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AEZS Aeterna Zentaris

Filed: 4 May 21, 8:00pm

 

Exhibit 99.1

 

 

Condensed Interim Consolidated Financial Statements

As at MARCH 31, 2021 and for the three-month periodS ended MARCH 31, 2021 and 2020

(In thousands of US dollars)

(Unaudited)

 

 
 

 

 

Condensed Interim Consolidated Financial Statements

As at MARCH 31, 2021 and for the three-month periodS ended MARCH 31, 2021 and 2020

(Unaudited)

 

 

Condensed Interim Consolidated Statements of Financial Position3
Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity5
Condensed Interim Consolidated Statements of Comprehensive (Loss) Income6
Condensed Interim Consolidated Statements of Cash Flows7
Notes to Condensed Interim Consolidated Financial Statements8

 

 (2) 

 

 

 

Condensed Interim Consolidated Statements of Financial Position

(In thousands of US dollars)

(Unaudited)

 

  March 31, 2021  December 31, 2020 
   $   $ 
ASSETS        
Current assets        
Cash and cash equivalents  73,371   24,271 
Trade and other receivables (note 5)  1,075   1,681 
Inventory  60   21 
Prepaid expenses and other current assets (note 6)  3,050   1,913 
Total current assets  77,556   27,886 
Restricted cash equivalents  325   338 
Right of use assets  122   157 
Property, plant and equipment  37   22 
Identifiable intangible assets  541   59 
Goodwill  8,433   8,815 
Total Assets  87,014   37,277 
LIABILITIES        
Current liabilities        
Payables and accrued liabilities (note 7)  2,252   2,199 
Current portion of provisions (note 8)  86   92 
Income taxes  378   395 
Current portion of deferred revenues  2,101   2,193 
Current portion of lease liabilities  129   135 
Total current liabilities  4,946   5,014 
Deferred revenues  3,800   3,289 
Lease liabilities  15   49 
Employee future benefits (note 9)  13,807   15,435 
Provisions (note 8)  272   279 
Total liabilities  22,840   24,066 
SHAREHOLDERS’ EQUITY        
Share capital (note 10)  293,781   235,008 
Warrants (note 10)  4,595   12,402 
Other capital (note 10)  89,518   89,505 
Deficit  (323,222)  (322,659)
Accumulated other comprehensive loss (“AOCI”)  (498)  (1,045)
Total shareholders’ equity  64,174   13,211 
Total liabilities and shareholders’ equity  87,014   37,277 

Commitments and contingencies (note 15)

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

 

(3)
 

 

 

Approved by the Board of Directors

 

/s/ Carolyn Egbert /s/ Pierre-Yves Desbiens

Carolyn Egbert

Chair of the Board

 

Pierre-Yves Desbiens

Director

 

(4)
 

 

 

Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity (DEFICIENCY)

For the three MONTHS ended MARCH 31, 2021 and 2020

(In thousands of US dollars, unaudited)

 

  Common
shares
(number of)1
  Share
capital
  Warrants  Other
capital
  Deficit  AOCI  Total 
     $  $  $  $  $  $ 
Balance - January 1, 2021  62,678,613   235,008   12,402   89,505   (322,659)  (1,045)  13,211 
Net loss              (1,445)     (1,445)
Other comprehensive loss:                            
Foreign currency translation adjustments                 547   547 
Actuarial gain on defined benefit plan (note 9)              882      882 
Comprehensive loss              (563)  547   (16)
Issuance of common shares, net of transaction costs (note 10)  23,586,207   29,082   1,897            30,979 
Exercise of warrants (note 10)  34,888,965   29,691   (9,704)            19,987 
Share-based compensation costs           13         13 
Balance - March 31, 2021  121,153,785   293,781   4,595   89,518   (323,222)  (498)  64,174 

 

  Common
shares
(number of)
  Share
capital
  Other
capital
  Deficit  AOCI  Total 
     $  $  $  $  $ 
Balance - January 1, 2020  19,994,510   224,528   89,806   (316,891)  94   (2,463)
Net income           779      779 
Other comprehensive loss:                        
Foreign currency translation adjustments              210   210 
Actuarial gain on defined benefit plan           1,388      1,388 
Comprehensive income           2,167   210   2,377 
Issuance of common shares and warrants, net  3,478,261   1,885            1,885 
Share-based compensation costs        (112)        (112)
Balance – March 31, 2020  23,472,771   226,413   89,694   (314,724)  304   1,687 

