Exhibit 99.2
KAMADA LTD.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2019
(Unaudited)
TABLE OF CONTENTS
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KAMADA LTD.
As of September 30, | As of December 31, | |||||||||||
2019 | 2018 | 2018 | ||||||||||
Unaudited | Audited | |||||||||||
U.S Dollars in thousands | ||||||||||||
Current Assets | ||||||||||||
Cash and cash equivalents | $ | 27,449 | $ | 12,871 | $ | 18,093 | ||||||
Short-term investments | 39,380 | 32,051 | 32,499 | |||||||||
Trade receivables, net | 23,999 | 14,826 | 27,674 | |||||||||
Other accounts receivables | 1,722 | 1,858 | 3,308 | |||||||||
Inventories | 34,031 | 28,934 | 29,316 | |||||||||
Total Current Assets | 126,581 | 90,540 | 110,890 | |||||||||
Property, plant and equipment, net | 28,297 | 24,406 | 25,004 | |||||||||
Other long term assets | 178 | 176 | 174 | |||||||||
Deferred taxes | 1,445 | - | 2,048 | |||||||||
Total Non-Current Assets | 29,920 | 24,581 | 27,226 | |||||||||
Total Assets | $ | 156,501 | $ | 115,121 | $ | 138,116 | ||||||
Current Liabilities | ||||||||||||
Current maturities of bank loans and leases | $ | 1,537 | $ | 585 | $ | 562 | ||||||
Trade payables | 13,079 | 11,512 | 17,285 | |||||||||
Other accounts payables | 5,439 | 4,662 | 5,261 | |||||||||
Deferred revenues | 561 | 1,854 | 461 | |||||||||
Total Current Liabilities | 20,616 | 18,613 | 23,569 | |||||||||
Non-Current Liabilities | ||||||||||||
Bank loans and leases | 4,513 | 880 | 716 | |||||||||
Deferred revenues | 347 | 677 | 668 | |||||||||
Employee benefit liabilities, net | 884 | 1,035 | 787 | |||||||||
Total Non-Current Liabilities | 5,744 | 2,592 | 2,171 | |||||||||
Shareholder's Equity | ||||||||||||
Ordinary shares | 10,420 | 10,406 | 10,409 | |||||||||
Additional paid in capital | 179,589 | 178,873 | 179,147 | |||||||||
Capital reserve due to translation to presentation currency | (3,490 | ) | (3,490 | ) | (3,490 | ) | ||||||
Capital reserve from hedges | 18 | (8 | ) | (57 | ) | |||||||
Capital reserve from securities measured at fair value through other comprehensive income | 137 | (5 | ) | 34 | ||||||||
Capital reserve from share-based payments | 9,898 | 9,246 | 9,353 | |||||||||
Capital reserve from employee benefits | 4 | (337 | ) | 4 | ||||||||
Accumulated deficit | (66,435 | ) | (100,769 | ) | (83,024 | ) | ||||||
Total Shareholder’s Equity | 130,141 | 93,916 | 112,376 | |||||||||
Total Liabilities and Shareholder’s Equity | $ | 156,501 | $ | 115,121 | $ | 138,116 |
The accompanying Notes are an integral part of the Consolidated Financial Statements.
2
Nine months period ended | Three months period ended | Year ended | ||||||||||||||||||
September 30, | September 30, | December 31, | ||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2018 | ||||||||||||||||
Unaudited | Unaudited | Audited | ||||||||||||||||||
U.S Dollars In thousands | ||||||||||||||||||||
Revenues from proprietary products | $ | 72,521 | $ | 47,646 | $ | 24,859 | 9,454 | $ | 90,784 | |||||||||||
Revenues from distribution | 22,595 | 18,612 | 8,207 | 5,521 | 23,685 | |||||||||||||||
Total revenues | 95,116 | 66,258 | 33,066 | 14,975 | 114,469 | |||||||||||||||
Cost of revenues from proprietary products | 38,412 | 30,506 | 13,234 | 7,869 | 52,796 | |||||||||||||||
Cost of revenues from distribution | 19,056 | 15,536 | 6,968 | 4,587 | 20,201 | |||||||||||||||
Total cost of revenues | 57,468 | 46,042 | 20,202 | 12,456 | 72,997 | |||||||||||||||
Gross profit | 37,648 | 20,216 | 12,864 | 2,519 | 41,472 | |||||||||||||||
Research and development expenses | 9,730 | 7,174 | 3,477 | 2,323 | 9,747 | |||||||||||||||
Selling and marketing expenses | 3,441 | 2,724 | 1,161 | 818 | 3,630 | |||||||||||||||
General and administrative expenses | 6,851 | 6,132 | 2,230 | 1,902 | 8,525 | |||||||||||||||
Other expenses and (incomes) | 327 | 311 | 299 | - | 311 | |||||||||||||||
Operating income ( loss) | 17,299 | 3,875 | 5,697 | (2,524 | ) | 19,259 | ||||||||||||||
Financial income | 887 | 628 | 328 | 214 | 830 | |||||||||||||||
Financial expenses | (217 | ) | (145 | ) | (68 | ) | (39 | ) | (172 | ) | ||||||||||
Change in fair value of debt securities | (3 | ) | (152 | ) | 55 | (45 | ) | (178 | ) | |||||||||||
Income (expense) in respect of currency exchange differences and derivatives instruments, net | (503 | ) | 334 | 25 | 3 | 602 | ||||||||||||||
Income ( loss) before taxes | 17,463 | 4,540 | 6,037 | (2,391 | ) | 20,341 | ||||||||||||||
Taxes on income | 574 | (11 | ) | 214 | - | (1,955 | ) | |||||||||||||
Net Income ( loss) | 16,889 | 4,551 | 5,823 | (2,391 | ) | 22,296 | ||||||||||||||
Other Comprehensive Income (loss) : | ||||||||||||||||||||
Items that may be reclassified to profit or loss in subsequent periods: | ||||||||||||||||||||
Gain (loss) from securities measured at fair value through other comprehensive income | 132 | (1 | ) | (66 | ) | 28 | 51 | |||||||||||||
Gain (loss) on cash flow hedges | 99 | (88 | ) | 28 | 56 | (176 | ) | |||||||||||||
Net amounts transferred to the statement of profit or loss for cash flow hedges | (20 | ) | 34 | (18 | ) | 27 | 70 | |||||||||||||
Items that will not be reclassified to profit or loss in subsequent periods: | ||||||||||||||||||||
Actuarial gain (loss) from defined benefit plans | - | - | - | - | 340 | |||||||||||||||
Deferred taxes | (33 | ) | - | 16 | - | (9 | ) | |||||||||||||
Total comprehensive income (loss) | $ | 17,067 | $ | 4,496 | $ | 5,783 | $ | (2,280 | ) | $ | 22,572 | |||||||||
Income (loss) per share attributable to equity holders of the Company: | ||||||||||||||||||||
Basic income (loss) per share | $ | 0.42 | $ | 0.11 | $ | 0.14 | $ | (0.06 | ) | $ | 0.55 | |||||||||
Diluted income (loss) per share | $ | 0.42 | $ | 0.11 | $ | 0.14 | $ | (0.06 | ) | $ | 0.55 |
The accompanying Notes are an integral part of the Consolidated Financial Statements.
