Braxia Scientific Corp. (CSE:BRAX, OTC:BRAXF) said it has acquired KetaMD Inc, a US-based telemedicine company focused on addressing mental health challenges through access to technology-facilitated ketamine-based treatments.
"Today marks a notable step forward in bringing awareness, accessibility and scalability of the benefits of ketamine and psychedelics generally for those suffering from depression and other mood disorders," Braxia Scientific CEO Dr Roger McIntyre said in a statement.
"We've seen improved outcomes first-hand from ketamine treatment in our clinics and in our clinical trials. 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 US and Canada, and globally in the future. I'm delighted the KetaMD leadership will be bringing their immeasurable talents as key leaders in the organization and as Braxia shareholders," he added.
READ: Braxia Scientific lifts revenue and narrows loss in fiscal 2022 as it looks to "significantly" scale offerings
KetaMD is currently available in Florida but roll-outs in California, New York, Texas, Colorado, and Washington have been planned for later this year, said Braxia, a medical research company.
According to World Psychiatry journal, the US had a shortage of 4 million mental health specialists at the end of 2020, with 115 million people lacking access to mental healthcare services, trained mental health specialists, physicians, and psychiatrists, the company noted, adding that its acquisition of KetaMD will address the gap.
"Combined, Braxia and KetaMD now have operations ranging from clinics to bioscience R&D to an at-home telemedicine platform, overseen by Dr McIntyre, one of the foremost authorities in mood disorders and treatments," KetaMD co-founder Zappy Zapolin said.
Psychedelic pioneers Zapolin and Warren Gumpel founded the HIPAA-compliant telemedicine platform providing affordable and potentially life-changing at-home medical ketamine treatments, along with mindfulness instructor and brand experience expert Kaia Roman and the company's president and CEO Leann Taylor.
Gumpel commented: "The KetaMD team is honored to have the opportunity to work with Dr McIntyre, (Braxia medical director) Dr Rosenblat, and a world-leading research team in the area of depression and mood disorders. I believe this will be the key distinguishing factor in KetaMD's success."
Braxia’s vice president of R&D and Growth Daniel Herrera added: "The KetaMD team have created a company and brand that we believe will connect and resonate with so many people in the rapidly growing mental health space. The combination of Braxia's mental health clinical expertise and KetaMD's digital platform, we believe, will quickly increase access to treatment for people suffering from mental health disorders, positioning the company as a leading provider of safe, affordable, at-home ketamine treatment in the US and Canada. This alliance also allows for innovation in clinical research and scaling of access to experimental therapeutics in this patient population."
Transaction highlights
Braxia said the acquisition involved the following transactions:
- The issuance of 42,144,629 Braxia common shares or 17.5% of the total issued share capital to KetaMD shareholders. Approximately 80.6% of the shares are subject to a contractual lock-up, with incremental 6-monthly releases until the final release in 18 months.
- The KetaMD shareholders will potentially also receive up to 21,915,207 Braxia common shares (Earnout Shares) in the event that (a) the market capitalization of Braxia reaches certain sustainable levels during the period ending on the fifth anniversary of the closing of the transaction and/or (b) KetaMD achieves certain gross income and EBITDA milestones over the three fiscal years following closing of the transaction. If issued, the Earnout Shares will represent 8.3% of the issued and outstanding Braxia common shares on a post-closing basis;
- Certain existing noteholders of KetaMD were issued approximately $2.94 million of convertible debentures of Braxia (Debentures) due December 31, 2023, in exchange for the cancellation of the KetaMD notes, which will provide a conversion right into Braxia shares at the option of the holder and mandatory conversion by Braxia if not converted or repaid prior to the maturity date. The Debentures may also be prepaid or redeemed at the option of Braxia. The conversion price for optional conversion by the holder will be based on the benchmark price of $0.10 per Braxia share (Benchmark Price). The conversion price for mandatory conversion by Braxia on the maturity date is $0.15 per share, which is 150% higher than the closing price of the Braxia shares on the Canadian Securities Exchange on August 2, 2022, of $0.06 per share. The Debentures holders will be entitled to convert a portion of their holdings into Braxia shares, and also to cash in the event Braxia raises US$10 million in equity capital prior to the maturity date.
- Based on the closing price of the Braxia common shares on the CSE on August 2, 2022, the total value of the consideration paid for KetaMD, including the amount of US$619,000 invested in the KetaMD notes, but excluding the value of the Earnout Shares since the timing and issuance is uncertain, is approximately $6,262,902; and
- KetaMD shareholders have agreed to support the proposed nominees of the board and other shareholder resolutions recommended by the Braxia board.
Braxia opened the first community-based clinic in Canada offering IV and oral ketamine treatments for depression in 2018. To-date, the company has expanded to five clinics across Ontario and Quebec with over 100 mental health medical professionals, and has administered more than 6,000 ketamine treatments in Canada.
Contact the author at jon.hopkins@proactiveinvestors.com