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

 

(5)
 

 

 

Condensed Interim Consolidated Statements of Comprehensive (Loss) INCOME

For the three months ended March 31, 2021 and 2020

(In thousands of US dollars, except share and per share data)

(Unaudited)

 

  Three months ended 
  March 31 
  2021  2020 
  $  $ 
Revenues        
Royalty income  8   14 
Product sales     1,016 
Supply chain  41   41 
Licensing revenue  537   19 
Total revenues  586   1,090 
Operating expenses        
Cost of sales  29   862 
Research and development costs  363   319 
General and administrative expenses  1,264   1,124 
Selling expenses  246   248 
Gain on modification of building lease     (185)
Total operating expenses (note 11)  1,902   2,368 
Loss from operations  (1,316)  (1,278)
Loss due to changes in foreign currency exchange rates  (248)  (104)
Change in fair value of warrant liability     2,470 
Other finance costs  (10)  (309)
Net finance (costs) income  (258)  2,057 
(Loss) income before income taxes  (1,574)  779 
Income tax recovery  129    
Net (loss) income  (1,445)  779 
Other comprehensive (loss) income:        
Items that may be reclassified subsequently to profit or loss:        
Foreign currency translation adjustments  547   210 
Items that will not be reclassified to profit or loss:        
Actuarial gain on defined benefit plans (note 9)  882   1,388 
Comprehensive (loss) income  (16)  2,377 
Net (loss) income per share [basic and diluted]  (0.02)  0.04 
Weighted average number of shares outstanding (note 14):        
Basic  95,444,990   21,523,416 
Diluted  95,444,990   21,860,416 

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

 

(6)
 

 

 

Condensed Interim Consolidated Statements of Cash Flows

For the three months ended MARCH 31, 2021 and 2020

(In thousands of US dollars, except share and per share data)

(Unaudited)

 

  Three months ended 
  March 31, 
  2021  2020 
  $  $ 
Cash flows from operating activities        
Net (loss) income for the period  (1,445)  779 
Items not affecting cash and cash equivalents:        
Change in fair value of warrant liability     (2,470)
Transaction costs of warrants issued and expensed as finance cost     310 
Utilization of provisions (note 8)  19   (327)
Depreciation and amortization  36   107 
Gain on modification of building lease     (185)
Share-based compensation costs  13   (112)
Employee future benefits (note 9)  49   49 
Amortization of deferred revenues  (537)  (14)
Foreign exchange gain on items denominated in foreign currencies  266   52 
Other non-cash items  29   (15)
Interest accretion on lease liabilities  2   (11)
Payment of income taxes  (1,124)  (811)
Changes in operating assets and liabilities (note 12)  1,647   204 
Net cash used in operating activities  (1,045)  (2,444)
Cash flows from financing activities        
Issuance of common shares (note 10)  34,200    
Issuance of common shares and warrants (note 10)     4,500 
Transaction costs (note 10)  (3,221)  (600)
Proceeds from exercise of warrants (note 10)  19,987    
Payments on lease liabilities  (33)  (158)
Net cash provided by financing activities  50,933   3,742 
Cash flows from investing activities        
Purchase of intangible assets  (490)   
Purchase of property and equipment  (17)   
Net cash used by investing activities  (507)   
Effect of exchange rate changes on cash and cash equivalents  (281)  46 
Net change in cash and cash equivalents  49,100   1,344 
Cash and cash equivalents – Beginning of period  24,271   7,838 
Cash and cash equivalents – End of period  73,371   9,182 
         

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

 

(7)
 

 

  

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS AT MARCH 31, 2021 AND FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(amounts in thousands of US dollars, except share/option/warrant and per share/option/warrant data and as otherwise noted) (Unaudited)

 

1. Business overview  

 

Summary of business

 