3
KAMADA LTD.
Additional | Capital reserve from securities measured at fair value through other | Capital reserve due to translation | Capital reserve | Capital reserve from | Capital reserve from | |||||||||||||||||||||||||||||||
Share | paid in | comprehensive | to presentation | from | sharebased | employee | Accumulated | Total | ||||||||||||||||||||||||||||
capital | capital | income | currency | hedges | payments | benefits | deficit | equity | ||||||||||||||||||||||||||||
Unaudited | ||||||||||||||||||||||||||||||||||||
U.S Dollars in thousands | ||||||||||||||||||||||||||||||||||||
Balance as of January 1, 2019 (audited) | $ | 10,409 | $ | 179,147 | $ | 34 | $ | (3,490 | ) | $ | (57 | ) | $ | 9,353 | $ | 4 | $ | (83,024 | ) | $ | 112,376 | |||||||||||||||
Cumulative effect of initially applying IFRS 16 | - | - | - | - | - | - | - | (300 | ) | (300 | ) | |||||||||||||||||||||||||
Balance as at January 1, 2019 (after initially applying IFRS 16) | 10,409 | 179,147 | 34 | (3,490 | ) | (57 | ) | 9,353 | 4 | (83,324 | ) | 112,076 | ||||||||||||||||||||||||
Net income | - | - | - | - | - | - | - | 16,889 | 16,889 | |||||||||||||||||||||||||||
Other comprehensive income | - | - | 132 | - | 79 | - | - | - | 211 | |||||||||||||||||||||||||||
Deferred taxes | - | - | (29 | ) | - | (4 | ) | - | - | - | (33 | ) | ||||||||||||||||||||||||
Total comprehensive income | - | - | 103 | - | 75 | - | - | 16,889 | 17,067 | |||||||||||||||||||||||||||
Exercise into shares and forfeiture of share-based payment | 11 | 442 | - | - | - | (442 | ) | - | - | 11 | ||||||||||||||||||||||||||
Cost of share-based payment | - | - | - | - | - | 987 | - | - | 987 | |||||||||||||||||||||||||||
Balance as of September 30, 2019 | $ | 10,420 | $ | 179,589 | $ | 137 | $ | (3,490 | ) | $ | 18 | $ | 9,898 | $ | 4 | $ | (66,435 | ) | $ | 130,141 |
The accompanying Notes are an integral part of the Consolidated Financial Statements.
4
KAMADA LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Capital reserve from securities measured at fair value through other comprehensive income | ||||||||||||||||||||||||||||||||||||
Capital reserve due to translation to presentation currency | Capital reserve from hedges | Capital reserve from sharebased payments | Capital reserve from employee benefits | |||||||||||||||||||||||||||||||||
Additional paid in capital | ||||||||||||||||||||||||||||||||||||
Share capital | Accumulated deficit | Total equity | ||||||||||||||||||||||||||||||||||
Unaudited | ||||||||||||||||||||||||||||||||||||
U.S Dollars in thousands | ||||||||||||||||||||||||||||||||||||
Balance as of January 1, 2018 (audited) | $ | 10,400 | $ | 177,874 | $ | (4 | ) | $ | (3,490 | ) | $ | 46 | $ | 9,566 | $ | (337 | ) | $ | (104,563 | ) | $ | 89,492 | ||||||||||||||
Cumulative effect of initially applying IFRS 15 | - | - | - | - | - | - | - | (757 | ) | (757 | ) | |||||||||||||||||||||||||
Balance as at January 1, 2018 (after initially applying IFRS 15) | 10,400 | 177,874 | (4 | ) | (3,490 | ) | 46 | 9,566 | (337 | ) | (105,320 | ) | 88,735 | |||||||||||||||||||||||
Net income | - | - | - | - | - | - | - | 4,551 | 4,551 | |||||||||||||||||||||||||||
Other comprehensive loss | - | - | (1 | ) | - | (54 | ) | - | - | - | (55 | ) | ||||||||||||||||||||||||
Total comprehensive income (loss) | - | - | (1 | ) | - | (54 | ) | - | - | 4,551 | 4,496 | |||||||||||||||||||||||||
Exercise into shares and forfeiture of share-based payment | 6 | 999 | - | - | - | (999 | ) | - | - | 6 | ||||||||||||||||||||||||||
Cost of share-based payment | - | - | - | - | - | 679 | - | - | 679 | |||||||||||||||||||||||||||
Balance as of September 30, 2018 | $ | 10,406 | $ | 178,873 | $ | (5 | ) | $ | (3,490 | ) | $ | (8 | ) | $ | 9,246 | $ | (337 | ) | $ | (100,769 | ) | $ | 93,916 |
The accompanying Notes are an integral part of the Consolidated Financial Statements.
