Alten
Annual Report 2018

Plain-text annual report

ANTIBE THERAPEUTICS INC. Consolidated Financial Statements March 31, 2018 and 2017 (Expressed in Canadian Dollars) INDEPENDENT AUDITORS’ REPORT To the Shareholders of Antibe Therapeutics Inc. We have audited the accompanying consolidated financial statements of Antibe Therapeutics Inc. (the “Company”), which comprise the consolidated statements of financial position as at March 31, 2018 and 2017, and the consolidated statements of loss and comprehensive loss, changes in shareholders’ equity and cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information. Management’s responsibility for the consolidated financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Antibe Therapeutics Inc. as at March 31, 2018 and 2017, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards. Emphasis of matter Without qualifying our opinion, we draw attention to Note 2(c) in the consolidated financial statements, which indicates that the Company incurred a net loss of $7,429,832 during the year ended March 31, 2018 and, as of that date, the Company had an accumulated deficit of $27,515,517. These conditions, along with other matters as set forth in Note 2(c), indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern. Toronto, Canada June 26, 2018 ANTIBE THERAPEUTICS INC. Consolidated Statements of Financial Position As at March 31, 2018 and 2017 (Expressed in Canadian Dollars) ASSETS Current Cash Restricted cash [note 8] Term deposits [note 6] Accounts receivable, net [note 4] Inventory Income taxes recoverable Prepaid expenses Due from Antibe Holdings Inc. [note 7] Total current assets Non-current Property and equipment, net Deposits Intangible assets, net [note 5] Goodwill Total non-current assets TOTAL ASSETS LIABILITIES Current Bank indebtedness [note 6] Accounts payable and accrued liabilities [note 12] Convertible debentures [notes 8 and 9] Total current liabilities Non-current liabilities Deferred revenue [note 13] Convertible debentures [notes 8 and 9] Deferred income taxes [note 20] Total non-current liabilities 2018 $ 3,725,824 - 25,000 1,106,987 3,106,316 2,504 169,600 174,398 8,310,629 94,408 22,965 2,779,707 1,283,221 4,180,301 2017 $ 1,501,959 545,000 25,000 1,045,003 2,752,996 18,862 197,027 137,557 6,223,404 75,294 18,453 3,125,325 1,283,221 4,502,293 12,490,930 10,725,697 1,291,259 1,894,874 246,117 3,432,250 1,083,540 - - 1,083,540 1,152,264 1,994,792 - 3,147,056 1,083,540 2,631,818 309,854 4,025,212 TOTAL LIABILITIES 4,515,790 7,172,268 SHAREHOLDERS’ EQUITY Share capital [note 9] Common share purchase warrants [note 9] Contributed surplus [note 9] Accumulated other comprehensive income Deficit TOTAL SHAREHOLDERS’ EQUITY 29,507,301 503,004 5,477,961 2,391 (27,515,517) 7,975,140 15,517,895 3,728,024 4,364,112 29,083 (20,085,685) 3,553,429 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 12,490,930 10,725,697 Commitments and contingencies [note 24] (Signed) Daniel Legault Daniel Legault, Director (Signed) John Wallace John Wallace, Director See accompanying notes to the consolidated financial statements 2 ANTIBE THERAPEUTICS INC. Consolidated Statements of Loss and Comprehensive Loss For the Years Ended March 31, 2018 and 2017 (Expressed in Canadian Dollars) REVENUE Product sales COST OF SALES GROSS PROFIT General and administrative [note 14] Selling and marketing [note 15] Research and development [note 16] Stock-based compensation [note 17] Amortization and depreciation [note 5] Total expenses LOSS FROM OPERATIONS Finance and related costs [note 18] Finance income LOSS BEFORE INCOME TAXES PROVISION FOR (RECOVERY OF) INCOME TAXES [note 19] Current Deferred Total recovery of income taxes NET LOSS OTHER COMPREHENSIVE INCOME (LOSS) Exchange differences on translation of foreign operations subject to future reclassification COMPREHENSIVE LOSS 2018 $ 2017 $ 8,510,149 9,054,404 5,134,909 5,120,594 3,375,240 3,933,810 2,845,484 3,381,279 2,742,476 692,996 377,139 10,039,374 3,968,705 2,964,662 700,796 1,155,753 352,614 9,142,530 (6,664,134) (5,208,720) 1,057,806 (17,347) (7,704,593) 905,742 (3,638) (6,110,824) 25,469 (300,230) (274,761) (63,564) (301,439) (365,003) (7,429,832) (5,745,821) (26,692) 6,911 (7,456,524) (5,738,910) Basic and diluted loss per share [note 10] (0.05) (0.06) Basic and diluted weighted average number of shares outstanding [note 10] 151,621,931 95,744,799 See accompanying notes to the consolidated financial statements 3 ANTIBE THERAPEUTICS INC. Consolidated Statements of Changes in Shareholders’ Equity For the Years Ended March 31, 2018 and 2017 (Expressed in Canadian Dollars) Number of common shares Share capital $ Common share purchase warrants $ Contributed surplus $ Accumulated other comprehensive income $ Deficit Total shareholders’ equity $ $ Balance, March 31, 2016 78,640,115 13,112,542 2,082,995 3,096,208 22,172 (14,339,864) 3,974,053 Shares issued 32,953,299 2,521,735 1,716,619 - Share issuance costs - (454,890) - 189,254 1,424,900 338,508 (71,590) (77,103) - - - - - - - - - 1,155,753 - - - - - - - - - - - 4,238,354 (265,636) 189,815 1,155,753 (5,745,821) (5,745,821) 6,911 - 6,911 Shares issued for exercised warrants Stock-based compensation Net loss for the year Exchange differences on translation of foreign operations Balance, March 31, 2017 Balance, March 31, 2017 Shares issued for exercised warrants Shares issued on debenture conversion Reallocation of exercised warrants Stock-based compensation Forfeiture of stock options Net loss for the year Exchange differences on translation of foreign operations Balance, March 31, 2018 Shares issued 49,828,999 3,066,824 1,916,076 - Share issuance costs - (678,805) (421,804) 309,030 113,018,314 15,517,895 3,728,024 4,364,112 29,083 (20,085,685) 3,553,429 113,018,314 15,517,895 3,728,024 4,364,112 29,083 (20,085,685) 3,553,429 21,699,781 8,520,802 (4,607,468) 14,002,659 3,080,585 - - - - - - - - - (111,824) 111,824 - - - - - 762,453 - (69,458) - - - - - - - - - - - - - 4,982,900 - (791,579) - - - 3,913,334 3,080,585 - - 762,453 - (69,458) (7,429,832) (7,429,832) (26,692) - (26,692) 198,549,753 29,507,301 503,004 5,477,961 2,391 (27,515,517) 7,975,140 See accompanying notes to the consolidated financial statements 4 ANTIBE THERAPEUTICS INC. Consolidated Statements of Cash Flows For the Years Ended March 31, 2018 and 2017 (Expressed in Canadian Dollars) CASH FLOWS FROM OPERATING ACTIVITIES Net loss Items not affecting cash: Deferred income taxes Stock-based compensation [note 17] Accretion interest [notes 8 and 18] Amortization of transaction costs [note 8] Depreciation of property and equipment Amortization of intangible assets [note 5] Amortization of deferred finance charges Interest paid-in-kind [note 8] Shares and warrants paid-in-kind Changes in non-cash working capital: Accounts receivable [note 4] Inventory Prepaid expenses Income taxes recoverable Deposits Accounts payable and accrued liabilities 2018 $ 2017 $ (7,429,832) (5,745,821) (309,854) 692,996 611,471 83,413 31,521 345,618 - - - (5,974,667) (61,984) (353,320) 27,427 16,358 (4,512) (99,918) (475,949) (298,242) 1,155,753 305,138 59,876 18,699 333,915 7,471 239,509 58,860 (3,864,842) 202,418 (379,309) (18,862) (11,970) - 632,774 425,051 Cash flows used in operating activities (6,450,616) (3,439,791) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of customer lists Purchase of license Purchase of equipment Cash flows used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Advances from (to) Antibe Holdings Inc. [notes 7 and 24] Repayment of long-term liabilities Increase in deferred revenue Net increase (decrease) in bank indebtedness [note 6] Net change to restricted cash and term deposits [note 8] Issuances: Gross proceeds from shares and warrant issuance [note 9] Proceeds from warrants [note 9] Issuance costs [note 9] Deferred expenses Cash flows provided by financing activities Net increase in cash during the year Exchange gain (loss) on translation of foreign subsidiary Cash, beginning of the year Cash, end of the year - - (50,636) (50,636) (36,841) - - 138,995 545,000 4,982,900 3,913,334 (791,579) - 8,751,809 2,250,557 (26,692) 1,501,959 3,725,824 (177,080) (66,810) (13,543) (257,433) 110,733 (106,040) 1,083,540 (392,373) - 4,179,495 189,815 (265,636) 6,673 4,806,207 1,108,983 6,911 386,065 1,501,959 See accompanying notes to the consolidated financial statements 5 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 1. DESCRIPTION OF BUSINESS Antibe Therapeutics Inc. (the “Company” or “Antibe”) was incorporated under the Business Corporations Act (Ontario) on May 5, 2009. The Company was originally established under the legal name 2205405 Ontario Inc. On December 16, 2009, the Company changed its name to Antibe Therapeutics Inc. On