A researcher and provider of ketamine-assisted treatments for mental health conditions, Braxia Scientific Corp. (OTC:BRAXF) has completed the acquisition of the issued and outstanding stock of U.S.-based, private telemedicine company KetaMD Inc., with the goal of addressing mental health issues by providing access to technology-mediated ketamine treatments.
Founded by psychedelic pioneers Zappy Zapolin and Warren Gumpel along with mindfulness instructor Kaia Roman and president and COO Leann Taylor, KetaMD's telemedicine platform works to provide access to safe and affordable at-home ketamine treatments for those suffering from depression and related mental health conditions across the country.
Zapolin and Gumpel also founded The Ketamine Fund, a non-profit organization that donated over 500 medically-supervised ketamine treatments to veterans with PTSD who reportedly noted substantial reduction in depression and suicidal ideation.
This legal treatment, currently available in Florida, will roll out in more states this year, most likely California, New York, Texas and Colorado. Washington is expected to join next year.
Treatments are medically supervised, guided by registered personnel, and backed by a group of international psychiatrists and researchers in depression. Through KetaMD's program, adults who receive a qualifying diagnosis from one of their licensed medical prescribers would be allowed to participate in the fully virtual program.
KetaMD’s acquisition provides Braxia the possibility to offer both in-person and digital telehealth ketamine treatments, besides the company’s work on clinical research and development towards the commercialization of its pharmaceuticals.
In fact, Braxia is preparing to augment its tools and capabilities of the recently-acquired platform, including planning new clinical trials in the U.S. and leveraging its proprietary patient dataset with patient outcomes as a means to support the further development of digital therapeutics for mental health conditions.
As for management, Warren Gumpel will continue as KetaMD’s CEO and Leann Taylor as its president and COO. Taylor will also join Braxia’s board following the closing. Zappy Zapolin and Kaia Roman will become advisors to KetaMD.
Lead Participants’ Comments
Braxia’s CEO Dr. Roger McIntyre said the importance of the transaction with regards to “bringing awareness, accessibility and scalability of the benefits of ketamine and psychedelics generally for those suffering from depression and other mood disorders."
With respect to what it means to Braxia, McIntyre further explained: "Adding digital telehealth capabilities through KetaMD's highly anticipated online and mobile platform strengthens our position to lead the medical use of evidence-based psychedelics, while accelerating our ability to get treatment to those in need, safely and quickly across the U.S. and Canada, and globally in the future."
KetaMD’s co-founder Zappy Zapolin commented: "Following the acquisition of KetaMD, Braxia is a well-positioned vertically-integrated psychedelic medicine company,” referring to the fact that both companies, now combined, sum up a grand set of operations ranging from clinics to bioscience R&D to an at-home telemedicine platform.
Co-founder and CEO Warren Gumpel expressed his eagerness with the new collaboration as well: "The KetaMD team is honored to have the opportunity to work with Dr. McIntyre, Dr. Rosenblat, and a world's leading research team in the area of depression and mood disorders. I believe this will be the key distinguishing factor in KetaMD's success."
Transaction Details
Braxia acquired 100% of KetaMD’s common stock under the following terms:
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KetaMD common stocks were issued 42,144,629 Braxia common shares, almost 17.5% of the total issued common shares on a post-closing basis;
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An estimated 80.6% of those shares are subject to a contractual lock-up, being released in 6-month increments until the final release in 18 months;
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Holders of these new shares would also receive up to 21,915,207 Braxia common shares if the market capitalization of the company reaches certain sustainable levels during the period ending on the fifth anniversary of the transaction closing date, or if KetaMD obtains certain gross income and EBITDA milestones over the three fiscal years following that date. If issued, the shares would represent 8.3% of the total issued and outstanding Braxia common shares on a post-closing basis;
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The new shareholders enter into a voting arrangement with Braxia following which they would support proposed board nominees and other shareholder resolutions recommended by Braxia’s board;
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Certain KetaMD noteholders were issued almost CA$2.94 million ($1.627.247) of convertible debentures of Braxia due in December 31, 2023 in exchange for the cancellation of their KetaMD notes, providing a conversion right into Braxia common shares at the holder’s option and mandatory conversion by Braxia if not converted or repaid prior to that date.
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Holders of those debentures will be entitled to convert a portion of their holdings into common shares prior to December 15, 2023, as follows: 33% of common share at a price equal to the benchmark price (BP); 33% of common share at a price equal to 150% of the BP, or CA$0.15 (approx. $0.12) per share; and 34% of the outstanding share at a price equal to 200% of the BP, or CA$0.20 (approx. $0.16) per share.
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Further, the debentures contain a mandatory cash prepayment if Braxia raises $10 million in equity capital prior to December 31, 2023.
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Based on the closing price of the Braxia common shares on the CSE on August 2, 2022, the total paid for KetaMD including the amount of $619,000 invested in notes, but excluding the earnout shares, the timing and issuance of which is uncertain is approximately CA$6,262,902 ($4.866.901).
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Following the transaction’s completion, there are no other KetaMD notes outstanding than those owned by Braxia.
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