5
KAMADA LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Share capital | Capital reserve from securities measured at fair value through other comprehensive income | |||||||||||||||||||||||||||||||||||
Capital reserve due to translation to presentation currency | Capital reserve from hedges | Capital reserve from sharebased payments | Capital reserve from employee benefits | Accumulated deficit | ||||||||||||||||||||||||||||||||
Additional paid in capital | Total equity | |||||||||||||||||||||||||||||||||||
Unaudited | ||||||||||||||||||||||||||||||||||||
U.S Dollars In thousands | ||||||||||||||||||||||||||||||||||||
Balance as of July 1, 2019 | $ | 10,418 | $ | 179,471 | $ | 187 | $ | (3,490 | ) | $ | 8 | $ | 9,663 | $ | 4 | $ | (72,258 | ) | $ | 124,003 | ||||||||||||||||
Net income | - | - | - | - | - | - | - | 5,823 | 5,823 | |||||||||||||||||||||||||||
Other comprehensive income | - | - | (66 | ) | - | 10 | - | - | - | (56 | ) | |||||||||||||||||||||||||
Deferred taxes | - | - | 16 | - | - | - | - | - | 16 | |||||||||||||||||||||||||||
Total comprehensive income (loss) | - | - | (50 | ) | - | 10 | - | - | 5,823 | 5,783 | ||||||||||||||||||||||||||
Exercise into shares and forfeiture of share-based payment | 2 | 118 | - | - | - | (118 | ) | - | - | 2 | ||||||||||||||||||||||||||
Cost of share-based payment | - | - | - | - | - | 353 | - | - | 353 | |||||||||||||||||||||||||||
Balance as of September 30, 2019 | $ | 10,420 | $ | 179,589 | $ | 137 | $ | (3,490 | ) | $ | 18 | $ | 9,898 | $ | 4 | $ | (66,435 | ) | $ | 130,141 |
Capital reserve from securities measured at fair value through other comprehensive income | ||||||||||||||||||||||||||||||||||||
Capital reserve from sharebased payments | ||||||||||||||||||||||||||||||||||||
Capital reserve due to translation to presentation currency | Capital reserve from hedges | Capital reserve from employee benefits | ||||||||||||||||||||||||||||||||||
Additional paid in capital | Accumulated deficit | |||||||||||||||||||||||||||||||||||
Share capital | ||||||||||||||||||||||||||||||||||||
Total equity | ||||||||||||||||||||||||||||||||||||
Unaudited | ||||||||||||||||||||||||||||||||||||
U.S Dollars In thousands | ||||||||||||||||||||||||||||||||||||
Balance as of July 1, 2018 | $ | 10,403 | $ | 178,745 | $ | (33 | ) | $ | (3,490 | ) | $ | (91 | ) | $ | 9,080 | $ | (337 | ) | $ | (98,378 | ) | $ | 95,899 | |||||||||||||
Net income | - | - | - | - | - | - | - | (2,391 | ) | (2,391 | ) | |||||||||||||||||||||||||
Other comprehensive income | - | - | 28 | - | 83 | - | - | - | 111 | |||||||||||||||||||||||||||
Total comprehensive income (loss) | - | - | 28 | - | 83 | - | - | (2,391 | ) | (2,280 | ) | |||||||||||||||||||||||||
Exercise into shares and forfeiture of share-based payment | 3 | 128 | - | - | - | (128 | ) | - | - | 3 | ||||||||||||||||||||||||||
Cost of share-based payment | - | - | - | - | - | 294 | - | - | 294 | |||||||||||||||||||||||||||
Balance as of September 30, 2018 | $ | 10,406 | $ | 178,873 | $ | (5 | ) | $ | (3,490 | ) | $ | (8 | ) | $ | 9,246 | $ | (337 | ) | $ | (100,769 | ) | $ | 93,916 |
The accompanying Notes are an integral part of the Consolidated Financial Statements.
6
KAMADA LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Additional paid in capital | Capital reserve from securities measured at fair value through other comprehensive income | Capital reserve due to translation to presentation currency | Capital reserve from hedges | Capital reserve from sharebased payments | Capital reserve from employee benefits | |||||||||||||||||||||||||||||||
Share capital | Accumulated deficit | Total equity | ||||||||||||||||||||||||||||||||||
Audited | ||||||||||||||||||||||||||||||||||||
U.S Dollars in thousands | ||||||||||||||||||||||||||||||||||||
Balance as of January 1, 2018 | $ | 10,400 | $ | 177,874 | $ | (4 | ) | $ | (3,490 | ) | $ | 46 | $ | 9,566 | $ | (337 | ) | $ | (104,563 | ) | $ | 89,492 | ||||||||||||||
Cumulative effect of initially applying IFRS 15 | - | - | - | - | - | - | - | (757 | ) | (757 | ) | |||||||||||||||||||||||||
Balance as at January 1, 2018 (after initially applying IFRS 15) | 10,400 | 177,874 | (4 | ) | (3,490 | ) | 46 | 9,566 | (337 | ) | (105,320 | ) | 88,735 | |||||||||||||||||||||||
net income | - | - | - | - | - | - | - | 22,296 | 22,296 | |||||||||||||||||||||||||||
Other comprehensive income (loss) | - | - | 38 | - | (103 | ) | - | 341 | - | 276 | ||||||||||||||||||||||||||
Total comprehensive income (loss) | - | - | 38 | - | (103 | ) | - | 341 | 22,296 | 22,572 | ||||||||||||||||||||||||||
Exercise into shares and forfeiture of share-based payment | 9 | 1,161 | - | - | - | (1,161 | ) | - | - | 9 | ||||||||||||||||||||||||||
Cost of share-based payment | - | - | - | - | - | 948 | - | - | 948 | |||||||||||||||||||||||||||
Deferred taxes | - | 112 | - | - | - | - | - | - | 112 | |||||||||||||||||||||||||||
Balance as of December 31, 2018 | $ | 10,409 | $ | 179,147 | $ | 34 | $ | (3,490 | ) | $ | (57 | ) | $ | 9,353 | $ | 4 | $ | (83,024 | ) | $ | 112,376 |
The accompanying Notes are an integral part of the Consolidated Financial Statements.