June 18, 2013, the Company completed its initial public offering and was listed on the TSX Venture Exchange. On September 15, 2014, the Company began trading in the United States on the OTCQX Exchange. On October 1, 2017, the Company changed trading platforms to the OTCQB Exchange. The Company originates, develops and out-licenses patent-protected new pharmaceuticals. Antibe’s lead compound, ATB-346, combines hydrogen sulfide with naproxen, an approved, marketed and off-patent non- steroidal anti-inflammatory drug (“NSAID”). The Company’s main objective is to develop ATB-346 to the end of Phase II by satisfying the requirements of the relevant drug regulatory authorities while also satisfying the commercial licensing objectives of prospective global partners. The Company has also established a development plan for its lead compound through to the end of Phase III human clinical studies for regulatory discussion purposes. Additionally, the Company continues to investigate other research projects as well as additional development opportunities that it has access to while not losing sight of its main objective. The Company is also, through its wholly owned subsidiary, Citagenix Inc. (“Citagenix”), a seller of tissue regenerative products servicing the orthopaedic and dental marketplaces. Citagenix has grown a comprehensive portfolio of branded biologics and medical devices that promote bone regeneration. Citagenix operates in Canada through its direct sales force and in the US, Germany and internationally via a network of distributors. The address of the Company's registered head office and principal place of business is 15 Prince Arthur Avenue, Toronto, Ontario, Canada, M5R 1B2. Approximately 7.6 % of the Company’s common shares are held by Antibe Holdings Inc. (“AHI”) as at March 31, 2018. These consolidated financial statements were authorized for issuance by the Board of Directors on June 26, 2018. 2. BASIS OF PRESENTATION (a) Statement of compliance - These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). These consolidated financial statements have been prepared using the accounting policies in note 3. (b) Consolidation - These consolidated financial statements include the accounts of the Company and its subsidiaries, as follows: Antibe Terapiya Rus LLP (“Tera”) Citagenix BMT Medizintechnik GmbH (“BMT”) Percentage ownership 100% 100% 100% Citagenix, the parent company of BMT, was acquired on October 15, 2015. Citagenix was incorporated under the Business Corporations Act (Quebec) on December 8, 1997 and operates in Canada. BMT was incorporated and operates in Germany. All intercompany balances and transactions have been eliminated on consolidation. 6 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 2. BASIS OF PRESENTATION (continued) (c) Going concern - The consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As at March 31, 2018, the Company had working capital of $4,878,379 (March 31, 2017 - $3,076,348), incurred a net loss for the year then ended of $7,429,832 (2017 - $5,745,821), and had negative cash flows from operations of $6,450,616 (2017 - $3,439,791). All of the factors above may cast significant doubt about the Company’s ability to continue as a going concern. Management’s plans to address these issues involve actively seeking capital investment and generating revenue and profit from the commercialization of its products. The Company’s ability to continue as a going concern is subject to management’s ability to successfully implement this plan. Failure to implement this plan could have a material adverse effect on the Company’s financial condition and financial performance. Until such time as the Company’s pharmaceutical products are patented and approved for sale, the Company’s liquidity requirements are dependent on its ability to raise additional capital by selling additional equity, from proceeds from the exercise of stock options and common share warrants or by obtaining credit facilities. The Company’s future capital requirements will depend on many factors, including, but not limited to, the market acceptance of its products and services. No assurance can be given that any such additional funding will be available or that, if available, it can be obtained on terms favourable to the Company. See notes 6 and 22. If the going concern assumption were not appropriate for these consolidated financial statements, then adjustments would be necessary to the carrying value of assets and liabilities, the reported revenue and expenses, and the classifications used in the consolidated statements of financial position. The consolidated financial statements do not include adjustments that would be necessary if the going concern assumption was not appropriate. (d) Use of estimates - The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the consolidated financial statements, and the reported amount of expenses during the year. Actual results may vary from the current estimates. These estimates are reviewed periodically and, as adjustments become necessary, they are reported in earnings in the year in which such adjustments become known. Significant estimates in these consolidated financial statements include determination of eligible expenditures for investment tax credit (“ITC”) purposes, inventory, intangible assets, impairment of goodwill, intangible assets not yet subject to amortization, and inputs related to the calculation of fair value of stock-based compensation and warrants. (e) Comparative figures - Certain reclassifications of amounts in fiscal 2017 have been made to facilitate comparison with the current year. Exercised warrants have been reallocated from contributed surplus to common share purchase warrants. Certain expense amounts have been reclassified from general and administrative to sales and marketing. 7 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Significant accounting policies Cash - Cash includes cash and liquid investments with a term to maturity of 90 days or less when acquired. Inventory - Inventory consists of ready for sale goods. Inventory is valued at the lower of cost and net realizable value. Cost is determined based on the average cost. Net realizable value is the estimated selling price less the estimated costs necessary to make the sale. Property and equipment - Property and equipment are stated at cost or deemed cost less accumulated depreciation and accumulated impairment losses. Property and equipment are amortized over their estimated useful life at the following rates and methods: Furniture and fixtures Computer equipment Leasehold improvements Vehicles 20% per annum 3 years 10 years 5 years declining balance method straight-line method straight-line method straight-line method The Company prorates depreciation for acquisitions made during the year. The depreciation method, useful life and residual values are assessed annually. When an item of property and equipment comprises significant components with different useful lives, the components are accounted for as separate items of property or equipment. Expenditures incurred to replace a component of an item of property or equipment that is accounted for separately are capitalized. Gains and losses on disposal of property and equipment are determined by comparing the proceeds from disposal with the carrying amount of property and equipment, and are recognized within other income in the consolidated statements of loss and comprehensive loss. Intangible assets - Intangible assets with finite lives are stated at cost less accumulated amortization. Amortization is based on the estimated useful life of the asset and is calculated as follows: Trademarks and brands License and customer lists Patents 10 years 10 years 17 years straight-line method straight-line method straight-line method 8 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Impairment of non-financial assets - The Company’s property, equipment and intangible assets with finite lives are reviewed for indications of impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. If indication of impairment exists, the asset’s recoverable amount is estimated. An impairment loss is recognized when the carrying amount of an asset, or its cash-generating unit (“CGU”), exceeds its recoverable amount. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Impairment losses are recognized in profit and loss for the year. