Full Press Release Details
MATERIAL CHANGE REPORT
Item 1: Name and Address of Company
ESSA Pharma Inc. ("ESSA" or the "Company")
Suite 720, 999 West Broadway
Vancouver, British Columbia, Canada V5Z 1K5
Item 2: Date of Material Change
Item 3: News Release
A news release announcing the material
change referred to in this report was issued on February 23, 2018 through Canada NewsWire and a copy has been filed on SEDAR at
www.sedar.com and EDGAR at www.sec.gov.
Item 4: Summary of Material Change
On February 23, 2018, ESSA announced
that on February 21, 2018 the board of directors of the Company ("Board") passed a resolution adopting a new stock
option plan (the "New Option Plan") and a restricted share unit plan (the "RSU Plan").
The Board further approved that an aggregate
of 1,957,000 stock options held by certain directors, officers, employees and consultants of the Company be cancelled and an aggregate
of 1,667,000 stock options (the "Replacement Options") be issued, with such options having an exercise price of C$0.245
or US$0.20, as applicable, and expiry dates that are ten years from the date of grant of the corresponding cancelled options. In
addition, such Replacement Options will vest in 48 equal instalments, with the first instalment vesting on March 21, 2018, and
subsequent instalments vesting on every one month anniversary thereafter.
The Company also announced that the
Board approved the grant of an aggregate of 14,523,000 additional stock options to certain directors, officers, employees and consultants
of the Company. The granted stock options have a term of 10 years expiring on February 21, 2028 and are exercisable at C$0.245
or US$0.20 per common share in the capital of the Company ("Common Shares"), as applicable. In addition, such stock
option will vest in 48 equal instalments, with the first instalment vesting on March 21, 2018, and subsequent instalments vesting
on every one month anniversary thereafter.
Item 5: Full Description
5.1 Full Description of Material
On February 23, 2018, ESSA announced
that on February 21, 2018 the Board passed a resolution adopting New Option Plan and the RSU Plan.
On November 27, 2017, ESSA's common
shares ("Common Shares") were delisted from the Toronto Stock Exchange and conditionally listed on the TSX Venture
Exchange (the "TSXV"). As a condition to the listing of the Common Shares on the TSXV, the Company is required to adopt
a stock option plan that complies with Policy 4.4 - Incentive Stock Options of the TSXV Corporate Finance Manual. In order
to comply with this condition, the Board has approved the New Option Plan, which is a fixed number stock option plan that incorporates
TSXV requirements and will replace the Company's existing option plan. The New Option Plan provides the Company with a share-related
mechanism to attract, retain and motivate qualified directors, officers, employees and consultants, and to reward such of those
directors, officers, employees and consultants as may be awarded options under the New Option Plan by the Board from time to time
for their contributions toward creating shareholder value through achievement of the short and long term goals of the Company.
The RSU Plan has been adopted to provide
a vehicle by which equity-based incentives may be awarded to the employees, consultants, directors and officers of the Company,
to recognize and reward their significant contributions to the long-term success of the Company including to align the employees',
consultants' directors' and officers' interests more closely with the shareholders of the Company. Pursuant to
the RSU Plan, the Board, through the Company's Compensation Committee, may grant restricted share unit awards ("RSUs")
as an incentive payment to eligible persons. The Board intends to use RSUs issued under the RSU Plan, as well as stock options
issued under the New Option Plan as part of the Company's overall executive compensation plan.
The maximum number of Common Shares
that may be reserved for issuances under the New Option Plan and RSU Plan, in aggregate, shall not exceed 23,104,377 Common Shares.
The New Option Plan and RSU Plan both remain subject to TSXV approval and requisite shareholder approvals including, in the case
of the RSU Plan, disinterested shareholder approval in accordance with the policies of the TSXV.
ESSA further announced that the Board
has approved the re-grant and repricing, and extension of the expiry dates of certain outstanding stock options granted to certain
directors, officers, employees and consultants of the Company. The significant drop in the trading price of the Company's
Common Shares on the TSXV has meant that the outstanding stock options as currently priced no longer offer an adequate incentive
to the directors, officers, employees and consultants of the Company. As such, the Board has approved that an aggregate of 1,957,000
stock options held by certain directors, officers, employees and consultants of the Company be cancelled and the Replacement Options
be issued, with such Replacement Options having an exercise price of C$0.245 or US$0.20, as applicable, and expiry dates that are
ten years from the date of grant of the corresponding cancelled options. In addition, such Replacement Options will vest in 48
equal instalments, with the first instalment vesting on March 21, 2018, and subsequent instalments vesting on every one month anniversary
The Company also announced that the
Board has approved the grant of an aggregate of 14,523,000 additional stock options to certain directors, officers, employees and
consultants of the Company. The granted stock options have a term of 10 years expiring on February 21, 2028 and are exercisable
at C$0.245 or US$0.20 per Common Share, as applicable. In addition, such stock option will vest in 48 equal instalments, with the
first instalment vesting on March 21, 2018, and subsequent instalments vesting on every one month anniversary thereafter.
The Replacement Options as well as the
granted additional stock options have been reserved for issuance pursuant to the Company's New Stock Option Plan and are
subject to, and cannot be exercised by their respective holders until, the Company's shareholders ratify the New Option Plan,
the TSXV approves the grants thereof, and the Company's shareholders approve such grants by way of disinterested shareholder
approval in accordance with the policies of the TSXV, at a duly constituted meeting of shareholders.
Following the aforementioned grants
of stock options, the Company has a total of 16,190,000 stock options outstanding, representing approximately 14% of the outstanding
Common Shares. An aggregate of 6,914,377 stock options and/or RSUs remain outstanding for future issuance under the New Option
Plan and the Company's RSU Plan, respectively.
Further details regarding the New Option
Plan, the RSU Plan, the re-grant and repricing, and extension of expiry dates of stock options, and grant of additional stock options
will be included in the management information circular of the Company that will be made available to shareholders in connection
with the annual and special meeting of shareholders of the Company.
The stock option grants referenced in
this press release include grants to certain related parties (as such term is defined under Multilateral Instrument 61-101 - Protection
of Minority Security Holders in Special Transactions ("MI 61-101")), including directors and senior officers
of the Company. Such stock option grants constitute a related party transaction under MI 61-101. These transactions are exempt
from the formal valuation and minority shareholder approval requirements of MI 61-101 pursuant to sections 5.5(a) and 5.7(1)(a)
of MI 61-101 as neither the fair market value of any securities issued to nor the consideration paid by such persons would exceed
25.0% of the Company's market capitalization.
5.2 Disclosure of Restructuring
Item 6: Reliance on subsection 7.1(2) of National Instrument
Item 7: Omitted Information
Item 8: Executive Officer
For further information, please contact David Wood, Chief
Financial Officer of the Company at 778-331-0962.
Item 9: Date of Report
Forward-Looking Statement Disclaimer
This material change
report contains certain information which, as presented, constitutes "forward-looking information" within the meaning
of the Private Securities Litigation Reform Act of 1995 and/or applicable Canadian securities laws. Forward-looking information
involves statements that relate to future events and often addresses expected future business and financial performance, containing
words such as "anticipate", "believe", "plan", "estimate", "expect", and "intend",
"potential", "promising", "refocus", statements that an action or event "may", "might",
"could", "should", or "will" be taken or occur, or other similar expressions and includes, but is
not limited to, statements about the New Option Plan and the RSU Plan, grants of stock options under the New Option Plan, including