7
KAMADA LTD.
Nine months period Ended | Three months period Ended | Year Ended | ||||||||||||||||||
September, 30 | September, 30 | December 31, | ||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2018 | ||||||||||||||||
Unaudited | Audited | |||||||||||||||||||
U.S Dollars In thousands | ||||||||||||||||||||
Cash Flows from Operating Activities | ||||||||||||||||||||
Net income | $ | 16,889 | $ | 4,551 | $ | 5,823 | $ | (2,391 | ) | $ | 22,296 | |||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||||||||||||||
Adjustments to the profit or loss items: | ||||||||||||||||||||
Depreciation | 3,379 | 2,814 | 1,128 | 874 | 3,703 | |||||||||||||||
Financial income, net | (164 | ) | (665 | ) | (340 | ) | (133 | ) | (1,082 | ) | ||||||||||
Cost of share-based payment | 987 | 679 | 353 | 294 | 948 | |||||||||||||||
Taxes on income | 574 | (11 | ) | 214 | - | (1,955 | ) | |||||||||||||
Loss (gain) from sale of property and equipment | (2 | ) | 70 | - | - | 55 | ||||||||||||||
Change in employee benefit liabilities, net | 97 | (109 | ) | 66 | (18 | ) | (16 | ) | ||||||||||||
4,871 | 2,778 | 1,421 | 1,017 | 1,653 | ||||||||||||||||
Changes in asset and liability items: | ||||||||||||||||||||
Decrease in trade receivables, net | 4,408 | 15,346 | 1,806 | 9,929 | 2,311 | |||||||||||||||
Decrease (increase) in other accounts receivables | 1,204 | (179 | ) | 955 | (16 | ) | (1,336 | ) | ||||||||||||
Decrease (increase) in inventories | (4,715 | ) | (7,864 | ) | 1,470 | (1,561 | ) | (8,246 | ) | |||||||||||
Decrease in deferred expenses | 333 | 522 | 605 | 91 | 235 | |||||||||||||||
Decrease in trade payables | (4,585 | ) | (6,394 | ) | (6,512 | ) | (4,786 | ) | (1,116 | ) | ||||||||||
Increase (decrease) in other accounts payables | 379 | (1,117 | ) | 432 | (141 | ) | (658 | ) | ||||||||||||
Decrease in deferred revenues | (221 | ) | (3,860 | ) | (95 | ) | (1,286 | ) | (5,256 | ) | ||||||||||
(3,197 | ) | (3,546 | ) | (1,339 | ) | 2,230 | (14,066 | ) | ||||||||||||
Cash received (paid) during the period for: | ||||||||||||||||||||
Interest paid | (182 | ) | (42 | ) | (58 | ) | (12 | ) | (54 | ) | ||||||||||
Interest received | 554 | 451 | 254 | 204 | 739 | |||||||||||||||
Taxes paid | (25 | ) | (17 | ) | (9 | ) | (8 | ) | (22 | ) | ||||||||||
347 | 392 | 187 | 184 | 663 | ||||||||||||||||
Net cash provided by operating activities | $ | 18,910 | $ | 4,175 | $ | 6,092 | $ | 1,040 | $ | 10,546 |
The accompanying Notes are an integral part of the Consolidated Financial Statements.
8
KAMADA LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months period Ended | Three months period Ended | Year Ended | ||||||||||||||||||
September, 30 | September, 30 | December 31, | ||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2018 | ||||||||||||||||
Unaudited | Audited | |||||||||||||||||||
U.S Dollars In thousands | ||||||||||||||||||||
Cash Flows from Investing Activities | ||||||||||||||||||||
Proceeds of investment in short term investments, net | (6,160 | ) | $ | (1,747 | ) | $ | (1,032 | ) | $ | 207 | $ | (2,322 | ) | |||||||
Purchase of property and equipment and intangible assets | (1,488 | ) | (2,033 | ) | (731 | ) | (534 | ) | (2,884 | ) | ||||||||||
Proceeds from sale of property and equipment | 9 | 15 | - | - | 30 | |||||||||||||||
Net cash used in investing activities | (7,639 | ) | (3,765 | ) | (1,763 | ) | (327 | ) | (5,176 | ) | ||||||||||
Cash Flows from Financing Activities | ||||||||||||||||||||
Proceeds from exercise of share base payments | 12 | 6 | 3 | 3 | 9 | |||||||||||||||
Repayment of long-term loans and leases | (1,147 | ) | (450 | ) | (386 | ) | (149 | ) | (596 | ) | ||||||||||
Net cash used in financing activities | (1,135 | ) | (444 | ) | (383 | ) | (146 | ) | (587 | ) | ||||||||||
Exchange differences on balances of cash and cash equivalent | (780 | ) | 224 | (332 | ) | (52 | ) | 629 | ||||||||||||
Increase in cash and cash equivalents | 9,356 | 190 | 3,614 | 515 | 5,412 | |||||||||||||||
Cash and cash equivalents at the beginning of the period | 18,093 | 12,681 | 23,835 | 12,356 | 12,681 | |||||||||||||||
Cash and cash equivalents at the end of the period | 27,449 | $ | 12,871 | 27,449 | $ | 12,871 | $ | 18,093 | ||||||||||||
Significant non-cash transactions | ||||||||||||||||||||
Purchase of property and equipment through leases | $ | 4,984 | $ | - | $ | 436 | $ | - | $ | - | ||||||||||
Purchase of property and equipment | $ | 264 | $ | 215 | $ | 264 | $ | 215 | $ | 720 |
The accompanying Notes are an integral part of the Consolidated Financial Statements.