Aeterna Zentaris (the “Company” or “Aeterna”) is a specialty biopharmaceutical company commercializing and developing therapeutics and diagnostic tests. The Company’s lead product, Macrilen™ (macimorelin), is the first and only U.S. Food and Drug Administration (“FDA”) and European Commission approved oral test indicated for the diagnosis of patients with adult growth hormone deficiency (“AGHD”). Macimorelin is currently marketed in the U.S. under the tradename Macrilen™ through a license agreement with Novo Nordisk Biopharm Limited (“Novo Nordisk”) where Aeterna Zentaris receives royalties on net sales. Macimorelin will be marketed in Europe and the United Kingdom through a license agreement with Consilient Health Ltd. (“Consilient Health”) and Aeterna Zentaris will receive royalties on net sales and other potential payments. The Company is conducting the Phase 3 study (“DETECT” trial) for macimorelin in the U.S. and Europe for the diagnosis of childhood-onset growth hormone deficiency (“CGHD”) in partnership with Novo Nordisk. Novo Nordisk is paying 100% of costs up to €9,000 (approximately $10,980) and includes reimbursement of Aeterna’s budgeted internal labor costs and any additional external jointly approved DETECT trial costs incurred over €9,000 (approximately $10,980) will be shared equally between Novo Nordisk and Aeterna. The Company is actively pursuing business development opportunities for the commercialization of macimorelin in Asia and the rest of the world, in addition to other non-strategic assets to monetize their value.

 

In addition, the Company is pursuing innovative development candidates in different indications with a focus on rare or orphan indications and potential for pediatric use.

 

COVID-19 impact

 

In 2020, the COVID-19 pandemic began causing significant financial market declines and social dislocation and, to date, the Company has not experienced significant business disruption from COVID-19. The situation is dynamic with various cities and countries around the world are responding in different ways to address the outbreak. The spread of COVID-19 may impact the Company’s operations, including the potential interruption of our clinical trial activities and the Company’s supply chain, or that of the Company’s licensee. For example, the COVID-19 outbreak may delay enrollment in the Company’s clinical trials due to prioritization of hospital resources toward the outbreak, and some patients may be unwilling to be enrolled in the Company’s trials or be unable to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services, which would delay the Company’s ability to conduct clinical trials or release clinical trial results and could delay the Company’s ability to obtain regulatory approval and commercialize the Company’s product candidates. The pandemic may also impact the ability of the Company’s suppliers to deliver components or raw materials on a timely basis or at all. In addition, hospitals may reduce staffing and reduce or postpone certain treatments in response to the spread of an infectious disease. The Company’s licensee may be impacted due to significant delays of diagnostic activities in the U.S. Management will continue to monitor and assess the impact of the pandemic on its judgments, estimates, accounting policies and amounts recognized in these consolidated financial statements. As at March 31, 2021, the Company assessed the possible impacts of COVID-19 on its financial results. The Company has evaluated its financial assets, property, plant and equipment, intangible assets, and goodwill for impairment and no changes from the carrying amount were required in the reporting period.

 

(8)
 

 

 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS AT MARCH 31, 2021 AND FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(amounts in thousands of US dollars, except share/option/warrant and per share/option/warrant data and as otherwise noted) (Unaudited)

 

Basis of presentation

 

These unaudited condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”) applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting. These unaudited condensed interim consolidated financial statements should be read in conjunction with the Company’s annual consolidated financial statements as at and for the year ended December 31, 2020. The accounting policies in these condensed interim consolidated financial statements are consistent with those presented in the Company’s annual consolidated financial statements.

 

These unaudited condensed interim consolidated financial statements were approved by the Board of Directors (the “Board”) on May 4, 2021.

 

2. Critical accounting estimates and judgements

 

The preparation of condensed interim consolidated financial statements in accordance with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of the Company’s assets, liabilities, revenues, expenses and related disclosures. Judgments, estimates and assumptions are based on historical experience, expectations, current trends and other factors that management believes to be relevant at the time at which the Company’s condensed interim consolidated financial statements are prepared.

 

Management reviews, on a regular basis, the Company’s accounting policies, assumptions, estimates and judgments in order to ensure that the condensed interim consolidated financial statements are presented fairly and in accordance with IFRS applicable to interim financial statements. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

 

Critical accounting estimates and assumptions, as well as critical judgments used in applying accounting policies in the preparation of the Company’s condensed interim consolidated financial statements, were the same as those applied to the Company’s annual consolidated financial statements as of December 31, 2020 and 2019 and for the years then ended except for the following:

 

Intangible assets

 

Separately acquired intangible assets are recognized at the price paid in cash, less amortization and impairments. All intangible assets are tested for impairment when there are indications that the carrying value may not be recoverable, or, at a minimum, annually. The recoverable amount is determined as the higher of value in use or fair value less costs to sell using a discounted cash flow calculation, where the products’ expected cash flows are risk-adjusted over their estimated remaining useful economic life. Any impairment losses are recognized immediately in the consolidated statements of comprehensive (loss) income. Intangible assets relating to products which fail during development (or for which development ceases for other reasons) are also tested for impairment and are written down to their recoverable amount (which is usually nil). If, subsequent to an impairment loss being recognized, development restarts or other facts and circumstances change indicating that the impairment is less or no longer exists, the value of the asset is re-estimated and its carrying value is increased to the recoverable amount, but not exceeding the original value, by recognizing an impairment reversal in the consolidated statements of comprehensive (loss) income. Amortization of such intangible assets begins once such assets are ready for their intended use.