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGUs and then to reduce the carrying amount of the other assets in the unit on a pro-rata basis. The recoverable amount is the greater of the CGU’s fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the CGU to which the asset belongs. The Company has two CGUs: Antibe, the pharmaceutical development and out-licensing business, and Citagenix, the tissue regenerative products business. An impairment loss is reversed if there is an indication that there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. Intangible assets that are not yet available for use are not amortized, but are tested for impairment at least annually or sooner if there is an indication of impairment. Goodwill - Goodwill represents the excess of the purchase price of business acquisitions over the fair value of identifiable net assets acquired in such acquisitions. Goodwill is determined at the date of the business combination. Goodwill is not amortized, but is tested for impairment annually, or more frequently if events or changes in circumstances indicate the asset might be impaired. For the purpose of impairment testing, goodwill is allocated to each of the Company’s CGUs that is expected to benefit from the synergies of the combination. If the recoverable amount of the CGU is less than its carrying amount, excluding any goodwill, the impairment loss is allocated first to reduce the carrying amount of goodwill allocated to the CGU and then reduces the carrying amount of the other assets of the CGU on a pro rata basis. An impairment loss for goodwill is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods. All of the Company’s goodwill on the Consolidated statements of financial position has been allocated to the Citagenix CGU. As at March 31, 2018, there is no impairment of goodwill. The Company tests goodwill for impairment annually in the fourth quarter. The impairment test on Citagenix is carried out by comparing the carrying amount of Citagenix and its recoverable amount. The recoverable amount of Citagenix is the higher of its fair value, less costs to sell, and its value in use. The recoverable amount has been determined by management using the value in use model. This complex valuation process entails the use of methods such as the discounted cash flow method, which requires numerous assumptions to estimate future cash flows. The recoverable amount is impacted significantly by the discount rate used in the discounted cash flow model, as well as the quantum and timing of expected future cash flows and the growth rate used in the projections. A reasonable possible change in the assumptions used could result in an impairment. However, management concluded that the assumptions used in the value-in-use analysis were the best estimate of the recoverable amount as at March 31, 2018. 9 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The estimated future cash flows were based on the budget and strategic plan for the next five years, and a growth rate of 3.0% was applied to derive a terminal value beyond the initial five-year period. The post-tax discount rate used to calculate the recoverable amount in fiscal year 2017 was 20%. Related party transactions - Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. Income taxes - Income taxes are accounted for using the liability method. Deferred tax assets and liabilities are recognized based on the temporary differences between the assets and liabilities for accounting purposes and the amounts used for tax purposes and the benefit of unutilized tax losses for which it is probable they will be realized and carried forward to future years to reduce income taxes. Deferred tax assets and liabilities are not recognized if the temporary differences arise from goodwill or from initial recognition of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax assets and liabilities are measured using tax rates enacted by tax laws or substantively enacted for the years in which deferred income tax assets are likely to be realized or deferred income tax liabilities settled. The effect of a change in tax rates on deferred income tax assets and liabilities is included in loss and comprehensive loss in the period when the change is substantially enacted. Deferred share issuance costs - These are costs related directly to the proposed issuance of shares by the Company pursuant to private placements and public share offerings. Upon completion of the share issuance, these costs are charged against share capital. Such costs are recognized as an expense in the event that it is determined that such transaction will not be completed. Government grants and investment tax credits - Amounts received or receivable resulting from government assistance programs are recognized when there is reasonable assurance that the amount of government assistance will be received and all attached conditions will be complied with. When the amount relates to an expense item, it is recognized into income as reduction to the costs that it is intended to compensate. When the amount relates to an asset, it reduces the carrying amount of the asset and is then recognized as income over the useful life of the depreciable asset by way of a reduced depreciation charge. ITCs receivable are amounts refundable from the Canadian federal and provincial governments under the Scientific Research & Experimental Development incentive program. The amounts claimed under the program represent the amounts submitted by management based on research and development costs paid during the period and included a number of estimates and assumptions made by management in determining the eligible expenditures. ITCs are recorded when there is reasonable assurance that the Company will realize the ITCs. Recorded ITCs are subject to review and approval by tax authorities and, therefore, could be different from the amounts recorded. 10 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Convertible debt instruments - The Company’s convertible debt instruments are segregated into their debt and equity elements at the date of issue, based on the relative fair market values of these elements. The debt element of the instruments is classified as a liability and recorded as the present value of the Company’s obligation to make future interest payments in cash and settle the redemption value of the instrument in cash. The carrying value of the debt element is accreted to the original face value of the instruments, over their life, using the effective interest method. Research and development expense - Research costs are expensed as incurred. Development costs are expensed in the year incurred unless they meet certain criteria for capitalization. No development costs have been capitalized to date. Revenue recognition - Revenue from license fees is recognized based on the terms of the license agreement, when there is persuasive evidence of an arrangement, delivery or performance has occurred, the fee is fixed or determinable, and when collection is reasonably assured. The licensing arrangements are reviewed in order to determine whether the elements can be divided into separate units of accounting, if certain criteria are met. If separable, the consideration received is allocated among the separate units of accounting based on their respective fair values and the applicable revenue recognition criteria are applied to each of the separate units. If not separable, the applicable revenue recognition criteria are applied to combined elements as a single unit of accounting. The Company recognizes revenue from sales of medical equipment when persuasive evidence of an arrangement exists, delivery has occurred, fees are fixed or determinable and collection is reasonably assured. Interest income is recognized using the effective interest method as earned. Deferred revenue - Revenue from up-front payments is deferred and amortized to the consolidated statements of loss and comprehensive loss at the point in time when the risks and rewards have been transferred to the licensee. Stock-based compensation - The Company accounts for options and warrants using the fair value-based method of accounting for stock-based compensation. Fair values are determined using the Black-Scholes-Merton option-pricing model (“BSM”). Management exercises judgment in determining the underlying share price volatility, expected life of the option, expected forfeitures and other parameters of the calculations. Compensation costs are recognized over the vesting period as an increase to stock-based compensation expense and contributed surplus. If, and when, stock options and warrants are ultimately exercised, the applicable amounts of contributed surplus and common share purchase warrants are transferred to share capital. Broker warrants - Warrants issued in a public or private placement to brokers are accounted for under IFRS 2 and are classified as equity. Warrants issued to brokers are valued at the fair value of the services received. 