9
Note 1:- | General |
These Financial Statements have been prepared in a condensed format as of September 30, 2019 and for the three and nine months then ended ("interim consolidated financial statements").
These financial statements should be read in conjunction with the Company's annual financial statements as of December 31, 2018 and for the year then ended and the accompanying notes ("annual consolidated financial statements").
Note 2:- | Significant Accounting Policies |
a. | Basis of preparation of the interim consolidated financial statements: |
The interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for the preparation of financial statements for interim periods, as prescribed in IAS 34, "Interim Financial Reporting".
b. | Implementation of new accounting standards The accounting policy applied in the preparation of the interim consolidated financial statements is consistent with that applied in the preparation of the annual consolidated financial statements, except for the following: |
1. | IFRS 16 – Leases |
As detailed below regarding the initial adoption of IFRS 16, "Leases" ("the Standard"), the Company chose to apply the provisions of the Standard using the modified retrospective approach (without restatement of comparative data). The accounting policy for leases applied before December 31, 2018, is as follows: The criteria for classifying leases as finance or operating leases depend on the substance of the agreements and are made at the inception of the lease in accordance with the following principles as set out in IAS 17. Operating leases: Leases in which substantially all the risks and rewards of ownership of the leased asset are not transferred to the Company are classified as operating leases. Lease payments are recognized as an expense in profit or loss on a straight-line basis over the lease term. The accounting policy for leases applied effective from January 1, 2019, is as follows: The Company accounts for a contract as a lease when the contract terms convey the right to control the use of an identified asset for a period of time in exchange for consideration. |
10
KAMADA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2:- | Significant Accounting Policies (Cont.) |
The Company as a lessee:
For leases in which the Company is the lessee, the Company recognizes on the commencement date of the lease a right-of-use asset and a lease liability, excluding leases whose term is up to 12 months and leases for which the underlying asset is of low value. For these excluded leases, the Company has elected to recognize the lease payments as an expense in profit or loss on a straight-line basis over the lease term. In measuring the lease liability, the Company has elected to apply the practical expedient in the Standard and does not separate the lease components from the non-lease components (such as management and maintenance services, etc.) included in a single contract.
On the commencement date, the lease liability includes all unpaid lease payments discounted at the interest rate implicit in the lease, if that rate can be readily determined, or otherwise using the Company's incremental borrowing rate. After the commencement date, the Company measures the lease liability using the effective interest rate method.
On the commencement date, the right-of-use asset is recognized in an amount equal to the lease liability plus lease payments already made on or before the commencement date and initial direct costs incurred less any lease incentives received. The right-of-use asset is measured applying the cost model and depreciated over the shorter of its useful life or the lease term. The Company tests for impairment of the right-of-use asset whenever there are indications of impairment pursuant to the provisions of IAS 36.
Lease extension and termination options:
A non-cancellable lease term includes both the periods covered by an option to extend the lease when it is reasonably certain that the extension option will be exercised and the periods covered by a lease termination option when it is reasonably certain that the termination option will not be exercised.
In the event of any change in the expected exercise of the lease extension option or in the expected non-exercise of the lease termination option, the Company remeasures the lease liability based on the revised lease term using a revised discount rate as of the date of the change in expectations. The total change is recognized in the carrying amount of the right-of-use asset until it is reduced to zero, and any further reductions are recognized in profit or loss.
Subleases:
In a transaction in which the Company is a lessee of an underlying asset (head lease) and the asset is subleased to a third party, the Company assesses whether the risks and rewards incidental to ownership of the right-of-use asset have been transferred to the sub-lessee, among others, by evaluating the sublease term with reference to the useful life of the right-of-use asset arising from the head lease.
When substantially all the risks and rewards incidental to ownership of the right-of-use asset have been transferred to the sub-lessee, the Company accounts for the sublease as a finance lease, otherwise it is accounted for as an operating lease.
11
KAMADA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2:- | Significant Accounting Policies (Cont.) |
The new Standard is effective for annual periods beginning on or after January 1, 2019.
Initial adoption of new financial reporting and accounting standards and amendments to existing financial reporting and accounting standards:
In January 2016, the IASB issued IFRS 16, "Leases" ("the Standard"), which supersedes IAS 17, "Leases" ("the old Standard"), IFRIC 4, "Determining Whether an Arrangement Contains a Lease", and SIC-15, "Operating Leases - Incentives". According to the Standard, a lease is a contract, or part of a contract, that conveys the right to use an asset for a period of time in exchange for consideration.
The effects of the adoption of the Standard are as follows:
According to the Standard, lessees are required to recognize all leases in the statement of financial position (excluding certain exceptions, see below). Lessees will recognize a liability for lease payments with a corresponding right-of-use asset, similar to the accounting treatment for finance leases under the old standard, IAS 17, "Leases". Lessees will also recognize interest expense and depreciation expense separately.
The Standard includes two exceptions which allow lessees to account for leases based on the existing accounting treatment for operating leases - leases for which the underlying asset is of low value and short-term leases (up to one year).
Certain right-of-use assets were measured as if the Standard has been applied from the commencement date of the lease but for the purpose of calculation, the lessee's incremental borrowing rate on the date of initial adoption was used, while the carrying amount of other right-of-use assets are identical to the carrying amount of the lease liability.