 

(9)
 

 

 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS AT MARCH 31, 2021 AND FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(amounts in thousands of US dollars, except share/option/warrant and per share/option/warrant data and as otherwise noted) (Unaudited)

 

Contingent payments

 

The Company accounts for contingent variable payments for separately acquired intangible assets with the cost accumulation approach. Contingent consideration is not considered on initial recognition of the asset but is added to the cost of the asset initially recorded, when incurred.

 

Measurement uncertainty:

 

The significant spread of COVID-19 within the U.S., Canada, Germany and elsewhere has resulted in a widespread health crisis and has had adverse effects on local, national and global economies generally, the markets the Company serves, its operations and the market price of its common shares.

 

Uncertain factors, including the duration of the outbreak, the severity of the disease and the actions to contain or treat its impact, could cause interruptions in the Company’s operations and supply chain, which could impact the Company’s ability to accurately measure the net realizable value of inventory and fair value of trade and other receivables.

 

3. Recent accounting pronouncements issued but not yet effective

 

The recent accounting pronouncements issued but not yet effective included in note 4 to the Company’s annual audited consolidated financial statements as at December 31, 2020 and 2019 and for the years then ended are unchanged.

 

4. License and distribution arrangements

 

(a)License Agreement for U.S. and Canada

 

Royalty income earned under the agreement with Novo Nordisk agreement for the three-month period ended March 31, 2021 was $8 (2020 - $14) and during the three-month period ended March 31, 2021, the Company invoiced Novo Nordisk $2,113 for the DETECT trial costs (2020 - $193), which is recorded as a reduction in research and development expenses, and $41 for supply chain activities (2020 - $41), which is recorded as revenue, both in the condensed interim consolidated statements of comprehensive (loss) income.

 

(b)License agreement for European Union and the United Kingdom

 

On December 7, 2020, the Company entered into an exclusive licensing and supply agreements with Consilient Health, Ltd. (“CH” or “Consilient Health”) for the commercialization in the European Union and the United Kingdom of macimorelin in any diagnostic application. As per the agreement terms, the Company received a cash payment of €1 million ($1,207) in January 2021. This cash payment has been recognized in the consolidated statements of financial position as long-term deferred revenue.

 

(10)
 

 

 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS AT MARCH 31, 2021 AND FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(amounts in thousands of US dollars, except share/option/warrant and per share/option/warrant data and as otherwise noted) (Unaudited)

 

5. Trade and other receivables

 

  March 31, 2021  December 31, 2020 
  $  $ 
Trade accounts receivable (net of expected credit losses of $55 (December 31, 2020 - $55))  554   1,190 
Value added tax and income tax receivable  511   468 
Other  10   23 
   1,075   1,681 

 

6. Prepaid expenses and other current assets

 

  March 31, 2021  December 31, 2020 
  $  $ 
Prepaid insurance  825   1,021 
Prepaid income taxes  2,128   873 
Other  97   19 
   3,050   1,913 

 

(11)
 

 

 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS AT MARCH 31, 2021 AND FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(amounts in thousands of US dollars, except share/option/warrant and per share/option/warrant data and as otherwise noted) (Unaudited)

 

7. Payables and accrued liabilities

 

  March 31, 2021  December 31, 2020 
  $  $ 
Trade accounts payable  1,046   1,187 
Salaries, employment taxes and benefits  478   474 
Accrued audit fees  104   144 
Accrued research and development costs  255   23 
Other accrued liabilities  369   371 
   2,252   2,199 

 

8. Provisions

 

The changes in the Company’s provisions for onerous contracts can be summarized as follows:

 

  Cetrotide(R)
onerous
contracts
 
  $ 
Balance – January 1, 2021  371 
Utilization of provisions  (16)
Change in provisions  19 
Impact of foreign exchange rate changes  (16)
Balance – March 31, 2021  358 
Less current portion  86 
Non-current portion  272 