11 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Foreign currency translation - The Company's presentation currency is the Canadian dollar. The functional currency of the Company and its subsidiary, Citagenix, is the Canadian dollar, while the functional currency of BMT and Tera is the euro. In preparing the financial statements of the individual entities, transactions in currencies other than the Company’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the date of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Foreign currency translation gains and losses are presented in the consolidated statements of loss and comprehensive loss in the period in which they occur. For its subsidiaries with a non-Canadian dollar functional currency, results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate at the end of the period, and equity is translated at historical exchange rates. Translation adjustments resulting from the process of translating the local currency financial statements into Canadian dollars are included in other comprehensive income (loss). Loss per share - Basic loss per share is calculated on the basis of loss attributable to the holders of common shares divided by the weighted average number of common shares outstanding during the period. Diluted per share amounts are calculated giving effect to the potential dilution that would occur if securities or other contracts to issue common shares were exercised or converted to common shares. The treasury stock method assumes that proceeds received from the exercise of in-the-money stock options and common share purchase warrants are used to repurchase common shares at the prevailing market rate. Diluted loss per share is equal to basic loss per share when the effect of otherwise dilutive securities is anti-dilutive. Provisions - The Company recognizes a provision when it has a present obligation (legal or constructive) as a result of a past event, it is probable it will be required to settle the obligation, and it can make a reliable estimate of its amount. The amount it recognizes as a provision is its best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the surrounding risks and uncertainties. Where it measures a provision using the cash flows estimated to settle the present obligation, the carrying amount is the present value of those cash flows, calculated using a pre-tax discount rate reflecting the risks specific to the liability. The Company adjusts the liability at the end of each reporting period for the unwinding of the discount rate and for changes to the discount rate or to the amount or timing of the estimated cash flows underlying the obligation. Leases - As at March 31, 2018, all leases are classified as operating leases. Operating lease payments are expensed on a straight-line basis over the term of the relevant lease. 12 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Measurement of financial instruments - Financial instruments are classified into one of five categories: fair value through profit or loss (“FVTPL”); held to maturity (“HTM”); loans and receivables; available for sale (“AFS”); or other financial liabilities. The classification is determined at initial recognition and depends on the nature and purpose of the financial instruments. (i) FVTPL financial instruments - Financial assets and financial liabilities are classified as FVTPL when the financial asset or financial liability is held for trading or it is designated as FVTPL. A financial asset or financial liability is classified as held for trading if it has been acquired principally for the purpose of selling in the near future; it is part of an identified portfolio of financial instruments that the Company manages and has an actual pattern of short-term profit making; or it is a derivative that is not designated and effective as a hedging instrument. Financial assets classified or designated as FVTPL are initially measured at fair value with any subsequent gain or loss recognized in other income (loss). The net gain or loss recognized incorporates any dividend or interest earned on the financial asset. Financial liabilities classified or designated as FVTPL are initially measured at fair value and with any subsequent gain or loss recognized in net income (loss). Interest and dividends paid on financial liabilities are recognized in other income (loss). The Company classifies cash, term deposits, restricted cash and bank indebtedness as FVTPL. (ii) HTM financial instruments - HTM financial instruments having a fixed maturity date and fixed or determinable payments, where the Company intends and has the ability to hold the financial instrument to maturity, are classified as HTM and measured at amortized cost using the effective interest rate method. Any gains or losses arising from the sale of HTM financial instruments are included in other income. Currently, the Company has no HTM financial instruments. (iii) Loans and receivables - Items classified as loans and receivables are measured at amortized cost using the effective interest method. Any gains or losses on the realization of loans and receivables are included in other income. The Company classifies due from AHI as loans and receivables. (iv) Available-for-sale - Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for- sale, or that are not classified as FVTPL, HTM, or loans and receivables. Available-for-sale financial assets are carried at fair value with unrealized gains and losses included in accumulated other comprehensive income until realized when the cumulative gain or loss is transferred to other income. Currently, the Company has no AFS financial instruments. (v) Other financial liabilities - Other financial liabilities are initially measured at fair value, net of transaction costs, and are subsequently measured at amortized cost using the effective interest method, with interest expense recognized on an effective yield basis. The Company has classified accounts payable and accrued liabilities, long-term debt and convertible debentures as other financial liabilities. 13 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (b) Future changes in significant accounting policies - At the date of approval of these consolidated financial statements, the following standards and interpretations, which may be applicable to the Company, but have not yet been applied in these consolidated financial statements, were in issue but not yet effective: (i) Financial Instruments - IFRS 9, Financial Instruments (“IFRS 9”), was issued in 2010 and is to replace International Accounting Standard 39, Financial Instruments: Recognition and Measurement (“IAS 39”). IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. In addition, under IFRS 9, the same impairment model is applied to all financial instruments that are subject to impairment accounting. The current impairment model is replaced with an expected credit loss model, which means that a loss event will no longer need to occur before an impairment allowance is recognized. IFRS 9 is effective for annual periods beginning on or after January 1, 2018. For the Company, the standard was effective as of April 1, 2018. Management is currently evaluating the impact of IFRS 9 on its consolidated financial statements. (ii) Revenue - IFRS 15, Revenue from Contracts with Customers (“IFRS 15”), was issued in May 2014 and establishes a five- step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The new revenue standard will supersede all current revenue recognition requirements under IFRS. Either a full retrospective application or a modified retrospective application is required for annual periods. IFRS 15 is effective for annual periods beginning on or after January 1, 2018. For the Company, the standard was effective as of April 1, 2018. Management is in the process of assessing a sample of contracts to evaluate any potential impacts of IFRS 15. (iii) Leases - In January 2016, the IASB issued IFRS 16, Leases (“IFRS 16”), its new leases standard that requires lessees to recognize assets and liabilities for most leases on their balance sheets. Lessees applying IFRS 16 will have a single accounting model for all leases, with certain exemptions. The new standard will be effective for annual periods beginning on or after January 1, 2019, with limited early application permitted. Management is currently evaluating the impact of IFRS 16 on its consolidated financial statements. 