The main effect of the initial adoption of the Standard relates to existing leases in which the Company is the lessee. According to the Standard, as explained in paragraph above, excluding certain exceptions, the Company recognizes a lease liability and a corresponding right-of-use asset for each lease in which it is the lessee. This accounting treatment is different than the accounting treatment applied under the old Standard according to which the lease payments in respect of leases for which substantially all the risks and rewards incidental to ownership of the leased asset were not transferred to the lessee were recognized as an expense in profit or loss on a straight-line basis over the lease term.
The Company elected to use the exemptions proposed by the standard with respect to lease contracts for which the underlying asset is of low value. The Company has leases of certain office equipment (i.e. printing and photocopying machines) that are considered of low value.
12
KAMADA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2:- | Significant Accounting Policies (Cont.) |
The Company also applied the available practical expedients wherein it the initial adoption of the Standard: (i) The Company elected not to reassess based on the principles in the Standard whether contracts are or contain a lease, and instead continued to classify contracts as leases that were previously identified as leases under IAS 17. (ii) used a single discount rate to a portfolio of leases with reasonably similar characteristics, (iii) relied on its assesments on whether leases are onerous immediately before the date of initial application, (iv) used hindsight in determining the lease term where the contract contains options to extend or terminate the lease and (v) Applied the short-term leases exemptions to leases with lease term that ends within 12 months at the date of initial application.
Impact on the statement of financial position (increase/(decrease)) as of January 1, 2019, September 30, 2019 and on the results for the nine and three ended at September 30, 2019 is presented below:
According to the previous accounting policy | Difference | According to the current accounting policy | ||||||||||
U.S Dollars in thousands | ||||||||||||
As of January 1, 2019 | ||||||||||||
Non-current assets: | ||||||||||||
Property, plant and equipment (right-of-use assets) | $ | 25,004 | $ | 4,162 | $ | 29,166 | ||||||
Liabilities | ||||||||||||
Current maturities of bank loans and leases | 562 | 810 | 1,372 | |||||||||
Bank loans and leases | 716 | 3,907 | 4,623 | |||||||||
Other accounts paybles | 5,261 | (255 | ) | 5,006 | ||||||||
Shareholder's Equity | ||||||||||||
Accumulated deficit | $ | 112,376 | $ | (300 | ) | $ | 112,076 |
As of September 30, 2019 | ||||||||||||
Assets | ||||||||||||
Property, plant and equipment (right-of-use assets) | $ | 24,197 | $ | 4,100 | $ | 28,297 | ||||||
Liabilities | ||||||||||||
Current maturities of bank loans and leases | 573 | 964 | 1,537 | |||||||||
Bank loans and leases | $ | 461 | $ | 4,052 | $ | 4,513 |
13
KAMADA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2:- | Significant Accounting Policies (Cont.) |
The lease liabilities as at January 1, 2019 can be reconciled to the operating lease commitments as of December 31, 2018 as follows:
U.S Dollars | ||||
In thousands | ||||
Future minimum payments for non-cancellable leases as per IAS 17 according to the financial statements as of December 31, 2018 | $ | 5,434 | ||
Weighted average incremental borrowing rate as at January 1, 2019* | 3.06%-4.6 | % | ||
Discounted operating lease commitment at January 1, 2019 | 4,685 | |||
Add: | ||||
Leases of other equipment | 32 | |||
Leases that were previously identified as leases under IAS 17 | 138 | |||
Lease liabilities as at January 1, 2019 | $ | 4,855 |
*The weighted average incremental borrowing rate was evaluated based on credit risk, terms of the leases and other economic variables. The weighted average incremental borrowing rate was used to discount future lease payments in the calculation of the lease liability on the date of initial adoption of the Standard.
Amount recognized in the ststement of financial position and profit or loss
Set out below, are the carrying amounts of the Company's right-of-use assets and lease liabilities and the movements during the period:
Right-of-use-assets | ||||||||||||||||
Rented Offices | Vehicles and | Lease | ||||||||||||||
other equipment | Total | liabilities | ||||||||||||||
U.S Dollars in thousands | ||||||||||||||||
As of January 1, 2019 | $ | 3,466 | $ | 696 | $ | 4,162 | $ | 4,855 | ||||||||
Additions | - | 694 | 694 | 819 | ||||||||||||
Write-off | - | (56 | ) | (56 | ) | (59 | ) | |||||||||
Depreciation expense | (325 | ) | (375 | ) | (700 | ) | - | |||||||||
Interest expense | - | - | - | 365 | ||||||||||||
Payments | - | - | - | (794 | ) | |||||||||||
As of September 30, 2019 | $ | 3,141 | $ | 959 | $ | 4,100 | $ | 5,186 |
Right-of-use-assets | ||||||||||||||||
Rented Offices | Vehicles and | Lease | ||||||||||||||
other equipment | Total | liabilities | ||||||||||||||
U.S Dollars in thousands | ||||||||||||||||
As of July 1, 2019 | $ | 3,249 | $ | 697 | $ | 3,946 | $ | 4,946 | ||||||||
Additions | - | 436 | 436 | 432 | ||||||||||||
Write-off | - | (44 | ) | (44 | ) | (43 | ) | |||||||||
Depreciation expense | (108 | ) | (130 | ) | (238 | ) | - | |||||||||
Interest expense | - | - | - | 116 | ||||||||||||
Payments | - | - | - | (266 | ) | |||||||||||
As of September 30, 2019 | $ | 3,141 | $ | 959 | $ | 4,100 | $ | 5,186 |
14
KAMADA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2:- Significant Accounting Policies (Cont.)
