (included on the signature pages to this Registration
Statement).
|
|
|
|
|
|
*
|
|
To be
filed by amendment or as an exhibit to a report pursuant to
Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, including any Report of Foreign Private Issuer on
Form 6-K, and incorporated herein by reference if necessary or
required by the transaction.
|
|
|
|
|
Item 10. Undertakings
a)
The undersigned
registrant hereby undertakes:
(1)
To file, during any
period in which offers or sales are being made, a post-effective
amendment to this registration statement:
(i)
To include any
prospectus required by Section 10(a)(3) of the Securities Act of
1933;
(ii)
To reflect in the
prospectus any facts or events arising after the effective date of
the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth
in the “Calculation of Registration Fee” table in the
effective registration statement; and
(iii)
To include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material
change to such information in the registration
statement;
Provided, however, that paragraphs (a)(1)(i),
(a)(1)(ii) and (a)(1)(iii) of this section do not apply if the
registration statement is on Form S-3, Form SF-3 or Form F-3 and
the information required to be included in a post-effective
amendment by those paragraphs is contained in reports filed with
or furnished to the
Commission by the registrant pursuant to section 13 or section
15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement, or, as to a
registration statement on Form S-3, Form SF-3 or Form F-3, is
contained in a form of prospectus filed pursuant to Rule 424(b)
that is part of the registration statement.
II-2
(2)
That, for the
purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona
fide offering thereof.
(3)
To remove from
registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination
of the offering.
(4)
To file a
post-effective amendment to the registration statement to include
any financial statements required by Item 8.A. of Form 20-F at the
start of any delayed offering or throughout a continuous
offering. Financial statements and information otherwise
required by Section 10(a)(3) of the Securities Act of 1933 need not
be furnished, provided, that the registrant
includes in the prospectus, by means of a post-effective amendment,
financial statements required pursuant to this paragraph (a)(4) and
other information necessary to ensure that all other information in
the prospectus is at least as current as the date of those
financial statements. Notwithstanding the foregoing, with
respect to registration statements on Form F-3, a post-effective
amendment need not be filed to include financial statements and
information required by Section 10(a)(3) of the Securities Act of
1933 or Rule 3-19 of Regulation S-X if such financial
statements and information are contained in periodic reports filed
with or furnished to the Commission by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the Form
F-3.
(5)
That, for the
purpose of determining liability under the Securities Act of 1933
to any purchaser:
(i)
Each prospectus
filed by the registrant pursuant to Rule 424(b)(3) shall be deemed
to be part of the registration statement as of the date the filed
prospectus was deemed part of and included in the registration
statement; and
(ii)
Each prospectus
required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7)
as part of a registration statement in reliance on Rule 430B
relating to an offering made pursuant to Rule 415(a)(1)(i), (vii),
or (x) for the purpose of providing the information required by
section 10(a) of the Securities Act of 1933 shall be deemed to be
part of and included in the registration statement as of the
earlier of the date such form of prospectus is first used after
effectiveness or the date of the first contract of sale of
securities in the offering described in the prospectus. As provided
in Rule 430B, for liability purposes of the issuer and any person
that is at that date an underwriter, such date shall be deemed to
be a new effective date of the registration statement relating to
the securities in the registration statement to which that
prospectus relates, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Provided,
however, that no statement
made in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or
prospectus that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such effective
date, supersede or modify any statement that was made in the
registration statement or prospectus that was part of the
registration statement or made in any such document immediately
prior to such effective date.
II-3
(6)
That, for the
purpose of determining liability of the registrant under the
Securities Act of 1933 to any purchaser in the initial distribution
of the securities:
The
undersigned registrant undertakes that in a primary offering of
securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method used
to sell the securities to the purchaser, if the securities are
offered or sold to such purchaser by means of any of the following
communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities
to such purchaser:
(i)
Any preliminary
prospectus or prospectus of the undersigned registrant relating to
the offering required to be filed pursuant to Rule
424;
(ii)
Any free writing
prospectus relating to the offering prepared by or on behalf of the
undersigned registrant or used or referred to by the undersigned
registrant;
(iii)
The portion of any
other free writing prospectus relating to the offering containing
material information about the undersigned registrant or its
securities provided by or on behalf of the undersigned registrant;
and
(iv)
Any other
communication that is an offer in the offering made by the
undersigned registrant to the purchaser.
b)
The undersigned
registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the
registrant’s annual report pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan’s annual report pursuant
to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
c)
The undersigned
registrant hereby undertakes to supplement the prospectus, after
the expiration of the subscription period, to set forth the results
of the subscription offer, the transactions by the underwriters
during the subscription period, the amount of unsubscribed
securities to be purchased by the underwriters, and the terms of
any subsequent reoffering thereof. If any public
offering by the underwriters is to be made on terms differing from
those set forth on the cover page of the prospectus, a
post-effective amendment will be filed to set forth the terms of
such offering.
d)
Insofar as
indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
II-4
e)
The undersigned
registrant hereby undertakes that:
(1)
For purposes of
determining any liability under the Securities Act of 1933, the
information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall
be deemed to be part of this registration statement as of the time
it was declared effective.