14 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 4. ACCOUNTS RECEIVABLE Trade receivables Value-added taxes receivable Harmonized Sales Taxes receivable Allowance for doubtful accounts 2018 $ 897,593 4,696 188,932 (793) 1,090,428 2017 $ 983,256 2,329 39,287 (569) 1,024,303 Employee advances [note 7] 16,559 20,700 1,106,987 1,045,003 5. INTANGIBLE ASSETS Intangible assets consist of the following: Cost As at March 31, 2016 Additions As at March 31, 2017 As at April 1, 2017 Additions As at March 31, 2018 Amortization As at March 31, 2016 Charge for the year As at March 31, 2017 As at April 1, 2017 Charge for the year As at March 31, 2018 Carrying amount As at March 31, 2017 As at March 31, 2018 Trademarks and brands $ License $ Customer list $ Patents $ Total $ 3,094,018 - 3,094,018 3,094,018 - 3,094,018 250,000 66,810 316,810 316,810 - 316,810 - 177,080 177,080 177,080 - 177,080 18,872 - 18,872 18,872 - 18,872 3,362,890 243,890 3,606,780 3,606,780 - 3,606,780 142,410 309,402 451,812 451,812 309,402 761,214 - - - - - - - 17,708 17,708 17,708 5,130 6,805 11,935 11,935 147,540 333,915 481,455 481,455 35,416 800 345,618 53,124 12,735 827,073 2,642,206 2,332,804 316,810 316,810 159,372 123,956 6,937 6,137 3,125,325 2,779,707 The term of the license agreement is 10 years from the date of the first commercial sale of the licensed product. As at March 31, 2018, there were no commercial sales of the licensed products. As such, no amortization is recognized in the current year related to this license. There were no indicators of impairment on this license. 15 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 6. BANK INDEBTEDNESS The Company has an operating line of credit with a Canadian Chartered Bank (the “Bank”) to a maximum of $2,000,000. The outstanding line of credit balance is due on demand and bears interest at the Bank’s prime lending rate plus 0.50% per annum. The following have been provided as security: 1. A moveable hypothec in the amount of $10,000,000 covering the Company's present and future claims and universality of the Company's present and future property and assets with all risk of insurance and with losses payable to the Bank; and 2. Assignment of inventory, in virtue of Section 427 of the Bank Act (Canada). The line of credit is subject to certain financial tests and covenants measured based on the Company's non- consolidated year-end financial statements of Citagenix. As at March 31, 2018, the Company was in compliance with these respective covenants. The line of credit matures on June 30, 2018. As at March 31, 2018, $1,283,241 was outstanding on the operating line of credit. The Company holds a corporate credit card facility with a $25,000 limit and the Bank holds $25,000 of term deposits in trust as collateral. This amount is presented as term deposits on the consolidated statements of financial position. The Company will continue its practice of paying all outstanding balances on the corporate credit card in full monthly. 7. RELATED PARTY TRANSACTIONS On June 29, 2016, with the enrolment of the first patient in a Phase II clinical trial, the Company triggered a milestone payment of $150,000 to AHI as detailed in a licensing agreement between the two companies dated December 22, 2009. See note 24 for details of the license agreement and potential future commitments. As part of the prospectus offering during the year ended March 31, 2018, one director of the Company purchased 1,000,000 Units, such investment being a “related party transaction” for purposes of Multilateral Instrument 61- 101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”). The Company has relied on the exemptions contained in sections 5.5(a) and 5.7(1)(a) of MI 61-101 from the valuation and minority shareholder approval requirements in MI 61-101 in respect of the director’s participation in the Offering, since neither the fair market value of the subject matter of, nor the fair market value of the consideration for, the director’s investment exceeds 25% of the Company’s market capitalization. During the year, the Company advanced $36,841 (2017 - $39,268) to AHI. As at March 31, 2018, $174,398 (2017 - $137,557) was receivable. This balance bears no interest, is payable on demand and is unsecured. Employee advances consist of cash advances, payments to the Company cell phone plan on behalf of employees, and petty cash in foreign currencies. Currently, the Company has one employee receiving cash advances. 16 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 8. CONVERTIBLE DEBENTURES The following is a summary of the private placements of senior secured convertible debentures as at March 31, 2017: Date Private placement October 15, 2015 CDC1a Gross proceeds $ 1,800,000 November 13, 2015 CDC1b 800,000 December 23, 2015 CDC2a 450,000 Interest rate per annum 10% 10% 10% Debenture conversion price per share $ 0.22 0.22 0.22 Debenture maturity date Warrants October 15, 2018 3,600,000 October 15, 2018 1,600,000 October 15, 2018 900,000 Warrant exercise price $ 0.31 0.31 0.31 Warrant expiry date October 15, 2018 October 15, 2018 October 15, 2018 CDC1a, CDC1b and CDC2a debentures were all secured by a first priority security interest over all assets of Antibe other than the shares of Citagenix. CDC1a, CDC1b and CDC2a warrants are exercisable for one common share of the Company. The debentures bore an interest rate of 10% per year, were secured by the assets of Antibe, and, upon maturity, were convertible at the option of the holder into common shares of Antibe at a price of $0.22 per share. In connection with CDC2a, a brokered private placement, the Company issued the following broker warrants to agents: Date Private placement Broker warrants Broker warrant exercise price $ Broker warrant expiry date December 23, 2015 CDC2a 143,182 0.22 December 23, 2017 The Debenture agreements provided that the Company may, at its sole option, elect to pay, in kind, certain interest payments. The following is a summary of all payment in-kind elections: Date interest due Aggregate interest payment added to principal amount Debenture conversion price per share Additional shares issuable upon conversion January 15, 2016 April 15, 2016 July 15, 2016 October 15, 2016 $ 62,014 77,587 79,522 82,400 $ 0.22 0.22 0.22 0.22 281,882 352,669 361,462 374,545 17 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 8. CONVERTIBLE DEBENTURES (continued) The following is a continuity of the convertible debentures: Balance, beginning of the year Interest paid-in-kind Accretion Amortization of issue costs Debentures converted to shares Balance, end of the year 2018 $ 2,631,818 - 611,471 83,413 (3,080,585) 2017 $ 2,027,295 239,509 305,138 59,876 - 246,117 2,631,818 As at March 31, 2018, six of the senior secured convertible debentures, including all interest paid-in-kind, were converted to common shares of the Company. In total, 14,002,659 common shares were issued at $0.22 per share for a total conversion of $3,080,585. As at March 31, 2017, of the total amount of the cash proceeds received on the issuance of convertible debentures, $545,000 was designated as restricted cash and held as additional security for one of the convertible debenture holders pending the achievement of certain milestones. As at March 31, 2018, the debenture holder converted to shares the entirety of the debenture including interest paid-in-kind, thereby releasing the restricted cash. 9. SHARE CAPITAL (a) Authorized The Company has an unlimited number of authorized common shares without par value. (b) Common shares Balance, beginning of the year Private placement (“PP4a”) Private placement (“PP4b”) Private placement (“PP5a”) Private placement (“PP5b”) Prospectus (“P2017a”) Prospectus (“P2017b”) Return of territory rights Warrants exercised Debentures converted Share issuance costs (PP4a, PP4b) Share issuance costs (PP5a, PP5b) Share issuance costs (P2017a, P2017b) Balance, end of the year 2018 2017 Shares 113,018,314 - - - - 40,498,999 9,330,000 - 21,699,781 14,002,659 - - - 198,549,753 Amount $ 15,517,895 - - - - 2,481,234 585,590 - 8,520,802 3,080,585 - - (678,805) 29,507,301 Shares 78,640,115 9,685,000 4,865,000 16,178,299 1,985,000 - - 240,000 1,424,900 - - - - 113,018,314 Amount $ 13,112,541 651,628 330,429 1,322,444 171,635 - - 45,600 338,508 - (145,113) (309,777) - 15,517,895 18 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 9. SHARE CAPITAL (continued) The following provides additional information on the private placements and prospectus raise completed during the years ended March 31, 2018 and 2017: Private placement / prospectus Number of units1 / shares issued Number of warrants issued Price per unit $ Gross proceeds2 $ 9,685,000 4,865,000 16,178,299 1,985,000 4,842,500 0.10 968,500 2,432,500 0.10 486,500 8,089,154 0.15 2,426,745 992,500 0.15 297,750 Warrant exercise price Warrant expiry date $ 0.15 0.15 0.22 0.22 Jun 10, 2018 Jun 20, 2018 Dec 15, 2018 Dec 21, 2018 Closing date Jun 10, 2016 Jun 20, 2016 Dec 15, 2016 Dec 21, 2016 Mar 27, 2017 PP4a PP4b PP5a PP5b Return of territory rights3 240,000 120,000 - - 0.22 Mar 27, 2019 Jun 21, 2017 P2017a 40,498,999 20,249,499 0.10 4,049,900 Aug 18, 2017 P2017b 9,330,000 4,665,000 0.10 933,000 0.15 0.15 Jun 21, 2020 Jun 21, 2020 1Each unit was composed of one common share and one-half of one common share purchase warrant. Each whole warrant entitles the holder to purchase one common share. 