 

(12)
 

 

 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS AT MARCH 31, 2021 AND FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(amounts in thousands of US dollars, except share/option/warrant and per share/option/warrant data and as otherwise noted) (Unaudited)

 

9. Employee future benefits

 

The Company sponsors a pension plan in Germany (The Aeterna Zentaris GmbH Pension Plan). The change in the Company’s accrued benefit obligations is summarized as follows:

 

  March 31, 2021  Year ended
December 31,
2020
 
  Pension
benefit
plans
  Other
benefit plans
  Total  Total 
   $   $   $   $ 
Balances – Beginning of the period  15,341   94   15,435   13,788 
Current service cost  15   1   16   54 
Interest cost  23      23   163 
Actuarial (gain) loss arising from changes in financial assumptions  (882)     (882)  651 
Benefits paid  (115)  (2)  (117)  (532)
Impact of foreign exchange rate changes  (664)  (4)  (668)  1,311 
Balances – End of the period  13,718   89   13,807   15,435 
Amounts recognized:                
In net loss  (77)  (1)  (78)  (218)
In other comprehensive loss  (1,546)  (4)  (1,550)  (1,961)

 

The calculation of the pension benefit obligation is sensitive to the discount rate assumption. Discount rates were 0.6% at December 31, 2020 and 1% at March 31, 2021.

 

10. Share capital, warrants and other capital

 

The Company has an unlimited number of authorized common shares (being voting and participating shares) with no par value, as well as an unlimited number of preferred, first and second ranking shares, issuable in series, with rights and privileges specific to each class, with no par value.

 

2021

 

On February 19, 2021, the Company closed a public offering of 20,509,746 common shares at a price to the public of $1.45 per common share, for gross proceeds of $29,739, before deducting underwriting discounts, commissions and offering expenses payable by the Company, in the amount of $2,837. Aeterna also granted the underwriter, which was also the Placement agent, a 30-day over-allotment option (the “Underwriter Option”) to purchase up to 3,076,461 additional common shares at the public offering price, less underwriting discounts and commissions, and 1,435,682 Placement agent warrants with an exercise price of $1.8125 and expiring on February 17, 2026. The net cash proceeds to the Company from the offering totaled $26,902. On February 22, 2021, the underwriter exercised the Underwriter Option in full and received 3,076,461 common shares for gross proceeds to the Company of $4,461. In connection with the public offering and the exercise of the Underwriter Option, the Company paid commissions and other expenses of $384 and issued 215,352 Placement agent warrants priced at $1.8125 and expiring on February 17, 2026. The net proceeds from the Underwriter Option was $4,077. Collectively, this financing is referred to as the “February 2021 Financing”. The gross proceeds of $34,200 was recorded to share capital with cash transaction costs of $3,221 and the fair value of the Placement agent warrants of $1,897 included as share issuance costs and as warrants in shareholders’ equity.

 

(13)
 

 

 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS AT MARCH 31, 2021 AND FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(amounts in thousands of US dollars, except share/option/warrant and per share/option/warrant data and as otherwise noted) (Unaudited)

 

The table presented below shows the inputs and assumptions applied to the Black-Scholes option pricing model in order to determine the fair value of these Placement agent warrants:

 

  Number of
equivalent
shares
  Market
value
per
share
price
  Weighted
average
exercise
price
  Risk-free
annual
interest
rate
  Expected
volatility
  Expected
life
(years)
  Expected
dividend
yield
 
     ($)  ($)  (i)  (ii)  (iii)  (iv) 
February 2021 Placement agent warrants – public offering  1,435,682   1.48   1.8125   0.58734%  119.18%  4.99   0.00%
February 2021 Placement agent warrants – Underwriter Option  215,352   1.48   1.8125   0.58544%  119.57%  4.98   0.00%

 

 

(i)Based on United States Treasury Government Bond interest rates with a term that is consistent with the expected life of the warrants.
(ii)Based on the historical volatility of the Company’s stock price over the most recent period consistent with the expected life of the warrants.
(iii)Based upon time to expiry from the reporting period date.
(iv)The Company has not paid dividends and it does not intend to pay dividends in the foreseeable future.