(2)
For the purpose of
determining any liability under the Securities Act of 1933, each
post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
II-5
SIGNATURES
Pursuant to the
requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form F-3 and has duly caused
this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Toronto,
Province of Ontario, Canada, on July 10, 2017.
|
|
|
|
|
|
|
INTELLIPHARMACEUTICS INTERNATIONAL INC.
|
||
|
|
|
|
|
|
|
By:
|
/s/ Dr. Amina
Odidi
|
|
|
|
|
Dr.
Amina Odidi
|
|
|
|
|
President, Chief
Operating Officer and Director
|
|
Pursuant to the
requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the
capacities and on the dates indicated.
|
Signature
|
|
Title
|
|
Date
|
||
|
|
|
|
|
|
||
|
/s/ Dr. Isa
Odidi
|
|
Chairman of the
Board of Directors
|
|
July
10, 2017
|
||
|
Dr.
Isa Odidi
|
|
and
Chief Executive Officer
|
|
|
||
|
|
|
|
|
|
||
|
/s/ Domenic Della
Penna
|
|
Chief
Financial Officer
|
|
July
10, 2017
|
||
|
Domenic Della
Penna
|
|
(Principal
Financial and Accounting
Officer)
|
|
|
||
|
|
|
|
|
|
||
|
/s/ Dr. Amina
Odidi
|
|
|
|
|
||
|
Dr.
Amina Odidi
|
|
President, Chief
Operating Officer and Director
|
|
July 10,
2017
|
||
|
|
|
|
|
|
||
|
*
|
|
|
|
|
||
|
Kenneth
Keirstead
|
|
Director
|
|
July
10, 2017
|
||
|
|
|
|
|
|
||
|
*
|
|
|
|
|
||
|
Bahadur
Madhani
|
|
Director
|
|
July
10, 2017
|
||
|
|
|
|
|
|
||
|
*
|
|
|
|
|
||
|
Eldon R.
Smith
|
|
Director
|
|
July
10, 2017
|
||
|
|
|
|
|
|
||
|
"*" By: /s/ Dr. Isa Odidi
, as Attorney-in-fact
|
|
|||||
II-6
AUTHORIZED REPRESENTATIVE
Pursuant to the
requirements of Section 6(a) of the Securities Act of 1933, the
undersigned has signed this Registration Statement, solely in the
capacity of the duly authorized representative of
Intellipharmaceutics International Inc. in the United States, on
July 10, 2017.
|
|
|
||
|
|
VASOGEN INC.
|
||
|
|
|
||
|
|
By:
|
/s/ Dr. Amina
Odidi
|
|
|
|
|
Name: Dr.
Amina Odidi
|
|
|
|
|
Title: President,
Chief Operating Officer and Director
|
|
II-7
EXHIBIT INDEX
|
Exhibit Number
|
|
Description
|
|
|
|
|
|
1.1*
|
|
Form of
Underwriting Agreement for common shares, preference shares,
warrants, subscription receipts, subscription rights and/or
units.
|
|
4.1
|
|
Articles
of Incorporation of the Company and Amendments thereto
(incorporated herein by reference to the Company’s Annual
Report on Form 20-F for the fiscal year ended November 30, 2009 as
filed on June 1, 2010).
|
|
4.2
|
|
By-laws
of the Company (incorporated by reference to the Company’s
Annual Report on Form 20-F for the fiscal year ended November 30,
2009 as filed on June 1, 2010).
|
|
4.3*
4.4*
|
|
Form of
Subscription Receipt Agreement.
Form of
Subscription Rights Agreement and Form Subscription Rights
Certificate.
|
|
4.5*
|
|
Form of
Warrant Agreement (including form of Warrant
Certificate).
|
|
4.6*
|
|
Form of
Unit Agreement.
|
|
5.1
|
|
Opinion
of Gowling WLG (Canada) LLP as to the legality of the securities
being registered.
|
|
8.1
|
|
Tax
opinion of Blank Rome LLP.
|
|
8.2
|
|
Tax
opinion of Gowling WLG (Canada) LLP.
|
|
23.1
|
|
Consent
of Independent Registered Public Accounting Firm (MNP
LLP)
|
|
23.2
|
|
Consent
of Deloitte LLP
|
|
23.3
|
|
Consent
included in opinion of Gowling WLG (Canada) LLP filed as Exhibit
5.1.
|
|
23.4
|
|
Consent
included in opinion of Blank Rome LLP filed as Exhibit
8.1.
|
|
23.5
|
|
Consent
included in opinion of Gowling WLG (Canada) LLP filed as Exhibit
8.2.
|
|
24.1
|
|
Power
of Attorney (included on the signature pages to this Registration
Statement).
|
|
--------------
|
|
|
|
*
|
|
To be
filed by amendment or as an exhibit to a report pursuant to
Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, including any Report of Foreign Private Issuer on
Form 6-K, and incorporated herein by reference if necessary or
required by the transaction.
|
|
|
|
|