2Gross proceeds have been allocated to share capital and warrants based on the residual method. Warrants were valued using the BSM. 3In connection with Antibe’s regional licensing deal with Laboratoires Acbel SA, Antibe issued common shares and common share purchase warrants to Knight Therapeutics Inc. (“Knight”) in exchange for the return of the ATB-346 territory rights to Romania (previously granted to Knight in November 2015). Each whole warrant entitles Knight to purchase one common share. With respect to the private placements and prospectus raise completed during the years ended March 31, 2018 and 2017, the Company issued the following warrants to brokers and finders: Private placement / prospectus Closing date Jun 10, 2016 PP4a Jun 20, 2016 PP4b Number of broker / finder warrants issued 318,000 378,880 Dec 15, 2016 PP5a 1,145,088 Dec 21, 2016 PP5b 165,150 Jun 21, 2017 P2017a 2,834,930 Aug 18, 2017 P2017b 653,101 Non-cash cost from issuance of warrants to brokers / finders Broker / finder warrant exercise price Broker / finder warrant expiry date Total issuance costs $ - 145,113 - 309,777 522,725 156,080 $ - 68,150 - 121,104 255,200 53,830 $ 0.15 0.15 0.15 0.15 0.10 0.10 Jun 10, 2018 Jun 20, 2018 Jun 15, 2018 Jun 21, 2018 Jun 21, 2019 Jun 21, 2019 19 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 9. SHARE CAPITAL (continued) All issuance costs were offset against share capital and common share purchase warrants in proportion to the allocation of proceeds. The following is a summary of all warrants exercised during the years ended March 31, 2018 and 2017: Exercise price Number of warrants exercised 2018 2017 Number of warrants exercised Gross proceeds $ Gross proceeds $ 2,211,854 14,108,509 1,019,419 4,360,000 221,185 2,116,276 224,273 1,351,600 478,400 946,500 47,840 141,975 - - - - $ 0.10 0.15 0.22 0.31 Each of the warrants entitled the bearer to purchase one common share of the Company. (c) Stock options The Company has established a stock option plan that provides a limited issuance of options, capped at 22,337,983 common shares. The plan is to encourage ownership of common shares by directors, senior officers and consultants of the Company. The fair value of the options is measured as of the grant date, using the BSM, and is recognized over the vesting period. The fair value is recognized as an expense over the vesting period in the consolidated statements of loss and comprehensive loss. The amount recognized as an expense is adjusted to reflect the number of share options expected to vest. Included in the options granted for the year ended March 31, 2017 are 3,500,000 performance options granted to key senior executives of Antibe and Citagenix. Vesting of these performance options is subject to the successful achievement of certain goals related to advancements in the clinical development of the Company’s lead drug, capital efficiency, and corporate profitability. The determination that the goals have been met is the responsibility of the Board of Directors. Option pricing models require the input of highly subjective assumptions, particularly as to the expected price volatility of the stock and the expected life of the option. Changes in the subjective input assumptions can materially affect the fair value estimate. There is no cash cost to the Company related to these options. The following is a summary of all options to purchase common shares that are outstanding as at March 31, 2018 and 2017, as well as details on exercise prices and expiry dates: Balance, beginning of the year Granted during the year Forfeited during the year Expired during the year Balance, end of the year 2018 2017 Weighted average exercise price $ 0.25 0.19 0.19 0.52 0.25 Options 21,134,000 73,500 (343,132) (24,000) 20,840,368 Weighted average exercise price $ 0.29 0.20 0.34 - 0.25 Options 11,449,000 9,712,000 (27,000) - 21,134,000 20 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 9. SHARE CAPITAL (continued) Number of options 300,000 12,000 12,000 12,000 12,000 24,000 2,700,000 18,000 150,000 805,000 75,000 604,799 6,651,357 150,000 9,240,712 37,500 36,000 20,840,368 Exercise price $ 0.24 0.17 0.15 0.13 0.23 0.19 0.33 0.20 0.55 0.66 0.54 0.14 0.15 0.19 0.20 0.085 0.29 Expiry date May 5, 2018 November 17, 2018 March 9, 2019 June 10, 2019 September 6, 2019 January 18, 2020 January 25, 2020 March 31, 2020 October 21, 2023 March 4, 2024 May 9, 2024 July 13, 2025 March 9, 2026 January 18, 2027 March 31, 2027 October 20, 2020 February 27, 2021 The number of options exercisable as at March 31, 2018 is 14,045,507, and the weighted average exercise price of these options is $0.23. The following assumptions were used in the BSM to determine the fair value of the share-based compensation expense relating to stock options in the year: Risk-free interest rate Expected volatility Expected dividend yield Expected life of options Weighted average share price Exercise price 2018 2017 1.53% - 1.89% 121% - 173% 0.00% 3 years $0.19 $0.085 - $0.29 0.53% - 1.70% 157% - 172% 0.00% 3 - 10 years $0.20 $0.13 - $0.23 21 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 9. SHARE CAPITAL (continued) (d) Common share purchase warrants In conjunction with the private placement or prospectus capital raises, the following broker and finder warrants were granted during the years ended March 31, 2018 and 2017: Closing date June 10, 2016 June 20, 2016 December 15, 2016 December 21, 2016 June 21, 2017 August 18, 2017 March 31, 2018* Private placement / prospectus Number of broker / finder warrants issued Non-cash cost from issuance of warrants to brokers / finders Broker / finder warrant exercise price Broker / finder warrant expiry date PP4a PP4b PP5a PP5b P2017a P2017b P2017a and P2017b 318,000 378,880 1,145,088 165,150 2,834,930 653,101 1,045,928 $ 31,094 37,056 106,891 14,212 255,200 53,830 $ 0.15 0.15 0.15 0.15 0.10 0.10 June 10, 2018 June 20, 2018 June 15, 2018 June 21, 2018 June 21, 2019 June 21, 2019 0.15 June 21, 2020 *The broker warrants issued under the June 21, 2017 and August 18, 2017 prospectus capital raise entitle the holder, upon exercise, to receive one common share of the Company and one-half broker warrant warrant. Each whole broker warrant warrant entitles the holder to purchase one common share of the company at an exercise price of $0.15 and expires June 21, 2020. As at March 31, 2018, 2,091,854 P2017a and P2017b broker warrants were exercised resulting in the issuance of 1,045,928 broker warrants. The estimated fair value of the broker/finder warrants was calculated using the BSM and was offset against share capital and common share purchase warrants as share issuance costs. The assumptions used for the BSM are summarized at the end of this note. The following is a summary of all warrants to purchase common shares that are outstanding as at March 31, 2018 and 2017, as well as details on exercise prices and expiry dates: 2018 2017 Warrants 31,948,454 29,448,458 (21,699,781) (930,683) 38,766,448 Weighted average exercise price $ 0.23 0.14 0.18 0.60 0.18 Warrants 16,213,362 18,483,772 (1,424,900) (1,323,780) 31,948,454 Weighted average exercise price $ 0.31 0.18 0.13 0.77 0.23 Balance, beginning of the year Granted during the year Exercised during the year Expired during the year Balance, end of the year 22 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 9. SHARE CAPITAL (continued) Number of warrants 162,500 125,000 2,067,500 633,297 2,418,000 46,150 1,740,000 168,000 7,094,735 967,500 120,000 907,500 1,396,177 20,920,089 38,766,448 Exercise price $ 0.15 0.15 0.15 0.15 0.15 0.15 0.31 0.83 0.22 0.22 0.22 0.83 0.10 0.15 Expiry date April 1, 2018 April 9, 2018 June 10, 2018 June 15, 2018 June 20, 2018 June 21, 2018 October 15, 2018 December 1, 2018 December 15, 2018 December 21, 2018 March 27, 2019 June 1, 2019 June 21, 2019 June 21, 2020 The following assumptions were used in the BSM to determine the fair value of warrants in the year: 2018 2017 Risk-free interest rate Expected volatility Expected dividend yield Expected life of warrants and options Weighted average share price Exercise price 0.91% - 1.59% 104% - 176% 0.00% 2 - 3 years $0.14 $0.10 - $0.15 0.49% - 1.70% 121% - 203% 0.00% 1.5 - 10 years $0.18 $0.10 - $0.23 10. LOSS PER SHARE Basic loss per share is calculated by dividing the net loss attributable to common shareholders by the weighted average number of common shares outstanding during the year. All unexercised share options and warrants were excluded from calculating diluted loss per share. 