 

During the three-month period ended March 31, 2021, holders exercised warrants as follows:

 

  Number Exercised  Exercise Price  Cash Receipts 
September 2019 Investor warrants  2,000,000  $1.65  $3,300,000 
February 2020 Investor warrants  1,739,130  $1.20  $2,086,956 
July 2020 Investor warrants  20,823,333  $0.45  $9,370,500 
July 2020 Placement Agent warrants  1,866,667  $0.5625  $1,050,000 
August 2020 Investor warrants  7,589,883  $0.47  $3,567,245 
August 2020 Placement Agent warrants  869,952  $0.7040625  $612,501 
   34,888,965      $19,987,202 

 

2020

 

On February 21, 2020, the Company closed a registered direct offering for 3,478,261 common shares, at a purchase price of $1.29 per share, priced at-the-market. Additionally, 2,608,696 investor warrants were issued at an exercise price of $1.20 per common share and 243,478 broker warrants were issued at an exercise price of $1.62 per common share. The net cash proceeds to the Company from the offering totaled $3,900. The gross proceeds of $4,500 was allocated as $2,325 to warrant liability based on the ascribed fair value and the remaining gross proceeds of $2,175 were allocated to share capital. The transaction costs of $600 were allocated between share capital and warrants based on their relative fair values. The fair value of the share capital was recorded within equity net of the allocated transaction costs and the transaction costs of $310 allocated to the warrant liability were recorded as expense in the consolidated statements of comprehensive loss.

 

(14)
 

 

 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS AT MARCH 31, 2021 AND FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(amounts in thousands of US dollars, except share/option/warrant and per share/option/warrant data and as otherwise noted) (Unaudited)

 

Warrants

 

  Number  Weighted
average
exercise
price
    
     (US$)  $ 
Balance – January 1, 2020         
Warrant liability reclassified to equity  16,368,033   0.8556   7,377 
Warrants issued as equity (July 2020)  28,533,333   0.4574   5,025 
Balance – December 31, 2020  44,901,366   0.6025   12,402 
Warrants granted  1,651,034   1.8125   1,897 
Warrants exercised  (34,888,965)  0.5728   (9,704)
Balance – March 31, 2021  11,663,435   0.8624   4,595 

 

Other capital

 

There are no changes in US dollar denominated (US$) Stock options and DSUs since December 31, 2020.

 

  Year ended
December 31, 2020
 
  

US$ Stock

Options
(Number)

  

Weighted average
exercise price

(US$)

  DSUs
(Number)
  CAN$ Stock options
(Number)
  

Weighted
average

exercise

price
(CAN$)

 
Balance – Beginning of period  741,116   3.61   212,000   441   912.00 
Granted  180,000   0.37   120,000       
Exercised        (159,000)      
Canceled/Forfeited  (330,350)  2.56          
Expired  (84,366)  2.14      (441)  912.00 
Balance – End of period  506,400   1.44   173,000       

 

(15)
 

 

 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS AT MARCH 31, 2021 AND FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(amounts in thousands of US dollars, except share/option/warrant and per share/option/warrant data and as otherwise noted) (Unaudited)

 

11. Operating expenses

 

The nature of the Company’s operating expenses from operations include the following:

 

  Three months ended March 31, 
  2021  2020 
  $  $ 
Key management personnel:        
Salaries and short-term employee benefits  219   163 
Consultant fees  48   46 
Share-based compensation costs  10   11 
Post-employment benefits including defined contribution plan benefits of $4 in 2021 and $7 in 2020  12   8 
   289   228 
Other employees:        
Salaries and short-term employee benefits  310   316 
Post-employment benefits including defined contribution plan benefits of $7 in 2021 and $2 in 2020  38   51 
Share-based compensation costs  3   (123)
   351   244 
Cost of inventory used and services provided  29   862 
Professional fees  580   498 
Consulting fees  130   141 
Insurance  227   221 
Third-party research and development  52   97 
Travel  22   33 
Marketing services  97   36 
Laboratory supplies  15    
Other goods and services  19   30 
Leasing costs  34   46 
Gain on modification of building lease     (185)
Depreciation and amortization  36   107 
Operating foreign exchange losses  21   10 
   1,902   2,368 

 

(16)
 

 

 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS AT MARCH 31, 2021 AND FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(amounts in thousands of US dollars, except share/option/warrant and per share/option/warrant data and as otherwise noted) (Unaudited)

 

12. Supplemental disclosure of cash flow information

 

  Three months ended 
  March 31, 
  2021  2020 
  $  $ 
Changes in operating assets and liabilities:        
Trade and other receivables  650   (7)
Inventory  (40)  836 
Prepaid expenses and other current assets  (93)  378 
Payables and accrued liabilities  115   (492)
Taxes payable  (129)   
Deferred revenues  1,227   (406)
Employee future benefits  (83)  (105)
   1,647   204 

 

13. Segment information

 

The Company operates in a single operating segment, being the biopharmaceutical segment.