Expense decrease (increase) | Expense decrease (increase) | |||||||
For the nine months ended on September 30, 2019 | For the three months ended on September 30, 2019 | |||||||
U.S Dollars in thousands | U.S Dollars in thousands | |||||||
Operating lease expense | $ | 853 | $ | 294 | ||||
Depreciation of right of use assets | (700 | ) | (238 | ) | ||||
Operating income | 153 | 56 | ||||||
Finance expense | (152 | ) | (50 | ) | ||||
Net Income (loss) | $ | 1 | $ | 6 |
According to the previous accounting policy | Difference | According to the current accounting policy | ||||||||||
U.S Dollars in thousands | ||||||||||||
For the nine months ended on September 30, 2019 | ||||||||||||
Cash flows from operating activities | $ | 18,222 | $ | 689 | $ | 18,910 | ||||||
Cash flows from financing activities | $ | (446 | ) | $ | (689 | ) | $ | (1,135 | ) |
According to the previous accounting policy | Difference | According to the current accounting policy | ||||||||||
U.S Dollars in thousands | ||||||||||||
For the three months ended on September 30, 2019 | ||||||||||||
Cash flows from operating activities | $ | 5,859 | $ | 233 | $ | 6,092 | ||||||
Cash flows from financing activities | $ | (150 | ) | $ | (233 | ) | $ | (383 | ) |
2. IFRIC 23, "Uncertainty over Income Tax Treatments":
In June 2017, the IASB issued IFRIC 23, "Uncertainty over Income Tax Treatments" ("the Interpretation"). The Interpretation clarifies the accounting for recognition and measurement of assets or liabilities in accordance with the provisions of IAS 12, "Income Taxes", in situations of uncertainty involving income taxes. The Interpretation provides guidance on considering whether some tax treatments should be considered collectively, examination by the tax authorities, measurement of the effects of uncertainty involving income taxes on the financial statements and accounting for changes in facts and circumstances in respect of the uncertainty.
The Interpretation has been initially applied in these financial statements.
15
KAMADA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2:- | Significant Accounting Policies (Cont.) |
The initial adoption of the Interpretation did not have a material effect on the Company's financial statements.
Note 3:- | Operating Segments |
a. | General: The company has two operating segments, as follows: |
Proprietary Products | - | Medicine development, manufacture and sale of plasma-derived therapeutics products. |
Distribution | - | Distribution of drugs in Israel manufacture by third parties, majority of which are produced from plasma or its derivatives products. |
b. | Reporting on operating segments: |
Proprietary Products | Distribution | Total | ||||||||||
U.S Dollars in thousands | ||||||||||||
Unaudited | ||||||||||||
Nine months period ended September 30, 2019 | ||||||||||||
Revenues | $ | 72,521 | $ | 22,595 | $ | 95,116 | ||||||
Gross profit | $ | 34,109 | $ | 3,539 | $ | 37,648 | ||||||
Unallocated corporate expenses | (20,349 | ) | ||||||||||
Finance income, net | 164 | |||||||||||
Income before taxes on income | $ | 17,463 |
Proprietary Products | Distribution | Total | ||||||||||
U.S Dollars in thousands | ||||||||||||
Unaudited | ||||||||||||
Nine months period ended September 30, 2018 | ||||||||||||
Revenues | $ | 47,646 | $ | 18,612 | $ | 66,258 | ||||||
Gross profit | $ | 17,140 | $ | 3,076 | $ | 20,216 | ||||||
Unallocated corporate expenses | (16,341 | ) | ||||||||||
Finance income, net | 665 | |||||||||||
Income before taxes on income | $ | 4,540 |
16
KAMADA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3:- Operating Segments (cont.)
b. | Reporting on operating segments: (cont.) |
Proprietary Products | Distribution | Total | ||||||||||
U.S Dollars in thousands | ||||||||||||
Unaudited | ||||||||||||
Three months period ended September 30, 2019 | ||||||||||||
Revenues | $ | 24,859 | $ | 8,207 | $ | 33,066 | ||||||
Gross profit | $ | 11,624 | $ | 1,240 | $ | 12,864 | ||||||
Unallocated corporate expenses | (7,167 | ) | ||||||||||
Finance income, net | 340 | |||||||||||
Income before taxes on income | $ | 6,037 |
Proprietary Products | Distribution | Total | ||||||||||
U.S Dollars in thousands | ||||||||||||
Unaudited | ||||||||||||
Three months period ended September 30, 2018 | ||||||||||||
Revenues | $ | 9,453 | $ | 5,522 | $ | 14,975 | ||||||
Gross profit | $ | 1,584 | $ | 935 | $ | 2,519 | ||||||
Unallocated corporate expenses | (5,043 | ) | ||||||||||
Finance income, net | 133 | |||||||||||
Income(Loss) before taxes on income | $ | (2,391 | ) |
Proprietary Products | Distribution | Total | ||||||||||
U.S Dollars in thousands | ||||||||||||
Unaudited | ||||||||||||
Year Ended December 31, 2018 | ||||||||||||
Revenues | $ | 90,784 | $ | 23,685 | $ | 114,469 | ||||||
Gross profit | $ | 37,988 | $ | 3,484 | $ | 41,472 | ||||||
Unallocated corporate expenses | (22,213 | ) | ||||||||||
Finance income, net | 1,082 | |||||||||||
Income before taxes on income | $ | 20,341 |
17
KAMADA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3:- Operating Segments (cont.)
c. Reporting on operating segments by geographic region: (cont.)