23 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 11. SEGMENTED RESULTS The Company has two primary business segments: Antibe Therapeutics, a pharmaceutical development company, and Citagenix, a marketer and distributor of regenerative medicines serving the dental and orthopaedic market places. Prior to the acquisition of Citagenix on October 15, 2015, the Company had only one business segment. The segmented performance of these two businesses as at March 31, 2018 and 2017 is as follows: Antibe $ - - - 5,809,100 2018 Citagenix $ 8,510,149 5,134,909 3,375,240 5,270,733 Consolidated $ 8,510,149 5,134,909 3,375,240 11,079,833 Antibe $ - - - 4,634,166 2017 Citagenix $ 9,054,404 5,120,594 3,933,810 5,410,468 Consolidated $ 9,054,404 5,120,594 3,933,810 10,044,634 (5,809,100) (1,895,493) (7,704,593) (4,634,166) (1,476,658) (6,110,824) Revenue Cost of goods sold Gross profit Expenses Loss before income taxes There is no single customer who comprises more than 10% of revenue. The Company’s assets and liabilities by each business as at March 31, 2018 and 2017 are as follows: 2018 2017 Antibe Citagenix Consolidated Antibe Citagenix Consolidated $ $ $ $ $ $ Assets: Current Non-current 4,158,760 1,600,031 4,151,869 2,580,270 8,310,629 4,180,301 2,267,186 1,600,081 3,956,218 2,902,212 6,223,404 4,502,293 Total assets 5,758,791 6,732,139 12,490,930 3,867,267 6,858,430 10,725,697 Liabilities: Current Non-current 526,507 1,083,540 2,905,743 - 3,432,250 1,083,540 420,139 4,025,212 2,726,917 - 3,147,056 4,025,212 Total liabilities 1,610,047 2,905,743 4,515,790 4,445,351 2,726,917 7,172,268 24 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 12. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES The following table summarizes accounts payable and accrued liabilities as at March 31, 2018 and 2017: Accounts payable Antibe Citagenix BMT Accrued liabilities Antibe Citagenix BMT 2018 $ 114,692 1,257,619 99,800 1,472,111 165,696 158,446 98,621 422,763 2017 $ 61,212 968,525 79,731 1,109,468 358,927 430,822 95,575 885,324 Total accounts payable and accrued liabilities 1,894,874 1,994,792 13. DEFERRED REVENUE On February 24, 2017, Antibe entered into an exclusive long-term license and distribution agreement (the “License Agreement”) with Acbel for ATB-346 in Albania, Algeria, Bulgaria, Greece, Jordan, Romania and Serbia (the “Territory”). Acbel is an affiliated holding company of Galenica SA and one of the largest pharmaceutical companies in Greece. Under the terms of the license agreement, Antibe was issued an upfront payment of €800,000 and is entitled to receive a 5% royalty on net sales of ATB-346 in the Territory. The upfront revenue is reflected in deferred revenue until the point that Acbel can benefit from the license. The amount of the license upfront payment is included on the consolidated statements of financial position as deferred revenue. 14. GENERAL AND ADMINISTRATIVE EXPENSES The nature of the general and administrative expenses for the years ended March 31, 2018 and 2017 is summarized as follows: Salaries and wages Professional and consulting fees Licensing fees Office expenses Other expenses Total general and administrative 2018 $ 1,284,160 904,244 - 524,471 132,609 2,845,484 2017 $ 1,792,305 1,110,286 150,000 551,247 364,867 3,968,705 25 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 15. SELLING AND MARKETING The nature of the selling and marketing expenses for the years ended March 31, 2018 and 2017 is summarized as follows: Salaries and wages Commissions Advertising and promotions Travel and entertainment Total selling and marketing 2018 $ 1,866,562 544,835 508,081 461,801 3,381,279 2017 $ 1,667,910 532,052 318,313 446,387 2,964,662 16. RESEARCH AND DEVELOPMENT The nature of the research and development expenses for the years ended March 31, 2018 and 2017 is summarized as follows: Salaries and wages Professional and consulting fees Development costs Scientific Research and Experimental Development payment (rebate) Total research and development 2018 $ 478,395 114,497 2,208,752 (59,168) 2,742,476 2017 $ 71,985 329,139 117,155 182,517 700,796 17. STOCK-BASED COMPENSATION The function of the stock-based compensation expense for the years ended March 31, 2018 and 2017 is summarized as follows: General and administrative Research and development Total stock-based compensation 2018 $ 469,202 223,794 692,996 2017 $ 719,928 435,825 1,155,753 26 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 18. FINANCE AND RELATED COSTS The components of the finance and related costs as at March 31, 2018 and 2017 are as follows: Interest on convertible debenture Accretion interest Interest and bank charges Unrealized foreign currency translation Total finance and related costs 2018 $ 412,452 611,471 154,029 (120,146) 1,057,806 2017 $ 384,805 305,138 145,222 70,577 905,742 19. INCOME TAXES The income tax provision recorded differs from the income tax obtained by applying the statutory income tax rate of 26.50% (2017 – 26.50%) to the loss before income taxes for the year, and is reconciled as follows: Loss before income taxes Expected income tax recovery at the combined basic f d l and provincial tax rate: Decrease (increase) resulting from: Non-deductible expenses Share issuance costs Others Amount related to unrecognized deferred tax assets Recovery of income taxes 2018 $ (7,704,593) 2017 $ (6,110,824) (2,041,717) (1,619,368) 320,956 (309,362) 28,917 1,726,445 (274,761) 412,720 (70,394) 38,997 873,042 (365,003) The Company has incurred losses of $19,375,590 for tax purposes, which are available to reduce future taxable income. Such benefits will be recorded as an adjustment to the tax provision in the year realized. The losses expire as follows: In the year ending March 31 2030 2031 2032 2033 2034 2035 2036 2037 2038 Indefinitely $ 258,166 607,722 735,014 875,160 1,426,628 2,006,240 2,858,123 3,002,487 6,718,598 887,452 19,375,590 27 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 19. INCOME TAXES (continued) The cumulative carry-forward pool of SR&ED expenditures as at March 31, 2018 applicable to future years, with no expiry date, is $4,716,807. 20. DEFERRED INCOME TAXES The recognized temporary differences and tax losses are attributable to the following: Amount related to tax loss Amount related to intangible assets on business combination Amount related to foreign exchange translation gains Amount related to transaction costs Amount related capital property Amount related to eligible capital property Net deferred income tax liabilities 2018 $ 578,774 (625,192) (20,337) 630 13,723 52,402 - 2017 $ 471,236 (710,754) (10,644) 867 1,236 (61,795) (309,854) Deferred tax expense of $9,733 (2017 – $10,644) related to the foreign exchange translation gains, was recognized in other comprehensive income for the year. Deferred tax assets have not been recognized in respect of the following temporary differences: Amount related to tax loss carryforwards Amount related to eligible capital property Amount related to SR&ED expenditures Amount related to donations Amount related to ITC, net of tax Amount related to ORDTC, net of tax Amount related to share issuance costs 2018 $ 4,541,168 67,099 1,249,954 14,178 461,975 39,248 351,138 6,724,760 2017 $ 3,109,404 58,141 1,100,595 13,250 380,611 - 194,879 4,856,880 Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable profit will be available against which the Company will be able to use these benefits. 28 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 21. FINANCIAL INSTRUMENTS The carrying values of cash, term deposits, restricted cash, accounts receivable, due from AHI, bank indebtedness, accounts payable and accrued liabilities approximate fair values due to the relatively short-term maturities of these instruments. The fair value of convertible debentures approximates their carrying value as the instruments are discounted at market rates. Financial instruments that are measured subsequent to initial recognition at fair value are grouped into a hierarchy based on the degree to which the fair value is observable. Level 1 fair value measurements are derived from unadjusted, quoted prices in active markets for identical assets or liabilities. Level 2 fair value measurements are derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability directly or indirectly. Level 3 fair value measurements are derived from valuation techniques that include inputs for the assets or liabilities that are not based on observable market data. Financial instruments classified as Level 1 include cash, term deposits, restricted cash and bank indebtedness. At the current time, the Company does not have financial instruments classified in Level 2 or Level 3, other than the convertible debentures (note 8). 