 

14. Net (loss) income per share

 

The following table sets forth pertinent data relating to the computation of basic and diluted net (loss) income per share attributable to common shareholders.

 

  Three months ended 
  March 31, 
  2021  2020 
  $  $ 
Net (loss) income  (1,445)  779 
Basic weighted average number of shares outstanding  95,444,990   21,523,416 
Net (loss) income per share (basic)  (0.02)  0.04 
         
Dilutive effect of stock options and DSUs     337,000 
Dilutive effect of warrants      
Diluted weighted average number of shares outstanding  95,444,990   21,860,416 
Net loss per share (diluted)  (0.02)  0.04 
         
Items excluded from the calculation of diluted net loss per share because the exercise price was greater than the average market price of the common shares or due to their anti-dilutive effect        
Stock options and DSUs  679,400   208,357 
Warrants  11,663,435   9,453,174 

 

Net (loss) income per share is calculated by dividing net (loss) income by the weighted average number of shares outstanding during the relevant period. Diluted weighted average number of shares reflects the dilutive effect of equity instruments, such as any “in the money” stock options and warrants. In periods with reported net losses, all stock options and warrants are deemed anti-dilutive such that basic net loss per share and diluted net loss per share are equal, and thus “in the money” stock options and warrants have not been included in the computation of net loss per share because to do so would be anti-dilutive.

 

(17)
 

 

 

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS AT MARCH 31, 2021 AND FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(amounts in thousands of US dollars, except share/option/warrant and per share/option/warrant data and as otherwise noted) (Unaudited)

 

15. Commitments and Contingencies

 

  Service and
manufacturing
  

R&D

contracts

  

 

TOTAL

 
  $  $  $ 
Less than 1 year  440   1,073   1,513 
1 - 3 years  11   1,297   1,308 
4 - 5 years     36   36 
More than 5 years         
Total  451   2,406   2,857 

 

During the first quarter of 2021, the Company executed various agreements including in-licensing and similar arrangements with development partners with $490 in additions of separately acquired intangible assets recognized in the condensed interim consolidated statements of financial position. Such agreements may require the Company to make payments on achievement of stages of development, launch or revenue milestones, although the Company generally has the right to terminate these agreements at no penalty. The Company recognizes research and development milestones as an intangible asset once it is committed to the payment, which is generally when the Company reaches a set point in the development cycle.

 

Based on the closing exchange rates, the Company expects to pay $2,406, including $2,116 [EUR 1,801], and $290 [GBP 210], in R&D contracts and up to $4,726, including $3,141 [EUR 2,675] and $1,585 [GBP 1,150], in R&D milestone payments and up to $7,656, including $5,933 [EUR 5,050] and $1,723 [GBP 1,250], in revenue related milestone payments. The table below contains all potential R&D and revenue-related milestone payments that the Company may be required to make under such agreements:

 

  Future potential
R&D milestone
payments
  

Future potential
revenue milestone

payments

  

 

TOTAL

 
  $  $  $ 
Less than 1 year  29      29 
1 - 3 years         
4 - 5 years  431      431 
More than 5 years  4,266   7,656   11,922 
Total  4,726   7,656   12,382 

 

The table excludes any payments already capitalized in the condensed interim consolidated statements of financial position. The future payments that are disclosed represent contract payments and are not discounted and are not risk-adjusted. The development of any pharmaceutical product candidates is a complex and risky process that may fail at any stage in the development process due to a number of factors. The timing of the payments is based on the Company’s current best estimate of achievement of the relevant milestone.

 

Contingencies

 

In the normal course of operations, the Company may become involved in various claims and legal proceedings related to, for example, contract terminations and employee-related and other matters.

 

On March 9, 2020, the Company settled the previously disclosed class-action lawsuit against it pending in the U.S. District Court for the District of New Jersey. This settlement remains subject to execution of final settlement documents and approval by the U.S. District Court for the District of New Jersey.

 

(18)