Proprietary Products | Distribution | Total | ||||||||||
U.S Dollars in thousands | ||||||||||||
Nine months period ended September 30, 2019 | Unaudited | |||||||||||
Geographical markets | ||||||||||||
U.S.A. | $ | 63,081 | $ | - | $ | 63,081 | ||||||
Israel | 1,969 | 22,595 | 24,564 | |||||||||
Europe | 3,120 | - | 3,120 | |||||||||
Latin America | 2,820 | - | 2,820 | |||||||||
Asia & others | 1,531 | - | 1,531 | |||||||||
$ | 72,521 | $ | 22,595 | $ | 95,116 |
Proprietary Products | Distribution | Total | ||||||||||
U.S Dollars in thousands | ||||||||||||
Nine months period ended September 30, 2018 | Unaudited | |||||||||||
Geographical markets | ||||||||||||
U.S.A. | $ | 37,128 | $ | - | $ | 37,128 | ||||||
Israel | 3,150 | 18,612 | 21,762 | |||||||||
Europe | 2,684 | - | 2,684 | |||||||||
Latin America | 2,814 | - | 2,814 | |||||||||
Asia & others | 1,870 | - | 1,870 | |||||||||
$ | 47,646 | $ | 18,612 | $ | 66,258 |
Proprietary Products | Distribution | Total | ||||||||||
U.S Dollars in thousands | ||||||||||||
Three months period ended September 30, 2019 | Unaudited | |||||||||||
Geographical markets | ||||||||||||
U.S.A. | $ | 20,676 | $ | - | $ | 20,676 | ||||||
Israel | 696 | 8,207 | 8,903 | |||||||||
Europe | 1,746 | - | 1,746 | |||||||||
Latin America | 1,243 | - | 1,243 | |||||||||
Asia & others | 498 | - | 498 | |||||||||
$ | 24,859 | $ | 8,207 | $ | 33,066 |
Proprietary Products | Distribution | Total | ||||||||||
U.S Dollars in thousands | ||||||||||||
Three months period ended September 30, 2018 | Unaudited | |||||||||||
Geographical markets | ||||||||||||
U.S.A. | $ | 6,586 | $ | - | $ | 6,586 | ||||||
Israel | 953 | 5,522 | 6,475 | |||||||||
Europe | 400 | - | 400 | |||||||||
Latin America | 1,093 | - | 1,093 | |||||||||
Asia & others | 421 | - | 421 | |||||||||
$ | 9,453 | $ | 5,522 | $ | 14,975 |
18
KAMADA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3:- Operating Segments (cont.)
c. Reporting on operating segments by geographic region: (cont.)
Proprietary Products | Distribution | Total | ||||||||||
U.S Dollars in thousands | ||||||||||||
Year ended December 31, 2018 | Audited | |||||||||||
Geographical markets | ||||||||||||
U.S.A. | $ | 75,331 | $ | - | $ | 75,331 | ||||||
Israel | 4,408 | 23,685 | 28,093 | |||||||||
Europe | 3,594 | - | 3,594 | |||||||||
Latin America | 3,994 | - | 3,994 | |||||||||
Asia & others | 3,457 | - | 3,457 | |||||||||
$ | 90,784 | $ | 23,685 | $ | 114,469 |
Note 4:- | Financial Instruments |
a. Classification of financial instruments by fair value hierarchy
Financial assets (liabilities) measured at fair value
Level 1 | Level 2 | |||||||
U.S Dollars in thousands | ||||||||
September 30, 2019 | ||||||||
Fair value through other comprehensive income : | ||||||||
Debt securities (corporate and government) | $ | 2,760 | $ | 8,931 | ||||
Derivatives instruments | - | (140 | ) | |||||
$ | 2,760 | $ | 8,791 | |||||
September 30, 2018 | ||||||||
Fair value through other comprehensive income : | ||||||||
Debt securities (corporate and government) | $ | 1,667 | $ | 8,137 | ||||
Derivatives instruments | - | 72 | ||||||
$ | 1,667 | $ | 8,209 | |||||
December 31, 2018 | ||||||||
Fair value through other comprehensive income: | ||||||||
Debt securities (corporate and government) | $ | 1,588 | $ | 8,736 | ||||
Derivatives instruments | - | (64 | ) | |||||
$ | 1,588 | $ | 8,672 |
b. During the nine months ended on September 30, 2019 there were no transfers due to the fair value measurement of any financial instrument from Level 1 to Level 2, and
furthermore, there were no transfers to or from Level 3 due to the fair value measurement of any financial instrument.
19
KAMADA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5:- | Significant Events during the period |
a. | Following Company's Board of Directors approval of November 5, 2018 the Company granted on February 1, 2019 options to purchase 15,000 Ordinary Shares of the Company at an exercise price of NIS 20.03 per share and 5,000 Restricted Shares (“RS”) (with no exercise price) to Michal Ayalon, the Company's VP Research and Devlopment and IP. The initial fair value of the options and of the RSs estimated based on the Binomial Model was $28 thousands and $26 thousands, respectively. |
b. | On June 20, 2019 the Company's Board of Directors approved the grant of the following equity instruments to the Company's employees, management and directors: |
1. | Options to purchase up to 428,800 Ordinary Shares of the Compnay at an exercise price of NIS 20.33 or NIS 21.34 per share, and 64,725 Restricted Shares (“RS”) (with no exercise price) to the Company’s management and employees. The fair value of the options and of the RSs estimation based on the Binomial Model, is $750 thousands and $355 thousands, respectively. |
2. | Options to purchase 90,000 Ordinary Shares of the Company at an exercise price of NIS 21.34 per share and 30,000 RS to Mr. Amir London, the Company’s CEO. The initial fair value of the options and of the RSs estimated based on the Binomial Model was $154 thousands and $165 thousands, respectively. |
3. | Options to purchase 212,000 Ordinary Shares of the Company at an exercise price of NIS 21.34 per shares to Board of Directors. The initiatl fair value of the options estimated based on the Binomial Model was $364 thousands. |
The grant of the equity instruments to Mr. London and the Board of Directors members are subject to the approval of the General Meeting of Shareholders of the Company that is expected to take place by the end of 2019. |
c. | During the thired qurter of 2019 Kamada entered into extension of GLASSIA® Supply and Distribution Agreement with Takeda through 2021. Based on licensing and technology transfer agreement between the companies, upon initiation of sales of GLASSIA manufactured by Takeda which is expected to take place during 2021, Takeda will pay royalties to Kamada at a rate of 12% on net sales through August 2025, and a rate of 6% thereafter until 2040, with a minimum of $5 million annually, for each of the years from 2022 to 2040. |
20