22. CAPITAL RISK MANAGEMENT The Company’s primary objective with respect to its capital management is to ensure that it has sufficient cash resources to fund the research, development and patent of drugs and the growth objectives of Citagenix. To secure the additional capital necessary to pursue these plans, the Company may attempt to raise additional funds through the issuance of equity. The Company includes the following in its definition of capital: common shares, common share purchase warrants, contributed surplus, accumulated other comprehensive income and deficit, which total $7,975,140 (2017 – 3,553,429). The Company is not subject to externally imposed capital requirements. 23. FINANCIAL RISK MANAGEMENT The Company is exposed to a variety of financial risks by virtue of its activities: market risk (including interest rate risk), credit risk, liquidity risk and foreign currency risk. The overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on financial performance. Risk management is carried out by the officers of the Company as discussed with the Board. The officers of the Company are charged with the responsibility of establishing controls and procedures to ensure that financial risks are mitigated in accordance with the expectation of the Board as follows: Credit risk The Company's credit risk is primarily attributable to accounts receivable, amount due from AHI and the excess of cash held in one financial institution over the deposit insurance by Canadian Deposit Insurance Corporation. The Company, in the normal course of operation, monitors the financial condition of its customers. The Company establishes an allowance for doubtful accounts that corresponds to the specific credit risk of its customers, historical trends and economic conditions. 29 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 23. FINANCIAL RISK MANAGEMENT (continued) Liquidity risk Liquidity risk is the risk that the Company is not able to meet its financial obligations as they become due or can do so only at excessive cost. The Company manages its liquidity risk by forecasting cash flows and anticipated investing and financing activities. Officers of the Company are actively involved in the review and approval of planned expenditures, including actively seeking capital investment and generating revenue and profit from the commercialization of its products. As at March 31, 2018, the Company’s financial obligations, including applicable interest, are due as follows: Less than one year $ 1 – 2 years $ After 2 years $ Total $ Accounts payable and accrued liabilities 1,894,874 Bank indebtedness Convertible debentures Interest on the above financial obligations Foreign currency risk 1,291,259 246,117 113,351 3,545,601 - - - - - - - - - - 1,894,874 1,291,259 246,117 113,351 3,545,601 The functional and reporting currency of the Company is the Canadian dollar. The Company undertakes transactions denominated in foreign currencies, including US dollars and euros, and, as such, is exposed to currency risk due to fluctuations in foreign exchange rates against the Canadian dollar. The Company does not use derivative instruments to reduce exposure to foreign exchange risk. Interest rate risk Interest risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Financial assets and financial liabilities with variable interest rates expose the Company to cash flow interest rate risk. The Company is currently exposed to interest rate risk on its credit facility and long-term debt. 30 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 24. COMMITMENTS AND CONTINGENCIES (a) Royalty and milestone commitment On December 22, 2009, the Company entered into a License Agreement with AHI that provided for the exclusive right and license to research, develop, and commercialize various patents. Pursuant to the agreement, the Company paid an upfront non-refundable license fee of $150,000 to obtain exclusive right to the patents. The agreement requires the Company to pay royalties of 4% of all net sales upon the first commercial sale or, if the Company sublicenses the patents, the Company will pay a 15% royalty on royalty revenue earned. Additionally, the Company is required to make milestone payments to AHI at various stages of development, namely: • • • • • the greater of a $150,000 payment upon enrolment of the first patient in a Phase I clinical trial or 10% of any milestone payment received from a sublicense relation thereto; the greater of a $150,000 payment upon enrolment of the first patient in the first Phase II clinical trial or 10% of any milestone payment received from a sublicense relation thereto; the greater of a $150,000 payment upon enrolment of the first patient in the first Phase III clinical trial or 10% of any milestone payment received from a sublicense relation thereto; the greater of a $250,000 payment upon the first filing of a new drug application or 10% of any milestone payment received from a sublicense relation thereto; and the greater of a $750,000 payment upon receipt of the first regulatory approval from any relevant registration authority or 10% of any milestone payment received from a sublicense relation thereto. On June 29, 2016, the Company made a milestone payment of $150,000 to AHI as a result of the enrolment of the first patient in ATB-346’s Phase II clinical trial. (b) Royalty agreement On November 16, 2015, the Company announced the signing of an exclusive long-term license and distribution agreement with Knight, a leading Canadian specialty pharmaceutical company, for the Company’s anti- inflammatory and pain drugs, ATB-346, ATB-352 and ATB-340, as well as the rights to other, future prescription drugs. Under the terms of the license agreement, the Company has granted Knight the exclusive commercial rights for the Company’s drug candidates and other future prescription drugs in Canada, Israel, Russia and sub- Saharan Africa. The Company is entitled to royalties on annual sales, along with the potential for $10 million in payments for sales-based milestones. (c) Licensing and distribution agreement On January 12, 2016, the Company announced the signing of an exclusive Licensing and Distribution Agreement with Induce Biologics Inc. (“Induce”) for the Canadian rights for Induce’s URIST (“Licensed Product”) biological product for dental and craniofacial applications. URIST is a bone graft substitute that contains bone morphogenetic protein-2 (BMP), and is being developed as a means of promoting the regeneration of bone following dental and oral maxillofacial surgery. The Company is committed to royalty fees paid quarterly based on net sales of the Licensed Product starting at the end of the quarter following the date of the first commercial sale of the URIST to Canadian market. As at March 31, 2018, the first commercial sale of URIST had not yet occurred. There were no indicators of impairment on this license. (d) Office lease commitments The Company has entered into long-term leases for its premises. The future minimum payments under the lease agreements are as follows: No later than 1 year Later than 1 year but no later than 5 years Total $ 244,875 979,501 1,224,376 31 ANTIBE THERAPEUTICS INC. Notes to Consolidated Financial Statements March 31, 2018 and 2017 24. COMMITMENTS AND CONTINGENCIES (continued) (e) Retention Bonus Certain Company executives are eligible to receive retention bonuses based on achieving certain profitability targets. To date, no accrual has been made for such bonuses as the probability of payout is uncertain. 25. SUBSEQUENT EVENTS (a) The following is a summary of all options exercised in the period from April 1, 2018 to the date of issuance of these consolidated financial statements: Exercise price Number of options exercised $ 0.140 0.145 0.200 0.235 44,799 2,419,570 95,837 300,000 2,860,206 Proceeds $ 6,272 350,838 19,167 70,500 446,777 Each of the options entitled the bearer to purchase one common share of the Company. (b) The following is a summary of all warrants exercised in the period from April 1, 2018 to the date of issuance of these consolidated financial statements: Exercise price Number of warrants exercised $ 0.100 0.150 0.220 0.310 50,000 6,153,107 360,000 1,600,000 8,163,107 Proceeds $ 5,000 922,966 79,200 496,000 1,503,166 Each of the warrants entitled the bearer to purchase one common share of the Company. (c) On April 10, 2018 and April 13, 2018, the remaining senior secured convertible debentures, including all interest paid-in-kind, were converted to common shares of the Company. In total, 1,231,533 common shares were issued at $0.22 per share for a total conversion of $270,937 subsequent to March 31, 2018. 32 

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